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China Real Estate Bubble Bursts in Bond Market Credit Markets

May 30, 2010

By Katrina Nicholas May 31 (Bloomberg) — Dollar bonds sold by China real estate companies this year are the worst performers among Asian non-financial corporate debt denominated in the U.S. currency amid concern the nation’s property market is overheating. Yields on the $3.9 billion of bonds issued by Kaisa Group Holdings Ltd. , Country Garden Holdings Co. and seven other developers since January widened by an average 2.26 percentage points relative to Treasuries as of last week, according to data compiled by Bloomberg. That’s more than the 2.05 percentage- point increase in spreads for the seven dollar-denominated bonds sold by other companies in Asia outside Japan. Investors are demanding greater yields to lend to China property firms, a sign they expect borrowers will have a harder time meeting debt payments amid a government clampdown down on lending. Goldman Sachs Group Inc. and Credit Suisse Group AG cut their profit estimates for Chinese real estate companies after a 12.8 percent jump in real estate prices in April from a year earlier spurred the state to increase regulation. “New issues by Chinese developers will stall for the time being,” Vince Chan , the Hong Kong-based chief credit strategist with Amias Berman & Co. LLP, a fixed-income advisory and brokerage firm founded by two former Citigroup Inc. bankers, said in a phone interview. “Investors need handsome rewards for getting exposed to weaker fundamentals.” Widening Spreads The amount of dollar bonds issued by China developers represents 45 percent of all corporate dollar debt sales in Asia outside Japan this year, Bloomberg data show. The yield spread on $350 million of 13.5 percent notes sold by Shenzhen-based Kaisa last month widened the most of the nine issues, expanding to 16.52 percentage points from 11.07 percentage points, Nomura Holdings Inc. prices on Bloomberg show. Kaisa is developing 18 projects in Shenzhen, Dongguan and other cities in the Pearl River Delta, most of them high-rise residential complexes that combine recreational and commercial space, according to its website . An investor who bought the company’s 2015 bonds at par would have lost 15.5 percent. Elsewhere in credit markets, the extra yield investors demand to own company debt instead of Treasuries widened 5 basis points last week to 193 basis points, or 1.93 percentage points, Bank of America Merrill Lynch index data show. The spread, which peaked at 511 on March 30, 2009, is up from this year’s low of 142 on April 21. Average yields rose to 4.06 percent, the highest based on weekly closes since the period ended March 5. Sales Slow Corporate bond issuance worldwide slowed this month to $66.1 billion, down from $183 billion in April and the least since December 2000, according to data compiled by Bloomberg. “Companies have to be prepared to strike and strike quickly,” Rick Martin, the London-based director of treasury at Virgin Media Inc. , the U.K.’s second-largest pay-television company, said at a May 28 briefing in London. “The key is to have the team ready and primed and able to pull the trigger at short notice. I can’t think of a time when the forces have been so polarizing.” The cost to insure U.S. corporate debt against default rose last week. Credit-default swaps on the Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses or to speculate on creditworthiness, increased 25.1 basis points this month to a mid-price of 117.2 basis points. The index typically rises as investor confidence deteriorates and falls as it improves. Bond risk rose in Asia today, with the Markit iTraxx Asia index up 4 basis points, according to Royal Bank of Scotland Group Plc. The Markit iTraxx Japan index rose 5 basis points, Morgan Stanley prices show. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year. Emerging Market In emerging markets, spreads narrowed 16 basis points last week to 321 basis points, trimming the monthly increase to 63, according to the JPMorgan Emerging Market Bond Index. China has added to regulations designed to cool the property market several times this year, including raising banks’ reserve requirements three times since January, restricting pre-sales by developers and curbing loans for third- home purchases. It also raised minimum mortgage rates and tightened down-payment requirements for second homes. Shanghai’s plan to begin a property tax on residential real estate was submitted to the central government for review, the China Securities Journal reported today, citing unidentified people. Demand ‘Premium’ Goldman Sachs lowered its 2010 net income estimates for Chinese developers by an average 13 percent and reduced earnings forecasts for the next two years by 25 percent, analysts led by Yi Wang wrote in a May 19 report. Credit Suisse pared earnings- per-share estimates by as much as 15 percent for 2010 and 20 percent for 2011, citing the government’s clampdown. “With the negative headlines coming out of this sector, investors are less likely to be drawn to participate in new issues because of a high coupon,” Tan Chew May , a credit analyst for Aberdeen Asset Management Asia Ltd., which oversees $1.5 billion of Asian dollar debt, said in a phone interview from Singapore. “With the trend of widening spreads, new names are forced to come at premium.” China property developers paid coupons as high as 14 percent to issue dollar debt this year, compared with an average 9.2 percent for other companies in Asia and 6.2 percent for U.S. property companies. On average, Chinese property companies are paying a 10.875 percent coupon. Renhe’s Delayed Sale Glorious Property Holdings Ltd ., which has 26 real estate projects in cities including Shanghai, Beijing, Harbin and Changchun, postponed its first sale of dollar-denominated bonds in April. The Hong Kong-listed company cited poor credit market conditions for the delay. Renhe Commercial Holdings Co ., a developer of underground shopping centers based in Harbin, China, sold five-year, 11.75 percent dollar notes on May 18 to yield 974 basis points more than Treasuries after delaying the sale for two weeks. The relatively strong finances of China developers means some companies can afford to pay double-digit coupons, according to Andy Mantel , Hong Kong-based founder of hedge fund manager Pacific Sun Investment Management Ltd. Country Garden , which builds villas, townhouses and apartments in China, sold bonds in April with an 11.25 percent coupon. The company, controlled by China’s second-richest woman, Yang Huiyan , said contracted revenue in the first quarter rose 82 percent on sales in the Guangdong area. Fantasia’s Coupon “The sector is relatively better financed than it was two years ago when there were serious liquidity issues,” Mantel said in a phone interview. “Investors might not make any money on the actual bond, but they’ll get their interest payments.” Fantasia Holdings Group Co .’s $120 million of five-year bonds pay the highest coupon at 14 percent. The company develops commercial and residential complexes in China’s Pearl River Delta and Chengdu-Chongqing Economic Zone regions. It raised HK$3.18 billion ($408 million) from an initial share sale in Hong Kong in November, boosting cash reserves to $497 million from a deficit, Bloomberg data show. “Sales and pre-sales have increased cash balances for most companies by over 20 to 30 percent while fresh debt issuance has extended maturity profiles,” analysts led by Raghav Bhandari at CreditSights Asia Research Ltd. wrote in a note to clients May 20. “Companies are in a much better position to handle this period of strain than they were a year ago.” High Yield “People are attracted by the high coupons of the sector, but are fearful of the regulatory announcements and how it might affect the credits,” Sean Henderson , head of Asia debt syndication at HSBC Holdings Plc, said in a phone interview from Hong Kong. “More recently, the overall market backdrop has taken the whole high-yield sector lower.” The yield spread on speculative-grade company dollar bonds in Asia rose 174 basis points this month as of May 28, compared with 50 basis points for investment-grade companies, JPMorgan indexes show. High-yield debt is rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s. Credit-default swaps insuring against Country Garden defaulting on its debt rose 343 basis points to 10.39 percentage point this month through May 18. The contracts suggest investors are pricing in a 50 percent chance of default. Similar contracts insuring Agile’s debt have soared 3.85 percentage points since mid-April, when China’s central bank pledged to implement new lending rules to cool real estate “madness.” At current rates investors are pricing in a 48 percent chance of default. Chinese property bonds are unlikely “to recover meaningfully anytime soon,” Amias Berman’s Chan said. “If we start to see the regulatory measures taking effect in the next few months then there may be a reversal of fortunes. But optimistically I think it’ll be the third or fourth quarter before things stabilize.” To contact the reporter on this story: Katrina Nicholas in Singapore at knicholas2@bloomberg.net

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Philip N. Cohen: Behind the Gendered Workplace

May 29, 2010

In a law review call and response, a law professor and a sociologist take on the issue of how to address gender discrimination legally. Duke Law professor Katharine Bartlett argues in the Virginia Law Review that strengthening options for suing employers is not the answer to gender discrimination. Instead, the good intentions of employers and managers should be supported, through strong, unambiguous norms, trust, teamwork, leadership, positive example, and opportunities to grow and advance. [On the other hand...] Excessive legal control and pressure undermine people’s sense of autonomy, competence, and relatedness and thus their commitment to nondiscrimination norms. In other words, we need more carrot and less stick to combat gender discrimination. In response, sociologist William Bielby , who has worked on behalf of the Wal-mart women’s  class-action suit , counters that, even if crude overt discrimination has diminished, not all the remaining gender inequality is caused by unconscious bias. He warns that, since the ” ‘cognitive turn’ in workplace bias discourse”: …scholars, litigators, human resource professionals, and diversity consultants have become so enamored with the notion of ubiquitous unconscious, implicit, or hidden bias that they are quick to attribute systemic workplace racial and gender inequality to what is going on in people’s heads. Instead, it is vital to consider what is built into organizational structures, processes, and routines. As it happens, this is the 20th anniversary of the classic article by Joan Acker, ” Hierarchies, Jobs, Bodies: A Theory of Gendered Organizations ” (now the second-most cited article in the history of the journal Gender & Society ). In the Spring newsletter for the ASA’s OOW section (don’t ask), Acker has a brief essay in which she reiterates the premise of her original article: “The worker” under capitalism is implicitly defined as unencumbered by any obligations other than those to the job, and work is usually organized on the basis of this assumption. Historically, women have been seen as encumbered wives and mothers and thus not real workers and not entitled to the rewards and rights of real workers. She and her colleagues have completed a study of welfare reform — Stretched Thin: Poor Families, Welfare Work, and Welfare Reform . Now she sees welfare reform as “part of the redefinition of most women in neoliberal society.” Equality may be defined now as the transformation of women into neoliberal gender-neutral unencumbered workers whose main efforts go to the job. This path to gender equality is impossible for many women, and some men, for whom it constitutes a fundamental contradiction: work expectations and family needs do not mesh. Acker’s article was important for establishing the gendered nature of workplace “structures, processes and routines” that Bielby is talking about — and wrote about in the Wal-mart case. Built-in assumptions are related to ways of thinking, but they are more than that — they become established ways of doing business, imprinting organizations with patterns of inequality — especially having to do with job segregation. My own research with Matt Huffman has helped establish that women in management positions reduce gender inequality at work (a paper forthcoming in Administrative Science Quarterly takes this further). We can’t say, however, if that’s because they have different assumptions about men and women, less motivation (and incentive) to discriminate, or more commitment to changing the established ways of doing things. Cross posted from the Family Inequality blog.

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Lloyd Chapman: Obama Proposes Tax Cut for Mega Rich Venture Capitalist Contributors

May 28, 2010

President Barack Obama has proposed new legislation that will allow many of the nation’s wealthiest venture capitalists to avoid paying billions of dollars in federal income tax. Under the new proposal some of President Obama’s top campaign contributors in the venture capital industry will be exempt from capital gains tax. I believe President Obama will also back legislation and policy that will attempt to change the longstanding federal definition of a small business as being “independently owned.” President Obama will likely back legislation or policy that will change the federal definition of a small business to include firms owned by many of the nation’s wealthiest venture capitalists. If he is successful, billions of dollars a month in federal small business contracts will be diverted from legitimate small businesses, and into the hands of mega wealthy venture capitalists. President Obama has maintained close ties to the National Venture Capital Association (NVCA) since his days in the Illinois State Legislature. Wealthy venture capitalists were major contributors to President Obama’s campaign. In February of 2009, a story in the Venture Capital Journal titled, “Real Change: New President Gets VC,” boasted about the close relationship between President Obama and the venture capital industry. ( http://www.vcjnews.com/story.asp?storycode=46450 ) President Obama’s close ties and political debt to the venture capital industry were clearly demonstrated when he appointed New York venture capitalist, and Tootsie Roll heiress Karen Mills to head the Small Business Administration (SBA). He appointed another venture capitalist, Winslow Sargeant to head the Small Business Administration Office of Advocacy. Both Mills and Sargeant were major contributors and fund raisers during Obama’s Presidential campaign. In addition to millions of dollars in contributions to President Obama, the NVCA and its members have spent millions of dollars lobbying Congress. The vast majority of venture capital industry contributions have been focused on the House and Senate small business committees. A story in AllBusiness.com described House Small Business Committee Chair Nydia Velázquez as “quarterbacking” legislation for well-heeled venture capitalists. ( http://www.allbusiness.com/company-activities-management/business-climate-conditions/9077284-1.html ) In the past, the NVCA and its members have pushed for pro-venture capital loopholes under the guise of “increasing access to capital for small businesses.” Nothing could be further from the truth. In reality, the true purpose of the NVCA political agenda is obviously to increase their access to billions of dollars in federal small business contracts and withdraw profits without paying taxes. According to the U.S. Census Bureau and the Kauffman Foundation, small businesses employ over 50.2 percent of the private sector workforce, are responsible for more than 50 percent of GDP and create nearly all net new jobs. Legislation or policy that would divert federal small business funds away from American small businesses could have a significant negative impact on the national economy. If President Obama truly wanted to increase access to capital for small businesses, he would not have allowed CIT, the nation’s leading lender to small businesses and firms owned by women, minorities and veterans, to fail. If President Obama were sincere about helping small businesses, he would have kept his campaign promises to: implement the 5 percent set-aside goal for woman owned firms, restore the SBA’s budget and staffing, restore the head of the SBA to a cabinet level position, and “end the diversion of federal small business contracts to corporate giants.” ( http://www.asbl.com/documents/20100526_ASBL_AnalysisObamaSB.pdf ) President Obama has broken every campaign promise he made to America’s 27 million small business owners. Instead he has continued to allow billions of dollars a month in federal small business funds to be diverted to corporate giants around the world. His administration has tried to cover up the diversion of federal small business contacts to corporate giants by destroying data in the Federal Procurement Data System such as the “small business flag” and the “parent DUNS number.” The Obama Administration is refusing to release a wide variety of information that the public can use to monitor the actual recipients of federal small business contracts. They have also refused to release reports on prime contractor compliance with federal small business goals. President Obama even refused to accept the recommendation of his own small business advisory council to end the “Comprehensive Subcontracting Plan Test Program.” This program allows prime contractors to ignore federally mandated small business goals and avoid any penalties for noncompliance. As I have said many times, the media and the American people need to quit listening to President Obama’s well written and insincere speeches, and look at what he is actually doing. When you do, it becomes clear that President Barack Obama is no friend to the 27 million small businesses where most American’s work. Quite the contrary, his administration has adopted numerous policies that are clearly anti-small business. I predict that President Obama will continue to pursue legislation and policy that will allow his wealthy contributors in the venture capital industry to hijack billions of dollars in federal small business contracts and avoid paying taxes on their ill gotten gains.

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Stocks Rise as U.S., China Discuss Trade, Yuan; U.S. Index Futures Decline

May 24, 2010

By James Regan and Shani Raja May 24 (Bloomberg) — Asian stocks rose, led by the biggest gain in China’s shares since November, as U.S. and Chinese officials met to discuss economic, trade and currency issues as Europe’s debt crisis threatens a global recovery. South Korea’s won hit an eight-month low on escalating tensions with the North. The Shanghai Composite Index jumped 3.5 percent to 2,673.42 and the MSCI Asia Pacific Index rose 0.6 percent to 112.66 at 5:10 p.m. in Tokyo. The Stoxx Euro 600 increased 0.7 percent to 238.85. Yuan forwards projected the least appreciation in eight months. Futures for the Standard & Poor’s 500 Index slid 0.2 percent following gains earlier in the day. U.S. Treasury Secretary Timothy F. Geithner, meeting in Beijing with Chinese leaders, said the U.S. and China are well placed to withstand the European financial crisis, with both nations experiencing stronger-than-expected economic recoveries. Chinese President Hu said China will move gradually and independently in making any changes to the yuan. “Economic growth in the U.S. and China is broader and stronger than many had anticipated, even a few months ago,” Geithner said. Even as European nations face challenges, the United States, China, India, Brazil and other emerging economies are “in a much stronger position today to overcome the challenges ahead,” he said. Standard Chartered Plc today revised its forecast for interest-rate increases in China this year to none, from two, and pushed back its forecast for when yuan appreciation will resume to late in the third quarter following Hu’s comments. China Stocks Just two of the 911 stocks in the Shanghai Composite Index declined. Hong Kong’s Hang Seng Index climbed 0.6 percent and the city’s Hang Seng China Enterprises Index of mainland companies rose 2 percent, rebounding from a three-month low. China Vanke Co. , the nation’s largest listed property developer, jumped 4.3 percent in Shanghai. Beiqi Foton Motor Co. paced gains by automakers, rising 6.9 percent after the Shanghai Securities News reported the government will extend subsidies for trade-in vehicles to the end of this year. Twelve-month non-deliverable yuan forwards weakened 0.2 percent to 6.7501 per dollar in Hong Kong, reflecting bets the currency will strengthen 1.2 percent from the spot rate of 6.8277, according to data compiled by Bloomberg. The yuan has barely moved versus the dollar this year, while against the euro it has appreciated 15 percent. Yuan Move ‘Unlikely’ “With all the volatility going on in financial markets and with the sharp rally in the yuan against most currencies, we think it’s unlikely for them to move anytime soon,” said Thomas Harr , a currency strategist at Standard Chartered in Singapore. “The window of opportunity is not there at the moment.” China will “steadily advance the reform of the formation mechanism of the exchange rate,” moving gradually and independently, Hu Jintao said in Beijing today. Geithner said allowing the yuan to reflect market forces is important to the Chinese economy. Chinese lenders have this year been ordered three times to set aside more funds as reserves and National Development and Reform Commission official Xu Lianzhong , writing in today’s China Securities Journal, urged caution in introducing new curbs. “Any indication China will take a measured approach to controlling overheating in some sectors, rather than crushing economic activity generally, means people can start to check this big item off the ‘macro concerns’ list,” said Prasad Patkar , who helps manage about $1.7 billion in Sydney at Platypus Asset Management Ltd. Beyond China Benchmark stock indexes in Taiwan, South Korea and Singapore, economies that count China as their No. 1 export market, all rose today. Trading resumed in South Korea and Hong Kong after May 21 holidays, while Thailand’s financial markets reopened for the first time since May 19 following anti- government riots. The SET Index of shares dropped 2.2 percent as concern about the worst political violence in 18 years overshadowed a government report today showing the economy expanded at the fastest pace since 1995. Gross domestic product increased 12 percent from a year earlier in the first three months of 2010. South Korea’s won slid 1.7 percent from the close on May 20 to 1,214.65 per dollar, according to Seoul Money Brokerage Services. It earlier touched 1,220.75, the weakest level since Sept. 15. The cost of insuring the nation’s bonds increased 4.5 basis points to a nine-month high of 147 basis points, according to credit-default swap prices at CMA DataVision. The government will seek United Nations Security Council action against North Korea and halt trade with its communist neighbor over the deadly torpedoing of one of its warships in March, which killed 46 sailors. North Korea shipping will also be banned from South Korean waters, President Lee Myung Bak said in Seoul today. North Korea last week threatened “all-out war” against any move to punish it, including any more UN sanctions. “When the news broke about the sinking of the ship, that it had been a North Korean torpedo, it was basically the start” of the won’s slide, said Gerrard Katz , head of foreign-exchange trading at Standard Chartered in Hong Kong. “There’s big concern about that in the market. Risk appetite is pretty weak.” To contact the reporter for this story: James Regan in Hong Kong Jregan19@bloomberg.net ;

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Asia Stocks Gain as China Rises Most in Seven Months on Policy Speculation

May 23, 2010

By James Regan and Shani Raja May 24 (Bloomberg) — Asia stocks rose, led by the biggest gain in China’s shares since November, on speculation Chinese policy makers will rein in efforts to cool the economy as Europe’s debt crisis threatens a global recovery. South Korea’s won hit an eight-month low on escalating tensions with the North. The Shanghai Composite Index jumped 3.1 percent to 2,664.65 and the MSCI Asia Pacific Index rose 0.5 percent as of 1:47 p.m. in Tokyo. Yuan forwards gained after President Hu Jintao pledged to work toward exchange-rate reform at the start of China-U.S. talks in Beijing. Standard & Poor’s 500 Index futures slid 0.2 percent, after the benchmark rallied 1.5 percent on May 21. China’s importance as an engine of global economic growth is increasing as austerity measures needed to repair public finances in Europe damp spending. Chinese lenders have this year been ordered three times to set aside more funds as reserves and National Development and Reform Commission official Xu Lianzhong , writing in today’s China Securities Journal, urged caution in introducing new curbs. “Any indication China will take a measured approach to controlling overheating in some sectors, rather than crushing economic activity generally, means people can start to check this big item off the ‘macro concerns’ list,” said Prasad Patkar , who helps manage about $1.7 billion in Sydney at Platypus Asset Management Ltd. More than 95 percent of the 911 stocks included in the Shanghai Composite Index advanced, while just three declined. Hong Kong’s Hang Seng Index climbed 0.6 percent and the city’s Hang Seng China Enterprises Index of mainland companies rose 2 percent, rebounding from a three-month low. Chinese Stocks China Vanke Co. , the nation’s largest listed property developer, jumped 4.5 percent in Shanghai. Beiqi Foton Motor Co. paced gains by automakers, rising 8.1 percent after the Shanghai Securities News reported the government will extend subsidies for trade-in vehicles to the end of this year. Benchmark stock indexes in Taiwan, South Korea and Singapore, economies that count China as their No. 1 export market, all rose today. Trading resumed in South Korea and Hong Kong after May 21 holidays, while Thailand’s financial markets reopened for the first time since May 19 following anti- government riots. The SET Index of shares dropped 2 percent. Yuan Forwards Twelve-month non-deliverable yuan forwards climbed 0.2 percent to 6.7498 per dollar in Hong Kong, reflecting bets the currency will strengthen 1.2 percent from the spot rate of 6.8275, according to data compiled by Bloomberg. China will “steadily advance the reform of the formation mechanism of the exchange rate,” President Hu said, echoing language in a May 10 central bank report. Treasury Secretary Timothy F. Geithner said allowing the yuan to reflect market forces is important to the Chinese economy. “The market wants to see something happen,” said Sean Callow , a currency strategist in Sydney at Westpac Banking Corp., Australia’s fourth-largest bank. “If there is nothing changed in the exchange-rate regime by early July, the Treasury will be under a lot of pressure.” South Korea’s won slid 1.4 percent from the close on May 20 to 1,210.90 per dollar, according to Seoul Money Brokerage Services. It earlier touched 1,220.75, the weakest level since Sept. 15. The government will seek United Nations Security Council action against North Korea and halt trade with its communist neighbor over the deadly torpedoing of one of its warships in March, which killed 46 sailors. North Korea shipping will also be banned from South Korean waters, President Lee Myung Bak said in Seoul today. North Korea last week threatened “all-out war” against any move to punish it, including any more UN sanctions. “When the news broke about the sinking of the ship, that it had been a north Korean torpedo, it was basically the start of this move from 1,180 to 1,240,” said Gerrard Katz , head of foreign-exchange trading at Standard Chartered Plc in Hong Kong. “There’s big concern about that in the market. Risk appetite is pretty weak.” To contact the reporter for this story: James Regan in Hong Kong Jregan19@bloomberg.net ;

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China May Hold Off Rate, Yuan Moves as Europe Crisis Worsens, BNP, AMP Say

