October 2009

Clinton Welcomes `Historic’ Honduras Accord; Zelaya May Return to Office

October 30, 2009
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Clinton Welcomes `Historic’ Honduras Accord; Zelaya May Return to Office

October 30, 2009
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Clinton Welcomes `Historic’ Honduras Accord; Zelaya May Return to Office

October 30, 2009
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Obama Bridge to Growth May Go Nowhere as Feldstein Warns of `Double Dip’

October 30, 2009
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Obama Bridge to Growth May Go Nowhere as Feldstein Warns of `Double Dip’

October 30, 2009
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Galleons Rajaratnam Asks Judge to Reduce Bail to $25 Million

October 30, 2009
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Russia’s Warning Against Speculative Inflows May Fall Victim to Oil Prices

October 30, 2009

By Alex Nicholson and Paul Abelsky Oct. 30 (Bloomberg) — The Russian central bank’s warning that it will use rate reductions to keep out speculative capital will probably fall victim to high oil prices, economists said. The bank yesterday cut the refinancing rate half a point to a record low 9.5 percent, partly aimed at “reducing the difference between short-term interest rates on the internal and external markets” to diminish “the attractiveness of short- term investments in Russian assets and stop the accumulation of risk on the stock and currency markets,” it said. Moscow-based Bank Rossii is struggling to stabilize the ruble and stem an appreciation that threatens to hurt exporters and stall economic recovery in the world’s biggest energy supplier. The bank bought more than $11 billion of currency this month, First Deputy Chairman Alexei Ulyukayev said on Oct. 23. Russia’s currency reserves , the world’s third-biggest stockpile, rose to $429.3 billion this week, the highest this year. The bank’s warning “will keep investors wary, but in the case of Russia, if oil rests this side of $60 a barrel, which isn’t difficult to envisage, then obviously we will see continued capital inflow,” said Simon Quijano-Evans , head of emerging-markets strategy at Credit Agricole Cheuvreux in Vienna. “It’s the first warning that they don’t want to see massive inflows of short-term portfolio investments occurring.” Risk Appetite Urals crude, Russia’s key export, has gained more than 80 percent this year and was trading at $77.09 a barrel yesterday. Oil makes up 30 percent of gross domestic product. The central bank uses foreign exchange transactions to steer the ruble against a basket of dollars and euros. Prime Minister Vladimir Putin said last month preventing a ruble appreciation remains one of the government’s objectives. Even so, the ruble is the fifth-best performer against the euro and the dollar since the end of June of the 26 emerging market currencies tracked by Bloomberg. It’s gained 7.2 percent against the dollar and 1.4 percent against the euro in the period. The Russian currency gained 0.5 percent to 29.0700 per dollar at the start of trading in Moscow today and was little changed against the euro. Rising crude prices coupled with “a renewed inclination of investors to take risks” required currency purchases to prevent “a sharp strengthening of the ruble,” the central bank said. “Clearly the currency is more influenced by things like the oil price and global capital flows and global risk aversion,” said Vladimir Osakovsky an economist at UniCredit Spa in Moscow. Carry Trades The ruble is appreciating as investor appetite for emerging market assets returns. “Currency appreciation in emerging markets has been particularly strong this year,” Nouriel Roubini , professor at the Stern Business School at New York University, wrote in an opinion piece about Latin American markets published on Forbes Magazine’s Web site yesterday. “Policy makers need to figure out how to avoid losing international competitiveness.” Emerging market equity funds drew in a net $2.2 billion in the week ended Oct. 28, EPFR Global said. Gains this week took the total inflows for the year to a record $64 billion, according to estimates by Morgan Stanley. Even so, this week’s emerging capital flows suggest investors are less keen to pursue high-yielding assets than they were a week earlier. Carry Trades Russian equity funds posted net outflows of $43 million in the seven days to Oct. 28 after drawing a record $450 million a week earlier, the most since EPFR began tracking data in the first quarter of 2002. “The recent bout of risk aversion, if prolonged, will also help calm the Russian central bank’s fears about the speculative inflows build-up,” Goldman Sachs Group Inc. economist Anna Zadornova said in an e-mailed note. As a carry trade, in which investors borrow funds in a country with low interest rates and invest where rates are higher, the ruble is still attractive, said Peter Westin , chief strategist at Moscow-based brokerage Aton LLC. “Russia has one of the highest differences if you look at policy rates related, for example, to the U.S.,” Westin said. “Some central banks have started to introduce capital controls to stem inflows in the light of currency strengthening.” Russia’s central bank and government seem “to be reluctant to impose capital controls again but at the same time we should probably expect to see continued rate cuts in an effort to make inflows less attractive.” 1,000% Inflation The bank wants to stabilize the currency to allow it to move toward an inflation target by 2011. That goal will be difficult to achieve as long as the economy fails to wean itself off its commodity reliance, economists said. Inflation eased to an annual 10.7 percent in September from 11.6 percent in August. Slowing price growth marks a reversal for Russia, which is haunted by inflation rates in excess of 100 percent after its 1998 default and more than 1,000 percent after it abandoned central planning for market prices in the early 1990s. While the central bank’s ability to prevent the ruble’s ascent is limited as long as demand for oil mounts, Russian authorities have no choice but to signal their readiness to act, economists said. Message Needed “They really needed to convey some verbal messages and be more explicit about this,” said Osakovsky. President Dmitry Medvedev has called Russia’s oil dependence “humiliating” and has said he envisages a diversified economy in 15 years. Even so, with a global recovery driving up commodity demand , Russia may find it hard to stay committed to its goal of diversification. “I don’t think they’ll be against a relatively strong ruble,” said Credit Agricole’s Quijano-Evans. “The ruble has actually underperformed all other currencies in the region, except perhaps the Romanian leu now. So there’s potential for the ruble to appreciate from this level, and that’s independent of the central bank’s refinancing rate.” To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net . Alex Nicholson in Moscow at anicholson6@bloomberg.net .

Read the full article →

Russia’s Warning Against Speculative Inflows May Fall Victim to Oil Prices

October 30, 2009

By Alex Nicholson and Paul Abelsky Oct. 30 (Bloomberg) — The Russian central bank’s warning that it will use rate reductions to keep out speculative capital will probably fall victim to high oil prices, economists said. The bank yesterday cut the refinancing rate half a point to a record low 9.5 percent, partly aimed at “reducing the difference between short-term interest rates on the internal and external markets” to diminish “the attractiveness of short- term investments in Russian assets and stop the accumulation of risk on the stock and currency markets,” it said. Moscow-based Bank Rossii is struggling to stabilize the ruble and stem an appreciation that threatens to hurt exporters and stall economic recovery in the world’s biggest energy supplier. The bank bought more than $11 billion of currency this month, First Deputy Chairman Alexei Ulyukayev said on Oct. 23. Russia’s currency reserves , the world’s third-biggest stockpile, rose to $429.3 billion this week, the highest this year. The bank’s warning “will keep investors wary, but in the case of Russia, if oil rests this side of $60 a barrel, which isn’t difficult to envisage, then obviously we will see continued capital inflow,” said Simon Quijano-Evans , head of emerging-markets strategy at Credit Agricole Cheuvreux in Vienna. “It’s the first warning that they don’t want to see massive inflows of short-term portfolio investments occurring.” Risk Appetite Urals crude, Russia’s key export, has gained more than 80 percent this year and was trading at $77.09 a barrel yesterday. Oil makes up 30 percent of gross domestic product. The central bank uses foreign exchange transactions to steer the ruble against a basket of dollars and euros. Prime Minister Vladimir Putin said last month preventing a ruble appreciation remains one of the government’s objectives. Even so, the ruble is the fifth-best performer against the euro and the dollar since the end of June of the 26 emerging market currencies tracked by Bloomberg. It’s gained 7.2 percent against the dollar and 1.4 percent against the euro in the period. The Russian currency gained 0.5 percent to 29.0700 per dollar at the start of trading in Moscow today and was little changed against the euro. Rising crude prices coupled with “a renewed inclination of investors to take risks” required currency purchases to prevent “a sharp strengthening of the ruble,” the central bank said. “Clearly the currency is more influenced by things like the oil price and global capital flows and global risk aversion,” said Vladimir Osakovsky an economist at UniCredit Spa in Moscow. Carry Trades The ruble is appreciating as investor appetite for emerging market assets returns. “Currency appreciation in emerging markets has been particularly strong this year,” Nouriel Roubini , professor at the Stern Business School at New York University, wrote in an opinion piece about Latin American markets published on Forbes Magazine’s Web site yesterday. “Policy makers need to figure out how to avoid losing international competitiveness.” Emerging market equity funds drew in a net $2.2 billion in the week ended Oct. 28, EPFR Global said. Gains this week took the total inflows for the year to a record $64 billion, according to estimates by Morgan Stanley. Even so, this week’s emerging capital flows suggest investors are less keen to pursue high-yielding assets than they were a week earlier. Carry Trades Russian equity funds posted net outflows of $43 million in the seven days to Oct. 28 after drawing a record $450 million a week earlier, the most since EPFR began tracking data in the first quarter of 2002. “The recent bout of risk aversion, if prolonged, will also help calm the Russian central bank’s fears about the speculative inflows build-up,” Goldman Sachs Group Inc. economist Anna Zadornova said in an e-mailed note. As a carry trade, in which investors borrow funds in a country with low interest rates and invest where rates are higher, the ruble is still attractive, said Peter Westin , chief strategist at Moscow-based brokerage Aton LLC. “Russia has one of the highest differences if you look at policy rates related, for example, to the U.S.,” Westin said. “Some central banks have started to introduce capital controls to stem inflows in the light of currency strengthening.” Russia’s central bank and government seem “to be reluctant to impose capital controls again but at the same time we should probably expect to see continued rate cuts in an effort to make inflows less attractive.” 1,000% Inflation The bank wants to stabilize the currency to allow it to move toward an inflation target by 2011. That goal will be difficult to achieve as long as the economy fails to wean itself off its commodity reliance, economists said. Inflation eased to an annual 10.7 percent in September from 11.6 percent in August. Slowing price growth marks a reversal for Russia, which is haunted by inflation rates in excess of 100 percent after its 1998 default and more than 1,000 percent after it abandoned central planning for market prices in the early 1990s. While the central bank’s ability to prevent the ruble’s ascent is limited as long as demand for oil mounts, Russian authorities have no choice but to signal their readiness to act, economists said. Message Needed “They really needed to convey some verbal messages and be more explicit about this,” said Osakovsky. President Dmitry Medvedev has called Russia’s oil dependence “humiliating” and has said he envisages a diversified economy in 15 years. Even so, with a global recovery driving up commodity demand , Russia may find it hard to stay committed to its goal of diversification. “I don’t think they’ll be against a relatively strong ruble,” said Credit Agricole’s Quijano-Evans. “The ruble has actually underperformed all other currencies in the region, except perhaps the Romanian leu now. So there’s potential for the ruble to appreciate from this level, and that’s independent of the central bank’s refinancing rate.” To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net . Alex Nicholson in Moscow at anicholson6@bloomberg.net .

Read the full article →

Russia’s Warning Against Speculative Inflows May Fall Victim to Oil Prices

October 30, 2009

By Alex Nicholson and Paul Abelsky Oct. 30 (Bloomberg) — The Russian central bank’s warning that it will use rate reductions to keep out speculative capital will probably fall victim to high oil prices, economists said. The bank yesterday cut the refinancing rate half a point to a record low 9.5 percent, partly aimed at “reducing the difference between short-term interest rates on the internal and external markets” to diminish “the attractiveness of short- term investments in Russian assets and stop the accumulation of risk on the stock and currency markets,” it said. Moscow-based Bank Rossii is struggling to stabilize the ruble and stem an appreciation that threatens to hurt exporters and stall economic recovery in the world’s biggest energy supplier. The bank bought more than $11 billion of currency this month, First Deputy Chairman Alexei Ulyukayev said on Oct. 23. Russia’s currency reserves , the world’s third-biggest stockpile, rose to $429.3 billion this week, the highest this year. The bank’s warning “will keep investors wary, but in the case of Russia, if oil rests this side of $60 a barrel, which isn’t difficult to envisage, then obviously we will see continued capital inflow,” said Simon Quijano-Evans , head of emerging-markets strategy at Credit Agricole Cheuvreux in Vienna. “It’s the first warning that they don’t want to see massive inflows of short-term portfolio investments occurring.” Risk Appetite Urals crude, Russia’s key export, has gained more than 80 percent this year and was trading at $77.09 a barrel yesterday. Oil makes up 30 percent of gross domestic product. The central bank uses foreign exchange transactions to steer the ruble against a basket of dollars and euros. Prime Minister Vladimir Putin said last month preventing a ruble appreciation remains one of the government’s objectives. Even so, the ruble is the fifth-best performer against the euro and the dollar since the end of June of the 26 emerging market currencies tracked by Bloomberg. It’s gained 7.2 percent against the dollar and 1.4 percent against the euro in the period. The Russian currency gained 0.5 percent to 29.0700 per dollar at the start of trading in Moscow today and was little changed against the euro. Rising crude prices coupled with “a renewed inclination of investors to take risks” required currency purchases to prevent “a sharp strengthening of the ruble,” the central bank said. “Clearly the currency is more influenced by things like the oil price and global capital flows and global risk aversion,” said Vladimir Osakovsky an economist at UniCredit Spa in Moscow. Carry Trades The ruble is appreciating as investor appetite for emerging market assets returns. “Currency appreciation in emerging markets has been particularly strong this year,” Nouriel Roubini , professor at the Stern Business School at New York University, wrote in an opinion piece about Latin American markets published on Forbes Magazine’s Web site yesterday. “Policy makers need to figure out how to avoid losing international competitiveness.” Emerging market equity funds drew in a net $2.2 billion in the week ended Oct. 28, EPFR Global said. Gains this week took the total inflows for the year to a record $64 billion, according to estimates by Morgan Stanley. Even so, this week’s emerging capital flows suggest investors are less keen to pursue high-yielding assets than they were a week earlier. Carry Trades Russian equity funds posted net outflows of $43 million in the seven days to Oct. 28 after drawing a record $450 million a week earlier, the most since EPFR began tracking data in the first quarter of 2002. “The recent bout of risk aversion, if prolonged, will also help calm the Russian central bank’s fears about the speculative inflows build-up,” Goldman Sachs Group Inc. economist Anna Zadornova said in an e-mailed note. As a carry trade, in which investors borrow funds in a country with low interest rates and invest where rates are higher, the ruble is still attractive, said Peter Westin , chief strategist at Moscow-based brokerage Aton LLC. “Russia has one of the highest differences if you look at policy rates related, for example, to the U.S.,” Westin said. “Some central banks have started to introduce capital controls to stem inflows in the light of currency strengthening.” Russia’s central bank and government seem “to be reluctant to impose capital controls again but at the same time we should probably expect to see continued rate cuts in an effort to make inflows less attractive.” 1,000% Inflation The bank wants to stabilize the currency to allow it to move toward an inflation target by 2011. That goal will be difficult to achieve as long as the economy fails to wean itself off its commodity reliance, economists said. Inflation eased to an annual 10.7 percent in September from 11.6 percent in August. Slowing price growth marks a reversal for Russia, which is haunted by inflation rates in excess of 100 percent after its 1998 default and more than 1,000 percent after it abandoned central planning for market prices in the early 1990s. While the central bank’s ability to prevent the ruble’s ascent is limited as long as demand for oil mounts, Russian authorities have no choice but to signal their readiness to act, economists said. Message Needed “They really needed to convey some verbal messages and be more explicit about this,” said Osakovsky. President Dmitry Medvedev has called Russia’s oil dependence “humiliating” and has said he envisages a diversified economy in 15 years. Even so, with a global recovery driving up commodity demand , Russia may find it hard to stay committed to its goal of diversification. “I don’t think they’ll be against a relatively strong ruble,” said Credit Agricole’s Quijano-Evans. “The ruble has actually underperformed all other currencies in the region, except perhaps the Romanian leu now. So there’s potential for the ruble to appreciate from this level, and that’s independent of the central bank’s refinancing rate.” To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net . Alex Nicholson in Moscow at anicholson6@bloomberg.net .

