middle-east

Asian Countries Join Forces To Fight Inflation Risk

May 3, 2011

HANOI – Finance ministers of China, Japan and South Korea are mindful of the challenges from inflation, rising commodity prices and the increasing volatility of capital flows to the region, a draft statement seen on Tuesday ahead of a trilateral meeting showed. In the draft prepared for a meeting set for Wednesday, the ministers said the region has been resilient after weathering the global financial crisis due to robust domestic demand and buoyant exports, but said appropriate policies and better coordination were needed. “There are also uncertainties such as the turmoil in the Middle East and North Africa region, and the aftermath of the earthquake in Japan,” it said. “We will continue to implement appropriate macroeconomic policies and strengthen policy cooperation to achieve strong, sustainable and balanced economic growth of the three countries.” The draft statement is subject to final revisions in negotiations among the three countries ahead of the meeting. The ministers of the three heavyweight Asian economies will also meet on Wednesday with their counterparts from the 10-member Association of Southeast Asian Nations (ASEAN) at the Asian Development Bank’s annual meeting in Hanoi. The draft statement emphasized the importance of improving financial integration and cooperation in the region with the launch of the ASEAN+3 Macroeconomic and Research Office (AMRO). “We shared the view that strengthening AMRO’s surveillance function is the most effective tool to prevent a financial crisis in the region and a key element to avoid moral hazard,” the draft said. Chinese media have reported the first head of the new office would be Wei Benhua, a former deputy head of China’s foreign exchange regulator. The three ministers also agreed to enhance financial cooperation in the region by working together to improve the Asian Bond Markets Initiative (ABMI). Working with ASEAN, the group also wants to strengthen regional financial ties and systems to avert the repeat of the 1997-1998 Asian Financial crisis. One measure, the Chiang Mai Initiative, a fund that can be used by members to defend their currencies in a crisis, was expanded to $120 billion in 2010 from the initial $80 billion. (Reporting by Aileen Wang; Editing by John Mair and John Ruwitch) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Bin Laden’s Death Gives Markets Boost Of Optimism, Eases Fear Of Recession

May 2, 2011

This post has been updated. Osama bin Laden’s death has decreased the risk of doing business around the globe and especially in the Middle East, providing a needed boost to the broader economic recovery, economists said Monday. The leader of the al Qaeda terrorist group is dead, President Barack Obama announced from Washington late Sunday. The news has been a tonic for financial markets: the price of a barrel of oil fell; Japanese stocks rose to a post-earthquake high and U.S. stock futures surged. We live in a new and potentially less dangerous world, headlines are declaring. It’s a change that promises more investment in Middle East countries, cheaper transportation costs and less risk the U.S. economy will tip back into recession. “There’s a lot of positives out of this,” John Silvia, chief economist of Wells Fargo, said in an interview Monday morning. “It lowers the risk premium of anything. It generally decreases what we would call event risk — in other words, a sudden outbreak of terrorism.” “It will last as long as it’s perceived there’s no bin Laden junior coming along,” he added. Stocks across the world rose on the news of the terrorist leader’s death. Japan’s Nikkei 225 Stock Average gained 1.6 percent, reaching a high not seen since a devastating earthquake and tsunami struck the northeastern cost in March, Bloomberg News reported. The Stoxx Europe 600 index posted an eighth day of gains, and Standard & Poor’s 500 Index futures rose in London. “The nation finally caught a break,” Mark Zandi, chief economist of Moody’s Analytics, said in an email Monday morning. “At the very least, this will lift the collective psyche and rally financial markets for a bit, and confidence is vital to any recovery.” [ UPDATE: 9:40 a.m. -- Stocks had a strong opening in New York, with the S&P 500 up 0.29 percent, and the Dow Jones Industrial Average up 0.33 percent. Both indices pared immediate gains.] The good news comes during a period of economic strain. The price of oil has skyrocketed in recent months as protests across the Middle East turned violent, stoking investors’ fears that the supply from that crucial region would be compromised. Brent crude, a global benchmark, was up 50 percent compared to last year, as of Friday. As the price of oil rose, the price of gas followed, and a gallon of regular gas in the U.S. now costs an average of nearly $4, according to the American Automobile Association. High energy prices were leading economists to slash their forecasts for U.S. economic growth. Consumer confidence, an important economic indicator, plummeted in March. High gas prices were causing Americans to cut back on driving, and, as business contended with increased transportation costs, some were forced to scrap plans to hire new workers. Further, high gas prices take a profound psychological toll, making people feel poorer. Energy prices rose to highs not seen since 2008, when months of high oil prices helped drag the economy into recession. But, at least for now, that trend has reversed. In the U.S., a barrel of crude for June delivery fell from near $114 to just above $112 on Monday. The general feeling among investors seems to be that there’s now less risk of an oil supply disruption. Some tension that has accumulated over the last few months has apparently now eased, bringing the price of oil down. The dollar, which had reached a three-year low, began to climb. “One interpretation is that bin Laden’s death means that Al Qaeda will be in disarray for some time, leading to relative calm with respect to new terrorist threats, which in turn reduces the potential for disruption in oil supply,” Andrew Lo, a finance professor at MIT, said in an email early Monday. “Financial markets will likely react positively to this news in the short run, but the repercussions may be more complex over time as we learn how bin Laden’s death affects his organization and, consequently, the political economy of the Middle East.” It’s too soon to say what the long-term economic effects of bin Laden’s death will be, economists noted. Bin Laden himself did not much affect oil prices while he was alive, said Nariman Behravesh, chief economist of IHS Global Insight, in an email Monday morning. But for now, the terrorist’s death has apparently given investors a sense of optimism, which has propelled financial markets upward. Over the longer term, it could make secular Middle East countries like Turkey more attractive to investors, noted Silvia, the Wells Fargo chief economist. The so-called risk premium of doing business there could be lower, as a major terrorist attack now seems less likely. An influx of investor money could give the region an economic boost. But fundamental economic problems remain. Greece, which requested a bailout last year and has been crippled by debt, still struggles. Portugal, Ireland and Spain and the other relatively weak countries in the Euro zone still confront the prospect of painful and lengthy economic recoveries, as the high value of the Euro makes it difficult to undertake the monetary easing that a country with its own currency can implement. Bin Laden’s death is “not going to be the answer to what’s going on,” Silvia said. Further, the status of al Qaeda remains uncertain. The leader’s death could even spark a surge of terrorist attacks in the short run. The State Department issued a travel alert Monday morning, warning of the potential for anti-American violence. The alert lasts until August 1.

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Ian Fletcher: America’s Fate Under Chinese Hegemony: A Review of Eamonn Fingleton’s Jaws of the Dragon

April 30, 2011

The news has recently hit the press that China’s economy, measured on the purchasing-power basis that adjusts for price differences between nations, may surpass the U.S. in only another five years or so. Surprisingly, China has still shown no signs of morphing into the cuddly liberal and democratic nation, devoted to American ways from Coca-Cola to democracy, whose eventual appearance has been assumed by American policy for thirty years now. Our policy during this period has, after all, enthusiastically cooperated with China’s efforts to build up its economic power–which entails, of course, every other kind of power, including the military kind. So our assumption of a benign China had better be right, or else we have been abetting the creation of a monster. A hostile China will be arguably even worse than the USSR, because it will not do us the favor of sabotaging its economy by adhering to a dysfunctional economic ideology. The above realities are the subject of Eamonn Fingleton’s book In The Jaws of the Dragon: America’s Fate Under Chinese Hegemony . Fingleton is a Tokyo-based Irish journalist who has lived in East Asia for over 25 years, and he has a long and distinguished record of telling truths about the region’s politics and economics that the establishment (on both sides of the Pacific!) would rather the public did not learn. This is one of those books that one wishes the President would read. While it is hardly news that America is facing a Chinese challenge, the seriousness of this challenge is still poorly appreciated. For example–this was my big takeaway from the book–China is not just another despotism. It is the implementer of a systematic and sophisticated political philosophy, which Fingleton calls Confucianism, which will almost certainly constitute a serious threat to liberal democracy in the years ahead. Confucianism, as the reader may recall from a comparative religions class taken long ago, is the political philosophy derived from the ancient Chinese sage Confucius. It was the official ideology of the state in Imperial China for thousands of years. Now Confucius wasn’t a bad man, but he did base his political philosophy on taking authoritarian government as a given and trying to civilize it. He did not, as Western political thinkers since the dawn of democracy in Ancient Greece have done, base his political ideology on trying to prevent despotism in the first place. As a result, he simply wasn’t that interested in concepts like individual freedom or limited government. The bottom line, after a few thousand years of history and some astonishing ideological twists and turns, is an approach to politics that is systematically opposite to liberal democracy. It is the velvet glove on the iron fist, and increasingly a very sophisticated one. It has tamed capitalism and mastered modern media. It is not headed for collapse or metamorphosis any time soon. If anything, it is currently more successful at imposing its will on us than we are at the reverse. To be fair to poor old Confucius, the political system of contemporary China is not a direct extrapolation of any blueprint he drew up, and its flaws should not blind humanity to the genuinely civilizing aspects of his teachings (which are real). But, as Fingleton shows in considerable detail, a Confucian mentality underlies the politics of not only China, but also, in a soft-authoritarian version that has mastered the surface rituals of democracy, the politics of neighboring nations like Japan, Korea, and Singapore. Make no mistake: East Asia is on a fundamentally different civilizational track than the U.S., and it isn’t going to get off any time soon. And why should it, when East Asians are currently watching America decline? If the U.S. had not chosen, by its unconditional embrace of economic globalization by means of (one way) free trade, to render itself vulnerable to China, the above might not matter very much. After all, for most of its long history, China has maintained a civilization upon principles very different from those of the West, and it didn’t do us much harm. Unfortunately, the U.S. has, in fact, chosen the opposite course, with the result that our own government is increasingly slipping under the control of an ethically alien and geopolitically hostile power. To take just the most obvious example: because political bribery is, by way of political action committees, essentially legal in the U.S., Beijing can manipulate the U.S. Congress and the presidency almost at will. Why? Because it can manipulate the profits of the Fortune 500 companies that do business in China, and they do its bidding as lobbyists here. Because they are still headquartered in the U.S., they find welcome on Capitol Hill, but it is Beijing that is calling the shots. Americans sometimes puzzle over why their government doesn’t “get” the Chinese threat. The answer is simple: because it has been bribed not to by China. The most important issue on which our government has been bribed is, of course, trade. China runs astronomical trade surpluses with the U.S. In fact, a majority of our trade deficit is now with China. This is no accident: it is the product of China’s aggressive embrace of predatory mercantilism plus America’s government being bribed not to take defensive measures. To find an historical parallel, one would probably have to go back to something like the suicide of the old Polish state in the 18th century, carved up by its adversaries after its domestic politics was paralyzed by foreign bribery. America’s defense against Chinese mercantilism is further sabotaged by the fact that, despite our using similar policies earlier in our own history, mainstream American economists are largely blind to the fact that mercantilism even works. Trapped in the same “free” market thinking that led to the 2008 financial crisis, they don’t believe that China’s policies can possibly be a winning move for that country. An economy that has gone from peasant agriculture to superpower in 30 years doesn’t seem to persuade them. Why are China’s economic policies so effective? The aggressive pursuit of exports is a game other nations, like Germany and Japan, also play well. But these are both medium-sized high-wage nations that are already developed, not gigantic low-wage nations still on the early stage of their development path. (China is an economic superpower because it has so many workers, but their per capita output still only qualifies China as a middle-income nation globally, behind nations like Jamaica.) China is unique because it combines standard-issue (if exceptionally cynical) mercantilism with other policies, like forced savings and systematic technology acquisition, made possible by its despotic ex-Marxist political system. For example, it has, by deliberate state fiat, a savings rate close to 50%, while America’s is close to zero. This gives China a tidal wave of investment capital to put into everything from factories to freeways. (It is also enabling China to accumulate ownership of American government securities and private-sector assets.) Japan never took over the world, so some people dismiss the Chinese threat as yet another big wolf-cry. But China has ten times Japan’s population, nuclear weapons, and a hard-authoritarian rather than soft-authoritarian political system. This time, it’s different. Beijing is already extending its political tentacles everywhere from the Middle East to Latin America. Now that Uncle Sam worships democracy (at least in principle) and doesn’t cut dictators the slack he did during the Cold War so long as they were anti-communist, China is the new best friend of despots everywhere. China’s voracious demand for natural resource imports alone guarantees that this rivalry will not remain trivial forever. If worst does come to worst, don’t say you weren’t warned. This is a readable and very important book.

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Georges Ugeux: Has Wall Street Lost It’s Way?

April 26, 2011

“Markets are always right.” This assertion loved by market analysts is increasingly losing its relevance. In recent years, we have seen that Wall Street was able to be heavily mistaken. The Dow Jones gained 30% since the lowest level of last year, July 6th. What concerns me most is the evolution since the beginning of this year. The Dow Jones has risen approximately 9%. On an annual basis, this would be somewhere above 30%. However, since the beginning of the year, we had a string of bad news. • Popular uprisings across the Middle East • A tsunami followed by a nuclear crisis that seriously weakens the Japanese economy • A rise of 40% of the yield 10-year US Treasury bonds, from 2.5% to 3.5%, over the last six months • A doubling of the yields of the obligations of countries in difficulty – with Greece’s 2-year bonds yielding almost 24% • A negative outlook on the United States AAA rating by Standard & Poor’s • Mediocre corporate results for the first quarter of 2011 in the USA • A 20% increase in food prices worldwide • A nearly 20% increase in the price of gasoline worldwide • A weakening US dollar against all key currencies Inflation is at our doors, we are going through democratic crises, Europe and the United States have become vulnerable, and interest rates are rising. Each of these factors alone would negatively influence the investment climate and lead Wall Street to decline. All of them combined have the potential to provoke a market collapse. This collective denial, which is reminiscent of 2007, gives the distinct impression that stock markets have lost all reason. Time has come to protect capital. We know what kind of crises Wall Street denials can provoke. Large financial institutions are now in a position to send a signal to sell shares, without being accused of lack of civic-mindedness, sense of responsibility, or both. This is the extent of the independence of financial advice that they publish. Today Equilar , a compensation analyst, reported that the S&P American CEO’s bonus increased 43% between 2009 and 2010, and that their average salary ($ 9 million) increased by 28%. The first press conference on Wednesday, of the President of the Federal Reserve, will most likely tell us nothing more than what we already know. It is good news for the “core inflation” level, namely the Consumer Price Index, without taking into account the price of energy or food ! This betrays the actual purchasing power of the consumers. Bernanke’s optimism will not reassure us: he has a track record for not seeing a crisis coming even if it’s the size of an iceberg. The current euphoria on Wall Street is definitely one of the most compelling signs of a selling opportunity in a long time.