May 20, 2010

By Chua Kong Ho May 21 (Bloomberg) — China may ease tightening measures as the deepening European crisis threatens global growth, AMP Capital Investors and BNP Paribas said, while BofA Merrill Lynch Global Research predicted a delay in the yuan’s revaluation. The government may postpone an increase in borrowing costs until the third quarter after raising mortgage rates and down payments to curb record gains in home prices , BNP said. The central bank this month ordered lenders to set aside more funds as reserves for a third time in 2010 to prevent asset bubbles. “We understand that Chinese policy makers have noticed the interaction between structural tightening and a possible double- whammy effect on growth,” BNP Paribas analysts Chen Xingdong and Isaac Meng said in a report. “We expect the government to become more cautious in additional tightening measures.” China’s Shanghai Composite Index has fallen 5.6 percent this week on concern the European crisis may slow China’s exports to a market that makes up more than a fifth of its overseas sales. The gauge has lost 22 percent this year after entering a bear market last week, the first among the world’s 10 biggest exchanges in 2010. “It’s too early to say the falls are over, but we see it as part of a correction,” Shane Oliver, Sydney-based head of investment strategy at AMP Capital, which oversees about $90 billion, said in e-mailed comments. “It’s increasingly likely the Chinese authorities will be starting to think about easing up on the brake.” ‘Complicated’ Chinese Premier Wen Jiabao said May 18 the global economic crisis is more “complicated” and serious than expected and the foundations of the recovery remain fragile, China Central Television reported. Europe is China’s biggest export destination, making up 20 percent of overseas sales. China Cosco Holdings Co. , the nation’s largest shipping company, has slumped 30 percent from this year’s high in January. Guangzhou Shipyard International Co. , which relies on Europe for more than 90 percent of sales, tumbled 25 percent. “While attention is heavily focused on Europe, China might be gradually getting a whole lot worse,” said Emil Wolter , head of Asian regional strategy at Royal Bank of Scotland Group Plc. “This is not a done deal but frankly this is now the big black swan from a global demand perspective.” A weeklong rout in global stocks deepened yesterday on concern that European governments are divided on resolving financial turmoil in the region. Uncoordinated attempts by European policy makers to resolve the region’s debt crisis have unnerved investors. France, the Netherlands and Finland said they have no plans to follow German Chancellor Angela Merkel ’s effort to control what she called “destructive” markets by restricting short selling. Rate Increases Standard & Poor’s 500 Index plunged the most in 13 months, tumbling 3.9 percent, after U.S. jobless claims rose by 25,000 to 471,000 in the week ended May 15, exceeding the median forecast of economists surveyed by Bloomberg News. China may hold off interest-rate increases until the second half or next year as growth slows, the state-run China Securities Journal newspaper said in a front-page editorial yesterday. Exports to Europe may also slow by six to seven percentage points in May, June, and in the third quarter as Europe’s debt crisis deals a “severe” blow to foreign trade, the Shanghai Securities News reported May 19, citing Huo Jianguo, a researcher at the Ministry of Commerce. “In the short term, the government doesn’t want to raise rates,” Citic Securities Chief Strategist Yu Jun said today. “The risk of the Chinese economy slowing is too great.” Reviewing Forecast The debt crisis also prompted Standard Chartered Plc to review its forecast for an appreciation in the yuan this month. The Chinese currency has appreciated more than 14 percent against the euro in the past four months and the gain is putting pressure on China’s exporters, Ministry of Commerce spokesman Yao Jian said May 17. “We are pushing back our call for the renminbi to exit the de facto U.S. dollar peg from this summer to the end of the year,” Merrill said in a report today, forecasting the yuan to trade at 6.80 to the dollar by the end of 2010. The U.S. and China’s biggest trading partners have asked for a revaluation of the yuan for a level-playing field for exports. China won’t succumb to external pressure and will modify the currency based on the economic situation, Assistant Finance Minister Zhu Guangyao said in Beijing yesterday. The country won’t make a “meaningful” commitment on the yuan, Market News International reported today, citing an unidentified People’s Bank of China official. “Clearly, for now the timing of a yuan revaluation has been pushed back,” said Thomas Harr , a currency strategist at Standard Chartered in Singapore. “The yuan’s nominal exchange rate has dropped and there is a lot less rationale for China to appreciate now” after the decline in the euro and other Asian currencies. BNP forecast a “limited” rate increase late in the third quarter, while a revaluation of the yuan is “increasingly unlikely.” The Australia and New Zealand Banking Group Ltd. said China may remain “cautious” on its currency policies and may delay any move on the yuan until at least late June. To contact the reporter on this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net

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SEC Bank Investigation: JPMorgan, Citi, Deutsche Bank, UBS Get Subpoenas Over Mortgage Deals

May 13, 2010

May 13 (Bloomberg) — U.S. federal prosecutors and the Securities and Exchange Commission are cooperating in a preliminary criminal probe into whether banks misled investors about their participation in mortgage-bond deals, the Wall Street Journal said, citing a person familiar with the matter. JPMorgan Chase & Co., Deutsche Bank AG, UBS AG and Citigroup Inc. have received civil subpoenas from the SEC, the newspaper said today. Goldman Sachs Group Inc. and Morgan Stanley are already being investigated under similar preliminary criminal scrutiny, the Journal said.

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U.S. Prosecutors Start Criminal Probe Into Wall Street Banks, WSJ Reports

May 13, 2010

By Chris Peterson and Joost Akkermans May 13 (Bloomberg) — U.S. federal prosecutors and the Securities and Exchange Commission are cooperating in a preliminary criminal probe into whether banks misled investors about their participation in mortgage-bond deals, the Wall Street Journal said, citing a person familiar with the matter. JPMorgan Chase & Co. , Deutsche Bank AG, UBS AG and Citigroup Inc. have received civil subpoenas from the SEC, the newspaper said today. Goldman Sachs Group Inc. and Morgan Stanley are already being investigated under similar preliminary criminal scrutiny, the Journal said. Wall Street firms are facing scrutiny from prosecutors and lawmakers over whether they improperly sold collateralized debt obligations linked to the subprime mortgages that caused the credit crisis. Goldman Sachs is contesting a lawsuit from the SEC, which alleges the firm misled investors about a mortgage- linked security in 2007. Prosecutors so far are gathering evidence and haven’t issued criminal subpoenas, or determined the outlines of any potential case, according to the Journal. To win a criminal case, the prosecutors would have to prove beyond a reasonable doubt that a firm or its employees intentionally misled investors, it reported. Chris Cockerill , a Hong Kong-based spokesman for UBS, and James Griffiths , a spokesman for Citigroup, declined to comment on the WSJ article when contacted by Bloomberg News. Cathy Knezevic , a Hong Kong-based spokeswoman at Deutsche Bank, and JPMorgan spokeswoman Marie Cheung didn’t immediately return calls. U.S. Prosecutors Spokespeople for the Manhattan U.S. Attorney’s office, the SEC and Goldman Sachs declined to comment, the Journal said. Morgan Stanley told the newspaper it hasn’t been contacted by prosecutors and has done nothing wrong. A spokesman for JPMorgan said the bank “hasn’t been contacted” by federal prosecutors and isn’t aware of any criminal investigation, it said. Morgan Stanley Chief Executive Officer James Gorman , speaking in Tokyo yesterday, denied allegations the U.S. bank misled investors about mortgage derivatives it sold. The executive responded to a Journal article saying the firm is being probed by U.S. prosecutors over whether it misled clients when it sold them CDOs as its own traders bet that the value of the securities would drop. The New York-based firm hasn’t been contacted by the Justice Department, Gorman said in the Japanese capital. Bond Businesses The probe stemmed from an ongoing civil-fraud investigation of more than a dozen Wall Street firms’ mortgage bond businesses by the SEC that began in 2009, the Journal said yesterday. The Manhattan U.S. Attorney’s office is conducting a criminal probe into some of those firms’ activities, it said. Government officials in the U.S. are seeking to assuage public anger over bank bailouts by tightening regulations after the worst financial crisis since the Great Depression. The changes are intended to prevent a repeat of the crisis that led to $1.78 trillion in writedowns and losses by financial firms. For Related News and Information: Stories on derivatives: TNI DRV RULES Top financial stories: FTOP Most-read finance news: MNI FIN Best-performing Dow stocks: INDU MRR1

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Stocks, Futures Decline on China Speculation; Euro Weakens on Debt Crisis

May 12, 2010

By Will McSheehy and Shani Raja May 12 (Bloomberg) — Asia stocks fell for the seventh time in eight days on speculation China will act to cut inflation and after the Wall Street Journal said Morgan Stanley is being investigated. The euro weakened on concern Europe’s debt crisis isn’t over. The MSCI Asia Pacific Index declined 0.2 percent to 118.65 as of 3:40 p.m. in Tokyo, Standard & Poor’s 500 Index futures fell 0.6 percent and Euro Stoxx 50 futures slid 1.3 percent. The euro declined against the yen and dollar. Gold for immediate delivery traded as high as a record $1,234.93 per ounce. “Weighing against any upward momentum is persistent uncertainty regarding the European rescue package and doubts about the rate of economic growth in China,” said Tim Schroeders , who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne. U.S. stocks fell yesterday after Federal Reserve Chairman Ben S. Bernanke told senators that European finance ministers’ almost $1 trillion aid package isn’t a cure-all for the euro region’s debt crisis. China shares followed, extending losses after entering a bear market yesterday, on concern the state will raise borrowing costs and unveil more measures to cool a housing market in which prices rose at a record pace last month. Morgan Stanley is being probed by U.S federal prosecutors over allegations it misled investors about mortgage derivatives, the Wall Street Journal reported, citing people familiar with the matter that it didn’t identify. Morgan Stanley spokesman Nick Footitt said the bank hasn’t been contacted by the Justice Department about transactions described in the Journal’s report. Japanese Banks Mitsubishi UFJ Financial Group Inc., which holds about 20 percent of Morgan Stanley, dropped 2.4 percent in Tokyo and Mizuho Financial Group Inc. fell 1.2 percent as the Nikkei 225 sank 0.2 percent to 10,394.03 at the 3 p.m. close in Tokyo. The MSCI Emerging Markets Index fell 0.5 percent to 953.93 as of 1:15 p.m. in Singapore, adding to yesterday’s 0.9 percent retreat. China’s Shanghai Composite Index fell 1.4 percent, extending its drop from the Nov. 23 peak to 22 percent. China Overseas Land & Investment Ltd., a developer controlled by the Chinese construction ministry, fell 2.7 percent. PetroChina Co. and Jiangxi Copper Co. tracked a decline in crude oil and copper prices. “China’s economy is growing too fast,” Yonghao Pu , UBS Wealth Management’s chief investment strategist for Asia Pacific, said in a Bloomberg Television interview. “If inflation further edges up, I’m sure the government will further tighten monetary policy, including raising interest rates.” Gains Erased Stocks erased earlier gains made after Toyota Motor Corp., the world’s largest carmaker, forecast net income will rise 48 percent this year on recovering U.S. sales and Commonwealth Bank of Australia said fiscal first-quarter earnings climbed 30 percent as charges for soured loans fell. The euro weakened for a second day against the dollar and the yen on concern Europe’s most-indebted nations will struggle to contain their deficits, slowing the economic recovery. The euro declined to $1.2639 as of 6:46 a.m. in London from $1.2662 in New York yesterday. The yen rose to 117.03 per euro from 117.32 and traded at 92.63 per dollar from 92.65. “As markets began to find faults with the loan package, it’s become clear that this will not solve the roots of the crisis,” said Tsutomu Soma , a bond and currency dealer at Okasan Securities Co. in Tokyo. “Investors are finding fewer reasons to buy the euro.” Gold climbed to a record for a second day, with bullion for immediate delivery rising to an all-time high of $1,234.93 an ounce before trading at $1,233.55 an ounce at 1:29 p.m. in Singapore. The metal has climbed 12 percent in 2010 and is heading for its 10th consecutive annual gain. “All we can do is to put our money into real assets because paper money everywhere is being debased,” Jim Rogers , Singapore-based chairman of Rogers Holdings, told Bloomberg Television today. To contact the reporters on this story: Will McSheehy in Sydney at wmcsheehy@bloomberg.net Shani Raja in Sydney at sraja4@bloomberg.net .

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Wall Street Journal Revs Up New York Times Rivalry

April 24, 2010

NEW YORK — It might be the last great American newspaper war. And Rupert Murdoch intends to win it. He has made a career of grabbing readers and advertisers from competing newspapers, and now he is racheting up the challenge his Wall Street Journal poses to The New York Times. On Monday, the Journal is launching a metro section that will vie for readers and advertisers on the Times’ turf. Although the new section will be available only in the New York City area, collateral damage could spread around the country. Both newspapers are jostling with each other, USA Today and regional dailies for readers. By dramatically lowering advertising rates in New York to undercut the Times, Murdoch’s assault could leave both newspapers with fewer resources for other expansion plans. “The Times has a lot of readers and a lot of them are very loyal, long-standing folks. It’s not going to be easy to peel off the Times’ core constituency,” says Dean Starkman, a former Journal reporter who writes for the Columbia Journalism Review. “As a business proposition, I think I’m with the majority of skeptics who think that this could ultimately damage both papers.” Luxury retailer Bergdorf Goodman, a longtime prominent advertiser in the Times, plans to advertise in the new Journal section. “We’re going to try it and see,” spokeswoman Ginger Reeder says. “We always look for new ways to reach our customers.” It’s not yet clear whether Bergdorf will reduce its advertising in the Times. Times President and General Manager Scott Heekin-Canedy says several prominent advertisers have assured him that their promotions in the Journal’s new section will not come at the expense of the Times. He declined to name the advertisers. “We won’t get in a pricing war,” he says. News Corp. said Murdoch, 79, was not available for an interview. But he has been open about his goal of using his media properties to challenge what he considers a left-leaning news establishment in the U.S. And he took a swipe at the Times in a speech to New York real estate executives last month. “We believe that in its pursuit of journalism prizes and a national reputation, a certain other New York daily has essentially stopped covering the city the way it once did,” he said. Times Co. CEO Janet Robinson fired back Thursday. “When you’re the lead dog, people are constantly going to go after you,” she told financial analysts. But she argued that the Times has a better case to make with advertisers. “They are aware of the fact certainly that we have a larger female audience. They are aware of the fact that there’s more time spent with our newspaper and website than the Wall Street Journal,” she said. Going after the Times is the fight Murdoch had in mind when News Corp. bought the Journal and its parent Dow Jones & Co. for $5 billion in 2007. Since then, he has tried to broaden the newspaper’s appeal by remaking the Journal’s front page. Last year it surpassed USA Today as the nation’s most widely circulated newspaper. The new Journal splashes color photos in place of its customary small, black-and-white renderings and includes more coverage of topics outside of business and finance. One recent edition carried a photo of the volcanic eruption in Iceland across the top of the page. To fill its new metro section, the Journal has hired several former staffers of The New York Sun. The Sun, a feisty upstart that – like the Journal – had conservative opinion pages, spent six years trying to rival the Times with aggressive local coverage before going out of business in 2008. John Seeley, the Sun’s former deputy managing editor, will lead the Journal’s new metro section. Pia Catton, the Sun’s former culture editor, has been named the section’s lead arts and leisure reporter. “They are hiring people trained to compete with the Times,” says one former Sun contributor who was approached about a job with the new section. He spoke on condition of anonymity because his discussions with the Journal were supposed to be confidential. Murdoch has relished similar competitions. After buying the Times of London in 1981, he grabbed circulation from The Daily Telegraph by slashing subscription prices and introducing coupon promotions and prize raffles. As the owner of the Telegraph, Conrad Black battled Murdoch before Black was convicted of defrauding his own company in 2007. The Telegraph survived, but in an e-mail from prison Black wrote that if his experience is any guide, The New York Times could struggle to “absorb the kind of price-cutting and profligate expenses Murdoch will pour on.” As owner of The New York Post, Murdoch has been willing to cut newsstand prices and lose tens of millions of dollars in his bid to outsell the New York Daily News. In 2000, the Post sold about 435,000 copies on an average weekday, compared with 714,000 for the Daily News. By 2009, the Post was up to roughly 530,000 copies while the Daily News had sunk to 570,000. And Murdoch’s underlings have been accused of using rougher tactics than just price cutting or promotions. News Corp. subsidiary News America, which prints coupons and grocery store ads and is led by New York Post publisher Paul Carlucci, agreed in January to pay $500 million to settle a lawsuit with rival Valassis Communications. Valassis had accused News America of using its market clout to demand that customers advertise exclusively with News America. It likened Carlucci to the gangster Al Capone beating his enemies with a baseball bat in the film “The Untouchables.” News Corp. would not make Carlucci available for comment. In a statement, the company said it settled the lawsuit because “significant risks were developing in presenting this case to a jury.” So far, competition between the Journal and the Times has taken a less cinematic course. The newspapers have shadowed each other’s moves across the country over the past year by opening sections devoted to local issues for readers in San Francisco and Chicago. But those new sections are running once or twice a week. The Journal has shuffled resources to staff its sections and hasn’t done any hiring. The Times has sought partnerships with local media rather than add staff. By contrast, the Journal is hiring about 35 reporters for its New York section, which will run about 10 pages every day. It will include color – a critical feature for advertisers who want to stand out. And it will mimic the wide range of coverage offered by the Times, including stories on local politics, culture and sports. Murdoch is willing to put $30 million into the section over the next two fiscal years, according to a person familiar with the Journal’s finances who was given anonymity to speak about internal company figures. The Times has countered with an ad campaign boasting that twice as many business professionals in the New York market read the Times as the Journal, based on surveys by the research group Scarborough. The Journal sells almost 2 million copies a day nationwide, and the Times sells about 900,000. But the advantage is reversed in the New York market, which includes the city and parts of New Jersey, Connecticut and Pennsylvania. The Times sold an average of 406,000 copies in the area on weekdays and the Journal sold 294,000 in the year that ended Sept. 30, based on Audit Bureau of Circulations figures. Even so, Murdoch still could reshape the local ad market. News Corp. is offering a discount for advertising in both the Journal and the Post and could package ads with other outlets it owns, such as the local Fox TV station. The Times essentially just has itself. Roberta Garfinkle, who heads print advertising strategy at the New York ad firm TargetCast, called Murdoch’s plan a “smart move” because it will offer advertisers a cheaper way to target wealthy New Yorkers than having to pay for ads that run nationally. For instance, a full-page black-and-white ad in the Journal’s national edition costs about $223,000 per day, while the same ad in the eastern edition – delivered from Alabama to Maine – costs about $102,000. (Both figures assume no volume discounts.) An ad that runs just in the New York market will cost even less. Materials prepared for one advertiser by the Journal and reviewed by The Associated Press offer a full-page ad in the New York section of the Journal – plus a full-page ad in the Post – for less than $20,000. Dow Jones says such promotions have been offered to a small number of advertisers. A comparable ad running in the New York regional edition of the Times could cost about $50,000, although rates vary by category of advertiser. The heightened competition for ad dollars comes as nearly every newspaper has lost advertising to the Internet. The newspapers’ own websites haven’t yielded the same kind of income that printed newspapers are used to. The Times Co. unit that includes its flagship newspaper lost more than 25 percent of its overall ad revenue last year and might not see it come back. News Corp. doesn’t disclose the Journal’s advertising figures or profits. But there are clear signs the newspaper has been struggling financially. It cut staff last year. According to the person knowledgeable about its finances, the Journal lost more than $80 million in the fiscal year that ended June 30. Journal spokeswoman Emily Edmonds would not confirm or deny the figure. However, if it comes down to who can hold his breath longer while the ad slump continues, Murdoch would appear to have the odds. News Corp. has more flexibility. Some of its businesses, such as Fox News and other cable channels, are larger than the entire Times Co. Analysts expect the movie “Avatar” alone will earn News Corp. as much as $400 million in operating profit. The Times Co. had an operating profit of just $74 million last year. As Starkman, the former Journal reporter, put it, “The Times is a cork bobbing in a pretty big ocean.”

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New Jersey Flips Build America Bonds as IRS Scrutinizes $90 Billion Market

April 15, 2010

By Dunstan McNichol April 15 (Bloomberg) — New Jersey ’s pension fund, facing a $46 billion deficit, is bolstering its finances by buying Build America Bonds from the state’s debt underwriters, then selling them for a profit in as little as five days, state records show. The pension, whose $700 million in Build America investments would make it the seventh-largest holder of the bonds, earned $2.6 million in the past year by rapidly buying and selling, or flipping, the taxable debt issued by municipalities across the U.S., according to data compiled by Bloomberg. New Jersey’s ability to turn profits 17 times in five months or less shows how some borrowers in the $93.4 billion Build America market may be selling bonds at a higher cost to taxpayers than necessary, said Robert Lamb , a professor at New York University’s Stern School of Business. “This is supposed to be a wash,” said Lamb, who serves on the board of editors of the Municipal Finance Journal, a scholarly quarterly. “The fact they are making a market in this fashion so quickly with, it appears, little added value certainly raises certain ethical questions and may involve legal issues.” Flipping is under review by the Internal Revenue Service because the U.S. Treasury subsidizes 35 percent of Build America costs. The Municipal Securities Rulemaking Board , the market’s self-regulator, is considering restrictions on how underwriters allocate the bonds among institutional and individual buyers. While public pensions in California, Kentucky and Pennsylvania also bought BABs, New Jersey may be unusual in both the amount it purchased and in the profits it made selling them, according to records from other states and interviews with fund managers. Fastest-Growing Build America Bonds, created under President Barack Obama ’s economic stimulus program, have become the fastest-growing part of the $2.8 trillion municipal market since they went on sale in April 2009. Underwriters control the availability of new issues at the initial offering price, when investor demand may outstrip supply. New Jersey got no preferential treatment in obtaining issues, said William Clark , who was director of the state treasury’s Investment Division until March 1, when he was named senior vice president and chief investment officer of the Federal Reserve System’s office of employee benefits. Ray Joseph , acting director since Clark’s departure, declined to comment. The Investment Division oversees the $67.3 billion pension fund for teachers and government workers, the 12th-largest in the U.S. ‘A Good Thing’ Ranking among the top institutional holders of Build America obligations is “a good thing,” said Andrew Pratt , a spokesman for the state Treasury Department in Trenton. “They’re government-backed bonds, which means they still have a higher degree of security than corporate bonds or stocks.” Merrill Lynch & Co. , Morgan Stanley , Barclays Plc , Goldman Sachs Group Inc ., Citigroup Inc. , Morgan Keegan & Co., Piper Jaffray & Co. , Stifel Nicolaus & Co. and Wachovia Securities sold new issues to New Jersey at par, or face value, that the state then flipped for a profit. The firms collected at least $18 million in fees and commissions trading stock and managing funds for the treasury’s Investment Division since 2008, according to information obtained through a public records request. ‘No Special Treatment’ “Certainly there’d be no special treatment for any particular client,” said Kathy Ridley , a spokeswoman for Regions Financial Corp. ’s Morgan Keegan. “When we offer them, they are made publicly available.” Morgan Keegan, based in Memphis, Tennessee, provided New Jersey with $2 million of University of Alabama BABs at par on Oct. 15. The bonds were resold five days later for a $31,000 gain, according to state records. Susan McCabe , a spokeswoman for Bank of America Corp. ’s New York-based Merrill Lynch, didn’t respond to e-mail and telephone requests for comment. Danielle Romero-Apsilos , a spokeswoman in New York for Citigroup Global Markets Inc., declined to comment. Ferris Morrison, a spokeswoman in Charlotte, North Carolina, for Wells Fargo & Co. ’s Wachovia, said New Jersey didn’t get any preferential treatment. The company’s dealings with the Investment Division don’t affect its handling of the state’s BABs purchases, she said. Jennifer Sala , a spokeswoman for Morgan Stanley, based in New York, declined to comment. Kristin Friel , a spokeswoman for London-based Barclays and Peter Czajkowski , a spokesman for St. Louis-based Stifel Nicolaus, also declined to comment. ‘Don’t Set the Pricing’ “We don’t set the pricing, control the books or the allocations, or have any interaction with investors for the underwriting” as co-manager of a deal New Jersey flipped, said Jennifer Olson-Goude , a spokeswoman for Minneapolis-based Piper Jaffray. Michael DuVally , a Goldman Sachs spokesman based in New York, declined to comment specifically on the firm’s deals with New Jersey. Trends in U.S. Treasury yields, which are “not something an issuer or underwriting group controls,” determine whether a buyer will gain or lose, DuVally said in an e-mail response to questions. New Jersey bought its first Build America Bonds on April 20, 2009, five days after the first BABs ever, taking a $10 million stake in a $1.4 billion issue by the New Jersey Turnpike Authority, the third-oldest toll road in the U.S., according to the division’s monthly transaction reports. The state bought the debt at par — for 100 cents on the dollar — to yield 7.414 percent. The Investment Division was among 94 customers who bought into the deal at that price, according to MSRB trading records. Driving Yield Even before the state made its purchase, other investors had flipped $2 million of the bonds at prices of as much as $105 per $100 of face value, driving the yield down to 7 percent for new buyers, the MSRB records show. Debt is traded on a when-issued basis until a deal settles. At the higher trading prices, the Investment Division’s bonds gained $500,000 immediately. If the Turnpike Authority had gotten the same rate of 7 percent, the cost of the transaction would have been cut by $166 million, or enough to let motorists travel toll-free from Jan. 1 through April 22. It’s the Investment Division’s responsibility to get the best returns possible for the funds it holds, said Pratt, the Treasury spokesman. ‘Wise’ to Profit “If the pension fund made money because for some reason the bonds were sold at too high a yield, it is wise of the pension fund to make a profit off it,” he said. “They would be derelict in their fiduciary duty if they saw a good investment and did not go out there and invest.” The IRS in February said it sent every Build America Bond issuer a questionnaire seeking information on their monitoring and record-keeping of deals. Included in the five groups of questions was one that specifically inquired about secondary-market trading of the obligations and whether any had traded “at a price greater than the issue price prior to the delivery” of the bonds. The questionnaire came three months after the MSRB proposed rules that would require that underwriters give priority to individual investors over their institutional accounts. “The board is still looking at the whole issue of priority of orders,” Lynnette Kelly Hotchkiss , executive director of the MSRB, said in a telephone interview from Alexandria, Virginia. The proposed rule is to be discussed at the board’s next meeting April 29-30 in Philadelphia, she said. Six Days The bonds New Jersey flipped came from municipalities as far away as Colorado. Before that state’s Jefferson County, home of Molson Coors Brewing Co. ’s biggest plant, saw a penny from its $67 million Build America issue managed by Stifel Nicolaus last year, New Jersey made a $28,000 profit, buying and selling the debt six days before the transaction officially closed. New Jersey also participated in a $150 million Build America sale by Arapahoe County Water & Wastewater Authority, a Colorado utility that provides water and sewer service to about 7,400 homes and businesses near Denver, according to bond documents. While the transaction was dated Dec. 16, state and MSRB trading records show New Jersey and another unidentified investor bought the debt at par on Dec. 9, while 283 other purchasers paid a 2.25 percent premium. New Jersey, which obtained its bonds from Piper Jaffray , a co-manager of the deal, sold $1 million of its stake about a month later for a gain of about $5,000, state trading records show. Biggest Holder New Jersey owns more Build America Bonds than all but six institutional investors, according to state records and a table provided by Ipreo LLC , a New York-based financial data company. The top holder is Pacific Investment Management Co. , based in Newport Beach, California, which oversees about $1 trillion, with $2.2 billion in BABs. Mark Porterfield , a spokesman for Pimco, declined to comment. At least three other public plans — the California State Teachers’ Retirement System, the second-largest pension in the U.S.; Kentucky Employee Retirement System and Pennsylvania’s Public School Employees Retirement System — have reported buying BABs in smaller quantities than New Jersey. Texas Bonds New Jersey realized its biggest Build America profit in October, when it gained $447,000 on the sale of $5 million in debt purchased last June as part of a $375 million issue for CPS Energy of San Antonio, the largest municipally owned gas and electric utility in the U.S. The state purchased the Texas bonds at par through the lead underwriter, Goldman Sachs, even as other investors had placed orders for five times the amount available, according to David Jungman, CPS’s senior director of finance. The Investment Division was among 46 investors that bought shares at par at 5 p.m., June 2, according to Treasury reports and MSRB trading records compiled by Bloomberg. When the bonds began trading at 8 a.m. the next day, the price jumped $3 per $100, boosting the value of New Jersey’s stake by $150,000. New Jersey held its CPS bonds until Oct. 20, selling them for a $447,000 gain, according to the Investment Division’s transactions report for the month. Lower Rate New Jersey’s sale price of $109 per $100 of bonds drove the yield on the 30-year notes to 5.37 percent, compared with the 5.99 percent CPS is paying. Over the life of the bond, the lower rate would have reduced the deal’s interest costs by $67.3 million, according to Bloomberg data. The state’s quick sales are driven by its need to free up cash for benefit payments, said Clark, the former state treasury official. Underwriters treat New Jersey like any other investor when initial offerings come to market, he said. “If they’re oversubscribed, everyone gets cut back,” said Clark. “We got cut back.” Underwriters wouldn’t be likely to offer New Jersey access to oversubscribed deals in the hopes of improving their prospects of landing business, Clark said. “They’re also doing work with everyone else who’s trying to buy bonds,” he said. To contact the reporter on this story: Dunstan McNichol in Trenton, New Jersey, at dmcnichol@bloomberg.net .

