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Cheapest Money in Two Months Spurs U.S. Muni Bond Sellers: Chart of Day

October 21, 2009

By Joe Mysak Oct. 21 (Bloomberg) — U.S. municipalities have decided it’s a good time to borrow money. The CHART OF THE DAY shows how the pipeline of bond offers coming to market over the next month, known as the 30-day visible supply, has filled to the highest level since at least August. Issuers are rushing to take advantage of the lowest interest rates since Lyndon B. Johnson was president. “We can see a pickup in refunding activity, in particular,” said Paul Brennan , a vice president and portfolio manager who oversees $14 billion at Nuveen Asset Management Inc. in Chicago. In addition, he said, “investors seem willing to take risk again, so we’re seeing A rated issuers come back to market.” A ranking of A is five levels below the top of the Standard & Poor’s scale. Health-care transactions scheduled to be priced this week may offer “opportunity” to buyers seeking yield, Brennan said. Catholic Health Initiatives, the second-largest U.S. nonprofit health-care system operator, plans to sell about $1.1 billion in tax-exempt bonds this week. The Michigan State Hospital Financing Authority plans to borrow $320 million, and Riverton, Utah, plans to borrow $250 million for IHC Health Services Inc., Utah’s largest health-care system. States and localities have sold $301 billion in long-term, fixed-rate bonds since January, making this the eighth consecutive year that issues have topped at least $300 billion, according to the Bond Buyer newspaper. To contact the reporter on this story: Joe Mysak in New York at jmysakjr@bloomberg.net .

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Central Banks’ Shift to Euro Ignores U.S. Trade, Savings: Chart of the Day

October 12, 2009

By Brendan Moynihan Oct. 12 (Bloomberg) — Central banks have been shifting their record reserves into the euro at the expense of the U.S. dollar. Investors may not follow, with America’s saving rate and trade balance data back at levels that prevailed when the European currency was unveiled in 1999. The CHART OF THE DAY shows the percentage of allocated world currency reserves in dollars has fallen as holdings in euros increased in the past decade, according to quarterly data compiled by the International Monetary Fund. Also tracked are the U.S. personal-saving rate and trade balance as a percentage of gross domestic product. A second chart shows the Intercontinental Exchange Inc.’s Dollar Index setting lows around the times Bear Stearns Cos. collapsed and Lehman Brothers Holdings Inc. went bankrupt. Short-term interest rate differentials favor the euro over the dollar, though only by 0.75 percentage point, the data show. The dollar’s position as the world reserve currency has been called into question since reaching an almost three-year high in March. The currency has been under siege as the Treasury sells a record amount of debt to finance a budget deficit that totaled $1.4 trillion in fiscal 2009 ended Sept. 30. To contact the writer of this column: Brendan Moynihan in Brentwood at bmoynihan@bloomberg.net .

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Surge in Stocks Reaching 52-Week Highs Sends Bullish Signal: Chart of Day

October 9, 2009

By Lynn Thomasson Oct. 9 (Bloomberg) — More U.S. stocks are trading at 52- week highs than at any time since June 2007, a sign to some investors that the steepest rally in 70 years may be sustained. The CHART OF THE DAY shows the number of companies at a 52- week high on American exchanges topped 1,069 yesterday, according to data compiled by Bloomberg. About a year ago, 14 stocks were at that level. “When I see new highs leading the market, it bodes well,” said John Wilson , chief technical strategist at Morgan Keegan & Co., which manages about $120 billion in Memphis, Tennessee. “It wouldn’t surprise me to see a sharp rally in the next quarter. The market is acting like it’s going to take out the recent highs.” The Standard & Poor’s 500 Index, up 57 percent since March and within 1 percents of its 2009 peak of 1,071.66, has climbed for the past four days in the longest streak of gains in a month. Equities advanced as the government said first-time jobless claims slid to the lowest level since January, Alcoa Inc. unexpectedly reported a profit and Goldman Sachs Group Inc. told investors to buy shares of large banks. There have only been 27 days when more U.S. stocks closed at a 52-week high than yesterday, based on data since 2002 tracked by Bloomberg. To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net .