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Client Trust Returns TO UBS’s Wealth Management Arm

April 26, 2011

ZURICH (Emma Thomasson) – UBS looked to put the financial crisis behind it on Tuesday, with money pouring into its core wealth management arm in the first quarter and its struggling investment bank doing better than expected. Inflows of 11.1 billion Swiss francs ($12.6 billion) — the highest since the end of 2007 and outstripping forecasts — showed client trust was returning, the Swiss bank said. Clients had withdrawn nearly 400 billion francs from the world’s second-largest wealth manager in recent years after it was bailed out following huge writedowns on toxic assets and was hit by U.S. charges that it helped wealthy Americans dodge tax. UBS said it had had strong inflows in the Asia Pacific region and emerging markets as well as from the ultra wealthy, although it continued to see outflows in Europe, where countries have been chasing tax evaders using secret Swiss accounts. Vontobel analyst Dirk Becker said the biggest positive was the wealth management inflows: “This … shows that UBS has now left the crisis behind even in this division, where client trust and confidence were shattered.” UBS expected sustainable inflows from now on, outgoing chief financial officer John Cryan told an analyst conference call. UBS shares were up 5.7 percent to 17.53 francs by 1045 GMT, while rival Credit Suisse — which reports quarterly earnings on Wednesday — rose 2.1 percent to 39.66 francs, compared to a 0.7 percent firmer European banking index. FIXED INCOME IN FOCUS UBS reported a pretax profit of 835 million francs at its investment bank, up from 100 million the previous quarter, performing well versus its peers in fixed income — where U.S. rivals have struggled — and in equities trading. But the bank did slip up in equity capital raisings — traditionally one of its strongest businesses — after the division was among the worst hit by departures, including that of global capital markets head Matthew Koder. Chief executive Oswald Gruebel’s plans to turn around the investment bank — which made the massive losses that almost felled UBS — are under scrutiny after an exodus of top bankers. “It was a decent result in investment banking which should reassure after the headcount turbulence of the last few months,” said Matthew Clark, analyst at Keefe Bruyette & Woods. UBS said it expected to see some improvement in parts of the investment bank, despite constraints imposed on some of the fixed income currencies and commodities (FICC) businesses by a focus on controlling risk. It also noted the competition for staff and base salary increases will increase costs. U.S. bank results showed fixed income profits falling from an unusually strong first quarter of 2010, while Goldman Sachs warned of layoffs if trading volumes do not pick up and said investors are holding their money close. UBS said the disaster in Japan, unrest in North Africa and the Middle East and the ongoing euro zone debt crisis had dampened usually strong first-quarter client activity. The bank said it expected second-quarter equity market trading volumes to stay around the levels seen in the first quarter, which should support transaction-based income in wealth management and flow trading in the investment bank. It expects short-term interest rates in the West, including Switzerland, to remain low, continuing to constrain interest margins, although wealth management’s gross margin on invested assets rose by 6 basis points to 98 basis points in the quarter. Florian Esterer of Swisscanto, which holds more than 9 million UBS shares, said the bank should benefit more than peers from the shift from offshore to lower margin onshore business. “Longer-term we expect the margin headwind to be more of an issue for Credit Suisse than UBS,” he said. REGULATORY PRESSURE ON TARGETS Gruebel said the quarterly result was satisfactory but still fell “short of our overall ambitions.” Sarasin analyst Rainer Skierka said the figures might counter recent doubts in the market about Gruebel’s mid-term target for a pretax profit of 15 billion francs — including 6 billion from the investment bank. “However, even after a rebounding first quarter there is still a long way to go especially in investment banking where a high compensation ratio remains a hot topic,” Skierka said. CFO Cryan said UBS was not deviating from those targets today but said the bank was carefully assessing the impact of new regulation, most notably on the capital-intensive FICC business, although it was too early to say what it might do. Gruebel has said stiff Swiss capital standards — which the government sent to parliament last week and could be approved this year — could force UBS to move units abroad. UBS said it was monitoring the effect of new rules in Switzerland, Britain, the United States and elsewhere on the corporate structure and would take action when needed. UBS is not paying a dividend for 2010 or for some time to come as it retains earnings to meet the tough new requirements. (Additional reporting by Martin de Sa’Pinto in Zurich, Edward Taylor in Frankfurt and Sarah White in London; editing by Alexander Smith) ($1 = 0.8843 Swiss franc) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Guest Commentary: The Rising Instability in the Middle East and Its Relation With Oil Prices

April 25, 2011

Guest Commentary: The Rising Instability in the Middle East and Its Relation With Oil Prices

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Obama’s Oil Market Fraud Squad May Miss Wall Street Abuses

April 22, 2011

WASHINGTON — On Thursday, President Obama unveiled a new working group to combat any fraud or manipulation in the oil and energy markets that may be contributing to near-record gas prices. But some economists and market experts worry that by focusing on criminal activity, Obama is shrugging off a much bigger problem: rampant Wall Street speculation in commodities markets that has helped drive up food and energy prices in the past. “If prices start moving quickly up, you can get a side effect … that people might try to play [fraudulent] games of one sort or another,” said Massachusetts Institute of Technology economist John Parsons. “But it wouldn’t be central to the price movement” currently being seen in the market, he said. Gas prices are approaching record levels set in 2008, when prices at the pump eclipsed $5 a gallon. While unrest in the Middle East is almost certainly playing a major role in boosting current prices, increased speculation in commodities markets is likely contributing to the near record prices. The number of speculative bets being placed on oil and gas now far exceeds that of the 2008 price swing , which many economists believe was driven by excess speculation. Moreover, on March 21, Goldman Sachs analyst David Greely advanced the argument that Wall Street speculation was helping drive up oil prices in a memo sent to the bank’s clients. But, if speculative excess is contributing to current sky-high gas prices, such activity may not be illegal, in part because the Commodities Futures Trading Commission has not yet issued key regulations intended to rein in Wall Street gambling on food and energy prices. Congress ordered the agency to crack down on excessive speculation with last year’s financial reform bill, but the CFTC has been slow to implement new rules in the face of intense lobbying from Wall Street bankers. Financiers are quick to note that commodities markets need speculation — a raw bet that the price of oil or food will move up or down — in order to function. But economists say that too much speculation can distort the market, leading to wild price swings. Even if so-called “fundamental” factors are driving prices, heavy speculation can cause prices to swing further than normal supply and demand forces would dictate. In January, the CFTC announced it would push back implementing ‘position limits’, a key regulatory tool that restricts the size of the bets investors can make on commodities, in order to collect more data. But many reform advocates and CFTC Commissioner Bart Chilton say that there is plenty of data available to implement new rules now. “What the administration and others should do, which they have the power to do quickly, is impose position limits, which would stop excessive speculation now,” said Dennis Kelleher, a former securities lawyer with Skadden, Arps, Slate, Meagher & Flom who now heads the financial reform advocacy group Better Markets. “An investigation into criminal acts is not likely to lead to much.” Attorney General Eric Holder, who is in charge of the new inter-agency taskforce, specifically instructed members of the new taskforce in a Thursday memo to look into “the role of speculators and index traders in oil futures markets” — something the CFTC is already required to do. Officials from the CFTC, the Federal Reserve, the Federal Trade Commission, the Department of Agriculture, the Deparment of Energy and state attorneys general will be part of the group. But Chilton, the CFTC’s strongest proponent of reining in commodity speculation, says that the task force may well do some good. “Seventy-five percent of the cases we send to the Justice Department for criminal prosecution are rejected,” Chilton told The Huffington Post. “But if we can work more closely with the DOJ folks, we may be able to put more people in jail.” Nevertheless, Chilton said the CFTC should be taking steps independent of the task force: “That doesn’t mean that the working group is a panacea for actions that can be taken by regulators right now. The position limits are something we can do right now. I don’t need a task force to tell me to do that.” Unlike the stock market and other capital markets, commodities markets are not designed to function as a forum for investment vehicles. Instead, commodity markets are supposed to allow farmers, manufacturers and other producers to hedge the risks of doing business. By taking out a futures contract, or similar bet in the derivatives markets, farmers can lock in a price for their crops, protecting themselves from price changes. Producers need someone to take the other side of their price bets, whether it be another producer or, as it more frequently is, a Wall Street trader. Commodities markets work well when around 30 percent of the market is dedicated to speculation, According to Kelleher. But since the mid-2000s, the share of speculators in commodity market activity has increased to about 70 percent, Kelleher says, in part driven by new commodities “index funds,” which allow investors to bet on the price of several commodities at once.The size of those funds expanded from about $15 billion in 2003 to $200 billion in 2008 , and are currently valued at over $400 billion , according to Barclays Capital. The explosion in the over-the-counter derivatives market has also contributed significantly to oil price increases, according to Kelleher, by allowing investors to place huge bets on commodities without either regulatory oversight or market scrutiny. The derivatives market for commodities grew from about $674 billion in 2001 to $13.2 trillion by June 2008 , according to the Bank for International Settlements. Last year’s financial overhaul gave the CFTC authority over that entire derivatives market — one vastly larger than the $5 trillion futures market that the agency had previously policed in isolation. Whatever new rules the CFTC writes, they will need funding additional funding to enforce them. “The CFTC’s current funding is far less than what is required to properly fulfill our significantly expanded mission,” CFTC Chairman Gary Gensler warned in April 12 testimony before the Senate Banking Committee . But Obama was willing to negotiate away additional funding for the agency during negotiations over the budget for the rest of 2011. Under the budget deal Obama struck with congressional Republicans earlier this month, the CFTC will receive a $34 million boost in funding for the remainder of the year. But, even with that additional cash, the agency will receive about $60 million less this year than the amount Obama requested for the agency under his 2011 budget. Calls to the White House were not returned. The Department of Justice declined to comment. Elise Foley contributed to this report.

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Gordon Brown: Global ‘Mini-Lateralism’ Will Get Us Nowhere

April 22, 2011

Two years ago the formal creation of the G20 helped prevent the world recession from becoming a world depression. World leaders agreed to a one trillion dollar underpinning of the world economy, and strengthened the World Bank, the IMF and the World Trade Organization. In its concluding statement, however, the G20 promised more: that it would work towards implementing new global standards and regulations across the world’s banking system and that it would be the architect of a global growth agreement designed to deliver rising prosperity and create jobs in the decades ahead. Two years on, what some now call mini-lateralism, seems to be the order of the day. The immediate crisis has passed and despite outstanding leadership in our international institutions and bold international initiatives by some national leaders, many governments have retreated into their national shells. We cannot agree on the proposed ‘global growth pact’, a world trade agreement is yet again stalled, risking the first failure of a planned trade agreement since 1948, and, even after a nuclear catastrophe in Japan and a period of violent volatility in oil prices, there is still insufficient momentum for a global climate change agreement. So what has happened? The need for cooperation cannot be in dispute. Indeed this year the world is facing an unremitting onslaught of new challenges – food shortages, commodity price rises, youth unemployment and social unrest ; and large imbalances even as inflation reappears. Some now talk not of a crisis but of crisis-ism, a state of ever recurring crises that cannot easily be resolved by nations acting autonomously. Our interdependent world means that our problems are no longer just problems we share in common but are global, interwoven between countries and only concerted action across continents can effectively tackle them. The IMF has already shown that we might have been in a position to raise world growth by an extra 3 per cent by 2015, and create anything between 25 and 50 million new jobs if the enhanced global cooperation that the G20 promised in 2009 had happened. But we need better global coordination not just to address the problems of today but the challenges of tomorrow, triggered by the next revolution ahead in global markets. Indeed, this generation finds itself in a unique place — at the vanguard of the biggest transformation of the world economy in history. In the last twenty years, two billion men and women have joined the ranks of industrial producers, trebling the size of the world’s industrial economy. In the next ten to fifteen years this revolution will be augmented by at least two billion people joining the ranks of the world’s middle-class, trebling its current numbers. So the recent shift in producer power will soon be matched by a coming shift in consumer power, and we will see and feel this transformation powering through our lives and shaping our national fortunes with an irresistible force. The world’s biggest market, for instance, will no longer be in America but in Asia and it will grow to around 40 percent of all consumer spending, twice the size of the American market, and substantially bigger than the German market (4 percent) and the British market (3 percent). So who will be the biggest beneficiaries of these changes? With the right opening up of trade, European and American brand names, with high value added, and technology driven, niche and custom-built products and services, could be providing us with engines of growth and employment as demand for these products and services rises in Asia (as well as in other areas with increasing consumer power, like Brazil, Turkey, Indonesia and parts of Africa). Yet without enhanced international cooperation the west will not be in the best position to take advantage of these changes. Indeed unless we enshrine market access in a global agreement we will lose out on some of the greatest economic opportunities for rising standards of living we have ever seen. And global coordination is necessary for other reasons, too. The world has been too ready to unlearn the lessons of the financial crisis and there is a danger that we are sowing the seeds of the next financial crash. Without agreement on global financial standards -and currently individual continents and even countries are going their own way- finance will be in a race to the bottom with the good financial centers at risk of being undercut by the bad and the bad by the worst. And of course, if present trends continue, if markets remain closed to certain countries or operate randomly and in an unfettered way, the world will become structurally more unequal — India, China, Indonesia, Brazil and Russia will see inequality grow and Africa will become more isolated. The economic discontents of the peoples of North Africa and the Middle East will not be met without international support. Enhanced cooperation is essential in helping to prevent embryonic problems in poorer parts of the world from escalating into crises that could threaten the security of and through mass migration risk the stability of all the peoples of the world. Without global flows of investment to empower entrepreneurship in Africa and to facilitate economic and educational development, the region will become the source of new migration, climate change and security crises that will threaten us all. Today, the responsibility to pick up the reins of global cooperation falls on all of us. We need to argue more strongly than ever for the employment benefits that will flow from a world growth plan. Civic organizations, especially churches and faith groups, often underestimate the resonance of their collective voice: their voice should be listened to as they demand action against poverty and youth unemployment. There should be a stronger partnership with business which, in a world of heightened risk, needs avoidable uncertainty removed not least the stable environment that comes from a clean banking system operating to global standards. Business benefits too when we act to end the volatility in energy prices, when we organize effectively to increase food production and reduce food prices and when we take active steps to raise employment levels. Enhanced global cooperation needs to be championed by a strengthened coalition of business, NGOs, international institutions and public leaders working together on global issues. That opportunity is being championed today by the vision of the World Economic Forum led by Professor Klaus Schwab, which is already part of the business outreach President Sarkozy has championed for the G20, following President Obamas lead in 2009. Today there is, indeed, too much mini-lateralism: we cannot succeed without enhanced cooperation and it’s time once again to raise our ambitions on what global co-operation can achieve. Gordon Brown is the former Prime Minister of the United Kingdom and author of Beyond the Crash; Overcoming the First Crisis of Globalisation. He is to be Chairman of the Global Policy Coordination Board of the World Economic Forum in an unpaid capacity.

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Hope Lewis: Can the U.S. Afford Economic Rights in an Economic Crisis?