Read the full article →

`Bill Gates of Belgium’ Fights SAP From Farmhouse as Free Software Spreads

October 30, 2009

By Matthew Campbell and Stephanie Bodoni Oct. 30 (Bloomberg) — To find the latest threat to business-software makers like SAP AG and Oracle Corp. , go to an unlikely location: a 150-year-old farmhouse in Belgium. That’s where closely held Tiny Sprl, run by 30-year-old Fabien Pinckaers, develops free business applications that are picking up customers during the recession. The economic “crisis has been very good for me,” Pinckaers said in an interview at the farm in Grand-Rosiere. “Restructuring is very good for enterprise resource planning.” Free programs such as Linux first challenged Microsoft Corp. in software that runs personal computers. Linux has gradually gained enough acceptance that government agencies and even some corporations are willing to try such programs for some of their most important tasks: applications that run billing, payroll and purchasing. That’s been the province of SAP and Oracle, whose products can carry list prices of thousands of dollars per user. Tiny, Openbravo SL and other open-source software providers write programs that are often given away and can be modified by users, not just their authors. The providers make money by charging for maintenance and services. Open-source applications and related services will drive $19 billion of revenue away from traditional, proprietary suppliers in 2012, rising from $7 billion now, according to researcher Gartner Inc. “It ain’t hippie idealism anymore,” said Brent Williams , an analyst at Benchmark Co. in New York. Tiny’s Business Pinckaers, who business magazine Trends said may be “the Bill Gates of Belgium,” predicts revenue will rise to 10.5 million euros ($15.6 million) in 2011 from 600,000 euros in the first half of this year. Tiny’s client list includes France’s postal service and L’Ecole Nationale d’Administration , an elite French university. Tiny’s Open ERP software manages purchasing, human resources and other administrative tasks. Requests for the software have increased by about 20 percent every two months since January, Pinckaers said. Like the Linux open-source operating system, created in Helsinki, Pinckaers’ seven-year-old Tiny may build influence from a headquarters far from Silicon Valley. Pinckaers chose the company’s farmhouse in rural Belgium for its proximity to the Universite Catholique de Louvain, which has a large computer- science department. Tiny has about 75 employees. Pinckaers said he is open to a takeover of Tiny “not today, because I still have a lot of things to do, but in four or five years.” Meanwhile, Tiny will arrange 4 million euros of venture-capital investment by the end of the year, he said. ‘Feeling the Pinch’ Certainly, open-source is a small part of the software market, and these programs sometimes don’t have all the features that can be found in proprietary applications made by traditional suppliers. Still, some analysts said SAP , the world’s biggest maker of business management software, is starting to feel the pinch. Walldorf, Germany-based SAP this week cut its sales forecast as clients in emerging markets and Japan spent less than it anticipated. Software and related service revenue will fall between 6 percent and 8 percent in 2009 before some items. In July, it had predicted the drop would be 4 percent to 6 percent. “When there is an alternative to paying for a license, people will look at it very seriously,” said Jonathan Crozier , an analyst at WestLB Equity Markets in London. “That’s catching up a bit with SAP.” RedHat Revenue The phenomenon started in operating systems, where RedHat Inc., the biggest seller of software based on the open-source Linux program, has picked up corporate customers including Whole Foods Market Inc., Banco Pastor SA in Spain and Union Bank in the U.S. RedHat’s second-quarter revenue rose 12 percent as it attracted clients away from Microsoft and Sun Microsystems Inc. “Prior to the fourth quarter of last year we were seeing some sporadic, slow but solid growth in certain areas of open source,” said Laurie Wurster, a Gartner analyst in Milford, New Hampshire. “Now, open-source producers are getting more interest from companies that wouldn’t even have considered them in the past.” Oracle didn’t respond to a call from Bloomberg News seeking comment. SAP isn’t being hurt by open-source applications, Chief Executive Officer Leo Apotheker said on a conference call this week after giving the forecast. “There is no negative effect from open-source software on our business,” he said. SAP supports open-source software in “certain domains,” so “you’ll find many customers running our software on open- source and we certainly welcome that,” Apotheker said. “For example, we do it for our midsize offering All-In-One. So I think open software is one of the supply chain elements of any software that the customer can run.” Market Openings Still, it may be difficult for established software companies to adapt, said Ken Allen , a portfolio manager at Baltimore-based T. Rowe Price Group Inc., the seventh-biggest institutional holder of Microsoft shares . “Like many types of disruptions, it’s hard for the incumbent companies to harvest them as they’d like,” leaving openings for new market entrants, he said. — With assistance from Simon Thiel in London. Editors: Robert Valpuesta , Cesca Antonelli . To contact the reporters on this story: Matthew Campbell in London at mcampbell39@bloomberg.net ; Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

Read the full article →

`Bill Gates of Belgium’ Fights SAP From Farmhouse as Free Software Spreads

October 30, 2009

By Matthew Campbell and Stephanie Bodoni Oct. 30 (Bloomberg) — To find the latest threat to business-software makers like SAP AG and Oracle Corp. , go to an unlikely location: a 150-year-old farmhouse in Belgium. That’s where closely held Tiny Sprl, run by 30-year-old Fabien Pinckaers, develops free business applications that are picking up customers during the recession. The economic “crisis has been very good for me,” Pinckaers said in an interview at the farm in Grand-Rosiere. “Restructuring is very good for enterprise resource planning.” Free programs such as Linux first challenged Microsoft Corp. in software that runs personal computers. Linux has gradually gained enough acceptance that government agencies and even some corporations are willing to try such programs for some of their most important tasks: applications that run billing, payroll and purchasing. That’s been the province of SAP and Oracle, whose products can carry list prices of thousands of dollars per user. Tiny, Openbravo SL and other open-source software providers write programs that are often given away and can be modified by users, not just their authors. The providers make money by charging for maintenance and services. Open-source applications and related services will drive $19 billion of revenue away from traditional, proprietary suppliers in 2012, rising from $7 billion now, according to researcher Gartner Inc. “It ain’t hippie idealism anymore,” said Brent Williams , an analyst at Benchmark Co. in New York. Tiny’s Business Pinckaers, who business magazine Trends said may be “the Bill Gates of Belgium,” predicts revenue will rise to 10.5 million euros ($15.6 million) in 2011 from 600,000 euros in the first half of this year. Tiny’s client list includes France’s postal service and L’Ecole Nationale d’Administration , an elite French university. Tiny’s Open ERP software manages purchasing, human resources and other administrative tasks. Requests for the software have increased by about 20 percent every two months since January, Pinckaers said. Like the Linux open-source operating system, created in Helsinki, Pinckaers’ seven-year-old Tiny may build influence from a headquarters far from Silicon Valley. Pinckaers chose the company’s farmhouse in rural Belgium for its proximity to the Universite Catholique de Louvain, which has a large computer- science department. Tiny has about 75 employees. Pinckaers said he is open to a takeover of Tiny “not today, because I still have a lot of things to do, but in four or five years.” Meanwhile, Tiny will arrange 4 million euros of venture-capital investment by the end of the year, he said. ‘Feeling the Pinch’ Certainly, open-source is a small part of the software market, and these programs sometimes don’t have all the features that can be found in proprietary applications made by traditional suppliers. Still, some analysts said SAP , the world’s biggest maker of business management software, is starting to feel the pinch. Walldorf, Germany-based SAP this week cut its sales forecast as clients in emerging markets and Japan spent less than it anticipated. Software and related service revenue will fall between 6 percent and 8 percent in 2009 before some items. In July, it had predicted the drop would be 4 percent to 6 percent. “When there is an alternative to paying for a license, people will look at it very seriously,” said Jonathan Crozier , an analyst at WestLB Equity Markets in London. “That’s catching up a bit with SAP.” RedHat Revenue The phenomenon started in operating systems, where RedHat Inc., the biggest seller of software based on the open-source Linux program, has picked up corporate customers including Whole Foods Market Inc., Banco Pastor SA in Spain and Union Bank in the U.S. RedHat’s second-quarter revenue rose 12 percent as it attracted clients away from Microsoft and Sun Microsystems Inc. “Prior to the fourth quarter of last year we were seeing some sporadic, slow but solid growth in certain areas of open source,” said Laurie Wurster, a Gartner analyst in Milford, New Hampshire. “Now, open-source producers are getting more interest from companies that wouldn’t even have considered them in the past.” Oracle didn’t respond to a call from Bloomberg News seeking comment. SAP isn’t being hurt by open-source applications, Chief Executive Officer Leo Apotheker said on a conference call this week after giving the forecast. “There is no negative effect from open-source software on our business,” he said. SAP supports open-source software in “certain domains,” so “you’ll find many customers running our software on open- source and we certainly welcome that,” Apotheker said. “For example, we do it for our midsize offering All-In-One. So I think open software is one of the supply chain elements of any software that the customer can run.” Market Openings Still, it may be difficult for established software companies to adapt, said Ken Allen , a portfolio manager at Baltimore-based T. Rowe Price Group Inc., the seventh-biggest institutional holder of Microsoft shares . “Like many types of disruptions, it’s hard for the incumbent companies to harvest them as they’d like,” leaving openings for new market entrants, he said. — With assistance from Simon Thiel in London. Editors: Robert Valpuesta , Cesca Antonelli . To contact the reporters on this story: Matthew Campbell in London at mcampbell39@bloomberg.net ; Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

Read the full article →

`Bill Gates of Belgium’ Fights SAP From Farmhouse as Free Software Spreads

October 30, 2009

By Matthew Campbell and Stephanie Bodoni Oct. 30 (Bloomberg) — To find the latest threat to business-software makers like SAP AG and Oracle Corp. , go to an unlikely location: a 150-year-old farmhouse in Belgium. That’s where closely held Tiny Sprl, run by 30-year-old Fabien Pinckaers, develops free business applications that are picking up customers during the recession. The economic “crisis has been very good for me,” Pinckaers said in an interview at the farm in Grand-Rosiere. “Restructuring is very good for enterprise resource planning.” Free programs such as Linux first challenged Microsoft Corp. in software that runs personal computers. Linux has gradually gained enough acceptance that government agencies and even some corporations are willing to try such programs for some of their most important tasks: applications that run billing, payroll and purchasing. That’s been the province of SAP and Oracle, whose products can carry list prices of thousands of dollars per user. Tiny, Openbravo SL and other open-source software providers write programs that are often given away and can be modified by users, not just their authors. The providers make money by charging for maintenance and services. Open-source applications and related services will drive $19 billion of revenue away from traditional, proprietary suppliers in 2012, rising from $7 billion now, according to researcher Gartner Inc. “It ain’t hippie idealism anymore,” said Brent Williams , an analyst at Benchmark Co. in New York. Tiny’s Business Pinckaers, who business magazine Trends said may be “the Bill Gates of Belgium,” predicts revenue will rise to 10.5 million euros ($15.6 million) in 2011 from 600,000 euros in the first half of this year. Tiny’s client list includes France’s postal service and L’Ecole Nationale d’Administration , an elite French university. Tiny’s Open ERP software manages purchasing, human resources and other administrative tasks. Requests for the software have increased by about 20 percent every two months since January, Pinckaers said. Like the Linux open-source operating system, created in Helsinki, Pinckaers’ seven-year-old Tiny may build influence from a headquarters far from Silicon Valley. Pinckaers chose the company’s farmhouse in rural Belgium for its proximity to the Universite Catholique de Louvain, which has a large computer- science department. Tiny has about 75 employees. Pinckaers said he is open to a takeover of Tiny “not today, because I still have a lot of things to do, but in four or five years.” Meanwhile, Tiny will arrange 4 million euros of venture-capital investment by the end of the year, he said. ‘Feeling the Pinch’ Certainly, open-source is a small part of the software market, and these programs sometimes don’t have all the features that can be found in proprietary applications made by traditional suppliers. Still, some analysts said SAP , the world’s biggest maker of business management software, is starting to feel the pinch. Walldorf, Germany-based SAP this week cut its sales forecast as clients in emerging markets and Japan spent less than it anticipated. Software and related service revenue will fall between 6 percent and 8 percent in 2009 before some items. In July, it had predicted the drop would be 4 percent to 6 percent. “When there is an alternative to paying for a license, people will look at it very seriously,” said Jonathan Crozier , an analyst at WestLB Equity Markets in London. “That’s catching up a bit with SAP.” RedHat Revenue The phenomenon started in operating systems, where RedHat Inc., the biggest seller of software based on the open-source Linux program, has picked up corporate customers including Whole Foods Market Inc., Banco Pastor SA in Spain and Union Bank in the U.S. RedHat’s second-quarter revenue rose 12 percent as it attracted clients away from Microsoft and Sun Microsystems Inc. “Prior to the fourth quarter of last year we were seeing some sporadic, slow but solid growth in certain areas of open source,” said Laurie Wurster, a Gartner analyst in Milford, New Hampshire. “Now, open-source producers are getting more interest from companies that wouldn’t even have considered them in the past.” Oracle didn’t respond to a call from Bloomberg News seeking comment. SAP isn’t being hurt by open-source applications, Chief Executive Officer Leo Apotheker said on a conference call this week after giving the forecast. “There is no negative effect from open-source software on our business,” he said. SAP supports open-source software in “certain domains,” so “you’ll find many customers running our software on open- source and we certainly welcome that,” Apotheker said. “For example, we do it for our midsize offering All-In-One. So I think open software is one of the supply chain elements of any software that the customer can run.” Market Openings Still, it may be difficult for established software companies to adapt, said Ken Allen , a portfolio manager at Baltimore-based T. Rowe Price Group Inc., the seventh-biggest institutional holder of Microsoft shares . “Like many types of disruptions, it’s hard for the incumbent companies to harvest them as they’d like,” leaving openings for new market entrants, he said. — With assistance from Simon Thiel in London. Editors: Robert Valpuesta , Cesca Antonelli . To contact the reporters on this story: Matthew Campbell in London at mcampbell39@bloomberg.net ; Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

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Honduran Congress to Have Final Say on Return of Ousted President Zelaya

October 30, 2009

By Blake Schmidt Oct. 30 (Bloomberg) — Acting Honduran President Roberto Micheletti said he will allow Congress to decide on whether ousted leader Manuel Zelaya can return to power, in a move that may end the country’s four-month political crisis. “My government has decided to support a proposal that allows a vote in Congress ,” Micheletti said in a statement late yesterday, adding it was a “significant concession” on his part. Zelaya, who was ousted at gunpoint by soldiers in late June, supports the agreement, Juan Barahona, a protest leader and former negotiator for the ousted leader, said in a telephone interview. Talks to end the country’s crisis had stalled on which state power has the final say on whether Zelaya should be restored to serve the remainder of his term, which ends in January. Zelaya had earlier rejected a proposal by the acting government that would give the Supreme Court ultimate jurisdiction over his return and wanted legislators to resolve the matter. U.S. Secretary of State Hillary Clinton welcomed the “historic” agreement and praised both sides for seeking to resolve the political crisis peacefully. “I cannot think of another example of a country in Latin America that having suffered a rupture of its democratic and constitutional order overcame such a crisis through negotiation and dialogue,” Clinton, who is on a three-day visit to Pakistan, told reporters. U.S. officials headed by the State Department’s top Latin America diplomat, Thomas Shannon , visited Honduras this week to jump-start the deadlocked talks. Supreme Court Under the new accord, Congress would have the final say on Zelaya’s restitution, though not before considering the opinion of the Supreme Court, Micheletti said in the statement. Barahona said the question remains whether Zelaya could be restored before Nov. 29 elections, as the U.S., European Union and Latin American countries have demanded. “On which day will the president be back in the presidential palace?” he asked. “The chronology must still be defined.” The military took Zelaya out of the country on June 28 after he ignored court orders to stop pursuing a referendum that would ask Hondurans if they wanted an assembly to rewrite the constitution. Opponents said Zelaya sought to change rules to allow himself to run for another term as president. Leaders across the Western Hemisphere, including President Barack Obama and Hugo Chavez of Venezuela, support Zelaya’s return to power. The ousted leader returned from exile more than a month ago and took refuge in the Brazilian embassy in Tegucigalpa. Constitutional Change Zelaya has better chances of returning to office by seeking Congressional approval rather than that of the Supreme Court, Barahona said. The court earlier this year ruled Zelaya’s push for constitutional change was illegal and ordered his arrest. Congress has passed resolutions pledging to support an agreement that comes from talks. Still, opposition lawmakers could filibuster Zelaya’s return until after the elections, Antonio Rivera, the second highest ranking lawmaker for the National Party , said in an interview. Congress opened an investigation into whether Zelaya was mentally fit to govern before his ouster, voted to disapprove the leader’s violations of the constitution and replaced him with Micheletti after he was ousted. “I really don’t understand why Zelaya wants to take this to Congress,” Rivera said. To contact the reporter on this story: Blake Schmidt in Tegucigalpa at bschmidt16@bloomberg.net .