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EBay’s Monthly Sales Increase for First Time in a Year: Chart of the Day

October 7, 2009

By Joseph Galante Oct. 7 (Bloomberg) — Retailers on EBay.com Inc. ’s site had sales gains in August and September, the first increases since at least July 2008, according to ChannelAdvisor Corp., which helps merchants sell on EBay, Amazon.com and other sites. The CHART OF THE DAY shows that same-store sales, or revenue for merchants selling for at least one year on EBay, gained 4.6 percent in August and 5.1 percent in September. Sales had declined every month since ChannelAdvisor started tracking its merchants on EBay 14 months ago. Sales growth among the 3,000 merchants ChannelAdvisor tracks was driven by fixed-price sales, an area EBay Chief Executive Officer John Donahoe has emphasized as he tries to move the company beyond its roots as an auctioneer. EBay has reported three straight quarters of falling revenue as buyers and sellers fled to rival sites. “It appears that EBay’s transition from a primarily auction format to a fixed-price format is finally at the point where the growth in fixed-price is making up for the decline in auction format, yielding an overall increase,” ChannelAdvisor CEO Scot Wingo said. Analysts estimate that EBay’s sales rose less than 1 percent to $2.13 billion in the third quarter from a year earlier, the average of 23 estimates in a Bloomberg survey. ChannelAdvisor said its customers include fewer international sellers than are on EBay as a whole. ChannelAdvisor’s merchants also don’t sell automobiles, which is EBay’s largest category. EBay, based in San Jose, California, owns a minority stake in ChannelAdvisor. To contact the reporter on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net

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China’s Rural Migration, Wealth Gap Strain Post-Mao Party: Chart of Day

October 1, 2009

By Lee J. Miller and Daniel Ten Kate Oct. 1 (Bloomberg) — China’s communist regime, marking its 60th anniversary, faces a widening wealth gap between farmers and city dwellers that may threaten stability, even as the economy is poised to pass Japan’s as the world’s second largest. The CHART OF THE DAY tracks per-capita annual net income of urban and rural households from 1981, with farmers earning 30 percent of their city counterparts’ pay in 2007, from as much as 54 percent in 1985, based on National Bureau of Statistics data. “The basic thing is still jobs, and most of those are in the cities,” Willy Wo-Lap Lam , an adjunct professor of history at the Chinese University of Hong Kong, said by telephone. “At the best of times they have to create 25 million new jobs a year.” The lower panel shows the population split since 1978, with the rural proportion falling to 55 percent of the nation’s total in 2007, from 82 percent in 1978, the data show. The world’s most-populous country had 1.32 billion people at the end of 2007. China had 225 million rural workers who were not employed on farms at the end of last year, 140 million of whom migrated outside their home towns for work, the bureau said in a report on its Web site in May. That has strained social services in cities and prompted the government to keep restrictions on rural migration introduced in 1958 by Communist Party leader Mao Zedong , Lam said. “Politically it’s a threat because the bulk of social unrest and riots come from these unsettled rural migrant workers and peasants,” he said. “They would pose a big threat to the regime if they had free movement.” (To save a copy of the chart, click here.) To contact the reporters for this story: Lee J. Miller in Bangkok at lmiller@bloomberg.net ; Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

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Cheryl Hall

September 27, 2009

… I would have freed that up.” Commercial real estate will be “the next transition,” he predicted, … … inflation.” When does he expect buying distressed real estate to pick up? Any day …

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Investors on `Risk-Seeking Mission’ Are Courting Failure: Chart of the Day

