December 2009

Mortgage Rate Anxieties Mean Fannie-Freddie Are in Limbo as Fed Pulls Back

December 28, 2009

By Dawn Kopecki Dec. 28 (Bloomberg) — Fannie Mae and Freddie Mac , the linchpins of the American housing market, continue to bedevil the U.S. financial system. In February 2003, their regulator issued a report saying the companies were taking on too much risk by using implicit government backing to plunge deeper into the mortgage market. The government-sponsored entities would pose a systemic threat to the economy in the “remote” chance that either failed, Armando Falcon told the Bond Market Association the same day. The Bush administration, considering his report a potential threat to financial markets, asked him to resign. Five years later, regulators seized the mortgage-finance companies. Since then, leaders from former Federal Reserve Chairman Alan Greenspan to Warren Buffett have argued the companies can’t be sustained in their dual roles — a for-profit enterprise beholden to shareholders and a tool of housing policy — and should be nationalized or sold. Nothing has happened. Instead, Fannie Mae and Freddie Mac, which buy home mortgages from banks and package them into bonds sold to investors, have been bailed out with $1.5 trillion in direct and indirect government aid. The Obama administration is banking on the companies to help end a three-year housing slump . The president is delaying plans to lay out a new framework for them in February, and Congress hasn’t scheduled hearings on their future. ‘Giant Pass’ “They’re going to get a giant pass on all of this,” said Paul Miller , a former examiner for the Federal Reserve Bank of Philadelphia who is now a bank analyst at FBR Capital Markets in Arlington, Virginia. It’s going to be “three to five years before their fate is determined.” Rather than beginning to extricate itself from Fannie Mae and Freddie Mac as it is with other bailed-out businesses, the Treasury Department on Christmas Eve removed a $200 billion limit on aid to each of the companies and promised to cover their losses through 2012. Earlier, the Federal Reserve extended a mortgage-bond purchase program by three months, through March. The approaching withdrawal of Fed support in the form of the mortgage-bond purchases risks “a very, very scary situation,” said Meredith Whitney , founder of Meredith Whitney Advisory Group LLC in New York. Mortgage rates would soar, endangering the economic recovery, if private buyers failed to step in to buy the companies’ debt, she said. The status of Fannie Mae and Freddie Mac isn’t dealt with in the proposed overhaul of the financial regulatory system that the Senate plans to take up next year. While Treasury Secretary Timothy Geithner said in June that the companies’ future would be discussed in the president’s budget outline in February, the Treasury in its Dec. 24 statement promised only to provide a “preliminary report” by then. Dual Mandates Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac own or guarantee about $5.5 trillion of the $11.8 trillion in U.S. residential mortgage debt. They have financed as much as 75 percent of new U.S. mortgages this year. They have been run for more than 40 years as shareholder- owned companies that also have a federally chartered mission to promote the housing market. Those dual mandates have collided and contributed to the companies’ failure, said Federal Deposit Insurance Corp. Chairman Sheila Bair . “Go one way or the other,” Bair said in an interview this month. “Either completely privatize them and get them completely out or run them as public utilities.” The hybrid structure, with private shareholders, public mandates and federal backstopping, “is classic too big to fail.” The companies are helping carry out the Treasury Department’s $75 billion plan to let as many 9 million homeowners modify or refinance their loans to more affordable terms to curb foreclosures. Mortgage Rates The Federal Reserve has bought $1.1 trillion of Fannie Mae and Freddie Mac’s home-loan bonds and $124.1 billion of their corporate debt this year. Those actions have lowered the companies’ funding costs and pushed mortgage rates to a record low 4.71 percent this month. For the year, interest rates on typical 30-year fixed-rate mortgages have averaged 5.04 percent, down from 6.05 percent last year, according to weekly surveys by Freddie Mac. To help keep the GSEs solvent, the Treasury has also bought $191 billion of Fannie Mae and Freddie Mac mortgage bonds, and made $112 billion of preferred stock purchases. The companies have lost a combined $188.4 billion in the past nine quarters. The federal government now holds almost 80 percent of the equity in each of the entities. Fannie Mae was unchanged at $1.05 on Dec. 24 in New York Stock Exchange composite trading and has fallen 85 percent since it was put in conservatorship in September 2008. Freddie Mac fell 5 cents, or 3.8 percent, to $1.26 and has declined 72 percent since it was seized. Relaxed Timeline The Treasury last week relaxed its timeline for Fannie Mae and Freddie Mac to shrink their portfolios of mortgage assets. Previously, the companies were instructed to do so at a rate of 10 percent a year. Now, they will be required to keep the value of their portfolios below a maximum limit, currently $900 billion, that will go down by 10 percent a year. This means they won’t need to take immediate action to trim their holdings and could allow them to rise. Fannie Mae’s portfolio ended October at $771.5 billion and Freddie Mac’s holdings at the end of November were $761.8 billion, according to the latest figures released by the companies. “Treasury does not expect Fannie Mae and Freddie Mac to be active buyers to increase the size of their retained mortgage portfolios, but neither is it expected that active selling will be necessary,” the Treasury said in the statement. The difference between yields on Fannie Mae’s 30-year fixed rate mortgage bonds and U.S. Treasuries narrowed to about 0.68 percentage point last month, the lowest since 1992, from close to a 25-year high at 2.32 percentage points just before the Fed announced its purchasing program. Yields on these and other so- called agency mortgage bonds generally guide interest rates on home loans. ‘Asset Collapse’ The Fed has been “the only buyer in the market,” Whitney told Bloomberg Radio in a Nov. 19 interview. “If they pulled back from the market or stopped buying from the market, we think there’s an asset collapse here.” Ajay Rajadhyaksha , a managing director at Barclays Capital in New York, says fears that Fannie Mae and Freddie Mac won’t be able to find buyers when the Fed halts its purchases of their corporate debt and mortgage bonds are overblown. “When you have someone as big as the Fed was in 2009 walking away cold turkey, there have to be bumps along the road,” Rajadhyaksha said in an interview. “But the thing to keep in mind is the massive amounts of cash that many investors have, which they absolutely want to put to work.” Scott Buchta , the head of investment strategy at Guggenheim Securities LLC in Chicago, agreed, saying that the initial change will be “minimal.” Yield spreads on Fannie Mae and Freddie Mac will rise 20 to 75 basis points, according to the strategists. “That puts you at a mortgage rate of between 5.5 percent to 5.75 percent, which by historical standards is still not bad at all,” Rajadhyaksha said. Test the Market The FDIC’s Bair says the market needs to be tested, even if the price of some mortgage bonds falls. “At some point you’re going to have to do it anyway, and if the market won’t support the values, and they have to go down, then well, that’s what the price should be and that’s how they should be valued,” Bair said. If the Fed is “gradual about it, I think they can ease out.” Alabama Senator Richard Shelby , the ranking Republican on the Senate Banking Committee, said it’s a “grave mistake” to delay decisions about Fannie Mae and Freddie Mac’s future. “I fear that the longer we wait, the more it is going to cost the American taxpayer,” Shelby said at an Oct. 8 hearing. Barney Frank , the Massachusetts Democrat who heads the House Financial Services Committee, is putting Fannie Mae and Freddie Mac at the top of next year’s agenda, said Steven Adamske , a spokesman for the lawmaker. “There is nothing on paper right now, but that day is coming,” Adamske said. “Their future is one of our next priorities next year.” To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.com .

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War on Wall Street as Congress Warms to Turn Clock Back to Glass-Steagall

December 28, 2009

By Alison Vekshin and James Sterngold Dec. 28 (Bloomberg) — A one-page proposal gaining traction in Congress could turn back the clock on Wall Street 10 years, forcing the breakup of banks, including Citigroup Inc. Lawmakers in both parties, seeking to prevent future financial crises while soothing public anger over bailouts and bonuses, are turning to an approach that’s both simple and transformative: re-imposing sections of the 1933 Glass-Steagall Act that separated commercial and investment banking. Those walls came down with passage of the Gramm-Leach- Bliley Act of 1999. A proposal to reconstruct them, made by U.S. Senators John McCain and Maria Cantwell on Dec. 16, would prevent deposit-taking banks from underwriting securities, engaging in proprietary trading, selling insurance or owning retail brokerages. The bill could also force the unwinding of deals consummated during the financial crisis, including Bank of America Corp. ’s acquisition of Merrill Lynch & Co. “The impact on Wall Street would be severe,” Wayne Abernathy , an executive vice president at the American Bankers Association , said in a telephone interview. Resurrecting Glass-Steagall goes beyond the array of new regulatory powers that President Barack Obama has proposed to fix the financial system. It has also sparked debate among academics, regulators and legislators over whether the Depression-era law could have prevented the crisis of 2008 or might help avoid future ones. ‘No Difference’ “If you look at what happened, with or without Glass- Steagall, it would have made no difference,” said H. Rodgin Cohen , chairman of New York-based law firm Sullivan & Cromwell LLP, who represented one side or the other in more than a dozen transactions stemming from the financial crisis last year, including the rescues of Bear Stearns Cos., Fannie Mae, Wachovia Corp., and American International Group Inc. Cohen and others say the law wouldn’t have saved Bear Stearns or Lehman Brothers Holdings Inc., both of which were pure investment banks, from collapse. And the government would not have been able to enlist JPMorgan Chase & Co. to take on the assets of Bear Stearns or allow Goldman Sachs Group Inc. and Morgan Stanley to become bank holding companies, giving them access to the Federal Reserve’s discount window. Rather than split up banks, regulators should provide better supervision and require tougher capital requirements, said Cohen, who was also involved on behalf of banking clients in shaping the bill that dismantled parts of Glass-Steagall. McCain-Cantwell The McCain-Cantwell proposal, which has picked up four additional co-sponsors, could be considered by the Senate Banking Committee as early as January, if Senator Christopher Dodd , the Democratic chairman from Connecticut, and other members complete negotiations on a financial overhaul bill. A similar bill has been introduced in the U.S. House of Representatives by Maurice Hinchey , a Democrat from New York. The House already adopted a measure on Dec. 11 to revamp financial regulation without Hinchey’s proposal. The chief sponsor of the overhaul measure, Representative Barney Frank , has said he supports giving regulators the power to apply Glass- Steagall in individual cases. “It is fair to argue that if the bill picks up steam in the Senate, the House could have the political appetite to pass it as well,” Paul Miller and four other analysts at FBR Capital Markets in Arlington, Virginia, said in a Dec. 17 note. One reason support for the idea is growing is that lawmakers see public anger building over what Obama called “fat cat bankers.” As industry profits bounce back and banks repay Troubled Asset Relief Program funds — and also get set to hand out billions of dollars in bonuses — Americans are still struggling with a 10 percent unemployment rate and home foreclosures. That’s leading Congress to seek ways to rein in the firms blamed for the financial crisis. ‘At War’ “Congress is at war with Wall Street,” said former Fed Governor Lyle Gramley , now a senior economic adviser at Soleil Securities Corp. in New York. “They perceive Wall Street as being the root source of our financial crisis, and they want to do something to make sure that doesn’t happen again.” Splitting banking functions needed for the smooth operation of the economy from riskier securities and trading activities was proposed earlier this year by the Group of Thirty, a nonprofit organization made up of former government officials and bankers, including Paul Volcker , a former Fed chairman and head of the president’s Economic Recovery Advisory Board. The group said the crisis spread like a contagion from firm to firm, putting both commercial banks and securities companies at risk. To prevent a domino effect, systemically important financial institutions shouldn’t be allowed to engage in proprietary trading that involved “particularly high risks” or “serious conflicts of interest,” the group said. ‘Failed the Test’ While that would not bar banks from underwriting securities, as some U.S. lawmakers want, it might force them to shutter or sell trading divisions. The financial system has “failed the test of the marketplace,” Volcker said in January. He added that “it’s been proven that they’re unmanageable, the existing conglomerates.” Some Wall Street executives endorse such a split. “What we need is a 21st century Glass-Steagall,” said Gerald Rosenfeld , deputy chairman of Rothschild North America Inc. and a professor of business and law at New York University. Rosenfeld favors regulating commercial banks like public utilities, while giving securities firms and hedge funds more freedom, as long as they adhere to capital guidelines. “The important thing is we have to have a structure that prevents the contagion from spreading when there are catastrophic losses in those riskier businesses,” he said. Smaller Is Better Others are guided by the principle that smaller is better. Christopher Whalen , managing director of Institutional Risk Analytics, a Torrance, California, firm that evaluates banks for investors, said the repeal of Glass-Steagall in 1999 was based on the false premise that bigger banks would be more competitive and efficient. “I don’t think there are any efficiencies of scale in banking,” Whalen said. “Making them smaller would be far more efficient and also improve competition. If we had broken up Citi last year, we would have seen a couple of new market entrants buying operations. That is what creative destruction is all about.” Roy Smith , a finance professor at New York University’s business school and a former Goldman Sachs partner, said reviving Glass-Steagall would affect Goldman Sachs less than other big banks because the firm focuses largely on investment banking and could give up banned businesses without difficulty. ‘Unwanted Stepchild’ For other firms, the fallout could be harsh, said Abernathy of the bankers’ association. “If you restore Glass-Steagall, for some of them the banking operation would be an unwanted stepchild,” he said. “It would be the less profitable of the two because its business would be far more constricted.” Bank lobbyists are targeting the Senate Banking Committee as lawmakers negotiate provisions of a regulatory overhaul bill. They’re arguing that a return to the pre-1999 era would reduce the diversity of revenue streams, make financial firms more vulnerable in a crisis, prevent them from acquiring ailing institutions, increase the cost of raising capital and undermine the global competitiveness of U.S. institutions. “Reinstating Glass-Steagall misses the mark — a point we intend to share with Chairman Dodd and other senators on the committee,” said Rob Nichols , president of the Financial Services Forum, a Washington-based trade group that represents the chief executive officers of the largest financial firms. Dodd said he doesn’t favor reviving Glass-Steagall as a way of dealing with “too-big-to-fail” institutions and added “there are other things we can do to break them up.” Leach, Gramm Also lining up on the side of the banks are two sponsors of the 1999 bill that dismantled Glass-Steagall. Jim Leach , a former Republican congressman from Iowa and now chairman of the National Endowment for the Humanities, said the biggest problem was overleveraging by securities firms, not the mingling of businesses. “Virtually all of the financial difficulty banks are in today relates to activities they could do before” President Bill Clinton signed his bill in 1999, Leach said. Phil Gramm , who as a Republican senator from Texas was another co-sponsor, said that, rather than weakening banks, the law cushioned the impact of the subprime mortgage crisis by making financial institutions more broad-based and competitive. “A lot of this is about trying to find somebody to blame,” said Gramm, now a vice chairman of investment banking at UBS Securities LLC. ‘Political Dynamite’ Hinchey, the congressman who introduced the House bill to reinstate Glass-Steagall, said in an interview that a comeback is “very questionable.” “There’s a lot of pressure coming from the big banks to prevent this kind of thing from happening,” Hinchey said. Those banks may have lost some of their political influence as their earnings have recovered, said William Isaac , a former chairman of the Federal Deposit Insurance Corp.     “The TARP legislation and the way it was administered was political dynamite for the banks,” said Isaac, now chairman of the global financial services unit of LECG Corp., an economic and financial consulting firm in Emeryville, California. “The public feels that this was all about protecting Wall Street and did nothing for Main Street, and it’s largely true.” To contact the reporters on this story: Alison Vekshin in Washington at avekshin@bloomberg.net ; James Sterngold in New York at jsterngold2@bloomberg.net