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Russia’s Warning Against Speculative Inflows May Fall Victim to Oil Price

October 30, 2009

By Alex Nicholson and Paul Abelsky Oct. 30 (Bloomberg) — The Russian central bank’s warning that it will use rate reductions to keep out speculative capital will probably fall victim to high oil prices, economists said. The bank yesterday cut the refinancing rate half a point to a record low 9.5 percent, partly aimed at “reducing the difference between short-term interest rates on the internal and external markets” to diminish “the attractiveness of short- term investments in Russian assets and stop the accumulation of risk on the stock and currency markets,” it said. Moscow-based Bank Rossii is struggling to stabilize the ruble and stem an appreciation that threatens to hurt exporters and stall economic recovery in the world’s biggest energy supplier. The bank bought more than $11 billion of currency this month, First Deputy Chairman Alexei Ulyukayev said on Oct. 23. Russia’s currency reserves , the world’s third-biggest stockpile, rose to $429.3 billion this week, the highest this year. The bank’s warning “will keep investors wary, but in the case of Russia, if oil rests this side of $60 a barrel, which isn’t difficult to envisage, then obviously we will see continued capital inflow,” said Simon Quijano-Evans , head of emerging-markets strategy at Credit Agricole Cheuvreux in Vienna. “It’s the first warning that they don’t want to see massive inflows of short-term portfolio investments occurring.” Risk Appetite Urals crude, Russia’s key export, has gained more than 80 percent this year and was trading at $77.09 a barrel yesterday. Oil makes up 30 percent of gross domestic product. The central bank uses foreign exchange transactions to steer the ruble against a basket of dollars and euros. Prime Minister Vladimir Putin said last month preventing a ruble appreciation remains one of the government’s objectives. Even so, the ruble is the fifth-best performer against the euro and the dollar since the end of June of the 26 emerging market currencies tracked by Bloomberg. It’s gained 7.2 percent against the dollar and 1.4 percent against the euro in the period. The Russian currency gained 0.5 percent to 29.0700 per dollar at the start of trading in Moscow today and was little changed against the euro. Rising crude prices coupled with “a renewed inclination of investors to take risks” required currency purchases to prevent “a sharp strengthening of the ruble,” the central bank said. “Clearly the currency is more influenced by things like the oil price and global capital flows and global risk aversion,” said Vladimir Osakovsky an economist at UniCredit Spa in Moscow. Carry Trades The ruble is appreciating as investor appetite for emerging market assets returns. “Currency appreciation in emerging markets has been particularly strong this year,” Nouriel Roubini , professor at the Stern Business School at New York University, wrote in an opinion piece about Latin American markets published on Forbes Magazine’s Web site yesterday. “Policy makers need to figure out how to avoid losing international competitiveness.” Emerging market equity funds drew in a net $2.2 billion in the week ended Oct. 28, EPFR Global said. Gains this week took the total inflows for the year to a record $64 billion, according to estimates by Morgan Stanley. Even so, this week’s emerging capital flows suggest investors are less keen to pursue high-yielding assets than they were a week earlier. Carry Trades Russian equity funds posted net outflows of $43 million in the seven days to Oct. 28 after drawing a record $450 million a week earlier, the most since EPFR began tracking data in the first quarter of 2002. “The recent bout of risk aversion, if prolonged, will also help calm the Russian central bank’s fears about the speculative inflows build-up,” Goldman Sachs Group Inc. economist Anna Zadornova said in an e-mailed note. As a carry trade, in which investors borrow funds in a country with low interest rates and invest where rates are higher, the ruble is still attractive, said Peter Westin , chief strategist at Moscow-based brokerage Aton LLC. “Russia has one of the highest differences if you look at policy rates related, for example, to the U.S.,” Westin said. “Some central banks have started to introduce capital controls to stem inflows in the light of currency strengthening.” Russia’s central bank and government seem “to be reluctant to impose capital controls again but at the same time we should probably expect to see continued rate cuts in an effort to make inflows less attractive.” 1,000% Inflation The bank wants to stabilize the currency to allow it to move toward an inflation target by 2011. That goal will be difficult to achieve as long as the economy fails to wean itself off its commodity reliance, economists said. Inflation eased to an annual 10.7 percent in September from 11.6 percent in August. Slowing price growth marks a reversal for Russia, which is haunted by inflation rates in excess of 100 percent after its 1998 default and more than 1,000 percent after it abandoned central planning for market prices in the early 1990s. While the central bank’s ability to prevent the ruble’s ascent is limited as long as demand for oil mounts, Russian authorities have no choice but to signal their readiness to act, economists said. Message Needed “They really needed to convey some verbal messages and be more explicit about this,” said Osakovsky. President Dmitry Medvedev has called Russia’s oil dependence “humiliating” and has said he envisages a diversified economy in 15 years. Even so, with a global recovery driving up commodity demand , Russia may find it hard to stay committed to its goal of diversification. “I don’t think they’ll be against a relatively strong ruble,” said Credit Agricole’s Quijano-Evans. “The ruble has actually underperformed all other currencies in the region, except perhaps the Romanian leu now. So there’s potential for the ruble to appreciate from this level, and that’s independent of the central bank’s refinancing rate.” To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net . Alex Nicholson in Moscow at anicholson6@bloomberg.net .

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Russia’s Warning Against Speculative Inflows May Fall Victim to Oil Price

October 30, 2009

By Alex Nicholson and Paul Abelsky Oct. 30 (Bloomberg) — The Russian central bank’s warning that it will use rate reductions to keep out speculative capital will probably fall victim to high oil prices, economists said. The bank yesterday cut the refinancing rate half a point to a record low 9.5 percent, partly aimed at “reducing the difference between short-term interest rates on the internal and external markets” to diminish “the attractiveness of short- term investments in Russian assets and stop the accumulation of risk on the stock and currency markets,” it said. Moscow-based Bank Rossii is struggling to stabilize the ruble and stem an appreciation that threatens to hurt exporters and stall economic recovery in the world’s biggest energy supplier. The bank bought more than $11 billion of currency this month, First Deputy Chairman Alexei Ulyukayev said on Oct. 23. Russia’s currency reserves , the world’s third-biggest stockpile, rose to $429.3 billion this week, the highest this year. The bank’s warning “will keep investors wary, but in the case of Russia, if oil rests this side of $60 a barrel, which isn’t difficult to envisage, then obviously we will see continued capital inflow,” said Simon Quijano-Evans , head of emerging-markets strategy at Credit Agricole Cheuvreux in Vienna. “It’s the first warning that they don’t want to see massive inflows of short-term portfolio investments occurring.” Risk Appetite Urals crude, Russia’s key export, has gained more than 80 percent this year and was trading at $77.09 a barrel yesterday. Oil makes up 30 percent of gross domestic product. The central bank uses foreign exchange transactions to steer the ruble against a basket of dollars and euros. Prime Minister Vladimir Putin said last month preventing a ruble appreciation remains one of the government’s objectives. Even so, the ruble is the fifth-best performer against the euro and the dollar since the end of June of the 26 emerging market currencies tracked by Bloomberg. It’s gained 7.2 percent against the dollar and 1.4 percent against the euro in the period. The Russian currency gained 0.5 percent to 29.0700 per dollar at the start of trading in Moscow today and was little changed against the euro. Rising crude prices coupled with “a renewed inclination of investors to take risks” required currency purchases to prevent “a sharp strengthening of the ruble,” the central bank said. “Clearly the currency is more influenced by things like the oil price and global capital flows and global risk aversion,” said Vladimir Osakovsky an economist at UniCredit Spa in Moscow. Carry Trades The ruble is appreciating as investor appetite for emerging market assets returns. “Currency appreciation in emerging markets has been particularly strong this year,” Nouriel Roubini , professor at the Stern Business School at New York University, wrote in an opinion piece about Latin American markets published on Forbes Magazine’s Web site yesterday. “Policy makers need to figure out how to avoid losing international competitiveness.” Emerging market equity funds drew in a net $2.2 billion in the week ended Oct. 28, EPFR Global said. Gains this week took the total inflows for the year to a record $64 billion, according to estimates by Morgan Stanley. Even so, this week’s emerging capital flows suggest investors are less keen to pursue high-yielding assets than they were a week earlier. Carry Trades Russian equity funds posted net outflows of $43 million in the seven days to Oct. 28 after drawing a record $450 million a week earlier, the most since EPFR began tracking data in the first quarter of 2002. “The recent bout of risk aversion, if prolonged, will also help calm the Russian central bank’s fears about the speculative inflows build-up,” Goldman Sachs Group Inc. economist Anna Zadornova said in an e-mailed note. As a carry trade, in which investors borrow funds in a country with low interest rates and invest where rates are higher, the ruble is still attractive, said Peter Westin , chief strategist at Moscow-based brokerage Aton LLC. “Russia has one of the highest differences if you look at policy rates related, for example, to the U.S.,” Westin said. “Some central banks have started to introduce capital controls to stem inflows in the light of currency strengthening.” Russia’s central bank and government seem “to be reluctant to impose capital controls again but at the same time we should probably expect to see continued rate cuts in an effort to make inflows less attractive.” 1,000% Inflation The bank wants to stabilize the currency to allow it to move toward an inflation target by 2011. That goal will be difficult to achieve as long as the economy fails to wean itself off its commodity reliance, economists said. Inflation eased to an annual 10.7 percent in September from 11.6 percent in August. Slowing price growth marks a reversal for Russia, which is haunted by inflation rates in excess of 100 percent after its 1998 default and more than 1,000 percent after it abandoned central planning for market prices in the early 1990s. While the central bank’s ability to prevent the ruble’s ascent is limited as long as demand for oil mounts, Russian authorities have no choice but to signal their readiness to act, economists said. Message Needed “They really needed to convey some verbal messages and be more explicit about this,” said Osakovsky. President Dmitry Medvedev has called Russia’s oil dependence “humiliating” and has said he envisages a diversified economy in 15 years. Even so, with a global recovery driving up commodity demand , Russia may find it hard to stay committed to its goal of diversification. “I don’t think they’ll be against a relatively strong ruble,” said Credit Agricole’s Quijano-Evans. “The ruble has actually underperformed all other currencies in the region, except perhaps the Romanian leu now. So there’s potential for the ruble to appreciate from this level, and that’s independent of the central bank’s refinancing rate.” To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net . Alex Nicholson in Moscow at anicholson6@bloomberg.net .

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Russia’s Warning Against Speculative Inflows May Fall Victim to Oil Price

October 30, 2009

By Alex Nicholson and Paul Abelsky Oct. 30 (Bloomberg) — The Russian central bank’s warning that it will use rate reductions to keep out speculative capital will probably fall victim to high oil prices, economists said. The bank yesterday cut the refinancing rate half a point to a record low 9.5 percent, partly aimed at “reducing the difference between short-term interest rates on the internal and external markets” to diminish “the attractiveness of short- term investments in Russian assets and stop the accumulation of risk on the stock and currency markets,” it said. Moscow-based Bank Rossii is struggling to stabilize the ruble and stem an appreciation that threatens to hurt exporters and stall economic recovery in the world’s biggest energy supplier. The bank bought more than $11 billion of currency this month, First Deputy Chairman Alexei Ulyukayev said on Oct. 23. Russia’s currency reserves , the world’s third-biggest stockpile, rose to $429.3 billion this week, the highest this year. The bank’s warning “will keep investors wary, but in the case of Russia, if oil rests this side of $60 a barrel, which isn’t difficult to envisage, then obviously we will see continued capital inflow,” said Simon Quijano-Evans , head of emerging-markets strategy at Credit Agricole Cheuvreux in Vienna. “It’s the first warning that they don’t want to see massive inflows of short-term portfolio investments occurring.” Risk Appetite Urals crude, Russia’s key export, has gained more than 80 percent this year and was trading at $77.09 a barrel yesterday. Oil makes up 30 percent of gross domestic product. The central bank uses foreign exchange transactions to steer the ruble against a basket of dollars and euros. Prime Minister Vladimir Putin said last month preventing a ruble appreciation remains one of the government’s objectives. Even so, the ruble is the fifth-best performer against the euro and the dollar since the end of June of the 26 emerging market currencies tracked by Bloomberg. It’s gained 7.2 percent against the dollar and 1.4 percent against the euro in the period. The Russian currency gained 0.5 percent to 29.0700 per dollar at the start of trading in Moscow today and was little changed against the euro. Rising crude prices coupled with “a renewed inclination of investors to take risks” required currency purchases to prevent “a sharp strengthening of the ruble,” the central bank said. “Clearly the currency is more influenced by things like the oil price and global capital flows and global risk aversion,” said Vladimir Osakovsky an economist at UniCredit Spa in Moscow. Carry Trades The ruble is appreciating as investor appetite for emerging market assets returns. “Currency appreciation in emerging markets has been particularly strong this year,” Nouriel Roubini , professor at the Stern Business School at New York University, wrote in an opinion piece about Latin American markets published on Forbes Magazine’s Web site yesterday. “Policy makers need to figure out how to avoid losing international competitiveness.” Emerging market equity funds drew in a net $2.2 billion in the week ended Oct. 28, EPFR Global said. Gains this week took the total inflows for the year to a record $64 billion, according to estimates by Morgan Stanley. Even so, this week’s emerging capital flows suggest investors are less keen to pursue high-yielding assets than they were a week earlier. Carry Trades Russian equity funds posted net outflows of $43 million in the seven days to Oct. 28 after drawing a record $450 million a week earlier, the most since EPFR began tracking data in the first quarter of 2002. “The recent bout of risk aversion, if prolonged, will also help calm the Russian central bank’s fears about the speculative inflows build-up,” Goldman Sachs Group Inc. economist Anna Zadornova said in an e-mailed note. As a carry trade, in which investors borrow funds in a country with low interest rates and invest where rates are higher, the ruble is still attractive, said Peter Westin , chief strategist at Moscow-based brokerage Aton LLC. “Russia has one of the highest differences if you look at policy rates related, for example, to the U.S.,” Westin said. “Some central banks have started to introduce capital controls to stem inflows in the light of currency strengthening.” Russia’s central bank and government seem “to be reluctant to impose capital controls again but at the same time we should probably expect to see continued rate cuts in an effort to make inflows less attractive.” 1,000% Inflation The bank wants to stabilize the currency to allow it to move toward an inflation target by 2011. That goal will be difficult to achieve as long as the economy fails to wean itself off its commodity reliance, economists said. Inflation eased to an annual 10.7 percent in September from 11.6 percent in August. Slowing price growth marks a reversal for Russia, which is haunted by inflation rates in excess of 100 percent after its 1998 default and more than 1,000 percent after it abandoned central planning for market prices in the early 1990s. While the central bank’s ability to prevent the ruble’s ascent is limited as long as demand for oil mounts, Russian authorities have no choice but to signal their readiness to act, economists said. Message Needed “They really needed to convey some verbal messages and be more explicit about this,” said Osakovsky. President Dmitry Medvedev has called Russia’s oil dependence “humiliating” and has said he envisages a diversified economy in 15 years. Even so, with a global recovery driving up commodity demand , Russia may find it hard to stay committed to its goal of diversification. “I don’t think they’ll be against a relatively strong ruble,” said Credit Agricole’s Quijano-Evans. “The ruble has actually underperformed all other currencies in the region, except perhaps the Romanian leu now. So there’s potential for the ruble to appreciate from this level, and that’s independent of the central bank’s refinancing rate.” To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net . Alex Nicholson in Moscow at anicholson6@bloomberg.net .