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Nine-Year-Old Fossil Hunter Finds New Species of Human Ancestor

April 12, 2010

By Meg Tirrell April 8 (Bloomberg) — A 9-year-old boy who wandered from his father’s side may have opened a new chapter in the evolutionary story of mankind when he found the fossilized collarbone of a child who lived almost 2 million years ago. Matthew Berger was about 15 meters (49 feet) from his dad, Lee, a paleontologist working at the archeological dig in South Africa known as the Cradle of Humankind , when he called out, his father said during a briefing yesterday with reporters. “Dad, I found a fossil,” the youngster said. The bone was just “sticking out of the rock,” the elder Berger said. Scientists now suspect Matthew discovered a new species of hominid, the name for humans and their extinct ancestors, that lived just prior to the historical development of modern man. Researchers reported finding partial skeletons of the male child and an adult female who lived 1.78 million to 1.95 million years ago in two papers published today in the journal Science . The new species “might be a Rosetta Stone to defining just what the genus Homo is,” Berger, a professor at the University of the Witwatersrand , in Johannesburg, said in the call with reporters. “This is a good candidate for being the transitional species between the southern African ape-man” and later groups more closely related to modern humans. The male child and the adult female would have been alive about 1 million years after “Lucy,” one of the best-known primitive human ancestors. The scientists said the species, named Australopithecus sediba, include a mix of characteristics belonging to more primitive and more advanced humans and may represent one of the most recent ancestors leading to those in the Homo genus, the group to which modern humans belong. ‘Natural Spring’ Australopithecus means “southern ape” and refers to an early human species that includes Lucy, who is 3.2 million years old and was discovered in Ethiopia in 1974. Sediba means “natural spring” or “fountain” in the South African language Sotho, an “appropriate name for a species that might be the point from which the genus Homo arises,” Berger said. The female adult and male child are estimated to have been about 1.27 meters (4.17 feet) tall, and to have weighed 33 kilograms (73 pounds) and 27 kilograms, respectively. The female was likely in her late 20s or early 30s, while the child was probably 8 years old to 13 years old, the scientists said. While the species has long arms, similar to apes, it has short, powerful hands, unlike the longer fingers of chimpanzees. Its long legs and more developed pelvis indicate it was able to walk upright, yet still likely spent some of its life in trees, according to the researchers. ‘Pinheads’ One of the most surprising aspects of the discovery helped convince the researchers that the two skeletons weren’t in the Homo genus: the small skull, Berger said. “It would look almost like a pinhead,” Berger said. The size of the cranium indicated this species had brains as small as some of the oldest “ape-men,” yet their faces more closely resembled something similar to Homo erectus , a more direct human ancestor, he said. The findings are significant because they come from a point in time that’s not well-documented, said Ian Tattersall , a curator in the division of anthropology at the American Museum of Natural History in New York, in an April 6 telephone interview. That’s the time “just after 2 million years ago when we think that the earliest members of the genus Homo, to which we belong, were evolving,” he said. More Skeletons Tattersall said he doesn’t think the newly discovered species represents the “actual precursor” to more recent human ancestors. “What these features do is show you can have features of this kind in an archaic kind of hominid that is not a member of the genus Homo,” he said. Since the first discoveries of the sediba specimens, made in 2008, Berger and his colleagues have found at least two more hominid skeletons at the site, he said yesterday. The bones were discovered along with skeletons of saber-toothed cats, a wild dog, a horse and antelopes among about two dozen species of animals, the scientists reported. The Cradle of Humankind, located 40 kilometers (25 miles) outside of Johannesburg, is also the place where the more than 2 million-year-old fossil of Australopithecus africanus known as “ Mrs. Ples ” was found in 1947. Discoveries at the site have yielded insight into human evolution dating back 3.3 million years, according to the Web site of World Heritage , a cultural institution connected to the United Nations. Underground Lake The latest finding occurred in what was once a deep cave or underground lake, and sediba and animals may have entered in search of water, said Paul Dirks , a structural geologist and professor at James Cook University in Queensland, Australia, and a lead author of one of the papers. The fossils were probably well-preserved because it’s likely they ended up in a place inaccessible to scavengers, Dirks said. “Perhaps at the time of their death, the area in which sediba lived experienced a severe drought,” he said. “Animals may have smelled the water, ventured in too deep, fallen down hidden shafts in the pitch dark, or got lost and died.” Sediba’s overlap of primitive characteristics with more developed features is indicative of the way humans evolved, with a period of possibly 600,000 years in which Australopithecus and Homo co-existed, Tattersall said. “We’re all brought up to think of our history as a slow, single-minded slog from primitiveness to perfection in some way, and clearly that was not the case,” he said. “We’re one of nature’s many experiments that seems to have succeeded.” To contact the reporter on this story: Meg Tirrell in New York at mtirrell@bloomberg.net .

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American Securities and ASP Westward Welcome James W. Hopson as CEO

April 8, 2010

NEW YORK, NY and HOUSTON, TX–(Marketwire – April 8, 2010) –  American Securities ( http://www.american-securities.com/Main ), majority owner of ASP Westward, and ASP Westward (Westward) are pleased to announce that James W. Hopson has joined Westward as chief executive officer, effective April 5, 2010. Tom Stamper, who served for 12 months as interim CEO, has assumed a new position as president of Westward’s East Texas division and publisher of the Longview News Journal , as well as resumed his previous role as vice president of operations, continuing to manage all of the company’s printing and distribution operations.

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American Securities and ASP Westward Welcome James W. Hopson as CEO of ASP Westward

April 8, 2010

NEW YORK, NY and HOUSTON, TX–(Marketwire – April 8, 2010) –  American Securities ( http://www.american-securities.com/Main ), a New York-based private equity firm and majority owner of ASP Westward, and ASP Westward (Westward) are pleased to announce that James W. Hopson has joined Westward as chief executive officer, effective April 5, 2010. Tom Stamper, who served for 12 months as interim CEO, has assumed a new position as president of Westward’s East Texas division and publisher of the Longview News Journal , as well as resumed his previous role as vice president of operations, continuing to manage all of the company’s printing and distribution operations.

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China Central Bank to Sell Three-Year Bills Today at 2.75%, Survey Shows

April 7, 2010

By Bloomberg News April 8 (Bloomberg) — China’s central bank will sell three-year bills for the first time since June 2008 at a yield of 2.75 percent, according to a survey of traders. The sale of 15 billion yuan ($2.2 billion) in the securities at 10 a.m. will be followed by issuance every two weeks, the People’s Bank of China said in a statement yesterday. The yield will be 82 basis points higher than the 1.93 percent on one-year bills sold on April 6, according to the median estimate in a Bloomberg News survey of nine finance companies. Selling higher-yielding bills may be a precursor to the first increase in benchmark lending rates in more than two years and allowing yuan gains, said Jiang Chao , an analyst at Guotai Junan Securities Co., the nation’s largest brokerage by revenue. Policy makers from China to India have begun withdrawing economic stimulus this year, seeking to prevent asset-price bubbles as Asia leads the recovery from a global recession. “This is meant to pave the way for the central bank to raise interest rates or resume yuan appreciation,” said Jiang. “The PBOC can drain liquidity by issuing bills.” The one-year swap contract, in which the floating seven-day repurchase rate is exchanged for a fixed payment, rose for a second day, reaching 2.27 percent as of 8:11 a.m. in Shanghai. The seven-day repurchase rate, a measure of interbank funding availability, gained eight basis points yesterday to 1.7 percent, the highest in three weeks. The People’s Bank is targeting a drop of 22 percent in new lending this year from 2009’s record 9.59 trillion yuan and has told banks twice this year to set aside more cash as reserves. India increased interest rates last month for the first time in almost two years. Australia’s central bank has raised borrowing costs in five out of the past six meetings. Inflation Target China’s central bank last cut its one-year lending rate by 0.27 percentage point to 5.31 percent in December 2008 to revive the economy amid the financial crisis. The monetary authority raised the rate in March 2007, two months after selling three- year bills following a 20-month interval. Its most-recent increase was in December 2007. Central bank adviser Li Daokui said the nation may raise rates this quarter should the inflation rate breach 3 percent, the China Securities Journal reported yesterday. Consumer prices rose 2.7 percent in February from a year earlier. The bills will drain cash from the economy by providing an alternative to lending, according to Xu Xiaoqing , a bond analyst at China International Capital Corp., the nation’s first Sino- foreign investment bank in Beijing. “The central bank needs to use higher-yielding bills to attract banks so that they won’t make too many loans,” said Xu, who sees a rate increase this quarter. “Three-year bills can lock up banks’ cash for longer periods, which will push up money-market rates and bond yields.” — Belinda Cao . Editors: Sandy Hendry , Ven Ram To contact the reporter on this story: Belinda Cao in Beijing at lcao4@bloomberg.net

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China Said to Sell Three-Year Bills in Signal Interest Rates May Soon Rise

April 6, 2010

By Bloomberg News April 7 (Bloomberg) — China’s central bank will sell three-year bills tomorrow for the first time since June 2008, seeking to drain cash from the world’s fastest-growing economy, traders at three of the nation’s largest banks said. The People’s Bank of China asked the lenders to give indications of their demand for the securities, said the traders, who asked not to be identified before an official announcement. The companies are primary dealers required to bid at bill auctions. A central bank press officer declined to comment. Selling higher-yielding bills may be a precursor to the first increase in benchmark lending rates in more than two years and allowing yuan gains, said Jiang Chao , an analyst at Guotai Junan Securities Co., the nation’s largest brokerage by revenue. Policy makers from China to India have begun withdrawing economic stimulus this year, seeking to prevent asset-price bubbles as Asia leads the recovery from a global recession. “This is meant to pave the way for the central bank to raise interest rates or resume yuan appreciation,” said Jiang. “The PBOC can drain liquidity by issuing bills if the interest- rate hike or appreciation attracts more hot money.” The seven-day repurchase rate , which measures interbank funding availability, rose eight basis points to 1.7 percent. The central bank last sold one-year bills at a yield of 1.9264 percent yesterday, unchanged for the 10th sale in a row. It guided the rate higher twice in January. Loan Growth Yuan forwards strengthened for a ninth day, the longest winning streak in more than a year, on speculation China will end a 21-month-old peg to the U.S. dollar to help curb inflationary pressures. U.S. Treasury Secretary Timothy F. Geithner yesterday said China needs to make its own decision on when to revalue the yuan. Twelve-month non-deliverable forwards climbed 0.1 percent to 6.6295 per dollar, reflecting bets the currency will strengthen 3 percent from the spot rate of 6.8255. The People’s Bank is targeting a drop of 22 percent in new lending this year from 2009’s record 9.59 trillion yuan ($1.4 billion) and has told banks twice this year to set aside more cash as reserves. India increased interest rates last month for the first time in almost two years. Australia’s central bank has raised borrowing costs in five out of the past six meetings. China’s central bank last cut its one-year lending rate by 0.27 percentage point to 5.31 percent in December 2008 to revive the economy amid the financial crisis. The monetary authority raised the rate in March 2007, two months after selling three- year bills following an 18-month interval. It’s most-recent increase was in December 2007. Inflation Target Central bank adviser Li Daokui said the nation may raise rates this quarter should the inflation rate breach 3 percent, the China Securities Journal reported today. Consumer prices rose 2.7 percent in February from a year earlier. The bills will drain cash from the economy by providing an alternative to lending, according to Xu Xiaoqing , a bond analyst at China International Capital Corp., the nation’s first Sino- foreign investment bank in Beijing. “The central bank needs to use higher-yielding bills to attract banks so that they won’t make too many loans,” said Xu, who sees a rate increase this quarter. “Three-year bills can lock up banks’ cash for longer periods, which will push up money-market rates and bond yields.” China’s finance ministry sold 28 billion yuan in five-year bonds at an average yield of 2.70 percent, two basis points higher than the 2.68 percent median estimate in a Bloomberg News survey. A basis point is 0.01 percentage point. Asset Bubbles China’s central bank said in its 2009 report on international financial markets on April 2 that asset bubbles are emerging in parts of the world and in certain industries that may burst unless supported by real economic recovery.     “They’re trying to tighten policy to some extent,” said Ben Simpfendorfer , Hong Kong-based chief China economist at Royal Bank of Scotland Group Plc. “There’s talk about a rate hike coming in the next few months, so this would be an initial step.” — Belinda Cao , Bob Chen , Judy Chen . Editors: Sandy Hendry , James Regan To contact the reporter on this story: Belinda Cao in Beijing at lcao4@bloomberg.net

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Breast Cancer Risk Rises, Lifespan Shortens After Childhood Cancer Therapy

April 5, 2010

By Nicole Ostrow April 5 (Bloomberg) — Women’s risk of developing breast cancer may increase as much as 20-fold if they were treated with chest radiation for malignancies as children or young adults, according to an analysis of studies. By the time they are in their 40s, the women’s incidence of breast malignancy may be 13 to 20 percent compared with about 1 percent for females generally, researchers said today in the Annals of Internal Medicine . A second study in the journal said both male and female survivors of childhood cancers die about a decade sooner. The findings add to research showing the effects of childhood cancer and its treatment, said Kevin Oeffinger , one of the authors of the breast cancer study. As adults, these survivors should be aware of their health risks and work with doctors to prevent premature death, the researchers said. “We still need radiation for treatment of many of the cancers,” said Oeffinger, director of the Adult Long-Term Follow-Up Program at Memorial Sloan-Kettering Cancer Center in New York, in a telephone interview on April 2. “If a woman were treated with radiation to the chest area for a pediatric or young-adult cancer, they should talk to their doctor” about when to begin screenings for breast cancer, he said. 300,000 Survivors There are more than 300,000 childhood-cancer survivors in the U.S., Oeffinger said. Treatments such as radiation can damage healthy cells while destroying malignant cells, according to the National Cancer Institute, based in Bethesda, Maryland. In children, this can prevent bones, tissues and organs from developing properly, leading to damage seen years later. People who beat cancer as children face a risk of worse health over their lifetime from heart disease, infertility and psychological ailments, according to the National Cancer Institute. As many as 55,000 women in the U.S. today were treated as children with moderate to high doses of radiation to their chest to fight lymphoma and other cancers, according to the breast- cancer study. Oeffinger and colleagues at the University of Chicago, St. Jude Children’s Research Hospital in Memphis and other institutions wanted to determine the breast cancer risk for such survivors. The researchers analyzed 11 studies that had data on 7,000 women who received chest radiation as children or young adults from 1960 to 2000. Radiation Dose Women who received chest radiation had a chance of developing breast cancer by the age of 40 to 45 that ranged from 13 percent to 20 percent, depending on the dose of radiation therapy they received as children, according to the analysis. Women in the general population have a 1 percent likelihood of getting breast cancer by age 45, the study said. The increased risk for breast cancer was seen as soon as eight years after the chest radiation was given and didn’t level off as the women grew older, the researchers said. The researchers also wanted to assess the benefits and risks for screening the women from age 25 throughout their lifetime for breast cancer, Oeffinger said. Results suggested the advantage of early cancer detection outweighed the risk of more radiation from screening X-rays. He said the best results came from combining mammograms with magnetic resonance imaging, or MRI . Life Expectancy In the second study on lifespan, Jennifer Yeh , a research fellow at Harvard School of Public Health in Boston, developed a mathematical model to predict the longevity of survivors of childhood cancers, including leukemia, brain and bone tumors and lymphoma. The estimates covered both men and women and varied by diagnosis, ranging from kidney-tumor survivors’ dying four years sooner than the general population to brain and bone tumor survivors’ dying almost 18 years earlier. That means as much as a 28 percent reduction in their life expectancy, said Yeh, who worked with colleagues from Harvard and Emory University in Atlanta. “Survivors of childhood cancer continue to face excess mortality risks in their adult years,” said Yeh in an e-mail on April 2. “Monitoring the health of the growing population of childhood cancer survivors and evaluating newer therapies for patients newly diagnosed with cancer can help to minimize the impact of these late effects on survivors’ life expectancy.” A childhood-cancer survivor who reaches the age of 40 has a 3.3-fold higher risk of dying before the age of 50 than those in the general population, according to the research. A person who reaches the age of 60 has a 1.4-fold higher risk of dying before the age of 70, Yeh said. “This suggests that as survivors age, the elevated risk of dying declines and approximates general population levels,’’ Yeh said. “Our estimates are based on data for survivors treated 20 to 40 years ago. Patients who received treatment more recently may have more favorable outcomes.’’ For Related News and Information: To contact the reporter on this story: Nicole Ostrow in New York at nostrow1@bloomberg.net .

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Lisa Mirza Grotts: Customer Service Etiquette: How to Keep Your Customers Happy

April 4, 2010

Who doesn’t feel welcome at Disneyland? Walt Disney got it right when he said, “Do what you do so well that they will want to see it again and bring their friends.” If only life were as simple as a fairy-tale. Shirley Temple presented Walt Disney with his special Academy Award for Snow White and the Seven Dwarfs 1937. A good salesperson can sell anything, but keeping the customer coming back for more is the key to measuring success. These days, promotions galore are getting customers in the door, but are they repeat customers? Making a customer happy is not always easy, so what can we do to help? • Think Before You Speak. Keep your tone friendly, even if you’re having a bad day. • First Impressions Create Lasting Impressions. Begin and end every encounter on a positive note. • Be Polite. It takes a lot less energy to be kind, so remain professional at all times. This could make the difference keeping an unhappy customer from moving on to the competition. • Be Creative. Search for solutions the customer may not have considered. • Be Honest. If your customer has a problem that you can’t fix, tell them up front. Under-promise and over-deliver whenever possible. • Be Thorough. Follow through on all that you promise to deliver. Share the game plan with your customers and make sure you do everything you say. • Follow Up. Once you have solved a problem, make sure you follow up to ensure the customer is not just satisfied but pleased with the results. Exceed customer expectations. Think the Golden Rule when it comes to customer care: Treat others only in the way you want to be treated. Lisa Mirza Grotts is a recognized etiquette expert and the author of A Traveler’s Passport to Etiquette. She is a former director of protocol for the City & County of San Francisco and the founder of The AML Group, (www.AMLGroup.com) , certified etiquette and protocol consultants. Her clients range from Cornell University and Microsoft to Nordstrom and KPMG. She has been quoted by The Sunday Times, the San Francisco Business Journal, the Los Angeles Times, and USA Today. She has appeared on various radio and television stations, such as ABC, CBS, and Fox News. To learn more about Lisa, follow her on www.Facebook.com/LisaGrotts and www.Twitter.com/LisaGrotts.

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Darell Hammond: How to Boost Creativity, Productivity and Morale in the Workplace: Let Your Employees Play!