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Attempted Airline Bombing Over Detroit Raises New Concerns About Security

December 28, 2009

By Jonathan D. Salant and Roger Runningen Dec. 28 (Bloomberg) — The ability of a suspected terrorist to bring explosives on board a U.S. plane exposes vulnerabilities in an aviation security system that had been overhauled and strengthened since the Sept. 11, 2001, attacks. Umar Farouk Abdulmutallab , a 23-year-old Nigerian, was able to pass through airport checkpoints and get on Northwest Airlines Flight 253 in Amsterdam. His alleged attempt to set off a bomb containing the explosive pentaerythritol was thwarted by passengers and crew as the jetliner approached Detroit airport on Christmas Day. Abdulmutallab, while on a list of people with suspected terrorist ties, wasn’t among those banned from flying or subject to extra screening. “The system did not work,” Representative Peter King of New York, the top Republican on the House Homeland Security Committee, said yesterday on “Face the Nation” on CBS. “He made it on the plane with explosives and he detonated the explosives. This came within probably seconds or inches of working.” President Barack Obama ordered a review of the procedures for compiling the lists and deciding when a suspect warrants extra screening or should be banned from air travel, White House spokesman Robert Gibbs said on ABC’s “This Week.” Obama has also asked the Homeland Security Department to review airport screening capabilities, Gibbs said. Standard magnetometers cannot detect explosives such as the kind that Abdulmutallab allegedly carried onto Flight 253, and that shoe-bomber Richard Reid used in an attempt to blow up a Paris to Miami American Airlines flight in 2001. Search for Explosives The Transportation Security Administration has been adding other machines, which use millimeter waves or low-level X-rays, to find explosives. There are 40 millimeter wave machines at 19 airports, and the TSA is buying 150 new X-ray units, the agency said on its Web site . Senator Joe Lieberman , the Connecticut Independent who chairs the Senate Homeland Security and Government Affairs Committee , said the machines should be used more widely. “There have been privacy concerns expressed about the use of these whole body-imaging devices, but I think those privacy concerns, which are, frankly, mild, have to fall in the face of the ability of these machines to detect material like this,” Lieberman said on “Fox News Sunday.” Concerns about privacy violations led the U.S. House in June to prohibit the TSA from allowing the machines to replace magnetometers in airports. The devices could be used to screen passengers singled out by security personnel. The Senate has not taken up the bill. “You don’t need to look at my wife and 8-year-old daughter naked in order to secure that airplane,” the measure’s sponsor, Jason Chaffetz , a Utah Republican, said during the debate. Insufficient Devices Representative Charles Dent , a Pennsylvania Republican, said during the debate that magnetometers are insufficient. “Prohibited items, like liquids and C4 for potential explosives, will be detected under the whole-body imaging technology but not under a magnetometer,” he said. Companies such as Smiths Group Plc , Safran SA and L-3 Communications Holdings Inc . may benefit from any requirement that airports buy more security equipment. London-based Smiths is the world’s biggest maker of airport scanners. Safran, based in Paris, is the world leader in biometric technologies, such as fingerprint scanners. New York-based L-3 also makes scanners for airport use. Released from Hospital Authorities are continuing to investigate Abdulmutallab, who was released from University of Michigan Medical Center, where he was taken after the plane landed Dec. 25. He is in the custody of U.S. marshals. Federal officials intend at a court hearing today to request approval for obtaining a DNA sample from Abdulmutallab and a second hearing is scheduled for Jan. 8, according to the U.S. Justice Department. Investigators are looking at whether Abdulmutallab had any ties to al-Qaeda, the terrorist group that attacked the U.S. in 2001, Homeland Security Secretary Janet Napolitano said on ABC. Senate Republican Leader Mitch McConnell , a Kentucky Republican, said Abdulmutallab had connections with Yemen, home of anti-American Muslim religious leader Anwar al-Awlaki . The imam communicated by e-mail with Fort Hood suspect Nidal Malik Hasan prior to the Nov. 5 shootings at Fort Hood that killed 13 people and injured 43. Lawmakers’ Questions Lawmakers questioned yesterday how Abdulmutallab was able to board the plane with the explosives, noting he was reported to U.S. authorities by his father, former First Bank of Nigeria Plc chairman Alhaji Umar Mutallab. Obama asked for a review of how it occurred. Abdulmutallab was on a 550,000-person list of people with suspected terrorist connections, known as the Terrorist Identities Datamart Environment, or TIDE. His name wasn’t among the 14,000 people requiring more screening, or among the 4,000 people on the “no-fly” list, which would have kept him off the plane. “It’s amazing to me that an individual like this, who was sending out so many signals, could end up getting on a plane going to the U.S.,” McConnell said. The U.S. didn’t have credible information to stop Abdulmutallab from flying to the U.S., Napolitano said on CNN’s “State of the Union. “You need information that is specific and credible if you are going to actually bar someone from air travel,” she said. Extra Attention Lieberman said on Fox that all 550,000 people on the TIDE list warrant extra attention. “That doesn’t mean they’re convicted of any wrongdoing, but it would be basis enough to take this guy out of the line in Amsterdam and do a full body check, and that would have determined that he was carrying explosives,” Lieberman said. The plane bore the markings of Atlanta-based Delta Air Lines Inc., which acquired Northwest Airlines Corp. in 2008. A disruptive passenger on a flight with the same number and same routing was taken into custody for questioning yesterday, said Susan Elliott, a Delta spokeswoman. The flight crew called on law enforcement “out of an abundance of caution,” she said. The Federal Bureau of Investigation said in a statement that the incident was “non-serious” and the passenger was later released. The Transportation Security Administration has set new rules for international flights to the U.S., requiring passengers to remain seated for the last hour of their flights. They are also barred during that period from getting anything from their bags and from keeping anything in their laps. “The traveling public is very, very safe in this air environment,” Napolitano said on CNN. “And while we continue to investigate the source of this incident, I think the traveling public should be confident in what we are doing now.” To contact the reporters on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net ; Roger Runningen in Washington at rrunningen@bloomberg.net .

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Tanker Glut Signals 25% Freight Decline as 26 Miles of Ships Meet Demand

December 28, 2009

By Alaric Nightingale and Alexander Kwiatkowski Dec. 28 (Bloomberg) — A 26-mile-long line of idled oil tankers, enough to blockade the English Channel, may signal a 25 percent slump in freight rates next year. The ships will unload 26 percent of the crude and oil products they are storing in six months, adding to vessel supply and pushing rates for supertankers down to an average of $30,000 a day next year, compared with $40,212 now, according to the median estimate in a Bloomberg News survey of 15 analysts, traders and shipbrokers. That’s below what Frontline Ltd. , the biggest operator of the ships, says it needs to break even. Traders booked a record number of ships for storage this year, seeking to profit from longer-dated energy futures trading at a premium to contracts for immediate delivery, according to SSY Consultancy & Research Ltd., a unit of the world’s second- largest shipbroker. Ships taken out of that trade would return to compete for cargoes just as deliveries from shipyards’ largest-ever order book swell the global fleet. “The tanker market has been defying gravity,” said Martin Stopford , a London-based director at Clarkson Plc, the world’s largest shipbroker. Stopford has covered shipping since 1971. More than half of the ships are in European waters, with the rest spread out across Asia, the U.S. and West Africa. Lined up end to end, they would stretch for about 26 miles. Storing Crude Traders are storing enough crude at sea to supply the 27- nation European Union for more than three days. Royal Dutch Shell Plc, Europe’s biggest oil company; London-based BP Plc; JPMorgan Chase & Co.; and Morgan Stanley were among those that sought vessels for storage. By the end of November, 168 tankers were storing crude or refined products, according to data from Simpson, Spence & Young Ltd., the world’s second-largest shipbroker. Their combined carrying capacity of 23.8 million deadweight tons is equal to 5.9 percent of the tanker fleet. That exceeds the previous record, set in 1981, when Japanese refiners used tankers with a combined 19.5 million deadweight tons. The storage helped prop up tanker rates this year as the Organization of Petroleum Exporting Countries, accounting for 40 percent of global oil supply, made the deepest-ever output cuts in response to the worst global recession since World War II. The storage trade is profitable so long as the spread between energy contracts exceeds ship rental, insurance and financing costs. A year ago, the spread between the first and sixth Brent crude-oil contracts traded on the London-based ICE Futures Europe exchange was 23 percent. Now, it’s 4.6 percent. Supertanker Fleet Daily returns from leasing supertankers on the industry’s benchmark route from Saudi Arabia to Japan advanced to $40,212 on Dec. 24, compared with $1,246 on Sept. 11, data from the London-based Baltic Exchange show. “If tanker rates go up, everybody will get rid of ships,” said Andreas Vergottis , Hong Kong-based research director at Tufton Oceanic Ltd., which manages the world’s largest shipping hedge fund. “It’s going to be a market that’s worse than 2009.” Vergottis expects the global tanker fleet to expand about 12 percent next year, of which 5 percentage points will come from ships returning from storage. That compares with the Paris- based International Energy Agency’s forecast for a 1.6 percent gain in global oil demand. Crude-oil storage will slump to 40 million barrels in six months and 19 million barrels in a year, from about 50 million barrels now, according to the Bloomberg News survey. Oil-product storage will shrink to 69 million barrels in six months and 29 million in a year, from 98 million now, the survey showed. ‘A Lot Longer’ Brent crude will average $75 a barrel next year, about 1.7 percent less than the closing price of $76.31 on Dec. 24, according to the median of 37 analyst estimates compiled by Bloomberg. Gasoil will average $679 a metric ton next year, compared with $626.50 now, forecasts compiled by Bloomberg show. Storage “already lasted a lot longer than most people anticipated,” said Jonathan Chappell , an analyst at JPMorgan in New York with “underweight” recommendations on Frontline and Overseas Shipholding Group, the largest U.S.-based oil-tanker owner. Ships unloading their cargoes will rejoin a fleet set to expand 3.5 percent next year, according to London-based Drewry Shipping Consultants Ltd. The order book for tankers stands at 121 million deadweight tons, or 32 percent of the existing fleet, it estimates. Deadweight tons are a measure of a ship’s capacity for carrying cargo, fuel and supplies. Oil-Tanker Owner Frontline dropped 17 percent in Oslo trading this year, and was 1.9 percent higher at 166 kroner as of 9:16 a.m. in Oslo, while Overseas Shipholding gained 6.8 percent in New York. The MSCI World Index of equities in 23 developed nations advanced 28 percent, heading for its best year since 2003. Five out of 27 analysts covering Frontline recommend buying the stock, while for New York-based Overseas Shipholding it’s three out of 17, recommendations compiled by Bloomberg show. The 2010 average tanker rate of $30,000 in the Bloomberg survey would still be 30 percent higher than this year’s average of $23,130, according to data from the Baltic Exchange. In May, July, August and September, charter rates fell so low that ship owners were contributing toward fuel as well as paying the crew, insurance, repairs and other running costs. Frontline, based in Hamilton, Bermuda, announced last month its first quarterly loss in seven years. Its supertankers need $32,900 a day to break even, the company said. Ship owners usually hire their vessels out in the spot market and on longer rentals at fixed prices. Single-Hull Tankers Unprofitable tanker rates may encourage owners to scrap more ships, according to Nikhil Jain, a Delhi-based editor for Drewry’s Tanker Forecaster report. A global ban on single-hulled tankers is scheduled to be phased in from next year, potentially further shrinking vessel supply. Single-hulled supertankers, deemed “more accident-prone” than double-hulled vessels by the European Union, account for about 17 percent of the total fleet, according to Lloyd’s Register-Fairplay data. The elimination of single-hull tankers will lead to “negative fleet growth” and rising charter rates in 2010, said Jens Martin Jensen , chief executive officer of Frontline’s management unit. “I still believe in increased oil demand compared to today,” he said. The Federal Reserve will likely keep interest rates low, curbing financing costs for those storing cargoes, said Morten Arntzen , chief executive officer of Overseas Shipholding. Global Recession “I don’t see this collapse as tankers come out of storage,” he said. Oil consumption will strengthen next year and the additional demand will require ships to travel further, buoying freight rates, Arntzen said. Demand for ships may also improve after governments spent at least $12 trillion to lift their economies out of recession. U.S. gross domestic product will expand 2.6 percent next year, compared with a 2.5 percent contraction this year, according to the median estimate from 58 economists surveyed by Bloomberg. The eurozone will advance 1.1 percent, rebounding from a 3.9 percent decline this year, the survey shows. The recovery may not be smooth. The announcement on Nov. 25 that state-controlled Dubai World would seek to freeze or delay debt repayments stoked concern that a default would add to the $1.7 trillion of credit losses and asset writedowns posted by global financial companies since 2007. “There are a lot of things to worry about on the economic front,” Clarkson’s Stopford said. “You don’t get over body shocks like that overnight. You get run over by an 8-wheeler truck and you don’t go back to work the next day.” To contact the reporters on this story: Alaric Nightingale in London at Anightingal1@bloomberg.net ; Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net .

