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Video: JPMorgan Profit More Than Quadruples, Beating Estimates: Video

January 15, 2010

Jan. 15 (Bloomberg) — JPMorgan Chase & Co., the second-largest U.S. bank by assets, said fourth-quarter profit more than quadrupled, beating analysts’ estimates on higher revenue from investment-banking fees. Net income increased to $3.28 billion, or 74 cents a share. (Source: Bloomberg)

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Fliers Face Higher Fees for Fuel, Bags as U.S. Airlines Seek 2010 Profits

January 14, 2010

By Mary Schlangenstein and Mary Jane Credeur Jan. 14 (Bloomberg) — U.S. airline passengers, already paying higher checked-bag fees and fuel surcharges in 2010, should brace for more increases as the industry tries to return to profit. Delta Air Lines Inc. , United Airlines and Continental Airlines Inc. are raising the cost to check a first and second bag this month. The higher fees follow last week’s $20 increase in the round-trip fuel surcharge on flights between the U.S. and Europe by the five biggest carriers with international service. Raising fees or surcharges eliminates uncertainty linked to fare increases, which carriers will rescind unless competitors match the higher rate. UAL Corp.’s United added the first bag charge in February 2008, joining airline fees that were already in place for getting meals or snacks, specific seats, blankets and pillows or to speak with a reservation agent. “With these fees, they can just unilaterally implement the new charge and realize a windfall of cash,” said Jay Sorensen , a consultant at IdeaWorks in Shorewood, Wisconsin, and a former Midwest Airlines executive. “They’re using bag fees as a lever against cost increases, namely oil.” Airlines collected at least $2 billion through so-called ancillary charges in 2009’s third quarter, according to the Bureau of Transportation Statistics. The nine largest U.S. airlines had combined net losses of about $3 billion through the first nine months of 2009. U.S. carriers increased fares on a broad basis 4 times last year, compared with 15 in 2008 and 17 in 2007, according to Rick Seaney , chief executive officer of ticket researcher FareCompare.com. Increases Considered “Passengers will face higher prices as we go through this year,” said David Swierenga , president of consultant AeroEcon in Round Rock, Texas. “The airlines recorded a big loss again in 2009, and they were unable to raise prices through most of that year.” The Bloomberg U.S. Airlines Index of 13 carriers rose 3.2 percent yesterday to its highest level in the past year. The index climbed 41 percent in the three months ended yesterday. The latest fuel surcharge increase brought the total of such fees to $280 on competing U.S.-Europe flights and $242 on routes between the U.S. and the U.K., airlines said. AMR Corp.’s American Airlines and US Airways Group Inc. said they are studying whether to join in increasing the price for a first checked piece of luggage to $23 from $15 and to $32 from $25 for a second. The change applies to online check- ins only, with airport transactions $2 more for the first bag and $3 more for the second. ‘Free Money’ “They look at it as free money and they will continue hiking them,” said Steve Cosgrove, owner of Dynamic Travel & Cruises Inc., one of the largest leisure travel booking agencies in the Dallas area. “As long as the other carriers match it, that means it’s good, let’s go for another round.” Most U.S. airlines had charged at least $15 for online check-in of a first bag and $25 for the second. Southwest Airlines Co., the biggest discounter, is alone among the six major U.S. carriers in letting fliers check two bags for free. Southwest’s decision not to charge bag fees is winning passengers for the Dallas-based carrier, Chief Executive Officer Gary Kelly said on Jan. 11, without providing data. Traffic, or miles flown by paying passengers, rose 1.3 percent on Southwest in 2009 even as it trimmed capacity 5.1 percent. Avoiding Bag Fees “They very much appreciate the no bag fees,” Kelly said. “We’re able to grow our traffic in a shrinking pie in the U.S. We’re flying less than we were a year ago, yet we’re carrying more passengers. There’s a remarkable share shift that has occurred.” U.S. carriers have reduced capacity each of the past two years to better match demand and help gain pricing power. As travel demand returns, crowded planes will allow airlines to boost prices further, Swierenga said. “They will run off those that won’t pay higher fares,” he said. “It’s not going to cost them anything as long as they can continue to fill those airplanes at higher prices. They are desperate to have this happen with two years of losses. This has to happen for the industry to really survive.” To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net ; Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net ;

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China Orders Banks to Set Aside More Cash in Reserves as Bubble Risk Grows

January 12, 2010

By Bloomberg News Jan. 12 (Bloomberg) — China raised the proportion of deposits that banks must set aside as reserves to cool the world’s fastest-growing major economy as a credit boom threatens to stoke inflation and create asset bubbles. Reserve requirements will increase by 50 basis points from Jan. 18, the central bank said on its Web site this evening. The existing levels are 15.5 percent for big banks and 13.5 percent for smaller ones. Chinese lenders added a record 9.21 trillion yuan ($1.3 trillion) of loans in the first 11 months of 2009, driving an economic rebound after the global financial crisis slashed exports. Credit growth surged last week, local media reported yesterday, and exports rose for the first time in 14 months in December, trade data showed on Jan. 10. Policy makers “are following through on their pledge to guide credit in order to pre-empt rising inflation and avoid asset-price bubbles,” said Jing Ulrich , chairwoman of China equities and commodities at JPMorgan Chase & Co. in Hong Kong. The increase, the first since June 2008, excludes rural cooperatives to aid agricultural output, the central bank said. The People’s Bank of China also sold bills at a higher yield for the second time in a week today. The moves fueled speculation that policy makers will raise benchmark interest rates in the first half of the year. Interest-Rate Forecasts BNP Paribas SA brought forward its forecast for higher rates to the second quarter from the third. China’s benchmark one-year lending rate is at a five-year low of 5.31 percent. “The central bank may raise policy rates earlier than market consensus which is the second half of this year,” said Ma Jun , chief China economist at Deutsche Bank AG in Hong Kong. “The trigger for the central bank is inflation as consumer prices may have climbed a higher-than-expected 2 percent in December.” Banks lent about 100 billion yuan ($14.6 billion) each day last week, the official China Securities Journal reported . That compares with 294.8 billion yuan for all of November. December data is yet to be released. While Chinese lending is typically biggest at the start of each year, the central bank said last week that it is aiming for “moderate” credit growth in 2010. Economic Acceleration China’s economy grew 8.9 percent in the third quarter of 2009 from a year earlier, the fastest pace in a year. Yao Zhizhong and He Fan , economists with the Chinese Academy of Social Sciences, warned this week that growth could accelerate to 16 percent this year, overheating the economy, unless stimulus measures are reined in. Today’s move “sends a pretty strong signal that a more substantive tightening is probably coming,” said Mark Williams, senior China economist at Capital Economics Ltd. in London. “It warns banks and it warns firms that they’re going to face higher interest rates down the road.” Economists are ratcheting up 2010 inflation forecasts for China. Citic Securities Co., the nation’s biggest listed brokerage, raised its estimate to 3.2 percent from 2.6 percent in a report dated yesterday. Bank of America Merrill Lynch last week increased its forecast to 3.1 percent from 2.5 percent. Premier Wen Jiabao pledged Dec. 27 to curb excessive property-price gains in some parts of China after the biggest nationwide increase in 16 months in November. To contact the reporter on this story: Paul Panckhurst in Beijing at ppanckhurst@bloomberg.net

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China Raises Bill Yields in Sale for Second Time, Presaging Higher Rates

January 12, 2010

By Bloomberg News Jan. 12 (Bloomberg) — China’s central bank sold bills at a higher yield for the second time in a week, increasing the likelihood that policy makers will raise the benchmark interest rate in the first half of the year. The People’s Bank of China sold one-year bills at a yield of 1.8434 percent after last week guiding three-month rates higher. Lu Ting , a Bank of America-Merrill Lynch economist, said today’s move reflects banks’ expectations for a “moderate” increase in the benchmark rate in 2010. BNP Paribas SA brought forward its forecast for higher interest rates to the second quarter from the third and said the central bank may raise lenders’ reserve requirements by 50 basis points in February. Credit growth surged last week, local media reported yesterday, and the cabinet said Jan. 10 that the nation is on guard against inflows of speculative capital that may stoke inflation and create asset bubbles. “The likelihood of an increase in banks’ reserve ratios is on the rise,” said Tao Dong , a Hong Kong-based economist at Credit Suisse Group AG. “Aggressive” lending last week may have encouraged the central bank to guide bill yields higher, Tao said. The Shanghai Composite Index rose 0.8 percent as of 1:33 p.m. local time. Industrial & Commercial Bank of China Ltd. , the nation’s biggest listed lender, dropped 0.4 percent. UBS AG forecasts an interest-rate increase in May or June after banks’ reserve requirements rise this quarter. Bigger Than Forecast Today’s yield increase of 8 basis points was the first since August for the one-year securities and exceeded the 4 basis point median forecast of 15 traders and analysts surveyed by Bloomberg News. On Jan. 7, the central bank allowed the yield on its three-month bills to climb 4 basis points to 1.3684 percent, the first increase in 19 weeks. Banks lent about 100 billion yuan ($14.6 billion) each day last week, the official China Securities Journal reported . That compares with 294.8 billion yuan for all of November. December data is yet to be released. While Chinese lending is typically biggest at the start of each year, the central bank said last week that it is aiming for “moderate” credit growth in 2010 after a record 9.21 trillion yuan of loans in the first 11 months of 2009. Economists are ratcheting up 2010 inflation forecasts for China. Citic Securities Co., the nation’s biggest listed brokerage, raised its estimate to 3.2 percent from 2.6 percent in a report dated yesterday. Bank of America Merrill Lynch last week increased its forecast to 3.1 percent from 2.5 percent. Inflation Threat Premier Wen Jiabao pledged Dec. 27 to curb excessive property-price gains in some parts of China after the biggest nationwide increase in 16 months in November. “Monetary policy is being gradually tightened as China faces very significant inflationary pressure and credit growth that is too fast,” said Isaac Meng , senior economist at BNP Paribas in Beijing. “By hiking this bill rate, the central bank is sending a clear tightening signal to the banks.” He said the central bank may initially raise interest rates by 27 basis points. China’s benchmark one-year lending rate is at a five-year low of 5.31 percent, and the reserve requirement is 15.5 percent for big banks. The central bank had kept the one-year bill rate steady since Aug. 11 in line with its “appropriately loose” monetary policy to help revive the economy. Now, growth is bouncing back, with exports climbing 17.7 percent last month from a year earlier. The monetary authority sold 20 billion yuan of the one-year securities at the auction today. It also sold 200 billion yuan of securities via 28-day repurchase transactions, a record according to Bloomberg data going back to 2004. “The central bank may keep its net weekly withdrawal at about 150 billion yuan this month to prevent a possible surge in loans in the first quarter,” said Chen Jianbo , a Beijing-based fixed-income analyst at BOC International Holdings Ltd. — Belinda Cao , Judy Chen, Kevin Hamlin, Sophie Leung, Li Yanping, Zhang Shidong. Editors: Paul Panckhurst , Chris Anstey . To contact the Bloomberg news staff on this story: Belinda Cao in Beijing at lcao4@bloomberg.net