Read the full article →

Russia’s Warning Against Speculative Inflows May Fall Victim to Oil Price

October 30, 2009

By Alex Nicholson and Paul Abelsky Oct. 30 (Bloomberg) — The Russian central bank’s warning that it will use rate reductions to keep out speculative capital will probably fall victim to high oil prices, economists said. The bank yesterday cut the refinancing rate half a point to a record low 9.5 percent, partly aimed at “reducing the difference between short-term interest rates on the internal and external markets” to diminish “the attractiveness of short- term investments in Russian assets and stop the accumulation of risk on the stock and currency markets,” it said. Moscow-based Bank Rossii is struggling to stabilize the ruble and stem an appreciation that threatens to hurt exporters and stall economic recovery in the world’s biggest energy supplier. The bank bought more than $11 billion of currency this month, First Deputy Chairman Alexei Ulyukayev said on Oct. 23. Russia’s currency reserves , the world’s third-biggest stockpile, rose to $429.3 billion this week, the highest this year. The bank’s warning “will keep investors wary, but in the case of Russia, if oil rests this side of $60 a barrel, which isn’t difficult to envisage, then obviously we will see continued capital inflow,” said Simon Quijano-Evans , head of emerging-markets strategy at Credit Agricole Cheuvreux in Vienna. “It’s the first warning that they don’t want to see massive inflows of short-term portfolio investments occurring.” Risk Appetite Urals crude, Russia’s key export, has gained more than 80 percent this year and was trading at $77.09 a barrel yesterday. Oil makes up 30 percent of gross domestic product. The central bank uses foreign exchange transactions to steer the ruble against a basket of dollars and euros. Prime Minister Vladimir Putin said last month preventing a ruble appreciation remains one of the government’s objectives. Even so, the ruble is the fifth-best performer against the euro and the dollar since the end of June of the 26 emerging market currencies tracked by Bloomberg. It’s gained 7.2 percent against the dollar and 1.4 percent against the euro in the period. The Russian currency gained 0.5 percent to 29.0700 per dollar at the start of trading in Moscow today and was little changed against the euro. Rising crude prices coupled with “a renewed inclination of investors to take risks” required currency purchases to prevent “a sharp strengthening of the ruble,” the central bank said. “Clearly the currency is more influenced by things like the oil price and global capital flows and global risk aversion,” said Vladimir Osakovsky an economist at UniCredit Spa in Moscow. Carry Trades The ruble is appreciating as investor appetite for emerging market assets returns. “Currency appreciation in emerging markets has been particularly strong this year,” Nouriel Roubini , professor at the Stern Business School at New York University, wrote in an opinion piece about Latin American markets published on Forbes Magazine’s Web site yesterday. “Policy makers need to figure out how to avoid losing international competitiveness.” Emerging market equity funds drew in a net $2.2 billion in the week ended Oct. 28, EPFR Global said. Gains this week took the total inflows for the year to a record $64 billion, according to estimates by Morgan Stanley. Even so, this week’s emerging capital flows suggest investors are less keen to pursue high-yielding assets than they were a week earlier. Carry Trades Russian equity funds posted net outflows of $43 million in the seven days to Oct. 28 after drawing a record $450 million a week earlier, the most since EPFR began tracking data in the first quarter of 2002. “The recent bout of risk aversion, if prolonged, will also help calm the Russian central bank’s fears about the speculative inflows build-up,” Goldman Sachs Group Inc. economist Anna Zadornova said in an e-mailed note. As a carry trade, in which investors borrow funds in a country with low interest rates and invest where rates are higher, the ruble is still attractive, said Peter Westin , chief strategist at Moscow-based brokerage Aton LLC. “Russia has one of the highest differences if you look at policy rates related, for example, to the U.S.,” Westin said. “Some central banks have started to introduce capital controls to stem inflows in the light of currency strengthening.” Russia’s central bank and government seem “to be reluctant to impose capital controls again but at the same time we should probably expect to see continued rate cuts in an effort to make inflows less attractive.” 1,000% Inflation The bank wants to stabilize the currency to allow it to move toward an inflation target by 2011. That goal will be difficult to achieve as long as the economy fails to wean itself off its commodity reliance, economists said. Inflation eased to an annual 10.7 percent in September from 11.6 percent in August. Slowing price growth marks a reversal for Russia, which is haunted by inflation rates in excess of 100 percent after its 1998 default and more than 1,000 percent after it abandoned central planning for market prices in the early 1990s. While the central bank’s ability to prevent the ruble’s ascent is limited as long as demand for oil mounts, Russian authorities have no choice but to signal their readiness to act, economists said. Message Needed “They really needed to convey some verbal messages and be more explicit about this,” said Osakovsky. President Dmitry Medvedev has called Russia’s oil dependence “humiliating” and has said he envisages a diversified economy in 15 years. Even so, with a global recovery driving up commodity demand , Russia may find it hard to stay committed to its goal of diversification. “I don’t think they’ll be against a relatively strong ruble,” said Credit Agricole’s Quijano-Evans. “The ruble has actually underperformed all other currencies in the region, except perhaps the Romanian leu now. So there’s potential for the ruble to appreciate from this level, and that’s independent of the central bank’s refinancing rate.” To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net . Alex Nicholson in Moscow at anicholson6@bloomberg.net .

Read the full article →

Russia’s Warning Against Speculative Inflows May Fall Victim to Oil Price

October 30, 2009

By Alex Nicholson and Paul Abelsky Oct. 30 (Bloomberg) — The Russian central bank’s warning that it will use rate reductions to keep out speculative capital will probably fall victim to high oil prices, economists said. The bank yesterday cut the refinancing rate half a point to a record low 9.5 percent, partly aimed at “reducing the difference between short-term interest rates on the internal and external markets” to diminish “the attractiveness of short- term investments in Russian assets and stop the accumulation of risk on the stock and currency markets,” it said. Moscow-based Bank Rossii is struggling to stabilize the ruble and stem an appreciation that threatens to hurt exporters and stall economic recovery in the world’s biggest energy supplier. The bank bought more than $11 billion of currency this month, First Deputy Chairman Alexei Ulyukayev said on Oct. 23. Russia’s currency reserves , the world’s third-biggest stockpile, rose to $429.3 billion this week, the highest this year. The bank’s warning “will keep investors wary, but in the case of Russia, if oil rests this side of $60 a barrel, which isn’t difficult to envisage, then obviously we will see continued capital inflow,” said Simon Quijano-Evans , head of emerging-markets strategy at Credit Agricole Cheuvreux in Vienna. “It’s the first warning that they don’t want to see massive inflows of short-term portfolio investments occurring.” Risk Appetite Urals crude, Russia’s key export, has gained more than 80 percent this year and was trading at $77.09 a barrel yesterday. Oil makes up 30 percent of gross domestic product. The central bank uses foreign exchange transactions to steer the ruble against a basket of dollars and euros. Prime Minister Vladimir Putin said last month preventing a ruble appreciation remains one of the government’s objectives. Even so, the ruble is the fifth-best performer against the euro and the dollar since the end of June of the 26 emerging market currencies tracked by Bloomberg. It’s gained 7.2 percent against the dollar and 1.4 percent against the euro in the period. The Russian currency gained 0.5 percent to 29.0700 per dollar at the start of trading in Moscow today and was little changed against the euro. Rising crude prices coupled with “a renewed inclination of investors to take risks” required currency purchases to prevent “a sharp strengthening of the ruble,” the central bank said. “Clearly the currency is more influenced by things like the oil price and global capital flows and global risk aversion,” said Vladimir Osakovsky an economist at UniCredit Spa in Moscow. Carry Trades The ruble is appreciating as investor appetite for emerging market assets returns. “Currency appreciation in emerging markets has been particularly strong this year,” Nouriel Roubini , professor at the Stern Business School at New York University, wrote in an opinion piece about Latin American markets published on Forbes Magazine’s Web site yesterday. “Policy makers need to figure out how to avoid losing international competitiveness.” Emerging market equity funds drew in a net $2.2 billion in the week ended Oct. 28, EPFR Global said. Gains this week took the total inflows for the year to a record $64 billion, according to estimates by Morgan Stanley. Even so, this week’s emerging capital flows suggest investors are less keen to pursue high-yielding assets than they were a week earlier. Carry Trades Russian equity funds posted net outflows of $43 million in the seven days to Oct. 28 after drawing a record $450 million a week earlier, the most since EPFR began tracking data in the first quarter of 2002. “The recent bout of risk aversion, if prolonged, will also help calm the Russian central bank’s fears about the speculative inflows build-up,” Goldman Sachs Group Inc. economist Anna Zadornova said in an e-mailed note. As a carry trade, in which investors borrow funds in a country with low interest rates and invest where rates are higher, the ruble is still attractive, said Peter Westin , chief strategist at Moscow-based brokerage Aton LLC. “Russia has one of the highest differences if you look at policy rates related, for example, to the U.S.,” Westin said. “Some central banks have started to introduce capital controls to stem inflows in the light of currency strengthening.” Russia’s central bank and government seem “to be reluctant to impose capital controls again but at the same time we should probably expect to see continued rate cuts in an effort to make inflows less attractive.” 1,000% Inflation The bank wants to stabilize the currency to allow it to move toward an inflation target by 2011. That goal will be difficult to achieve as long as the economy fails to wean itself off its commodity reliance, economists said. Inflation eased to an annual 10.7 percent in September from 11.6 percent in August. Slowing price growth marks a reversal for Russia, which is haunted by inflation rates in excess of 100 percent after its 1998 default and more than 1,000 percent after it abandoned central planning for market prices in the early 1990s. While the central bank’s ability to prevent the ruble’s ascent is limited as long as demand for oil mounts, Russian authorities have no choice but to signal their readiness to act, economists said. Message Needed “They really needed to convey some verbal messages and be more explicit about this,” said Osakovsky. President Dmitry Medvedev has called Russia’s oil dependence “humiliating” and has said he envisages a diversified economy in 15 years. Even so, with a global recovery driving up commodity demand , Russia may find it hard to stay committed to its goal of diversification. “I don’t think they’ll be against a relatively strong ruble,” said Credit Agricole’s Quijano-Evans. “The ruble has actually underperformed all other currencies in the region, except perhaps the Romanian leu now. So there’s potential for the ruble to appreciate from this level, and that’s independent of the central bank’s refinancing rate.” To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net . Alex Nicholson in Moscow at anicholson6@bloomberg.net .

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Consumer Spending in U.S. Probably Decreased After `Clunkers’ Plan Expired

October 30, 2009

By Timothy R. Homan Oct. 30 (Bloomberg) — Spending by U.S. consumers probably fell in September for the first time in five months as auto dealer showrooms emptied in the wake of the government’s auto- rebate program, economists said before a report today. Purchases decreased 0.5 percent after a 1.3 percent jump in August that was the biggest in almost eight years, according to the median forecast of 75 economists surveyed by Bloomberg News. Other reports may show consumer sentiment dropped this month and business activity shrank at a slower pace. Today’s spending report may also show Americans’ incomes were little changed last month as payrolls dropped and unemployment climbed. Stagnant wages and waning confidence raise the risk that consumers will retrench in coming months as government assistance programs such as the so-called cash-for- clunkers plan expire. “Income growth will remain sluggish in the fourth quarter because of job losses,” said Nigel Gault , chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “The fuel for consumer spending isn’t there.” The Commerce Department report is due at 8:30 a.m. in Washington. Spending estimates in the Bloomberg survey ranged from a decline of 0.9 percent to a gain of 0.5 percent. An unchanged reading on incomes would follow gains of 0.2 percent in August and July. At 10 a.m., Reuters/University of Michigan figures may show the index of consumer sentiment fell to 70 from 73.5 in September, according to the survey median. Estimates ranged from 68 to 74. A preliminary reading earlier this month came in at 69.4. Monthly Breakdown Today’s spending report will provide the monthly breakdown of the quarterly figures issued by the Commerce Department yesterday, which may influence the outlook for the next three months. Household purchases, which account for about 70 percent of the economy, rose at a 3.4 percent annual pace in the third quarter , the strongest performance in more than two years, the figures showed. The world’s largest economy expanded at a 3.5 percent rate from July through September, exceeding the median estimate of economists surveyed. The report on gross domestic product contributed to the biggest advance in benchmark stock indexes since July. The Standard & Poor’s 500 Index climbed 2.3 percent to close at 1,066.11. Contract Less The Institute for Supply Management-Chicago Inc.’s business barometer probably rose to 49 this month from 46.1 in September, according to the survey median. Readings below 50 signal contraction. The report is due at 9:45 a.m. Washington time. Kellogg Co. , the largest U.S. breakfast-cereal maker, yesterday reported third-quarter profit that exceeded analysts’ estimates as costs fell more than sales. “Consumers remain nervous and are more value conscious than they were a couple of years ago,” Chief Executive Officer David Mackay said in a telephone interview. “We have to be pragmatic about consumers and the issues and pressures they face, and try to help them in any way we can.” A report from the Labor Department scheduled for release at 8:30 a.m. may show employment expenses in the U.S. rose 0.4 percent in the third quarter, the same as in the previous three months, according to the median estimate of economists surveyed. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Alcatel-Lucent Third-Quarter Loss Widens More Than Estimates on Sales Drop

October 30, 2009

By Marcel van de Hoef Oct. 30 (Bloomberg) — Alcatel-Lucent SA , the world’s largest supplier of fixed-line phone networks, said its third- quarter net loss widened as sales fell. The net loss deepened to 182 million euros ($270 million), or 8 cents a share, from 40 million euros, or 2 cents, a year earlier, the Paris-based company said in a statement. That missed the 174.4 million-euro loss average of eight estimates compiled by Bloomberg. Alcatel-Lucent reiterated a forecast for adjusted operating income of around break-even this year as Chief Executive Officer Ben Verwaayen cuts jobs and other costs. The company said it achieved 80 percent of its goal to reduce annual expenses by 750 million euros by the fourth quarter. “Our company continues its transformation journey,” Verwaayen said in today’s statement. “This quarter demonstrates both the relevance of our strategy through key customer wins and our capacity to consistently execute our plans with significant operational progress.” Network-equipment suppliers have suffered as the economic slump cut demand at phone operators, who capped or postponed spending. Nokia Oyj wrote down the value of its joint venture Nokia Siemens Networks by 908 million euros, citing a deteriorated outlook for the business. Ericsson AB , the world’s largest maker of wireless phone networks, posted a steeper-than- expected 71 percent drop in third-quarter profit, as clients slashed spending and Chinese competition drove down prices. In the latest quarter, Alcatel sales fell 9.3 percent to 3.69 billion euros. Analysts had predicted sales of 3.88 billion euros, the average of 16 estimates. Before today, Alcatel-Lucent shares had gained 88 percent this year, after losing 69 percent in 2008. To contact the reporter on this story: Marcel van de Hoef in Amsterdam at mvandehoef@bloomberg.net

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Alcatel-Lucent Third-Quarter Loss Widens More Than Estimates on Sales Drop

October 30, 2009

By Marcel van de Hoef Oct. 30 (Bloomberg) — Alcatel-Lucent SA , the world’s largest supplier of fixed-line phone networks, said its third- quarter net loss widened as sales fell. The net loss deepened to 182 million euros ($270 million), or 8 cents a share, from 40 million euros, or 2 cents, a year earlier, the Paris-based company said in a statement. That missed the 174.4 million-euro loss average of eight estimates compiled by Bloomberg. Alcatel-Lucent reiterated a forecast for adjusted operating income of around break-even this year as Chief Executive Officer Ben Verwaayen cuts jobs and other costs. The company said it achieved 80 percent of its goal to reduce annual expenses by 750 million euros by the fourth quarter. “Our company continues its transformation journey,” Verwaayen said in today’s statement. “This quarter demonstrates both the relevance of our strategy through key customer wins and our capacity to consistently execute our plans with significant operational progress.” Network-equipment suppliers have suffered as the economic slump cut demand at phone operators, who capped or postponed spending. Nokia Oyj wrote down the value of its joint venture Nokia Siemens Networks by 908 million euros, citing a deteriorated outlook for the business. Ericsson AB , the world’s largest maker of wireless phone networks, posted a steeper-than- expected 71 percent drop in third-quarter profit, as clients slashed spending and Chinese competition drove down prices. In the latest quarter, Alcatel sales fell 9.3 percent to 3.69 billion euros. Analysts had predicted sales of 3.88 billion euros, the average of 16 estimates. Before today, Alcatel-Lucent shares had gained 88 percent this year, after losing 69 percent in 2008. To contact the reporter on this story: Marcel van de Hoef in Amsterdam at mvandehoef@bloomberg.net