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Speculative Capital Adds to Volatility of China Stocks, Property, Fan Says

December 28, 2009

By Bloomberg News Dec. 28 (Bloomberg) — Inflows of speculative capital, or “hot money,” are contributing to volatility in China’s stock and property markets, said Fan Gang , the academic member of the central bank’s monetary policy committee. While the inflows help make it cheaper to borrow, “it will also cause asset bubbles,” Fan said at a financial forum in Beijing today. He also said that capital will keep heading into emerging markets for “a considerable period” because of limited or zero growth prospects in the industrialized economies. Fan’s warning comes a day after Premier Wen Jiabao pledged to tackle excessive property-price increases in some parts of the nation, citing taxes and loan rates as possible tools. China’s policy makers are trying to secure an economic rebound while avoiding the stock and housing bubbles that plagued the U.S. this decade. While the Shanghai Composite Index has fallen more than 8 percent from this year’s peak in August, it remains up 75 percent for 2009. China’s property benchmark , which measures prices in 70 cities, rose the most in 16 months in November. Fan is among Asian officials who have warned in recent weeks that the U.S. Federal Reserve’s policy of keeping its benchmark interest rate near zero is spurring global liquidity that’s heading to emerging markets. Rate Stance “Because of uncertainties in the global outlook, the European Central Bank, the Federal Reserve and other central banks are likely to stay reluctant to raise rates or exit stimulus, which will result in more arbitrage trading or speculative funds flowing to emerging markets,” Fan said today. Separately, he forecast China’s economy may grow 8 percent to 9 percent in 2010 as property investment grows at a faster face, private-sector production increases and exports recover, giving the world’s third-largest economy a further boost as the impact of government stimulus gradually fades. Fan, who heads the National Institute of Economic Research, said this was his personal view. A $585 billion stimulus package and a record $1.3 trillion of new loans in the first 11 months spurred an acceleration in China’s economic growth in the past two quarters. Gross domestic product rose 8.9 percent in the three months through September from a year earlier. Growth Path Quarterly growth may slow from the second quarter of 2010, Fan said today, adding that the slower pace doesn’t mean China will have a “second-dip,” referring to a renewed slowdown. China’s currency, the yuan, “has no reason to depreciate against the U.S. dollar or other currencies,” Fan also said today, citing reasons for long-term strength including the nation’s generally low inflation, rising productivity and a relatively low debt to gross domestic product ratio. “Moreover, when you depreciate, other currencies can follow suit and result in competitive depreciation, so in the end you won’t benefit,” he said. China has held the yuan at about 6.83 per dollar since July last year, shielding its exporters from the slump in global demand. Premier Wen reiterated yesterday his government will “absolutely not yield” to calls for currency gains. The International Monetary Fund has said the yuan is “undervalued.” China’s exchange-rate policy should be based on the nation’s need for balanced growth, “follow the trend of global currencies increasing in number,” and take into account the increased competition that China has with other emerging markets, Fan said, without elaborating. — Li Yanping . Editors: Chris Anstey , Paul Panckhurst . To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net

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Hong Kong’s $1.34 Billion Land Sale Misses Estimates; Property Stocks Drop

December 28, 2009

By Kelvin Wong and Wendy Leung Dec. 28 (Bloomberg) — Sino Land Co. and K Wah International Holdings Ltd. together paid HK$10.4 billion ($1.3 billion) for two waterfront sites in Hong Kong’s New Territories, falling short of estimates for the land auction. Shares of Hong Kong property companies , the best-performing group this year on the Hang Seng Index, fell. Three analysts polled by Bloomberg News gave estimates that ranged between HK$11.4 billion and HK$13 billion for the 20,925 square meter (225,000 square foot) plots in the Tai Po district, the largest properties offered since September 2007, according to Lands Department records. “Apart from Sino Land, which owns sites nearby and would benefit from paying a higher premium, other developers weren’t keen on pushing up the price,” said Conita Hung , head of equity markets at Delta Asia Securities Ltd. in Hong Kong. Shortage of land and buying by overseas speculators has fueled gains in home prices of as much as 30 percent this year, sparking a public outcry over housing costs and prompting the central bank to warn of “sharp corrections” in asset prices should fund flows reverse. “This shows the developers are being more cautious,” said Kevin Lai , an economist with Daiwa Institute of Research in Hong Kong. “A lot of this year’s economic recovery comes from short- term capital inflows and the money isn’t likely to be swimming around in the next 3-5 years.” The Hang Seng Property Index fell after the close of the auction. The gauge, which had gained as much as 1.3 percent before the sale began at 2:30 p.m., retreated as much 0.5 percent. It has advanced 60 percent this year, outpacing the 50 percent added by the benchmark Hang Seng Index. Sino Gains Sino Land, controlled by the family of Chairman Robert Ng , added 0.5 percent. It had gained as much as 2.2 percent before the auction commenced. K. Wah fell 1.7 percent. The auction result “suggests that developers are not pushing too aggressively because of concerns that interest rates will begin to rise,” said Kenny Tang , an analyst at Redford Securities Co. in Hong Kong. Morgan Stanley forecasts yields on U.S. 10-year treasuries will climb about 40 percent next year, pushing interest rates on 30-year mortgages almost to their highest in a decade. Because Hong Kong’s dollar is pegged to the U.S. currency, official interest rates track those in America. The peg to the dollar has also meant that speculative money has flown into Hong Kong as a decline in the greenback has made asset prices relatively cheap. More than HK$640 billion flowed into Hong Kong since October last year, Hong Kong Monetary Authority Chief Executive Norman Chan said this month. Asset bubbles are the “No. 1 threat” to financial stability in Asia, he said. Crisis Brewing? Chan’s comments followed those from Donald Tsang , the city’s chief executive, who said Nov. 13 he was “scared” that money flowing into Asia because of low interest rates in the U.S. could lead to another financial crisis in the region. Hong Kong’s economy has contracted for four straight quarters, year- on-year, even as property prices surged. In October, the city raised down-payment requirements on mortgages for homes valued at more than HK$20 million to 40 percent from 30 percent of the purchase price to curtail speculation. Developers say the government, one of the largest suppliers of building sites, should offer more land to help hold down prices. Raymond Kwok , vice chairman of Hong Kong’s biggest developer Sun Hung Kai Properties Ltd., said Dec. 3 that property prices in Hong Kong are still “reasonable.” Hang Lung Properties Ltd. Chairman Ronnie Chan said Dec. 4 that Hong Kong’s home market is a “good bet,” joining billionaire Lee Shau-kee in forecasting rising prices. Lee is the chairman of Henderson Land Development Co. Luxury Prices Low mortgage costs, near-zero interest rates on savings deposits and buying by mainland Chinese pushed up existing home prices 28 percent this year as of Dec. 20, according to the Centa-City Leading Index, a weekly measure developed by Centaline Property Agency Ltd. and the City University of Hong Kong. Hong Kong home transactions almost tripled in November from a year earlier, figures from the Land Registry show, marking the eighth straight monthly gain. Transactions of luxury homes, or those costing at least HK$10 million, jumped to 595 in November from 99 in the same month last year, according to the Land Registry . Henderson Land said in October it set a global record by selling an apartment for HK$88,000 ($11,354) a square foot on a net area basis. The first Tai Po site sold today at HK$7,145 a square foot, according to Ricacorp Properties Ltd. “We’re satisfied with the result,” said Chris Mills, assistant director of lands for the Hong Kong government. “The media has been talking up the value of the sites over the past few weeks to some quite major extent.” To contact the reporter on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net

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Most Profitable CEOs Get Smallest Gains in Biggest Stock Rally Since 1930s

December 28, 2009

By Alexis Xydias

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Stocks Rise in Europe, Asia on Chinese Growth; Won Gains, Treasuries Drop

December 28, 2009

By Nicolas Johnson and Kana Nishizawa Dec. 28 (Bloomberg) — European stocks rose to a 14-month high and Asian shares advanced after China said its economy grew faster than estimated so far this year. Emerging-market currencies strengthened and U.S. Treasuries fell. The Dow Jones Stoxx 600 Index added 0.4 percent to 252.90 as of 11:08 a.m. in Paris. The MSCI Asia Pacific Index climbed 0.7 percent to 120.41, the highest level since Dec. 8. U.S. futures rose. The won advanced against 14 of the most- traded currencies tracked by Bloomberg. Treasuries dropped ahead of this week’s $118 billion auction of government debt. China’s economy, which is leading the world out of the first global recession since World War II, grew faster than previously estimated, the government said. The U.S. will turn in its best performance since 2004 next year as spending picks up and companies increase investment, said Dean Maki , the most-accurate forecaster in a Bloomberg News survey. “The global economy is just about bottoming out,” said Masaru Hamasaki , chief strategist at Tokyo-based Toyota Asset Management Co., which oversees the equivalent of $14 billion. “I don’t expect huge economic growth, but I do see things recovering.” ArcelorMittal, the world’s biggest steelmaker, and Outokumpu Oyj led European basic-resources companies higher as metal prices rose in Asia. Seadrill Ltd., the drilling company founded by billionaire John Fredriksen, and Saipem SpA gained with crude oil prices. China, Japan The Shanghai Composite Index and Nikkei 225 Stock Average led the gains in the MSCI Asia Pacific Index. Hong Kong’s Hang Seng Index fell 0.2 percent, reversing gains of as much as 1 percent, after property auctions raised less money than the lowest analyst estimates. Standard & Poor’s 500 Index futures , which were closed for trading on Dec. 25, rose 0.1 percent. The Shanghai Composite advanced 1.5 percent to the highest since Dec. 16, led by consumer stocks on the growth outlook and as the government increased price caps for rural purchases of home appliances. GD Midea Holding Co. , China’s second-biggest publicly traded appliance maker, climbed to a 19-month high. The Nikkei 225 added 1.3 percent after Japan reported today that industrial production improved for a ninth month in November. JFE Holdings Inc. and Hitachi Construction Machinery Co. led gains. Doosan Corp., Doosan Heavy Industries & Construction Co., Hyundai Engineering & Construction Co. and Korea Electric Power Corp. surged more than 4 percent after they won a $20 billion United Arab Emirates nuclear-power-plant contract. Korea’s Kospi Index climbed 0.2 percent. Korean Won The won rose 0.4 to 1,170.15, near the strongest in more than a week. East Asian economies will grow faster than initially estimated this year, the World Bank said last month. Developing East Asia, which excludes Japan, Hong Kong, Taiwan, South Korea, Singapore and the Indian subcontinent, will expand 6.7 percent this year, more than an April estimate of 5.3 percent, it said, adding that growth may accelerate to 7.8 percent next year. The U.S. economy will expand 3.5 percent in 2010, according to Maki, the chief U.S. economist at Barclays Capital Inc. in New York. The rebound in stocks and rising incomes will prompt Americans to boost consumption, said Maki, a former economist at the Federal Reserve. Companies will become confident the expansion will be sustained as inventories dwindle and demand increases, he said. Stronger Dollar The dollar strengthened for the first time in four days against the euro and yen before reports tomorrow forecast to show improving U.S. property values and consumer confidence. The dollar rose to $1.4394 per euro in Tokyo from $1.4411 in New York on Dec. 25, and advanced to 91.48 yen from 91.30 yen against the Japanese currency. Treasuries declined, pushing 10-year yields to a four-month high of 3.84 percent as investors bet the U.S. recovery will fuel inflation and reduce demand for debt at auctions this week. The gap between yields on 2-year and 10-year Treasuries reached 285 basis points, or 2.85 percentage points, near the highest on record. The government sells $44 billion of two-year notes today. Copper Copper futures in Shanghai climbed as much as 1.6 percent to 58,770 yuan ($8,608) a ton, the highest level since September 2008, after workers at Codelco’s Chuquicamata copper mine in Chile rejected the company’s latest wage offer. Prices also increased after stockpiles in China, the world’s largest consumer of the metal, dropped for the second time in three weeks last week, according to data from the Shanghai Futures Exchange. Platinum for immediate delivery rose as much as 1.8 percent to the highest since Dec. 4, and gold advanced 0.5 percent to $1,110.78 an ounce on speculation that some investors are increasing their holdings after the metal fell for a fourth week, the longest losing streak since April. Crude oil traded above $78 a barrel in New York after rising to a three-week high on signs that the U.S. economy is recovering. Corn climbed for a third day, rising as much as 1 percent to $4.125 a bushel on the Chicago Board of Trade, on speculation that snow and ice may damage late-harvested U.S. crops. To contact the reporters for this story: Nicolas Johnson in Tokyo at nicojohnson@bloomberg.net ; Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net .