September 14, 2009

By David Wilson Sept. 14 (Bloomberg) — U.S. investors are on “an incredible risk-seeking mission” that belies a still-shaky economy and financial system, according to Gina Martin Adams , a strategist at Wells Fargo Securities LLC. The CHART OF THE DAY shows the Ted spread, a widely followed risk indicator, dropped last week to its lowest level since 2004. This gauge tracks the difference between rates that banks and the U.S. Treasury pay to borrow for three months. A narrower spread reflects greater confidence in U.S. assets. The gap shrank last week to 16 basis points, far below an October 2008 peak of 463 basis points. Each basis point amounts to 0.01 percentage point. Martin Adams included a similar chart today in a report that raises doubts about whether rallies in riskier assets, especially stocks, will persist. When the spread was last so small, “the global economy was surging, housing prices were soaring, and credit concern was the last thing on most investors’ minds,” the report said. The gains in government debt that have accompanied stocks’ rise since June are also a cause for concern, she added. Yields on 10-year Treasury notes are lower than they were when the U.S. financial system began imploding last year, as the report noted. “There is likely one dominant force keeping bonds from selling off, and that is the fear of deflation,” she wrote. “Investors should be wary of a difficult economic future.” (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Aluminum Prices `Particularly Exposed’ as Clunkers Plans End: Chart of Day

September 10, 2009

By Claudia Carpenter Sept. 10 (Bloomberg) — Aluminum prices are “particularly exposed” to a decline because vehicle sales are likely to shrink as government “cash for clunkers” programs end, Standard Chartered Plc said. The CHART OF THE DAY shows aluminum rallied in June and July as a clunkers program drove U.S. sales to their first monthly gain since 2007 in August. The U.S. program ended last month. Germany’s 5 billion-euro ($7.3 billion) clunkers fund, the world’s largest, ran out of money a week ago. Car sales rose for a seventh consecutive month in August from a year earlier, the country’s main auto-industry association, VDA, said. “After a surge in car sales in many major countries, the next few months are likely to be disappointing,” Daniel Smith , a Standard Chartered analyst in London, wrote in a Sept. 7 report. “The U.S., in particular, is likely to fall back sharply in September.” Aluminum has gained 23 percent this year in London, rebounding from two consecutive annual declines. Supply of the metal will outpace demand this year and next, Barclays Capital said Aug. 18. Stockpiles in warehouses monitored by the London Metal Exchange have almost doubled this year, reaching a record 4.63 million tons on Aug. 20. Aluminum for delivery in three months will average $1,550 a metric ton in the fourth quarter, Smith forecast. The median of 15 analysts surveyed by Bloomberg is for an average of $1,639. The metal closed at $1,895 on Sept. 8 and averaged $1,821 so far this quarter. An average North American passenger car uses 319 pounds (145 kilograms) of the metal, according to the Aluminum Association in Arlington, Virginia. (To save a copy of the chart, click here.) To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net

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Rebound in IPOs in the U.S. Will Be Different This Time: Chart of the Day

September 9, 2009

By David Wilson Sept. 9 (Bloomberg) — Any rebound in U.S. initial public offerings won’t look like the one that followed a lull in the early 1990s, according to Renaissance Capital LLC, a research firm specializing in newly public companies. Funds created to invest in so-called distressed assets and companies owned by private-equity firms will dominate the IPO lineup, rather than the technology, health-care and retail industries, Renaissance wrote yesterday in a report. The CHART OF THE DAY shows the extent of the current slump, according to data compiled by Bloomberg. Just 91 companies have gone public since last year. That’s less than one-fourth of the annual average from 1991 through 2007. Sixty-seven companies have registered to go public or amended IPO filings within the last year, the report said. The number of candidates has more than doubled since March, when 29 initial share sales were in the pipeline. “There is a pool of unusual candidates shaped by an era of cheap credit and the unprecedented mortgage crisis that followed,” Renaissance wrote. Real estate investment trusts focusing on mortgages account for 19 percent of the would-be public companies, according to the firm. Twelve of the last 26 IPO filings were from companies with private-equity owners. Dollar General Corp., a unit of KKR & Co. LP that registered last month, was among them. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Princeton, Harvard Raise Undergrad Tuition as Economy Burns: Chart of Day