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Alcatel-Lucent Third-Quarter Loss Widens More Than Estimates on Sales Drop

October 30, 2009

By Marcel van de Hoef Oct. 30 (Bloomberg) — Alcatel-Lucent SA , the world’s largest supplier of fixed-line phone networks, said its third- quarter net loss widened as sales fell. The net loss deepened to 182 million euros ($270 million), or 8 cents a share, from 40 million euros, or 2 cents, a year earlier, the Paris-based company said in a statement. That missed the 174.4 million-euro loss average of eight estimates compiled by Bloomberg. Alcatel-Lucent reiterated a forecast for adjusted operating income of around break-even this year as Chief Executive Officer Ben Verwaayen cuts jobs and other costs. The company said it achieved 80 percent of its goal to reduce annual expenses by 750 million euros by the fourth quarter. “Our company continues its transformation journey,” Verwaayen said in today’s statement. “This quarter demonstrates both the relevance of our strategy through key customer wins and our capacity to consistently execute our plans with significant operational progress.” Network-equipment suppliers have suffered as the economic slump cut demand at phone operators, who capped or postponed spending. Nokia Oyj wrote down the value of its joint venture Nokia Siemens Networks by 908 million euros, citing a deteriorated outlook for the business. Ericsson AB , the world’s largest maker of wireless phone networks, posted a steeper-than- expected 71 percent drop in third-quarter profit, as clients slashed spending and Chinese competition drove down prices. In the latest quarter, Alcatel sales fell 9.3 percent to 3.69 billion euros. Analysts had predicted sales of 3.88 billion euros, the average of 16 estimates. Before today, Alcatel-Lucent shares had gained 88 percent this year, after losing 69 percent in 2008. To contact the reporter on this story: Marcel van de Hoef in Amsterdam at mvandehoef@bloomberg.net

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Alcatel-Lucent Third-Quarter Loss Widens More Than Estimates on Sales Drop

October 30, 2009

By Marcel van de Hoef Oct. 30 (Bloomberg) — Alcatel-Lucent SA , the world’s largest supplier of fixed-line phone networks, said its third- quarter net loss widened as sales fell. The net loss deepened to 182 million euros ($270 million), or 8 cents a share, from 40 million euros, or 2 cents, a year earlier, the Paris-based company said in a statement. That missed the 174.4 million-euro loss average of eight estimates compiled by Bloomberg. Alcatel-Lucent reiterated a forecast for adjusted operating income of around break-even this year as Chief Executive Officer Ben Verwaayen cuts jobs and other costs. The company said it achieved 80 percent of its goal to reduce annual expenses by 750 million euros by the fourth quarter. “Our company continues its transformation journey,” Verwaayen said in today’s statement. “This quarter demonstrates both the relevance of our strategy through key customer wins and our capacity to consistently execute our plans with significant operational progress.” Network-equipment suppliers have suffered as the economic slump cut demand at phone operators, who capped or postponed spending. Nokia Oyj wrote down the value of its joint venture Nokia Siemens Networks by 908 million euros, citing a deteriorated outlook for the business. Ericsson AB , the world’s largest maker of wireless phone networks, posted a steeper-than- expected 71 percent drop in third-quarter profit, as clients slashed spending and Chinese competition drove down prices. In the latest quarter, Alcatel sales fell 9.3 percent to 3.69 billion euros. Analysts had predicted sales of 3.88 billion euros, the average of 16 estimates. Before today, Alcatel-Lucent shares had gained 88 percent this year, after losing 69 percent in 2008. To contact the reporter on this story: Marcel van de Hoef in Amsterdam at mvandehoef@bloomberg.net

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Alcatel-Lucent Third-Quarter Loss Widens More Than Estimates on Sales Drop

October 30, 2009

By Marcel van de Hoef Oct. 30 (Bloomberg) — Alcatel-Lucent SA , the world’s largest supplier of fixed-line phone networks, said its third- quarter net loss widened as sales fell. The net loss deepened to 182 million euros ($270 million), or 8 cents a share, from 40 million euros, or 2 cents, a year earlier, the Paris-based company said in a statement. That missed the 174.4 million-euro loss average of eight estimates compiled by Bloomberg. Alcatel-Lucent reiterated a forecast for adjusted operating income of around break-even this year as Chief Executive Officer Ben Verwaayen cuts jobs and other costs. The company said it achieved 80 percent of its goal to reduce annual expenses by 750 million euros by the fourth quarter. “Our company continues its transformation journey,” Verwaayen said in today’s statement. “This quarter demonstrates both the relevance of our strategy through key customer wins and our capacity to consistently execute our plans with significant operational progress.” Network-equipment suppliers have suffered as the economic slump cut demand at phone operators, who capped or postponed spending. Nokia Oyj wrote down the value of its joint venture Nokia Siemens Networks by 908 million euros, citing a deteriorated outlook for the business. Ericsson AB , the world’s largest maker of wireless phone networks, posted a steeper-than- expected 71 percent drop in third-quarter profit, as clients slashed spending and Chinese competition drove down prices. In the latest quarter, Alcatel sales fell 9.3 percent to 3.69 billion euros. Analysts had predicted sales of 3.88 billion euros, the average of 16 estimates. Before today, Alcatel-Lucent shares had gained 88 percent this year, after losing 69 percent in 2008. To contact the reporter on this story: Marcel van de Hoef in Amsterdam at mvandehoef@bloomberg.net

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Yen Advances Against Dollar on Speculation Exporters Bringing Home Profits

October 30, 2009

By Yasuhiko Seki and Ron Harui Oct. 30 (Bloomberg) — The yen advanced, heading for a weekly gain, on speculation Japanese exporters purchased the nation’s currency on the last trading day of the month. The dollar headed for a four-month drop against the euro, the longest stretch since 2004, as the U.S.’s return to growth renewed optimism a global recovery will quicken, aiding demand for higher-yielding assets. Demand for the yen also rose after the Bank of Japan said it will stop buying corporate debt at the end of the year, as central banks around the world phase out emergency measures taken during the financial crisis. “There’s talk of exporters buying the yen because of month-end demand,” said Lee Wai Tuck , a currency strategist at Forecast Pte in Singapore. The yen advanced to 91.13 per dollar as of 7:58 a.m. in London from 91.41 yesterday in New York. Japan’s currency was at 135.09 per euro from 135.51 yesterday. The dollar traded at $1.4823 per euro from $1.4822 in New York yesterday. Australia’s currency bought 91.24 U.S. cents from 91.50 cents and is set to gain 3.4 percent in October. Large Japanese manufacturers expected the yen to average 94.50 per dollar in the 12 months to March 2010, according to the Bank of Japan’s quarterly Tankan survey released Oct. 1. The forecast in the previous report was for a rate of 94.85. Toyota Motor Corp. and Honda Motor Co. , Japan’s two biggest automakers, may increase overseas production as a stronger yen makes exports less competitive. Japanese carmakers have lost U.S. market share to South Korea’s Hyundai Motor Co. after the yen rose to a 13-year high against the dollar in January. ‘Liquidity Is Ample’ Australia’s dollar is rising for a record ninth month as global stocks rallied and prices climbed for commodities that comprise more than half the South Pacific nation’s exports. “The recovery is still at work and the liquidity is ample,” said Tomohiro Nishida , a dealer in Tokyo at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest banking group. “You can’t stop money flying into higher-yielding currencies at the expense of funding currencies.” The MSCI Asia Pacific Index of regional shares advanced 1.8 percent today and the Nikkei 225 Stock Average gained 1.4 percent. The Standard & Poor’s 500 Index increased 2.3 percent yesterday and crude oil for December delivery increased 3.8 percent to $79.87 a barrel. U.S. Recovering The dollar fell against 13 of its 16 most-traded counterparts as a Bloomberg News survey of economists showed that the Institute for Supply Management-Chicago Inc.’s business barometer probably rose to 49.0 in October from 46.1 in the previous month. The data is due today. Adding to signs the world’s largest economy is recovering, the Institute for Supply Management’s factory gauge also rose to 53.0 in October from 52.6 in the previous month, according to a separate Bloomberg News survey before the release on Nov. 3. Fifty is the dividing line between expansion and contraction. The Commerce Department reported yesterday that U.S. gross domestic product grew at a 3.5 percent annual pace in the third quarter, after shrinking the previous four periods. The median forecast of 79 economists in a Bloomberg survey was for an expansion of 3.2 percent. Investors remained skeptical that the Federal Reserve will increase borrowing costs early next year. Fed funds futures indicated yesterday a 33 percent chance that the central bank will lift its target lending rate at the March meeting from a range of zero to 0.25 percent, compared with a 47 percent likelihood a month earlier. Bank of Japan “The Fed is still far away from exiting credit easing,” said Kengo Suzuki , manager of the foreign bond department in Tokyo at Mizuho Securities Co. “The hyper-liquidity will keep a lid on the dollar.” The Federal Reserve Board holds a two-day policy meeting next week. The Bank of Japan today said it will let programs to buy corporate debt expire at year-end as policy makers around the world start phasing out emergency measures taken at the height of the financial crisis. The BOJ decided to end purchases of commercial paper and corporate bonds from lenders as scheduled, while extending unlimited collateral-backed lending through March 31, the bank said in a statement released in Tokyo today. It kept the benchmark interest rate unchanged at 0.1 percent. ‘Good Data’ “The BOJ’s decision to unwind some of its unconventional steps is being perceived among foreigners as limiting the availability of excessive liquidity,” said Yuji Saito , head of the foreign-exchange group at Societe Generale SA in Tokyo. “This may damp appetite for yen carry trades, thereby pushing up the Japanese currency.” Yields on three-month euro-yen futures contracts rose to 0.495 percent from 0.485 percent yesterday. Gains in the yen were limited after a report showed Japan’s jobless rate fell to 5.3 percent from 5.5 percent in August. The median estimate of 29 economists surveyed by Bloomberg was for the rate to increase to 5.6 percent. The yen headed for its ninth-straight monthly decline against the New Zealand dollar, the longest slide since 1997. “Good data from Japan will strengthen the risk appetite that resurfaced on strong U.S. data,” said Takashi Kudo , director of foreign-exchange sales in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. Euro Versus Pound Separate Japanese government figures showed the job-to- applicant ratio , a leading indicator of employment trends, improved for the first time in more than two years. The ratio rose to 0.43 last month from a record low of 0.42 in August, meaning there are 43 jobs for 100 job seekers. The euro may rise for the first time in four days against the pound on speculation a German report will show retail sales rebounded in September, adding to signs the recession in the 16- nation region is over. Retail sales in Germany, Europe’s largest economy, rose 1 percent in September after a revised 2.4 percent decline in August, according to a Bloomberg News survey of economists. The Federal Statistics Office releases the report at 8 a.m. in Wiesbaden today. “The recovery in the euro-zone economy appears to be on a solid footing,” said Masanobu Ishikawa , general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The bias is for the euro to rise.” European Central Bank council member Axel Weber yesterday signaled policy makers may start to withdraw emergency stimulus measures next year by scaling back the bank’s “very long-term” loans to banks. The comments are the first to indicate the ECB is getting closer to enacting its exit strategy. The euro traded at 89.66 pence from 89.58 pence in New York yesterday, and was set for its first monthly decline versus the pound since June. To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net ; Ron Harui in Singapore at rharui@bloomberg.net

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Bank of Japan to End Corporate Debt Purchases as Recovery Gains Traction

October 30, 2009

By Mayumi Otsuma Oct. 30 (Bloomberg) — The Bank of Japan said it will stop buying corporate debt at the end of the year, as central banks around the world phase out emergency measures taken at the height of the financial crisis. Governor Masaaki Shirakawa and his colleagues also said they will only extend a program providing unlimited collateral- backed loans to banks one last time through March 31. Yesterday, Germany’s Axel Weber signaled the European Central Bank may pull back its handouts of emergency liquidity next year. Policy makers from the Group of Seven nations are starting to withdraw emergency measures as some smaller nations such as Australia and Norway tighten policy in response to a global economic recovery and surging asset prices. In Japan, the jobless rate unexpectedly fell to a four-month low in September, household spending rose and stocks rallied on optimism a rebound from its worst postwar recession is taking hold. “Given steady improvements in credit markets, it’s not wrong to end these finance-support measures,” said Masaaki Kanno , chief economist at JPMorgan Chase & Co. in Tokyo, who used to work at the central bank. Kanno added that falling prices will prompt the policy board to keep the key rate near zero for all of 2010 at least. The yen traded at 90.97 per dollar at 8:32 a.m. in London from 91.31 before the announcement. The Nikkei 225 Stock Average climbed 1.5 percent. The bank also left its benchmark interest rate at 0.1 percent and pledged to keep borrowing costs at “low levels” as it forecast deflation will extend into fiscal 2011. Shirakawa said he’s “committed to prolonging the current extremely accommodative financial environment.” Lingering Deflation “It’s hard to expect a rate increase in Japan as long as deflation lingers,” said Seiji Shiraishi , chief economist at HSBC Securities in Tokyo. “The Bank of Japan probably won’t raise interest rates before the Fed takes action.” Two-year Treasury note yields this week rose to the highest level in almost a month on speculation the Federal Reserve will discuss next month how and when to signal the possibility of higher U.S. rates. The U.S. economy expanded for the first time in more than a year last quarter, a report showed yesterday. Exit strategies in Europe are starting to take shape. Bundesbank President Weber yesterday said the ECB may scale back unlimited offerings of 12-month loans in 2010. Even in the U.K., where the economy unexpectedly shrank in the third quarter, the Bank of England will probably slow or pause its bond-purchase program, former policy maker Charles Goodhart said. The ECB and the Bank of England next meet on Nov. 5. Inflation Expectations China’s central bank said today that policy makers need to “manage inflation expectations,” curb excess capacity and encourage sustainable lending growth. Some central banks aren’t waiting for the Fed. Australia this month became the first Group of 20 nation to raise rates since the height of the crisis and Norway’s central bank followed this week. At the same time, Shirakawa stressed the BOJ has no plan to raise rates even though lenders’ need for the bank’s purchases of commercial paper and corporate bonds has diminished as companies find it easier to obtain credit. “I want to underline our commitment to holding interest rates at the same level, even though the economy is recovering,” Shirakawa told reporters in Tokyo. The bank’s forecasts of prolonged deflation will help to quash speculation for any early rate increase, analysts said. Consumer prices excluding fresh food slid 2.3 percent in September from a year ago, the government said today. Return to Growth The policy board said prices will fall 1.5 percent in the year ending March 2010, 0.8 percent next fiscal year and 0.4 percent in the period ending March 2012. The economy will shrink 3.2 percent this fiscal year and grow 1.2 percent next year, board members said. The expansion will accelerate to 2.1 percent in the following 12 months. Reports this week nevertheless show the recovery may be gaining traction. The unemployment rate fell to 5.3 percent in September and the ratio of jobs available to applicants rose for the first time in more than two years. Factory output climbed for a seventh month, figures earlier this week showed. In one example of a firm able to get credit, Kirin Holdings Co. yesterday raised 100 billion yen ($1.1 billion) in bonds to fund its acquisition of Australian brewer Lion Nathan Ltd., according to data compiled by Bloomberg. ‘Signs of Improvement’ “Japan’s financial environment, with some lingering severity, has been increasingly showing signs of improvement,” the central bank said . Other companies are reporting better-than-expected earnings. Sony Corp. narrowed its full-year loss forecast to 95 billion yen today, citing faster cost reductions and improving earnings from consumer electronics. The central bank said it will stop the limitless lending facility on March 31, when companies close their books for the fiscal year end, and that the program won’t be extended further. Board member Atsushi Mizuno opposed the decision, along with the scrapping of the corporate bond purchases in December. “The special loan program, which provides lenders with as much cash as they need, distorts price-setting in financial markets and should be wrapped up eventually,” said Izuru Kato , chief market economist at Totan Research Co. in Tokyo. “Postponing its expiry to the fiscal year end seems like a safe judgment.” To contact the reporter on this story: Mayumi Otsuma in Tokyo motsuma@bloomberg.net