April 21, 2011

Can the U.S. afford to recognize economic and social rights in the midst of high unemployment rates at home and an ongoing global economic crisis? Yes we can. We can’t afford not to respect economic and social rights when millions in our country are struggling to find decent work, to find a stable place to live, to educate their children, to overcome discrimination, and to care for the sick. How can we fail to protect economic and social rights when banks defraud people out of their homes or when businesses discriminate against or mistreat workers who try to organize? We can’t afford not to promote economic and social rights when constitutional courts, schools, and ordinary people protesting on the streets around the world are beginning to understand and apply them. We can’t afford to ignore our obligation to fulfill economic and social rights with an 8.8% unemployment rate , an astonishing 15.5% rate among African-Americans, the incarceration of 2.3 million people , and with infant mortality rates among some Americans that rival those in poor countries. The State Department has just announced a new policy embracing human rights (” The Four Freedoms Turn 70 .”) What’s new about that, you say? This time, the rights at stake include the right to health, education, housing, jobs, and fair working conditions, and the right to organize. The rights are to apply at home as well as in far-flung countries around the globe. For human rights advocates like me, this is a welcome (and long-awaited) turn of events. It is also something of a surprise. For decades, the U.S. official position was that economic and social rights such as those are “pie in the sky” aspirations, and not “real” rights like the right to vote or the prohibition on torture. The State’s new policy position, formally announced by Michael Posner, Assistant Secretary of State for Democracy, Human Rights, and Labor, could mean a sea change for human rights protection both in the U.S. and internationally. But only if the rhetoric is accompanied by the serious commitments necessary at all levels of government — executive, legislative, and in the courts. And only if people throughout the United States — working people, the unemployed, racial and ethnic minorities, women, immigrants, and academics — hold our leaders accountable for taking these rights seriously. One phrase in particular struck me as Posner spoke: “human rights reflect what a person needs in order to live a meaningful and dignified existence.” I agree. That is why the historical U.S. ambivalence, even hostility, toward economic, social, and cultural rights has been so counterproductive, both within the U.S. and outside it. We should have understood their importance long ago. The failure to fulfill civil and political rights is equally counter-productive, as certain regimes in North Africa and the Middle East are learning after decades of repression and military and economic support from the U.S. A commitment to human rights means a commitment to the dignity and worth of each human being, without discrimination. Such a commitment, although daunting, can only work to the benefit of the United States and its people. We spend billions — trillions — of dollars each year on wars, anti-terrorism strategies, incarceration, crime control, anti-immigrant anxiety, emergency room care, and disaster response. What if, instead, we were to spend even a reasonable portion of that amount ensuring early education and nutrition, providing access to preventive health care and the social supports for good health (including the food and agricultural, environmental, drug rehabilitation, and anti-smoking policies that contribute to it), and accessible, sturdy housing? What if we reoriented our international trade and aid policies to focus on fairness, equity, self-determination, and sustainability? It must be the case that such a sea change would be at least as effective as the alternatives. Economic and social rights are no stranger to U.S. administrations. Posner spoke in recognition of this year’s 70th anniversary of President Franklin D. Roosevelt’s ground-breaking 1941 ” Four Freedoms ” speech to the U.S. Congress. In the midst of war, FDR argued that freedom of speech, freedom of belief, freedom from fear, and freedom from want were all linked in a web of human rights and needs. Not only were they moral imperatives, they were also necessary to achieve and maintain peace and security in the United States and internationally. This insight was to be echoed in the 1948 Universal Declaration of Human Rights, the influential statement of human rights and fundamental freedoms drafted by the United Nations Commission on Human Rights under the Chairmanship of Eleanor Roosevelt. The U.S. voted in favor of the Declaration that year and has since signed, or become a party to, several important international human rights treaties that recognize the full range of civil, political, economic, social, and cultural rights for all. Sure, implementing economic and social rights costs money. So does establishing courts, building prisons, and funding political campaigns. The recent and upcoming budget and deficit debates continue to be a grand political show. But this country’s future depends on recognizing that human rights, including economic and social rights, are nothing less than the most important guide by which we can set pragmatic policies. After 70 years, it is a good thing to hear the U.S. administration talk as if economic and social human rights can be a reality for poor and marginalized Americans. Now, the talk must be followed by the action it takes to make change. Yes, we can. Hope Lewis is Professor of International Law at Northeastern University School of Law, a member of the Executive Council of the American Society of International Law, and co-author of Human Rights and the Global Marketplace: Economic, Social, and Cultural Dimensions. The positions expressed here are in her individual capacity and do not necessarily reflect those of organizations with which she is affiliated.

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Video: Morales Says Intel Has `Breakthrough’ Tablet Technology

April 20, 2011

April 20 (Bloomberg) — Christian Morales, head of Europe, Middle East and Africa at Intel Corp., discusses the company’s first-quarter profit and development of technology for tablet devices. He talks with Linzie Janis on Bloomberg Television’s “Countdown.”

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Video: Jerusalem Bookseller Finds Backers to Fight Deportation

April 19, 2011

April 19 (Bloomberg) — Munther Fahmi, owner of the American Colony Hotel bookshop in Jerusalem, talks about his possible deportation by Israeli authorities. Fahmi, who sells hard-to-find books on Middle East politics, culture and travel, is getting support from authors, academics and political figures including Orhan Pamuk, Ian McEwan, and Amos Oz. He spoke with Bloomberg’s Calev Ben-David on April 10. (Source: Bloomberg)

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WATCH: Donald Trump’s Big Idea To Lower Gas Prices

April 17, 2011

WASHINGTON — With gas prices rising above $3.50 a gallon in all but one state , Americans are getting hit hard at the pump. But billionaire and presidential aspirant Donald Trump thinks he has the solution: Simply tell OPEC to cut prices. Trump blamed gas costs on the Organization of Petroleum Exporting Countries (OPEC), a conglomerate of developing nations responsible for 40 percent of global oil supplies . He said on CNN’s “State of the Union” Sunday that lowering the price of gas is as easy as telling OPEC’s members to do so — something he believes President Obama is incapable of. When host Candy Crowley argued that the United States can’t control OPEC, Trump disagreed, saying our country only needs “brain power.” “Candy, it’s the messenger,” said Trump. “You know, I can send two executives into a room. They can say the same thing. One guy comes home with the bacon and the other one doesn’t. And I’ve seen it a thousand times. It’s the messenger.” “We don’t have the right messenger. Obama is not the right messenger,” he continued. “We are not a respected nation anymore. The world is laughing at us. … Let me tell you, it’ll go down if you say it properly.” Trump also criticized Obama’s handling of the conflict in Libya, saying the United States should just go in there and take the country’s oil. “Either I’d go in and take the oil or I don’t go in at all,” he said. “We can’t be the policeman for the world.” He added that he would leave Libya “plenty” of oil so that “they can live very happily” as well. WATCH: Other Republican presidential aspirants have more directly blamed the Obama administration for rising gas prices. Mississippi Gov. Haley Barbour, for example, has suggested the White House deliberately drives up prices. “This administration’s policies have been designed to drive up the cost of energy in the name of reducing pollution, in the name of making very expensive alternative fuels more economically competitive,” said Barbour in a speech to the U.S. Chamber of Commerce in Washington, DC last month. On NBC’s “Meet the Press” on Sunday, Treasury Secretary Tim Geithner cited tensions in the Middle East and North Africa along with the nuclear situation in Japan for impacting gas costs. He said that high gas prices have a ” measurable impact on the economy ” by slowing the recovery process “moderately.”

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G20 Backs Early-Warning Plan Against Future Crises

April 17, 2011

WASHINGTON (Daniel Flynn and Wanfeng Zhou) – Leading world economies agreed on Friday to put the policies of seven major nations under a microscope as part of a plan to prevent a repeat of the global financial crisis. The pact was agreed by the Group of 20 nations after months of wrangling highlighted by China’s fears that its policy of limiting its currency’s rise was being targeted. Under the deal, the International Monetary Fund will look at national levels of debt, budget deficits and trade balances to determine if a nation’s policies are putting the global economy at risk and should be changed. One potential shortcoming is that countries will not be bound to follow any recommendations that emerge. French Finance Minister Christine Lagarde said the agreement marked “huge progress” on the path to more balanced world growth and said seven major economies would automatically be subject to review. Others could face scrutiny as well if their policies are found to be stoking global risks. “The net is a little bit tighter for those countries that are considered of systemic importance,” Lagarde said. France is president of the G20 this year. Countries representing more than 5 percent of the combined output of the G20 will be examined by the IMF under the deal. The list would include the debt-burdened United States and export-rich China — the two main economies at the heart of the debate over global imbalances. France, Britain, Germany, Japan and India would round out the list, officials said. “Our aim is to promote external sustainability and ensure that G20 members pursue the full range of policies required to reduce excessive imbalances,” G20 finance officials said in a communique issued at the close of a full-day meeting. Many economists say global imbalances — notably the gaping and persistent U.S. trade gap and correspondingly large surplus in China — laid ground for the 2007-2009 crisis, which ended with the worst global recession since World War II. The G20 has become the main forum to prevent similar boom-bust cycles. Agreeing on how best to do that has grown difficult now that the darkest days of crisis have passed. Eswar Prasad, a senior fellow at the Brookings Institution and former IMF official, said the real test of the latest plan from the G20 rich and emerging economies will come once all the numbers are filled in and countries have to answer for policies that are deemed a danger to the world. “Once the numbers are put on the table, that’s when you’ll start to see the pushback,” he said. The G20 appeared to offer room for countries to sidestep criticism. “National circumstances will … be taken into account,” it said without elaboration. It said the global recovery was strengthening but warned of continued risks, including the political unrest in the Middle East and North Africa and the disasters in Japan. PROGRESS ON CAPITAL CONTROLS Officials also agreed to keep working on a framework for determining when countries can use controls over capital inflows — a sensitive topic for emerging market nations that are fighting inflation stoked by “hot money” from countries with low interest rates, such as the United States. Brazil has resisted efforts to restrict the use of capital controls. “We don’t want high levels of global liquidity to turn into problems for the Brazilian economy,” the country’s central bank chief, Alexandre Tombini, said on Friday. European Central Bank Governing Council member Christian Noyer said officials “made enormous progress” on the issue. “We do not any more have two fronts, one saying there should be total freedom and never any measure taken, and the other saying each country should have total faculty to do whatever it feels necessary,” he said. Policymakers from advanced economies, led by the United States, have argued that emerging nations can combat inflows and price pressures by allowing their currencies to strengthen against the dollar. They say if countries such as China were to do so it would help balance world trade. Emerging nations, in contrast, blame near zero interest rates in the United States for sending investors elsewhere in the search for returns. Despite efforts by Brazil to weaken its real currency, it hit a near two-year high this week. While China had been especially wary about the effort to set up a monitoring process, it welcomed the G20 accord. Chinese Vice Finance Minister Zhu Guangyao said the agreement “fully reflects each country’s demands,” including “reforming the international financial system and strengthening financial regulation.” “We’re satisfied with the results,” he said. Lena Komileva, an economist at Brown Brothers Harriman, said officials were still a long way from securing the future of the world economy. “The global recovery has been achieved at the price of a record U.S. budget deficit and overheating in emerging markets such as China,” she said. “This is not a sustainable platform for global economic stability.” (Reporting by Reuters IMF/G20 team; Writing by Steven C. Johnson and Glenn Somerville; Editing by William Schomberg, Leslie Adler and Tim Ahmann) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Shutdown: Economic Support Systems Would Continue, Even As Housing, Small Businesses Take Hits

April 8, 2011

If the federal government shuts down tonight, much of the apparatus that has helped prop up the faltering economy will remain in place. The Federal Reserve will continue its $600 billion asset-purchase program, buying government debt from Wall Street banks in an effort to get money flowing through the economy. The Treasury, which, as of late March, owned $142 billion of mortgage securities, will continue to sell that portfolio, as it works to earn a profit on the taxpayers’ investment. The New York Fed will continue selling the toxic securities it bought from AIG during the height of the financial crisis. Even if thousands of workers are furloughed, and struggling families miss government checks , these economic support systems will continue. “We got ourselves in a situation by letting banks become too big to fail, that they’re now basically sucking at the tit of the government,” said Mark Blyth, a professor of international political economy at Brown University. “If we let them go, we harm ourselves.” Two and a half years after the worst financial crisis since the Great Depression, the broader economy remains on fragile ground. The unemployment rate is close to nine percent. Home prices are still falling. As fighting continues in the Middle East, oil prices are rising, pushing up energy costs and tearing precious resources from the American economy. During the last major government shutdown, from late 1995 to early 1996, the economy was stronger. Then, as now, the country was emerging from a recession. But at that point, the recovery was being felt throughout the broader economy. The unemployment rate was 5.6 percent. Nothing like today’s economic support system was in place back then. “The apparatus wasn’t in place because it wasn’t necessary,” said Gus Faucher, director of macroeconomics at Moody’s Analytics. A shutdown now would come at a time when the economy is relying on government support to a historic degree. Since the recent financial crisis, government programs have helped promote a recovery. But the progress has been uneven. Flush with the taxpayer bailout and confident in explicit and implicit government guarantees, big banks have seen their revenues and profits skyrocket. Pay at Wall Street firms last year hit a new record, while wages for middle class Americans stagnated. Since the Fed launched a second so-called “quantitative easing” program late last year, the central bank’s New York branch has been buying U.S. government debt from big banks, allowing those firms to reap easy profits. The policy is designed to lower interest rates throughout the economy in order to stimulate a broader recovery. The Federal Reserve, which relies on separate funding, would not be affected by a shutdown of the federal government. Similarly, the Treasury holds a massive portfolio of mortgage-backed securities, which it bought during the worst of the crisis in an effort to calm markets. It began the process of selling this $142 billion portfolio last month. Those operations will continue if the government shuts down, a Treasury spokesperson confirmed on Thursday. But other economic programs that aren’t explicitly tied to the current slump would halt. The Federal Housing Administration, which insures and guarantees nearly a third of U.S. mortgages, would stop its operations, potentially causing further slowdowns in the housing market. Since spring is normally peak home-buying season, the shutdown could present a further obstacle to an already weakened sector of the economy. Without the government insuring mortgages, some mortgage issuance will likely stop. JPMorgan Chase plans to stop making new FHA loans in the event of a shutdown, The New York Times reported. “This is the worst time that we could introduce that uncertainty into this fragile housing market,” Housing Secretary Shaun Donovan told a Senate subcommittee on Thursday. Small businesses, too, could suffer. The Small Business Association would stop approving applications for loan guarantees and direct loans to small businesses, potentially hampering these businesses’ growth. Small businesses pay 44 percent of the nation’s private payroll, according to the SBA. “We will continue to do our part, we just won’t be able to close loans,” said Dave Rader, head of SBA lending at Wells Fargo. A shutdown, he added, would hamper the bank’s ability to “provide access to capital for small business borrowers.” If the shutdown drags on for more than a few weeks, it could wither Americans’ confidence enough to provoke a relapse into recession , Mark Zandi, chief economist at Moody’s Analytics, said last week. But the real danger, experts say, is if the gridlock in Congress infects the debate on whether to raise the federal debt limit . The government must borrow money to finance its existing debt and other obligations. It will hit its ceiling in mid-May, Treasury Secretary Tim Geithner said this week before a Senate subcommittee. If the government were to default, U.S. interest rates would likely rise, potentially touching off an economic crisis that could send panic around the globe. “This is a symbolic exercise we’re going through,” said Robert Shapiro, a fellow at the Georgetown Center for Business and Public Policy and a former U.S. Under Secretary of Commerce for Economic Affairs. “If it goes a month, that means you’ve got much more serious problems. You’ve got problems with real political gridlock, at a real fundamental level. That begins to really worry markets.” Nathaniel Cahners Hindman contributed to this report.