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NAR reports: Four out of 10 recent buyers relied on FHA loans

December 28, 2009

current challenges, FHA is a critical part of the American housing fabric.” The RCI results also indicated that distressed sales increased to 33 percent of all home sales last month, and that both investors and first-time homebuyers are competing for

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Denver real estate fares better than most

December 28, 2009

commercial and businesses in 2009, but not as bad as in many other U.S. cities. The constricted debt market remained one of the biggest problems for all real estate businesses, including commercial developers and homebuilders. Lenders, partly because of

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Commercial market to infect housing? | Real Estate | Philadelphia …

December 28, 2009

There is also a slim chance that the banking system’s problems with commercial real estate could end up to be a boon for residential real estate investors. As Deutch reasons, the problems of distressed commercial real estate are so …

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Save the Date for Newly Formatted Commercial Strategies for Success in Construction Lending Seminar: March 3-4, 2010 … (PRWeb via Yahoo! News)

December 28, 2009

The Strategies for Success in Construction Lending (SSCL) Seminar for the commercial industry will be held March 3-4, 2010 at The Ritz-Carlton, Denver in downtown Denver, Colorado.

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Restaurateurs Attack U.K. Banks for Tight Lending Even as Diners Return

December 27, 2009

By Richard Vines Dec. 25 (Bloomberg) — London restaurateurs are not optimistic they can get financing from banks for new eateries, even though they have fared better in the recession than they expected, said Richard Corrigan , owner of Corrigan’s Mayfair. “The banks are really negative toward our sector,” Corrigan said. “If you went in and asked them for 3 million pounds ($4.8 million) to open a restaurant, you might need a balaclava and gun to get it.” Corrigan, who also owns Bentley’s oyster bars in London and Dublin, said he started the year nervous because he opened in November 2008, just after the collapse of Lehman Brothers Holdings Inc. , which had been among the biggest customers at his London eateries. He was speaking on Bloomberg Television’s “Restaurant Review of the Year,” where the other guests at Corrigan’s Mayfair were David Moore, owner of Pied a Terre and L’Autre Pied; Russell Norman of Polpo; and Peter Prescott of Prescott & Conran Ltd., which opened Boundary and Lutyens in the past year. “It’s a strange approach from lenders at the moment,” Norman said. While the restaurateurs said business had picked up toward the end of the year after a slow start, spending on wine had generally not returned to that of the pre-recession days. “We found a turnaround in September, when all of a sudden we were getting more and more interest,” Moore said. “We’ve got the City types, bankers, not afraid to be seen spending money any more.” Lutyens, Boundary Prescott said Lutyens, his company’s new restaurant close to the financial district, still had some way to go but that spending was easier at Boundary, in Shoreditch, a fashionable part of East London that is known for its eateries and bars. At Lutyens, “We are still struggling a little bit because we are directly across the road from Goldman Sachs and there are lots of silly rumors like they can’t be seen anywhere near a glass of Champagne. We’ve seen some very good signs from October onwards. The wine spend in the City is still quite low, but fortunately it’s still reasonably good in Shoreditch.” Norman’s Polpo, which opened in Soho in September, has been a notable success with its informal ambience and inexpensive food and drinks. I’ve been a few times and seen the queues. Norman says recession may not be all bad for restaurateurs. “It’s one of the best things that we now have to work harder to keep our customers,” he said. Corrigan closed his restaurant in Soho, Lindsay House, after opening his new establishment in Mayfair. Did he have any regrets about leaving Soho, known for its night life? “Opening Corrigan’s was much better than I expected,” he said. “I took the punt and I’m very happy what it’s turned out to be. The horses have certainly come home for me on this site. But I miss all the crack dealers and the petty criminals.” The half-hour show starts on Bloomberg Television on Dec. 25 at 09:00 U.K. time and repeats through to Jan. 1, 2010. (Richard Vines is the chief food critic for Bloomberg News. Opinions expressed are his own.) To contact the writer on the story: Richard Vines in London at rvines@bloomberg.net .

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Cowboys Beat Redskins 17-0 to Clinch Playoff Spot, Eliminate Giants

December 27, 2009

By Erik Matuszewski Dec. 27 (Bloomberg) — The Dallas Cowboys beat the Washington Redskins 17-0 to clinch a spot in the National Football League playoffs and eliminate the New York Giants from postseason contention. Tony Romo threw a touchdown pass and Marion Barber added a scoring run for the Cowboys, who improved to 10-5 with one week left in the NFL’s regular season. Dallas claimed the last of the six playoff spots in the National Football Conference and ended the Giants’ chances of reaching the postseason. The Giants fell to 8-7 earlier today with a 41-9 home loss to the Carolina Panthers. The NFC’s other playoff teams are the New Orleans Saints, Minnesota Vikings, Philadelphia Eagles, Arizona Cardinals and Green Bay Packers.

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Economy in U.S. Poised for Growth Surge as Most Accurate Economist Sees It

December 27, 2009

By Timothy R. Homan and Bob Willis

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Final U.S. Health Care Bill Will Resemble Senate Version, Democrats Say

December 27, 2009

By Jonathan D. Salant Dec. 28 (Bloomberg) — Any health-care legislation that reaches President Barack Obama ’s desk will be close to the version the Senate passed last week, top Democrats said yesterday. The Senate garnered the minimum 60 votes needed to overcome Republican objections and pass its measure overhauling health care, and any major changes would jeopardize final approval, said Senator Bob Menendez of New Jersey, chairman of the Democratic Senate Campaign Committee. “If we are going to have a final law, it will look a lot more like the Senate version than the House version,” Menendez said on “Fox News Sunday.” “I’m sure there’ll be some compromises, but at the end of the day, I would expect that it will look very much like the Senate version.” Menendez’s counterpart in the House, Democratic Congressional Campaign Committee Chairman Chris Van Hollen of Maryland, said it is important to hold on to the 60 votes in the Senate. “We’re not going to rubber-stamp the Senate bill,” Van Hollen said on Fox. “On the other hand, we recognize the realities in the Senate.” Both versions would require Americans to get insurance or pay a penalty, offer expanded government aid and online purchasing exchanges to help buy policies and impose new rules on insurers, requiring them to accept customers regardless of pre-existing conditions. Both measures would reduce the federal deficit, according to the Congressional Budget Office. Final Bill White House spokesman Robert Gibbs said on NBC’s “Meet the Press” yesterday that President Barack Obama would be working with Senate and House leaders to draft a final bill. “The major parts of health care reform that the president sought to have enacted as a candidate are now very close to happening, and he thinks the commonality between the two proposals overlaps quite a bit,” Gibbs said. Van Hollen and House Majority Whip Jim Clyburn of South Carolina, said they would not let House-Senate disputes over abortion, taxes and a public option to compete with private insurers kill the legislation. Clyburn said on CBS’ “Face the Nation” that he could support legislation without the public option, which is in the House version. Some senators who backed the health-care measure, including Connecticut Independent Joe Lieberman , said a public option would be a deal-breaker. ‘No Consequence’ “We want a public option to do basically three things: create more choice for insurers, create more competition for insurance companies and to contain costs,” Clyburn said. “So if we can come up with a process by which these three things can be done, then I’m all for it. Whether or not we label it a public option is of no consequence.” The two chambers came up with different ways to fund their measures. The House approved a 5.4 percent income surtax on individuals earning more than $500,000 and couples earning more than $1 million. The Senate version would place a 40 percent excise tax on the costliest health-insurance policies, and raise the Medicare payroll tax to 2.35 percent from 1.45 percent for individuals earning more than $200,000 or families making more than $250,000. Labor unions, among the Democrats’ most loyal supporters, have opposed the tax on high-end health plans. Van Hollen raised the possibility of a higher threshold for the health-plan tax and some tax on higher-earners. “You can see room for a compromise there,” he said. As for abortion, Van Hollen said he expected language “that meets that principle that taxpayer dollars will not go to pay” for the procedure under any health-insurance plan. To contact the reporter on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net .

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Chinese Industrial Company Profits Surge as Stimulus Boosts Construction

December 27, 2009

By Bloomberg News Dec. 28 (Bloomberg) — Chinese industrial companies’ profits rose for the first time in a year, cementing the recovery in the world’s third-largest economy. Net income grew 7.8 percent in the January to November period to 2.59 trillion yuan ($379 billion) from a year earlier, the statistics bureau said today. Profits dropped 10.6 percent in the first eight months of the year. Stimulus spending and a record $1.3 trillion of new loans in the first 11 months of 2009 helped to drive up demand, boosting earnings at companies from China Resources Enterprise Ltd. to Beijing Automotive Industry Holding Co. Premier Wen Jiabao said yesterday that the government was wary of derailing the recovery by withdrawing stimulus measures too early. “Companies’ profits will continue to improve as China’s recovery gains momentum,” said Lu Ting , an economist at Bank of America-Merrill Lynch in Hong Kong. “Industrial companies are enjoying better price margins and expanding domestic demand.” China’s economy is leading the recovery in Asia, where Japan reported today its biggest gain in output in six months. Chinese industrial companies’ sales through November rose 7.1 percent to 47.5 trillion yuan. The data, released every three months, is for businesses with annual sales of more than 5 million yuan in 39 industries, including steel, chemicals, electricity, telecommunications and mining. PetroChina’s Expansion A fuel pricing system introduced last year guarantees a profit margin for state oil refiners and has encouraged China Petroleum & Chemical Corp. and PetroChina Co. to expand capacity to meet rising demand. Manufacturers reporting higher earnings include China Resources , the Chinese partner of SABMiller Plc, and Beijing Auto, which is buying technology from General Motors Co.’s Saab unit to speed the development of own-brand models to meet growing domestic demand. China’s industrial production grew in November at the fastest pace since March 2008 as property sales climbed and government subsidies supported consumer spending. Gross domestic product will expand 8.5 percent this year and 9.4 percent in 2009, according to a Bloomberg News survey of economists. On Dec. 25, the statistics bureau said the economy grew 9.6 percent last year, more than the 9 percent initially reported. That narrowed the gap with Japan, the world’s second-biggest economy. China may become No. 2 next year, according to International Monetary Fund projections. — Li Yanping , Sophie Leung. Editors: Paul Panckhurst , To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net

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ranjan munshi's Page – Commercial Real Estate Professional …

December 27, 2009

All content on this site is strictly the opinion of the member and does not necessarily convey the beliefs of CREPIG or it’s associates. CREPIG(tm) Commercial Real Estate – Distressed Commercial Property – CRE Funding – Investments …

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REITs Look To Get Back On Track

December 27, 2009

Extract not available.

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Video: David Cohen Says U.S. Dollar May Rise to 92-93 Yen: Video

December 27, 2009

Dec. 28 (Bloomberg) — David Cohen, an economist at Action Economics in Singapore, talks with Bloomberg’s Haslinda Amin about his forecast for the U.S. dollar and yen. Cohen also discusses the outlook for the U.S. economy and Federal Reserve policy. (This is an excerpt. Source: Bloomberg)

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Commercial Real Estate Presents Big Profit | Easy Free Ads

December 27, 2009

Therefore, once you recognize the probability of significant commercial growth within a region (whatever the reason i.e. municipal tax concessions), you should begin to evaluate the potential for appreciation in commercial real estate …

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A year of maturity for the realty sector (Zawya)

December 27, 2009

Year 2009 was a year of “price correction” for Dubai’s realty market, transforming it into a matured and favourable one for end-users.

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People & Places for Dec. 28 (Richmond Times-Dispatch)

December 27, 2009

ON THE MOVE CERTIFICATION Wanda Bond has earned her Certified Distressed Property Expert designation. She is with Weichert, Realtors. Bruce Richardson Sr. has earned his Certified Distressed Property Expert designation. He is with Weichert, Realtors. CONSTRUCTION Danielle Carpenter is a project manager at M.L. Bell Construction. She was formerly with BraRon Painting and Dallan Construction. She …

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Video: Ishizuka Says Sony Ericsson Aims to Maintain Asia Growth: Video

December 27, 2009

Dec. 28 (Bloomberg) — Hirokazu Ishizuka, head of the Asia-Pacific region at Sony Ericsson Mobile Communications Ltd., talks with Bloomberg’s Haslinda Amin about the company’s growth strategy in Asia. Ishizuka, who spoke in Singapore on Dec. 7, also discussed subscribers and pricing for the company’s new smartphones. (Source: Bloomberg)

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Commercial market hopes for less pain

December 27, 2009

The velocity of commercial real estate transactions is expected to increase in 2010, while new commercial development will be practically nonexistent. Thats the assessment of local commercial real estate experts who see a number of

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Alfa Romeo Leads ICAP Leopard, Wild Oats XI in Sydney to Hobart Yacht Race

December 27, 2009

By Iain Wilson Dec. 28 (Bloomberg) — Alfa Romeo surged down the Tasmanian coast in the lead today in a bid to claim a line honors victory in the Sydney to Hobart sailing race. Alfa Romeo, skippered by 2002 Rolex Sydney Hobart winner Neville Crichton, was leading ICAP Leopard and Wild Oats XI, which began the 628-nautical mile (1,163-kilometer) race as the bookmaker’s favorite. The race, which takes competitors down Australia’s southeast coast and across Bass Strait to the island state of Tasmania, attracted 12 overseas entrants in the 100-boat fleet.