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Nearly One Year Later, Obama Plan To Help 1.5 Million Struggling Homeowners Yet To Launch

January 8, 2010

An Obama administration plan announced in April to help up to half of all struggling homeowners avoid foreclosure has yet to officially launch, the Treasury Department acknowledged Friday. The program, a component of the administration’s $75 billion Making Home Affordable effort, was supposed to attack second-lien mortgages, which are additional, second mortgages taken out on a home on top of the initial first mortgage. It’s like taking out two loans to pay the same debt. The Second Lien Program is supposed to automatically reduce the payments on a second mortgage when the first mortgage is modified under the administration’s loan modification effort, the Home Affordable Modification Program. The administration says that by lowering monthly mortgage payments, HAMP will eventually help up to four million homeowners stay in their homes Some housing experts say the second-mortgage component of the plan is necessary to effectively tackle the foreclosure mess — 3 million foreclosure notices were sent out in 2009; another 3 million are estimated to go out this year — because so many distressed homeowners have second mortgages. When rolling out the program in April, the administration estimated that ” up to 50 percent of at-risk mortgages currently have second liens .” Addressing only the first lien is insufficient, experts say, if no changes are made to seconds. Per the administration’s fact sheet on the program accompanying its April 28 announcement: Second liens contribute to the number of American homeowners unable to afford their housing payments. Even where a first mortgage payment may be affordable, the addition of a second mortgage payment can increase monthly payments beyond affordable levels. In addition, second mortgages often complicate or prevent modification or refinancing of a first mortgage. The Second Lien Program will help create a sustainably affordable mortgage payment for millions of homeowners who qualify for a first mortgage modification, yet still face challenges in affording their monthly payments because of a second mortgage. Compounding the problem is the fact that millions of homeowners owe more on their mortgage than their house is worth, putting them “underwater.” About a quarter of all homeowners with a mortgage have negative equity, according to real estate research firm First American CoreLogic . “The single largest problem [with the housing market] is negative equity,” said Laurie S. Goodman, senior managing director at Amherst Securities and one of country’s top mortgage bond analysts according to Institutional Investor magazine , before a Congressional panel last month . “The [government's] current modification program does not address negative equity, and is therefore destined to fail.” Goodman is right — the administration’s Home Affordable Modification Program [HAMP] does not address negative equity. Rather, it reduces monthly payments for struggling borrowers. Housing experts and consumer advocates agree that lowering monthly payments is a good start to reducing foreclosures. For borrowers with negative equity, though, lower monthly payments does not decrease the total debt owed on the house. In fact, under the administration’s plan homeowners end up owing more on their mortgage because mortgage servicers have simply cut interest rates and lengthened the life of the loan, putting them further underwater. Goodman added: “Any principal reduction program requires the [Obama] administration to address the second lien problem head on…It should be noted that second liens have thus far, under HAMP, been treated with kid gloves.” In an e-mail to the Huffington Post, a Treasury Department spokeswoman confirmed that the eight-month-old program has yet to get off the ground as not a single mortgage servicer has signed a contract with the federal government for this particular effort. “We don’t have any official contracts signed yet, but servicers are committing to the program,” Meg Reilly wrote. “We have made enormous progress and continue to move forward with innovative technological development and program implementation and expect to finalize servicer contracts soon.” The hang-up was first discovered by Thomas A. Lawler , a former top official at Fannie Mae and an expert on housing and mortgage matters, who runs Lawler Economic & Housing Consulting. Part of the reason why it’s taken so long for the program to start is due to the complex nature of mortgages, the Treasury Department argues. Mortgages are owned not just by the lenders themselves, but also by investors, who could be anyone from hedge funds to Wall Street banks to municipal pension funds. “Because there has not been a systematic method of notification to second lien holders when a first lien on the same property is modified, ramp up has taken some time,” Reilly said. Some, like influential New York Times columnist Gretchen Morgenson , have pointed their fingers squarely at four specific culprits — the four biggest banks in the country. As of Sept. 30, Bank of America, JPMorgan Chase, Citigroup and Wells Fargo were carrying a combined $452.4 billion worth of second mortgages on their balance sheets, according to the most recent quarterly data filed with the Federal Reserve . That’s $92.1 billion in junior-lien mortgages (mostly second liens) and $360.1 billion in home equity lines of credit. While the Big Four — which are also the nation’s four biggest mortgage servicers — may be willing to cut borrowers’ payments on mortgages owned by investors, doing so for mortgages carried on the Big Four’s books would immediately impact their income; after all, less money would be coming in. But the country’s biggest bank may be poised to finally sign onto the program. A Treasury official told the Huffington Post that Bank of America’s new CEO, Brian Moynihan, re-committed to Treasury Secretary Timothy Geithner this week the bank’s intent to join the administration’s second lien effort. But for now, eight months after the plan’s announcement, up to 1.5 million struggling homeowners are waiting for a program that’s, thus far, stuck in the mud.

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Giants Fire Defensive Coordinator Bill Sheridan After Second-Worst Year

January 4, 2010

By Erik Matuszewski Jan. 4 (Bloomberg) — New York Giants defensive coordinator Bill Sheridan was fired after a season in which the team missed the playoffs and allowed the second-most points in franchise history. New York finished 8-8 after a 5-0 start and allowed 40 points or more in five games, including yesterday’s 44-7 season- ending loss to the Minnesota Vikings. The Giants gave up 427 points for the season, behind only a franchise-record 501 in 1966. The 26.7 points-per-game average was the third highest in the National Football League this season, Sheridan’s first as defensive coordinator and one year after the Giants allowed the fifth-fewest points in the NFL. Sheridan’s dismissal was announced on the Giants’ Web site . To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net .

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Jack Myers: Media 2020 Vision: Perspectives and Solutions for the New Decade

January 4, 2010

The first decade of the 21 st Century seems to have passed in a nano-second, yet this past year moved at a glacial pace as cracked corporate walls came tumbling down and eroding financial foundations collapsed. Ten years ago, the media and advertising businesses appeared to have a prosperous road ahead. Google and eBay were still in their terrible twos. Amazon and Craigslist were in their infancy. YouTube, Hulu, Facebook, My Space, Twitter, Skype and most of today’s hottest media growth properties did not yet exist. A very different reality exists as we enter this second decade of the 21 st Century. Wall Street and corporate investor relations groups remain mired in quarterly financial details that often obfuscate the true value of a company – or lack of value. In the context of the speed with which the industry is changing, analyses and forecasts looking forward just one or two years seem irrelevant. As we enter the second decade of the 21st Century a look forward to the state of the industry in 2020 strikes me as far more pertinent. We are in an industry in which “Chicken Little threats-that-the-sky-is-falling” have become a cacophony even though traditional business models survive and often appear to be thriving. But the fact is that for many the sky is actually falling and their infrastructures are truly collapsing. The media industry is at a historic turning point. What will the media world look like in 2020? In my first subscriber-only report of this new decade, I share my Vision of Media and Advertising in the year 2020. Share your comments at Media 2020 Vision Jack Myers advises media companies, agencies and marketers on business strategies. He can be contacted at Jack@mediadvisorygroup.com . This post originally appeared at JackMyers.com.