September 4, 2009

By Joe Mysak Sept. 4 (Bloomberg) — Life on top means not having to lower your prices. The CHART OF THE DAY shows how the cost of a year as an undergraduate at Harvard and Princeton has risen through boom and bust. Tuition and fees at Harvard jumped 67.8 percent over the decade; at Princeton, they increased 43.4 percent. That hasn’t dented demand. Freshman applications at Harvard in Cambridge, Massachusetts, rose by 60.9 percent over the last 10 years. At Princeton in New Jersey, which started accepting the Common Application standardized form for admission in 2005 (Harvard did so in 1994), demand rose by 47.7 percent. The two Ivy League schools haven’t been entirely immune from the recession. Harvard this year reported that its endowment fell an estimated 30 percent; Princeton’s, 25 percent. “They say trees can’t grow to the sky, but apparently there’s no stopping college tuitions,” said Jay Diamond , a managing director at Annaly Capital Management, a New York real estate investment trust with total assets of $86 billion, and member of Princeton class of 1986. “It would appear that an undergraduate degree at a place like Princeton is actually a Giffen good. As a prospective college tuition-paying parent — my kids are in 10th and eighth grades and kindergarten — I wish that colleges competed on price, but that is certainly wishful thinking.” A Giffen good, first observed by British economist Robert Giffen (1837-1910), is something for which demand rises even as its price goes up. To contact the reporter on this story: Joe Mysak in New York at jmysakjr@bloomberg.net .

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Kindles Are Friendlier to Environment Than Print Books: Chart of the Day

September 2, 2009

By Joseph Galante Sept. 2 (Bloomberg) — Amazon.com Inc. ’s Kindle and rival electronic reading devices will do more to curb pollution from the production of printed books than publishing industry efforts such as recycling, according to Cleantech Group LLC . The CHART OF THE DAY shows that by 2012 the carbon-emission benefits from using e-readers will outweigh by more than twofold the environmental damage caused by manufacturing, electricity and battery disposal associated with the devices. The e-reader savings eclipse attempts by the publishing industry to reduce its damage to the environment through cleaner manufacturing processes and more recycling programs, the San Francisco-based research and consulting firm said in a report. “E-readers will have a staggering impact on improving the sustainability and environmental impact on one of the world’s most polluting industries: the publishing of books, newspapers and magazines,” the report said. “The carbon emitted in the lifecycle of a Kindle is fully offset after the first year of use.” More than 14 million e-readers will be sold by 2012, up from 1 million now, Cleantech said, basing its statistics on its own analysis as well as on outside studies. A year after purchasing a Kindle, the annual net carbon savings are equal to the publishing and distribution of 22.5 printed books, the group said. To contact the reporter on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net

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Florida’s Economic Bust Propels Muni Bond Default Spike: Chart of the Day

September 1, 2009

By Joe Mysak Sept. 1 (Bloomberg) — No other state comes close to Florida in defaulted municipal bonds. The CHART OF THE DAY shows the number of bond issues that have gone into default over the past decade and Florida’s contribution to the total, according to the Distressed Debt Securities newsletter of Miami Lakes, Florida. Of the 126 bonds that are in default in 2009, 70 were sold in Florida. Blame it on the collapse of the real estate market in general and, in particular, on Community Development Districts, which sell bonds to pay for infrastructure to support new real estate developments. Florida has 600 such districts, and 105 have gone into default on a total of $3.2 billion in bonds. Asked how the so-called dirt district defaults in Florida compared with similar meltdowns in Colorado in the 1980s, Texas in the late 1980s and early 1990s and California in the 1990s, Richard Lehmann , publisher of the newsletter, said, “It’s worse than all three combined.” He also observed that some California defaults are still being worked out a decade after they occurred. Lehmann has launched a Web site devoted to this, http:// www.floridacddreport.com . “The death of Florida real estate has been reported and greatly exaggerated,” said Terry O’Grady , senior vice president of municipal trading at FMSBonds Inc. in North Miami Beach, which makes a market in Florida CDD bonds. “If you have time to do the research properly, and can figure out which districts are going to be built out, this is a good buying opportunity.” After Florida, Ohio is second-largest with eight defaults and Illinois is third with five. The record year for municipal defaults was 2008, when 151 municipalities violated covenants on $7.9 billion in bonds. To contact the reporter on this story: Joe Mysak in New York at jmysakjr@bloomberg.net .