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Japan Finance Minister Fujii Hospitalized for High Blood Pressure, Fatigue

December 27, 2009

By Kyoko Shimodoi and Toru Fujioka Dec. 28 (Bloomberg) — Japanese Finance Minister Hirohisa Fujii , 77, has been admitted to hospital for high blood pressure and exhaustion following work on the government’s budget, a Finance Ministry official said. Fujii will be hospitalized for about 10 days, said the official, who spoke on the condition of anonymity. He will still attend Cabinet meetings scheduled for Dec. 30 and Jan. 5, the person said. “This won’t have any impact on the economy or markets,” given that the budget has been released and traders aren’t on alert for intervention in the currency market, said Kyohei Morita , chief economist at Barclays Capital in Tokyo. The finance chief was asked by Prime Minister Yukio Hatoyama to postpone retirement and run in an August election that brought the Democratic Party of Japan to power for the first time. Fujii, a former finance ministry budget examiner, previously headed the ministry in 1993. To contact the reporter on this story: Kyoko Shimodoi in Tokyo at kshimodoi@bloomberg.net ; Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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China’s Stocks Climb to a Two-Week High as GD Midea, Hisense Lead Advance

December 27, 2009

By Bloomberg News Dec. 28 (Bloomberg) — China’s stocks rose to a two-week high, led by consumer stocks after the government said it will raise this year’s quarterly economic growth figures and increased price caps for rural purchase of home appliances. GD Midea Holding Co. , China’s second-biggest publicly traded appliance maker, climbed to a 19-month high, while Hisense Electric Co. , a manufacturer of flat-panel televisions, surged to a record. “Consumer stocks are good bets as they will receive most of the government support next year,” said Wei Wei , an analyst at West China Securities Co. in Shanghai. The Shanghai Composite Index rose 48.69, or 1.6 percent, to 3,190.04 as of 10:08 a.m. local time, the highest since Dec. 16. The CSI 300 Index , measuring exchanges in Shanghai and Shenzhen, gained 1.6 percent to 3,477.78. The Shanghai gauge has rallied 75 percent this year as government spending and a credit boom helped the nation’s economy recover from its steepest slump in more than a decade. The index has dropped 0.2 percent this month as a flood of share sales diverted funds from existing equities and the government raised down payments on land purchases. Midea rose 2.4 percent to 23.21 yuan, the highest since May 6, 2008. Hisense gained 4.6 percent to 26.56 yuan. Suning Appliance Co. , China’s biggest home appliance retailer by market value, added 1.2 percent to 19.90 yuan. Price caps for mobile phones and televisions doubled and levels for seven other types of home appliances, including refrigerators and washing machines, increased by between 25 percent and 75 percent, Vice Finance Minister Zhang Shaochun said in an online chat with the public on the government’s Web site on Dec. 25 He didn’t specify when the changes take effect. China’s stock market has “little risk, much opportunity” in 2010 as corporate profits expand and liquidity remains ample, according to the China Securities Journal. China’s nominal gross domestic product may reach 13 percent next year, corporate profits may grow 25 percent and bank lending will be at least 8 trillion yuan, it said in a front- page editorial. Inflation may top 3 percent in the first quarter, prompting investors to shift more savings into equities, the report said. — Zhang Shidong . Editor: Linus Chua To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-7014 or szhang5@bloomberg.net

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Swedish Krona to Rally From Worst in Quarter as Growth Prompts Rate Rises

December 27, 2009

By Anna Rascouet and Anchalee Worrachate Dec. 28 (Bloomberg) — The Swedish krona, the worst performer among the 16 biggest currencies this quarter, will rebound in 2010 as the economy recovers and interest rates rise, according to some of the largest foreign-exchange traders. UBS AG has made betting on krona gains versus the euro one of its top trades for next year. UniCredit SpA advises buying options to sell the euro against the krona, Danske Bank A/S says the currency is below its true value, and Deutsche Bank AG sees it rising 6.6 percent versus the euro by the end of March. “It’s the most undervalued currency in the Group of 10 universe by any metric you choose to use,” said John Hydeskov , a foreign-exchange strategist in Copenhagen at Danske Bank, Denmark’s largest lender, which sees the currency gaining about 3.3 percent by the end of the first quarter versus the euro. “The largest potential belongs to the krona. The Riksbank will raise rates quite dramatically in the second half.” Purchasing power parity, a measure of the cost of goods relative to other countries, shows the krona is 46 percent below its true value against the euro, the biggest disparity among the currencies of the G-10 richest countries, according to data compiled by Bloomberg. The krona will appreciate to 9.88 per euro by June of next year and 9.60 by the end of 2010, according to the median of 23 estimates compiled by Bloomberg. The currency was at 10.47 per euro as of Dec. 24. Latvian Effect The krona slid 4.2 percent against the dollar, 2.7 percent versus the euro and 2.7 percent compared with the yen in the fourth quarter through Dec. 24, more than any of the 16 most- traded currencies tracked by Bloomberg. The declines came as the nation’s worst recession since World War II hampered exports at companies from truckmaker Volvo AB to SKF AB , the world’s biggest maker of ball bearings, and investor concern a devaluation by neighboring Latvia would result in losses at Swedish banks, after Prime Minister Valdis Dombrovskis proposed capping mortgage holders’ liability. Sweden’s recession has been deeper than for some of its neighbors. The economy will shrink 4.7 percent this year compared with a decline of 1.4 percent in Norway and a contraction of 4.5 percent in Denmark, according to November forecasts by the Paris-based Organization for Economic Cooperation and Development. Gothenburg, Sweden-based Volvo cut at least 22,000 jobs this year as demand for its goods dropped. SKF, also headquartered in Gothenberg, posted its fourth straight drop in quarterly earnings on Oct. 20. Exports make up half of Sweden’s $480 billion economy. Expanding Economy As the global economic recovery revives demand, the Swedish economy may expand 2.7 percent next year, after shrinking about 4.5 percent in 2009, the Stockholm-based Riksbank said on Dec. 16. Unemployment will peak at 10.1 percent next year, before falling to 10 percent in 2011, it said. “We see good scope for the Riksbank to start raising rates in the second quarter, months before the ECB,” said Mansoor Mohi-uddin , the global head of currency strategy in Zurich at UBS, the world’s second-biggest currency trader. “Some policy makers are already talking about a strong recovery coming through soon in the Swedish economy. Being short euro-krona is one of our top trades for 2010.” Swedish policy makers left the nation’s benchmark interest rate at 0.25 percent on Dec. 16 and repeated a pledge to keep it at a record low until autumn 2010. The Riksbank will raise the rate by 75 basis points in the third quarter next year to 1 percent, according to a weighted average of 11 economist forecasts compiled by Bloomberg. The ECB, whose main refinancing rate is 1 percent, will refrain from increasing it until the fourth quarter, according to the average of 16 forecasts. Fiscal Stimulus Sweden had a budget surplus of 6.7 billion kronor ($915 million) in November, putting it on course to post a smaller deficit than initially forecast, the country’s debt office said on Dec. 7. “Sweden will be among the few countries that can actually afford to continue to provide some sort of stimulus in terms of fiscal policy,” said Henrik Gullberg , a London-based foreign- exchange strategist at Deutsche Bank AG, the world’s largest currency trader. “That will make a big difference, especially compared with some of the major economies where huge deficit numbers are being run.” The krona slumped 2.4 percent against the euro in October, its biggest monthly slide in eight months, as investors speculated Latvia would drop its currency peg with the euro. The Baltic state drew up legislation designed to limit homeowner mortgage liability in case of a decline in its currency, stoking concern that Swedish banks, the biggest lenders in the country, would suffer losses on loans. Baltic Risk ‘Contained’ “The problem is contained in regards to the Baltic nations, Latvia in particular,” said Ken Dickson , a money manager at Edinburgh-based Standard Life Investments, which oversees $220 billion. “We remain very positive on the krona. It’s undervalued, especially against the euro.” While the krona rebounds, bets on other currencies may produce better returns, according to HSBC Holdings Plc, Europe’s biggest bank by market value and the world’s seventh largest currency trader. “The markets always had a love-affair with the krona and they got their fingers badly burnt through the crisis last year,” said Paul Mackel , a director of currency strategy at HSBC Holdings Plc in London. “It looks like Sweden is through the worst but the story is stronger elsewhere and, on a relative basis, the krona doesn’t deserve to fall back into favor the way everyone seems to be thinking.” The krona will strengthen to 6.61 per dollar by the end the second quarter before weakening to 6.92 by the end of 2010, according to the median of 20 estimates compiled by Bloomberg. It was at 7.26 per dollar as of Dec. 24. The Swedish currency may also recover as evidence of the global economic rebound fuels gains in stocks, according to Chiara Cremonesi , a strategist at Unicredit in London. The Standard & Poor’s 500 Index of shares had a correlation with the krona’s moves against the euro of 0.73 last week, and reached 0.87 during the quarter. A value of 1 would mean they moved in lockstep. “Risk appetite will resume at the beginning of 2010,” Cremonesi said. “This will favor the Swedish krona.” To contact the reporters on this story: Anna Rascouet in London at arascouet@bloomberg.net ; Anchalee Worrachate in London at aworrachate@bloomberg.net

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Japan Factory Output Climbs Most in Six Months as Exports Sustain Recovery

December 27, 2009

By Aki Ito and Toru Fujioka Dec. 28 (Bloomberg) — Japan’s industrial production climbed the most in six months in November, while falling wages restrained retail sales , underscoring the nation’s reliance on overseas demand to sustain the economy’s recovery. Factory output rose 2.6 percent from the previous month, the Trade Ministry said today in Tokyo. Retail sales advanced 0.2 percent after a 0.9 percent drop in October, and fell 1 percent from a year before, the ministry also said. A separate report showed monthly wages posted an 18th straight monthly drop. Stocks rose as the manufacturing report signaled that Japan’s exporters are coping with the impact of a stronger yen that threatened to make them less competitive. At the same time, today’s domestic figures underscore why the nation is poised to slip behind China next year as the world’s No. 2 economy. “We won’t see another recession because exports will keep recovering,” said Naoki Iizuka , a senior economist at Mizuho Securities Co. in Tokyo. At the same time, “consumer spending is in a tight situation” given falling wages, and domestic demand may not see a recovery until 2012, he said. The Nikkei 225 Stock Average rose 1.43 percent to 10,644.71 at the 12:58 p.m. in Tokyo. Hitachi Construction Machinery Co. , the world’s largest maker of giant excavators, gained 2.7 percent, Toyota Motor Co. advanced 1 percent and Tokyo Electron Ltd. , the second-largest maker of chip-manufacturing equipment, rose 2.4 percent. Gradual Recovery Japan’s Cabinet Office three days ago said the nation’s economy “will probably recover gradually” next year, with a 1.4 percent expansion in the year starting in April. Prime Minister Yukio Hatoyama is aiming to sustain the recovery from the country’s worst postwar recession with measures to buttress household incomes. After shrinking for four consecutive quarters, Japan’s economy emerged from recession in the three month period ended June 30, overcoming the financial crisis earlier than the U.S. and Europe. Reports show the yen’s surge to a 14-year high of 84.83 on Nov. 27 has yet to hurt sentiment or cut sales. Companies surveyed by the Trade Ministry in today’s production report said they plan to increase output by 3.4 percent this month and 1.3 percent in January. A strengthening economy in China, Japan’s largest trading partner, has aided the industrial rebound. China’s statistics bureau on Dec. 25 increased its estimate for 2008 gross domestic product to 31.405 trillion yuan ($4.6 trillion), narrowing the gap with Japan. The International Monetary Fund sees China taking Japan’s spot behind the U.S. in GDP rankings next year. Japanese exports to Asia rose for the first time in 14 months in November. Elpida Memory Inc., Japan’s largest computer-memory chipmaker, may return to profit for the first time in three years thanks to higher demand, Chief Executive Officer Yukio Sakamoto said this month. Companies from Toyota to Nissan Motor Co. are also ramping up production at home again. Toyota, Japan’s largest carmaker, increased output for the first time in 16 months in November, while Nissan’s output rose by a 21 percent from a year earlier. “As long as Japan’s exports pick up and production continues to increase, the economy will stay on a recovery trend,” said Masamichi Adachi , a senior economist at JPMorgan Chase &　Co. in Tokyo. “There won’t be a double-dip” slump, he said. To contact the reporter on this story: Aki Ito in Tokyo at aito16@bloomberg.net ; Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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Asian Stocks Rise on Outlook for China, Japan Growth; Won, Copper Advance

December 27, 2009

By Nicolas Johnson and Kana Nishizawa Dec. 28 (Bloomberg) — Asian stocks rose to a three-week high and emerging-market currencies strengthened after China raised growth figures and Japan’s industrial production increased, showing the region’s expansion is accelerating. The MSCI Asia Pacific Index climbed 1.1 percent at noon in Tokyo, to 120.64, the highest since Dec. 8. South Korea’s won rose against all 16 of the most-traded currencies tracked by Bloomberg after four Korean companies won a $20 billion nuclear- power-plant contract from the United Arab Emirates. Copper advanced to a 15-month high in Shanghai. China’s growth in 2008 was faster than previously estimated and Japan reported today that industrial production improved for a ninth month in November as Asia leads the world economy out of the first global recession since World War II. Gains were limited after Chinese Premier Wen Jiabao said the government will stem property speculation, and a newspaper showed falling approval ratings for Japanese Prime Minister Yukio Hatoyama . “The global economy is just about bottoming out,” said Masaru Hamasaki , chief strategist at Tokyo-based Toyota Asset Management Co., which oversees the equivalent of $14 billion. “I don’t expect huge economic growth, but I do see things recovering.” The MSCI Asia Pacific Index’s gains were led by the 1.8 percent jump in China’s Shanghai Composite Index and 1.1 percent advance in Japan’s Nikkei 225 Stock Average. Futures on the Standard & Poor’s 500 Index, which were closed from trading on Dec. 25, rose less than 0.1 percent. Nuclear Contract Doosan Corp., Doosan Heavy Industries & Construction Co., Hyundai Engineering & Construction Co. and Korea Electric Power Corp. surged more than 5 percent after the nuclear-power order from the U.A.E. Korea’s Kospi Index climbed 0.2 percent. The Shanghai Composite rose to a two-week high, led by consumer stocks on the growth outlook and as the government increased price caps for rural purchases of home appliances. GD Midea Holding Co. , China’s second-biggest publicly traded appliance maker, climbed to a 19-month high. The dollar strengthened for the first time in four days against the euro and yen before reports forecast to show improving U.S. property values and consumer confidence. Treasuries were little changed ahead of a record-tying $118 billion in bond auctions this week. The dollar rose to $1.4375 per euro in Tokyo from $1.4411 in New York on Dec. 25. The U.S. currency advanced to 91.56 yen from 91.11 yen. The euro traded at 131.61 yen from 131.64 yen. Copper Copper futures in Shanghai climbed as much as 1.6 percent to 58,770 yuan ($8,608) a ton, the highest since September 2008, after workers at Codelco’s Chuquicamata copper mine in Chile rejected the company’s latest wage offer. Prices also increased after stockpiles in China, the world’s largest consumer, dropped. Gold advanced 0.5 percent to $1,110.78 an ounce on speculation that some investors are increasing their holdings after the metal fell for a fourth week, the longest losing streak since April. Crude oil traded above $78 a barrel in New York after rising to a three-week high on signs that the U.S. economy is recovering. Corn climbed for a third day, rising as much as 1 percent to $4.125 a bushel on the Chicago Board of Trade, on speculation that snow and ice may damage late-harvested U.S. crops. To contact the reporters for this story: Nicolas Johnson in Tokyo at nicojohnson@bloomberg.net ; Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net .