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Gold Prices Hit Record High On U.S. Dollar’s Decline

April 8, 2011

NEW YORK (Frank Tang) – Gold rose to a record high for a fourth straight day and silver surged on Friday, as a weaker dollar, the prospect of a U.S. government shutdown and inflation worries lifted precious metals in a broad commodities rally. Gold was set for its biggest weekly gain in four months, drawing support from renewed euro zone sovereign debt fears amid Portugal’s financial crisis and inflation jitters as crude oil and corn hit new highs this week. Bullion broke above key resistance on technical charts and could target above $1,500 an ounce. The metal has risen more than 10 percent since late January when political unrest began to flare in the Middle East and North Africa. “With the expected future inflation being higher in this low interest rate environment, investors are more inclined to have some contributions to commodities as an inflation hedge,” said Hakan Kaya, commodities portfolio manager at Neuberger Berman, which manages about $190 billion client assets. Spot gold rose as high as $1,474.19 an ounce and was later up 1 percent at $1,472.20 an ounce by 12:36 a.m. EDT. Bullion was on track to rise 2.5 percent this week for a fourth straight weekly gain. U.S. gold futures for June delivery gained 1 percent to $1,473.60. Gold remained far below its all-time inflation-adjusted high, estimated at almost $2,500 an ounce set in 1980 as a result of heightened geopolitical pressure and hyperinflation. (Graphic: r.reuters.com/ren88r ) U.S. futures activity was sharply below average for a second consecutive day, but analysts said low volume is not detrimental to the bull run after a strong price rally. Silver rose 2.3 percent to $40.42 an ounce, just off the session high of $40.49. The gold-to-silver ratio — the number of silver ounces needed to buy an ounce of gold — fell to a 28-year low near 36 on Friday. “One would expect silver to outperform in this environment because it bears a higher risk than gold on a volatility basis,” Kaya said. DOLLAR WEAKNESS UNDERPINS The dollar slide against the euro, supported by widening interest rate differentials after ECB’s rate hike, and crude oil’s surge to 2-1/2 year high added fuel to a rally that has already taken gold to a series of record highs this year. Gold also benefits from dollar weakness as Democratic and Republican congressional leaders said on Friday there was no overall deal on government funding for the rest of the fiscal year that ends September 30, and could not even agree on what disagreements remain ahead of the midnight Friday deadline. The looming U.S. government shutdown was “simply a minor problem of far greater problems,” said Camilla Sutton, chief currency strategist at Scotia Capital. The issues with the U.S. dollar are not temporary and the dollar is expected to remain weak this year, she added. On charts, gold breached important technical resistance at $1,466 an ounce near Thursday’s high, said Rick Bensignor, chief market analyst at Dahlman Rose. If bullion could hold above $1,466 early next week, it should next target an area between $1,500 and $1,510 an ounce, Bensignor said. Among other precious metals, platinum gained 1.3 percent to $1,803.74 an ounce, while palladium jumped 2.2 percent to $791.97. Prices at 12:36 p.m. EDT (1636 GMT) (Additional reporting by Julie Haviv in New York, Jan Harvey in London; Editing by David Gregorio) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Attacks On Libyan Oil Fields Cause Global Price Hike

April 8, 2011

Oil hit a 32-month high near $125 on Friday after attacks on Libyan oil fields raised the prospect of long-term supply cuts, with commodities in general rising on optimism global economic recovery will fuel demand. Ongoing unrest in the Middle East and concerns postponed elections in Nigeria could spark a new wave of militant violence and disrupt supply also contributed to the bullish mood in the market. By 1216 GMT Brent was up $1.82 to $124.49, after earlier climbing more than $2 to just below $125. U.S. crude climbed $1.29 to $111.59, down from slightly an intra-day peak of $111.90 last reached in September 2008. “Troubles in Libya mean Gaddafi has caused damage to the Sirte basin which has about two thirds of their oil, there’s dollar weakness and some very large fund action piling into the market in oil and base metals,” said Rob Montefusco, an oil trader at Sucden Financial. “People are saying the target is $150 but if we get up there it will come off pretty quickly. I don’t think this is a sustainable rally because we’re not seeing real demand pick up.” Rebels and forces loyal to embattled leader Muammar Gaddafi exchanged bitter accusations over who had attacked oilfields and infrastructure vital to both sides. The seven-week old civil war has cut Libya’s 1.6 million barrels per day output by 80 percent to between 250,000 and 300,000, a senior government official said. It took Kuwait two years to restore oil production to pre-war levels of about 1.6 million bpd, similar to Libya’s pre-conflict production, after the 1991 Gulf War, according to International Energy Agency data. Fellow OPEC member and 1.9 million bpd producer Nigeria postponed parliamentary elections again in some areas although polls will go ahead in most of the country on Saturday as planned. “Upcoming elections in Nigeria has already seen an uptick in violence in oil rich states of Akwa Ibom and Balyesa, with any loss in Nigerian crude (similar in quality to Libya) likely to put further pressure on light-heavy differentials,” said Barclays Capital analyst Amrita Sen. Further supply worries came from Norway where a trade source said the North Sea Oseberg crude oil stream will load 118,000 barrels per day in May, significantly down from the provisional program of 160,000 bpd in April. COMMODITIES BOOMING Crude prices rallied in step with gains across the commodities market where gold hit a record high, driven by a weaker dollar and positive global outlook despite Portugal’s request for a bailout earlier this week. But surging oil prices have stoked inflationary concerns for governments worldwide due to the potential adverse impact on economic growth of the rising cost of foodstuffs and raw materials, and the risk of demand destruction. “Awash with still extremely cheap money – the leading policy approach to cope with the passed recession – the investment community is pouring record volumes into long commodity positions,” said analysts at JBC Energy in a note. “This drives not only fuel and food prices to record highs, but also raises the costs for other raw materials massively, clearly putting the economic outlook under threat.” (Additional reporting by Randy Fabi and Alejandro Barbajosa; editing by Keiron Henderson) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Parsons Appoints Mehula as MENA+ President

April 6, 2011

PASADENA, CA–(Marketwire – April 6, 2011) – Parsons today announced that Guy Mehula has been appointed Parsons MENA+ President. In his new role, Mr. Mehula will be responsible for providing overall leadership and promoting Parsons’ core values and strategic objectives in the MENA+ region (Middle East, North Africa, and the northern Mediterranean Sea border countries). Mr. Mehula will succeed Jeffrey F. Squires who served as the founding President of the MENA+ region.

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Libyan Opposition Strikes Oil Deal

April 1, 2011

BENGHAZI, Libya — A plan to sell rebel-held oil to buy weapons and other supplies has been reached with Qatar, a rebel official said Friday, in another sign of deepening aid for Libya’s opposition by the wealthy Gulf state after sending warplanes to help confront Moammar Gadhafi’s forces. It was not immediately clear when the possible oil sales could begin or how the arms would reach the rebel factions, but any potential revenue stream would be a significant lifeline for the militias and military defectors battling Gadhafi’s superior forces. Rebel units were pushed back about 100 miles (160 kilometers) this week along the Mediterranean coast, but still held parts of oil-rich eastern Libya and the key city of Benghazi. In recent clashes, rebels displayed more firepower including mortars and rockets, but remain significantly outgunned. Ali Tarhouni, who handles finances for the opposition’s National Transitional Council, said that Qatar has agreed to market oil currently in storage in parts of southeastern Libya. He said one sticking point is how to truck the oil out of the country. Tarhouni said money from oil sales will be put into an escrow account the opposition will use to pay for weapons, food, medicine, fuel and other needs. He said the rebels had asked visiting U.N. and French envoys to have sanctions lifted on the parts of Libya controlled by the rebels. He said that if transport issues are solved, the rebels could immediately start exporting 1 million barrels per week. When asked, he said the rebels would certainly use oil revenues to buy arms. “People are dying,” he said. He said the council was exploring “buying arms, any kind of arms that we can get to. We have a list of the arms we need and we’re trying some different fronts to buy them. There was no immediate comment from officials in Qatar, one of the few Arab states taking part in the international military contingent enforcing a no-fly zone in Libya. Qatar is also assisting a rebel satellite TV operation that began broadcasts this week from Qatar’s capital Doha and has agreed to host a meeting of Libyan opposition groups. A spokesman for Qatar Petroleum, the state company responsible for selling the Gulf nation’s oil, declined to comment. In London earlier this week, Britain’s foreign secretary, William Hague, said Qatar had offered to “facilitate” oil sales that are consistent with international law. Hague did not provide details about who would be supported, how the facilitation process would work, or how Qatar’s offer has been received by diplomats. It has been unclear how exactly such an arrangement would work. The effort to get oil out is hampered by several factors, including the rebels’ ability to hold eastern oil production and export facilities, the departure of skilled foreign oil-field workers and international sanctions that technically apply to the country as a whole. OPEC member Libya produced about output of 1.6 million barrels per day of oil before the conflict, just under 2 percent of world production. Qatar – host of the U.S. Army’s Middle East command hub – has significantly boosted its international profile in recent years with diplomatic initiatives and top-level sporting events, including being picked to host the 2022 World Cup. The 22-member Arab League was critical in winning U.N. Security Council support for the no-fly zone. But only Arab League members Qatar and the United Arab Emirates have contributed aircraft to the mission. Qatar also has agreed to host the first meeting of an international contact group aimed at coordinating political action and opening channels with Libya’s opposition. No date for the meeting has been set. A Qatari aid plane carrying 30 tons of relief supplies including medicine, medical equipment and blankets landed in the Libyan city of Tobruk on Wednesday, according to the official Qatar News Agency. Last month, Qatar sent ground troops to join a Saudi-led force aiding the rulers in Bahrain, which has been wracked by anti-government protests and violence for more than six weeks. In the Arab world, however, Qatar may be best known as the headquarters for the powerful Al-Jazeera broadcasting network, which was founded by the country’s rulers in 1996. A Libyan rebel spokesman, Mahmoud Shamam, said a satellite channel, Libya TV, began broadcasts from Doha earlier this week with financial and logistical support from Qatar. A top rebel official, Mustafa Abdul-Jalil, offered a cease-fire Friday if Gadhafi pulls his military forces out of cities and allows peaceful protests against his regime. ___ Associated Press writers Adam Schreck and Brian Murphy in Dubai, United Arab Emirates, contributed to this report.

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Robert Lenzner: Turning Dirty Coal in China Into Clean Natural Gas

March 31, 2011

The future of a technology that converts dirty cheap coal into clean natural gas for transportation fuel was underscored last night by a Chinese investment in Synthesis Energy Systems (SYMX,NASDAQ), a small Houston company that holds a valuable license for this transforming technology. The transaction is significant because it comes to fruition in the wake of crisis over nuclear energy signified by damage to the Japanese nuclear plant sending radioactive particles to China, and at a time of political unrest in the Middle East, when crude oil is priced well above $100 a barrel. And it underscores the crucial need to utilize an abundance of dirty coal in China and Mongolia as a clean energy source for the fastest growing economy in the world. The investment by China Energy and its investment arm Zhongjinuan Investment Management, a private company in Beijing, can be leveraged into $3.0 billion capital investments in new gasification plants with financing from some later-to-be identified state-owned companies, according to Robert Rigdon, SYMX chief executive officer, calling from Beijing last night. “The current energy landscape supports the use of low quality coal,” Rigdon emphasized last night. The $83.5 million is being raised from private Chinese investors, in a transaction that is unique for the manner in which Chinese investors will now be on the way to controlling a technology in gasification of coal that was originated in the US. The deal for 43.5% of SYMX at $2.25 a share can be increased to 60% in 8 years, giving the Chinese ultimate control of the U.S. company and a valuable hold on a technology that is held by the Gas Technological Institute. SYMX stock has been trading at a volume multiple its usual activity the last several days. The transaction will undoubtedly be seen as a model for other such strategies that could help the Chinese slow down their plans to build dozens of new nuclear power plants. SES(SYMX) has a 10 year exclusive license to the technology, which can be extended further. It already has a plant producing methanol in China and has plans to produce both methanol and and glycol in another facility. Methanol and glycol are used as blending agents for gasoline fuel, according to Rigdon.

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Jeffrey Rubin: Regime Change Not Bullish for Oil Production in the Middle East

March 30, 2011

If the Western military intervention in Libya is really being driven by oil, maybe it’s time to think again. History says regime change is never bullish for oil production in the Middle East and even less so for oil exports. Iran and Iraq, two of the larger producers in the region, are cases in point. While no one misses the Shah’s regime, Iran and the rest of the world still miss the oil production and the oil exports his regime once produced. At the height of the Shah’s power, Iran was pumping out six million barrels a day. Today, 32 years after the Iranian revolution sent Shah Mohammad Reza Pahlavi and his cronies packing, Iran barely produces four million barrels a day. Exports have fallen even more than production. During the Shah’s reign, Iran consumed less than a million barrels a day, leaving over five million barrels for daily export. Today, thanks to decades of massive fuel price subsidies, domestic oil consumption has almost doubled, leaving only two million barrels a day for export — or 40% of the export volumes prior to the Iranian revolution. Iraq’s experience should give Western allies no more confidence in their Libyan mission than the Iranian one. Prior to the invasion of Kuwait and the trade sanctions it triggered, Saddam Hussein’s Iraq produced around three million barrels a day in the late-1980s. Since then, oil production has never been close to that level. When the Americans invaded Iraq in 2003, the U.S. Department of Energy confidently predicted the country would be throwing its arms open to foreign investment and the oil sector would be producing over four million barrels per day by 2010. Instead, the Sunni insurgency broke out and a whole lot of pipelines (and people) started getting blown up. Oil production plunged, and it has taken almost a decade to get production back to pre-invasion two and a half million pace. What will happen in Libya is still anyone’s guess. Will a defeated Muammar Gadhafi try to blow up the oil fields like Saddam Hussein did on his forced retreat from Kuwait? Will oil production and oil installations simply collapse as collateral damage in a protracted civil war that partitions the country? Or will a new regime take over and prove to be as dysfunctional as its predecessor or less inclined to develop the country’s oil reserves? Whatever happens, both the Iranian and Iraqi experience suggest a post -Gadhafi Libya will produce less, not more, oil. Of course, maybe the missing 1.3 million barrels of oil exports from the country have nothing to do with why we are in Libya. Maybe it is just a humanitarian mission after all. But if protecting defenseless populations from Middle Eastern dictators is what this is all about, why aren’t we intervening in Bahrain, Yemen and Syria as well?