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S&P 500 May Surge 40% as U.S. Duplicates Japan in 1990s: Chart of the Day

August 28, 2009

By Alexis Xydias Aug. 28 (Bloomberg) — U.S. stocks are behaving like Japanese equities in the 1990s, meaning the Standard & Poor’s 500 Index may return 40 percent in the next year, according to Bank of America Corp. The CHART OF THE DAY shows the Nikkei 225 Stock Average since 1980 and the S&P 500 during the past two decades, when adjusted for currencies. The Nikkei doubled between October 1998 and April 2000 in dollar terms, as the chart illustrates. The S&P 500 has risen 34 percent since March when the Dollar Index, a measure of the dollar against currencies in six major U.S. trading partners, is factored in. A “melt-up” rally in the U.S. may be triggered by central bankers keeping interest rates near record lows, an economic recovery or an undervalued dollar, Bank of America strategists wrote in an Aug. 26 report. “Even in economies overcoming credit booms, rallies can be powerful and last much longer than you think,” Bank of America’s Sadiq Currimbhoy , Arik Reiss and Jacky Tang wrote. Should the similarity between the U.S. and Japan persist, the S&P 500 will keep rising, partly because of gains in the dollar, the Hong Kong-based strategists said. “If there is one persistent similarity between Japan and the U.S., it is they both seem to be fighting a debt problem by producing more debt,” they added. “So, for equity investors, if these relationships were to repeat themselves, the risk for the U.S. market is that like Japan, the stock market ends up with big rallies and then sell-offs.” When adjusted for currencies, the Nikkei 225 peaked in December 1989, while the S&P 500 reached its high in September 2000. Following its jump through 2000, the Nikkei retreated three years. On the vertical axis of the Chart of the Day, 100 corresponds to the Japanese index’s record high. (To save a copy of this chart, click here.) To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net .

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Consumer Spending in U.S. May Revive to the `Old Normal’: Chart of the Day

August 27, 2009

By David Wilson Aug. 27 (Bloomberg) — Spending on items that U.S. consumers can do without or put off buying has slumped so badly that it’s bound to bounce back, according to Tobias Levkovich , Citigroup Inc.’s chief U.S. equity strategist. As the CHART OF THE DAY shows, these so-called discretionary goods and services accounted for a smaller percentage of consumer outlays last quarter than at any other time since 1959. The proportion dropped about 0.3 percentage point, the sixth decline in seven quarters, to 15.6 percent. The chart is similar to one created by Steven Wieting , Citigroup’s managing director of economic and market analysis, that Levkovich cited yesterday in a report. Both were based on spending figures compiled by the Commerce Department. Consumer behavior is likely to revert to “the ‘Old’ Normal” — spending more closely tied to income, rather than borrowing — that prevailed during the 1950s through the 1970s, Levkovich wrote. “Some reasonable bounce is to be expected” in discretionary spending as that occurs, the report said. “The frivolous consumer will not turn into the frugal,” he wrote, adding that pent-up demand will lead to production and employment gains. Houses, cars and other durable goods, or items made to last more than three years, are the biggest category of discretionary spending as defined by Citigroup. The firm also included outlays on games, sports supplies, flowers, newspapers and magazines, hotel rooms, recreation and non-U.S. travel. The “old normal” reference contrasts with the “new normal” that Pacific Investment Management Co., or Pimco, foresees. The firm expects relatively slow economic growth for the next three to five years as households and businesses retrench. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Nickel Price to Climb as Stockpiles Fail to Deter Funds: Chart of the Day