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Video: Japan’s Tobacco Tax to Increase Cigarette Prices by 33%: Video

December 27, 2009

Dec. 28 (Bloomberg) — Bloomberg’s Mike Firn reports on Japan’s plan to raise tobacco taxes for the first time in four years. The Cabinet approved a plan to raise the duty by 3.5 yen (4 cents) per cigarette from Oct. 1 next year, and tobacco companies will charge an extra 1.5 yen each. A pack of 20 cigarettes would increase by an average 100 yen, or 33 percent, to 400 yen. The tax increase is part of Prime Minister Yukio Hatoyama’s pledge to discourage smoking to curb health insurance costs as the population ages. (Source: Bloomberg)

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Commercial real-estate market suffered in 2009; more of the same forecast for 2010 (Seattle Times)

December 27, 2009

Commercial real-estate insiders say 2010 could be as bad, if not worse, than 2009 for their industry.

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Ten stories that drove Florida’s economy in 2009

December 27, 2009

point toward a fledgling recovery. ”It’s horrific and getting better,” said Adam Greenberg, managing director of BayBridge Real Estate in Miami. ”In May, we were all at bars drinking at two in the afternoon. Now I’m just getting home after a full day

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Commercial real-estate market suffered in 2009; more of the same …

December 27, 2009

Commercial real – estate insiders say 2010 could be as bad, if not worse, than 2009 for their industry. Here is the original post: Commercial real – estate market suffered in 2009; more of the same forecast for 2010 (Seattle Times)

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`Avatar’ Is No. 1 Movie in Highest-Grossing U.S., Canada Film Weekend Ever

December 27, 2009

By Esme E. Deprez and Linda Sandler Dec. 27 (Bloomberg) — “Avatar,” James Cameron’s 3-D science-fiction adventure for News Corp., was the top film in the U.S. and Canada with $75 million in sales as Hollywood posted its highest-grossing weekend ever. Receipts totaled $278 million. “Sherlock Holmes,” British director Guy Ritchie ’s adaptation of Arthur Conan Doyle ’s detective novels for Time Warner Inc. , was second with $65.4 million, according to researcher Hollywood.com Box-Office. U.S. ticket sales this year have surpassed $10 billion for the first time, according to Hollywood.com, buoyed by 3-D movies and the higher tickets prices they command, as well as increased attendance. The right films and still-moderate prices helped make this weekend a record breaker, even at the tail-end of a recession, an analyst said. “For films to boom, you need a combination of appealing movies and the movies retaining their standard as one of the cheapest forms of entertainment,” said Brandon Gray , president and publisher of Box Office Mojo, in a phone interview. This Christmas weekend’s sales topped the $261 million made in July 2008, when “The Dark Knight” was in theaters. ‘Sherlock Holmes’ “Avatar” has taken in $212.3 million in two weeks, and the film’s $77 million opening weekend set a record for a 3-D movie in the U.S. Attendance at U.S. theaters is up an estimated 5.1 percent this year, Los Angeles-based Hollywood.com said. The rise comes even as an estimated 515 movies were released in U.S. theaters, the lowest in four years, and down from 2007’s high of 631, said Jeff Bock , senior box-office analyst at Los Angeles-based Exhibitor Relations Co. Hollywood is turning to 3-D films to bolster attendance and sales. Cinemas on average charge about $3 more per ticket for a 3-D movie. The number of 3-D releases will climb to 50 by 2012 from more than 35 this year, Bock said. Bock expects “Avatar,” the story of a paraplegic marine dispatched to planet Pandora on a mission, to stay in the top two for the next five weeks and pull in between $350 million and $400 million. ‘It’s Complicated’ Time Warner’s “Sherlock Holmes,” which came in second, set a Christmas Day record debut with $24.9 million in receipts. Robert Downey Jr . plays Holmes and Jude Law is his aide, Dr. Watson, in the film from Warner Bros. The pair fight a killer and sorcerer who threatens all of England. Rachel McAdams also stars. The film was helped by a marketing campaign that presented it as a fun action-adventure with a brand name, and with Downey riding high after “Iron Man,” said Box Office Mojo’s Gray. Finishing third was Twentieth Century Fox’s “Alvin and the Chipmunks: The Squeakquel.” It grossed $50.2 million in three days of release. “It’s Complicated,” a romantic comedy featuring Meryl Streep and Alec Baldwin , opened in fourth place taking, in $22.1 million for General Electric Co.’s NBC Universal. The film tells the story of a divorced couple who reconcile. “Up in the Air,” a business comedy starring George Clooney , was fifth with $11.8 million after expanding its release to 1,895 on Dec. 23 from 15 theaters on Dec. 4. The movie, about a man who travels to company branch offices to fire workers, received the most nominations for the Golden Globe awards this month. Sales for the top 12 films rose 47 percent to $264.4 million from $179.5 million a year earlier, Hollywood.com said. Year-to-date receipts total $10.4 billion, up 9.2 percent from a year earlier. The following table has figures provided by studios to Hollywood.com. The amounts are based on actual ticket sales from Dec. 25-26 and estimates for today. To contact the reporters on this story: Esmé E. Deprez in New York at edeprez@bloomberg.net Linda Sandler in New York at lsandler@bloomberg.net .

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Urban Meyer Takes Leave as Florida Gators’ Football Coach Due to Health

December 27, 2009

By Nancy Kercheval Dec. 27 (Bloomberg) — Urban Meyer will leave his University of Florida football coaching position for health reasons after the No. 5 Gators play the third-ranked University of Cincinnati in the Sugar Bowl. The 45-year-old coach was hospitalized with chest pains after then top-ranked Florida lost 32-13 to No. 2 University of Alabama in the Southeastern Conference title Dec. 5. The Gators will meet Cincinnati on Jan. 1 in New Orleans. “I have given my heart and soul to coaching college football and mentoring young men for the last 24-plus years and I have dedicated most of my waking moments the last five years to the Gator football program,” Meyer said yesterday in a statement on the Gainesville university’s Web site. “I have ignored my health for years, but recent developments have forced me to re-evaluate my priorities of faith and family.” Meyer led the Gators to two National Championships and two SEC conference titles in 2006 and 2008. He is the only coach to win two Bowl Championship Series titles and the only coach in the history of the SEC to win two outright National Championships. Meyer has a 95-18 record for an .841 winning percentage over nine seasons. During the past five at Florida, he is 56-10 for an .848 winning percentage, the best in the school’s history and 32-8 in the SEC to earn the top career conference winning percentage of .800 among head coaches who were in the SEC at least five years. BCS Winner “I’m very thankful for the chance to work with some of the best assistants in college football and coach some of the best college football players and watch them grow both on and off the field as people,” said Meyer, who coached 2007 Heisman Trophy winner Tim Tebow . “I will cherish the relationships with them the most.” Under his direction, the Gators twice beat the BCS top- ranked teams in consecutive games by defeating Alabama in the SEC Championship in 2008 and then the University of Oklahoma in the national title game. The previous year, Florida beat Ohio State University in the national championship game to make Meyer the only coach to defeat three No. 1-ranked teams in his career. “The bottom line is that Coach Meyer needed to make a choice that is in the best interest of his well being and his family,” Athletics Director Jeremy Foley said. “I have never seen anyone more committed to his players, his family and his program.” ‘Lasting Legacy’ Four of the 17 Gators he coached who were selected for the National Football League Draft were picked in the first round. During his career, he has coached 62 players who signed NFL contracts. Meyer began his head coaching career in 2001 at Bowling Green State University, which went from a record of 2-9 to 8-3. He moved to the University of Utah, tallying 16 consecutive victories at the end of his time there in 2004. He extended his winning streak to 20 games when the Gators won their first four contests under his coaching expertise. “As a Gator, Urban has done everything we asked of him and more,” said university President J. Bernard Machen . “He leaves a lasting legacy on the field, in the classroom and in the Gainesville community. I am saddened that Urban is stepping down but I have deep respect for his decision.” To contact the reporter on this story: Nancy Kercheval in Washington at nkercheval@bloomberg.net .

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Jets End Colts’ Unbeaten Season as Giants Move Close to NFL Playoff Ouster

December 27, 2009

By Nancy Kercheval Dec. 27 (Bloomberg) — Urban Meyer will leave his University of Florida football coaching position for health reasons after the No. 5 Gators play the third-ranked University of Cincinnati in the Sugar Bowl. The 45-year-old coach was hospitalized with chest pains after then top-ranked Florida lost 32-13 to No. 2 University of Alabama in the Southeastern Conference title Dec. 5. The Gators will meet Cincinnati on Jan. 1 in New Orleans. “I have given my heart and soul to coaching college football and mentoring young men for the last 24-plus years and I have dedicated most of my waking moments the last five years to the Gator football program,” Meyer said yesterday in a statement on the Gainesville university’s Web site. “I have ignored my health for years, but recent developments have forced me to re-evaluate my priorities of faith and family.” After choosing to quit the job, Meyer decided instead to start an indefinite leave of absence, the Associated Press reported today. The news agency quoted an unidentified person familiar with decision and said Meyer may return to the Gators. Meyer led the Gators to two National Championships and two SEC conference titles in 2006 and 2008. He is the only coach to win two Bowl Championship Series titles and the only coach in the history of the SEC to win two outright National Championships. Meyer has a 95-18 record for an .841 winning percentage over nine seasons. During the past five at Florida, he is 56-10 for an .848 winning percentage, the best in the school’s history and 32-8 in the SEC to earn the top career conference winning percentage of .800 among head coaches who were in the SEC at least five years. BCS Winner “I’m very thankful for the chance to work with some of the best assistants in college football and coach some of the best college football players and watch them grow both on and off the field as people,” said Meyer, who coached 2007 Heisman Trophy winner Tim Tebow . “I will cherish the relationships with them the most.” Under his direction, the Gators twice beat the BCS top- ranked teams in consecutive games by defeating Alabama in the SEC Championship in 2008 and then the University of Oklahoma in the national title game. The previous year, Florida beat Ohio State University in the national championship game to make Meyer the only coach to defeat three No. 1-ranked teams in his career. “The bottom line is that Coach Meyer needed to make a choice that is in the best interest of his well being and his family,” Athletics Director Jeremy Foley said. “I have never seen anyone more committed to his players, his family and his program.” ‘Lasting Legacy’ Four of the 17 Gators he coached who were selected for the National Football League Draft were picked in the first round. During his career, he has coached 62 players who signed NFL contracts. Meyer began his head coaching career in 2001 at Bowling Green State University, which went from a record of 2-9 to 8-3. He moved to the University of Utah, tallying 16 consecutive victories at the end of his time there in 2004. He extended his winning streak to 20 games when the Gators won their first four contests under his coaching expertise. “As a Gator, Urban has done everything we asked of him and more,” said university President J. Bernard Machen . “He leaves a lasting legacy on the field, in the classroom and in the Gainesville community. I am saddened that Urban is stepping down but I have deep respect for his decision.” To contact the reporter on this story: Nancy Kercheval in Washington at nkercheval@bloomberg.net .

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Thirty-Year Fixed Rate Mortgage Climbs to 5.05%, Highest in Three Months

December 27, 2009

By Brian Louis Dec. 24 (Bloomberg) — Mortgage rates for fixed 30-year U.S. home loans increased for a third consecutive week to the highest in three months, reducing affordability for buyers and owners who wish to refinance. The rate for the week ended today increased to 5.05 percent from 4.94 percent. It set a record low 4.71 percent in the week ended Dec. 3. The average 15-year rate was 4.45 percent, the McLean, Virginia-based company said today in a statement. Mortgage rates are rising along with yields on the benchmark 10-year Treasury note. Yields on Fannie Mae and Freddie Mac mortgage securities climbed to the highest in four months this week, signaling interest rates on new home loans may continue climbing. “The housing market’s in recovery,” Brian Bethune , chief financial economist at IHS Global Insight in Lexington, Massachusetts, said. A Federal Reserve program to buy as much as $1.25 trillion in securities backed by home loans has helped reduce mortgage rates this year. The program is scheduled to end the first quarter of next year. The bond purchases from Fannie Mae , Freddie Mac and Ginnie Mae, which buy mortgages from lenders and package them into bonds, brought yields on the securities down this year and allowed lenders to reduce mortgage rates while still selling the securities at a profit. New-home sales unexpectedly fell 11 percent in November to an annual pace of 355,000, lower than the lowest estimate of economists surveyed by Bloomberg News. The median sales price fell 1.9 percent to $217,400 from a year earlier. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a mortgage fell 11 percent in the week ended Dec. 18. The purchase index fell 12 percent and the refinancing gauge slumped 10 percent. To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net .