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Poll Suggests Americans Growing Increasingly Pessimistic On Economy

March 30, 2011

WASHINGTON — For all the talk of recovery, Americans are growing increasingly pessimistic about the economy as soaring gas costs strain already-tight budgets. So far, people aren’t taking it out on President Barack Obama, a new Associated Press-GfK poll shows. Even so, the survey highlights a central challenge Obama will face in his campaign for re-election. The president will have to convince a lot of voters who are still feeling financial hardship that things are getting better. Obama’s approval ratings have held steady at around 50 percent over the past month. But the disconnect between negative perceptions of the economy and signs that a rebound are under way could provide an opening for Republicans at the outset of the 2012 campaign. In the survey, just a sliver of Americans – 15 percent – said they believed the economy had improved over the past month, compared with 30 percent who had thought that in January. Only a third were optimistic of better times ahead for the country, down from about half earlier this year. And 28 percent thought the economy would get worse, the largest of slice of people who have expressed that sentiment since the question was first asked in December 2009. “It’s in a poor state,” said Billy Shirley, 74, a Democrat from Commerce, Ga. “Everything’s going to the bad. Everyone’s spending more on gas, food, everything. The prices on everything are going up, and that’s hurting the nation.” Recent economic indicators paint a more positive picture: The unemployment rate, though still high at 8.9 percent, has been declining, and consumer spending and personal income were both up last month. The gross domestic product was growing at an annual rate of 3.1 percent as last year ended. Americans are acutely focused on their financial well-being, even as turmoil in the Middle East commands international attention. And the foreign unrest is directly affecting them by boosting oil prices. More Americans – 77 percent, up from 54 percent last fall – now say gas prices are highly important to them. Obama’s job-performance ratings haven’t suffered as people’s attitudes about the economy have shifted over the past month. Half still approve of how he’s doing his job, and half say he deserves to be re-elected. His rating on handling the economy was unchanged: 47 percent approved. In fact, twice as many people said Obama “understands the important issues the country will need to focus on during the next two years” as said that about Republicans in Congress. That’s not to say that Obama is escaping responsibility for the economic situation. Annale Iltis, 26, of Sarasota, Fla., faults big business, the federal government and, to a lesser extent, the president. “I do a bit,” she said, “but at the same time he has good ideas. He just doesn’t have the backers in the House and the Senate to get them done.” The self-described independent voter, who supported Obama in 2008 and says she would do so next year, is concerned that deep budget cuts that Congress is considering will hurt the fragile economic recovery. “It seems stable now but I fear it’s going to go downhill quickly,” she said. Henry Kugeler, 49, of Chicago, likened the situation to the fable about the crawling tortoise that wins the race against the speedy hare, saying: “Right now, the country is the tortoise. I don’t think the economy is getting worse. The recovery that’s happening is real, but it’s incredibly slow.” The Democrat doesn’t blame Obama or other politicians, saying: “They haven’t helped but I don’t know that they’ve hurt.” Obama inherited an economy in recession. Republicans angling for the chance to challenge him next fall have been blaming him for the slow recovery and arguing they could do better. Presidential advisers are hopeful that the positive economic trends continue, giving Obama an opportunity to make the case for keeping him in office rather than risk an economic backslide. As the slow-to-start GOP nomination fight starts in earnest this spring, the poll shows that candidates clearly have work to do. More than or nearly half of Republicans surveyed say they don’t know enough about the following potential contenders to even express an opinion about them: Mississippi Gov. Haley Barbour, Indiana Gov. Mitch Daniels, former Utah Gov. Jon Huntsman, former Minnesota Gov. Tim Pawlenty, former Pennsylvania Sen. Rick Santorum and Minnesota Rep. Michele Bachmann. Roughly two-thirds of Republicans expressed favorable views of former Arkansas Gov. Mike Huckabee and former Alaska Gov. Sarah Palin, while former House Speaker Newt Gingrich and former Massachusetts Gov. Mitt Romney got slightly lower marks. Even though many of the candidates aren’t well-known, about half of Republicans say they are satisfied with their choices. The poll comes just as Republicans and Democrats on Capitol Hill wrestle over the federal budget, and there could be a partial government shutdown without further action by Congress. The Republican-controlled House has approved some $60 billion in spending cuts. The Democratic Senate is looking at $33 billion. Without agreement, some Republicans say they won’t approve funding to keep the government operating. The issue of federal spending isn’t just something lawmakers talk about. It’s clearly weighing on the public. Roughly half in the survey said they expected enormous federal budget deficits to cause a major economic crisis for the country for the next decade, and most said they worry that mounting federal debt will hamper the financial future of their children and grandchildren. In the shorter term, people in the poll view everyone negatively when it comes to handling the deficit, but lawmakers get worse marks than the president. Only about a third of those surveyed approve of how Republicans and Democrats are dealing with the issue, while 41 percent approve of Obama on the matter. People also are evenly divided on which party would best handle the deficit. The Associated Press-GfK Poll was conducted March 24-28 by GfK Roper Public Affairs and Corporate Communications. It involved landline and cell phone interviews with 1,001 adults nationwide and had a margin of sampling error of plus or minus 4.2 percentage points. ___ Associated Press Polling Director Trevor Tompson, Deputy Polling Director Jennifer Agiesta and News Survey Specialist Dennis Junius contributed to this report. Online: http://ap-gfkpoll.com

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Video: Croft Says Libya Oil Exports May Be Halted for One Year

March 30, 2011

March 30 (Bloomberg) — Helima Croft, an analyst at Barclays Capital, talks about the conflict in Libya and the outlook for oil exports from the country. Croft also discusses unrest elsewhere in the Middle East and Africa and the potential impact on oil markets. She speaks with Lisa Murphy on Bloomberg Television’s “Fast Forward.” (Source: Bloomberg)

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Video: Croft Says Libya Oil Exports May Be Halted for One Year

March 30, 2011

March 30 (Bloomberg) — Helima Croft, an analyst at Barclays Capital, talks about the conflict in Libya and the outlook for oil exports from the country. Croft also discusses unrest elsewhere in the Middle East and Africa and the potential impact on oil markets. She speaks with Lisa Murphy on Bloomberg Television’s “Fast Forward.” (Source: Bloomberg)

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How To Prepare Your Garage For An Electric Car

March 30, 2011

— With gas prices rising and instability in the Middle East, the thought of an electric car in the garage might be getting more appealing. Before you jump for the new technology, though, make sure your garage is ready to be a refueling station. Depending on which car you buy and how old your home is, it could cost a couple thousand dollars to prep the garage so you can charge a car quickly enough to take off for work in the morning with a full battery. Then again, it could cost nothing at all. Start with the age of the home. Older houses may not have enough juice to handle an electric car. Fifty years ago, who would have thought we’d be plugging in cars at night? So the garage may have to be rewired. According to experts, you need at least a 12-amp circuit to charge a car in a reasonable amount of time. You also need a circuit in the garage with little or nothing else on it. Anything else drawing power from the same circuit can slow the charging. Even if you have a dedicated circuit in the garage, it still may not work for you. Most garages have standard 120-volt outlets. But a dedicated 240-volt outlet, similar to the kind that powers an electric dryer, can cut the charging time in half. That’s important depending on the electric car you buy. Two mass-market electric cars, the Chevrolet Volt and the Nissan Leaf, have different power systems and different charging needs. The Leaf is all electric and can go up to 100 miles on a single charge. But it needs more juice than the Volt to refill the batteries. It takes eight hours to recharge a Leaf even with a 240-volt circuit, double that at 120 volts. The Volt can only go about 40 miles on battery power, but it has a small gas motor on board that can keep the car going when the battery runs out. With its smaller battery pack, it can be recharged in 10 hours even on 120 volts, five hours or less at 240. GM estimates that recharging the Volt will add no more than about $1.50 per day to your electric bill, based on the national average electricity cost of 11 cents per kilowatt hour. AeroVironment, the company that makes charging stations for Nissan, recommends outfitting your garage with a special 240-volt station. The basic station begins charging when you plug the car in; a smart station can start charging later in the evening when the load on the power company grid is lower. Either way, you’ll need an electrician who knows about car charging to figure out your needs and hook the 240-volt station to a dedicated 40-amp circuit, said Kristen Helsel, vice president of electric vehicle solutions for AeroVironment. “This is no different than installing an appliance or something else,” she said. “We need to take the power from your breaker box and run it to where you want the charging station installed.” Charging stations also are available from other manufacturers. Helsel said it will cost about $2,000 to buy the dock and standard installation services by an electrician when done through AeroVironment and a Nissan dealership. The Volt, however, may not need anything. If you have a dedicated circuit in your garage, General Motors, which makes the car, recommends charging the car first on 120 volts before spending the cash on a 240-volt charging station. “Most cars are parked more than 10 hours,” said Britta Gross, GM’s director of electrical infrastructure. “If I were a consumer, I would always try 120 first, and if you’re not satisfied, then you can consider the 240-volt upgrade.” The Volt has a setting that lets the owner pick the time by which the car has to be recharged fully, and the car can wait to start charging. The Leaf has a timer so the owner can set on and off times for charging based on the day of the week. The Volt charger from GM costs $495, and about $1,500 to install, although it could be more depending on how much work is needed at the house, Gross said. And whether you need a special charging station depends on how far you drive. If you go only 20 miles a day, a 120-volt outlet will work for either car because the battery doesn’t have to be fully charged every night. Gross said she’s working to change building codes so that all garages have 240-volt outlets to charge cars, but she conceded that will take years. Many auto industry analysts say it will be years before electric cars are in a lot of garages because cars powered by internal combustion engines will continue to get more efficient. A 120-volt outlet wouldn’t work for James Brazell, 84, of Asheville, N.C., one of the first people in the country to buy a Volt. He didn’t want to use any gasoline, yet he makes several short trips per day, and on some days, when he attends class at the University of North Carolina Asheville, he will drive 51 miles, more than the Volt’s electric range. At first, he used the standard outlet in the garage of his home at a retirement community, but he ended up using a half-gallon of gasoline in four days. Then the charger he ordered from GM arrived at a cost of $530 including shipping. An electrician in his community installed it for an estimated $300, although he hasn’t received the final bill. Now he plugs the car in after short trips. “Pretty much I top it up every time I bring it into the garage,” he said. Before the charging station, the 120-volt outlet didn’t charge his car much between trips, he said. Even though he’s a retired oil company executive, Brazell knows that the country will need to change the way it gets around because oil is a finite resource. And he likes driving by gas stations. “It makes me feel good, especially when gasoline went up 30 cents a gallon the day I got the car back here.”

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Oil Prices, Japan Holding U.S. Auto Sales Back

March 29, 2011

By Ben Klayman DETROIT (Reuters) – U.S. auto sales in March are expected to rise about 12 percent from last year’s depressed levels, but high gasoline prices and production problems caused by the Japanese earthquake could slow a recovery, analysts and investors said. Auto sales represent one of the first snapshots every month of U.S. consumer demand, and while an increase from last year is expected, lower incentives will likely mean a decline from February. However, that does not scare investors who like the industry’s recovery story. “Gas prices and disruptions with the Japanese earthquake are relevant, we pay attention to them, but it doesn’t change the medium- or longer-term backdrop of there being some compelling fundamentals for new-car sales,” said Walter Stackow, a senior research analyst with Manning & Napier. Stackow, whose firm owns shares in BMW (BMWG.DE: Quote, Profile, Research, Stock Buzz), Suzuki (7269.T: Quote, Profile, Research, Stock Buzz) and several dealers, cited the average age of cars topping 10 years, sales trailing the rate at which people scrap older vehicles, the rising cost of used cars and the improving financing market as reasons for longer-term optimism. Automakers are set to report March auto sales on Friday. March is traditionally a stronger sales month than February, but lower incentive spending by General Motors Co (GM.N: Quote, Profile, Research, Stock Buzz), Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) and others likely resulted in a lower growth rate than February’s stronger-than-expected 27 percent gain, analysts said. For the sixth consecutive month, sales on an annualized basis are expected to top 12 million vehicles in March. The average forecast of 34 economists surveyed by Reuters was 13.2 million vehicles on that basis, up from 11.78 million last year, but off slightly from 13.4 million in February. J.D. Power and Associates expects a 9 percent increase in March sales, while TrueCar.com and Edmunds.com estimate gains of 12 percent and 16 percent, respectively. PAIN AT THE PUMP Despite the expected sales increase, rising oil prices and the resulting pain at the pump could push consumers away from more lucrative light trucks, analysts said. J.P. Morgan analyst Himanshu Patel estimated in a research note that each $1 increase in the U.S. retail price of gas results in a 5 percentage-point shift toward lower-margin cars for the industry. Light truck sales, which include pickup trucks and sport utility vehicles, make up a little more than half of U.S. auto sales and account for a disproportionate share of profits at the U.S. automakers because of their higher prices. Gas prices rose more than 3 cents to $3.60 a gallon over the last week, the Energy Department said. The average price of regular gas is 80 cents higher than a year ago as conflict in Libya and rising tensions in the Middle East have sent the cost of crude oil to above $100 a barrel. “I don’t think at these levels it’s going to affect car sales,” said Gary Bradshaw, a portfolio manager with Hodges Capital Management, which owns Ford shares. “The auto recovery is still intact,” he added. “I still think we’ll see 13 (million) to 13-1/2 million cars sold in this country this year, but if oil (hits) $125 a barrel then all bets may be off.” Another focus is the aftermath of the Japanese earthquake and subsequent tsunami earlier this month that caused many supplier plants there to close or cope with power outages. GM, Ford, Toyota, Honda, Nissan and other automakers have all idled plants or scheduled downtime at facilities because of the parts shortages. Even a shortage of a specialty pigment that gives cars a glittering shine prompted Chrysler Group LLC (FIA.MI: Quote, Profile, Research, Stock Buzz) and Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) to temporarily restrict orders on vehicles in certain shades of black, red and other colors. The parts shortages may cut global vehicle output 30 percent within six weeks in a worst-case scenario, research firm IHS Automotive said. Most analysts do not see the shortages affecting March sales much, but if it continues, April or May sales could be hurt because there will be fewer cars on dealer lots to sell. Deals for consumers are already drying up as TrueCar estimated the industry’s average incentive spending per vehicle in March would drop 6 percent from February to $2,432, driven by declines of 17 percent and 11 percent at GM and Toyota, respectively. Edmunds sees a 9.5 percent drop. (Reporting by Ben Klayman in Detroit; Editing by Maureen Bavdek) Copyright 2011 Thomson Reuters. Click for Restrictions

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Federal Reserve Unlikely To Extend Quantitative Easing, Top Officials Say

March 25, 2011

NEW YORK, March 25 – With the economy on firmer footing the Federal Reserve Bank is unlikely to extend its bond-buying stimulus program beyond a planned $600 billion, several top Fed officials said on Friday. Members of the more hawkish wing of the Fed went further, with Philadelphia Fed Bank President Charles Plosser saying the U.S. central bank will have to reverse its easy money policy in the “not-too-distant future” to avoid sowing the seeds of inflation. The Fed has kept short-term rates near zero since December 2008 and has bought more than $2 trillion in long-term securities to push borrowing costs down further and boost recovery from the 2007-2009 recession. At its most recent policy-setting meeting, policymakers voted to continue the bond-buying program begun last November and slated to end in June. “Following through on that to the tune of $600 billion, like we’ve said, I think is appropriate,” Chicago Fed President Evans told reporters at the regional bank’s headquarters. “I personally don’t see as many needs for a further amount, as I probably thought last fall.” Evans comments, along with those of Atlanta Fed President Dennis Lockhart who said on Friday that “it’s a high bar” for the Fed to do more, suggest the debate at the Fed has moved away from a consideration of further easing. “Given the pressure, from the hawks on the Federal Open Market Committee, the public, Congress, and foreign officials, I would highly doubt Evans would say something like that if Chairman Ben Bernanke, New York Fed President William Dudley, and Fed Vice Chair Janet Yellen didn’t agree with him,” said Eric Stein, a fund manager at Eaton Vance in Boston. Minneapolis Fed President Narayana Kocherlakota told reporters in Marseilles that the U.S. economy would need to worsen “materially” for the bank to consider further bond-buying. Plosser and fellow hawk Dallas Fed Fisher continue to press for the Fed to do less. Fisher, speaking in Brussels Friday, said the Fed has done enough and may even have done too much. Speaking in New York, Plosser said consumer spending continues to expand at a “reasonably robust pace,” and the labor market is improving. The overall economy, he said, has gained “significant strength and momentum” since the summer. “If this forecast is broadly accurate, then monetary policy will have to reverse course in the not-too-distant future and begin to remove the massive amount of accommodation it has supplied to the economy,” said Plosser, one of the central bank’s biggest inflation hawks. “Failure to do so in a timely manner could have serious consequences for inflation and economic stability in the future,” said Plosser, a voter on the Fed’s policy-setting committee this year. Plosser outlined his preferred strategy for eventually tightening policy. He said he would like to raise interest rates and reduce the Fed’s balance sheet — which ballooned to more than $2 trillion during the crisis — at the same time. “My proposed strategy involves raising rates and shrinking the balance sheet concurrently and tying the pace of asset sales to the pace and size of interest rate increases,” Plosser said. “By tying sales to interest rate decisions, it allows the process for selling assets to be conditional on economic outcomes in ways that are familiar to market participants,” he said. Evans, who like Plosser has a vote on the policy-setting committee this year, suggested that the Fed would not quickly move to tighten its extraordinarily loose monetary policy, and would likely try to keep its balance sheet steady once active bond-buying stopped. That would require the Fed to continue to reinvest proceeds of maturing securities in new purchases, as it has been done for some months now. “It is natural to expect there would be some period of time between when the $600 billion is completed and an assessment in the change of the trajectory,” he said. After a period of what could be some months, he said, the Fed could stop reinvestments, a “modest step” toward tightening that probably not be followed quickly by other steps unless the economy was outpacing expectations. Evans and Plosser both said the earthquake and nuclear crisis in Japan and the rise in oil prices because of turmoil in the Middle East pose a risk to the U.S. recovery — but said he expected this risk to be small and short-term. (Reporting by Kristina Cooke, Edith Honan in New York, Ann Saphir in Chicago, Pedro Nicolai da Costa in Ft. Myers, Fla., Philip Blenkinsop in Brussels, Editing by Padraic Cassidy and Andrew Hay) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Video: Salem Sees `Tremendous’ U.S. Investor Interest in Egypt