August 20, 2009

By Kim Kyoungwha Aug. 20 (Bloomberg) — Nickel, which surged 17 percent the past month, may advance further as “price momentum” and inflation expectations lure fund managers even as stockpiles of the metal approach a 14-year high, according to Commerzbank AG. The CHART OF THE DAY shows the price of nickel and open interest on the London Metal Exchange. The lower panel tracks inventories in metric tons. The price jumped to its highest level for a year on Aug. 13 and open interest was a record 147,117 contracts on Aug. 14, according to LME data. Stockpiles of the material used to protect steel from corrosion are close to the highest since 1995 amid weak demand in the construction and transportation industries. “I find the one-way, very dramatic price rise in all metals anomalous given the shaky fundamental basis and rising LME inventories,” Eugen Weinberg , a commodity analyst with Commerzbank in Frankfurt, said in an interview Aug 18. “The price momentum behind metals is so strong that the market is attracting external players.” Nickel for three-month delivery on the London Metal Exchange traded at $19,000 a ton at 10:45 a.m. in Singapore. The contract jumped to $21,325 last week, the highest since Aug. 22, 2008. Nickel is the biggest gainer in the past three months among 24 commodity contracts in the Standard & Poor’s GSCI Index. Shifting money into base metals also signals concern that inflation will build up, Weinberg said. The jump in open interest, the number of outstanding contracts, is an indication that fund managers are turning from cash or other asset categories into materials such as nickel on concern that $2 trillion of economic stimulus spending by governments worldwide will spark inflation and the U.S. dollar will decline, he said. The Dollar Index , which tracks the greenback against a basket of currencies, has fallen 12 percent from this year’s high in March. The dollar will weaken as a swelling U.S. deficit erodes its status as a reserve currency, according to Pacific Investment Management Co., the biggest manager of bond funds. (To save a copy of the chart, click here.) To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net

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Kill Tax-Exempt Muni-Bond Market, Use Tax Credits Instead: Chart of Day

August 19, 2009

By Joe Mysak Aug. 19 (Bloomberg) — The tax-exempt bond market costs the U.S. government $36 billion a year in foregone taxes. Replace the exemption with a credit and the government would lose less. That’s the contention of the Congressional Budget Office, which suggested the change in its latest volume of options for altering federal spending and revenue. CHART OF THE DAY shows the amount of revenue the CBO said such a move might produce. Taxable interest payments would be offset by a federal tax credit, whose amount would be determined by the Treasury. The credit would change with the type of bond “on the basis of its perceived benefit to the public,” the CBO said in its report, whose options derive from a variety of sources, including legislative proposals and the president’s budget. The tax credit might yield a smaller reduction in federal revenue than the current system. Opponents maintain that it could “raise the interest rates that state and local governments pay on borrowed funds,” the budget office said. Earlier this year, the government introduced the Build America Bonds program, which pays municipal issuers 35 percent of the interest cost if they sell taxable rather than tax-exempt debt. The federal subsidy results in borrowing costs to the issuer even lower than those available in the tax-exempt market. Since April, $22.6 billion in Build America Bonds have been sold as against $202.5 billion in tax-exempt bonds. To contact the reporter on this story: Joe Mysak in New York at jmysakjr@bloomberg.net .

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OPEC Spare Production Capacity May Stymie Oil’s Rally: Chart of the Day

August 13, 2009

By Mark Shenk Aug. 13 (Bloomberg) — Crude oil prices, which have surged 60 percent this year, may not rise above $80 a barrel because spare production capacity among OPEC members has swollen. The CHART OF THE DAY shows the relationship between crude oil futures traded in New York and excess output capacity of the Organization of Petroleum Exporting Countries this decade. Prices climbed to a record $147.27 on July 11, 2008, when OPEC members had the ability to bring fewer than 3 million barrels of additional production online. In March the 12-member group could have produced 6.84 million barrels a day above its actual production, if needed, the most since 2001, according to a monthly Bloomberg News survey of oil companies, producers and analysts. That margin was 6.11 million barrels last month. “The numbers have gotten much larger over the past year,” said Rick Mueller , a director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “The Saudis alone probably have close to 3 million barrels excess capacity. The excess shows how effective OPEC’s been in managing the market.” OPEC agreed at three meetings last year that the members with quotas would cut output by a combined 4.2 million barrels a day to 24.845 million in a bid to bolster prices. The group is scheduled to discuss production levels in Vienna on Sept. 9 after leaving output unchanged at two meetings this year. “The Saudis are happy with oil in the $70-to-$80 range,” Mueller said. “It’s low enough to stop development of some oil sands and alternative energy sources while not hurting the economy. If prices rose above $75 they would open the spigot.” Saudi Arabian Oil Minister Ali al-Naimi said on May 23 in Rome that crude oil at $75 a barrel would be healthy for the global economy. The aim will be “keeping it between $70 and $80,” he said. The Kingdom is the world’s biggest oil exporter. To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