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Homeownership in U.S. May Fall as Slump Wipes Out Equity, Fed Study Finds

December 27, 2009

By Vivien Lou Chen Dec. 24 (Bloomberg) — The rate of homeownership in the U.S. may fall in coming years as households rebuild equity wiped out by the worst slump since the Great Depression, according to a study by economists at the Federal Reserve Bank of New York. “The official homeownership rate will likely experience significant downward pressure in the coming years,” Andrew Haughwout, Richard Peach and Joseph Tracy wrote in a paper posted on the bank’s Web site. Owners whose mortgages are larger than the properties are worth “very likely will convert officially to renters,” assuming prices don’t climb in the next several years, they said. U.S. homes have lost about $5.9 trillion in value since the market’s peak in March 2006 as mounting foreclosures and the recession weighed on prices, according to Zillow.com. The homeownership rate peaked at 69 percent in 2006 and has since dropped to 67.3 percent, a level not seen since 2000, the authors wrote. A drop in homeownership would have broader implications for the economy, boosting the national savings rate, they said. Foreclosure filings in the U.S. are set to climb to a record for the second consecutive year with 3.9 million notices sent to homeowners in default, RealtyTrac Inc. said this month. This year’s filings will surpass 2008’s total of 3.2 million as record unemployment and price erosion batter the housing market, the Irvine, California-based company said. To contact the reporter on this story: Vivien Lou Chen in San Francisco at vchen1@bloomberg.net

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Wen Says China Will Cool Property Market, Resist Pressure for Yuan to Gain

December 27, 2009

By Bloomberg News Dec. 28 (Bloomberg) — Chinese Premier Wen Jiabao said the government will cool property prices, resist pressure for the yuan to appreciate and keep inflation at “reasonable” levels. “Property prices have risen too quickly in some areas and we should use taxes and loan interest rates to stabilize” them, Wen said yesterday in an online interview with the official Xinhua News Agency . China will “absolutely not yield” to calls for currency gains, he said. China’s property prices climbed last month at the quickest pace since July 2008, adding to concern that record lending and inflows of money will inflate asset bubbles in the world’s fastest-growing major economy. Central bank adviser Fan Gang said Nov. 18 that the nation needs to be on alert for stock, real-estate and commodity bubbles as global capital flows into emerging economies. “It’s difficult to see how serious the government is about cooling the property market,” said Andy Xie , former Morgan Stanley chief Asian economist. “The issue isn’t about introducing new measures but enforcing existing measures.” In November, real-estate prices in 70 major cities rose 5.7 percent from a year earlier, compared with 3.9 percent in October. Wen reiterated plans to build more low-cost housing and said the government would crack down on illegal activities such as land hoarding that drive up prices. China should anticipate inflation because of factors including rising global commodity costs, Wen said, pledging to keep price increases in a “reasonable range.” End of Deflation Consumer prices climbed 0.6 percent in November from a year earlier, snapping a nine-month run of deflation. The government will maintain a “moderately loose” monetary policy and a “proactive” fiscal stance, Wen said, adding that it would be a mistake to withdraw stimulus measures too quickly. “China will keep its loose stance at least in the first half of next year as inflation is expected to stay within tolerable levels,” said Shen Minggao , chief economist for Greater China at Citigroup Inc. “There won’t be significant changes to maintain policy stability but some industries with excess capacity have seen credit tightened.” On Dec. 25, China raised its 2008 growth estimate to 9.6 percent from 9 percent and said this year’s quarterly figures will also increase, narrowing the gap with Japan, the world’s second-biggest economy. Too Much Lending A record 9.2 trillion yuan ($1.3 trillion) of loans in the first 11 months of this year drove China’s recovery after the global crisis slashed export demand. It also added to the risk of bad loans. The premier said yesterday that it would be better if lending weren’t on such a large scale. Wen reiterated the government’s stance on the yuan after last month rejecting a call by visiting European officials, including European Central Bank President Jean-Claude Trichet , for a stronger currency. China has held the yuan at about 6.83 per dollar since July last year, shielding its exporters from the slump in global demand. “Maintaining a stable yuan has made an important contribution globally,” Wen said in the Xinhua interview. “We will absolutely not yield to pressure to appreciate.” He added that nations calling for a stronger yuan are also taking “protectionist” measures against China. Twelve-month non-deliverable yuan forwards indicate that China’s currency will appreciate 2.6 percent against the dollar in the next year. The yuan gained about 21 percent in the three years after a fixed exchange rate was scrapped in July 2005. A $586 billion, two-year stimulus package and subsidies for consumer purchases helped the economy expand 8.9 percent last quarter, the fastest pace in a year. China is poised to replace Japan as the world’s second-biggest economy next year, according to International Monetary Fund projections. — Irene Shen . With assistance from Kyunghee Park in Hong Kong. Editors: Richard Dobson , Paul Panckhurst , Kevin Costelloe . To contact the Bloomberg News staff on this story: Irene Shen in Shanghai at ishen4@bloomberg.net

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Japan’s Industrial Production Rose 2.6% in November, Ninth Monthly Gain

December 27, 2009

By Keiko Ujikane and Toru Fujioka Dec. 28 (Bloomberg) — Japanese manufacturers increased output at the fastest pace in six months in November, supporting the nation’s recovery from its deepest postwar recession. Factory production rose 2.6 percent last month after climbing 0.5 percent in October, the Trade Ministry said today in Tokyo. The median estimate of 24 economists surveyed by Bloomberg News was for a 2.5 percent gain. The Nikkei 225 Stock Average rose 1.1 percent after the report. Renewed demand in Asia is encouraging companies including Fuji Heavy Industries Ltd. and Suzuki Motor Corp. to increase production and the government said today companies plan to boost output in December and January. “We’re seeing continued strength in output,” said Hiroaki Muto , a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “Manufacturers will drive the recovery next year and help the economy avoid a double-dip recession.” Japan’s currency traded at 91.59 per dollar at 9:47 a.m. in Tokyo from 91.49 before the report. The yen has weakened since hitting a 14-year high of 84.83 on Nov. 27. A higher yen erodes the value of profits companies earn abroad and adds to deflation by driving import costs lower. Companies surveyed by the trade ministry said they plan to increase output by 3.4 percent this month and 1.3 percent in January, today’s report showed. Deeper Cuts The gains in factory output may ease concern Japan’s economic recovery will stall after a government report this month showed companies plan deeper spending cuts on plant and equipment in the fiscal year ending March 31. “Demand from China and other emerging economies will remain a locomotive for industrial production,” said Shunsuke Saito , an economist at Dai-Ichi Life Research in Tokyo. Exports to China and Asia rose in November for the first time since September 2008, according to a Finance Ministry report released last week. Shipments to Asia advanced 4.7 percent in November from a year earlier, while exports to China climbed 7.8 percent. Fuji Heavy, the maker of Subaru cars, expects to boost sales in the U.S. and China next year by 15,000 vehicles in each market, Chief Executive Officer Ikuo Mori said in an interview on Dec. 16. Suzuki Motor plans to increase production of small cars in emerging markets including Pakistan, Indonesia and Vietnam, the company’s Chairman Osamu Suzuki said this month. Trade Rebound Asian economies are benefiting from a global trade rebound that’s being driven by interest-rate cuts and more than $2 trillion in government spending worldwide. Growth in China will accelerate to 9.4 percent next year, according to the median estimate of economists surveyed by Bloomberg News. Japanese policy makers are trying to sustain a recovery that’s under threat from the currency’s gains and deflation. Prime Minister Yukio Hatoyama unveiled a 7.2 trillion yen economic stimulus package on Dec. 8, a week after the Bank of Japan released a 10 trillion yen credit program. Hatoyama’s government also last week announced a record 92.3 trillion yen budget for the year starting April. Large companies plan to cut capital spending 13.8 percent in the year ending March 2010, the second-worst projection on record, the Bank of Japan’s Tankan survey showed this month. Economic growth slowed to an annualized 1.3 percent in the third quarter, about half the pace of the previous three months. Too Weak The export-led recovery is still too weak to spur spending by companies and consumers, economists say. Retail sales slid 1 percent in November from a year earlier, the trade ministry said in a separate report today. Household confidence fell in November for the first time this year and wages have slumped for 17 months. Same-store sales at Watami Co. dropped 13.5 percent from a year earlier on subdued consumer spending, the pub-operator said on its Web site. Same-store sales for Mitsukoshi department stores, operated by Isetan Mitsukoshi Holdings Ltd. , slid 13 percent from a year earlier. “The rebound in exports and the stimulus effects are the main reason behind the increase in production, and capital spending remains dull,” said Yasukazu Shimizu , a senior market economist at Mizuho Securities Co. in Tokyo. “We’re still far off from a sustainable recovery in Japan.” To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

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Passenger Questioned After New Incident on Northwest Flight To Detroit

December 27, 2009

By Jonathan D. Salant Dec. 27 (Bloomberg) — A disruptive passenger on a Northwest Airlines international flight to Detroit was taken into custody today after the plane landed, according to a spokeswoman for parent company Delta Air Lines Inc. The Federal Bureau of Investigation said in a statement that the incident was not serious. Susan Elliott, a spokeswoman for Atlanta-based Delta, said the flight crew asked law enforcement officers to meet the plane “out of an abundance of caution.” The plane landed without incident. The unnamed passenger had spent a long time in an airplane lavatory, the FBI said. The flight has the same number, 253, and flew the same route, Amsterdam to Detroit, as the one taken by Umar Farouk Abdulmutallab , a 23-year-old Nigerian, who allegedly attempted to light an explosive as the flight neared the Detroit airport on Christmas Day. The jetliner carried 257 passengers and 12 crew members, Elliott said. With airline security heightened since the attempted bombing, President Barack Obama was told of the latest incident, White House spokesman Bill Burton said in a statement. Burton said Obama requested a briefing as soon as possible. “The president stressed the importance of maintaining heightened security measures for all air travel,” Burton said. To contact the reporter on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net .

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Attempted Bombing Shows Vulnerabilities in Overhauled Air Security System

December 27, 2009

By Jonathan D. Salant and Roger Runningen Dec. 27 (Bloomberg) — The ability of a suspected terrorist bring explosives on board a U.S. plane exposes vulnerabilities in an aviation security system that had been overhauled and strengthened since the Sept. 11, 2001, attacks. Umar Farouk Abdulmutallab , a 23-year-old Nigerian, was able to pass through airport checkpoints and get on Northwest Airlines Flight 253 in Amsterdam. His alleged attempt to set off a bomb containing the explosive pentaerythritol was thwarted by passengers and crew as the jetliner approached Detroit airport. Abdulmutallab, while on a list of people with suspected terrorist ties, wasn’t among those banned from flying or subject to extra screening. “The system did not work,” Representative Peter King of New York, the top Republican on the House Homeland Security Committee, said today on “Face the Nation” on CBS. “He made it on the plane with explosives and he detonated the explosives. This came within probably seconds or inches of working.” President Barack Obama ordered a review of the procedures for compiling the lists and deciding when a suspect warrants extra screening or should be banned from air travel, White House spokesman Robert Gibbs said on ABC’s “This Week.” Obama has also asked the Homeland Security Department to review airport screening capabilities, Gibbs said. Standard magnetometers cannot detect explosives such as the kind that Abdulmutallab allegedly carried onto Flight 253, and that shoe-bomber Richard Reid used in an attempt to blow up a Paris to Miami American Airlines flight in 2001. Search for Explosives The Transportation Security Administration has been adding other machines, which use millimeter waves or low-level X-rays, to find explosives. There are 40 millimeter wave machines at 19 airports, and the TSA is buying 150 new X-ray units, the agency said on its Web site . Senator Joe Lieberman , the Connecticut Independent who chairs the Senate Homeland Security and Government Affairs Committee , said the machines should be used more widely. “There have been privacy concerns expressed about the use of these whole body-imaging devices, but I think those privacy concerns, which are, frankly, mild, have to fall in the face of the ability of these machines to detect material like this,” Lieberman said on “Fox News Sunday.” Concerns about privacy violations led the U.S. House in June to prohibit the TSA from allowing the machines to replace magnetometers in airports. The devices could be used to screen passengers singled out by security personnel. The Senate has not taken up the bill. “You don’t need to look at my wife and 8-year-old daughter naked in order to secure that airplane,” the measure’s sponsor, Jason Chaffetz , a Utah Republican, said during the debate. Insufficient Devices Representative Charles Dent , a Pennsylvania Republican, said during the debate that magnetometers are insufficient. “Prohibited items, like liquids and C4 for potential explosives, will be detected under the whole-body imaging technology but not under a magnetometer,” he said. Authorities are continuing to investigate Abdulmutallab, who was released from University of Michigan Medical Center, where he was taken after the plane landed Dec. 25. He is in the custody of U.S. marshals. Federal officials intend at a court hearing tomorrow to request approval for obtaining a DNA sample from Abdulmutallab and a second hearing is scheduled for Jan. 8, according to the U.S. Justice Department. Investigators are looking at whether Abdulmutallab had any ties to al-Qaeda, the terrorist group that attacked the U.S. in 2001, Homeland Security Secretary Janet Napolitano said on ABC. Connections With Yemen Senate Republican Leader Mitch McConnell , a Kentucky Republican, said Abdulmutallab had connections with Yemen, home of anti-American Muslim religious leader Anwar al-Awlaki . The imam communicated by e-mail with Fort Hood suspect Nidal Malik Hasan prior to the Nov. 5 shootings at Fort Hood that killed 13 people and injured 43. Lawmakers questioned today how Abdulmutallab was able to board the plane with the explosives, noting he was reported to U.S. authorities by his father, former First Bank of Nigeria Plc chairman Alhaji Umar Mutallab. Obama asked for a review of how it occurred. Abdulmutallab was on a 550,000-person list of people with suspected terrorist connections, known as the Terrorist Identities Datamart Environment, or TIDE. His name wasn’t among the 14,000 people requiring more screening, or among the 4,000 people on the “no-fly” list, which would have kept him off the plane. ‘Many Signals’ “It’s amazing to me that an individual like this, who was sending out so many signals, could end up getting on a plane going to the U.S.,” McConnell said. The U.S. didn’t have credible information to stop Abdulmutallab from flying to the U.S., Napolitano said on CNN’s “State of the Union. “You need information that is specific and credible if you are going to actually bar someone from air travel,” she said. Lieberman said on Fox that all 550,000 people on the TIDE list warrant extra attention. “That doesn’t mean they’re convicted of any wrongdoing, but it would be basis enough to take this guy out of the line in Amsterdam and do a full body check, and that would have determined that he was carrying explosives,” Lieberman said. The plane bore the markings of Atlanta-based Delta Air Lines Inc., which acquired Northwest Airlines Corp. in 2008. A disruptive passenger on a flight with the same number and same routing was taken into custody today, said Susan Elliott, a Delta spokeswoman. The flight crew called on law enforcement “out of an abundance of caution,” she said. The Federal Bureau of Investigation said in a statement that the incident was “non-serious” and the passenger was later released. New Rules The Transportation Security Administration has set new rules for international flights to the U.S., requiring passengers to remain seated for the last hour of their flights. They are also barred during that period from getting anything from their bags and from keeping anything in their laps. “The traveling public is very, very safe in this air environment,” Napolitano said on CNN. “And while we continue to investigate the source of this incident, I think the traveling public should be confident in what we are doing now.” To contact the reporters on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net ; Roger Runningen in Washington at rrunningen@bloomberg.net .