March 25, 2011

March 25 (Bloomberg) — Mahmoud Salem, head of depository receipts for the Middle East at Bank of New York Mellon Corp., discusses the role of depository receipts during the closure of Egypt’s stock exchange, investor interest in Egypt and investment opportunities in the country. Salem speaks with Margaret Brennan on Bloomberg Television’s “InBusiness.” (Source: Bloomberg)

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Fears Of Weakening Economy, Global Unrest Threaten U.S. Recovery

March 25, 2011

NEW YORK — Just a couple of months ago, it seemed the slow economic recovery was starting to gather momentum. But that was before a series of violent protests in the Middle East pushed energy prices to their highest level since 2008. A devastating earthquake struck Japan, threatening global supply chains and raising fresh fears about nuclear radiation. Last weekend, international conflict began in Libya, as a U.S.-led coalition pummeled the country with missiles. Americans appear to be growing nervous, and that unease could take an economic toll. Consumer sentiment fell in March to its lowest level since November 2009, according to the Reuters/University of Michigan index, released Friday. With oil prices rising, Americans’ confidence in the economic recovery has taken a sudden plunge. Amid new anxieties, people are becoming less inclined to spend money. And consumer spending makes up two-thirds of U.S. economic activity. So as Americans worry about unrest abroad and a still-weak domestic economy, the recovery faces another strain. “There’s a negative psychological blow when the economy starts to deteriorate,” said Bernard Baumohl, chief global economist for the Economic Outlook Group. “We can see consumers begin to worry enough to cut back on spending and preserve their savings.” In a sobering new report, Baumohl argues that a combination of recent economic strains has caused crucial engines of economic growth to cool. Consumers are cutting back. Businesses are likely delaying new investments. Growth in U.S. economic output this year, originally predicted to be 3.5 percent, is now expected to be 2.8 percent, the report says. The reversal in consumer sentiment has been dramatic. Late last year, holiday sales were stronger than expected. In February, a month when the unemployment rate finally dipped below 9 percent, consumer confidence reached a three-year high. But that confidence appears to be eroding. Gas prices are still rising. The value of Brent crude, an industry benchmark, has risen more than 20 percent since the beginning of the year, reaching nearly $116 a barrel on Thursday. Each $10 rise in the price of a barrel of oil translates into a 25-cent increase in gas prices, which tears more than $25 billion from the U.S. economy yearly, economists say. If energy prices continue a sustained rise, that would constitute the “primary threat” to the U.S. economic recovery, said Gus Faucher, director of macroeconomics at Moody’s Analytics. High pump prices strain consumers’ wallets, and can force businesses to pass high transportation costs on to customers. But expensive fuel also has another effect: It makes people nervous. Combined, the financial and psychological strains appear to be encouraging Americans to cut back. Already, one in three consumers has cut spending due to rising gas prices, according to the RBC Consumer Outlook Index, released in early March. “These are not quiet economic times. We see a lot of shakeups, we see a lot of displacements,” said Michael Czinkota, a professor of marketing and international business at Georgetown University. “Does that contribute to uncertainty by customers? Absolutely, yes.” That situation isn’t likely to improve soon. Gas prices, for one, will likely stay elevated as long as investors remain nervous that the world’s oil supply could be disrupted. Already, Libya’s oil output has been reduced by three-fourths. It could fall to zero, the chairman of Libya’s National Oil Corporation said in a televised media conference last week. Investors, whose contracts help boost the price of oil, seem concerned that supply disruptions could strike the region’s major producers. Tensions between Saudi Arabia and Iran, which together provide more than 17 percent of the world’s oil, appear to be mounting. If that supply were compromised, prices would likely skyrocket. “The ‘fear premium’ built into these prices will likely remain,” Baumohl said. “No one has a clue how all these disruptions — the friction in Saudi Arabia, in Lybia and Bahrain — how all this will play out.” Still, the decline in consumer confidence may be temporary. Such measures are sensitive to news and are liable to change, said Tim Quinlan, an economist at Wells Fargo. “These sorts of measures tend to get big movements off of either job market moves or gasoline prices,” Quinlan said. “You add to that news stories of political instability all over the Middle East and the earthquake in Japan, and fears about radiation in water in Tokyo — you tend to rattle cages with consumers all over the world.”

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Crisis Of Conscience: Lobbyist For Bahrain, Yemen Loses Top Execs

March 24, 2011

This story has been updated NEW YORK — One of Washington’s best-known lobbying and public relations firms has been upended in the wake of the turmoil in the Middle East due in part to its representation of some of the region’s autocratic governments. In the last two months, more than a third of the partners at Qorvis have left the firm to start their own lobby shops, partly because of the firm’s work on behalf of such clients as Yemen, Bahrain, Saudi Arabia and the Central African nation of Equatorial Guinea, say former employees. “I just have trouble working with despotic dictators killing their own people,” a former Qorvis insider tells The Huffington Post. “People don’t want to be seen representing all these countries — you take a look at the State Department’s list of human rights violators and some of our clients were on there.” The governments of Bahrain and Yemen, which have been condemned by the United Nations for their brutal crackdowns that resulted in dozens of protesters killed and hundreds injured, are both represented by Qorvis through a subcontract to British public relations giant Bell Pottinger . Saudi Arabia, which last week sent troops to assist in riot control in Bahrain and has long been cited for its poor human rights record , is a longtime client of the firm. And Equatorial Guinea, an oil-rich dictatorship considered one of the most corrupt and undemocratic regimes in the world, likewise pays Qorvis to burnish its reputation. Several former Qorvis staffers blamed the firm’s current management for cultivating such “black hat” clients, noting that much of that business came about through the firm’s partnership with Bell Pottinger, the United Kingdom’s largest public relations firm, which took heat for representing Sri Lanka during that South Asian country’s brutal crackdown on rebel groups during the last two years. “They have zero conscience in what they do,” says the first former insider, referring to Bell Pottinger. A spokesperson for Bell Pottinger did not return calls for comment. Such “black hat” countries pay well — Equatorial Guinea pays Qorvis $55,000 per month and Saudi Arabian initially paid Qorvis $14 million per year back in 2002 to polish its reputation in the wake of the Sept. 11, 2001, attacks, though in recent years the latter contract has been much less lucrative. “These scumbags will pay whatever you want,” says the former insider. “You can charge retainers that are huge.” The firm’s founder and CEO, Michael Petruzello, says that such complaints are “ridiculous” and disingenuous, asserting that the firm’s work with international clients preceded the tenure of departing partners and that no one complained about it. “If they had a problem with it, it would have been discussed,” he said. He adds that most of those former partners worked at Qorvis for six to seven years and that they left primarily to start their own businesses, which is very common in the hothouse world of D.C.-based lobbying and public relations outfits. The principals who departed include Kelley McCormick (who left in early March for Gibraltar Associates), Don Goldberg, Michael Quint and Jason Siegel (who resigned in February to start a new firm, Bluetext), and Maura Corbett , who left in November to launch the Glen Echo Group. Petruzello defends the firm’s work on behalf of countries with troubled reputations, explaining that the firm’s international clients represent only 20 percent of its business (which primarily consists of large corporate clients such as Cisco and Sprint). “The reason they hire Qorvis and others is that they have a narrative they feel is not being heard — and they want a chance to be heard in the court of public opinion.” He adds that he’s proud of the work the firm has done for Bahrain, for example, explaining that every Secretary of the Navy has said that there is no stronger ally of the United States than the island nation, which hosts the U.S. Navy’s 5th Fleet. And Petruzello, who quickly named four new principals in recent weeks , insists that the firm “has the strongest leadership team in [its] 10-year history.” Among them are former State Department staffer Greg Lagana and former Washington Times editor Seam Dealey, who are handling a new $92,000 litigation communications contract with Cairo-based EZZ Industries. That company’s owner, Egyptian business tycoon Ahmed Ezz, a friend of the Mubarak family, was arrested amid the unrest in that country. Qorvis’s role is to promote “a transparent judicial system in Egypt,” reports O’Dwyer’s. It’s not the first time that Qorvis has witnessed a mass exodus due in some part to its unsavory clients. After Qorvis was retained by Saudi Arabia several months after 9/11, the contract attracted controversy and a Justice Department probe of the firm for its involvement in a radio ad campaign that burnished the image of the country, leading three top principals (Bernie Merrit, Jim Weber and Judy Smith) to leave the firm . Weber and Merritt, who run their own firm, did not return calls for comment. One of the methods used by Qorvis and other firms is online reputation management — through its Geo-Political Solutions (GPS) division , the firm uses ‘”black arts” by creating fake blogs and websites that link back to positive content, “to make sure that no one online comes across the bad stuff,” says the former insider. Other techniques include the use of social media, including Facebook, YouTube and Twitter. Recently, Qorvis helped frame the kingdom’s crackdown on protests by highlighting statements made by Secretary of State Hillary Clinton, in which she emphasized America’s commitment to Bahrain and affirmed its “sovereign right” to invite security forces from other countries. Clinton’s comment that the government is “on the wrong track,” however, was omitted, notes the Sunlight Foundation’s Paul Blumenthal . The firm’s work for Equatorial Guinea, whose strongman Teodoro Obiang has been accused by the UN Commission on Human Rights of directly overseeing the torture of his opponents, includes sending out news releases about the country’s support for animal conservation and a native daughter being named Michigan “Teacher of the Year.” In a lengthy Harper ‘s profile of Obiang and his son, Qorvis principal Matthew J. Lauer defended the country, saying, “No one is saying there are no problems, but it’s not North Korea,” but declined to respond to questions about claims of corruption and money laundering by U.S. investigators. Other high-powered firms operate in the Mideast — Patton Boggs, which owns a percentage of Qorvis and which recently made headlines when President Obama sent one of the firm’s lawyers , Frank Wisner, to negotiate with Egypt’s recently-ousted former president Hosni Mubarak, has long worked with Egypt and Saudi Arabia. Qorvis and Patton Boggs were both subpoenaed in 2002 by the House Committee on Government Reform , which was investigating reports of American children kidnapped and held in Saudi Arabia. The Livingston Group, founded by former Louisiana Rep. Robert L. Livingston, was paid $2.4 million to represent Libya in 2008 and 2009. And the Washington Media Group ended its $420,000 contract to enhance the image of Tunisia in January after images of the country’s brutal crackdown on protesters made headlines around the world. The United Arab Emirates was the second-biggest foreign lobbying client , paying $5.3 million to DLA Piper and other firms in 2009 to help get more access to U.S. nuclear technology, among other issues. And former Wall Street Journal reporter Christopher Cooper was recently hired for $20,000 a month by Bahrain’s envoy to the U.S. government to help get the administration and members of Congress behind the Crown Prince’s idea of a national dialogue, says Cooper. Envoy Abdul Latif Zayani, Bahrain’s former chief of police, is a familiar presence in military and diplomatic circles and was once a classmate of Joint Chiefs Chairman Mike Mullen. The region is attractive to lobbying firms due to the lucrative contracts but it can also present challenges. “If you get associated with somebody who turns out to be a Gaddafy kind of person, you’re not in the company of one of the nice people of the world and that could harm your reputation,” says Howard Marlowe, president of the American League of Lobbyists. “And in the lobbying world, your reputation is everything.” “Most of us are not guns for hire — we would like to be able to wake up in the morning and look in the mirror and feel that we are not associated with child molesters, wife beaters. And to do work that meets our own test of ethics and conscience,” he added. Making sure to emphasize that he was not referring to the Qorvis situation, he called on lobbyists to follow their conscience. “It’s a commendable thing for a lobbyist to have their own set of ethics — if I’m doing something that I’m uncomfortable with, then I need to get out of it.” Correction: A previous version of this story erroneously reported that legendary publicist Judy Smith died last year based on an incorrect online report. I sincerely regret the error.

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World Shares Recover All Of Post-Japan Losses

March 24, 2011

LONDON – Global stocks inched higher on Thursday and are now higher than when Japan’s earthquake and tsunami struck, buoyed by confidence that the world economic recovery remains on track. The euro also recovered early losses to trade a touch higher despite negative signs from banking and politics in Portugal and Spain, the two countries now at the center of Europe’s continuing debt crisis. The single European currency was set for its largest weekly slide since early January, after the Portuguese parliament rejected a series of austerity measures and prime minister Jose Socrates stepped down, although equity markets rallied after gains in the heavyweight mining sector offset losses elsewhere. “Sentiment is still relatively good. The cycle is good. We are still mildly optimistic on the overall picture,” said Joost de Graff, senior portfolio manager at Kempen Capital Manageent in the Netherlands. Surveys on Thursday showed economic recovery continued in March, shrugging off Japan’s disaster, although Middle East tensions are sending prices rocketing and the impact of public sector cutbacks in Europe is a risk. The MSCI All-Country index .MIW0000PUS was last up 0.1 percent. In Asia, Tokyo’s Nikkei .N225 fell 0.2 percent. It remains 8 percent below its close when the earthquake hit on March 11. EU BAILOUT Much of the anxiety over the euro zone’s debt problems had been soothed by the prospect of a longer-term reinforcement of the EU bailout fund. But this has now been delayed until June, while Portugal faces what are viewed as unsustainable borrowing costs ahead of multi-billion euro bond repayments in April and June. The premium investors demand to hold Portuguese debt rather than benchmark German Bunds hit euro-lifetime highs, while the premium to hold other peripheral debt also rose, reflecting the growing preference among bondholders to own higher-rated paper. “If — and this is a big if — there is a bailout for Portugal, the question would be how it would be negotiated with a government in essentially a caretaker mode,” said David Forrester, currency strategist at Barclays Capital in Singapore. The euro was last up 0.1 percent against the dollar at $1.4101, having fallen earlier to a low of $1.4049, while against the yen it was flat at 114.11 yen. The yen itself was steady against the dollar at 80.95 yen, although market players are still wary Japan may intervene to sell the currency if the dollar breaches 80 yen. Euro zone government bonds were flat, with Bunds having pared some of their earlier gains to trade at 3.229 percent, while Portuguese 10-year yields rose 11 basis points to 7.931 percent, leaving the premium to Bunds at a euro-lifetime high of 470 basis points. European Union leaders begin a two-day summit on Thursday but the political turmoil in Portugal and looming elections in other countries are expected to delay any tough decisions to address the region’s debt problem. An official euro zone source estimated in January that if Portugal asked for international aid, it might need between 60 billion to 80 billion euros (up to $113 billion). European shares edged higher as gains in the mining sector offset some of the weakness in banking stocks, which came under pressure from persistent concern about the euro zone’s finance and after Moody’s downgraded 30 Spanish banks. .EU The FTSEurofirst 300 .FTEU3 was up 0.2 percent at 1,113.49 points, while S&P 500 futures rose 0.1 percent, pointing to a modestly higher start on Wall Street later. .EU .N Brent crude was off 0.2 percent at $115.35, down for a second successive trading day. Spot gold traded around $1,43999 an ounce, in sight of its record $1,444.40 set earlier in the month. (Additional reporting by Kirsten Donovan and Harpreet Bhal in London and Alejandro Barbajosa and Alex Richardson in Singapore) (Reporting by Amanda Cooper; editing by Patrick Graham) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Video: Religare Capital’s Mostaque Recommends UAE, Qatar Stocks

March 24, 2011

March 24 (Bloomberg) — Emad Mostaque, chief strategist at Religare Capital Markets Plc, discusses the outlook for Middle East stocks. He talks with Francine Lacqua on Bloomberg Television’s “On The Move.”