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Cost of Back-to-School Shopping Trip Means $999 Bill: Chart of the Day

August 11, 2009

By Mark Clothier Aug. 11 (Bloomberg) — More powerful calculators, field trips and clarinet rentals are driving up the cost of sending a kid to school even as consumers curb spending in the U.S. recession. The CHART OF THE DAY shows the estimated expense for parents to have a child in elementary, middle or high school has risen in the past two years, mostly because of new fees and small gadgets, according to a study by Huntington National Bank. The bank calculated the expenses based on school supply lists and fees in five states. Consumers have eased spending on non-necessities as unemployment climbs in the recession, which started in December 2007. Back-to-school spending will drop 13 percent this year, according to the National Retail Federation, a Washington-based trade group . “People are trying to budget , but back-to-school is sensitive,” said Deb Stein , who heads Huntington National’s retail banking in Columbus, Ohio, where the bank is based. “Parents are embarrassed if they can’t provide it. This is the kind of stuff that really hits home,” she said in a telephone interview. Parents will spend about $473 for supplies and activities for elementary school kids this year. That’s 34 percent more than in 2007 because of the higher cost of musical-instrument rent and newer fees for things like art supplies, club dues and magazine subscriptions, said Maureen Brown, a bank spokeswoman. High-schoolers will require about $999 apiece in equipment and fees for extracurricular items, including test preparation and sports fees, 12 percent more than in 2007. The cost of middle-school preparedness rose 1 percent to about $536. To contact the reporter on this story: Mark Clothier in Atlanta at mclothier@bloomberg.net

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Taxpayers Lose as Flippers Profit in New Municipal Bonds: Chart of the Day

August 10, 2009

By Joe Mysak Aug. 10 (Bloomberg) — Almost all secondary market sales of new municipal issues occur within the first 30 days of pricing, with a network of buyers reselling the bonds to make quick profits getting them into the hands of individual investors. The CHART OF THE DAY, taken from the Municipal Securities Rulemaking Board’s 2008 Fact Book, depicts this pattern of new municipal bond trades. Underwriters sell the bonds in large blocks or amounts to so-called favored institutional investors, such as mutual funds, who in turn sell them to other buyers, who sell them to individuals, the “retail” crowd. Traders, money managers, bond issuers and the former head of the Municipal Securities Rulemaking Board have all commented on how intermediate buyers profit by marking up bonds and reselling, or “flipping” them to individuals. Municipal bonds are not well-placed to final investors by this system, said Christopher “Kit” Taylor , who for almost 30 years was executive director of the MSRB , the market’s self- regulatory organization. “There is an unhealthy relationship between the bond funds and the dealer community,” said Taylor, now a consultant based in Alexandria, Virginia. “I have long suspected that dealers throw money at the funds by selling them new-issue securities in blocks and then slowly buying them back at up-prices for sale to retail.” James C. Cusser , a former portfolio manager and municipal bond analyst for 30 years, who recently completed his masters degree in education at Harvard University, observed, “The biggest/best buyers take advantage of the nature of the illiquid muni market with the help of their best friends in the world.” The same happens in the taxable bond market, Cusser, previously a fund manager at Waddell & Reed Inc., in Overland Park, Kansas, said. “But the price differences are slimmer and the potential profit is less certain.” To contact the reporter on this story: Joe Mysak in New York at jmysakjr@bloomberg.net .