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Ravens Clinch NFL Playoff Berth With Win Over Raiders; Jets Seek Last Spot

January 3, 2010

By Dex McLuskey Jan. 3 (Bloomberg) — The Super-Bowl champion Pittsburgh Steelers are in danger of missing the National Football League playoffs even though they ended the regular season with a 30-24 win over the Miami Dolphins. While the Steelers improved to 9-7, their postseason chances took a hit when the Houston Texans overcame a 27-13 fourth-quarter deficit to beat the New England Patriots 34-27. Pittsburgh now needs losses by the New York Jets, Baltimore Ravens and Denver Broncos to clinch one of the final two playoff spots available in the American Football Conference. The Jets and Ravens would make the postseason with wins over the Cincinnati Bengals and Oakland Raiders respectively. The Broncos could make the playoffs if the Jets or Ravens lose and they beat the Kansas City Chiefs. The Texans, who secured their first winning season by scoring 21 straight points in the fourth quarter against the Patriots, could make the playoffs with two losses among the Jets, Ravens and Broncos. The Dolphins were eliminated from contention with their loss to the Steelers, while Jacksonville Jaguars’ season ended with a 23-17 loss to the Cleveland Browns. The Indianapolis Colts, the San Diego Chargers, New England and Cincinnati had clinched AFC playoff spots before today, while the Dallas Cowboys, New Orleans Saints, Minnesota Vikings, Philadelphia Eagles, Arizona Cardinals and Green Bay Packers claimed the National Football Conference’s six berths. The playoffs begin Jan. 9. The Minnesota Vikings (12-4) thrashed the New York Giants 44-7 to end a two-game losing skid and remain in contention for the NFC’s No. 2 seed and a first-round bye in the playoffs. Brett Favre passed for 316 yards and four touchdowns as the Vikings finished 8-0 at home this season. The Philadelphia Eagles would claim the No. 2 seed with a win over the Dallas Cowboys today, while a loss would give the Vikings the second seeding. The Eagles-Cowboys matchup will also determine the NFC East Division champion. The New Orleans Saints, who already locked up the top seed in the NFC, lost today to the Carolina Panthers 23-10 to finish the regular season with a three-game losing streak. Quarterback Drew Brees was among the Saints’ starters who didn’t play. The Indianapolis Colts, the AFC’s top seed, lost their regular-season finale 30-7 in Buffalo. Peyton Manning reached 4,500 passing yards for the second time in his career before leaving the game midway through the second quarter. Manning completed 14 of 18 passes for 95 yards and an interception in his 192nd straight start, before giving way to rookie quarterback Curtis Painter . His season total is 57 yards short of the career-high 4,557 he amassed in 2004. Elsewhere in Week 17, it was Chicago 37, Detroit 23; San Francisco 28, St. Louis 6; and Atlanta 20, Tampa Bay 10. Also today, Green Bay is at Arizona, Washington plays San Diego and Tennessee visits Seattle. The Jets host the Bengals tonight in the final regular-season game at Giants Stadium in East Rutherford, New Jersey. To contact the reporter on this story: Dex McLuskey in Dallas at dmcluskey@bloomberg.net

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Mississippi Beats No. 19 Oklahoma State in Cotton Bowl; Texas Tech Wins

January 3, 2010

By Nancy Kercheval Jan. 3 (Bloomberg) — Dexter McCluster ran for 185 yards and two touchdowns as the University of Mississippi beat 19th- ranked Oklahoma State University 21-7 in the Cotton Bowl. McCluster ran for 86 yards for a touchdown in the second quarter and two yards in the fourth to put Mississippi (9-4) ahead 14-7 at Cowboys Stadium in Arlington, Texas. A total of 12 turnovers were recorded during the game with Mississippi charged with five and Oklahoma State (9-4) committing seven. In the Alamo Bowl, Taylor Potts passed for 384 yards and two touchdowns, while Baron Batch ran for two more scores to give Texas Tech University a 41-31 victory over Michigan State University. Texas Tech (9-4) was playing without coach Mike Leach , who was fired after the regular season for allegedly mistreating a player. Defensive coordinator Ruffin McNeill stepped in to direct the team at the Alamodome in San Antonio, Texas. Steven Sheffield, who replaced Potts, completed an 11-yard touchdown pass to Detron Lewis with 5:08 left in the game to take a 34-31 lead. Three minutes later, Batch sealed the victory with a 13-yard run. Kirk Cousins passed for 220 yards, one touchdown and two interceptions for Michigan State (6-7). Arkansas Win In the Liberty Bowl, Alex Tejada kicked a 37-yard field goal in overtime to give the University of Arkansas a 20-17 victory over East Carolina University. Jarius Wright caught a 41-yard pass from Arkansas quarterback Ryan Mallett with 5:16 left in the game to tie the score at 17-17 and force the overtime. Mallett completed 15 of 36 passing attempts for 202 yards and one touchdown for the Razorbacks (8-5). East Carolina’s Ben Hartman missed two field goal attempts in the last minute of regular play and also sent the ball veering wide left in overtime at Liberty Bowl Memorial Stadium in Memphis, Tennessee. Patrick Pinkney passéd for 212 yards, one touchdown and two interceptions for East Carolina, which had a 10-0 halftime advantage. In the International Bowl, Mike Ford rushed for 207 yards and one touchdown to lead the University of South Florida to a 27-3 win over the Northern Illinois University. South Florida Win B.J. Daniels threw two touchdown passes to A.J. Love as South Florida outscored Northern Illinois 24-0 in the second Half at Rogers Centre in Toronto. Daniels passed for 217 yards and Carlton Mitchell had six receptions for 94 yards for the Bulls (8-5). Mike Salerno kicked a 21-yard field goal in the second quarter for the Northern Illinois (7-6) points. In the Papajohns.com Bowl, Andre Dixon rushed for 126 yards and one touchdown and Dave Teggart added two field goals for the University of Connecticut’s 20-7 win over the University of South Carolina. Zach Frazer completed nine of 21 passing attempts for 107 yards and one touchdown for Connecticut (8-5). Stephen Garcia passed for 129 yards and one interception for South Carolina (7-6). Brian Maddox scored the Gamecocks’ only touchdown on a two-yard run with 3:24 left in the game at Legion Field in Birmingham, Alabama. To contact the reporter on this story: Nancy Kercheval in Washington at nkercheval@bloomberg.net .

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Oklahoma Beats No. 21 Stanford; Virginia Tech, Air Force Win Bowl Games

January 1, 2010

By Nancy Kercheval Jan. 1 (Bloomberg) — Landry Jones passed for 418 yards and three touchdowns to lead the University of Oklahoma to a 31-27 win over No. 21 Stanford University in the Sun Bowl. Ryan Broyles, on the receiving end of Jones’s passes, set a Sun Bowl record with three touchdown receptions. The Sooners (8-5) rallied from a 24-17 halftime deficit to beat Stanford (8-5) at El Paso, Texas. Toby Gerhart, a Heisman Trophy candidate, rushed for 135 yards and two touchdowns for Stanford. Tavita Pritchard passed for 117 yards and two interceptions. In the Chick-fil-A Bowl, Ryan Williams ran for 117 yards and two touchdowns as 11th-ranked Virginia Tech beat the University of Tennessee 37-14. Matt Waldron added three field goals of 21, 46 and 21 yards for the Hokies (10-3), who had a 17-14 halftime lead at the Georgia Dome in Atlanta. Jonathan Crompton passed for 235 yards, one touchdown and one interception for the Vols (7-6). Tennessee gained only five yards rushing compared with Virginia Tech’s 230 yards. In the Armed Forces Bowl, Asher Clark rushed for two touchdowns to help give Air Force a 47-20 victory over the University of Houston. Six Turnovers Clark rushed for 129 yards on 17 carries for Air Force (8- 5), which controlled the game for more than 41 minutes at Amon Carter Stadium in Fort Worth, Texas. Case Keenum, who completed 24 of 41 passing attempts for 222 yards and one touchdown, was plagued by six interceptions for Houston (10-4). In the Texas Bowl, Ricky Dobbs ran for three touchdowns and passed for a fourth as Navy defeated the University of Missouri 35-13 at Reliant Stadium in Houston. Dobbs ran for 166 yards and passed for 130 yards as Navy (10-4) widened its 14-10 halftime advantage in the second half. The Midshipmen controlled the ball for nearly 41 mintes. Blaine Gabbert completed 15 of 31 passing attempts for 291 yards, one touchdown and two interceptions for Missouri (8-5). At Sun Devil Stadium in Tempe, Arizona, Austin Arnaud rushed nine yards for one touchdown and passed for a second score to help Iowa State University win 14-13 over the University of Minnesota in the Insight Bowl. Arnaud dominated the scoring in the second quarter, running for one touchdown and connecting with Jake Williams on a 38-yard pass for a second for Iowa State (7-6). The quarterback, who passed for 216 yards and rushed for 77 yards, also was intercepted twice and lost two fumbles. Eric Ellestad kicked two field goals of 36 and 21 yards and Nick Tow Arnett scored on a 23-yard pass from Adam Weber for Minnesota (6-7). To contact the reporter on this story: Nancy Kercheval in Washington at nkercheval@bloomberg.net .

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Morgan Stanley Said to Defer 65% of Year-End Bonuses for Top 30 Executives

December 29, 2009

By Bradley Keoun Dec. 29 (Bloomberg) — Morgan Stanley , the second-biggest U.S. securities firm, plans to defer at least 65 percent of year-end bonuses for its top 30 executives to blunt criticism over outsize pay, a person familiar with the matter said. One-fifth of the deferred amount will be tied to Morgan Stanley’s performance , said the person, who spoke on condition of anonymity because discussions on the plan are private. The remainder will be a combination of Morgan Stanley shares and cash and won’t be fully paid for three years, the person said. Banks including Goldman Sachs Group Inc. have changed the way they pay employees in response to demands by shareholders and regulators that compensation be more closely aligned with company performance. President Barack Obama this month said he’s frustrated that Wall Street firms that benefited from last year’s taxpayer bailouts continue to enrich top executives, investment bankers and traders. “Morgan Stanley gets the environment we’re living in,” Chief Administrative Officer Thomas Nides said today in an interview. The bonus deferrals at the New York-based bank were reported yesterday on the Wall Street Journal’s Web site. U.S. regulators, seeking to rein in the risk-taking blamed for triggering the worst recession in 60 years, imposed limits on bonuses. Special U.S. master Kenneth Feinberg on Oct. 22 slashed 2009 cash compensation for top executives at seven companies including Citigroup Inc. and Bank of America Corp. that received extraordinary taxpayer aid, forcing the firm to focus on stock-based compensation. Goldman Sachs’ Bonuses Goldman Sachs, the most profitable firm in Wall Street history, on Dec. 10 said the top 30 executives at the New York- based firm will get year-end bonuses in stock they can’t sell for five years. Through the first nine months of 2009, Morgan Stanley set aside $10.9 billion for compensation and benefits , down 9.2 percent from the prior year. Revenue fell 47 percent from a year earlier to $17 billion. Chief Executive Officer John Mack , who plans to step down this week, told employees in a Dec. 18 memo that he would forgo a 2009 bonus partly because of the “extraordinary financial support governments provided to our industry” and the “economic challenges facing so many countries.” Morgan Stanley’s shares, which tumbled 70 percent last year , are up 83 percent this year and rose 14 cents to $29.43 at 2:26 p.m. in New York Stock Exchange composite trading. The price is less than half the $67.60 at the end of 2006. Performance, Equity Return About half the 2009 performance-based bonuses will be in special shares that only pay out if Morgan Stanley’s stock price gains more than peers , the person said. The other half will only be paid if Morgan Stanley’s return on equity — a gauge of profitability and earnings growth — exceeds a specified target, the person said. That target will be disclosed in a regulatory filing detailing compensation matters in advance of next year’s annual shareholder meeting. The Morgan Stanley stock and restricted cash awards will be paid out in equal installments at the end of the second and third years, the person said. The restricted cash awards also are subject to a “clawback” provision that require recipients to reimburse the firm if the pay is based on profits that later turn out to have been overstated, the person said. To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net .