April 2, 2010

Do “work” and “play” always have to be mutually exclusive? Not in my book. As CEO of a nonprofit dedicated to saving play for our nation’s children and communities, I can’t lose sight of the fact that adults need to play, too! For us, instilling a sense of play into the organization helps fuel the passions of our employees and keeps us focused on our mission. If we don’t play ourselves, how can we expect to motivate others to do the same? That said, I think every organization would benefit by setting aside time for its employees to play (recess, so to speak), regardless of its focus or mission. Nancy Baptiste, an editor for Early Childhood Education Journal , points out: “… as adults we may not play enough. Just as children’s opportunities for play have eroded in our society (Elkind, 1988; Postman, 1982), so have opportunities for adult play (Elkind, 1988). Personal, family, employment, community, and societal stressors influence our lives in such a way that our disposition for pure, unadulterated play has diminished. Work and more work have replaced adult play.” But, you say, time is money! Play is for children! Why would we sacrifice valuable work hours for silly games? After all, we have stuff to do ! Actually, KaBOOM! employees report returning from “play time” feeling refreshed, invigorated and more productive — just as kids feel after recess, research suggests. They also say that play helps to deepen their sense of connection to their coworkers and increases workplace cohesion by temporarily flattening hierarchies. A culture of play won’t manifest itself overnight. It takes conscious effort and continuous nurturing — even here, in an organization that’s all about play! Top-level management must condone, and participate in, play activities, and employees at all levels must be able to help direct what these activities are. See some examples here . Don’t just take it from me — largely because of our deliberately playful culture, The NonProfit Times recently named KaBOOM! one of the top 50 nonprofits to work for in the United States. The senior management team and I celebrated the honor by donning chef’s hats and cooking up some eggs, pancakes and bacon for the staff: The collective wisdom out there is that play takes away from work. But if we instead abide by the philosophy that play contributes to work, we end up with employees who are happier, healthier and better able to rise to the high standards we set for ourselves. See our playful office in action here.

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Human Genome Mapping Payoff Disappoints Gene Scientists Ten Years Later

March 31, 2010

By Ellen Gibson March 31 (Bloomberg) — The time and money invested in genomic cancer studies has yielded only “modest” advances and is diverting funds from time-tested approaches for understanding disease, a leading gene scientist said. Ten years after the first survey of the human genome, the payoff is getting mixed reviews. Francis Collins , former head of the government program that mapped the genome’s sequence, praises the wealth of genetic data emerging. J. Craig Venter , who led a private push for the sequence, and Robert Weinberg , who found the first human cancer-causing gene, said information gained from genomic research so far doesn’t justify the cost. Their editorials are published today in the journal Nature . Genome projects, mostly designed to generate data, are taking funds from those designed to test ideas about the cause of cancer and its treatment, Weinberg said. It’s unclear whether the onslaught of genetic data has helped illuminate the biology underlying cancers or just added more complexity, Weinberg said. “There has not been an adequate critical examination of how useful some of these massive data-generating projects and technologies are,” Weinberg said in a phone interview yesterday. “The question is how much bang we’ve gotten for the buck, and from certain perspectives it’s been modest.” Citing advances in molecular and cellular biology, immunology and neurobiology, Weinberg argued in his editorial that hypothesis-driven science — the process of coming up with a theory and testing it in experiments — has served scientists well over the past half-century. No ‘Major Breakthroughs’ Genomic data has yet to yield “major breakthroughs” in our understanding of how a tumor develops or how many mutations are needed to cause one, said Weinberg, co-founder of the Whitehead Institute for Biomedical Research in Cambridge, Massachusetts. “These projects consume an enormous amount of resources and researchers’ energy,” said Weinberg. “The repercussions of major agencies shifting their funding allocations will be felt for a generation.” Collins contends that the amount of money funneled into large-scale genomic projects is probably about 1 percent of total biomedical research funding — a “tiny” portion, he said in a phone interview today. The National Human Genome Research Institute in Bethesda, Maryland receives about $500 million in annual funding, according to public records. For companies like San Diego-based Illumina and Life Technologies in Carlsbad, California, deciphering a person’s full genetic code takes about a day and costs $4,500 to $10,000. Rapid Sequencing Venter said he is impressed by the rapid improvements in sequencing tools, though feels that the technology is outpacing scientists’ ability to interpret the data for the benefit of patients. “Spending lots of money to generate huge data sets without any real effort to getting to new knowledge or understanding has been a huge frustration,” Venter said in a phone interview today. “It’s now easy with the new technology to generate a lot of different data, but there are very few groups or scientists generating knowledge out of this data. We’re at a frighteningly unsophisticated level of genome interpretation.” As the current head of the National Institutes of Health, Collins, who stood alongside then-president Bill Clinton in 2000 to announce the first draft of the human genome, is in a position to influence funding. In his editorial, he praises ambitious ventures like the Cancer Genome Atlas, which is analyzing tumors and blood samples from 20 types of cancer. Data-Harvesting Advantages “As the cost falls and evidence grows, there will be increasing merit in obtaining complete-genome sequences for each of us,” he wrote. As head of the publicly funded Human Genome Project, Collins raced with Venter and his for-profit company Celera Genomics to map the first human genome, which ended in a tie as announced at Clinton’s White House ceremony in 2000. Todd Golub , director of the cancer research program at the Broad Institute of MIT and Harvard in Cambridge, Massachusetts, disagrees with Weinberg’s take. “This large-scale, data- harvesting approach to biological research has significant advantages over conventional, experimental methods,” he said in a separate Nature editorial. Genome-based screening technologies are “providing a powerful new source of leads” about how cancer develops, he wrote. He offered the example of Novartis AG’s Gleevec, now the standard treatment for chronic myeloid leukemia . The key discovery about what drives this form of cancer came from comparing the genomes of tumor cells to normal cells, he said. Power of Genomics “The power of the genomic approach is you don’t have to be limited by what you already know,” Collins said. “You can survey all the DNA in a cancer cell and find out everything that made that good cell go bad.” Another genome-driven triumph, according to Golub, was the discovery of a new class of drugs for treating skin cancer. In 2002, DNA sequencing revealed that melanoma patients have frequent mutations in the BRAF gene. It was a “smoking gun,” but prior to that discovery, there had been no reason to suspect it, Golub said. Now Basel, Switzerland-based Roche AG and Berkeley-based Plexxikon Inc. have developed a BRAF-inhibiting drug that is in the last stage of testing needed for U.S. approval. These successes “didn’t come from our deep dissection of cancer biology pathways,” Golub said in a phone interview yesterday. “They came from unbiased surveys of the cancer genome. If you let the genetics speak for themselves, that gives you a very direct path to drug discovery.” Revealing Abnormalities Eventually genomic analysis will reveal the complete set of genetic abnormalities involved in cancer, Golub said. “That’s a great place to start, but to really have impact, we need to be able to manipulate those abnormal mechanisms,” Golub said. “At the moment, the conventional drug-discovery approach is not fully up to the task.” Collins agrees that the biggest challenge facing scientists is translating genetic insights into approved drugs — a long, failure-prone process, he said. “But it’s hardly fair to say that the fact that we haven’t cured cancer means it’s all a flop,” he said. To contact the reporters on this story: Ellen Gibson in New York at egibson9@bloomberg.net ;

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Bank Chief’s Fall From Grace Leaves Irish Taxpayer With $30 Billion Bill

March 31, 2010

By Dara Doyle April 1 (Bloomberg) — Sean Fitzpatrick was feted as Ireland’s top business person in 2002. Eight years later, the taxpayer is facing a $30 billion bill to salvage the bank he built and the authorities are asking questions. Dublin-based Anglo Irish Bank Corp. yesterday reported a loss of 12.7 billion euros ($17.2 billion) for the 15 months to the end of 2009. The bank may need 18.3 billion euros to survive, in addition to the 4 billion euros it got from the state in 2009, Finance Minister Brian Lenihan said on March 30. “It’s improbable that the Irish taxpayer will get anymore than a small fraction back,” said John Fitzgerald, an economist at the Economic and Social Research Institute in Dublin. “It’s impossible to see it being worth anything.” Few people personify the fall from grace of Ireland’s “Celtic tiger” economy more than Fitzpatrick. Under his stewardship, Anglo Irish bankrolled many of the property developers behind the building boom that drove economic growth to an average 6 percent in the first half of the decade. As property prices sank last year, the government seized control of the bank a month after Fitzpatrick resigned as chairman because he failed to disclose some borrowings to investors. “It’s reasonable to say Anglo was at the heart of the boom and bust,” said Karl Whelan , a professor at University College Dublin and a former economist at the Federal Reserve in Washington. “You can draw a line from aggressive lending practices in Anglo and what happened later during the boom.” ‘Irregularities’ Police officers quizzed Fitzpatrick, 61, on March 18 about “financial irregularities” at Anglo Irish before releasing him without charge. When contacted on his mobile phone yesterday, Fitzpatrick said he wasn’t able to comment. Fitzpatrick has denied any wrongdoing and said when resigning in December 2008 his activities “did not in any way breach banking or legal regulations.” He stepped down because some transactions “were inappropriate and unacceptable from a transparency point of view,” he said. Irish banks need 31.8 billion euros in new capital after “appalling” lending decisions left them on the brink of collapse, Lenihan said March 30. Fitzpatrick ran Anglo Irish for a quarter century before becoming chairman in 2005. He joined the bank in April 1974 because he was rejected for a loan for a house that cost 6,800 punts, the equivalent to $11,680, according to an interview published in the Irish Farmers Journal five years ago. “That was the only reason I joined the bank: to get a loan,” he told the publication. During his tenure, he transformed Anglo Irish into the country’s third-biggest bank from a 20-client operation by focusing on lending to business. The company’s shares soared more than 3,000 percent in the 10 years through 2006, 10 times the growth of the country’s benchmark ISEQ index. ‘Corporate McCarthyism’ In 2002, Fitzpatrick was named business person of the year by Dublin-based Business & Finance magazine. Five years later, he warned about the dangers of “corporate McCarthyism,” referring to the threat from overzealous regulators. At the same time, from its headquarters overlooking St. Stephen’s Green in Dublin’s heart, Anglo was building its exposure to real estate developers. The bank set aside 15.1 billion euros for risky loans, it said yesterday. Prices for malls and offices were down 56 percent in December from their peak in 2007, according to London-based Investment Property Databank Ltd. “There was a total failure of oversight by both the regulator and shareholders,” said Brian Lucey , associate professor of finance at Trinity College Dublin. “But when things are going well, no-one wants to raise concerns.” Borrowing Euros The surge in real-estate prices was fueled in part by Ireland’s entry into the euro area in 2000, which gave banks greater access to international money markets. Net borrowing overseas by Irish banks amounted to 10 percent of gross domestic product by 2003, and by 2008 the figure was more than 60 percent, according to Central Bank Governor Patrick Honohan . Anglo Irish’s strategy unraveled as credit dried up in the wake of the bankruptcy of Lehman Brothers Holdings Inc. in September 2008. Three months later, Fitzpatrick resigned after a public revelation that he obtained a series of loans from the bank that had previously not been disclosed to investors. Now, the taxpayer is left with the bill. The cost of the Anglo Irish bailout may run to 22.3 billion euros, equivalent to about 14 percent of the economy , based on sums the government has injected or pledged to inject since its collapse. Lenihan has said it would cost 30 billion euros to wind down the bank. Fitzpatrick foresaw some, if not, all the problems back in 2005, especially when it came to the Irish borrowing money to invest in property abroad. “Will it end in catastrophe?” Fitzpatrick said in the interview with the Farmers Journal . “Without question, there will be casualties and the banks may be part of that. Do I think it’s going to be wholesale? No I don’t.” To contact the reporter on this story: Dara Doyle in Dublin at ddoyle1@bloomberg.net

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Bank Chief’s Fall From Grace Leaves Irish Taxpayer With $30 Billion Bill

March 31, 2010

By Dara Doyle April 1 (Bloomberg) — Sean Fitzpatrick was feted as Ireland’s top business person in 2002. Eight years later, the taxpayer is facing a $30 billion bill to salvage the bank he built and the authorities are asking questions. Dublin-based Anglo Irish Bank Corp. yesterday reported a loss of 12.7 billion euros ($17.2 billion) for the 15 months to the end of 2009. The bank may need 18.3 billion euros to survive, in addition to the 4 billion euros it got from the state in 2009, Finance Minister Brian Lenihan said on March 30. “It’s improbable that the Irish taxpayer will get anymore than a small fraction back,” said John Fitzgerald, an economist at the Economic and Social Research Institute in Dublin. “It’s impossible to see it being worth anything.” Few people personify the fall from grace of Ireland’s “Celtic tiger” economy more than Fitzpatrick. Under his stewardship, Anglo Irish bankrolled many of the property developers behind the building boom that drove economic growth to an average 6 percent in the first half of the decade. As property prices sank last year, the government seized control of the bank a month after Fitzpatrick resigned as chairman because he failed to disclose some borrowings to investors. “It’s reasonable to say Anglo was at the heart of the boom and bust,” said Karl Whelan , a professor at University College Dublin and a former economist at the Federal Reserve in Washington. “You can draw a line from aggressive lending practices in Anglo and what happened later during the boom.” ‘Irregularities’ Police officers quizzed Fitzpatrick, 61, on March 18 about “financial irregularities” at Anglo Irish before releasing him without charge. When contacted on his mobile phone yesterday, Fitzpatrick said he wasn’t able to comment. Fitzpatrick has denied any wrongdoing and said when resigning in December 2008 his activities “did not in any way breach banking or legal regulations.” He stepped down because some transactions “were inappropriate and unacceptable from a transparency point of view,” he said. Irish banks need 31.8 billion euros in new capital after “appalling” lending decisions left them on the brink of collapse, Lenihan said March 30. Fitzpatrick ran Anglo Irish for a quarter century before becoming chairman in 2005. He joined the bank in April 1974 because he was rejected for a loan for a house that cost 6,800 punts, the equivalent to $11,680, according to an interview published in the Irish Farmers Journal five years ago. “That was the only reason I joined the bank: to get a loan,” he told the publication. During his tenure, he transformed Anglo Irish into the country’s third-biggest bank from a 20-client operation by focusing on lending to business. The company’s shares soared more than 3,000 percent in the 10 years through 2006, 10 times the growth of the country’s benchmark ISEQ index. ‘Corporate McCarthyism’ In 2002, Fitzpatrick was named business person of the year by Dublin-based Business & Finance magazine. Five years later, he warned about the dangers of “corporate McCarthyism,” referring to the threat from overzealous regulators. At the same time, from its headquarters overlooking St. Stephen’s Green in Dublin’s heart, Anglo was building its exposure to real estate developers. The bank set aside 15.1 billion euros for risky loans, it said yesterday. Prices for malls and offices were down 56 percent in December from their peak in 2007, according to London-based Investment Property Databank Ltd. “There was a total failure of oversight by both the regulator and shareholders,” said Brian Lucey , associate professor of finance at Trinity College Dublin. “But when things are going well, no-one wants to raise concerns.” Borrowing Euros The surge in real-estate prices was fueled in part by Ireland’s entry into the euro area in 2000, which gave banks greater access to international money markets. Net borrowing overseas by Irish banks amounted to 10 percent of gross domestic product by 2003, and by 2008 the figure was more than 60 percent, according to Central Bank Governor Patrick Honohan . Anglo Irish’s strategy unraveled as credit dried up in the wake of the bankruptcy of Lehman Brothers Holdings Inc. in September 2008. Three months later, Fitzpatrick resigned after a public revelation that he obtained a series of loans from the bank that had previously not been disclosed to investors. Now, the taxpayer is left with the bill. The cost of the Anglo Irish bailout may run to 22.3 billion euros, equivalent to about 14 percent of the economy , based on sums the government has injected or pledged to inject since its collapse. Lenihan has said it would cost 30 billion euros to wind down the bank. Fitzpatrick foresaw some, if not, all the problems back in 2005, especially when it came to the Irish borrowing money to invest in property abroad. “Will it end in catastrophe?” Fitzpatrick said in the interview with the Farmers Journal . “Without question, there will be casualties and the banks may be part of that. Do I think it’s going to be wholesale? No I don’t.” To contact the reporter on this story: Dara Doyle in Dublin at ddoyle1@bloomberg.net

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Dan Duncan Dead: Enterprise Products Co-Founder Dies At 77

March 29, 2010

Businessman Dan Duncan died last night at his home in Houston, Texas, at the age of 77. Duncan’s business Enterprise Products Partners LP, a natural gas and crude oil pipeline company, announced the news today in a statement. A cause of death was not listed. “The entire Enterprise family mourns the unexpected passing of Dan Duncan, who will truly be missed,” said Michael Creel, president and CEO of Enterprise Products. “Our thoughts and prayers are with his family.” Duncan is described by the Houston Business Journal as a “longtime oilman” and co-founder of Houston-based Enterprise in 1968. Forbes named Duncan named the richest person in the city of Houston in 2007 and the third richest person in Texas for the same year. More from the Associated Press: HOUSTON (AP) – Dan L. Duncan, a founder and the chairman of Enterprise Products Partners LP, died Sunday night at his home, the company said. Duncan was 77. Enterprise Products, Duncan Energy Partners LP and Enterprise GP Holdings LP issued a statement Monday saying Duncan would be missed. Duncan co-founded the company in 1968 and took it public 30 years later. The company said it did not plan to change ownership or management of the partnerships. Duncan is survived by his wife Jan, four children and four grandchildren.

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Euro Drops on Greece Bailout Concerns; Asian Stocks, Oil, Copper Decline

March 18, 2010

By James Poole March 18 (Bloomberg) — The euro weakened against the dollar and the yen for a second day on concern Greece won’t receive aid from the European Union next week and may need help from the International Monetary Fund. Asia stocks and oil fell. The euro dropped to $1.3667 per dollar as of 5:15 p.m. in Tokyo from $1.3738 yesterday in New York. The MSCI Asia Pacific Index lost 0.3 percent to 124.53, declining for the first time in three days. Standard & Poor’s 500 futures were down 0.3 percent. The Stoxx Euro 600 gave up 0.1 percent to 261.15 at 8:15 a.m. in London. Crude oil dropped 0.9 percent to $82.19 a barrel and copper slid 0.7 percent to $7,481 a metric ton. While Greek government proposals to reduce its deficit led S&P to affirm Greece’s investment-grade credit rating on March 16, the shift in Germany underscored the rift in the European Union as the global economy emerges from the worst slump since World War II. Michael Meister , the chief finance spokesman for German Chancellor Angela Merkel ’s party, said attempting a Greek rescue without the IMF “would be a very daring experiment.” “Fundamentally the euro will be undermined by the situation, even though there may not be a complete sovereign default by Greece,” said Derek Mumford , a Sydney-based senior consultant at HiFX, a foreign exchange risk management firm. “The euro-zone will have low growth and the euro will suffer.” The yen strengthened to 123.58 per euro in Tokyo from 124.06 yesterday in New York. The Japanese currency snapped a two-day drop against the Australian dollar after Chinese newspaper reports indicated the nation, the fastest-growing major economy, is trying to quash land and currency speculation. Risk Aversion “Worries over further monetary tightening in China and political discord within Europe over a rescue package for Greece are sparking risk aversion,” said Lee Wai Tuck , a currency strategist at Forecast Pte in Singapore. “This is leading to buying in the yen and the dollar and selling of the euro.” Greece may seek aid from the IMF over the April 2 to April 4 Easter weekend, Dow Jones said today, citing a senior Greek official it didn’t name. China has banned banks from lending to developers found to be hoarding land or holding back sales of apartments to wait for higher prices, the China Securities Journal said today, citing an unidentified source. Yuan forwards snapped a three-day decline after a trade group said the government is testing the ability of companies to withstand a stronger currency. China is conducting yuan stress tests for 12 industries, Zhang Wei , vice chairman of the China Council for the Promotion of International Trade, said at a briefing in Beijing today. The yuan’s 12-month forwards gained 0.1 percent to 6.6650. The contracts reflect bets the currency will strengthen 2.4 percent from the spot rate of 6.8264. Intervention Speculation Asian currencies declined from near their strongest levels since 2008 on speculation central banks will intervene to damp appreciation that may hurt exports. The South Korean won dropped 0.5 percent to 1,133.85 per dollar. Central banks intervene in the currency markets by arranging purchases or sales. “There’s some rumors that the Bank of Korea has been in the market,” said Gerrard Katz , head of foreign-exchange trading at Standard Chartered Plc in Hong Kong. “Fundamentals still point to a lower dollar against Asian currencies.” Credit risk is declining as Australia & New Zealand Banking Group Ltd., the third-largest bank in Australia, said domestic corporate lending was increasing for the first time in a year. The Markit iTraxx index for Japan and its Asia counterpart fell 1 basis point to the lowest level since the middle of January. More shares fell than gained on the MSCI Asia Pacific Index , which has advanced 3.4 percent this year. Japan’s Nikkei 225 Stock Average lost 1 percent, the biggest drop among major markets in Asia. Westfield, Mitsui Westfield Group, the world’s largest owner of shopping malls by market value, gained 2.2 percent in Sydney after Deutsche Bank AG upgraded the stock. Mitsui Fudosan Co. , Japan’s largest developer, dropped 2.4 percent after a downgrade from Morgan Stanley. A combination of record mutual fund inflows and the world’s fastest economic growth are failing to lift shares in the largest developing nations with valuations at the highest level versus advanced countries since at least 1995. Emerging-market stock funds lured $86.6 billion in the year through January, the most in 14 years of data , according to Cambridge, Massachusetts-based researcher EPFR Global. MSCI’s developing nation index slid 2.2 percent from this year’s peak on Jan. 11 and pared an 80 percent rally in the previous 12 months that sent its price-to-book ratio to a record 17 percent over the MSCI World Index, data compiled by Bloomberg show. Crude Oil, Copper Crude oil declined as the dollar gained and a government report showed fuel demand dropped and crude supplies rose in the U.S. The Organization of Petroleum Exporting Countries, supplier of about 40 percent of the world’s oil, agreed to keep its production limits unchanged for a fifth meeting. It cut quotas by a record 4.2 million barrels a day in late 2008 when global demand collapsed because of the recession. Copper for three-month delivery fell for the first time in three days. To contact the reporter for this story: James Poole in Singapore jpoole4@bloomberg.net ;

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Euro Drops on Greece Bailout Concerns; Asian Stocks, Oil, Copper Decline

March 18, 2010

By James Poole March 18 (Bloomberg) — The euro weakened against the dollar and the yen for a second day on concern Greece won’t receive aid from the European Union next week and may need help from the International Monetary Fund. Asia stocks and oil fell. The euro dropped to $1.3667 per dollar as of 5:15 p.m. in Tokyo from $1.3738 yesterday in New York. The MSCI Asia Pacific Index lost 0.3 percent to 124.53, declining for the first time in three days. Standard & Poor’s 500 futures were down 0.3 percent. The Stoxx Euro 600 gave up 0.1 percent to 261.15 at 8:15 a.m. in London. Crude oil dropped 0.9 percent to $82.19 a barrel and copper slid 0.7 percent to $7,481 a metric ton. While Greek government proposals to reduce its deficit led S&P to affirm Greece’s investment-grade credit rating on March 16, the shift in Germany underscored the rift in the European Union as the global economy emerges from the worst slump since World War II. Michael Meister , the chief finance spokesman for German Chancellor Angela Merkel ’s party, said attempting a Greek rescue without the IMF “would be a very daring experiment.” “Fundamentally the euro will be undermined by the situation, even though there may not be a complete sovereign default by Greece,” said Derek Mumford , a Sydney-based senior consultant at HiFX, a foreign exchange risk management firm. “The euro-zone will have low growth and the euro will suffer.” The yen strengthened to 123.58 per euro in Tokyo from 124.06 yesterday in New York. The Japanese currency snapped a two-day drop against the Australian dollar after Chinese newspaper reports indicated the nation, the fastest-growing major economy, is trying to quash land and currency speculation. Risk Aversion “Worries over further monetary tightening in China and political discord within Europe over a rescue package for Greece are sparking risk aversion,” said Lee Wai Tuck , a currency strategist at Forecast Pte in Singapore. “This is leading to buying in the yen and the dollar and selling of the euro.” Greece may seek aid from the IMF over the April 2 to April 4 Easter weekend, Dow Jones said today, citing a senior Greek official it didn’t name. China has banned banks from lending to developers found to be hoarding land or holding back sales of apartments to wait for higher prices, the China Securities Journal said today, citing an unidentified source. Yuan forwards snapped a three-day decline after a trade group said the government is testing the ability of companies to withstand a stronger currency. China is conducting yuan stress tests for 12 industries, Zhang Wei , vice chairman of the China Council for the Promotion of International Trade, said at a briefing in Beijing today. The yuan’s 12-month forwards gained 0.1 percent to 6.6650. The contracts reflect bets the currency will strengthen 2.4 percent from the spot rate of 6.8264. Intervention Speculation Asian currencies declined from near their strongest levels since 2008 on speculation central banks will intervene to damp appreciation that may hurt exports. The South Korean won dropped 0.5 percent to 1,133.85 per dollar. Central banks intervene in the currency markets by arranging purchases or sales. “There’s some rumors that the Bank of Korea has been in the market,” said Gerrard Katz , head of foreign-exchange trading at Standard Chartered Plc in Hong Kong. “Fundamentals still point to a lower dollar against Asian currencies.” Credit risk is declining as Australia & New Zealand Banking Group Ltd., the third-largest bank in Australia, said domestic corporate lending was increasing for the first time in a year. The Markit iTraxx index for Japan and its Asia counterpart fell 1 basis point to the lowest level since the middle of January. More shares fell than gained on the MSCI Asia Pacific Index , which has advanced 3.4 percent this year. Japan’s Nikkei 225 Stock Average lost 1 percent, the biggest drop among major markets in Asia. Westfield, Mitsui Westfield Group, the world’s largest owner of shopping malls by market value, gained 2.2 percent in Sydney after Deutsche Bank AG upgraded the stock. Mitsui Fudosan Co. , Japan’s largest developer, dropped 2.4 percent after a downgrade from Morgan Stanley. A combination of record mutual fund inflows and the world’s fastest economic growth are failing to lift shares in the largest developing nations with valuations at the highest level versus advanced countries since at least 1995. Emerging-market stock funds lured $86.6 billion in the year through January, the most in 14 years of data , according to Cambridge, Massachusetts-based researcher EPFR Global. MSCI’s developing nation index slid 2.2 percent from this year’s peak on Jan. 11 and pared an 80 percent rally in the previous 12 months that sent its price-to-book ratio to a record 17 percent over the MSCI World Index, data compiled by Bloomberg show. Crude Oil, Copper Crude oil declined as the dollar gained and a government report showed fuel demand dropped and crude supplies rose in the U.S. The Organization of Petroleum Exporting Countries, supplier of about 40 percent of the world’s oil, agreed to keep its production limits unchanged for a fifth meeting. It cut quotas by a record 4.2 million barrels a day in late 2008 when global demand collapsed because of the recession. Copper for three-month delivery fell for the first time in three days. To contact the reporter for this story: James Poole in Singapore jpoole4@bloomberg.net ;