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Japan’s Stocks Offer Cheap Bets on China 20 Years After Nikkei Record High

December 27, 2009

By Masaki Kondo and Toshiro Hasegawa Dec. 28 (Bloomberg) — Japan’s Nikkei 225 Stock Average , the world’s worst performer in the 20 years since its record high, offers a cheap way to bet on emerging markets, according to Mitsubishi UFJ Asset Management Co. Investors should buy Japanese steelmakers, machinery manufacturers and plant builders to benefit from economic growth in countries from China to Brazil, said Kiyoshi Ishigane , a strategist at the unit of Japan’s largest listed bank with $68 billion of assets. China has allocated 89 percent of its 4 trillion yuan ($586 billion) stimulus fund to infrastructure, according to an August report by the McKinsey Global Institute. “Infrastructure spending will continue to grow for a long time in emerging markets,” Ishigane said. “That’s where Japanese companies have an absolute advantage.” The idea of investing in Japanese companies as a play on emerging markets shows how much the world has changed in two decades. Japan’s nominal gross domestic product rose 23 percent between 1989 and 2008, while that of the U.S. increased 163 percent, according to data compiled by Bloomberg. During the same period, Brazil’s economy grew 278 percent and China’s surged 17-fold. The Nikkei has lost 73 percent since it climbed to a record 38,915.87 on Dec. 29, 1989, the worst performance of the world’s major markets. 44,000 Level On Jan. 3, 1990, the day before asset valuations began collapsing, the Nikkei newspaper’s top headline read, “Nikkei Average May Reach 44,000 at Year-End,” citing 20 heads of major companies. The most promising stock for 1990 was Shimizu Corp., the newspaper said. The construction company’s shares have since fallen 87 percent. As much as 80 percent of Louis Vuitton products worldwide were bought by Japanese, while international opera stars sang for fans paying 30,000 yen ($330) a ticket, according to a Nikkei story dated Dec. 31, 1989. In July 2008, China overtook the U.S. as Japan’s biggest export market, according to Finance Ministry reports . Consumer brands such as Unicharm Corp. , a diaper supplier, and cosmetics makers Fancl Corp. and Shiseido Co. are expected to expand business in China, said Peter Eadon-Clarke , director of strategy for Macquarie Group Ltd.’s Tokyo brokerage. “Cosmetics companies have decades of research on Asian skin, Asian make-up, so there is a competitive advantage in that sense,” said Eadon-Clarke. Deflation Factor Mitsubishi UFJ Asset Management started a fund in November investing in Japanese companies benefiting from Asian demand. The fund owns shares in Unicharm, Komatsu Ltd. , a maker of earth-movers, and Fanuc Ltd., an industrial robot manufacturer, according to a company report. Wages fell in Japan for a 17th-straight month in October and consumer prices dropped 1.7 percent in November from a year earlier, according to government reports. “Deflation has weighed on Japan’s nominal GDP, which tends to determine the direction of the stock market,” said Mitsubishi UFJ Asset Management’s Ishigane. Concerns over growth and earnings made Japan’s benchmark gauges the worst performers among the world’s 40 largest stock markets this year, with the Nikkei 225 rising 18.5 percent and the Topix gaining 5.8 percent. The yen averaged 93.65 to the dollar in 2009, the highest level since currencies began trading freely in 1971. A strong yen reduces companies’ overseas revenue in local terms. ‘Undervalued’ Stocks Shares on the Nikkei trade at 1.4 times book value . The Shanghai Composite Index is at 3.3 times, while Brazil’s Bovespa Index trades at 2.1 times. Both of those measures have soared more than 70 percent in 2009. “If I had 5 trillion yen, I’d spend it all on Japanese stocks,” said Atsuto Sawakami , chief executive officer of Sawakami Asset Management Inc., which manages the equivalent of $2.3 billion in Tokyo. “They’re undervalued.” Of the Nikkei 225 members, Honda Motor Co. posted the biggest gain since December 1989 with a 240 percent advance, followed by Canon Inc. and Shin-Etsu Chemical Co. In the 1980s, Japanese snapped up overseas assets ranging from New York City’s Rockefeller Center to Vincent Van Gogh’s Sunflowers painting. Yoshihiro Ito , 66-year-old senior strategist at Tokyo-based Okasan Asset Management Co., recalled that people bought any asset they could, from stocks to golf- club memberships because prices were soaring. “I got a golf club membership for 900,000 yen in 1981, and a broker offered 11.7 million yen for it in 1989,” said Ito. “I had an illusion it would rise further and didn’t expect the price would later fall to a mere 150,000 yen. Now, I don’t know how much it’s worth, nor do I go to the club anymore because it’s too far.” To contact the reporters for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net ; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net .

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South Korea Consumer Confidence Unchanged Amid Concern at Pace of Recovery

December 27, 2009

By Sungwoo Park Dec. 28 (Bloomberg) — South Korea’s consumer confidence was unchanged this month, reflecting concerns about the sustainability of the nation’s recovery. The sentiment index stood at 113 in December, the Bank of Korea said in an e-mailed statement in Seoul today. The gauge reached 117 in October, the highest reading in more than seven years. A figure exceeding 100 indicates optimists exceed pessimists. The central bank left its benchmark interest rate at a record-low 2 percent on Dec. 10 as it seeks to strengthen the nation’s economic recovery. Governor Lee Seong Tae said the bank shouldn’t wait too long before gradually raising borrowing costs, provided the recovery maintains momentum. The Korean economy will expand 4.6 percent next year, the fastest pace in three years, as a pickup in the global economy boosts demand for the nation’s goods, the central bank said Dec. 11. The bank said it would “maintain the accommodative policy stance for the time being.” While the economy remains on a “recovery trend” amid improvements in exports and consumer spending, there is “uncertainty” about the outlook, it said. Exports rose for the first time in 13 months in November. The benchmark Kospi stock index has risen 8 percent this month and the won fell 0.8 percent in the same period against the dollar. The consumer confidence index was based on a survey of 2,200 households in 56 major cities, conducted by mail and telephone between Dec. 11 and 18. To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net .

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U.K. Retailers Cut Discounts as Shoppers Flood Stores for Holiday Bargains

December 27, 2009

By Sarah Shannon Dec. 28 (Bloomberg) — U.K. retailers offered fewer discounted products and cut prices less in the post-holiday season this year as consumers stepped up spending. Shoppers in Britain spent 132 million pounds ($210 million) online on Dec. 25 alone, a 29 percent increase from a year earlier, according to estimates by payment-processing company Retail Decisions. The number of U.K. customers on Boxing Day, the day after Christmas, increased by 19 percent, Experian Plc said in an e-mailed statement. Retailers avoided last year’s pre-Christmas discounting by cutting inventory to “much healthier” levels, according to Morgan Stanley analysts. Prices, which were slashed by as much as 75 percent in 2008, were down by about 50 percent on London’s Oxford Street shopping district on Dec. 26 at retailers including Inditex SA’s Zara clothing chain, House of Fraser Ltd. and billionaire Philip Green’s Bhs and Topshop clothing outlets. “Last year a lot of stores were offering huge discounts on a bulk of products,” Andrew Parkinson, general manager of the Bluewater shopping center in Kent, southern England, said by phone. “We’re not seeing that this year.” Marks & Spencer Group Plc , the U.K.’s largest clothing retailer, began offering discounts of as much as 50 percent in its stores on Dec. 27. Last year the company had several pre- Christmas clearance days starting in November to shift unwanted stock. An Added Boost The New West End Co., the organization that represents retailers in central London’s main shopping district, expects consumers will have spent 120 million pounds over the Christmas weekend. “The sales will give retailers an added boost following a positive Christmas period, which saw stores trading around 10 to 12 percent up on last year,” spokesman Jace Tyrrell said. Tony Graham, a 19-year-old student standing outside the HMV Group Plc music store on Oxford Street said he used his Christmas voucher to buy a Microsoft Corp. Xbox 360, slashed from 69.99 pounds to 30 pounds. “I’m totally happy my parents gave me a voucher so I was forced to wait until the sales,” he said. “They might not be as good as last year but it’s still worth waiting for.” The strength in Christmas trading isn’t expected to continue in 2010, according to analysts, who said potential public spending cuts, tax increases and rising unemployment will weigh on consumer confidence next year. Concerns for 2010 “Given the fiscal situation facing the U.K., and the election timing, there are concerns that consumption will deteriorate further,” Andy Hughes , an analyst at UBS AG said. He estimates an average same-store sales decline of 1 percent for the retail industry next year. Market researcher Euromonitor forecasts overall U.K. retail revenue will rise by 2.5 percent to 332 billion pounds next year. “It’s not a massive increase and, in term of recent growth, it’s much down,” said Jon Wright , retailing manager at Euromonitor. “2009 was definitely better than most people expected. For 2010 it’s the macro-economic conditions that really concern us.” To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net .

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Korea Electric, Doosan Jump After Winning $20 Billion U.A.E. Nuclear Order

December 27, 2009

By Saeromi Shin Dec. 28 (Bloomberg) — Korea Electric Power Corp. , Doosan Heavy Industries & Construction Co. and other South Korean builders jumped the most in a year after winning a $20 billion nuclear-plant contract from the United Arab Emirates, the first such order awarded by a Gulf Arab nation. Korea Electric gained 11 percent to 36,500 won as of 9:19 a.m. on the Korea Exchange, while Doosan Heavy climbed the daily limit of 15 percent to 84,900 won. Both rose by the most since Dec. 8, 2008. The benchmark Kospi stock index advanced 0.7 percent. A Korea Electric-led group, which also includes Hyundai Engineering & Construction Co. and Samsung C&T Corp., will design, build and help operate four 1,400-megawatt nuclear power units to be completed from 2017 to 2020, Emirates Nuclear Energy Corp. said yesterday in an e-mailed statement. The order is part of a “fleet of power plants” the U.A.E. wants to build, Chief Executive Officer Mohammed al-Hammadi said. “This industry has just started to grow, and there’s strong growth potential for the next two decades,” said Lee Jin Woo , a fund manager at KTB Asset Management Co. in Seoul, which manages the equivalent of $8.5 billion. “There are expectations for winning additional orders.” Hyundai Engineering rose 9.4 percent to 74,400 won, while Samsung C&T gained 8.6 percent to 58,000 won. Both stocks advanced the most since Dec. 15, 2008. To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net .

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Japan Stocks Rise on Government’s Growth Outlook, Rise in Factory Output

December 27, 2009

By Kana Nishizawa and Toshiro Hasegawa Dec. 28 (Bloomberg) — Japanese stocks rose, after the government said the world’s second-largest economy will expand for the first time in three years, and after the nation’s November industrial production climbed for a ninth month. Isuzu Motors Ltd. , Japan’s largest maker of light-duty trucks, rose 2.9 percent. The Cabinet office said Japan’s gross domestic product will probably expand 1.4 percent in the year starting April 2010. Hitachi Construction Machinery Co., the world’s largest maker of giant excavators, advanced 1.9 percent. Japan’s industrial production rose 2.6 percent, according to the Trade Ministry, 0.1 percent more than economists’ estimates. “A positive industrial production report would prove the strength of the economy, relieving concerns for a double dip recession,” said Tomochika Kitaoka , a senior strategist at Mizuho Securities Co. in Tokyo. The Nikkei 225 Stock Average climbed 0.9 percent to 10,584.05 as of 9:26 a.m. in Tokyo. The broader Topix index added 0.7 percent to 915.61, with about four stocks rising for three that fell. The Topix index has gained 6.5 percent this year, compared with 25 percent by the Standard & Poor’s 500 Index in the U.S. and 27 percent for Europe’s Dow Jones Stoxx 600 Index. Stocks in the Topix are valued at an average of 38.3 times estimated earnings, compared with an average of 18.2 times for the S&P 500 and 15.8 times for the Dow Jones Stoxx 600 index. To contact the reporters for this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net ; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net .

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