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World War Pope Sainthood Like Obama’s Nobel: Celestine Bohlen

December 28, 2009

Commentary by Celestine Bohlen Dec. 29 (Bloomberg) — It’s not at all clear that the world needs another Roman Catholic saint, let alone another canonized Catholic pope. By one count , there are already more than 10,000 saints and “beati” or blessed, accumulated since Roman times, with at least three saints already assigned for every day of the year. That’s just one good reason why Pope Benedict XVI’s decision to proceed toward the canonization of Pius XII , the church’s controversial World War II-era pope, was so surprising. Another two miracles to his name, and Pius will have cleared all the hurdles to sainthood, where he will be among the ranks of such beloved figures as Saint Francis of Assisi and Saint Joan of Arc. It’s hard to see the urgency or the necessity of an act that was sure to anger and upset large groups of people — most significantly, Jews who worry that Benedict has again delivered a setback to the difficult and delicate task of reconciling Catholicism and Judaism. There may be explanations for Pius XII’s studied silence about the Holocaust in the early 1940s: it is true that public criticism might have put more innocent people in danger, and it is also true that the Pope, like many Catholics, took risks to protect Jews. The question of Pius’ wartime record remains open, and will stay that way as long as the relevant archives are closed. Benedict himself had previously asked Vatican officials to hold off any decision on Pius until the opening of the 1939-1958 archives, now slated for 2014. This approach was endorsed by Jewish leaders, who are now left expressing puzzlement and dismay over Benedict’s decision to jump the gun and issue a decree proclaiming Pius’ “heroic virtues,” setting the stage first for beatification, and then canonization. Vatican Bureaucrat So what was the rush? The answer is politics — which does not make for an edifying religious spectacle. The common perception, disputed by the Vatican, is that by pairing Pius XII with John Paul II in the Dec. 20 decree, Benedict had hoped to satisfy both the conservative and the liberal wings of the Catholic Church. Let’s just leave aside the fact that there isn’t much of a public constituency clamoring for a Saint Pius XII (Pius IX is beatified and Pius I, V and X are already saints), as there is for a Saint John Paul II, a charismatic pope who played a key role in the collapse of Communism. At his funeral in 2005, crowds called for a quick beatification, with chants of “Beato subito.” In contrast, Pius XII — born Eugenio Pacelli, scion of Rome’s so-called black nobility, which has staffed the church’s upper ranks for centuries — was a lifelong Vatican bureaucrat- turned-diplomat, with a dour, ascetic manner. No Mother Theresa This isn’t Mother Teresa , the Albanian-born nun who spent her life caring for the poor of Calcutta and was beatified in 2002, or even Father Jerzy Popieluszko, the Polish priest who was beaten to death by the communist secret police in 1984 and who this month was put on the path to sainthood, together with Pius XII and John Paul II. Last week, the Vatican once again found itself trying to calm waters stirred by one of Benedict’s decisions. Last February, when the pope offered an olive branch to leading figures of a conservative schismatic movement who included a Holocaust-denying ex-bishop, the Vatican blamed “a management error.” This time, the Vatican press office issued a statement explaining that the pope’s decree on Pius’s “heroic virtues” wasn’t an assessment of “the historical impact of all his operative decisions,” but a confirmation that he had led a deeply Christian life. Surely, that was a requirement Pacelli met when he was chosen to be Pope in 1939. Modern Teachings Many experts think that Benedict is trying to reconcile the church with its own history, with teachings that prevailed before the Second Vatican Council, the historical gathering of church leaders convened by Pope John XXIII in the 1960s. That was when the Roman Catholic Church entered the modern age, adopting such principles as separation of church and state, freedom of religion, a more modern liturgy and a repudiation of anti-Semitism. “Benedict wants to emphasize the continuity of the church’s teachings, to make the point that the Second Vatican Council was not a break with the past,” said the Reverend Thomas Reese, a Jesuit scholar and senior fellow at the Woodstock Theological Center at Georgetown University. This isn’t a surprising line of thinking from a conservative pope who as a theologian, once kept watch over the church’s doctrine. But he didn’t need to add another pope to the roster of saints to make the point. Of the 265 popes in history, 76 are already saints: six are blessed. Perhaps now is the time to declare a halt to the practice, for liberals like John Paul II and John XXIII, as well as for conservatives like Pius XII. As Father Reese aptly noted, popes cannot be examples for ordinary Christians: Popes can only be examples for other popes. After President Barack Obama won the Nobel Peace Prize, a lot of people argued that heads of states should not be nominated for that kind of award until after they have left office. Maybe in the case of popes, sitting on the throne of St. Peter should be honor enough. ( Celestine Bohlen is a Bloomberg News columnist. The opinions expressed are her own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Celestine Bohlen in Paris at cbohlen1@bloomberg.net

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Krugman: ‘Reasonably High Chance’ Economy Will Contract Next Year (VIDEO)

December 27, 2009

Economist Paul Krugman said on Sunday that there’s a “reasonably high chance” the economy will contract in the second half of next year. Appearing on ABC’s “This Week,” Krugman said he agreed with fellow economist (and Nobel prize winner) Joseph Stiglitz. “The things we know about are all gonna be negative in the second half of next year,” he said. But he said the chance, while significant, was “less than fifty-fifty odds.” “I would basically go with Joe Stiglitz,” Krugman added, “I’m really worried about the second half.” Stiglitz has been calling for a second stimulus .

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Glencore Considers Initial Offering After Crisis Delivers `Wakeup Call’

December 23, 2009

By Firat Kayakiran and Brett Foley Dec. 24 (Bloomberg) — Glencore International AG, the world’s largest commodity trader, is considering an initial public offering after the credit crisis and tumbling commodity prices threatened to curb its funding. Glencore said yesterday it sold as much as $2.2 billion of bonds to investors including BlackRock Inc. and Government of Singapore Investment Corp. The bonds are convertible upon an IPO, the Baar, Switzerland-based trader said. An offering would end more than three decades of the company operating as a closely held partnership. “Going back a decade they probably didn’t consider it, but there was a wakeup call for them during the credit crisis,” Henri Alexaline , a credit analyst at BNP Paribas SA in London, said by phone. “Now they realize they must diversify their funding methods to give themselves greater flexibility when those problems occur.” The firm, renamed Glencore after management bought former fugitive U.S. financier Marc Rich ’s interest in Marc Rich & Co. in 1994, trades metals and oil. As commodity prices slid in the second half of 2008, credit-default swaps on Glencore’s 5-year bonds rose 10-fold, indicating investors believed there was increasing chance of default. Marc Ocskay , a spokesman for Glencore, declined to comment. Glencore’s credit rating was cut by Standard & Poor’s to BBB-, the lowest investment grade, in December of last year. Profit in the first quarter fell 69 percent. Senior staff agreed to defer their first payment until at least 2012 in the event of their departure, Glencore told bondholders in March, in an attempt to strengthen its finances. Improved Disclosure The company, led by Chief Executive Officer Ivan Glasenberg , 52, improved disclosure by issuing increasingly detailed financial statements. Glencore published details of its earnings on its Web site for the first time this year. Net debt was $9.3 billion as of Sept. 30. Selling the bonds “marks an important milestone as we embark on the next stage of our corporate development,” it said yesterday in a statement. “Glencore was never going to go from fully private to fully public in one step,” Alexaline said. “This is an evolution in how they fund their business.” As well as trading commodities, Glencore owns zinc mines in Peru and Kazakhstan and coal in South Africa, and smelts copper in the Philippines. Assets also include a 34 percent stake in Swiss mining company Xstrata Plc, for which Glencore sells some production, and 9.7 percent of Moscow-based United Co. Rusal, the world’s largest aluminum producer. Xstrata Merger? Glencore could hold an IPO in the second half of next year, and may plan to merge with Xstrata after the offering, said Subramaniam Varada , an analyst at broker Liberum Capital in London. The other motive in selling the bonds is to fund Glencore’s purchase of the Prodeco coal assets in Colombia, which were sold for $2 billion in March to Xstrata, Varada said. Glencore has an option to buy back the assets for $2.25 billion at any point up to the first anniversary of the completion of the deal. Commodity prices have rebounded in 2009, with copper doubling and oil gaining 72 percent. Metals prices are forecast to rise again in 2010 as Chinese demand keeps growing. “To come to the market like this shows they are confident in the fundamentals,” Alexaline said. To contact the reporter on this story: Brett Foley in London at bfoley8@bloomberg.net Firat Kayakiran in London at fkayakiran@bloomberg.net

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Real Estate Investment Trusts Helping Drive The IPO Market