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Feldstein Sees Greek Euro-Exit Pressure as Plan Fails

March 17, 2010

By Simon Kennedy March 17 (Bloomberg) — Harvard University Professor Martin Feldstein , who warned almost two decades ago that the euro would prove an “economic liability,” said Greece’s austerity plan will fail and the country may quit the single currency to fix its fiscal crisis. Under pressure from investors and fellow policy makers, Prime Minister George Papandreou ’s government is striving to knock four percentage points off its budget gap this year from 12.7 percent of gross domestic product and has vowed to meet the EU’s 3 percent limit in 2012 for the first time since 2006. “The idea that Greece can go from a 12 percent deficit now to a 3 percent deficit two years from now seems fantasy,” Feldstein, an adviser to U.S. presidents since Ronald Reagan , said in a March 13 interview in Geneva. “The alternatives are to default in some way or to leave, or both.” His diagnosis clashes with that of European Central Bank President Jean-Claude Trichet , who calls Greece’s strategy “convincing” and rejects as “absurd” any speculation it might leave the euro zone. Investors nevertheless aren’t ruling out Feldstein’s analysis. Billionaire George Soros said last month that the euro “may not survive,” and credit default swaps indicate a 22 percent chance Greece will default within five years, up from 16 percent a year ago. Latest Broadside The judgment of Feldstein, 70, a former contender to chair the Federal Reserve, marks his latest broadside against the single currency five years after he said its rules generated a “very strong bias toward large chronic fiscal deficits” and more than a year since he first suggested the 16-nation bloc may splinter. He “has more reason to think he’s right than five years ago, and it’s natural to talk about limitations,” said Philip Lane , an economics professor at Trinity College Dublin. “But the euro area will absolutely not break up.” Greek workers disrupted transportation services and tried to storm parliament on March 5 as lawmakers passed 4.8 billion euros ($6.6 billion) of extra deficit reductions, including lower wages for public employees. Such cutbacks will continue to run into resistance as unemployment is propelled above December’s 10.2 percent and recent declines in the country’s bond yields are tied to cheerleading by European policy makers, Feldstein said. ‘Polite Way’ Greece’s 10-year bond yielded 6.12 percent at 12:25 p.m. in London today, more than a percentage point lower than Jan. 28 . The premium investors demand to hold the bonds over their German equivalents narrowed to 298 basis points from 396 basis points in the same period. Greece will ultimately need to mull alternative ways to tackle its crisis, possibly by finding a “polite way” to default, Feldstein said. That might include persuading investors to swap maturing bonds for longer-term assets at lower interest rates. Another option would be leaving the euro area to devalue and then returning once the fiscal weaknesses are solved. “I don’t know that there’s a good solution to this problem,” Feldstein said. Pulling out and re-entering is impractical and gives other countries an excuse not to restrain deficits and improve their competitiveness within the euro zone, said Charles Wyplosz , a former student of Feldstein’s and director of the International Center for Monetary and Banking Studies in Geneva. While leaving the bloc and devaluing its currency would likely enable Greece to boost exports , the so-called holiday strategy would also require spending cuts, lower real wages and tax increases, Feldstein said. Belt-Tightening “Put all that together, and it doesn’t look like countries are going to eagerly line up to do it,” he said. European governments this week laid the groundwork for a financial lifeline to Greece that would provide emergency loans if needed, breaking a taboo against aid to cash-strapped nations to avert a deeper crisis for the euro. Standard & Poor’s yesterday removed Greece from “creditwatch negative,” lowering the threat of a further credit-rating cut. Greece has a BBB+ rating after S&P downgraded it from A- in December. While a bailout would be a “relatively painless solution,” Feldstein said it would generate opposition among voters and risk other nations demanding similar assistance. Feldstein’s opinions command attention because of his career at the hearts of both academia and politics. This experience catapulted him to the brink of the Fed chairmanship five years ago before President George W. Bush picked Ben S. Bernanke . Counseled Presidents Feldstein received the John Bates Clark Medal in 1977 as the U.S. economist under the age of 40 who made the most significant contribution to economic thought and knowledge, then ran the National Bureau of Economic Research , arbiter of U.S. business cycles, for most of the next 30 years until 2008. He chaired Reagan’s Council of Economic Advisers , counseled Bush’s White House campaign and now sits on President Barack Obama ’s Economic Recovery Advisory Board . Among his former students are Lawrence Summers and Lawrence Lindsey , the current and former directors of the White House’s National Economic Council . “Marty’s a very important economist,” said Glenn Hubbard , dean of Columbia University’s Graduate School of Business in New York, who was also taught by Feldstein and chaired Bush’s Council of Economic Advisers. “He’s a great scholar, but what distinguishes him is that his ideas have practical impact, too.” ‘EMU and War’ As long ago as June 1992, Feldstein wrote in the Economist that “economic analysis” didn’t justify a single European currency. In his most-famous contribution to the debate, he wrote in Foreign Affairs in 1997 that “war within Europe itself would be abhorrent but not impossible” under the euro. Many economists read his comment ahead of the birth of Economic and Monetary Union as a forecast that war would break out. Feldstein denies that, saying an editor wrote the headline — “EMU and War” — and he was arguing that the euro wasn’t a guarantee against such a conflict and might fan cross-border political differences. While Feldstein says he likes Trichet “a lot and I think it’s mutual,” he notes the ECB president often points out that skeptics doubted the euro would exist or last. “You don’t find any of that in my writings,” he said. Even so, Lars Jonung, an adviser to the European Commission in Brussels and co-author of a January paper on how American economists viewed the euro through the 1990s, says Feldstein is a “consistent pessimist, and so far he’s been proved wrong.” Well-Established The currency is well-established and hasn’t sparked political turmoil, trade has increased and inflation differentials in the euro area are similar to those for U.S. states, Jonung said in his Econ Journal Watch study . Greece’s measures and the response of EU governments will eventually strengthen monetary union, he added. Feldstein counters that global growth during the currency’s first decade helped mask its flaws, such as the mismatch of spreading uniform interest and exchange rates over diverse economies that lack fiscal discipline. His criticism doesn’t stop him from predicting the euro will appreciate against the dollar as investors punish the U.S. trade imbalance. The euro has fallen about 4 percent against the U.S. currency this year and traded at $1.38 today. Feldstein turned his attention to the implications of the euro for budgets in 2005, when he said a decision by the euro’s members to ease fiscal curbs left the “way open to much larger sustained deficits.” By November 2008, he was writing that diverging bond yields within the region signaled investors “regard a breakup as a real possibility.” ‘Testing Time’ Two months later, as the euro marked its 10th anniversary, Feldstein told the American Economic Association the currency faced an “important testing time” and countries may ultimately leave it to regain control of their economies. “American economists such as Marty have been proved wrong for a decade and will be proved wrong for the next decade,” said Wyplosz, who predicts that a Greece exit would trigger a “total collapse of the Greek economy.” Feldstein stands by his analysis that it’s not “unthinkable” some countries may choose life outside the euro area. Leaving is “certainly possible, and in part it can happen even if all the economic advice to a government is, ‘You shouldn’t do this,’” he said. “Politicians don’t always listen to their economists.” To contact the reporter on this story: Simon Kennedy in Paris at skennedy4@bloomberg.net

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Feldstein Sees Greece Euro-Exit Pressure as Government Deficit Plan Fails

March 16, 2010

By Simon Kennedy March 17 (Bloomberg) — Harvard University Professor Martin Feldstein , who warned almost two decades ago that the euro would prove an “economic liability,” said Greece’s austerity plan will fail and the country may quit the single currency to fix its fiscal crisis. Under pressure from investors and fellow policy makers, Prime Minister George Papandreou ’s government is striving to knock four percentage points off its budget gap this year from 12.7 percent of gross domestic product and has vowed to meet the EU’s 3 percent limit in 2012 for the first time since 2006. “The idea that Greece can go from a 12 percent deficit now to a 3 percent deficit two years from now seems fantasy,” Feldstein, an adviser to U.S. presidents since Ronald Reagan , said in a March 13 interview in Geneva. “The alternatives are to default in some way or to leave, or both.” His diagnosis clashes with that of European Central Bank President Jean-Claude Trichet , who calls Greece’s strategy “convincing” and rejects as “absurd” any speculation it might leave the euro zone. Investors nevertheless aren’t ruling out Feldstein’s analysis. Billionaire George Soros said last month that the euro “may not survive,” and credit default swaps indicate a 22 percent chance Greece will default within five years, up from 16 percent a year ago. The judgment of Feldstein, 70, a former contender to chair the Federal Reserve, marks his latest broadside against the single currency five years after he said its rules generated a “very strong bias toward large chronic fiscal deficits” and more than a year since he first suggested the 16-nation bloc may splinter. ‘Absolutely’ Won’t Break Up He “has more reason to think he’s right than five years ago, and it’s natural to talk about limitations,” said Philip Lane , an economics professor at Trinity College Dublin. “But the euro area will absolutely not break up.” Greek workers disrupted transportation services and tried to storm parliament on March 5 as lawmakers passed 4.8 billion euros ($6.6 billion) of extra deficit reductions, including lower wages for public employees. Such cutbacks will continue to run into resistance as unemployment is propelled above December’s 10.2 percent and recent declines in the country’s bond yields are tied to cheerleading by European policy makers, Feldstein said. Greece’s 10-year bond yielded 6.16 percent as of 4:57 p.m. yesterday in London, a percentage point lower than Jan. 28 . The premium investors demand to hold the bonds over their German equivalents narrowed to 297 basis points from 396 basis points. ‘Polite Way’ Greece will ultimately need to mull alternative ways to tackle its crisis, possibly by finding a “polite way” to default, Feldstein said. That might include persuading investors to swap maturing bonds for longer-term assets at lower interest rates. Another option would be leaving the euro area to devalue and then returning once the fiscal weaknesses are solved. “I don’t know that there’s a good solution to this problem,” Feldstein said. Pulling out and re-entering is impractical and gives other countries an excuse not to restrain deficits and improve their competitiveness within the euro zone, said Charles Wyplosz , a former student of Feldstein’s and director of the International Center for Monetary and Banking Studies in Geneva. While leaving the bloc and devaluing its currency would likely enable Greece to boost exports , the so-called holiday strategy would also require spending cuts, lower real wages and tax increases, Feldstein said. “Put all that together, and it doesn’t look like countries are going to eagerly line up to do it,” he said. Belt-Tightening European governments this week laid the groundwork for a financial lifeline to Greece that would provide emergency loans if needed, breaking a taboo against aid to cash-strapped nations to avert a deeper crisis for the euro. Standard & Poor’s yesterday removed Greece from “creditwatch negative,” lowering the threat of a further credit-rating cut. Greece has a BBB+ rating after S&P downgraded it from A- in December. While a bailout would be a “relatively painless solution,” Feldstein said it would generate opposition among voters and risk other nations demanding similar assistance. Feldstein’s opinions command attention because of his career at the hearts of both academia and politics. This experience catapulted him to the brink of the Fed chairmanship five years ago before President George W. Bush picked Ben S. Bernanke . Feldstein received the John Bates Clark Medal in 1977 as the U.S. economist under the age of 40 who made the most significant contribution to economic thought and knowledge, then ran the National Bureau of Economic Research , arbiter of U.S. business cycles, for most of the next 30 years until 2008. Former Students He chaired Reagan’s Council of Economic Advisers , counseled Bush’s White House campaign and now sits on President Barack Obama ’s Economic Recovery Advisory Board . Among his former students are Lawrence Summers and Lawrence Lindsey , the current and former directors of the White House’s National Economic Council . “Marty’s a very important economist,” said Glenn Hubbard , dean of Columbia University’s Graduate School of Business in New York, who was also taught by Feldstein and chaired Bush’s Council of Economic Advisers. “He’s a great scholar, but what distinguishes him is that his ideas have practical impact, too.” As long ago as June 1992, Feldstein wrote in the Economist that “economic analysis” didn’t justify a single European currency. In his most-famous contribution to the debate, he wrote in Foreign Affairs in 1997 that “war within Europe itself would be abhorrent but not impossible” under the euro. ‘EMU and War’ Many economists read his comment ahead of the birth of Economic and Monetary Union as a forecast that war would break out. Feldstein denies that, saying an editor wrote the headline — “EMU and War” — and he was arguing that the euro wasn’t a guarantee against such a conflict and might fan cross-border political differences. While Feldstein says he likes Trichet “a lot and I think it’s mutual,” he notes the ECB president often points out that skeptics doubted the euro would exist or last. “You don’t find any of that in my writings,” he said. Even so, Lars Jonung, an adviser to the European Commission in Brussels and co-author of a January paper on how American economists viewed the euro through the 1990s, says Feldstein is a “consistent pessimist, and so far he’s been proved wrong.” Well-Established The currency is well-established and hasn’t sparked political turmoil, trade has increased and inflation differentials in the euro area are similar to those for U.S. states, Jonung said in his Econ Journal Watch study . Greece’s measures and the response of EU governments will eventually strengthen monetary union, he added. Feldstein counters that global growth during the currency’s first decade helped mask its flaws, such as the mismatch of spreading uniform interest and exchange rates over diverse economies that lack fiscal discipline. His criticism doesn’t stop him from predicting the euro will appreciate against the dollar as investors punish the U.S. trade imbalance. The euro has fallen about 4 percent against the U.S. currency this year and traded at $1.37 yesterday. Feldstein turned his attention to the implications of the euro for budgets in 2005, when he said a decision by the euro’s members to ease fiscal curbs left the “way open to much larger sustained deficits.” By November 2008, he was writing that diverging bond yields within the region signaled investors “regard a breakup as a real possibility.” Two months later, as the euro marked its 10th anniversary, Feldstein told the American Economic Association the currency faced an “important testing time” and countries may ultimately leave it to regain control of their economies. ‘Proved Wrong’ “American economists such as Marty have been proved wrong for a decade and will be proved wrong for the next decade,” said Wyplosz, who predicts that a Greece exit would trigger a “total collapse of the Greek economy.” Feldstein stands by his analysis that it’s not “unthinkable” some countries may choose life outside the euro area. Leaving is “certainly possible, and in part it can happen even if all the economic advice to a government is, ‘You shouldn’t do this,’” he said. “Politicians don’t always listen to their economists.” To contact the reporter on this story: Simon Kennedy in Paris at skennedy4@bloomberg.net

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Prius Recall: Runaway Prius Story Of Owner James Sikes’ Questioned In New Report

March 13, 2010

SAN DIEGO — Investigators with Toyota Motor Corp. and the federal government were unable to make a Toyota Prius speed out of control as its owner said it did on a California freeway, according to a memorandum obtained Saturday by The Associated Press that a congressional spokesman says casts doubt on the driver’s story. James Sikes, 61, called 911 on Monday to report losing control of his Prius as the hybrid reached speeds of 94 mph. A California Highway Patrol officer helped Sikes bring the vehicle to a safe stop on Interstate 8 near San Diego. Federal and Toyota investigators who examined and test drove the car could not replicate the problems Sikes said he encountered, the memo said. The findings raise questions about “the credibility of Mr. Sikes’ reporting of events,” said Kurt Bardella, a spokesman for California Rep. Darrell Issa, the top Republican on the House Oversight Committee that is looking into the incident. Sikes could not be reached to comment. However, his wife, Patty Sikes, said he stands by his story. “Everyone can just leave us alone,” she said. “Jim didn’t get hurt. There’s no intent at all to sue Toyota. If any good can come out of this, maybe they can find out what happened so other people don’t get killed.” Mrs. Sikes said the couple’s lives have been turned upside down since Monday and they are getting death threats. “We’re just fed up with all of it,” she said. “Our careers are ruined and life is just not good anymore.” Monday’s incident appeared to be another blow to Toyota, which has had to fend off intense public backlash over safety after recalls of some 8.5 million vehicles worldwide – more than 6 million in the United States – because of acceleration and floor mat problems in multiple models and braking issues in the Prius. Regulators have linked 52 deaths to crashes allegedly caused by accelerator problems. During two hours of test drives Thursday, technicians with Toyota and the National Highway Traffic Safety Administration failed to duplicate the same experience that Sikes described, according to the memo prepared for the Oversight Committee. “It does not appear to be feasibly possible, both electronically and mechanically that his gas pedal was stuck to the floor and he was slamming on the brake at the same time,” the memo stated. The brakes on the Prius also did not show wear consistent with having been applied at full force at high speeds for a long period, the Wall Street Journal reported Saturday, citing three people familiar with the probe, whom it did not name. The newspaper said the brakes may have been applied intermittently. Toyota Corp. spokesman Mike Michels declined to confirm the Journal’s report. He said the investigation was continuing and the company planned to release technical findings soon. Michels said the hybrid braking system in the Prius would make the engine lose power if the brakes and accelerator were pressed at the same time. Transportation Department spokeswoman Jill Zuckman said investigators “are still reviewing data and have not reached any conclusions.” Sikes called 911 from the freeway on Monday and reported that his gas pedal was stuck and he could not slow down. In two calls that spanned 23 minutes, a dispatcher repeatedly told him to throw the car into neutral and turn it off. Sikes later said he had put down the phone to keep both hands on the wheel and was afraid the car would flip if he put it in neutral at such high speed. The officer – who eventually pulled alongside the car and told Sikes over a loudspeaker to push the brake pedal to the floor and apply the emergency brake – said Sikes braking coincided with a steep incline on the freeway. Once the car slowed to 50 mph, Sikes shut off the engine, the officer said. The memorandum obtained by The AP said when investigators placed the Prius up on a lift, they found the driver side front wheel well was dislodged and the brake pads were worn down. “Visually checking the brake pads and rotor it was clearly visible that there was nothing left,” the memo said. Drivers of two other Toyota vehicles that crashed last week said those incidents also resulted from the vehicles accelerating suddenly. NHTSA is sending experts to a New York City suburb where the driver of a 2005 Prius said she crashed into a stone wall Monday after the car accelerated on its own. And in Fort Wayne, Indiana, the driver of a 2007 Lexus said it careened through a parking lot and crashed into a light pole Thursday after its accelerator suddenly dropped to the floor. That car was the subject of a floor mat recall. Driver Myrna Cook of Paulding, Ohio, said it had been repaired. ___ Thomas reported from Washington, D.C.

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HIV Discoverer Criticizes Singapore for Lack of Free Testing, Treatment

March 4, 2010

By Simeon Bennett March 5 (Bloomberg) — The lack of free testing and treatment for HIV in Singapore is hindering progress on controlling the spread of the virus in the city-state, said Francoise Barre-Sinoussi , winner of the 2008 Nobel Prize in Medicine for her co-discovery of the virus that causes AIDS. “The stigma, the fact that they have to pay for everything, it’s the worst conditions for stimulating people to be tested and treated,” Barre-Sinoussi, 62, said in an interview at the French embassy in Singapore today. “The numbers they announce are probably much lower than the numbers they have.” New HIV infections in the nation of 4.6 million people rose to 456 in 2008 from 242 in 2003, according to the health ministry. In France, which has 64 million people, new cases fell to 6,940 from 8,930 over the same period, data presented at an AIDS conference last month show. Singapore’s government has opened more anonymous testing clinics, boosted HIV education programs and produced a soap opera to curb new infections of HIV, which have doubled in the past 10 years, even as the spread of the virus slows in neighboring Malaysia and Thailand. Treatment can cost as much as S$1,500 ($1,073) a month in Singapore, said Stuart Koe, chief executive officer of Fridae.com , Asia’s largest gay Web site. The government said in January it would subsidize HIV treatment for patients who can’t afford it. An anonymous HIV test costs S$30, according to the Web site of Action for AIDS, which runs Singapore’s biggest anonymous testing clinic. ‘Difficult to Accept’ “Coming from a country where everything is free, it’s difficult to accept,” Barre-Sinoussi said. “The situation is even worse than in developing countries not far from here. In Cambodia, everything is free.” HIV-AIDS is the world’s deadliest infectious disease . About 33 million people were living with HIV, 2.7 million were newly infected with the virus and 2 million people died with AIDS in 2008, according to the latest World Health Organization estimates. Barre-Sinoussi is director of the Regulation of Retroviral Infections Unit at the Institut Pasteur in Paris. In 1983 she co-wrote a report with Luc Montagnier in the journal Science that detailed the discovery of the pathogen that later became known as human immunodeficiency virus, or HIV. To contact the reporter on this story: Simeon Bennett in Singapore at sbennett9@bloomberg.net

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Alzheimer’s Theory on Brain Material May Shift by Benefit Found in Study