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U.S. Recovery Gaining Traction, Fed Officials Say

March 22, 2011

AKRON, Ohio/FRANKFURT – The U.S. recovery is gaining traction, two top Federal Reserve officials said on Tuesday, though they differed on the risks of inflation in the U.S. economy. Cleveland Fed President Sandra Pianalto said she expects the U.S. recovery to continue at a moderate pace, with rising commodity and energy prices only temporarily putting pressure on broader consumer prices. “The recovery seems to have established a firmer footing. I am seeing clearer signs of a virtuous cycle of growth,” Pianalto said in a speech at the University of Akron. Dallas Fed President Richard Fisher, speaking in Frankfurt, Germany, said the U.S. recovery was gathering momentum and needs no further Fed support. “The Fed has done enough, if not too much, and we should do no more. In my opinion no further accommodation is necessary after June,” Fisher said. The Fed last week kept its easy money policy unchanged, voting unanimously to forge ahead with its $600 billion bond-buying program announced in November to support a fragile recovery. The bond purchase program is scheduled to be completed by the end of June. The U.S. approach contrasts with a growing likelihood of rate hikes by the European Central Bank and the Bank of England. Pianalto, whose views tend to be aligned with the center of the Fed’s policy setting committee, said she does not see rising energy prices associated with political unrest in the Middle East and North Africa spilling over into broader inflation. But she called the oil price rise a “key risk” to the U.S. economy that bears monitoring. “If the spike in oil prices is sustained, it will potentially slow the pace of GDP growth,” she said. “Even if the growth consequences turn out to be relatively small, a sustained increase in the price of oil could cause some people to worry about higher inflation.” Pianalto said she does not think rising food and energy prices will have a sustained impact on the inflation rate. She expects inflation to rise only gradually to 2 percent by 2013. “To cause a lasting rise in inflation, the increases in food or energy prices have to be large enough and persist long enough that they spill over and cause sustained increases in a wide array of other consumer prices. At this point, there is no evidence of broad spillover,” she said. Fisher, one of the more hawkish Fed officials on inflation, warned there were signs that the speculative style of trading that had helped fuel the financial crisis was beginning to resurface. “We are seeing speculative activity that may be exacerbating (price rises in) key commodities such as oil,” he said. Fisher said it was too early to gauge the impact that Japan’s earthquake and nuclear crisis and the rising tensions in the Middle East would have on the U.S. economy. “There are different views being expressed, but we are central bankers. We have to think about the long term. … It is way too early to tell,” said Fisher, who is a voter on monetary policy this year. Beyond disruptions to global supply chains (click here for a special report: r.reuters.com/muk68r) some business leaders worry that Japan’s disasters could affect consumer confidence in the United States. “I wouldn’t be surprised if this fed into U.S. consumer spending,” said James Tisch, a member of the New York Fed’s board of director who is the chief executive of conglomerate Loews Corp. Tisch is among directors who provide anecdotal input that helps inform Fed policy. “I think it is part of the uncertainty people are feeling. There is a sense that nothing is safe and secure,” Tisch said in an interview. Pianalto, who is not a voter on monetary policy this year, expects economic growth of slightly above 3 percent a year, with rising incomes and profits supporting retail sales and business demand. Housing, though, continues to be a drag on growth, she said. “Many homes remain in the foreclosure pipeline, and we are looking at well over a year before the number of bank-owned properties begins to decline significantly,” she said. Fisher reiterated his concern about the U.S. deficit, and stressed the importance of debt-cutting measures. “If we continue down on the path on which the fiscal authorities put us, we will become insolvent. The question is when,” he said. “The short-term negotiations are very important. I look at this as a tipping point.” (Additional reporting by Marc Jones, writing by Kristina Cooke; Editing by Leslie Adler) Copyright 2011 Thomson Reuters. Click for Restrictions

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Video: Von Rumohr Says Boeing’s Defense Unit `Relatively Flat’

March 22, 2011

March 22 (Bloomberg) — Cai von Rumohr, an analyst at Cowen & Co., talks about the impact of political unrest in North Africa and Middle East on aerospace sales for Boeing Co. and Raytheon Co. Von Rumohr speaks with Lisa Murphy on Bloomberg Television’s “Fast Forward.” (Source: Bloomberg)

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Video: Von Rumohr Says Boeing’s Defense Unit `Relatively Flat’

March 22, 2011

March 22 (Bloomberg) — Cai von Rumohr, an analyst at Cowen & Co., talks about the impact of political unrest in North Africa and Middle East on aerospace sales for Boeing Co. and Raytheon Co. Von Rumohr speaks with Lisa Murphy on Bloomberg Television’s “Fast Forward.” (Source: Bloomberg)

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World Bank: We Must Rethink Our Role In The Middle East

March 21, 2011

WASHINGTON (Reuters) – The World Bank is rethinking its role in the Middle East and North Africa to tackle economic and social problems that sparked political unrest, the bank’s President Robert Zoellick said on Monday. The poverty-fighting institution needs to find some way to convince resistant governments change is needed, he said. “We have produced a number of flagship reports on governance, youth inequality, quality of education, special disparities, and the noncompetitive nature of the private sector in the region,” Zoellick said in opening remarks at a World Bank conference on Arab issues. “But the record of action has been spotty. Like others, we also have much to learn,” he added. The conference, held at the bank’s Washington headquarters and carried live on the Internet, brought together journalists, think tanks, youth and women groups, and academics from the Arab world to discuss changes taking place across the region. Protests against political repression, corruption, high unemployment and a rising cost of living toppled rulers in Egypt and Tunisia and spurred uprisings in Yemen, Bahrain, Morocco, Jordan, Algeria, Saudi Arabia, Syria and Libya. The changes have forced institutions like the World Bank and the International Monetary Fund to take a harder look at their roles amid criticism they supported economic and development policies of authoritarian governments that worsened poverty and unemployment. Zoellick said part of the process of modernizing multilateral institutions was to learn from mistakes. “The challenge we have as an institution is when a government resists, how do we engage?” he told reporters. “Some people say pull back, don’t do anything, but often there are opportunities to … make a difference,” he added. Zoellick said such issues need to be debated by World Bank member countries who fund the institution and meetings of the World Bank and IMF in mid-April present an opportunity to address ways the bank can support the transitions. In the near-term, Zoellick said he worried about high expectations for change at a time when global food prices are rising, adding to the fiscal burden of countries in the region that import most of their food. LEARNING FROM HISTORY He said while there may be a tendency to want to forget the past, there were important lessons “not necessarily to be choked by them but to understand what questions to ask going forward”. “In order to identify and explore these issues, we need first and foremost to open up a genuine and deep dialogue with and between the different voices in the region,” Zoellick told the conference. “They are issues that will not go away simply because one government fell, or one leader replaced another.” Samer Shehata, a professor at the Center for Contemporary Arab Studies at Georgetown University, told Reuters revolutions in Tunisia and Egypt were reactions against economic and social policies championed by the World Bank and IMF. “In many ways the Tunisian and Egyptian revolutions were against neo-liberal economic policies that were merciless on poor people because they bet on the future,” Shehata said, pointing at the 14.4 percent unemployment rate in Tunisia. Shehata said the institutions needed to change the methods they use to evaluate development and progress in the region, and should not sidestep sensitive political questions. “They need to focus on the vast majority of the population and their living conditions, and also political issues like how good is the quality of institutions, is there political participation, and are elections free and fair,” he said. “It can’t just be simply about rates of growth.” (Editing by Padraic Cassidy and Andrew Hay) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Diane Francis: Japan and Libya Mark Canada’s Energy Victory

March 21, 2011

Japan’s nuclear catastrophe, and the UN Security Council’s support for Libyan people against Muammar Gaddafi, have financial implications well beyond market volatility. The Japanese “brand”, based on brilliant planning and execution, has been permanently tarnished. First it was Toyota’s colossal recalls and now the world discovers that six reactors were built in an earthquake zone, subject to tsunamis, without sufficient fortifications or back-ups to back-ups. Instead, the repair job has become a Kamikaze-like effort by several dozen middle-aged volunteers whose failure will take the world into uncharted territory. This fiasco guarantees that the nuclear option, to replace fossil fuels and save the world from the effects of over-population, is about as attractive as having Colonel Gaddafi drop by for dinner. This increases dramatically the probability that two Canadian pipeline projects, and others, will be invited to dinner: The Keystone Pipeline expansion bringing oil sands output to US refineries and the Mackenzie Valley Gas Pipeline will proceed. The US government has been dithering about Keystone’s environmental impact (they already have 50,000 miles of pipelines there) and the Canadian government has dithered for decades about Mackenzie, mostly recently over a request to back a small portion of the line so aboriginals can own a piece of the action. Both governments must approve these lines. In the US, this is because, without construction of new nuclear facilities, the country will need more oil and Middle East volatility means that region is undesirable as a supplier. So Canada’s oil sands are essential. Tellingly, USA Today editorialized in favor of Canada’s “dirty” oil. “The Keystone expansion would provide an extra 500,000 barrels of oil a day from a secure ally and neighbor, enabling the US to offset declining supplies from Mexico and Venezuela and avoid having to reach out to less-stable oil exporters. At a time of rising gasoline prices and turmoil in the Middle East, the US is in no position to be finicky about its oil imports,” said the newspaper. “And here’s something else to consider: If the US blocks the pipeline, Canadian developers have made it clear they’ll be glad to build west instead of south — and sell oil from the West Coast to China.” The Mackenzie Pipeline will, and should, proceed because increasing oil sands production (which needs natural gas), removal of the nuclear option in Canada and commitments to take coal plants out of service by 2025 will require four times more natural gas than it can bring to markets. According to Ziff Energy, a leading energy consultancy, the Mackenzie, Alaska gas pipeline, producible shale gas and conventional gas deposits would all be needed and viable in future. For instance, Ziff said that Canadian conventional gas reserves are declining by up to 20% per year, which requires the replacement of up to 4 billion cubic feet per day of new supplies. That’s equivalent to the total production from three Mackenzie Valley Pipelines. Decline rates are similar south of the border and will require at least ten times’ more gas. Power generation is also starting to switch from coal or oil to natural gas for environmental reasons. In June 2010, this was mandated in a Canadian Federal Government policy which will phase out 33 inefficient coal-fired plants in Canada whose economic life will end by 2025. Their licenses will not be renewed unless their emissions are reduced dramatically to the same level as gas-fired plants. The amount of gas needed to replace these 33 dirty coal plants totals 1.2 billion cubic feet per day, or the entire annual output of the Mackenzie Valley Pipeline. Fossil fuels brings me to the democratization of the Arab world and this week’s Libya support in the United Nations. Ten countries voted in favor of a resolution to crush him some time soon by any method necessary, while the other five — China, India, Russia, Brazil and Germany — were smart enough to simply abstain and get out of the way. This vote was historically significant for two reasons: It was backed by broad-based support for democracy and against tyrants and, secondly, it marked a stepping down by the United States from the role of superpower which, frankly, it cannot any longer afford financially or reputationally. The fact is that President Obama is delivering on his promises to take the training wheels off Iraq’s fragile democracy and to be multilateral and let others do the heavy lifting. As an American taxpayer, and a Canadian one, I applaud his behind-the-scenes community activist role in letting if not encouraging the French, of all nations, to take the lead in the Libya initiative, followed by the British, Arab League and African Union. It’s also a sign of fiscal prudence on the part of Washington which is good news for Americans and Canadians alike. Cross-posted in the Financial Post .

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Video: Gheit Says Oil Could Rise $10 or More on Gulf Disruption

March 21, 2011

March 21 (Bloomberg) — Fadel Gheit, an oil analyst at Oppenheimer & Co., talks about the possible impact of the conflict in Libya on oil markets. Gheit, speaking with Matt Miller and Carol Massar on Bloomberg Television’s “Street Smart,” says Libyan leader Muammar Qaddafi may attempt to sabotage oil facilities in the Middle East in an attempt to cut supplies and “exact his revenge on coalition forces.” (Source: Bloomberg)

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Obama: I’m Going To Latin America To Discuss Jobs

March 18, 2011

In recent weeks, we’ve seen how turmoil and tragedy around the globe can affect our own prosperity and security; how events abroad often have implications for everything from markets on Wall Street to families’ wallets on Main Street. And as a nation, we will continue to do everything we can both to promote stability and democracy in the Middle East and help the people of Japan recover from the devastating earthquake and tsunami.

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Video: UBS’s Golub Says He’s a Buyer at Current Levels

March 18, 2011

March 18 (Bloomberg) — Jonathan Golub, chief U.S. market strategist at UBS Securities LLC, talks about his view on technology, financial and industrial stocks. Golub, speaking with Betty Liu, Sheila Dharmarajan and Jon Erlichman on Bloomberg Television’s “In the Loop,” also discusses the impact of the unrest in the Middle East and the crisis in Japan on market volatility. (Source: Bloomberg)

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Video: Sen Says Oil May Rise on `Souring’ U.S.-Saudi Relations

March 18, 2011

March 18 (Bloomberg) — Amrita Sen, a commodities analyst at Barclays Capital, discusses U.S. relations with Saudi Arabia and the outlook for oil prices amid political upheaval in the Middle East and North Africa. She speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.”