December 23, 2009

minor craze for special-purpose acquisition companies. In 2009, the SPACs disappeared, but it’s been boom time for real estate investment trusts. Nine REITs went public this year, making it the second most popular type of IPO after tech firms. Currently,

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Economy in U.S. Expanded at a Slower-Than-Forecast 2.2% Rate Last Quarter

December 22, 2009

By Timothy R. Homan Dec. 22 (Bloomberg) — The economy in the U.S. expanded in the third quarter at a slower pace than anticipated as companies curbed spending and cut inventories at an even faster pace, reductions that have set the stage for acceleration in growth. The 2.2 percent increase in gross domestic product from July through September compares with a 2.8 percent gain previously reported by the Commerce Department in Washington. Improved consumer spending combined with a record drop in stockpiles this year will promote increases in production that may keep the world’s largest economy growing well into 2010. At the same time, companies such as Dell Inc. point to gains in business investment that signal growing confidence the expansion will continue. “We are really starting to see the mechanisms for a sustained recovery come into place,” said Robert Dye, a senior economist at PNC Financial Services Group in Pittsburgh. “We are starting to see investment numbers come back.” Stock-index futures trimmed earlier gains after the report. The contract on the Standard & Poor’s 500 Index rose 0.3 percent to 1,111.5 at 9:00 a.m. in New York after having been up as much as 0.6 percent. The 2.8 percent projected pace of growth was based on the median estimate of 73 economists in a Bloomberg News survey. Estimates ranged from gains of 2.5 percent to 3.7 percent. The GDP report is the third and final for the quarter. The government’s advance estimate two months ago was 3.5 percent. Economic Slump The economy shrank 3.8 percent in the 12 months to June, the worst performance in seven decades. The four consecutive decreases through the second quarter mark the longest stretch of declines since quarterly records began in 1947. This month’s revisions also showed a bigger gain in earnings than first estimated. Third-quarter corporate profits increased 10.8 percent rather than 10.6 percent, marking the biggest gain in more than five years. Productivity gains have boosted company earnings as payrolls are reduced. Labor costs fell at a 2.5 percent rate last quarter, capping the biggest 12-month drop in seven years, Labor Department figures showed earlier this month. Productivity , a measure of employee output per hour, surged at an 8.1 percent pace percent in the third quarter, the fastest pace in six years. The economy has lost 7.2 million jobs since the recession began in December 2007. Payroll cuts peaked at 741,000 in January before receding to 11,000 in November. Unemployment Forecast The unemployment rate last month fell to 10 percent, from a 26-year high of 10.2 percent in October. Economists surveyed by Bloomberg this month forecast the jobless rate will remain above 10 percent through the first half of next year. The elevated jobless rate is one reason Federal Reserve policy makers said last week they would keep their benchmark interest rate low for an “extended period.” Another reason was that prices aren’t accelerating. The Fed’s preferred inflation gauge, increased less than forecast. The measure, which is tied to consumer spending and strips out food and energy costs, rose at a 1.2 percent annual pace following a 2 percent increase in the prior quarter. Consumer spending, which accounts for about 70 percent of the economy, rose at a 2.8 percent pace last quarter, compared with the 2.9 percent rate forecast by economists and a 0.9 percent decline the previous three months. Spending added 2 percentage points to third-quarter growth. Using Discounts Retailers such as Best Buy Co. are using discounts to boost holiday sales. A report tomorrow is projected to show household purchases rose 0.7 percent in November for a second month. Today’s report showed business fixed investment dropped at a 1.3 percent pace last quarter compared with a previously estimated 0.3 percent increase. Purchases of equipment and software increased at a 1.5 percent pace, less than the Commerce Department estimated last month. The drop in commercial construction was larger than estimated last month. “Overall commercial spending is looking better than what we had hoped for,” Steve Felice, president of Round Rock, Texas- based Dell’s small- and medium-business division, said yesterday in a Bloomberg Television interview. “We’re coming into this holiday season much more optimistic than a year ago.” Inventories dropped at a $139.2 billion annual pace, more than previously estimated. The decrease was smaller than the record $160.2 billion decline in the second quarter, adding 0.7 percentage point to growth. Housing Stabilizing Residential construction jumped at an 18.9 percent pace last quarter, the most in six year and adding 0.4 percentage point to growth. Recent reports indicate the housing slump, which helped trigger the financial crisis, is showing signs of continued improvement. Home sales have been supported in part by tax credits for homebuyers and Fed purchases of mortgage-backed securities that have helped lower borrowing costs. The economy will likely expand at a 3 percent annual rate from October through December, the median forecast in a survey earlier this month showed. Since then, economists at Credit Suisse and JPMorgan Chase & Co. in New York have boosted their projections from 3.5 percent to 4.5 percent as inventories began to grow in October and exports rose. Trade subtracted 0.8 percentage point from third-quarter GDP. The gap between exports and imports climbed to $357.4 billion at an annual pace from $330.4 billion. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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U.K. Economy Shrank 0.2% in Third Quarter, Less Than Previously Estimated

December 22, 2009

By Jennifer Ryan Dec. 22 (Bloomberg) — The U.K. economy shrank less than previously estimated in the third quarter as a jump in construction and fixed investment brought the longest recession on record closer to ending. Gross domestic product fell 0.2 percent from the second quarter, compared with a previous measurement of a 0.3 percent drop, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 24 economists was for a 0.1 percent contraction. The Confederation of British Industry yesterday raised its 2010 economic growth forecast and said the Bank of England may pause its bond-purchase plan in February. Policy makers have pledged to print 200 billion pounds of new money to stoke spending and shake off Britain’s longest recession on record. “It looks like the fourth quarter will be in positive territory and pick up pace next year,” Nick Kounis, chief European economist at Fortis Bank Nederland NV in Amsterdam and a former U.K. Treasury official, said before the report. “The bank could start to become uncomfortable with the extremely loose monetary policy.” The pound was little changed at $1.6042, down 0.2 percent on the day as of 9:33 a.m. in London. The yield on the two-year government bond was up 1 basis point today at 1.198 percent. Recession Damage The recession has now shaved 6 percent off gross domestic product, the statistics office said. The economy contracted 5.1 percent from a year earlier, more than the 4.9 percent median forecast in a Bloomberg News survey of 21 economists. The U.S. economy probably grew an annualized 2.8 percent in the third quarter, according to the median forecast of 62 economists. The Commerce Department will publish that data at 8:30 a.m. in Washington. Construction jumped 1.9 percent, compared with a previous estimate of a 1.1 percent drop, the statistics office said. That offset bigger contractions in services and industrial production. Travis Perkins Plc, the U.K. building-materials supplier that owns the Wickes home-improvement chain, said Dec. 17 it expects earnings for 2009 to be “at the upper end” of analyst estimates as spending on do-it-yourself projects aided sales. Fixed investment increased 2.2 percent, instead of the 0.3 percent drop previously measured. Government spending rose 0.3 percent and consumer spending increased 0.1 percent, the statistics office said. Election Looming Prime Minister Gordon Brown is trying to revive the economy and rebuild support in time for an election which he must call by June. In an Ipsos-Mori poll published in the Observer on Dec. 20, the opposition Conservatives had support of 43 percent of voters, a 17 percentage point lead over Brown’s ruling Labour Party. The economy may already be expanding again. Bank of England policy maker Kate Barker said in an interview last week that economic growth probably resumed in the fourth quarter. Unemployment unexpectedly fell in November for the first time since February 2008. The Royal Institution of Chartered Surveyors today forecast house prices will rise as much as 2 percent in 2010. The CBI yesterday raised its 2010 growth forecast to 1.2 percent from a previous prediction of 0.9 percent. The group said the central bank will start raising the key interest rate from a record low of 0.5 percent in the second quarter. Barker, speaking on Dec. 15, said that the economic pickup may still lapse in 2010. ‘Bumpy’ Recovery “I’ve always been one of the people who thought that the path of this recovery was likely to be quite bumpy and uneven,” she said. “I wouldn’t rule out the possibility that we’d see another quarter of negative growth.” The household savings ratio, which measures the proportion of income hoarded by consumers, rose to 8.6 percent in the third quarter, the most since the first quarter of 1998, the statistics office said. The central bank kept its bond purchase plan unchanged and held the benchmark interest rate at a record low of 0.5 percent. Minutes showing how Barker and her colleagues voted will be released tomorrow. The current account gap widened to 4.7 billion pounds in the third quarter, or 1.3 percent of GDP, from 4.4 billion pounds in the previous three months, the statistics office said in a separate report today. To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

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Real estate sales surge 57% in second half (Crain’s New York Business)

December 18, 2009

Theresa Agovino – Sales of Manhattan commercial real estate surged in the latter half of this year, but activity remains vastly below levels seen in 2008, according to a new report from brokerage Massey Knakal. So far, in the second half of this year, 148 properties have been sold, a 57% increase over the number that changed hands in the first six months of 2009. That number, however, is still …

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Greenspan Says S&P 500 Rally Cuts Stimulus Needs as Household Wealth Rises