March 2, 2010

By Michelle Fay Cortez March 3 (Bloomberg) — Beta amyloid that builds up in the brains of patients with Alzheimer’s disease may go along with beneficial antimicrobial activity, researchers said. The findings from investigators at Massachusetts General Hospital raise the possibility that some cases of Alzheimer’s may stem from chronic, undetected brain infections. The results also cast doubt on the pharmaceutical industry’s efforts to find drugs to wipe out beta amyloid from the brain, one of the main methods now in development to fight the most common form of dementia in the elderly, the researchers said. Beta amyloid, or abeta, remains harmful in high concentrations, they said. “Most people think abeta is junk,” a toxic byproduct of other activity in the brain, said Rudolph Tanzi , director of genetics and aging at Massachusetts General’s Institute for Neurodegenerative Disease . “This says tread carefully. It may play a normal, essential role in the brain and be part of the way the brain protects itself.” Laboratory tests showed beta amyloid inhibited the growth of eight organisms, including the yeast Candida albicans , which can cause thrush, and bacteria such as Listeria, Staphylococcus and Streptococcus, according to a report in the journal PLoS One . Tissue taken from the brains of patients with Alzheimer’s disease suppressed Candida, while samples from people without it didn’t, the researchers said. They theorize that beta amyloid is an antimicrobial peptide, a natural part of the innate immune system found in plants, animals and the human brain. Antimicrobial peptides are the first line of defense against pathogens in the immune system, which may go awry in Alzheimer’s patients, they said. ‘Big Question’ “The big question is what is most often triggering the innate immune system in the elderly that are the most at risk for Alzheimer’s disease,” Tanzi said in a telephone interview. “Perhaps as we age, there may be unnoticed low-grade infections that are triggering the innate immune system to produce beta amyloid.” Johnson & Johnson , based in New Brunswick, New Jersey, Merck & Co., based in Whitehouse Station, New Jersey, Ireland’s Elan Corp. , New York-based Pfizer Inc. and Eli Lilly & Co. of Indianapolis are working on Alzheimer’s disease drugs that target beta amyloid. Alzheimer’s is a progressive disease that starts with mild forgetfulness and eventually robs patients of memories and independence. It afflicts 30 million people worldwide, a number that may exceed 100 million by 2050, according to Alzheimer’s Disease International, an advocacy group based in London. Short-Term Benefit Robert Moir , from Massachusetts General’s genetics and aging research unit and a senior author of the paper with Tanzi, compared beta amyloid to a fever. While both are bad for the patient, they are worse for bugs causing an infection, he said. A little bit is good for the patient, a lot of it may be helpful for a short period, while a lot of it for long periods is dangerous, he said in a telephone interview. “We really need to be thinking about what causes the amyloid beta to go up in the first place,” he said. “If it is a response to an infection, then by treating the infection you can treat the disease.” While the concept is surprising, it fits with existing knowledge, said Samuel Gandy , associate director of Mount Sinai School of Medicine’s Alzheimer’s Disease Research Center in New York. It gives researchers a new angle to approach Alzheimer’s and should be easy to test in animal models, he said. Additional research is under way, Tanzi and Moir said. “In the field, the concept that amyloid beta isn’t just pathological is heretical,” Moir said. “It’s my hope that this study will start people thinking about this much more than they have, rather than just being obsessively focused on reducing amyloid beta.” To contact the reporter on this story: Michelle Fay Cortez in London at mcortez@bloomberg.net

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Aspirin Doesn’t Prevent Heart Attacks in Those With No Symptoms

March 2, 2010

By Nicole Ostrow March 2 (Bloomberg) — Aspirin doesn’t prevent heart attacks or strokes in people who have a high risk of heart disease yet show no symptoms, a study in Scotland found. Half of the 3,350 people in the study were given low-dose aspirin after a screening test showed they had a higher-than- average risk for heart disease. They had a similar number of heart attacks and strokes to the other half of participants taking a placebo, researchers reported today in the Journal of the American Medical Association . The study is the first to look at an apparently healthy population, screen them for their heart disease risk using a test that detects artery blockages in their legs and then try to reduce that with aspirin, lead author F. Gerald Fowkes said. Aspirin has been shown to lower heart attacks in people who have symptoms of heart disease, and more studies are needed to find a way to prevent cardiovascular problems in people who have a high risk and no symptoms, he said. “One of the problems we have with coronary heart disease and stroke is we’re still not that good at preventing it in people who are supposedly healthy,” said Fowkes, a professor of epidemiology at the University of Edinburgh, in a telephone interview today. “We’ve not cracked that. This was an opportunity to pick people who are at increased risk and try to target a new population to try to prevent getting a heart attack or stroke.” Alternative Drugs Research is needed to see if Pfizer Inc. ’s Lipitor and AstraZeneca Plc ’s Crestor, two cholesterol-lowering drugs called statins, work in these patients to reduce their risk of heart attack or stroke, Fowkes said. Another approach is to test whether Bristol Myers Squibb Co. ’s Plavix, an anti-clotting drug, works in this group. More than 81 million people in the U.S. have one or more forms of cardiovascular disease, including coronary artery disease, high blood pressure and chest pain, according to the American Heart Association. It is the leading cause of death in the U.S. Aspirin helps prevent clots from forming in the arteries and has been shown to be effective in people who have symptoms of heart disease, said Jeffrey Berger , an assistant professor of medicine and surgery at New York University, who wrote an accompanying editorial in the journal. Right Population “I still think aspirin is a very effective drug,” Berger said in a telephone interview today. “We just have to find the right population to do it in for prevention of first heart attack or stroke.” Fowkes said he isn’t sure why aspirin didn’t appear to work in the study. It may be that the trial wasn’t large enough to detect a difference or people didn’t continue taking their aspirin, he said. The study included 3,350 people who had a low score on a test called the Ankle Brachial Index . The test measures blood pressure at the ankle compared with pressure in the arm. It is used to determine if someone has peripheral artery disease, or blocked arteries in their legs and other parts of the body, which increases the risk of heart attack and stroke. Eight Years Those in the study were randomly assigned to receive either a low-dose, 100 milligram aspirin tablet or a placebo. They were followed for about eight years. The researchers found that 181 people, or 10.8 percent, of the aspirin group and 176 people, or 10.5 percent, of the placebo group had a heart attack or stroke. Today’s study, was sponsored in part by the British Heart Foundation and Bayer AG, maker of a low-dose aspirin for cardiac health. Future trials should help identify patients who have increased levels of blood platelets, Berger said. Doctors know they have a higher risk for heart disease. Such research may determine if aspirin therapy decreases heart attacks and strokes by reducing those platelet levels, he said. For Related News and Information: To contact the reporter on this story: Nicole Ostrow in New York at nostrow1@bloomberg.net .

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Sports Death Risk Found in Harvard Athletes by $88 Test for Heart Ailment

March 1, 2010

By Tom Randall March 1 (Bloomberg) — Heart defects that can cause otherwise healthy athletes to die while playing in basketball and football games were detected in Harvard University athletes using a common $88 test. The tests, known as electrocardiography or ECG, were given to 510 Harvard athletes in addition to their standard physicals, according to a study published today by the Annals of Internal Medicine. The added tests identified two players who were deemed healthy in typical examinations despite having dangerous defects that should bar them from competition. Scientists in three articles debated the merits of routine ECG tests for athletes. Genetic heart defects caused the courtside deaths of Hank Gathers , an All-America 23-year-old basketball forward at Loyola Marymount University in Los Angeles, and Reggie Lewis , a 27- year-old All Star guard for the Boston Celtics of the National Basketball Association. Such defects are the top cause of sudden death in sports, killing 1 of every 220,000 young athletes each year, according to previous studies. “Screening limited to medical history and physical examination fails to identify a significant percentage of athletes with increased risk,” wrote authors led by Aaron Baggish , a cardiology researcher and clinical instructor at Harvard Medical School and Massachusetts General Hospital in Boston. Still, he said, “our results may not end the complicated debate.” The biggest drawback to the tests was the number of young athletes who were incorrectly identified as having a risk, the Harvard researchers said. The rate of so-called false positives tripled to 17 percent for ECG-tested patients, compared with 5.5 percent under normal screening. Expensive Follow-Up False readings require expensive follow-up tests and “would unavoidably promote inappropriate disqualifications, unnecessary anxiety, and possibly chaos in a national program,” said Barry Maron , director of the Hypertrophic Cardiomyopathy Center of the Minneapolis Heart Institute Foundation, in an editorial published today with the study. Loyola’s Gathers collapsed and died after scoring in a tournament game in 1990, and the Celtics’ Lewis died during practice in 1993. Both deaths were blamed on a detectable heart defect, prompting some doctors to call for expanded testing. The defect, hypertrophic cardiomyopathy, is the most common cause of sudden fatalities in young athletes according to a study last year in the journal Circulation. Cardiomyopathy causes some areas of the heart to harden, forcing muscles to work harder and sometimes causing dangerous rhythms, according to the National Institutes of Health in Bethesda, Maryland. The risk from such hardening often goes undiagnosed until someone faints or dies during exercise. Test Procedure In an ECG, 10 electrodes are attached with sticky circles to a patient’s arms, legs and chest. The electrodes monitor pulses of electricity that flash through a beating heart as the muscles constrict and pump blood. The readings detect unusual patterns that may indicate a birth defect or diseased heart. The American Heart Association doesn’t endorse mandatory sports testing with ECG, though some colleges have begun screening on their own, according to today’s report. Italy adopted mandatory ECG testing in the 1980s, a policy that has reduced sudden deaths by almost 90 percent, according to previous studies. Routine ECG screening in the U.S. would cost about $88 per athlete, or about $42,900 for each year of life saved, according to a separate study by Stanford University researchers, also published in the Annals today. The Stanford study relied on data collected from Italy’s program, adjusting the model to reflect higher expenses and lower rates of defects in the U.S. The study estimates screening a population of 3.7 million competitive athletes in the U.S. Cost Evaluation Procedures costing less than $100,000 for each year saved, also known as Quality-Adjusted Life Year, or QUALY, are usually considered “a good deal,” according to William Schaffner , chairman of the department of preventive medicine at Vanderbilt University in Nashville Tennessee. In the Harvard study, heart abnormalities that could affect sports participation were detected in 2.2 percent of the study population. A routine physical and family history consultation detected the risk in 5 patients. ECG testing found 5 additional patients with abnormalities. Additional testing using cardiac ultrasound, a sensitive scanning tool that gives a definitive diagnosis, found that three students had sufficient risk to bar them from competitive exercise. Only one of the highest-risk patients was detected by standard screening methods. Previous studies have suggested that monitoring the heart’s activity should be more widely used to save lives. An Italian study of more than 30,000 athletes, published in the British Medical Journal in 2008, found 159 patients were disqualified from sports because of heart problems identified through ECG tests. Only six would have been identified through history and physical examination alone, according to the report. To contact the reporter on this story: Tom Randall in New York at trandall6@bloomberg.net .

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Sports Death Risk Found in Harvard Athletes by $88 Test for Heart Ailment

March 1, 2010

By Tom Randall March 1 (Bloomberg) — Heart defects that can cause otherwise healthy athletes to die while playing in basketball and football games were detected in Harvard University athletes using a common $88 test. The tests, known as electrocardiography or ECG, were given to 510 Harvard athletes in addition to their standard physicals, according to a study published today by the Annals of Internal Medicine. The added tests identified two players who were deemed healthy in typical examinations despite having dangerous defects that should bar them from competition. Scientists in three articles debated the merits of routine ECG tests for athletes. Genetic heart defects caused the courtside deaths of Hank Gathers , an All-America 23-year-old basketball forward at Loyola Marymount University in Los Angeles, and Reggie Lewis , a 27- year-old All Star guard for the Boston Celtics of the National Basketball Association. Such defects are the top cause of sudden death in sports, killing 1 of every 220,000 young athletes each year, according to previous studies. “Screening limited to medical history and physical examination fails to identify a significant percentage of athletes with increased risk,” wrote authors led by Aaron Baggish , a cardiology researcher and clinical instructor at Harvard Medical School and Massachusetts General Hospital in Boston. Still, he said, “our results may not end the complicated debate.” The biggest drawback to the tests was the number of young athletes who were incorrectly identified as having a risk, the Harvard researchers said. The rate of so-called false positives tripled to 17 percent for ECG-tested patients, compared with 5.5 percent under normal screening. Expensive Follow-Up False readings require expensive follow-up tests and “would unavoidably promote inappropriate disqualifications, unnecessary anxiety, and possibly chaos in a national program,” said Barry Maron , director of the Hypertrophic Cardiomyopathy Center of the Minneapolis Heart Institute Foundation, in an editorial published today with the study. Loyola’s Gathers collapsed and died after scoring in a tournament game in 1990, and the Celtics’ Lewis died during practice in 1993. Both deaths were blamed on a detectable heart defect, prompting some doctors to call for expanded testing. The defect, hypertrophic cardiomyopathy, is the most common cause of sudden fatalities in young athletes according to a study last year in the journal Circulation. Cardiomyopathy causes some areas of the heart to harden, forcing muscles to work harder and sometimes causing dangerous rhythms, according to the National Institutes of Health in Bethesda, Maryland. The risk from such hardening often goes undiagnosed until someone faints or dies during exercise. Test Procedure In an ECG, 10 electrodes are attached with sticky circles to a patient’s arms, legs and chest. The electrodes monitor pulses of electricity that flash through a beating heart as the muscles constrict and pump blood. The readings detect unusual patterns that may indicate a birth defect or diseased heart. The American Heart Association doesn’t endorse mandatory sports testing with ECG, though some colleges have begun screening on their own, according to today’s report. Italy adopted mandatory ECG testing in the 1980s, a policy that has reduced sudden deaths by almost 90 percent, according to previous studies. Routine ECG screening in the U.S. would cost about $88 per athlete, or about $42,900 for each year of life saved, according to a separate study by Stanford University researchers, also published in the Annals today. The Stanford study relied on data collected from Italy’s program, adjusting the model to reflect higher expenses and lower rates of defects in the U.S. The study estimates screening a population of 3.7 million competitive athletes in the U.S. Cost Evaluation Procedures costing less than $100,000 for each year saved, also known as Quality-Adjusted Life Year, or QUALY, are usually considered “a good deal,” according to William Schaffner , chairman of the department of preventive medicine at Vanderbilt University in Nashville Tennessee. In the Harvard study, heart abnormalities that could affect sports participation were detected in 2.2 percent of the study population. A routine physical and family history consultation detected the risk in 5 patients. ECG testing found 5 additional patients with abnormalities. Additional testing using cardiac ultrasound, a sensitive scanning tool that gives a definitive diagnosis, found that three students had sufficient risk to bar them from competitive exercise. Only one of the highest-risk patients was detected by standard screening methods. Previous studies have suggested that monitoring the heart’s activity should be more widely used to save lives. An Italian study of more than 30,000 athletes, published in the British Medical Journal in 2008, found 159 patients were disqualified from sports because of heart problems identified through ECG tests. Only six would have been identified through history and physical examination alone, according to the report. To contact the reporter on this story: Tom Randall in New York at trandall6@bloomberg.net .

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Roxanne Emmerich: Make the Decision to Engage

February 27, 2010

A recent survey by the Conference Board finds that only 45 percent of employed Americans are satisfied with their jobs. Most of those plan to look for something new once the current unpleasantness is done — presumably because everything will be red roses and caramel mochaccinos in the new workplace. Bad idea. Whenever someone changes jobs in order to run from a situation, as opposed to going TO an opportunity, it’s pretty much inevitable that the issues will follow, nipping at their heels. Within six months, that person will be hating the new employer just as much. It’s important for workers to stop thinking the grass is greener in the next pasture. The answer is not to polish up the résumé and leap into another workplace, but to help build a more positive workplace so you can love the one you’re with. Employee engagement is about more than good feelings. A landmark 2006 study by the Gallup Management Journal estimated that a typical organization loses $3,400 in productivity for every $10,000 of payroll due to disengaged employees. So while bottom-line troubles are often said to fuel disengagement, it’s really the other way around. I can honestly say that I’ve loved every job I’ve ever had. Notice I didn’t say I loved every job equally , or that I loved every job completely . That’s just not gonna happen. But I can honestly say that I have loved them all. It’s not that I’ve been especially lucky. I simply realized early on that loving your job is a DECISION. There were some jobs that better fit with my skills and values, but regardless of where I was, I always found things to celebrate and be joyful about. It’s like a marriage. Anyone who has been married more than a day knows that there are delightful, wonderful things about your spouse — as well as a few areas for improvement. (Look in the mirror and realize that your spouse can say the same.) So where do you put your focus? When we focus on the positives, the delightfuls and the wonderfuls, our marriage works much, much better. If on the other hand we focus on all of those things that aren’t so hot, we’ll start accumulating baggage, bit by bit, until the marriage is crushed under the weight of it. Happens all the time. The same is true for the marriage of employee and employer. No employer ever hires the perfect human being — but how would you like it if your employer chose to focus relentlessly on your imperfections? Likewise, an employee marinating in grievances about the employer will make him or herself miserable — a misery that spreads quickly to everyone around, taking engagement AND productivity down with it. So do you want to focus on the problems of your current position, or the positives? The choice is yours, but the happiness or misery that results from that choice will be shared by everyone around you. Recognize that your own job satisfaction is a decision — then decide well.

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Glaxo Knew of Heart Risk From Avandia Diabetes Drug, Senate Report Finds

February 20, 2010

By Rob Waters Feb. 20 (Bloomberg) — GlaxoSmithKline Plc knew its diabetes drug Avandia might cause heart damage several years before a study documented the risk and the company pressed doctors to retract or revise warnings about side effects, said a report from researchers for the U.S. Senate Finance Committee. Avandia came on the market in 1999 and achieved annual revenue of $3 billion by 2006, including sales of a combination drug that includes Avandia. Sales plummeted after a 2007 study was published in the New England Journal of Medicine which linked Avandia to a 43 percent increased risk of heart attack. By 2009, sales of the drug had fallen to $1.2 billion. Executives of the London-based Glaxo obtained a copy of the 2007 study in advance of its publication from a company consultant who also worked as a reviewer for the journal, the Senate report said. Although company scientists internally recognized the study’s validity and acknowledged Avandia’s heart risks, Glaxo prepared a public relations effort to refute suggestions that the drug triggered heart attacks, according to internal e-mails reviewed by Senate researchers. “It can be argued that GSK had a duty to warn patients and the FDA of the Company’s concerns,” wrote Max Baucus of Montana, a Democrat, and Charles Grassley of Iowa, the ranking Republican, in the Senate committee report. “Instead, GlaxoSmithKline executives attempted to intimidate independent physicians, focused on strategies to minimize or misrepresent findings that Avandia may increase cardiovascular risk, and sought ways to downplay findings that a competing drug might reduce cardiovascular risk.” Doctors Pressed The heart risks posed by Avandia were reported in a story published in today’s New York Times based on the Senate report and other documents. Glaxo, then known as SmithKline Beecham, pressed medical researchers who observed the emergence of heart and liver problems in patients taking Avandia to stop disseminating their findings, contacting the doctors’ superiors in several cases, according to the report. Glaxo, in a statement e-mailed today, said it rejects the Times’s conclusions about Avandia’s risks. “Contrary to the assertions in the story, and consistent with the FDA-approved labeling, the scientific evidence simply does not establish that Avandia increases ischemic cardiovascular risk or causes myocardial ischemic events,” the company said. Phone messages and e-mails left for Karen Riley , an FDA spokeswoman, weren’t immediately returned. Glaxo fell 58 cents, or 1.5 percent, to $38.26 in New York Stock Exchange composite trading yesterday. The stock is up 24 percent in the past 12 months. Sales of Actos, a competing drug sold by Tokyo-based Takeda Pharmaceuticals Co., were $4.4 billion for the year ended March 2009. To contact the reporter on this story: Rob Waters in San Francisco at rwaters5@bloomberg.net .

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Cancer `Red Flag’ Gene Marker May Help Doctors Find Whether Therapy Works

February 18, 2010

By Ellen Gibson Feb. 18 (Bloomberg) — Blood tests derived from the DNA of cancer patients’ tumors will offer doctors a new way to determine whether the patients’ treatment has eliminated the disease, a study said. Scientists at the Johns Hopkins Kimmel Cancer Center and Life Technologies , a Carlsbad, California-based biotechnology company, scanned the genomes of six cancer patients, looking for large chunks of rearranged DNA. These alterations occur in cancer cells but not in healthy tissue. By using these gene sequences to create biomarkers, or “red flags”, the researchers were able to see whether the patients’ blood, tested after treatment, contained any traces of DNA from the tumor. These blood tests may give oncologists a clearer picture of how a patient is responding to treatment, according to a report published online today in the journal Science Translational Medicine . The blood tests may alert doctors to a recurrence of cancer earlier than commonly used imaging tools, such as CT scans, would detect it. “This is going to have huge implications in cancers where there are no biomarkers,” said Luis Diaz , a cancer specialist at Johns Hopkins Hospital in Baltimore, in a telephone interview yesterday. “When we give a therapy like surgery or radiation, we have no good way of differentiating who was cured. It’s becoming clearer with novel biomarkers like this.” The researchers are refining the technique to make a “commercially viable” genome-based blood test, according to a statement from Johns Hopkins. Study Design The researchers took samples of solid-tumor tissue and healthy cells from four patients with colorectal cancer and two with breast cancer. They used a next-generation gene-sequencing technology to sequence multiple fragments of DNA in parallel. Scientists think tumors have DNA rearrangements that are not present in normal blood and tissue, according to the report. Diaz describes this as “a sort of erosion of the genome” as the cancer grows. In each of the tumor samples, the researchers found at least four confirmed regions where there was incorrect ordering or orientation of DNA sequences. These unique sequences were used to create telltale biomarkers. When the researchers took blood samples from the patients, they were able to search for these “red flags” to hunt down residual tumor DNA. Barriers to Use The main barrier to using this in cancer patients is the high cost of sequencing the genome, according to the report. A genome scan currently costs about $5,000 per patient, whereas a CT scan is priced about $1,500, the paper said. The cost of sequencing continues to come down, however. In November, Complete Genomics, a closely held Mountain View, California-based company, produced complete sequences of three people’s DNA at an average cost of $4,500. Illumina Inc., the San Diego-based maker of DNA analysis equipment, has a new system called HiSeq2000, which can decipher a person’s entire genetic code for less than $10,000. Two years ago, the company said, it took four weeks and cost $100,000 to sequence a human genome. “If you envision that sequencing is going to come down in price to $1,000 or less, this test becomes a huge cost saver,” said Diaz. Another way the tests may bring down the cost of medical care is by sparing post-surgical patients the need for costly chemotherapy treatments when the blood exam shows the cancer has been eliminated by surgery alone, he said. A potential application of this approach may be to use blood tests for cancer screening, Diaz said. One problem is that unlike testing for mutations that are common to certain cancers, scientists don’t know which DNA rearrangements to look for because they vary from one individual to another. “It’s like looking for a criminal without knowing his fingerprint,” Diaz said. The study was funded by the National Institutes of Health, the Lustgarten Foundation , a Bethpage, New York-based nonprofit advocacy group, and the National Colorectal Cancer Research Alliance. To contact the reporter on this story: Ellen Gibson in New York at egibson9@bloomberg.net

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Yanukovych’s Russian Overtures May Signal Ukraine’s Shifting Allegiance