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Bank of Japan to End Corporate Debt Purchases as Recovery Gains Traction

October 30, 2009

By Mayumi Otsuma Oct. 30 (Bloomberg) — The Bank of Japan said it will stop buying corporate debt at the end of the year, as central banks around the world phase out emergency measures taken at the height of the financial crisis. Governor Masaaki Shirakawa and his colleagues also said they will only extend a program providing unlimited collateral- backed loans to banks one last time through March 31. Yesterday, Germany’s Axel Weber signaled the European Central Bank may pull back its handouts of emergency liquidity next year. Policy makers from the Group of Seven nations are starting to withdraw emergency measures as some smaller nations such as Australia and Norway tighten policy in response to a global economic recovery and surging asset prices. In Japan, the jobless rate unexpectedly fell to a four-month low in September, household spending rose and stocks rallied on optimism a rebound from its worst postwar recession is taking hold. “Given steady improvements in credit markets, it’s not wrong to end these finance-support measures,” said Masaaki Kanno , chief economist at JPMorgan Chase & Co. in Tokyo, who used to work at the central bank. Kanno added that falling prices will prompt the policy board to keep the key rate near zero for all of 2010 at least. The yen traded at 90.97 per dollar at 8:32 a.m. in London from 91.31 before the announcement. The Nikkei 225 Stock Average climbed 1.5 percent. The bank also left its benchmark interest rate at 0.1 percent and pledged to keep borrowing costs at “low levels” as it forecast deflation will extend into fiscal 2011. Shirakawa said he’s “committed to prolonging the current extremely accommodative financial environment.” Lingering Deflation “It’s hard to expect a rate increase in Japan as long as deflation lingers,” said Seiji Shiraishi , chief economist at HSBC Securities in Tokyo. “The Bank of Japan probably won’t raise interest rates before the Fed takes action.” Two-year Treasury note yields this week rose to the highest level in almost a month on speculation the Federal Reserve will discuss next month how and when to signal the possibility of higher U.S. rates. The U.S. economy expanded for the first time in more than a year last quarter, a report showed yesterday. Exit strategies in Europe are starting to take shape. Bundesbank President Weber yesterday said the ECB may scale back unlimited offerings of 12-month loans in 2010. Even in the U.K., where the economy unexpectedly shrank in the third quarter, the Bank of England will probably slow or pause its bond-purchase program, former policy maker Charles Goodhart said. The ECB and the Bank of England next meet on Nov. 5. Inflation Expectations China’s central bank said today that policy makers need to “manage inflation expectations,” curb excess capacity and encourage sustainable lending growth. Some central banks aren’t waiting for the Fed. Australia this month became the first Group of 20 nation to raise rates since the height of the crisis and Norway’s central bank followed this week. At the same time, Shirakawa stressed the BOJ has no plan to raise rates even though lenders’ need for the bank’s purchases of commercial paper and corporate bonds has diminished as companies find it easier to obtain credit. “I want to underline our commitment to holding interest rates at the same level, even though the economy is recovering,” Shirakawa told reporters in Tokyo. The bank’s forecasts of prolonged deflation will help to quash speculation for any early rate increase, analysts said. Consumer prices excluding fresh food slid 2.3 percent in September from a year ago, the government said today. Return to Growth The policy board said prices will fall 1.5 percent in the year ending March 2010, 0.8 percent next fiscal year and 0.4 percent in the period ending March 2012. The economy will shrink 3.2 percent this fiscal year and grow 1.2 percent next year, board members said. The expansion will accelerate to 2.1 percent in the following 12 months. Reports this week nevertheless show the recovery may be gaining traction. The unemployment rate fell to 5.3 percent in September and the ratio of jobs available to applicants rose for the first time in more than two years. Factory output climbed for a seventh month, figures earlier this week showed. In one example of a firm able to get credit, Kirin Holdings Co. yesterday raised 100 billion yen ($1.1 billion) in bonds to fund its acquisition of Australian brewer Lion Nathan Ltd., according to data compiled by Bloomberg. ‘Signs of Improvement’ “Japan’s financial environment, with some lingering severity, has been increasingly showing signs of improvement,” the central bank said . Other companies are reporting better-than-expected earnings. Sony Corp. narrowed its full-year loss forecast to 95 billion yen today, citing faster cost reductions and improving earnings from consumer electronics. The central bank said it will stop the limitless lending facility on March 31, when companies close their books for the fiscal year end, and that the program won’t be extended further. Board member Atsushi Mizuno opposed the decision, along with the scrapping of the corporate bond purchases in December. “The special loan program, which provides lenders with as much cash as they need, distorts price-setting in financial markets and should be wrapped up eventually,” said Izuru Kato , chief market economist at Totan Research Co. in Tokyo. “Postponing its expiry to the fiscal year end seems like a safe judgment.” To contact the reporter on this story: Mayumi Otsuma in Tokyo motsuma@bloomberg.net

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Bank of Japan to End Corporate Debt Purchases as Recovery Gains Traction

October 30, 2009

By Mayumi Otsuma Oct. 30 (Bloomberg) — The Bank of Japan said it will stop buying corporate debt at the end of the year, as central banks around the world phase out emergency measures taken at the height of the financial crisis. Governor Masaaki Shirakawa and his colleagues also said they will only extend a program providing unlimited collateral- backed loans to banks one last time through March 31. Yesterday, Germany’s Axel Weber signaled the European Central Bank may pull back its handouts of emergency liquidity next year. Policy makers from the Group of Seven nations are starting to withdraw emergency measures as some smaller nations such as Australia and Norway tighten policy in response to a global economic recovery and surging asset prices. In Japan, the jobless rate unexpectedly fell to a four-month low in September, household spending rose and stocks rallied on optimism a rebound from its worst postwar recession is taking hold. “Given steady improvements in credit markets, it’s not wrong to end these finance-support measures,” said Masaaki Kanno , chief economist at JPMorgan Chase & Co. in Tokyo, who used to work at the central bank. Kanno added that falling prices will prompt the policy board to keep the key rate near zero for all of 2010 at least. The yen traded at 90.97 per dollar at 8:32 a.m. in London from 91.31 before the announcement. The Nikkei 225 Stock Average climbed 1.5 percent. The bank also left its benchmark interest rate at 0.1 percent and pledged to keep borrowing costs at “low levels” as it forecast deflation will extend into fiscal 2011. Shirakawa said he’s “committed to prolonging the current extremely accommodative financial environment.” Lingering Deflation “It’s hard to expect a rate increase in Japan as long as deflation lingers,” said Seiji Shiraishi , chief economist at HSBC Securities in Tokyo. “The Bank of Japan probably won’t raise interest rates before the Fed takes action.” Two-year Treasury note yields this week rose to the highest level in almost a month on speculation the Federal Reserve will discuss next month how and when to signal the possibility of higher U.S. rates. The U.S. economy expanded for the first time in more than a year last quarter, a report showed yesterday. Exit strategies in Europe are starting to take shape. Bundesbank President Weber yesterday said the ECB may scale back unlimited offerings of 12-month loans in 2010. Even in the U.K., where the economy unexpectedly shrank in the third quarter, the Bank of England will probably slow or pause its bond-purchase program, former policy maker Charles Goodhart said. The ECB and the Bank of England next meet on Nov. 5. Inflation Expectations China’s central bank said today that policy makers need to “manage inflation expectations,” curb excess capacity and encourage sustainable lending growth. Some central banks aren’t waiting for the Fed. Australia this month became the first Group of 20 nation to raise rates since the height of the crisis and Norway’s central bank followed this week. At the same time, Shirakawa stressed the BOJ has no plan to raise rates even though lenders’ need for the bank’s purchases of commercial paper and corporate bonds has diminished as companies find it easier to obtain credit. “I want to underline our commitment to holding interest rates at the same level, even though the economy is recovering,” Shirakawa told reporters in Tokyo. The bank’s forecasts of prolonged deflation will help to quash speculation for any early rate increase, analysts said. Consumer prices excluding fresh food slid 2.3 percent in September from a year ago, the government said today. Return to Growth The policy board said prices will fall 1.5 percent in the year ending March 2010, 0.8 percent next fiscal year and 0.4 percent in the period ending March 2012. The economy will shrink 3.2 percent this fiscal year and grow 1.2 percent next year, board members said. The expansion will accelerate to 2.1 percent in the following 12 months. Reports this week nevertheless show the recovery may be gaining traction. The unemployment rate fell to 5.3 percent in September and the ratio of jobs available to applicants rose for the first time in more than two years. Factory output climbed for a seventh month, figures earlier this week showed. In one example of a firm able to get credit, Kirin Holdings Co. yesterday raised 100 billion yen ($1.1 billion) in bonds to fund its acquisition of Australian brewer Lion Nathan Ltd., according to data compiled by Bloomberg. ‘Signs of Improvement’ “Japan’s financial environment, with some lingering severity, has been increasingly showing signs of improvement,” the central bank said . Other companies are reporting better-than-expected earnings. Sony Corp. narrowed its full-year loss forecast to 95 billion yen today, citing faster cost reductions and improving earnings from consumer electronics. The central bank said it will stop the limitless lending facility on March 31, when companies close their books for the fiscal year end, and that the program won’t be extended further. Board member Atsushi Mizuno opposed the decision, along with the scrapping of the corporate bond purchases in December. “The special loan program, which provides lenders with as much cash as they need, distorts price-setting in financial markets and should be wrapped up eventually,” said Izuru Kato , chief market economist at Totan Research Co. in Tokyo. “Postponing its expiry to the fiscal year end seems like a safe judgment.” To contact the reporter on this story: Mayumi Otsuma in Tokyo motsuma@bloomberg.net

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Bank of Japan to End Corporate Debt Purchases as Recovery Gains Traction

October 30, 2009

By Mayumi Otsuma Oct. 30 (Bloomberg) — The Bank of Japan said it will stop buying corporate debt at the end of the year, as central banks around the world phase out emergency measures taken at the height of the financial crisis. Governor Masaaki Shirakawa and his colleagues also said they will only extend a program providing unlimited collateral- backed loans to banks one last time through March 31. Yesterday, Germany’s Axel Weber signaled the European Central Bank may pull back its handouts of emergency liquidity next year. Policy makers from the Group of Seven nations are starting to withdraw emergency measures as some smaller nations such as Australia and Norway tighten policy in response to a global economic recovery and surging asset prices. In Japan, the jobless rate unexpectedly fell to a four-month low in September, household spending rose and stocks rallied on optimism a rebound from its worst postwar recession is taking hold. “Given steady improvements in credit markets, it’s not wrong to end these finance-support measures,” said Masaaki Kanno , chief economist at JPMorgan Chase & Co. in Tokyo, who used to work at the central bank. Kanno added that falling prices will prompt the policy board to keep the key rate near zero for all of 2010 at least. The yen traded at 90.97 per dollar at 8:32 a.m. in London from 91.31 before the announcement. The Nikkei 225 Stock Average climbed 1.5 percent. The bank also left its benchmark interest rate at 0.1 percent and pledged to keep borrowing costs at “low levels” as it forecast deflation will extend into fiscal 2011. Shirakawa said he’s “committed to prolonging the current extremely accommodative financial environment.” Lingering Deflation “It’s hard to expect a rate increase in Japan as long as deflation lingers,” said Seiji Shiraishi , chief economist at HSBC Securities in Tokyo. “The Bank of Japan probably won’t raise interest rates before the Fed takes action.” Two-year Treasury note yields this week rose to the highest level in almost a month on speculation the Federal Reserve will discuss next month how and when to signal the possibility of higher U.S. rates. The U.S. economy expanded for the first time in more than a year last quarter, a report showed yesterday. Exit strategies in Europe are starting to take shape. Bundesbank President Weber yesterday said the ECB may scale back unlimited offerings of 12-month loans in 2010. Even in the U.K., where the economy unexpectedly shrank in the third quarter, the Bank of England will probably slow or pause its bond-purchase program, former policy maker Charles Goodhart said. The ECB and the Bank of England next meet on Nov. 5. Inflation Expectations China’s central bank said today that policy makers need to “manage inflation expectations,” curb excess capacity and encourage sustainable lending growth. Some central banks aren’t waiting for the Fed. Australia this month became the first Group of 20 nation to raise rates since the height of the crisis and Norway’s central bank followed this week. At the same time, Shirakawa stressed the BOJ has no plan to raise rates even though lenders’ need for the bank’s purchases of commercial paper and corporate bonds has diminished as companies find it easier to obtain credit. “I want to underline our commitment to holding interest rates at the same level, even though the economy is recovering,” Shirakawa told reporters in Tokyo. The bank’s forecasts of prolonged deflation will help to quash speculation for any early rate increase, analysts said. Consumer prices excluding fresh food slid 2.3 percent in September from a year ago, the government said today. Return to Growth The policy board said prices will fall 1.5 percent in the year ending March 2010, 0.8 percent next fiscal year and 0.4 percent in the period ending March 2012. The economy will shrink 3.2 percent this fiscal year and grow 1.2 percent next year, board members said. The expansion will accelerate to 2.1 percent in the following 12 months. Reports this week nevertheless show the recovery may be gaining traction. The unemployment rate fell to 5.3 percent in September and the ratio of jobs available to applicants rose for the first time in more than two years. Factory output climbed for a seventh month, figures earlier this week showed. In one example of a firm able to get credit, Kirin Holdings Co. yesterday raised 100 billion yen ($1.1 billion) in bonds to fund its acquisition of Australian brewer Lion Nathan Ltd., according to data compiled by Bloomberg. ‘Signs of Improvement’ “Japan’s financial environment, with some lingering severity, has been increasingly showing signs of improvement,” the central bank said . Other companies are reporting better-than-expected earnings. Sony Corp. narrowed its full-year loss forecast to 95 billion yen today, citing faster cost reductions and improving earnings from consumer electronics. The central bank said it will stop the limitless lending facility on March 31, when companies close their books for the fiscal year end, and that the program won’t be extended further. Board member Atsushi Mizuno opposed the decision, along with the scrapping of the corporate bond purchases in December. “The special loan program, which provides lenders with as much cash as they need, distorts price-setting in financial markets and should be wrapped up eventually,” said Izuru Kato , chief market economist at Totan Research Co. in Tokyo. “Postponing its expiry to the fiscal year end seems like a safe judgment.” To contact the reporter on this story: Mayumi Otsuma in Tokyo motsuma@bloomberg.net

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Bank of Japan to End Corporate Debt Purchases as Recovery Gains Traction