December 17, 2009

By Jeff Kearns Dec. 17 (Bloomberg) — The biggest stock market advance in seven decades is reducing the need for additional government stimulus measures, according to former Federal Reserve Chairman Alan Greenspan . The Standard & Poor’s 500 Index ’s 64 percent jump since March made Americans richer by restoring $5.4 trillion to U.S. equities and helped spur a 1.3 percent increase in retail sales last month, data compiled by Bloomberg and the Commerce Department show. “The stimulus is only a third spent, and its order of magnitude is not large enough to compare with the strength and power of the remarkable global equity increase that’s occurred since early March,” Greenspan, 83, said in a telephone interview yesterday from Washington. “Capital gains have proved a far greater stimulus than one can attribute to the $787 billion program that has been only partially spent.” Increasing spending beyond the $11.6 trillion already pledged may also be unnecessary because higher stocks will help boost profits and make loans easier to come by, Greenspan said. Earnings among S&P 500 companies are forecast to rise 65 percent in the fourth quarter, ending the longest series of declines since World War II, data compiled by Bloomberg show. “When stock prices go up, the market value of common stock or of equity in banks and other financial institutions rises,” he said. “And the market value of liabilities is importantly affected by the size of the equity market value cushion on banks’ balance sheets.” Wealth Effect Futures on the S&P 500 expiring in March fell 0.4 percent to 1,101.10 as of 5:01 a.m. in New York today. Net worth for U.S. households increased to $53.4 trillion in the third quarter, up $2.7 trillion from the prior period, helped by share gains, according to a Fed report released on Dec. 10. Assets in so-called defined contribution plans such as 401(k) retirement accounts and IRAs climbed 35 percent to $1.93 trillion from the first quarter to the third, the data show. Retail spending rose in November at more than twice the 0.6 percent median estimate in a Bloomberg survey, Commerce Department data showed. The Reuters/University of Michigan index of consumer sentiment for December increased to 73.4 from 67.4 the month before. Adding Liquidity “All of the statistical evidence indicates that the level of household wealth is a major factor in consumer expenditures and indeed apparently finances directly and indirectly about 15 percent of consumer outlays,” Greenspan said. “The impact on consumption expenditures is significant, largely because the amount of wealth is five times the level of income.” Greenspan ran the central bank from 1987 to 2006, a period in which the S&P 500 climbed more than sixfold, including dividends, according to data compiled by Bloomberg. He reduced interest rates to a half-century low of 1 percent in 2003 and didn’t raise them for a year, helping spur a 16 percent gain in home prices in 2004 and setting the stage for a housing-market collapse that led to more than $1.7 trillion in global bank losses and writedowns. Fed policy makers pledged yesterday to keep their target rate for overnight loans between banks “exceptionally low” for an extended period after a two-day meeting in Washington. U.S. stocks erased most of their increase and 10-year Treasury yields rose on concern Chairman Ben S. Bernanke is preparing investors for higher interest rates next year after holding them near zero since December. Mutual Funds “Financial market conditions have become more supportive of economic growth,” policy makers wrote. Along with government actions, “market forces will contribute to a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability,” they said. U.S. mutual funds are poised for their biggest gain since 2003, according to Morningstar Inc. data. Funds that invest in stocks returned an average 31 percent this year, according to the Chicago-based provider of investment research, after losing 39 percent last year. “There’s no need for a second stimulus,” said Philip Orlando , who helps manage $392.3 billion as chief equity market strategist at Federated Investors Inc. in New York. “People feel better about themselves. They’ve had some of their lost money restored, and now they’re going to go out and spend some of it.” Jobless Rate Employers in the U.S. cut the fewest jobs in November since the recession began, and the unemployment rate unexpectedly fell, the Labor Department said on Dec. 4. Payrolls decreased by 11,000, compared with the median forecast for a 125,000 decline in a Bloomberg survey of economists, while the jobless rate dropped to 10 percent. Ratings cuts by S&P on U.S. issuers have declined each quarter this year, falling to 145 downgrades in the current three-month period from 282 in the third quarter, 554 in the second and 756 in the first, Bloomberg data show. Three-hundred forty-two companies have been upgraded in the second half of the year, compared with 204 ratings increases in the first six months of 2009. “Equity is there to cushion liabilities,” Greenspan said. “The greater the market value of equities, the greater the support for the liabilities, which means bond prices and their ratings go up.” To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net .

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Greenspan Says S&P 500 Rally Cuts Stimulus Needs as Household Wealth Rises

December 17, 2009

By Jeff Kearns Dec. 17 (Bloomberg) — The biggest stock market advance in seven decades is reducing the need for additional government stimulus measures, according to former Federal Reserve Chairman Alan Greenspan . The Standard & Poor’s 500 Index ’s 64 percent jump since March made Americans richer by restoring $5.4 trillion to U.S. equities and helped spur a 1.3 percent increase in retail sales last month, data compiled by Bloomberg and the Commerce Department show. “The stimulus is only a third spent, and its order of magnitude is not large enough to compare with the strength and power of the remarkable global equity increase that’s occurred since early March,” Greenspan, 83, said in a telephone interview yesterday from Washington. “Capital gains have proved a far greater stimulus than one can attribute to the $787 billion program that has been only partially spent.” Increasing spending beyond the $11.6 trillion already pledged may also be unnecessary because higher stocks will help boost profits and make loans easier to come by, Greenspan said. Earnings among S&P 500 companies are forecast to rise 65 percent in the fourth quarter, ending the longest series of declines since World War II, data compiled by Bloomberg show. “When stock prices go up, the market value of common stock or of equity in banks and other financial institutions rises,” he said. “And the market value of liabilities is importantly affected by the size of the equity market value cushion on banks’ balance sheets.” Wealth Effect Futures on the S&P 500 expiring in March fell 0.4 percent to 1,101.10 as of 5:01 a.m. in New York today. Net worth for U.S. households increased to $53.4 trillion in the third quarter, up $2.7 trillion from the prior period, helped by share gains, according to a Fed report released on Dec. 10. Assets in so-called defined contribution plans such as 401(k) retirement accounts and IRAs climbed 35 percent to $1.93 trillion from the first quarter to the third, the data show. Retail spending rose in November at more than twice the 0.6 percent median estimate in a Bloomberg survey, Commerce Department data showed. The Reuters/University of Michigan index of consumer sentiment for December increased to 73.4 from 67.4 the month before. Adding Liquidity “All of the statistical evidence indicates that the level of household wealth is a major factor in consumer expenditures and indeed apparently finances directly and indirectly about 15 percent of consumer outlays,” Greenspan said. “The impact on consumption expenditures is significant, largely because the amount of wealth is five times the level of income.” Greenspan ran the central bank from 1987 to 2006, a period in which the S&P 500 climbed more than sixfold, including dividends, according to data compiled by Bloomberg. He reduced interest rates to a half-century low of 1 percent in 2003 and didn’t raise them for a year, helping spur a 16 percent gain in home prices in 2004 and setting the stage for a housing-market collapse that led to more than $1.7 trillion in global bank losses and writedowns. Fed policy makers pledged yesterday to keep their target rate for overnight loans between banks “exceptionally low” for an extended period after a two-day meeting in Washington. U.S. stocks erased most of their increase and 10-year Treasury yields rose on concern Chairman Ben S. Bernanke is preparing investors for higher interest rates next year after holding them near zero since December. Mutual Funds “Financial market conditions have become more supportive of economic growth,” policy makers wrote. Along with government actions, “market forces will contribute to a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability,” they said. U.S. mutual funds are poised for their biggest gain since 2003, according to Morningstar Inc. data. Funds that invest in stocks returned an average 31 percent this year, according to the Chicago-based provider of investment research, after losing 39 percent last year. “There’s no need for a second stimulus,” said Philip Orlando , who helps manage $392.3 billion as chief equity market strategist at Federated Investors Inc. in New York. “People feel better about themselves. They’ve had some of their lost money restored, and now they’re going to go out and spend some of it.” Jobless Rate Employers in the U.S. cut the fewest jobs in November since the recession began, and the unemployment rate unexpectedly fell, the Labor Department said on Dec. 4. Payrolls decreased by 11,000, compared with the median forecast for a 125,000 decline in a Bloomberg survey of economists, while the jobless rate dropped to 10 percent. Ratings cuts by S&P on U.S. issuers have declined each quarter this year, falling to 145 downgrades in the current three-month period from 282 in the third quarter, 554 in the second and 756 in the first, Bloomberg data show. Three-hundred forty-two companies have been upgraded in the second half of the year, compared with 204 ratings increases in the first six months of 2009. “Equity is there to cushion liabilities,” Greenspan said. “The greater the market value of equities, the greater the support for the liabilities, which means bond prices and their ratings go up.” To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net .

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`Substantial’ Bank Writedowns Needed to Spur Housing Rebound, Goodman Says

December 14, 2009

By Thomas R. Keene and Jody Shenn Dec. 14 (Bloomberg) — Banks will need to take “substantial” writedowns on home-equity loans to enable loan modifications that will allow the U.S. housing market to recover, according to Amherst Securities Group LP. The government’s mortgage-modification program will fail to avert many of the 9 million to 10 million looming foreclosures because it doesn’t reduce principal for borrowers, about a quarter of whom owe more than the current values of their houses, Laurie Goodman , a New York-based mortgage-bond analyst at Amherst, said today in a Bloomberg Radio interview. “It’s important to realize the largest second-lien holders are the largest banks, and there’s going to have to be some very substantial writedowns if you go to a principal-reduction program,” Goodman said. “And this is going to have to be addressed head-on.” Bond investors such as BlackRock Inc. and Fortress Investment Group LLC have criticized the treatment of home- equity loans under the Obama administration’s $75 billion Home Affordable program, citing in part the potential conflicts of interest that banks such as Wells Fargo & Co. and Bank of America Corp. have in acting as both first-mortgage servicers and owners of second-lien debt. Debt Forgiveness A program that uses debt forgiveness would be likelier to succeed in stemming property seizures than changes to borrower payments and would require banks to write off many of their second mortgages, she said in the interview. Goodman is the former head of fixed-income research at UBS Securities LLC, whose team there was top-ranked for non-agency mortgage debt in a 2008 poll by Institutional Investor magazine. She testified to lawmakers on mortgage modifications last week. On April 28, the Treasury announced provisions for an expansion of the U.S. modification plan that would require second mortgages be reworked to reduce or forgive payments or whenever first-lien debt is changed. Officials said then the second-lien program would be running in about a month. The government remains in “discussions with all the top servicers on the second-lien program,” Michael Barr , the assistant Treasury secretary for financial institutions, said on a Nov. 30 conference call with reporters. The administration is now focused on creating a “well-oiled machine,” with servicers, converting as many trial modifications as possible into permanent debt changes, he said. Permanent Modifications Through November, U.S. lenders permanently modified 31,382 of as many as 4 million mortgages targeted by the Home Affordable program, the Treasury said Dec. 10. As many as half of “at-risk” homeowners have second mortgages, the department said in April. U.S. banks held $855 billion of home-equity debt, including closed-end second mortgages and amounts drawn from revolving credit lines, as of Sept. 30, according to Federal Deposit Insurance Corp. data. The administration’s planned second-lien program, created in part to address complaints by mortgage-bond investors, falls short of what’s needed, Goodman said. Policy makers should consider making payments to banks to encourage them to forgive second mortgages, or allow them to take losses on the debt over several years, she said. To contact the reporters on this story: Thomas R. Keene in New York tkeene@bloomberg.net ; Jody Shenn in New York at jshenn@bloomberg.net