February 18, 2010

By Daryna Krasnolutska and Lyubov Pronina Feb. 18 (Bloomberg) — Ukraine’s President-elect Viktor Yanukovych may be stepping up efforts to move the former Soviet state closer to Russia and end a standoff that’s obstructed gas flows and heightened regional tensions for half a decade. In the 11 days since beating Yulia Timoshenko in a runoff vote, Yanukovych signaled on his Web site he may allow Russia’s Black Sea Fleet to stay in Ukrainian waters. He asked for Russian help to ease gas flows into Europe and yesterday said he wants Ukraine to join Russia’s customs union with Belarus and Kazakhstan, Kommersant reported. Yanukovych’s “policy will steer the country toward a return of good, friendly relations with Russia,” said Sergei Markov , a lawmaker in Prime Minister Vladimir Putin’s United Russia Party. “What we observed before was an artificial attempt to make Russia and Ukraine quarrel.” Yanukovych, 59, who has promised to restore Russian as Ukraine’s second official language, also says he will seek to balance Russian and European Union ties. While he wrote in the Wall St. Journal yesterday that he wants to prepare Ukraine for EU membership “when the time comes,” his actions indicate his ambition to renew relations with Moscow may be stronger than he signaled previously. “Yanukovych is still under the influence of his election win,” said Yuriy Yakymenko , an analyst at the Kiev-based Razumkov Center for Political and Economic Studies. “He pledged to implement all changes that Russia would like to see, ignoring Ukraine’s political context and without thinking whether he really can do it.” New Cold War The defeat of outgoing President Viktor Yushchenko in the Jan. 17 first round ended an era of tense Ukraine-Russian relations that contributed to a souring of ties between Moscow and Washington. Former Presidents George W. Bush and Putin used Yushchenko’s ambition to steer the country into the North Atlantic Treaty Organization as an excuse to ramp up antagonism between the two former Cold War adversaries and prompted fears of a military clash in the region. The Kremlin curbed natural-gas deliveries to Ukraine in 2006 and 2009, withheld a new ambassador to Kiev and accused Yushchenko of supplying arms to Georgia during Russia’s war with its southern neighbor in August 2008. Markets Yushchenko, who defeated Yanukovych in the 2004 Orange Revolution, had targeted NATO membership and joining the European Union as ways of freeing Ukraine from Russian influence. Ukraine’s economic collapse since then, which has left it reliant on a $16.4 billion International Monetary Fund loan, and his bickering with Timoshenko have left voters jaded and contributed to his defeat. Ukraine’s sovereign debt is the third most expensive to insure after Venezuela and Argentina, according to credit default swap spreads. The country’s CDS spread has widened 2 1/2 times since the Orange Revolution, indicating heightened investor perceptions of a default risk, and stood at 975 basis points yesterday, compared with 946 before the Feb. 7 runoff. The hryvnia has lost 42 percent against the dollar since the start of September 2008, making it the second-worst performer of the 175 currencies tracked by Bloomberg in the period, after the Venezuelan bolivar. ‘Strategic Partner’ In yesterday’s Journal article, Yanukovych pledged to rebuild ties with Ukraine’s nuclear-armed neighbor. “We are a nation with a European identity but we have historic cultural and economic ties to Russia as well,” he wrote. “We will rebuild relations with Moscow as a strategic economic partner.” Russia, which traces its statehood to medieval Kiev, shares close economic, linguistic and religious ties to its neighbor. Without Ukraine, Russia stops being an empire with a foothold in Europe, former U.S. national security adviser Zbigniew Brzezinski wrote in his 1997 book “The Grand Chessboard.” Ukraine was incorporated into the USSR in 1922 and it was known as the breadbasket of the Soviet empire because of its agricultural produce. Much of industrialized eastern Ukraine is populated by Russian speakers whose first loyalty was always to Moscow. The Crimean peninsula on the Black Sea, associated with some of Russia’s greatest writers including Chekhov , Bulgakov and Tolstoy, was given to the Ukrainian soviet republic by Russia in 1954. ‘East Is Russian’ Russia’s Black Sea fleet is based in Crimea and 80 percent of Russian gas exports to Europe go through Ukrainian territory. Eastern Ukraine will become part of Russia “in five years,” said Vladimir Zhirinovsky , head of the Liberal- Democratic Party of Russia, on Ekho Moskvy radio. “The east is Russian. The population is largely Russian,” Yanukovych is “basically Russian.” Though Yanukovych has made clear he won’t stick to the NATO membership aspiration, some of his promises to Russia will require significant legislative upheaval to enact. His offer to allow the Black Sea Fleet to stay past 2017 ignores Ukraine’s constitution, which doesn’t allow foreign troops outside the terms of the lease. Yanukovych will need to secure a 300 vote majority in the 450-seat parliament to overturn that law. ‘Change in Policy’ Ukraine’s military strategy stipulates that the country should target NATO entry, though membership would require a referendum. Yanukovych’s request to join the customs union seems not to take into account Ukraine’s membership in the World Trade Organization since May 2008. “Yanukovych’s comments obviously reflect a change in policy,” Yushchenko said at a meeting of his Our Ukraine Party on Feb. 16. Yanukovych has been congratulated on his victory by U.S. President Barack Obama , EU Commission President Jose Barroso and NATO Secretary General Anders Fogh Rasmussen , though Russian President Dmitry Medvedev was first to invite him for an official visit, Interfax reported on Feb. 15. “Russia gains by having a friendlier and even preferential relationship but not a dominant one,” said Chris Weafer , chief strategist at UralSib Financial Corp. in Moscow. “That delivers the Holy Grail for the Kremlin. Good business and good politics: Putin’s dream.” To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net

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Yanukovych’s Russian Overtures May Signal Ukraine’s Shifting Allegiance

February 18, 2010

By Daryna Krasnolutska and Lyubov Pronina Feb. 18 (Bloomberg) — Ukraine’s President-elect Viktor Yanukovych may be stepping up efforts to move the former Soviet state closer to Russia and end a standoff that’s obstructed gas flows and heightened regional tensions for half a decade. In the 11 days since beating Yulia Timoshenko in a runoff vote, Yanukovych signaled on his Web site he may allow Russia’s Black Sea Fleet to stay in Ukrainian waters. He asked for Russian help to ease gas flows into Europe and yesterday said he wants Ukraine to join Russia’s customs union with Belarus and Kazakhstan, Kommersant reported. Yanukovych’s “policy will steer the country toward a return of good, friendly relations with Russia,” said Sergei Markov , a lawmaker in Prime Minister Vladimir Putin’s United Russia Party. “What we observed before was an artificial attempt to make Russia and Ukraine quarrel.” Yanukovych, 59, who has promised to restore Russian as Ukraine’s second official language, also says he will seek to balance Russian and European Union ties. While he wrote in the Wall St. Journal yesterday that he wants to prepare Ukraine for EU membership “when the time comes,” his actions indicate his ambition to renew relations with Moscow may be stronger than he signaled previously. “Yanukovych is still under the influence of his election win,” said Yuriy Yakymenko , an analyst at the Kiev-based Razumkov Center for Political and Economic Studies. “He pledged to implement all changes that Russia would like to see, ignoring Ukraine’s political context and without thinking whether he really can do it.” New Cold War The defeat of outgoing President Viktor Yushchenko in the Jan. 17 first round ended an era of tense Ukraine-Russian relations that contributed to a souring of ties between Moscow and Washington. Former Presidents George W. Bush and Putin used Yushchenko’s ambition to steer the country into the North Atlantic Treaty Organization as an excuse to ramp up antagonism between the two former Cold War adversaries and prompted fears of a military clash in the region. The Kremlin curbed natural-gas deliveries to Ukraine in 2006 and 2009, withheld a new ambassador to Kiev and accused Yushchenko of supplying arms to Georgia during Russia’s war with its southern neighbor in August 2008. Markets Yushchenko, who defeated Yanukovych in the 2004 Orange Revolution, had targeted NATO membership and joining the European Union as ways of freeing Ukraine from Russian influence. Ukraine’s economic collapse since then, which has left it reliant on a $16.4 billion International Monetary Fund loan, and his bickering with Timoshenko have left voters jaded and contributed to his defeat. Ukraine’s sovereign debt is the third most expensive to insure after Venezuela and Argentina, according to credit default swap spreads. The country’s CDS spread has widened 2 1/2 times since the Orange Revolution, indicating heightened investor perceptions of a default risk, and stood at 975 basis points yesterday, compared with 946 before the Feb. 7 runoff. The hryvnia has lost 42 percent against the dollar since the start of September 2008, making it the second-worst performer of the 175 currencies tracked by Bloomberg in the period, after the Venezuelan bolivar. ‘Strategic Partner’ In yesterday’s Journal article, Yanukovych pledged to rebuild ties with Ukraine’s nuclear-armed neighbor. “We are a nation with a European identity but we have historic cultural and economic ties to Russia as well,” he wrote. “We will rebuild relations with Moscow as a strategic economic partner.” Russia, which traces its statehood to medieval Kiev, shares close economic, linguistic and religious ties to its neighbor. Without Ukraine, Russia stops being an empire with a foothold in Europe, former U.S. national security adviser Zbigniew Brzezinski wrote in his 1997 book “The Grand Chessboard.” Ukraine was incorporated into the USSR in 1922 and it was known as the breadbasket of the Soviet empire because of its agricultural produce. Much of industrialized eastern Ukraine is populated by Russian speakers whose first loyalty was always to Moscow. The Crimean peninsula on the Black Sea, associated with some of Russia’s greatest writers including Chekhov , Bulgakov and Tolstoy, was given to the Ukrainian soviet republic by Russia in 1954. ‘East Is Russian’ Russia’s Black Sea fleet is based in Crimea and 80 percent of Russian gas exports to Europe go through Ukrainian territory. Eastern Ukraine will become part of Russia “in five years,” said Vladimir Zhirinovsky , head of the Liberal- Democratic Party of Russia, on Ekho Moskvy radio. “The east is Russian. The population is largely Russian,” Yanukovych is “basically Russian.” Though Yanukovych has made clear he won’t stick to the NATO membership aspiration, some of his promises to Russia will require significant legislative upheaval to enact. His offer to allow the Black Sea Fleet to stay past 2017 ignores Ukraine’s constitution, which doesn’t allow foreign troops outside the terms of the lease. Yanukovych will need to secure a 300 vote majority in the 450-seat parliament to overturn that law. ‘Change in Policy’ Ukraine’s military strategy stipulates that the country should target NATO entry, though membership would require a referendum. Yanukovych’s request to join the customs union seems not to take into account Ukraine’s membership in the World Trade Organization since May 2008. “Yanukovych’s comments obviously reflect a change in policy,” Yushchenko said at a meeting of his Our Ukraine Party on Feb. 16. Yanukovych has been congratulated on his victory by U.S. President Barack Obama , EU Commission President Jose Barroso and NATO Secretary General Anders Fogh Rasmussen , though Russian President Dmitry Medvedev was first to invite him for an official visit, Interfax reported on Feb. 15. “Russia gains by having a friendlier and even preferential relationship but not a dominant one,” said Chris Weafer , chief strategist at UralSib Financial Corp. in Moscow. “That delivers the Holy Grail for the Kremlin. Good business and good politics: Putin’s dream.” To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net

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Zachery Kouwe Plagiarism Scandal? New York Times Says Reporter ‘Borrowed’ Repeatedly

February 14, 2010

The New York Times has issued an editor’s note saying that business reporter Zachery Kouwe , “reused language from The Wall Street Journal, Reuters and other sources without attribution or acknowledgment.” According to the Times, they were notified of the issue by the Journal. In articles about the Bernard Madoff scandal that appeared in both newspapers on February 6, there were similar phrases and even identical sentences. Versions of the stories were also available online on February 5. For example, each contained a sentence reading: Last year Mr. Madoff’s wife, Ruth, also agreed to an asset freeze as part of a separate trustee’s $45 million lawsuit against her. In each story, that sentences was immediately preceded by very similar passages. From the New York Times version : Under the agreement, the family members cannot transfer or sell property or assets valued at more than $1,000 or incur debts and obligations greater than $1,000 without approval of Mr. Picard. They are allowed to use credit cards for necessary living expenses. The defendants also will provide the trustee with an accounting of their expenditures. From the Wall Street Journal version : The family members agreed not to transfer or sell property or assets valued at more than $1,000 or incur debts and obligations greater than $1,000 without approval of the trustee. They are allowed to use credit cards for necessary living expenses. The defendants also will provide the trustee with an accounting of their expenditures, the orders say. The Times indicated that the problem may be larger, potentially involving unattributed work from Reuters and elsewhere. From the paper’s corrections page : A subsequent search by The Times found other cases of extensive overlap between passages in Mr. Kouwe’s articles and other news organizations’. (The search did not turn up any indications that the articles were inaccurate.) Copying language directly from other news organizations without providing attribution — even if the facts are independently verified — is a serious violation of Times policy and basic journalistic standards. It should not have occurred. The matter remains under investigation by The Times, which will take appropriate action consistent with our standards to protect the integrity of our journalism.

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China’s Imports Jump 85.5% in January as Exports Rise 21%, Government Says

February 10, 2010

By Bloomberg News Feb. 10 (Bloomberg) — China’s exports jumped 21 percent in January from a year earlier, providing more ammunition to trading partners calling for a stronger yuan. Imports climbed a record 85.5 percent, according to data released by the customs bureau on its Web site today. U.S. officials may see Chinese trade gains as a sign that the nation no longer needs to protect exporters by keeping the yuan pegged to the dollar. At the same time, China’s policy makers may see the below-forecast exports and trade surplus as indicating that global demand is only gradually improving. “Chinese policy makers will be very cautious in interpreting the January data, which is highly distorted by the Chinese lunar new year holiday,” said Lu Ting , a Hong Kong- based economist at Bank of America-Merrill Lynch. “They may wait a few more months before making major policy moves.” Twelve-month non-deliverable yuan forwards dropped 0.3 percent to 6.6808 per dollar as of 12:20 p.m. in Hong Kong. Also today, an editorial in the state-owned China Securities Journal said that the currency may not have “big gains” in the first half because economic conditions haven’t improved. Stocks pared gains after the trade release, with the MSCI Asia Pacific index up 0.3 percent as of 12:10 p.m. in Hong Kong after earlier rising as much as 0.8 percent. China’s export gain was the biggest since September 2008. It compared with a 17.7 percent increase in December and the median 28 percent estimate of economists. The trade surplus of $14.17 billion fell short of economists’ $20 billion forecast. Imports rose by the most since Bloomberg data began in 1991. Fastest-Growing Economy The week-long lunar holiday was in January last year and February in 2010. The “positive trend remains intact,” and today’s report bolsters the case for the government to tighten policies and let the yuan strengthen in coming months, said Brian Jackson , an emerging-market strategist at Royal Bank of Canada in Hong Kong. The central bank has already raised banks’ reserve requirements to cool the world’s fastest-growing major economy. U.S. officials, pressing for a stronger Chinese currency to reduce trade imbalances, also argue that yuan gains against the dollar would also help China to restrain inflation. China last year overtook Germany as the world’s largest exporter, the German statistics office confirmed yesterday. Germany itself is benefitting from the expansion of China’s market, with its BGA wholesale and export federation projecting a 10 percent gain in shipments abroad in 2010, propelled by Chinese demand. Arms Sales, Chickens In Taiwan, government figures this week showed the biggest gain in its exports in more than 30 years on spending in China before the lunar holiday. Comparisons from a year earlier are also affected by depressed readings in early 2009 due to the financial crisis. China’s exports slid 17.5 percent in January 2009 and imports tumbled 43.1 percent. China’s static currency is fueling tensions with the U.S. that span anti-dumping duties on American chicken, arms sales to Taiwan, and the Dalai Lama’s planned meeting with President Barack Obama . On Feb. 4, China’s Foreign Ministry rejected Obama’s call for a stronger yuan, adding that “accusations and pressure will not help solve the issue.” The Chinese economy risks overheating this year as exports rebound, government economist Zhang Ming wrote in the China Securities Journal this month, adding that inflation pressures will encourage policy makers to let the yuan gain. Economic Acceleration Gross domestic product climbed 10.7 percent in the fourth quarter from a year earlier, the fastest pace in two years, after the government loosed an unprecedented expansion in credit to counter the effects of the financial crisis. China this year is projected to overtake Japan as No. 2 in global GDP rankings, after the U.S. “It’s getting too big a part of the global pie to keep relying on exports for growth, and so we do think there’s going to be a lot more policies to drive domestic consumption going forward,” Robert Subbaraman , chief economist for Asia excluding Japan at Nomura International Ltd., said in an interview on Bloomberg Television in Hong Kong today. Policy makers may opt to shrink the trade surplus through raising wages rather than yuan gains, Credit Suisse Group AG economist Tao Dong said in an interview yesterday. Higher labor costs would cut Chinese export competitiveness while boosting domestic spending power and sustaining growth, he said. Jiangsu’s Wage Boost Jiangsu, the nation’s third-largest exporting province in 2008, boosted the minimum wage 13 percent this month in an effort the local labor department said was aimed at attracting workers. Central bank Governor Zhou Xiaochuan said yesterday that policy makers need to “closely watch” inflation. Fan Gang , the academic member of the monetary policy committee, warned Feb. 1 that asset bubbles are “the real worry” for the Chinese economy. A report tomorrow may show consumer prices increased 2.1 percent in January from a year earlier, the most since November 2008, according to the median forecast in a Bloomberg News survey of economists. Property price figures are also due this week. To contact the reporter on this story: Sophie Leung in Hong Kong at sleung59@bloomberg.net

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China January Exports Jump 21%, Adding Pressure to Calls for Stronger Yuan

February 10, 2010

By Bloomberg News Feb. 10 (Bloomberg) — China’s exports jumped 21 percent in January from a year earlier, providing more ammunition to trading partners calling for a stronger yuan. Imports climbed a record 85.5 percent, according to data released by the customs bureau on its Web site today. U.S. officials may see Chinese trade gains as a sign that the nation no longer needs to protect exporters by keeping the yuan pegged to the dollar. At the same time, China’s policy makers may see the below-forecast exports and trade surplus as indicating that global demand is only gradually improving. “Chinese policy makers will be very cautious in interpreting the January data, which is highly distorted by the Chinese lunar new year holiday,” said Lu Ting , a Hong Kong- based economist at Bank of America-Merrill Lynch. “They may wait a few more months before making major policy moves.” Twelve-month non-deliverable yuan forwards dropped 0.3 percent to 6.6808 per dollar as of 12:20 p.m. in Hong Kong. Also today, an editorial in the state-owned China Securities Journal said that the currency may not have “big gains” in the first half because economic conditions haven’t improved. Stocks pared gains after the trade release, with the MSCI Asia Pacific index up 0.3 percent as of 12:10 p.m. in Hong Kong after earlier rising as much as 0.8 percent. China’s export gain was the biggest since September 2008. It compared with a 17.7 percent increase in December and the median 28 percent estimate of economists. The trade surplus of $14.17 billion fell short of economists’ $20 billion forecast. Imports rose by the most since Bloomberg data began in 1991. Fastest-Growing Economy The week-long lunar holiday was in January last year and February in 2010. The “positive trend remains intact,” and today’s report bolsters the case for the government to tighten policies and let the yuan strengthen in coming months, said Brian Jackson , an emerging-market strategist at Royal Bank of Canada in Hong Kong. The central bank has already raised banks’ reserve requirements to cool the world’s fastest-growing major economy. U.S. officials, pressing for a stronger Chinese currency to reduce trade imbalances, also argue that yuan gains against the dollar would also help China to restrain inflation. China last year overtook Germany as the world’s largest exporter, the German statistics office confirmed yesterday. Germany itself is benefitting from the expansion of China’s market, with its BGA wholesale and export federation projecting a 10 percent gain in shipments abroad in 2010, propelled by Chinese demand. Arms Sales, Chickens In Taiwan, government figures this week showed the biggest gain in its exports in more than 30 years on spending in China before the lunar holiday. Comparisons from a year earlier are also affected by depressed readings in early 2009 due to the financial crisis. China’s exports slid 17.5 percent in January 2009 and imports tumbled 43.1 percent. China’s static currency is fueling tensions with the U.S. that span anti-dumping duties on American chicken, arms sales to Taiwan, and the Dalai Lama’s planned meeting with President Barack Obama . On Feb. 4, China’s Foreign Ministry rejected Obama’s call for a stronger yuan, adding that “accusations and pressure will not help solve the issue.” The Chinese economy risks overheating this year as exports rebound, government economist Zhang Ming wrote in the China Securities Journal this month, adding that inflation pressures will encourage policy makers to let the yuan gain. Economic Acceleration Gross domestic product climbed 10.7 percent in the fourth quarter from a year earlier, the fastest pace in two years, after the government loosed an unprecedented expansion in credit to counter the effects of the financial crisis. China this year is projected to overtake Japan as No. 2 in global GDP rankings, after the U.S. “It’s getting too big a part of the global pie to keep relying on exports for growth, and so we do think there’s going to be a lot more policies to drive domestic consumption going forward,” Robert Subbaraman , chief economist for Asia excluding Japan at Nomura International Ltd., said in an interview on Bloomberg Television in Hong Kong today. Policy makers may opt to shrink the trade surplus through raising wages rather than yuan gains, Credit Suisse Group AG economist Tao Dong said in an interview yesterday. Higher labor costs would cut Chinese export competitiveness while boosting domestic spending power and sustaining growth, he said. Jiangsu’s Wage Boost Jiangsu, the nation’s third-largest exporting province in 2008, boosted the minimum wage 13 percent this month in an effort the local labor department said was aimed at attracting workers. Central bank Governor Zhou Xiaochuan said yesterday that policy makers need to “closely watch” inflation. Fan Gang , the academic member of the monetary policy committee, warned Feb. 1 that asset bubbles are “the real worry” for the Chinese economy. A report tomorrow may show consumer prices increased 2.1 percent in January from a year earlier, the most since November 2008, according to the median forecast in a Bloomberg News survey of economists. Property price figures are also due this week. To contact the reporter on this story: Sophie Leung in Hong Kong at sleung59@bloomberg.net

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Asian Stocks, Currencies Rise on Speculation of Greek Aid, Global Recovery

February 10, 2010

By Sandy Hendry and Shani Raja Feb. 10 (Bloomberg) — Asian stocks and emerging-market currencies rallied as Germany signaled it may help support Greece’s finances and economic reports showed recovering demand in Asia. The MSCI Asia Pacific Index added 0.2 percent to 114.90 as of 12:36 a.m. in Tokyo, with two stocks rising for each one that dropped. The South Korean won climbed 0.3 percent and the cost of protecting Asia-Pacific bonds from default fell the most in five months. Germany is considering assistance for Greece after the country’s deficit threatened the stability of financial markets, two lawmakers from Chancellor Angela Merkel ’s governing coalition said yesterday. Reports showed rising Japanese machinery orders in December and the fastest pace of economic growth in Indonesia in a year in the fourth quarter. China’s car sales doubled from a year earlier in January. “Whether Greece will fail to repay its debt is the crux of this issue, and I think it’s unlikely that an EU member will default,” said Masaru Hamasaki , chief strategist at Tokyo-based Toyota Asset Management Co., which oversees the equivalent of $14 billion. “With robust foreign demand, companies, especially manufacturers, will likely beat their own earnings forecasts.” Futures on the Standard & Poor’s 500 Index fell 0.3 percent, after the index gained 1.3 percent yesterday. Walt Disney Co., the world’s biggest media company, posted fiscal first-quarter profit that beat analysts’ estimates after the market closed as television revenue rose. Commodities Producers The Nikkei 225 Stock Average advanced 0.5 percent in Tokyo. Markets pared gains after a Chinese government report showed exports jumped 21 percent in January from a year earlier, less than the median 28 percent estimate in a Bloomberg News survey. “Earnings across the region reinforce the view that the recovery is gaining momentum,” said Stephen Halmarick , Sydney- based head of investment-markets research at Colonial First State Global Asset Management, which holds about $135 billion. Japan’s industrial manufacturers advanced after the Cabinet Office reported a 20.1 percent month-on-month surge in machinery orders in December, more than twice as much as economists had estimated. Fanuc Ltd. , Japan’s largest maker of industrial robots, advanced 1.8 percent to 8,950 yen, while Komatsu Ltd. , the world’s second-biggest maker of earthmoving equipment, gained 4.2 percent to 1,801 yen. Car Sales Nissan Motor Co. , Japan’s No. 3 carmaker, jumped 3 percent after scrapping its loss projection yesterday to forecast net income for the year to March 31. The company benefited from government subsidies in China and Japan. China’s Shanghai Composite Index rose for a second day, adding 0.6 percent. SAIC Motor Corp., the largest carmaker, climbed 2.6 percent. Sales of cars, multipurpose vehicles and sport-utility vehicles increased to 1.32 million units, the China Association of Automobile Manufacturers said yesterday. Malayan Banking Bhd. , Malaysia’s biggest bank, rose 1.3 percent, the most in two months, after second-quarter profit rose 35 percent on faster loan growth. Acer Inc. , the world’s second-largest computer vendor, added 1.9 percent after reporting its biggest quarterly profit in almost three years. Won, Peso The won climbed to 1,160.3 per dollar after South Korea’s Vice Finance Minister Hur Kyung Wook said yesterday the impact from Greece’s fiscal woes on his nation will be “limited.” The Philippine peso gained 0.1 percent to 46.36 after a report showed exports increased 23.6 percent from a year earlier in December, the fastest pace in four years. The Indonesian rupiah strengthened 0.1 percent to 9,363 as a government report showed the economy expanded 5.4 percent in the fourth quarter from a year earlier. The dollar advanced 0.3 percent to $1.3760 per euro on speculation a Commerce Department report today will show the U.S. trade deficit narrowed. The trade gap will shrink to $35.8 billion in December from $36.4 billion the prior month, according to a Bloomberg News survey of economists. The greenback pared losses against the yen before the release of testimony today by Federal Reserve Chairman Ben S. Bernanke on the central bank’s strategy for exiting from a policy of keeping interest rates low. The dollar advanced to 89.72 yen in Tokyo from 89.69 yen in New York yesterday. It earlier touched 90.02 yen, the highest level since Feb. 4. “Demand for the dollar will increase if Bernanke’s remarks indicate the U.S. is heading for exit,” said Toshiya Yamauchi , manager of currency margin trading at Ueda Harlow Ltd. in Tokyo. Yuan, Commodities Yuan forwards declined, snapping a two-day advance, after an editorial in a state-owned newspaper signaled Chinese authorities may limit appreciation to help sustain a recovery in exports. The currency may not have “big” gains in the first half because economic conditions haven’t improved, the China Securities Journal column said. Twelve-month non-deliverable yuan forwards dropped 0.3 percent to 6.6770 per dollar. Copper dropped, reversing earlier gains, after January imports by China were less than expected. Shipments of copper and products by the world’s largest consumer of the metal totaled 292,096 metric tons last month, the customs office said today. That’s 21 percent less than December’s level, according to data compiled by Bloomberg. Copper for three-month delivery on the London Metal Exchange fell as much as 0.2 percent to $6,576.25 a ton. Oil dropped 0.7 percent to $73.27 a barrel after the American Petroleum Institute said crude inventories rose 7.2 million barrels and gasoline supplies by 1.55 million barrels last week, more than expected. To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net ;