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Cash for Clunkers May Add 0.5 Percentage Points to U.S. GDP: Chart of Day

August 5, 2009

By Lee J. Miller and Marco Babic Aug

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`Sell in May’ Strategy Fails as MSCI World Rallies 19%: Chart of the Day

August 4, 2009

By Adam Haigh and Michael Patterson Aug. 4 (Bloomberg) — Global equity investors who follow the Wall Street axiom to “sell in May and go away” are missing out on the biggest gains in at least four decades. The MSCI World Index climbed 19 percent from May 1 through yesterday, the steepest advance for that period in the 23- country measure’s history stretching back to 1970, according to data compiled by Bloomberg

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Value Stocks, Laggards This Year, Are Now Seen as Leaders: Chart of Day

August 3, 2009

By David Wilson Aug. 3 (Bloomberg) — U.S. stocks that are relatively cheap based on price-earnings ratios and other gauges are worth buying as they lead the market’s recovery, according to Brian Belski , Oppenheimer & Co.’s chief investment strategist

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President Obama Raises a Glass as Beer Sales Fall Flat: Chart of Day

July 31, 2009

By Duane D. Stanford July 31 (Bloomberg) — President Barack Obama ’s three-man race-relations symposium at the White House is providing publicity for a U.S

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Cinema Stock Surge May Let Redstone Keep More Theaters: Chart of the Day

July 30, 2009

By Andy Fixmer and Rodney Yap July 30 (Bloomberg) — Sumner Redstone , chairman of Viacom Inc. and CBS Corp., may have an easier time digging out of debt because of the surging shares of movie-theater companies

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Dow Average Sends Buy Signal That’s Worked Since 1921: Chart of the Day

July 29, 2009

By Eric Martin and Michael Patterson July 29 (Bloomberg) — The Dow Jones Industrial Average is sending a buy signal that has foreshadowed gains of 18 percent during the past nine decades. The 30-stock gauge climbed to more than 10 percent above its mean level from the previous 200 days, rebounding from 34 percent below the so-called 200-day moving average in November, according to data compiled by Bloomberg. Eighteen of the last 21 times the Dow rallied from at least 10 percent below the 200-day level to 10 percent above, it posted gains during the next 12 months, Bloomberg data since 1921 show.

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IEA Projection for 1.7% Gain in Oil Demand Looks Optimistic: Chart of Day

July 27, 2009

By Mark Shenk July 27 (Bloomberg) — The International Energy Agency’s forecast for a 1.7 percent gain in global oil consumption next year may be too optimistic, based on the historic relation between gross domestic product and energy consumption. The CHART OF THE DAY shows the IEA’s projections for oil demand growth will trail the World Bank’s forecast for GDP growth by 0.8 percentage point, the least in 14 years. Since 1997, oil use has followed GDP by an average of more than 2 percentage points and in 2006 the spread widened to 3.9 percentage points.

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Stock Trading Slowdown May Indicate Rally Will Fizzle: Chart of the Day

July 24, 2009

By Kayla Carrick July 24 (Bloomberg) — Stock trading in the U.S. hasn’t slowed this much midyear in at least two decades, causing some investors to worry that the steepest Standard & Poor’s 500 Index rally since the 1930s will fizzle. The CHART OF THE DAY shows 84 percent as many shares changed hands daily on the New York Stock Exchange between May 1 and July 20, compared with the average from Jan. 1 to April 30.

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Realtors’ `Rosy’ Index Overstates U.S. Housing Affordability: Chart of Day

July 20, 2009

By Jody Shenn July 20 (Bloomberg) — A common measure of the affordability of homes for buyers is providing a too “rosy” assessment because of tighter credit conditions, according to Bank of America Corp. strategists

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Plane Crashes Cut Travel Demand, Raise Insurance Rates: Chart of the Day

July 19, 2009

By Chan Sue Ling July 17 (Bloomberg) — Airline load-factors could fall as insurance rates rise following more than 550 plane-crash deaths since June 1, according to Indoswiss Aviation. The crash by Iran’s Caspian Airlines this week brings fatalities from commercial airliner accidents to about 629 in 2009, including cargo services, based on data compiled by the Flight Safety Foundation

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