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Exxon to Buy XTO for $31 Billion in Bet on U.S. Gas

December 14, 2009

By Jim Polson Dec. 14 (Bloomberg) — Exxon Mobil Corp. , the biggest U.S. oil company, agreed to buy XTO Energy Inc. for $31 billion in a bet that U.S. emissions restrictions will spur increased demand for natural gas. Owners of Fort Worth, Texas-based XTO will get 0.7098 share of Exxon for each of their shares, the companies said today in a statement. The transaction, the largest energy acquisition since 2006 and Irving, Texas-based Exxon ’s biggest takeover since the purchase of Mobil Corp. in 1999, values XTO at $51.69 a share, 25 percent higher than its last closing price. “This says that corporate M&A is alive and well in the exploration and production sector,” said Curtis Trimble , an analyst at Natixis Bleichroeder Inc. in Houston. “It also says that Exxon isn’t shy about stepping up their exposure to the natural-gas market. Almost certainly, we will see some more follow-the-leader type transactions.” Exxon , which also will assume $10 billion in debt, will get the largest producer of U.S. natural gas. Demand for the fuel will grow as U.S. carbon legislation prompts power producers to switch from coal, Kenneth Cohen , Exxon’s vice president for government affairs, said in a Dec. 7 interview. XTO rose $6.52, or 16 percent, to $48.01 at 10:20 a.m. in New York Stock Exchange composite trading. The stock had climbed 18 percent this year before today. Exxon fell $2.90 to $69.93. Acquisition Outlook The purchase is scheduled to close in the second quarter, the companies said. JPMorgan Chase & Co. and Davis Polk & Wardwell are advising Exxon . Barclays Plc, Jefferies & Co. and Skadden Arps Slate Meagher & Flom LLP are advising XTO. “In terms of which deal gets triggered next, it’s kind of a race to the altar,” said Ted Harper , who helps manage $6.1 billion, including 137,550 XTO shares and 932,268 Exxon shares, at Frost Investment Advisors in Houston. Acquirers will probably be major oil companies that are having a tough time increasing production, such as Europe’s Royal Dutch Shell Plc and Total SA, Harper said. Potential takeover targets would include independent exploration and production companies like Ultra Petroleum Corp. , EnCana Corp., and Range Resources Corp., he said. XTO’s output jumped 23 percent to the equivalent of 2.95 billion cubic feet of gas a day after a $4.2 billion acquisition spree last year that included Hunt Petroleum Corp. The company reported proved reserves equivalent to almost 13.9 trillion cubic feet of gas at the end of last year. Including reserves not yet proved, XTO has an estimated 45 trillion cubic feet of gas equivalent, according to today’s statement. Reserves Needed “There very little in the way of really good reserves out there,” said Stephen Leeb , who manages $175 million as president of Leeb Capital Management in New York. “If you want reserves you can count on, you really have to buy domestic reserves, or reserves in countries that are, you know, trustworthy, and XTO has a lot of wonderful domestic reserves, especially, I think, in the gas area.” Including all reserves, not just proved, Exxon is paying $5.47 per barrel of oil equivalent in reserves, Chief Executive Officer Rex Tillerson told reporters today on a conference call. XTO extracts gas from the Barnett Shale region of Texas, the largest so-called unconventional gas field in the U.S., and is drilling in the Bakken Shale in North Dakota, where oil is trapped between shale beds in rock resembling concrete. The company is doubling its drilling in the Marcellus Shale, a gas-bearing formation that stretches through parts of Pennsylvania, New York and West Virginia. Shale developments, where rock formations are fractured and injected with water, sand and chemicals to release trapped gas, drove a jump in U.S. gas production last year. Exxon’s War Chest XTO’s headquarters will be the center of Exxon ’s unconventional oil and gas unit, which will be based in Fort Worth, Tillerson said on the conference call. The company will exploit shale formations globally, he said. Additional scale is needed to develop shale formations, XTO Chairman Bob Simpson said on the call. Exxon amassed more than $31 billion in cash as of the end of last year and almost $200 billion of its own shares purchased through buybacks. Prior to today’s announcement, the company had used its cash stockpile on its own capital projects and asset purchases. The Mobil deal was the company’s last major takeover. “They’ve been sitting on a huge amount of cash for the last several years, with speculation mounting as to what they will do,” said Gianna Bern , president of Brookshire Advisory & Research Inc. in Flossmoor, Illinois. “Acquisitions that increase their production capabilities will be viewed fairly positively.” Gas Drops The Exxon-XTO deal is the largest U.S. energy takeover since Houston-based ConocoPhillips acquired Burlington Resources Inc., also primarily a gas producer, for $36 billion in 2006. ConocoPhillips recorded $34 billion in fourth-quarter 2008 costs to reflect a drop in the value of acquired assets, including the Burlington gas properties. U.S. gas futures tumbled to a seven-year low in September as the recession eroded demand for the heating and power-plant fuel. Global energy demand will rise 30 percent by 2030, led by gains in use of gas, Exxon Senior Vice President Andrew P. Swiger said last month in a presentation in New York. Gas use will increase twice as fast as demand for crude oil and will surpass coal as the second-largest energy source, he said. To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net .

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Shell, Lukoil to Join Iraq’s Top Oil Producers on Winning Bids in Auction

December 13, 2009

By Anthony DiPaola Dec. 13 (Bloomberg) — Royal Dutch Shell Plc and OAO Lukoil will join BP Plc and Exxon Mobil Corp. among Iraq’s top oil producers based on their pledges in winning bids this weekend as the country auctioned 28 percent of its crude assets. Russia’s Lukoil and partner Statoil ASA of Norway won rights yesterday to develop the second phase of Iraq’s “super giant” West Qurna deposit, agreeing to pump 1.8 million barrels of oil from the field within six years. Shell and Malaysian partner Petroliam Nasional Bhd. , or Petronas, committed on Dec. 11 in Baghdad to extract the same amount of crude from Iraq’s Majnoon field. China National Petroleum Corp. , Russia’s OAO Gazprom, and Angola’s Sonangol SA also won contracts in the two-day auction. The government in Iraq, which holds the world’s third-largest oil reserves, aims to boost production capacity to more than 12 million barrels a day, Oil Minister Hussain al-Shahristani said. “When you have such huge reserves in a few fields, it’s only the giant oil companies that can win and afford to do the work,” said Tariq Shafiq , an adviser with London-based Petrolog & Associates and a former Oil Ministry official. Iraq offered almost a third of its reserves in 10 blocs in the second round of oil licensing yesterday and Dec. 11. A first round in June assigned a similar amount of crude, with BP and China National Petroleum Corp. agreeing to develop Rumaila, the largest field awarded, with 17 billion barrels of reserves. The Persian Gulf state is trying to attract investors to rebuild its economy after almost a decade of conflict and prior sanctions destroyed infrastructure. Iraq pumps about 2.4 million barrels a day and hasn’t exceeded 3 million since late 2000. $200 Billion Iraq will get about $200 billion a year from the development contracts awarded to international companies in the two rounds. The winning bidders will spend about $100 billion developing the deposits, al-Shahristani said after the auction ended in Baghdad yesterday. The work is scheduled to start about six months from the signing of the deals. He called the second round a “success” after Iraq awarded seven contracts and got no bids for three blocs. In the first auction in June, Iraq signed only one contract out of 10 offered. The government agreed last month to two other deals and is in talks on a fourth field from the first round. London-based BP and China National agreed in June to produce 2.85 million barrels a day at Rumaila, the only field locked up in that round. Security Concerns Exxon, based in Irving, Texas, and Shell, based in The Hague, agreed last month to terms for the first phase of West Qurna and pledged to pump 2.33 million barrels of crude a day there. Eni SpA agreed to pump more that 1 million barrels a day from the Zubair field, and Shell is still in talks over Kirkuk, all of which were offered in the first auction. The opening of Iraq’s reserves persuaded more than 35 international and state-run oil companies to set aside concerns that insurgent attacks or political instability may disrupt operations. Bombings in Baghdad last week left at least 101 people dead and hundreds injured as violence escalates before elections planned in March. Al-Shahristani has said the government would approve bids awarded this weekend by the end of year and said final approval for Exxon and Eni’s deals is imminent. Petronas was one of the most active bidders in the second round, having been involved in four winning bids and one losing offer for West Qurna-2. Total SA may be disappointed in the results after it won a stake in the Halfaya field and lost on two others, said Samuel Ciszuk , an analyst at IHS Global Insight in London. Return to Iraq Paris-based Total, seeking to return to the country it first explored in 1927, was interested in Majnoon and West Qurna-2, exploration and production head Yves-Louis Darricarrere said Dec. 2. Majnoon holds 12.6 billion barrels of reserves and Halfaya holds 4.1 billion barrels, according to U.S. estimates. “We are pleased to resume our operations in Iraq with our partners at Halfaya,” Total spokeswoman Phenelope Semavoine said by telephone yesterday. Lukoil, the Russian producer with the most oil assets abroad, beat out teams headed by BP, Total and Petronas in the bidding for West Qurna-2. The winning bidders for two of Iraq’s largest fields, West Qurna and Majnoon, offered their services at one-quarter to one- third of the best bids proposed at the first auction in June, according to Oil Ministry data. BP agreed in the first round to develop Rumaila for $2 a barrel, half the initial bid. Price Is Right “The round is a success in the sense that the prices given for the fields were right,” said Shafiq. Shafiq said he doubts Iraq can achieve 12 million barrels a day of capacity in the six years without damaging the field reservoirs and hurting potential production. Thamir Ghadhban, an adviser to Iraqi Prime Minister Nuri Kamil Al-Maliki and former oil minister, questioned on Dec. 7 whether production from Rumaila, West Qurna-1 and Zubair will reach the levels proposed by BP, Exxon and Eni. West Qurna, described as a “super giant” by Iraq’s Oil Ministry, is being developed in two licenses. The 12.9 billion barrels of oil reserves in West Qurna’s phase two make that deposit the biggest on offer in the second bidding round, according to U.S. Energy Department data. The first phase has about 8.7 billion barrels of reserves. Saddam Hussein Lukoil received a contract to develop the deposit from former Iraqi dictator Saddam Hussein in 1997. He then annulled it in 2002. Lukoil’s CEO unsuccessfully lobbied Iraqi Prime Minister Nuri al-Maliki to reinstate it this April. Petronas and Japan Petroleum Exploration Co., known as Japex, won the Garraf field yesterday, outbidding groups led by Turkish Petroleum Corp., known as TPAO, and PT Pertamina, Indonesia’s oil company. Gazprom led the only group bidding for rights to develop the Badra oilfield. It won the contract after lowering its cost for the work. Sonangol, Angola’s state-run oil company, lowered its initial bids for the Qaiyarah and Najmah crude deposits to meet Iraq’s conditions. Iraq received no bids for the Middle Furat, or Middle Euphrates, fields, the Eastern Fields and the East Baghdad deposit. Iraq, the third-largest producer in the Organization of Petroleum Exporting Countries, is the only member not subject to a production quota. It is “too early” for OPEC to set a quota for Iraq’s crude production, Oil Ministry spokesman Asim Jihad said yesterday. Boosting capacity as planned would enable Iraq to rival Saudi Arabia’s 12.5 million barrels of daily capacity, OPEC’s largest. Iraq will hold a 25 percent stake in all field development licenses, with the remainder split between companies winning the bid. Bidders must accept service contracts with a flat fee for each barrel extracted, rather than production-sharing agreements in which they gain a stake in the crude produced. This means they are not positioned to benefit from a rise in oil prices. CNPC, Petronas and Total won the contract to boost production at Halfaya to 535,000 barrels a day, beating groups led by Statoil, Italy’s Eni SpA and India’s Oil & Natural Gas Corp. To contact the reporter on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net