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Weight-Loss Surgery May Help Severely Obese Teens, Study Finds

February 9, 2010

By Jason Gale Feb. 10 (Bloomberg) — Weight-loss surgery was more effective at slimming severely obese teens and improving their health than two years of diet and exercise, a study found. Adolescents fitted with Allergan Inc. ’s Lap-Band device lost about 11 times more weight compared with a group following so-called lifestyle approaches, researchers in Melbourne said. The results reported today in the Journal of the American Medical Association suggest bariatric surgery is an effective treatment for younger obese patients, the authors said. Weight-loss surgery has soared in popularity among U.S. adults in response to rising rates of obesity. The procedure has been controversial because the quality of evidence to support it is poor, said Edward H. Livingston , professor of surgery at the University of Texas Southwestern Medical Center in Dallas and a contributing editor to the journal. The study’s findings “go a long way toward providing the evidence necessary to evaluate the benefits and risks of bariatric surgery,” Livingston wrote in an accompanying editorial. “Many insurance companies in the United States will not pay for bariatric surgeries, and their decision to not cover this treatment is based on the lack of compelling, universally accepted evidence in its favor.” Obesity Rate Doubled At least one U.S. adolescent in six — more than 5 million people — was obese in 2004, according to the study. The number of obese Americans has more than doubled over 30 years to 72 million, according to the U.S. Centers for Disease Control and Prevention. People who are overweight or obese have a greater risk of diabetes, heart attacks and strokes, the Atlanta-based agency said last month. Allergan had 2009 revenue of $238 million for products designed to treat obesity and most of it was from sales of the Lap-Band, said company spokeswoman Cathy Taylor in an e-mail today. The Irvine, California, company is testing the device in severely obese adolescents ages 14 to 17 and submitted an application to the U.S. Food and Drug Administration last year for approval in that age group, she said. For the study, researchers at Melbourne’s Monash University followed 50 adolescents ages 14 to 18 over two years. All participants were deemed severely obese, having a body mass index , or BMI, greater than 35. Half were randomly selected for gastric banding and the remainder was asked to follow an individualized diet and exercise plan. Reversible Procedure Gastric banding is done when a surgeon places a band around the upper portion of the stomach to create a pouch to hold food, which limits the amount a person can eat. The reversible procedure is one of the two most common for weight loss, with the other being gastric bypass . In today’s study, two years after the start the gastric banding group had lost an average of 34 kilograms (76 pounds), representing an overall average loss of 28 percent of total body weight and 79 percent of excess weight, the researchers said. In comparison, the lifestyle group lost an average of 3 kilograms (6.6 pounds), or an average of 3.1 percent total weight loss and 13 percent excess weight loss. “Despite a comprehensive, behaviorally focused intervention, those in the lifestyle group were not able to achieve substantial weight loss,” wrote the study’s authors led by Paul E. O’Brien , director of Monash’s Centre for Obesity Research and Education. “Indeed, keeping adolescents and their parents involved in the trial for its two-year duration proved challenging.” Allergan supplied the Lap-Band Adjustable Gastric Banding system used in the research, the study said. Lower Risk Although the study wasn’t designed to measure improvements in specific health problems, it did demonstrate a reduction in a group of conditions associated with increased risk for cardiovascular disease and diabetes, the authors said. At enrollment, 9 study participants in the gastric banding arm and 10 in the lifestyle group suffered from so-called metabolic syndrome , as the group is known. After 24 months, none of the gastric banding group had the problem, compared with 4 of the 18 teens in the lifestyle group who completed the study. “Gastric banding proved to be an effective intervention leading to a substantial and durable reduction in obesity and to better health,” the authors said. The gastric banding group experienced no adverse events in the period shortly after surgery, the authors said. Eight operations to adjust the band or repair tubing connected to the band were required in seven patients in the surgery group. “The gastric banding approach to weight loss is not a quick fix,” the researchers wrote. Lifestyle treatments may achieve weight loss and improved health for some individuals and should remain the first option for obese adolescents, they said. The study was funded by the National Health and Medical Research Council. One of the study’s authors, John Dixon of Monash University, reported consulting agreements with Allergan and other companies. To contact the reporter on this story: Jason Gale at j.gale@bloomberg.net

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Thirdhand Smoke Forms Cancer-Causing Indoor Residue That Lasts, Study Says

February 8, 2010

By Nicole Ostrow Feb. 8 (Bloomberg) — Tobacco smoke contamination lingering on furniture, clothes and other surfaces, dubbed thirdhand smoke, may react with indoor air chemicals to form potential cancer-causing substances, a study found. After exposing a piece of paper to smoke, researchers found the sheet had levels of newly formed carcinogens that were 10 times higher after three hours in the presence of an indoor air chemical called nitrous acid commonly emitted by household appliances or cigarette smoke. That means people may face a risk from indoor tobacco smoke in a way that’s never been recognized before, said one of the study’s authors, Lara Gundel . Previous research has shown that secondhand smoke, which is inhaled by nonsmokers exposed to fumes from cigarettes, raises the risk of cancer and heart disease. More research is needed to identify the potential health hazards of thirdhand smoke, Gundel said. Overall, tobacco use causes 20 percent of all cancer deaths, according to the study published in today’s Proceedings of the National Academy of Sciences . “We have considered that nicotine on surfaces has been pretty benign up to this point. It turns out we shouldn’t say that now,” said Gundel, a staff scientist at Lawrence Berkeley National Laboratory in Berkeley, California, in a Feb. 5 telephone interview. “People can be exposed to toxins in tobacco smoke in a way that’s never been recognized before.” Residue Found A spokesman for Philip Morris USA, a unit of Altria Group Inc. , did not return a telephone call for comment. Spokesmen for Reynolds American Inc. and Lorillard Inc. did not respond to telephone calls for comment. A previous study, published in the journal Pediatrics in January 2009, found residual tobacco smoke is deposited on furniture, carpeting and clothing and coined the phrase “thirdhand smoke.” Today’s study found that when the residue from tobacco smoke settled on indoor surfaces, it mixed with indoor air pollutants to form tobacco-specific nitrosamines, or TSNAs, which are potent cancer-causing substances found in unburned tobacco and tobacco smoke. The researchers checked for nitrosamine levels by exposing paper to smoke and then to nitrous acid, which is produced by gas ovens and burners that aren’t properly vented and by cars. They also tested the surfaces on the inside of a truck of a heavy smoker. In both cases they found the reaction between the nicotine in thirdhand smoke and the nitrous acid produced two known and potent nitrosamines. They also found a tobacco-specific nitrosamine that is absent in freshly emitted tobacco smoke. Children Exposed People, particularly infants and toddlers, are most likely exposed to these carcinogens by either inhaling dust or by skin contact, the authors said. Using fans and opening a window doesn’t help eliminate the hazards because most of the nicotine and other substances from burning cigarettes aren’t found in the air, but are absorbed by surfaces, Gundel said. “Buildings, rooms, public places should be 100 percent smoke free,” she said. “Replace nicotine-laden furniture, carpets and curtains. Nicotine absorbs into these materials. The stuff that’s imbedded can continue to come to the surface.” The researchers are trying to determine how long these nitrosamines may last as a result of the interaction of thirdhand smoke and the indoor air pollutant, nitrous acid. They are also looking to develop ways to track exposure to nitrosamines. “We know that these residual levels of nicotine may build up over time after several smoking cycles, and we know that through the process of aging, thirdhand smoke can become more toxic over time,” said study co-author Hugo Destaillats , a chemist with the Indoor Environment Department of the Berkeley national lab’s Environmental Energy Technologies Division, in a statement. “Our work highlights the importance of thirdhand smoke reactions at indoor interfaces, particularly the production of nitrosamines with potential health impacts.” The study was sponsored by the University of California’s Tobacco-Related Disease Research Program . To contact the reporter on this story: Nicole Ostrow in New York at nostrow1@bloomberg.net .

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Japan Plans Law to Boost Mine Investment as China, Korea Competition Grows

January 27, 2010

By Jae Hur and Ichiro Suzuki Jan. 28 (Bloomberg) — Japan plans to revise legislation in order to help domestic companies acquire mining rights overseas and secure raw materials amid competition from neighboring China and South Korea. The Ministry of Economy, Trade and Industry has prepared a bill that will allow state-owned Japan Oil, Gas and Metals National Corp. to invest in foreign mines in collaboration with private companies and to provide government guarantees to fund projects, according to Yohei Matsuda, deputy director at the ministry’s natural resources and energy agency. “Compared with China’s recent investment growth, Japan is well behind,” said Takashi Murata , an analyst at Daiwa Securities Capital Markets Co. in Tokyo. “This will help boost domestic companies’ investment in mines abroad.” China is purchasing overseas mines to feed growth that accelerated at the fastest pace since 2007 in the fourth quarter, moving it closer to overtaking Japan as the world’s second- largest economy. China’s central government plans to boost investment in overseas mineral exploration, the China Securities Journal reported in December. Under the proposed bill, JOGMEC, as the agency is known, can invest as much as 27.5 billion yen ($308 million) in overseas mines, Masanori Okada , chairman of the Japan Mining Industry Association, said Jan. 21. Under the current law, it can invest only in overseas projects for oil and natural gas. State Guarantees The bill, which will be submitted to the cabinet early next month, will allow JOGMEC to provide government guarantees to help private companies get financing for mineral resources projects such as rare metals, base metals and iron ore, Matsuda said in an interview today. “If everything goes well, the revised law will be effective from July,” he said. Japan’s auto and electronics sectors are among the world’s major consumers of metals such as platinum, indium, lithium and chrome that are used in mobile phones, computers, catalytic converters, liquid-crystal displays and so-called green technologies, including low-energy light bulbs. “With JOGMEC’s participation, private companies can hedge political risk in overseas mine investment,” said Yasuhiro Narita , an analyst specializing in trading companies at Nomura Securities Co. in Tokyo. On Jan. 20, Orocobre Ltd. , an Australian mineral exploration company, said it will set up a joint venture with Toyota Tsusho Corp. , which is 22 percent owned by Toyota Motor Corp. , to develop a mine in Argentina that will provide raw materials for vehicles powered by lithium-ion batteries. Foreign Mines If the proposed bill is passed by parliament, “companies can invest in overseas mines promptly if prices of mineral resources decline amid the yen’s rally,” Murata said. In addition to JOGMEC, the Japan Bank for International Cooperation , a unit of government-owned Japan Finance Corp ., provides support for overseas mining projects. The bank signed a contract to provide a $245 million loan for a copper mine expansion project in Chile, it said on Jan. 26. Japan is the biggest importer of copper concentrate after China. China’s foreign currency reserves, the world’s largest, rose to a record $2.4 trillion at the end of December. The central government has spent 735 million yuan ($108 million) supporting efforts by Chinese companies to explore and develop mines overseas, the China Securities Journal said last month. Chinese companies had spent $47.3 billion on overseas projects, excluding oil and gas developments, up to the end of 2008, the report said. China Investment China Investment Corp. , the nation’s sovereign wealth fund, has had “early” talks for direct investments in Brazil and Mexico, Chairman Lou Jiwei said Jan. 20. CIC, which held almost $300 billion in assets at the end of 2008, last year accelerated investments in resource-related companies, including Teck Resources Ltd. , Canada’s largest base-metals producer. Teck Resources sold a 17 percent stake to CIC in July for C$1.74 billion ($1.5 billion) to reduce debt. China Minmetals Corp. , the nation’s largest metals trader, bought $1.4 billion of mines, including the Century mine, from Australia’s OZ Minerals Ltd. in June. South Korea expects domestic companies to make record investments of more than $12 billion on overseas energy and mineral resource projects this year to boost supplies. That’s an increase of about 80 percent from $6.7 billion last year, the Ministry of Knowledge Economy said Jan. 19. To contact the reporters on this story: Jae Hur in Tokyo at jhur1@bloomberg.net ; Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net

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Half Teaspoon Less Salt Each Day May Save Lives, Billions in Medical Costs

January 20, 2010

By Alexandra Thomas Jan. 20 (Bloomberg) — Consuming just half a teaspoon less salt each day may save as many as 92,000 U.S. deaths and as much as $24 billion in medical costs a year, a study found. A 3-gram daily salt reduction per person would lower annual cases of heart disease and stroke by about one-third, according to an analysis published today in the New England Journal of Medicine . The authors used a computer-simulation model to estimate that the change in consumption would save $10 billion to $24 billion in annual health-care costs from drugs and other treatments for high blood pressure and cardiovascular disease. Reducing salt intake would improve health as much as quitting smoking, losing weight and taking medications for lowering cholesterol, the researchers found. Salt reduction lowers blood pressure, so a cutback of just 1 gram per day would have substantial benefits in about one third of adults with high blood pressure, the study said. “There is a common misperception that only certain people should reduce their salt intake and that for the vast majority of the population salt reduction is unnecessary,” said Lawrence Appel and Cheryl Anderson of Johns Hopkins University in Baltimore in an editorial published today in the journal. “The opposite is true. For adults who reach the age of 50 years, the lifetime risk that hypertension will develop is 90 percent.” Recommendations Half a teaspoon of salt equals about 1,200 milligrams of sodium, or 3 grams of salt, according to the American Heart Association’s Web site . The heart association also announced today it was lowering its recommended amount of daily sodium intake to less than 1,500 milligrams from 2,300 milligrams. Sodium is found in a number of products besides table salt. Those include monosodium glutamate and baking soda. The study was done by researchers from the University of California, San Francisco, at Stanford University, near Palo Alto, California, and at Columbia University in New York using a computer model of coronary heart disease in U.S. residents age 35 and older. The researchers estimated that lowering daily salt intake by 3 grams would have health benefits at least as large as reducing smoking by 50 percent or using statin drugs to treat people with a low or intermediate risk for heart disease. New York City health officials are pushing for a reduction in the amount of salt in packaged and restaurant foods by 25 percent over the next five years, since Americans currently consume about twice the recommended daily amount of salt, city officials said. Mayor Michael Bloomberg recently changed other city health regulations, cutting trans fats in eating places and requiring fast-food restaurant menus to list calories. The United Kingdom, Finland and Ireland already have aggressive public programs to reduce salt intake, according to the editorial that accompanied the study. To contact the reporter on this story: Alexandra Thomas in Washington at athomas48@bloomberg.net .

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Sitting Is Silent Killer, Say Swedish Doctors in Warning to Couch Potatoes

January 19, 2010

By Michelle Fay Cortez Jan. 19 (Bloomberg) — Desk jockeys and couch potatoes beware: Too much sitting, and not just a lack of exercise, may cause heart disease and other life-threatening illnesses, according to doctors from the Karolinska Institute and the Swedish School of Sport and Health. The more time people spend in a completely sedentary state, independent of the exercise they get at other times, the higher their risk of becoming obese, and developing diabetes, heart disease and cancer, the doctors wrote in an editorial in the British Journal of Sports Medicine . The dangers are greater still for people who do little exercise as it is, the authors wrote. Public health officials have designed elaborate programs to encourage people to exercise, recommending a minimum of 2.5 hours of physical activity each week to stay fit and healthy. Individuals should also be encouraged to climb stairs rather than take the elevator, walk to the store, and take regular 5- minute breaks during a working day spent behind a desk, said doctors led by Elin Ekblom-Bak, from Karolinska and the Astrand Laboratory of Work Physiology. “In the demanding and stressful society of the present, to prescribe these low and minimally time-consuming efforts may encourage many people with problems in maintaining a sufficient level of exercise,” the doctors wrote . “Encouragingly, research has shown that simple forms of prescribing individualized physical activity in clinical practice has had a beneficial impact on exercise level as well as sedentary time.” While many people think of being sedentary as lacking in exercise, this is more accurately described as the time when the body’s muscles get no activity, the doctors said. They cited an Australian study showing that each extra hour women spent watching television boosted their risk of developing a group of heart complications known as metabolic syndrome by 26 percent, regardless of what exercise they took. “The present amount of research supporting the independent importance of sedentary behavior is small but consistent,” they said. “People already insufficiently physically active will increase their risk even further by prolonged sitting time.” To contact the reporter on this story: Michelle Fay Cortez in London at mcortez@bloomberg.net

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Drug-Resistant HIV Wave Threatens Decades of AIDS Progress, Study Says

January 15, 2010

By Simeon Bennett Jan. 14 (Bloomberg) — A wave of drug-resistant HIV emerging in the U.S. threatens to undermine progress made in treating patients in poor countries, a study published online by the journal Science found. About 60 percent of drug-resistant HIV strains circulating in San Francisco can spur self-sustaining epidemics as patients who haven’t been treated spread them, researchers from the University of California, Los Angeles said in the study. About 75 percent of those strains are impervious to a class of drugs that includes those made by Pfizer Inc. , Johnson & Johnson and Bristol-Myers Squibb Co., they said. The mutant strains may reverse progress made in expanding treatment programs in poorer nations such as South Africa, where there is little access to back-up medicines when resistance occurs, researchers led by Sally Blower at the university’s Center for Biomedical Modeling said. Patients in developed countries are less likely to suffer because they have better access to alternative treatments, they said. “If the resistant strains we have identified in our analyses evolve in these countries, they could significantly compromise HIV treatment programs,” Blower and colleagues wrote. Mutant forms circulating in San Francisco and other rich cities “pose a great and immediate threat to global public health,” they said. The study casts doubt on research by World Health Organization experts published last year that predicted testing everyone for HIV in hard-hit African countries and treating all infections immediately may eliminate most of the virus’s spread. That model is flawed because it doesn’t take drug resistance into account, Blower said in a telephone interview. ‘Very Strong’ “Our modeling is saying the drug resistant strains that you will generate from this kind of strategy are ones that will be very strong, transmissible, and therefore you will get an awful lot of problems,” she said. About 33.4 million people were infected with the AIDS- causing virus worldwide as of the end of 2008, according to the WHO, making it the world’s most prevalent infectious disease. About 13 percent of people newly infected with HIV in San Francisco get drug-resistant strains, Blower and colleagues said in the study today. The extent of HIV drug resistance in developing nations hasn’t been measured because of a lack of reliable data , the WHO said on its Web site. Blower and colleagues developed a computer model to trace and predict resistance to three classes of HIV drugs known as PIs, NRTIs, and NNRTIs in San Francisco. The greatest resistance was to NNRTIs, a category that includes Bristol- Myers’ Sustiva, Johnson & Johnson’s Intelence and Pfizer’s Rescriptor. Similar trends have been observed in other cities in the U.S. and Europe, the authors wrote. The model predicted that resistance to NRTIs, such as Gilead Sciences Inc.’s Truvada, and PIs including Abbott Laboratories’ Kaletra will remain at current levels until 2013, while resistance to NNRTIs will increase. To contact the reporter on this story: Simeon Bennett in Singapore at sbennett9@bloomberg.net

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Mutant HIV Wave Threatens Decades of Drug Progress, Study Finds

January 14, 2010

By Simeon Bennett Jan. 14 (Bloomberg) — A wave of drug-resistant HIV emerging in the U.S. threatens to undermine progress made in treating patients in poor countries, a study published online by the journal Science found. About 60 percent of drug-resistant HIV strains circulating in San Francisco can spur self-sustaining epidemics as patients who haven’t been treated spread them, researchers from the University of California, Los Angeles said in the study. About 75 percent of those strains are impervious to a class of drugs that includes those made by Pfizer Inc. , Johnson & Johnson and Bristol-Myers Squibb Co., they said. The mutant strains may reverse progress made in expanding treatment programs in poorer nations such as South Africa, where there is little access to back-up medicines when resistance occurs, researchers led by Sally Blower at the university’s Center for Biomedical Modeling said. Patients in developed countries are less likely to suffer because they have better access to alternative treatments, they said. “If the resistant strains we have identified in our analyses evolve in these countries, they could significantly compromise HIV treatment programs,” Blower and colleagues wrote. Mutant forms circulating in San Francisco and other rich cities “pose a great and immediate threat to global public health,” they said. The study casts doubt on research by World Health Organization experts published last year that predicted testing everyone for HIV in hard-hit African countries and treating all infections immediately may eliminate most of the virus’s spread. That model is flawed because it doesn’t take drug resistance into account, Blower said in a telephone interview. ‘Very Strong’ “Our modeling is saying the drug resistant strains that you will generate from this kind of strategy are ones that will be very strong, transmissible, and therefore you will get an awful lot of problems,” she said. About 33.4 million people were infected with the AIDS- causing virus worldwide as of the end of 2008, according to the WHO, making it the world’s most prevalent infectious disease. About 13 percent of people newly infected with HIV in San Francisco get drug-resistant strains, Blower and colleagues said in the study today. The extent of HIV drug resistance in developing nations hasn’t been measured because of a lack of reliable data , the WHO said on its Web site. Blower and colleagues developed a computer model to trace and predict resistance to three classes of HIV drugs known as PIs, NRTIs, and NNRTIs in San Francisco. The greatest resistance was to NNRTIs, a category that includes Bristol- Myers’ Sustiva, Johnson & Johnson’s Intelence and Pfizer’s Rescriptor. Similar trends have been observed in other cities in the U.S. and Europe, the authors wrote. The model predicted that resistance to NRTIs, such as Gilead Sciences Inc.’s Truvada, and PIs including Abbott Laboratories’ Kaletra will remain at current levels until 2013, while resistance to NNRTIs will increase. To contact the reporter on this story: Simeon Bennett in Singapore at sbennett9@bloomberg.net

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China Property Prices Climb Most in 18 Months as Asset Bubble Risks Grow

January 13, 2010

By Chia-Peck Wong Jan. 14 (Bloomberg) — China’s property prices rose at the fastest pace in 18 months in December, increasing the likelihood of more government measures to limit speculation. Residential and commercial real-estate prices in 70 cities rose 7.8 percent from a year earlier, the National Development and Reform Commission said on its Web site today. That compares with a 5.7 percent increase in November. China’s central bank on Jan. 12 raised banks’ reserve requirements by 50 basis points, seeking to rein in excess liquidity in the financial system from record loan growth , the trade surplus, and inflows of speculative capital. Premier Wen Jiabao pledged Dec. 27 to stabilize property prices, crack down on speculation and keep housing affordable. “We only expect to see about a 5 percent increase in overall prices this year as we believe that would be acceptable to the Chinese government,” Raymond Cheng , a Hong Kong-based analyst at Credit Suisse AG, said before the data release. “They don’t want the bubble to burst.” The People’s Bank of China raised the proportion of deposits banks must set aside as reserves after twice guiding yields higher at bill auctions this month. The steps signaled the central bank will boost its benchmark rate in coming months to temper the nation’s record credit boom. China’s State Council said Jan. 10 that the government would increase guidance of property lending, counter inflows of speculative capital from abroad and tackle “overly rapid” price gains in some cities after a record expansion of credit in 2009. The cabinet urged the strict application of a 40 percent down-payment requirement for second homes. It didn’t raise the requirement or add a property tax after speculation in Chinese media that it might. New lending surged as 2010 began, Chinese media reported Jan. 11, with banks loaning about 100 billion yuan each day last week, the official China Securities Journal reported . That would compare with 294.8 billion yuan for all of November. Chinese lending is usually biggest at the start of each year. To contact the reporter on this story: Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net

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