October 30, 2009

By Mayumi Otsuma Oct. 30 (Bloomberg) — The Bank of Japan said it will stop buying corporate debt at the end of the year, as central banks around the world phase out emergency measures taken at the height of the financial crisis. Governor Masaaki Shirakawa and his colleagues also said they will only extend a program providing unlimited collateral- backed loans to banks one last time through March 31. Yesterday, Germany’s Axel Weber signaled the European Central Bank may pull back its handouts of emergency liquidity next year. Policy makers from the Group of Seven nations are starting to withdraw emergency measures as some smaller nations such as Australia and Norway tighten policy in response to a global economic recovery and surging asset prices. In Japan, the jobless rate unexpectedly fell to a four-month low in September, household spending rose and stocks rallied on optimism a rebound from its worst postwar recession is taking hold. “Given steady improvements in credit markets, it’s not wrong to end these finance-support measures,” said Masaaki Kanno , chief economist at JPMorgan Chase & Co. in Tokyo, who used to work at the central bank. Kanno added that falling prices will prompt the policy board to keep the key rate near zero for all of 2010 at least. The yen traded at 90.97 per dollar at 8:32 a.m. in London from 91.31 before the announcement. The Nikkei 225 Stock Average climbed 1.5 percent. The bank also left its benchmark interest rate at 0.1 percent and pledged to keep borrowing costs at “low levels” as it forecast deflation will extend into fiscal 2011. Shirakawa said he’s “committed to prolonging the current extremely accommodative financial environment.” Lingering Deflation “It’s hard to expect a rate increase in Japan as long as deflation lingers,” said Seiji Shiraishi , chief economist at HSBC Securities in Tokyo. “The Bank of Japan probably won’t raise interest rates before the Fed takes action.” Two-year Treasury note yields this week rose to the highest level in almost a month on speculation the Federal Reserve will discuss next month how and when to signal the possibility of higher U.S. rates. The U.S. economy expanded for the first time in more than a year last quarter, a report showed yesterday. Exit strategies in Europe are starting to take shape. Bundesbank President Weber yesterday said the ECB may scale back unlimited offerings of 12-month loans in 2010. Even in the U.K., where the economy unexpectedly shrank in the third quarter, the Bank of England will probably slow or pause its bond-purchase program, former policy maker Charles Goodhart said. The ECB and the Bank of England next meet on Nov. 5. Inflation Expectations China’s central bank said today that policy makers need to “manage inflation expectations,” curb excess capacity and encourage sustainable lending growth. Some central banks aren’t waiting for the Fed. Australia this month became the first Group of 20 nation to raise rates since the height of the crisis and Norway’s central bank followed this week. At the same time, Shirakawa stressed the BOJ has no plan to raise rates even though lenders’ need for the bank’s purchases of commercial paper and corporate bonds has diminished as companies find it easier to obtain credit. “I want to underline our commitment to holding interest rates at the same level, even though the economy is recovering,” Shirakawa told reporters in Tokyo. The bank’s forecasts of prolonged deflation will help to quash speculation for any early rate increase, analysts said. Consumer prices excluding fresh food slid 2.3 percent in September from a year ago, the government said today. Return to Growth The policy board said prices will fall 1.5 percent in the year ending March 2010, 0.8 percent next fiscal year and 0.4 percent in the period ending March 2012. The economy will shrink 3.2 percent this fiscal year and grow 1.2 percent next year, board members said. The expansion will accelerate to 2.1 percent in the following 12 months. Reports this week nevertheless show the recovery may be gaining traction. The unemployment rate fell to 5.3 percent in September and the ratio of jobs available to applicants rose for the first time in more than two years. Factory output climbed for a seventh month, figures earlier this week showed. In one example of a firm able to get credit, Kirin Holdings Co. yesterday raised 100 billion yen ($1.1 billion) in bonds to fund its acquisition of Australian brewer Lion Nathan Ltd., according to data compiled by Bloomberg. ‘Signs of Improvement’ “Japan’s financial environment, with some lingering severity, has been increasingly showing signs of improvement,” the central bank said . Other companies are reporting better-than-expected earnings. Sony Corp. narrowed its full-year loss forecast to 95 billion yen today, citing faster cost reductions and improving earnings from consumer electronics. The central bank said it will stop the limitless lending facility on March 31, when companies close their books for the fiscal year end, and that the program won’t be extended further. Board member Atsushi Mizuno opposed the decision, along with the scrapping of the corporate bond purchases in December. “The special loan program, which provides lenders with as much cash as they need, distorts price-setting in financial markets and should be wrapped up eventually,” said Izuru Kato , chief market economist at Totan Research Co. in Tokyo. “Postponing its expiry to the fiscal year end seems like a safe judgment.” To contact the reporter on this story: Mayumi Otsuma in Tokyo motsuma@bloomberg.net

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Equity Residential Pays $100M for Arlington Multifamily

October 29, 2009

Equity Residential closed its purchase of Metropolitan at Pentagon Row, a 326-unit apartment complex in Arlington, VA, from joint venture partners Cornerstone Real Estate Advisers and Kettler for $100 million, or approximately $306,748 per unit. The acquisition…

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An Object Lesson In Governmental Failure: Derivatives Reform

October 29, 2009

If you want to understand why Congress seems completely incapable of checking the power of Wall Street, look back to a hearing on the Hill last October 7, and the subsequent events surrounding it. On that day, the House Financial Services Committee hosted a panel on reform of the market for derivatives, the financial instrument which played such a notable role in the country’s economic meltdown.

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An Object Lesson In Governmental Failure: Derivatives Reform

October 29, 2009

If you want to understand why Congress seems completely incapable of checking the power of Wall Street, look back to a hearing on the Hill last October 7, and the subsequent events surrounding it. On that day, the House Financial Services Committee hosted a panel on reform of the market for derivatives, the financial instrument which played such a notable role in the country’s economic meltdown.

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An Object Lesson In Governmental Failure: Derivatives Reform

October 29, 2009

If you want to understand why Congress seems completely incapable of checking the power of Wall Street, look back to a hearing on the Hill last October 7, and the subsequent events surrounding it. On that day, the House Financial Services Committee hosted a panel on reform of the market for derivatives, the financial instrument which played such a notable role in the country’s economic meltdown.

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FAR: Condo Sales Up 77% Over Year

October 29, 2009

Search for Miami Commercial Real Estate Thursday, October 29, 2009 – At least 5,000 residential condominium units were sold statewide in September, 77% more than the same month last year and up 9% from

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FAR: Condo Sales Up 77% Over Year

October 29, 2009

Search for Miami Commercial Real Estate Thursday, October 29, 2009 – At least 5,000 residential condominium units were sold statewide in September, 77% more than the same month last year and up 9% from

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FAR: Condo Sales Up 77% Over Year

October 29, 2009

Search for Miami Commercial Real Estate Thursday, October 29, 2009 – At least 5,000 residential condominium units were sold statewide in September, 77% more than the same month last year and up 9% from

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Yankees Beat Phillies 3-1 to Tie World Series Baseball at One Game Each

October 29, 2009
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China Committed to Free Trade Accord, Strong Ties With Australia, Li Says

October 29, 2009

By Madelene Pearson Oct. 30 (Bloomberg) — Chinese Vice Premier Li Keqiang said China is committed to a free trade agreement with Australia and developing a broader relationship, as he began a three-day visit aimed at cementing ties strained in the past year. The two nations should view their relationship “from a strategic height,” Li said at a lunch organized by the Australia China Business Council in Sydney today, adding he aims to “enhance mutual trust” during the trip. Relations between the two countries have been frayed in recent months over a failed investment deal with Rio Tinto Group and the detention of Rio employee Stern Hu by China. Foreign Minister Stephen Smith said this week Australia’s relationship with China is one of its most important and that the two governments must work through any difficulties in a “calm and measured way.” Two-way trade between the two nations was worth A$74 billion ($68 billion) in 2008, compared with A$8 billion in 1995. Australia is pushing for a comprehensive free trade agreement with China and wants resource producers to enter into long-term supply contracts with Chinese companies. The FTA should be approached “step by step” and in a “down to earth” manner, said Li, who’s scheduled to hold talks today with Prime Minister Kevin Rudd in Canberra. The growth in trade has been a highlight in relations between the two countries, he added. ‘Strategic Choice’ The negotiations are a “strategic choice for both of us,” Li said through an interpreter. “Our political will of advancing these negotiations remains unchanged and our confidence of concluding negotiations and reaching agreement remains unchanged.” Li, who arrived late yesterday, will also visit Brisbane, where he will meet with Queensland state leaders, China’s official Xinhua News Agency reported. Agreements covering forestry, cultural heritage, illegal logging and education and training were signed earlier today, Deputy Prime Minister Julia Gillard’s office said. China is Australia’s largest source of overseas student enrolments, with more than 125,000 last year. Li and Gillard will discuss global challenges such as recovery from the financial crisis and addressing climate change, her office said. Li’s visit is an “obvious gesture to say that the relationship is now returning to the status quo, which was a developing relationship,” Michael McKinley , senior lecturer in international relations and strategy at the Australian National University, said in a telephone interview today. ‘Economic Interests’ “There have been some distractions in the relationship,” McKinley said. “But economic interests are what count.” Li, who has a doctorate in economics from Peking University, is seen as a possible successor to Premier Wen Jiabao in 2013. Tensions between the two governments rose after Rio Tinto rebuffed a $19.5 billion investment from state-owned Aluminum Corp. of China in June. The detention of Hu, an Australian citizen, and three Chinese Rio executives in July further stained ties. Hu has been formally arrested on suspicion of violating commercial secrets and taking bribes, the Department of Foreign Affairs and Trade in Canberra said Oct. 23. Uighur leader Rebiya Kadeer’s visit to Australia in August escalated the spat. The government in Beijing accuses Kadeer of orchestrating clashes in July between Muslim Uighurs and ethnic Han Chinese that left more than 190 people dead in Xinjiang province. Kadeer denies the allegation. ‘Prosperous Win-Win’ Former Prime Minister Bob Hawke , who attended today’s lunch, told reporters the visit is a “very firm indication that those difficulties, major difficulties, are behind us and we can go forward now on what is going to be a very prosperous win-win for both countries.” Australian regulators have approved more than 100 investment proposals from China to acquire Australian businesses since November 2007, Smith said this week. Felix Resources Ltd. became the latest high-profile Chinese investment in Australia when the government agreed to allow Yanzhou Coal Mining Co. ’s A$3.5 billion takeover offer on Oct. 23. Li, accompanied by a 50-strong delegation, will visit New Zealand from Nov. 1-3 for talks with Prime Minister John Key and Deputy Prime Minister Bill English , the government in Wellington said in a statement today. Administrative arrangements on educational cooperation, dairy products, temporary workers and meat products will be signed during the visit, according to the statement. To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net

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Dollar Falls for Fourth Month Against Euro; U.S. Growth Aids Risk Demand

October 29, 2009

By Yasuhiko Seki and Ron Harui Oct. 30 (Bloomberg) — The dollar fell toward its fourth monthly drop against the euro, the longest stretch since 2004, as the U.S.’s return to growth renewed optimism a global recovery will quicken, aiding demand for higher-yielding assets. The yen is set for the biggest monthly slide against the 16-nation currency since May, after a government report showed Japan’s jobless rate unexpectedly dropped for a second month, reducing demand for the relative safety of the Japanese currency. Australia’s dollar is rising for a record ninth month as global stocks rallied and prices climbed for commodities that comprise more than half the South Pacific nation’s exports. “The recovery is still at work and the liquidity is ample,” said Tomohiro Nishida , a dealer in Tokyo at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest banking group. “You can’t stop money flying into higher-yielding currencies at the expense of funding currencies.” The dollar traded at $1.4853 per euro at 1:21 p.m. in Tokyo from $1.4822 yesterday in New York. The yen was at 135.54 per euro from 135.51 yesterday and is set to fall 3.1 percent this month. The greenback bought 91.24 yen from 91.41 yen. Australia’s currency bought 91.69 U.S. cents from 91.50 cents in New York yesterday and is set to gain 3.9 percent in October. The MSCI Asia Pacific Index of regional shares advanced 1.8 percent today and the Nikkei 225 Stock Average gained 1.4 percent. The Standard & Poor’s 500 Index increased 2.3 percent yesterday and crude oil for December delivery increased 3.8 percent to $79.87 a barrel. U.S. Recovering The dollar fell against 14 of its 16 most-traded counterparts as a Bloomberg News survey of economists showed that the Institute for Supply Management-Chicago Inc.’s business barometer probably rose to 49.0 in October from 46.1 in the previous month. The data is due today. Adding to signs the world’s largest economy is recovering, the Institute for Supply Management’s factory gauge also rose to 53.0 in October from 52.6 in the previous month, according to a separate Bloomberg News survey before the release on Nov. 3. Fifty is the dividing line between expansion and contraction. The Commerce Department reported yesterday that U.S. gross domestic product grew at a 3.5 percent annual pace in the third quarter, after shrinking the previous four periods. The median forecast of 79 economists in a Bloomberg survey was for an expansion of 3.2 percent. Fed Rate View Investors remained skeptical that the Federal Reserve will increase borrowing costs early next year. Fed funds futures indicated yesterday a 33 percent chance that the central bank will lift its target lending rate at the March meeting from a range of zero to 0.25 percent, compared with a 47 percent likelihood a month earlier. “The Fed is still far away from exiting credit easing,” said Kengo Suzuki , manager of the foreign bond department in Tokyo at Mizuho Securities Co. “The hyper-liquidity will keep a lid on the dollar.” The Federal Reserve Board holds a two-day policy meeting next week. The Bank of Japan today said it will let programs to buy corporate debt expire at year-end as policy makers around the world start phasing out emergency measures taken at the height of the financial crisis. Bank of Japan The BOJ decided to end purchases of commercial paper and corporate bonds from lenders as scheduled, while extending unlimited collateral-backed lending through March 31, the bank said in a statement released in Tokyo today. It kept the benchmark interest rate unchanged at 0.1 percent. The yen headed for its ninth-straight monthly decline against the New Zealand dollar, the longest losing streak since 1997, as Japan’s unemployment rate dropped to 5.3 percent from 5.5 percent in August. The median estimate of 29 economists surveyed by Bloomberg was for the rate to increase to 5.6 percent. “Good data from Japan will strengthen the risk appetite that resurfaced on strong U.S. data,” said Takashi Kudo , director of foreign-exchange sales in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. Separate Japanese government figures showed the job-to- applicant ratio , a leading indicator of employment trends, improved for the first time in more than two years. The ratio rose to 0.43 last month from a record low of 0.42 in August, meaning there are 43 jobs for 100 job seekers. Euro Versus Pound The euro may rise for the first time in four days against the pound on speculation a German report will show retail sales rebounded in September, adding to signs the recession in the 16- nation region is over. Retail sales in Germany, Europe’s largest economy, rose 1 percent in September after a revised 2.4 percent decline in August, according to a Bloomberg News survey of economists. The Federal Statistics Office releases the report at 8 a.m. in Wiesbaden today. “The recovery in the euro-zone economy appears to be on a solid footing,” said Masanobu Ishikawa , general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The bias is for the euro to rise.” European Central Bank council member Axel Weber yesterday signaled policy makers may start to withdraw emergency stimulus measures next year by scaling back the bank’s “very long-term” loans to banks. The comments are the first to indicate the ECB is getting closer to enacting its exit strategy. The euro traded at 89.61 pence from 89.58 pence in New York yesterday, and was set for its first monthly decline versus the pound since June. To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net ; Ron Harui in Singapore at rharui@bloomberg.net

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Asian Stocks Rise as Earnings, Japan Jobless Data, Stoke Growth Optimism