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Robert Reich: As the Global Economy Trembles, Our Nation’s Capitol Fiddles

March 17, 2011

Why isn’t Washington responding? The world’s third largest economy suffers a giant earthquake, tsunami, and radiation dangers. A civil war in Libya and tumult in the Middle East cause crude-oil prices to climb. Poor harvests around the world make food prices soar. All this means higher prices. American consumers, still reeling from job losses and wage cuts, will be hit hard. (Wholesale food prices surged almost 4 percent in February, the largest upward spike in more than a quarter century.) Even before these global shocks the U.S. recovery was fragile. Consumer confidence is at a five-month low. Housing prices continue to drop. More than 14 million Americans remain jobless, and the ratio of employed to our total population is at an almost unprecedented low. So you might think our elected representatives would want to avoid a repeat of what happened the second half of 2010 when the fragile recovery began tanking. They’d certainly want to prevent a double-dip recession. You’d think they’d be creating booster rockets to counter these recessionary forces — freeing up more spending, exempting the first $20,000 of income from payroll taxes, imposing a moratorium on bank foreclosures, giving Americans another six months to file their income taxes, lending states whatever money they need to prevent more of their own budget cuts. Think again. Amazingly, the big debate in Washington is about how whether to cut $10 billion or $61 billion from the federal budget between now and September 30. House Majority Leader Eric Cantor recently stated the Republican view succinctly: “Less government spending equals more private sector jobs.” In the past I’ve often wondered whether they’re knaves or fools. Now I’m sure. Republicans wouldn’t mind a double-dip recession between now and Election Day 2012. They figure it’s the one sure way to unseat Obama. They know that when the economy is heading downward, voters always fire the boss. Call them knaves. What about the Democrats? Most know how fragile the economy is but they’re afraid to say it because the White House wants to paint a more positive picture. And most of them are afraid of calling for what must be done because it runs so counter to the dominant deficit-cutting theme in our nation’s capital that they fear being marginalized. So they’re reduced to mumbling “don’t cut so much.” Call them fools. The U.S. economy is flirting with another dip at a time when the global economy is teetering and most Americans are still in economic trouble. But nothing is being done in our nation’s capital because knaves and fools are in charge.

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Video: Exclusive Analysis’s Itani Sees Bahrain Riots Escalating

March 16, 2011

March 16 (Bloomberg) — Faysal Itani, deputy head of forecasting for the Middle East at Exclusive Analysis, discusses the state of emergency in Bahrain and the intervention by Saudi Arabian-led military forces. He talks from Beirut with Mark Barton on Bloomberg Television’s “Countdown.”

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Dan Solin: The Only Question That Matters for Investors

March 16, 2011

The financial media is whipped into a frenzy. There is so much uncertainty. Here’s a summary of recent developments: Bill Gross eliminated U.S. government debt from the Pimco’s Total Return Fund. Nouriel Roubini (“Dr. Doom”) predicts $100 billion in municipal bond defaults over five years. Ireland, Greece, Portugal and Spain remain in tenuous financial condition. The devastating earthquake in Japan has broad economic ramifications. Unrest in Libya and in the rest of the Middle East threatens oil prices. What does it all mean for investors? How fortunate we are to have so many “experts” who can make sense of these disturbing developments. Money manager Laszlo Birinyi advises “[]These kinds of strong beginnings lead to long and durable bull markets. Hedge fund manager Barton Biggs agrees. Over at The Wall Street Journal , they’re not so sure. Brett Arends listed ten reasons why investors should be worried. His sources are interesting. He relies on an unnamed “European hedge fund manager” who is “worried about China.” The source is not buying aggressively, and Arends find that significant. It’s quite remarkable what passes for responsible financial journalism at The Wall Street Journal these days. I get asked for my opinion on many of these issues by readers of my books and blogs, advisory clients and prospective clients. Many can’t hide their disappointment when I tell them I have no clue how these events will affect the markets. What’s more, neither does anyone else, including those who are so confident of their predictions and who dispense their advice so freely. What’s more, I don’t care and I don’t believe intelligent investors should either. Here’s why. Many studies confirm the relationship between loss of money and suicide. Ask most men what they fear most and they will tell you it is the loss of their money and homelessness. You would think their investing decisions would seek to minimize this possibility. Instead, they are more often focused on the short term consequences of current events. This makes no sense. The average sixty-year-old will live another twenty years or so. Here’s the only question she (and all other investors) should be asking her financial advisor: Can you financially engineer a portfolio for me, using long term (at least 50 years) data, that will maximize my returns for the amount of risk I will be taking, for the rest of my life, and will minimize the possibility that I will be destitute in my old age? The good news is that it is very easy to accomplish this goal. We have all the tools and data necessary to do so. The analysis can be based on sound academic, peer-reviewed research, used by savvy pension and trust fund administrators and high net worth individuals. Of course, it’s not predictive, but it’s far more reliable than relying on financial astrologers. I have rarely met an investor who had such a plan, or who understood that he could get one. You have a choice. You can listen to the musings of people who believe they can predict the future, or you can plan intelligently for your own future. The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein. Furthermore, the information on this blog should not be construed as an offer of advisory services. Please note that the author does not recommend specific securities nor is he responsible for comments made by persons posting on this blog.

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Japan Grabbed More U.S. Debt Prior To Earthquake

March 15, 2011

WASHINGTON — Japan increased its holdings of U.S. government debt for an eighth straight month in January. But the second-largest holder of U.S. Treasury bonds will likely scale back its purchases of foreign holdings, and even sell off some, in coming months to divert money toward rebuilding a nation devastated by a powerful earthquake and an ensuing nuclear crisis. The Treasury Department said Tuesday that Japan boosted its holdings 0.4 percent to $885.9 billion in January. Economists said a reduction in Japan’s foreign holdings would put some upward pressure on U.S. interest rates. But they cautioned the change would have a limited impact. The Federal Reserve, which has been buying Treasury securities as part of its efforts to keep interest rates low, would move to counteract any significant increase in rates, they said. “Any impact from the sales would be short-term and relatively small,” said Nariman Behravesh, chief economist at IHS Global Insight. The Treasury report showed that China, the second-largest holder of U.S. debt, reduced its holdings for a third straight month, trimming them 0.5 percent to $1.15 trillion. Overall, foreign holdings of Treasury securities rose 0.3 percent to $4.45 trillion in January. This data is carefully followed to determine whether foreign countries still have an appetite for Treasury debt at a time of record federal deficits. Interest rates could rise if the biggest buyers of U.S. debt began trimming their holdings significantly. That would slow America’s economic recovery and increase Washington’s costs for financing the $14.3 trillion national debt. But Gregory Daco, another economist at IHS Global Insight, said the crisis in Japan makes Treasury securities more attractive, as does unrest Middle East and other problems facing the global economy. That’s because U.S. Treasurys are considered to be among the safest investments. Analysts at Bank of America-Merrill Lynch noted that the Bank of Japan announced a major asset-purchase program on Monday aimed at supporting the Japanese economy. They said part of that program will likely include further purchases of U.S. Treasury securities. That would ensure the Japanese yen does not strengthen against the dollar and hurt Japanese exports. “We believe this buying program will be the dominant story (affecting U.S. Treasury demand) over the near-term,” Ethan Harris, chief economist at Bank of America-Merrill Lynch, said in a note to clients.

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Video: Hammoudeh Says Libyan Revolution Won’t Spread to Algeria: Video

March 11, 2011

March 11 (Bloomberg) — Shawkat Hammoudeh, an economics professor at Drexel University, talks about the political unrest in the Middle East and northern Africa and its impact on oil-producing nations in the region. Hammoudeh speaks with Matt Miller and Carol Massar on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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Video: Ross Says Japan Quake’s Impact on Economy `Containable’

March 11, 2011

March 11 (Bloomberg) — Billionaire investor Wilbur Ross, chairman and chief executive officer of WL Ross & Co., discusses the potential impact of the Japan’s earthquake and tsunami on the economy. Ross, speaking with Betty Liu on Bloomberg Television’s “In the Loop,” also talks about the unrest in the Middle East and his investment strategy. (Source: Bloomberg)

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Video: Blanch Expects 6 Month Oil Supply Disruption From Libya

March 11, 2011

March 11 (Bloomberg) — Francisco Blanch, global head of commodities research at Bank of America-Merrill Lynch, discusses the impact of the earthquake in Japan and unrest in the Middle East on oil prices. Blanch talks with Betty Liu on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

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Pamela Rosenau: How Bernanke Takes His Porridge

March 8, 2011

The noted American philosopher and psychologist William James once said “the art of being wise is the art of knowing what to overlook.” This is often the case with investing — one must sometimes ignore issues that may be important in the long run in order to focus on what could have impact today. In fact, we need to look no further than Ben Bernanke for evidence of this strategy. As Chairman of the Fed, Bernanke is tasked with the dual mandate of controlling inflation while maintaining employment. But given the deep recession this country is emerging from and the scars it has inflicted upon the American workforce, Bernanke seems to be “overlooking” his inflation mandate in order to focus on restoring employment. At his most recent testimony to the Senate, he said “currently, the cost pressures from higher commodity prices are also being offset by the stability in unit labor costs. Thus, the most likely outcome is that the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in US consumer price inflation.” According to market strategist David Rosenburg, unit labor costs fell at a 0.6% annualized rate in Q4, which made for a negative figure in five out of the last six quarters. Because of this persistent drag of wage costs, Bernanke is choosing to not be concerned about the acceleration of commodity prices. However, the rest of the world doesn’t necessarily share his views. A quote from the boutique research firm GaveKal sums it up perfectly: “when the Fed worries about something, I start to worry about something else.” We may be in a position where the overall Consumer Price Index isn’t changing dramatically, but that doesn’t mean that individual components aren’t shifting. The weakness in labor costs continues to mask the upward moves in other areas. To take advantage of these shifts, I have positioned my clients with an overweight in energy and an underweight in consumer discretionary sectors. Rising energy costs will obviously benefit their producers, while they will tighten the purse strings of consumers for non-essential spending. And while Bernanke may not be ready to face inflation head on right now, it is only a matter of time before he has to deal with it. Therefore I think it is wise to shorten duration ahead of what are inevitable moves up in interest rates. BCA Research points out that “even policy hawks would agree that tightening in the face of a geopolitical/oil shock would be madness.” Because of the tenuous situation in the Middle East, policymakers have to cool their jets at least for the time being. Prior to these events, the ‘DO NOT WALK’ sign was already flashing when it came to buying bonds. In the last 200 years, US treasury 10 year yields have only been below their current level from the late 1930s to the early 1950s, during which time we were suffering through a depression and WWII. So it’s unlikely that without the distortive effects of the QE programs we would stay at these levels for much longer. But the global unrest and fear of undoing any recovery is giving investors a few more precious moments to ‘cross the street’ so to speak from bonds to equities, and unload their duration risk before the developed economies start hiking rates. Once we start discussing rising interest rates, many get concerned that equities are destined for difficult times as well. But actually, the investment research firm Strategas finds that the average S&P 500 performance 6 months following the first hike in interest rates is about 8%. I am still willing to put money to work with those types of potential returns. The only danger is that the economy is recovering at a healthy enough clip to encourage money to move out of financial assets and invest in the ‘real’ economy (ie building businesses and making capital expenditures). While a stronger GDP print would spell good news for politicians, because of this potential investment shift, it doesn’t necessarily imply that the stock market will move up in tandem. In fact, Ed Easterling of Crestmont Research has found that in the last century, secular bear markets have experienced higher nominal GDP growth than secular bull markets. Recently we have seen the Citi Economic Surprise Index, which measures actual macro data versus consensus estimates, registering new highs. Things are recovering faster than people would expect. Strategists often hope for the Goldilocks Scenario, where the ideal economy is neither too cold to cause a recession, nor too hot to cause inflation, but just right. Bernanke still thinks it is too cold. I think we are just right for the time being, but the porridge seems to be heating up. Rosenau/Paul is a team of investment professionals registered with HighTower Securities, LLC, member FINRA, MSRB and SIPC & HighTower Advisors, LLC, a registered investment advisor with the SEC. All securities are offered through HighTower Securities, LLC and advisory services are offered through HighTower Advisors, LLC. This document was created for informational purposes only; the opinions expressed are solely those of the author, and do not represent those of HighTower Advisors, LLC or any of its affiliates. In preparing these materials, we have relied upon and assumed without independent verifications, the accuracy and completeness of all information available from public and internal sources. HighTower shall not in any way be liable for claims and make no expressed or implied representations or warranties as to their accuracy or completeness or for statements or errors contained in or omissions from them. This is not an offer to buy or sell securities. No investment process is free of risk and there is no guarantee that the investment process described herein will be profitable. Investors may lose all of their investments. Past performance is not indicative of current or future performance and is not a guarantee. Carefully consider investment objectives, risk factors and charges and expenses before investing.

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Food Prices Could Be More Of A Concern Than Oil Spikes

March 7, 2011

WASHINGTON (Reuters) – Food, not oil, may prove to be the bigger threat to global growth, with the pain falling disproportionately upon the developing economies that powered the latest economic recovery. Oil market investors are pricing in only a small risk that Middle East unrest spreads to top oil producer Saudi Arabia — an event that would instantly catapult oil to the top of the global economic risk list. Assuming Saudi Arabia’s oil flows unimpeded, the blow to global consumer spending looks relatively modest. Food prices, however, are expected to remain elevated for some time, which puts more pressure on household budgets. “At the moment, the increase in food prices is much more of a concern,” Thomas Helbling, an advisor in the International Monetary Fund’s research department, told Reuters Insider. Treasury Secretary Timothy Geithner echoed that view last week, pointing out that rich nations could tap strategic oil reserves if needed, while food prices will remain high “for a long period of time.” Retail sales figures coming this week from the United States, China and Britain will shed some light on how consumers coped in February, when violence in Libya drove energy prices sharply higher. Economists polled by Reuters expect yet another month of explosive growth in China, with retail sales up 19.1 percent year-on-year. For the United States, the consensus view shows a month-on-month sales gain of 1 percent, which would be far faster than in January. To be sure, some of that strong growth reflects more money spent on fuel in February, and if oil prices remain elevated they will tax consumption. WHICH CRACKS FIRST? So far, however, U.S. consumer confidence has risen right along with gasoline prices, according to the Thomson Reuters-University of Michigan Surveys of Consumers. Richard Curtin, the survey’s director, said if oil prices continue to climb, it will be confidence that breaks first. “That aberrant trend is unlikely to continue,” Curtin said. “Either gas prices will begin to decline or, more likely, expectations will fall.” If investors are right, however, oil prices will top out around $106 a barrel and then drift lower next year. Deutsche Bank economist Peter Hooper said a “mild” oil shock that pushes prices no higher than $110 a barrel would trim 0.4 percent off global economic growth. That would be a relatively modest hit, considering that economists in a Reuters poll expect 2011 global growth of 4.2 percent. If oil hits $150 a barrel — Hooper puts just a 10 to 15 percent probability on that — it would wipe 2 percentage points off global growth. Food prices, on the other hand, are widely expected to continue rising, partly because of a recent spate of crop-damaging weather, but also because rising living standards around the world have pushed up demand for meat. That cost will fall most heavily on poorer countries, where food takes up a bigger share of household budgets. World Bank President Robert Zoellick told Reuters last week that politicians in rich countries did not always recognize the political and economic challenges that higher food prices pose to developing countries. If food costs start eating into developing economy growth rates, the rich world will have to take notice. Emerging and developing economies are expected to grow at a 6.5 percent clip this year, according to IMF estimates. Advanced economies will likely grow at just a 2.5 percent pace. The global economy needs emerging markets’ strength. But everyone has to eat. (Editing by Dan Grebler) Copyright 2011 Thomson Reuters. Click for Restrictions .

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