October 29, 2009

By Shani Raja and Ian Sayson Oct. 30 (Bloomberg) — Asian stocks advanced, paring the MSCI Asia Pacific Index’s first monthly decline since February, as better-than-estimated earnings and Japan jobless figures followed a rebound in U.S. economic growth. Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. gained more than 4 percent on profits that topped analyst predictions. Olympus Corp. , a camera maker that gets 24 percent of its sales in North America, surged 8.7 percent in Tokyo after the Nikkei newspaper said the company will probably beat its profit forecast. Rio Tinto Group , the world’s No. 3 mining company, rose 4.1 percent as commodity prices increased. The MSCI Asia Pacific Index added 1.8 percent to 116.77 as of 12:54 p.m. in Tokyo, paring its drop this week to 2.3 percent. The gauge has lost 1 percent in October on concern governments will start withdrawing measures enacted to revive global growth. Australia this month became the first Group of 20 nation to raise interest rates amid signs of strength in its economy. “The expectation is that the world economy will still grow faster in 2010 compared with this year, even with the anticipated withdrawal of stimulus spending by governments,” said Joel Mendoza , investment strategist at Manila-based BDO Private Bank Inc. in Manila, which manages at least $2 billion in assets. “The easy money has been made and the challenge now is to find the gems in the market.” Japan’s Nikkei 225 Stock Average rose 1.4 percent, while Hong Kong’s Hang Seng Index climbed 3.2 percent. China’s Shanghai Composite Index jumped 2.1 percent. Australia’s S&P/ASX 200 Index increased 1.6 percent. U.S. Growth Samsung Electronics Co. , which gets 19 percent of its sales from America, advanced 2.7 percent after tripling profits. Komatsu Ltd. , the world’s second-biggest maker of construction equipment, advanced 3.4 percent even after its first-half net income sank. Sony Corp. , maker of the PlayStation game console, gained 3.9 percent as the yen weakened. Futures on the S&P 500 were little changed. The gauge jumped 2.3 percent yesterday, the largest advance since July 23, as the U.S. government said gross domestic product grew at a 3.5 percent pace from July through September. The growth, which followed four quarters of contraction, topped the median estimate of 3.2 percent in a Bloomberg survey of economists. Japan’s statistics bureau said today the country’s unemployment rate declined to 5.3 percent from 5.5 percent in August. The median estimate of 29 economists surveyed by Bloomberg was for the rate to increase to 5.6 percent. ‘Sigh Of Relief’ “There’s a sigh of relief,” said Tim Schroeders , who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “The Japan data gives credence to the breadth of the recovery, that it’s not just occurring in the developing economies, and that’s very important for the sustainability of it.” Industrial & Commercial Bank and Bank of China’s third- quarter earnings were buoyed by a loan surge and lower provisions for potential losses on loans and investments. ICBC gained 4.4 percent to HK$6.35 after net income in the period rose 19 percent to 33.6 billion yuan ($4.9 billion). Bank of China , whose profit in the quarter jumped 19 percent, climbed 5.8 percent to HK$4.58. Both beat the average estimate of analysts surveyed by Bloomberg News. Positive Surprises In Tokyo, Olympus surged 8.7 percent to 2,885 yen. The Nikkei newspaper said the company may beat its 19 billion yen ($208 million) operating profit forecast for the six months ended September by about 50 percent. Merrill Lynch & Co. also raised the stock’s rating to “buy” from “underperform.” “I see many positive surprises and many companies are likely to raise profit forecasts,” said Juichi Wako , a senior strategist at Tokyo-based Nomura Holdings Inc. “A gradual recovery will continue in the October-December period.” Sharp Corp. advanced 2.6 percent to 992 yen. Japan’s largest maker of liquid-crystal displays posted a loss of 17.7 billion yen, less than the 19 billion yen median of five analyst estimates compiled by Bloomberg. The MSCI Asia Pacific Index has climbed 65 percent from a more than five-year low on March 9, outpacing gains of more than 50 percent by the Standard & Poor’s 500 Index and Europe’s Dow Jones Stoxx 600 Index. Stocks in the MSCI index are valued at 22 times estimated earnings , compared with 17 times for the S&P and 15 times for the Stoxx 600. Chips, Mobile Phones Samsung Electronics Co. added 2.7 percent to 737,000 won. Asia’s biggest maker of chips, flat screens and mobile phones said profit tripled to a quarterly record as the global economic recovery spurred a rebound in prices. Komatsu lost 3.4 percent to 1,805 yen. Raw-material producers accounted for 12 percent of the MSCI Asia Pacific Index’s advance today. The London Metals Index, a measure of six metals including copper and zinc, rallied 3.5 percent, the largest advance in three weeks. Crude oil climbed 3.1 percent to $79.87 a barrel in New York yesterday. Rio Tinto Group rose 4.1 percent to A$63.50. BHP Billiton Ltd. , the world’s largest mining company and Australia’s biggest oil producer, gained 0.7 percent to A$37.39. Sony gained 3.9 percent to 2,815 yen amid hopes the weaker yen will raise the value of sales generated overseas in local terms for Japanese companies. The yen depreciated to 91.58, compared with 90.39 against the dollar at the close of stock trading in Tokyo yesterday. Against the euro, Japan’s currency weakened to 135.92 from 133.14. Nintendo Sales Nintendo Co. , the world’s largest maker of video-game players, fell 4.4 percent to 23,000 yen after slashing its full- year net income forecast on slumping sales of its Wii console. Net income will fall to 230 billion yen in the year to March 2010, the company said. The projected profit, the first annual drop in six years, missed the 270 billion yen median of 23 analyst estimates compiled by Bloomberg. In Sydney, Crane Group Ltd. shares tumbled 11 percent to A$9.16 after the company said profit before significant items in fiscal 2010 may be about 30 percent lower than a year earlier. To contact the reporters for this story: Shani Raja in Sydney at sraja4@bloomberg.net ; Ian C. Sayson in Manila at isayson@bloomberg.net .

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Bank of Japan to Stop Buying Corporate Debt as Stimulus Measures Unwound

October 29, 2009

By Mayumi Otsuma Oct. 30 (Bloomberg) — The Bank of Japan said it will let its programs of buying corporate debt expire at the year’s end as central banks around the world start phasing out emergency measures taken at the height of the financial crisis. The policy makers decided to end purchases of commercial paper and corporate bonds from lenders as scheduled, while extending unlimited collateral-backed lending through March 31, the bank said in a statement released in Tokyo today. It kept the benchmark interest rate unchanged at 0.1 percent. Governor Masaaki Shirakawa has said the need for the debt purchases has diminished as companies are finding it easier to obtain credit amid a recovery from Japan’s worst postwar recession. Analysts say scrapping the measures doesn’t indicate that the bank is preparing to raise borrowing costs, given that it will probably forecast later today that deflation will extend into fiscal 2011. “Ending the corporate debt purchases will have little effect on the economy,” said Teizo Taya , a former central bank board member and now adviser to the Daiwa Institute of Research in Tokyo. “A rate increase won’t be an option for the BOJ as long as prices keep falling.” The credit programs have been in place since the bank slashed the benchmark interest rate to 0.1 percent in December amid the worst global financial crisis since the 1930s. It decided in July to extend the measures to Dec. 31. Today’s decision came after reports eased concern about the durability of the recovery. The unemployment rate unexpectedly fell to a four-month low of 5.3 percent in September and household spending rose, the statistics bureau said today. Industrial production climbed for a seventh month and retail sales fell at the slowest pace in 10 months, reports earlier this week showed. To contact the reporter on this story: Mayumi Otsuma in Tokyo motsuma@bloomberg.net

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Cohen Financial To Offer New Distressed Solutions

October 29, 2009

Search for Chicago Commercial Real Estate Thursday, October 29, 2009 – Locally-based Cohen Financial is making strides to be able to address the $1.3 trillion of commercial real estate loans that will come due

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Steve Parker: Nissan Leaf EV – Be first to see it in person!

October 29, 2009

Nissan has announced a US national tour of their new pure EV, Leaf, beginning with a first American public showing on November 13th in Los Angeles. Though not yet officially announced, the first public sighting of Leaf at a major auto show will be at the 2010 Los Angeles Auto Show which runs from December 4th through 13th. Leaf is ready for its close-up at the Tokyo Motor Show Much of the talk at this week’s Tokyo Motor Show, the 41st iteration of that extravaganza, held in Makuhari, about ½-hour north of Tokyo, was understandably about EVs, hybrids and various other green technologies. Nissan, however, topped the competition by displaying a production version of Leaf, the only Japanese car maker at the show claiming they’re not just working on a real-world, production EV, but showing one they’ll be making and selling worldwide beginning in 2011. There’s still room for overwrought fun, though. Toyota introduced a production version of their Lexus LF-A supercar, a $375,000, 552-horsepower monster with a 4.8 liter V10 engine. Only 500 will be built in total for the world and production commences in December, 2010. Much more at: www.Lexus-LFA.com. On the other hand, at Tokyo, Lexus displayed a production verison of their new LF-A supercar … not very green, but a helluva lotta fun … what do you think of the car’s looks? Me? I’m not so sure … Here’s the Leaf tour information from a Nissan press release: Nissan North America announced that the Nissan LEAF zero-emission, all-electric car will make its North American debut in Los Angeles on Nov. 13. The Los Angeles showing will be the first time people in the United States will be able to see the five-passenger, five-door, gasoline-free car, which is embarking on a nationwide tour. The Nissan LEAF Zero Emission Tour will make stops in 22 cities, in 11 states, the District of Columbia, and Vancouver, Canada, offering the opportunity for interested drivers, media, civic partners, businesses and university students to learn more about the Nissan LEAF and the benefits of zero-emission driving. Interior of production Leaf Follow the tour, get updates on the final schedule and specific showings, and sign up for more information, at www.nissanusa.com/Leaf-electric-car. Look for the Nissan LEAF to make public appearances in the following areas during these times: Southern California Los Angeles: Nov. 13-17 Orange County: Nov. 18 San Diego: Nov. 19-21 Northern California Berkeley/Walnut Creek: Nov. 23-24 San Francisco: Nov. 25-29 Santa Rosa: Dec. 1 Sacramento: Dec. 1 San Jose: Dec. 3-6 Pacific Northwest Seattle: Dec. 8-12 Vancouver, Canada: Dec. 14-15 Portland, Ore.: Dec. 17-23 Rear 3/4 view of Leaf Southwest Phoenix/Tucson: Dec. 30-Jan. 5 Las Vegas: Jan. 6 Midwest/East Coast Detroit: Jan. 11-13 Knoxville/Chattanooga, Tenn.: Jan. 16 Middle Tennessee: Jan. 19-21 Washington, D.C.: Jan. 26-28 Raleigh, N.C.: Jan. 29 Orlando: Feb. 1-2 Texas Houston: Feb. 5-6 New York New York City: Feb. 9-14 Leaf’s drivetrain Nissan is the only automaker committed to making all-electric vehicles available to the mass market on a global scale. Through the Nissan LEAF Zero Emission Tour, Nissan will be showcasing the electric vehicle and battery technology as well as the company’s zero-emission mobility objectives. Nissan already has partnered on the development of an electric-vehicle infrastructure through partnerships in the State of Tennessee, the State of Oregon, Sonoma County, San Diego, Phoenix, Tucson, Washington D.C., Seattle, Raleigh, and Vancouver. Additional partnerships will be announced in the near future. In North America, Nissan’s operations include automotive design, engineering, consumer and corporate financing, sales and marketing, distribution and manufacturing. Nissan is dedicated to improving the environment under the Nissan Green Program 2010, whose key priorities are reducing CO2 emissions, cutting other emissions and increasing recycling. Prototype Leaf instrument panel from an earlier version of the car More information on the Nissan LEAF and zero emissions can be found at www.nissan-usa.com/Leaf-electric-car and www.nissan-zeroemission.com (end Nissan release) By the way, those two websites are really fun. Also, while we’re talking about the LA Auto Show and green technology, Green Car Journal (www.GreenCar.com) has announced its five finalists for their 2010 Green Car of the Year award. For the fifth consecutive year, the award will be announced during a press conference at the Los Angeles Auto Show on Dec. 3. The finalists are the Audi A3 TDI, Honda Insight, Mercury Milan Hybrid, Toyota Prius and Volkswagen Golf TDI (Prius was named Japan Car of the Year at the Tokyo Motor Show this past weekend). Will you be lining up to see Leaf in your area? And what do you think of the Green Car of the Year nominees?

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Confusion Over "Too Big To Fail" Bill, Legislation Will Be Changed

October 29, 2009

Democrats and Republicans ripped into Treasury Secretary Timothy Geithner during a Congressional hearing Thursday , as Geithner defended an administration plan to address “too big to fail” financial firms. Legislators argued that the plan institutionalized “too big to fail” by requiring perpetual government assistance — bailouts — for failed firms deemed to be systemically important; that the plan’s fund — to be used in the event of a firm’s failure — should be prepaid by these firms, as opposed to being paid after the fact by the survivors; and that the proposal specified that a list of designated firms would be kept secret, which was neither realistic nor helpful. Federal bank regulators echoed that last point. FDIC Chairman Sheila Bair said it’s not “realistic to try to keep this confidential.” Comptroller of the Currency John Dugan added that “it’s going to be hard not to disclose…who they are.” “Through some combination of mandatory disclosures to shareholders and financial analysts [figuring it out]…it is likely most, if not all, would eventually be known to the public,” said Federal Reserve Governor Daniel Tarullo. “We should be realistic here about what will or will not be known.” A quick scan of the bill’s language , though, shows that this isn’t necessarily the case . But at the very least the language contributed to — if not caused — the confusion . On page 12 of the bill, which was released Tuesday, the new body created to watch over systemically important firms “is authorized to issue formal recommendations, publicly or privately, that a Federal financial regulatory agency adopt heightened prudential standards for firms it regulates to mitigate systemic risk.” In short, the proposed council can publicly declare that regulators should apply tougher standards to these firms, thereby outing them as “too big to fail.” But later, on page 17, the bill specifies that the new council and the Federal Reserve “may not publicly release a list of companies identified” as systemically important. “There was this confusion today,” House Financial Services Committee Chairman Barney Frank (D-Mass.) said in an interview with the Huffington Post. “It does look complicated.” To that end, Frank said he’s changing the bill, calling for the council to publicly recommend which firms will need tougher oversight by regulators. The effect will be that the public will know who is “too big to fail.” Not that most wouldn’t be able to figure it out, though. “If we polled the markets to find out which 20 institutions they believe are too big to fail, I am confident that there would be near-perfect agreement and that the list would very largely overlap that of the regulators,” writes Douglas Elliott, a former investment banker and currently a fellow in economic studies at the Brookings Institution, a think tank.

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Patricia Handschiegel: The New Power Girls: Influencers – Is The Company Your Company Keeps Hurting Or Helping Your Brand?

October 29, 2009

It’s a chilly fall night at Hollywood’s Roosevelt hotel as the 140 conference parties (three total!) go full swing poolside under the stars. Guests mingle and chit-chat as out of town revelers see familiar faces and catch up. Cabanas line the perimeter as wait staff deliver trays of cocktails. At a private suite to the side of the hotel’s signature pool, some of the most influential people on the city’s technology and business scene are gathered. A group of women, all friends, are perched on the outside chaise, laughing and talking business. The array of fashionable shoes proves it’s not just about substance in this town, but style as well. They’re bloggers, connectors, personalities, CEOs, founders, and execs that make business move here. As I sip from a glass of champagne, the words a friend recently said came to mind, “these are the most influential people you may not have heard of.” It got me thinking. It seems real influencers don’t need to hustle themselves constantly in the media and at conferences. Their work does the work for them. Take for example female founder and pioneering fashion media CEO Kathryn Finney of TheBudgetFashionista.com . Her reach into the market goes far past her more than 500 television and media appearances to a real, bonafide audience that respects and follows her advice. She’s a soon-to-be twice author, an in demand speaker, and advisor who knows the business because she’s done the work. She’s had the ear of major brands for longer than any fashion blog in the business. A current campaign with TJ Maxx has been underway with enormous success. New Power Girls co-creator Meghan Cleary is another – ShopNBC tapped her for a shoe line because of her solid, real position and reach among shoppers and consumers, and saw one of the highest shoe sales to date with her on board. In a market where people can call themselves “experts” without even a formal job or real work history in the industry, or deem themselves “influencers” without a real audience, people like Kathy and Meghan are the people that brands should know. In fact, companies may need to be careful more than ever before. Traffic numbers can be gamed, media coverage is as easily attained through friendships and relationships and not necessarily real demand. Brands have seen backlash for selecting who they work with, how they present their products and worse. I know of at least three cases where it cost businesses their reputation, and at least five times where conference attendees complained about a panelist speaker having little or no experience in the industry. “It’s easy for brands to be seduced by wanting to hire a celebrity (be it an actor or a well known web-brity),” said public relations guru Nicole Jordan , who has worked with some of the best brands in the market. “But the question I ask is – what does it really get you at the end of the day and does it equal credibility? Paying an ‘influencer’ to promote does not.” With out a doubt, companies should do the homework when bringing influencers and experts, from Google search and requesting references to carefully evaluating whether or not someone’s a fit for your brand. “If the social web has taught us anything,” adds Jordan. “the people who can move mountains (aside of Oprah) are your natural evangelists who want to see you succeed, and are happy to help you.” You’ll know right away who that is. Hear what Meghan and I have to say about influencers here .

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Yankees Tie Phillies 1-1 in Fourth Inning of World Series Game 2

October 29, 2009
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Yankees Tie Phillies 1-1 in Fourth Inning of World Series Game 2

October 29, 2009
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Women Say More About an Economy Than Money Does: William Pesek

October 29, 2009
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Don’t Move to Mac, and How to Do It Anyway: Rich Jaroslovsky

October 29, 2009
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