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Shell, Lukoil to Join Iraq’s Top Oil Producers on Winning Bids in Auction

December 13, 2009

By Anthony DiPaola Dec. 13 (Bloomberg) — Royal Dutch Shell Plc and OAO Lukoil will join BP Plc and Exxon Mobil Corp. among Iraq’s top oil producers based on their pledges in winning bids this weekend as the country auctioned 28 percent of its crude assets. Russia’s Lukoil and partner Statoil ASA of Norway won rights yesterday to develop the second phase of Iraq’s “super giant” West Qurna deposit, agreeing to pump 1.8 million barrels of oil from the field within six years. Shell and Malaysian partner Petroliam Nasional Bhd. , or Petronas, committed on Dec. 11 in Baghdad to extract the same amount of crude from Iraq’s Majnoon field. China National Petroleum Corp. , Russia’s OAO Gazprom, and Angola’s Sonangol SA also won contracts in the two-day auction. The government in Iraq, which holds the world’s third-largest oil reserves, aims to boost production capacity to more than 12 million barrels a day, Oil Minister Hussain al-Shahristani said. “When you have such huge reserves in a few fields, it’s only the giant oil companies that can win and afford to do the work,” said Tariq Shafiq , an adviser with London-based Petrolog & Associates and a former Oil Ministry official. Iraq offered almost a third of its reserves in 10 blocs in the second round of oil licensing yesterday and Dec. 11. A first round in June assigned a similar amount of crude, with BP and China National Petroleum Corp. agreeing to develop Rumaila, the largest field awarded, with 17 billion barrels of reserves. The Persian Gulf state is trying to attract investors to rebuild its economy after almost a decade of conflict and prior sanctions destroyed infrastructure. Iraq pumps about 2.4 million barrels a day and hasn’t exceeded 3 million since late 2000. $200 Billion Iraq will get about $200 billion a year from the development contracts awarded to international companies in the two rounds. The winning bidders will spend about $100 billion developing the deposits, al-Shahristani said after the auction ended in Baghdad yesterday. The work is scheduled to start about six months from the signing of the deals. He called the second round a “success” after Iraq awarded seven contracts and got no bids for three blocs. In the first auction in June, Iraq signed only one contract out of 10 offered. The government agreed last month to two other deals and is in talks on a fourth field from the first round. London-based BP and China National agreed in June to produce 2.85 million barrels a day at Rumaila, the only field locked up in that round. Security Concerns Exxon, based in Irving, Texas, and Shell, based in The Hague, agreed last month to terms for the first phase of West Qurna and pledged to pump 2.33 million barrels of crude a day there. Eni SpA agreed to pump more that 1 million barrels a day from the Zubair field, and Shell is still in talks over Kirkuk, all of which were offered in the first auction. The opening of Iraq’s reserves persuaded more than 35 international and state-run oil companies to set aside concerns that insurgent attacks or political instability may disrupt operations. Bombings in Baghdad last week left at least 101 people dead and hundreds injured as violence escalates before elections planned in March. Al-Shahristani has said the government would approve bids awarded this weekend by the end of year and said final approval for Exxon and Eni’s deals is imminent. Petronas was one of the most active bidders in the second round, having been involved in four winning bids and one losing offer for West Qurna-2. Total SA may be disappointed in the results after it won a stake in the Halfaya field and lost on two others, said Samuel Ciszuk , an analyst at IHS Global Insight in London. Return to Iraq Paris-based Total, seeking to return to the country it first explored in 1927, was interested in Majnoon and West Qurna-2, exploration and production head Yves-Louis Darricarrere said Dec. 2. Majnoon holds 12.6 billion barrels of reserves and Halfaya holds 4.1 billion barrels, according to U.S. estimates. “We are pleased to resume our operations in Iraq with our partners at Halfaya,” Total spokeswoman Phenelope Semavoine said by telephone yesterday. Lukoil, the Russian producer with the most oil assets abroad, beat out teams headed by BP, Total and Petronas in the bidding for West Qurna-2. The winning bidders for two of Iraq’s largest fields, West Qurna and Majnoon, offered their services at one-quarter to one- third of the best bids proposed at the first auction in June, according to Oil Ministry data. BP agreed in the first round to develop Rumaila for $2 a barrel, half the initial bid. Price Is Right “The round is a success in the sense that the prices given for the fields were right,” said Shafiq. Shafiq said he doubts Iraq can achieve 12 million barrels a day of capacity in the six years without damaging the field reservoirs and hurting potential production. Thamir Ghadhban, an adviser to Iraqi Prime Minister Nuri Kamil Al-Maliki and former oil minister, questioned on Dec. 7 whether production from Rumaila, West Qurna-1 and Zubair will reach the levels proposed by BP, Exxon and Eni. West Qurna, described as a “super giant” by Iraq’s Oil Ministry, is being developed in two licenses. The 12.9 billion barrels of oil reserves in West Qurna’s phase two make that deposit the biggest on offer in the second bidding round, according to U.S. Energy Department data. The first phase has about 8.7 billion barrels of reserves. Saddam Hussein Lukoil received a contract to develop the deposit from former Iraqi dictator Saddam Hussein in 1997. He then annulled it in 2002. Lukoil’s CEO unsuccessfully lobbied Iraqi Prime Minister Nuri al-Maliki to reinstate it this April. Petronas and Japan Petroleum Exploration Co., known as Japex, won the Garraf field yesterday, outbidding groups led by Turkish Petroleum Corp., known as TPAO, and PT Pertamina, Indonesia’s oil company. Gazprom led the only group bidding for rights to develop the Badra oilfield. It won the contract after lowering its cost for the work. Sonangol, Angola’s state-run oil company, lowered its initial bids for the Qaiyarah and Najmah crude deposits to meet Iraq’s conditions. Iraq received no bids for the Middle Furat, or Middle Euphrates, fields, the Eastern Fields and the East Baghdad deposit. Iraq, the third-largest producer in the Organization of Petroleum Exporting Countries, is the only member not subject to a production quota. It is “too early” for OPEC to set a quota for Iraq’s crude production, Oil Ministry spokesman Asim Jihad said yesterday. Boosting capacity as planned would enable Iraq to rival Saudi Arabia’s 12.5 million barrels of daily capacity, OPEC’s largest. Iraq will hold a 25 percent stake in all field development licenses, with the remainder split between companies winning the bid. Bidders must accept service contracts with a flat fee for each barrel extracted, rather than production-sharing agreements in which they gain a stake in the crude produced. This means they are not positioned to benefit from a rise in oil prices. CNPC, Petronas and Total won the contract to boost production at Halfaya to 535,000 barrels a day, beating groups led by Statoil, Italy’s Eni SpA and India’s Oil & Natural Gas Corp. To contact the reporter on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net

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Lukoil, Statoil Win Iraq’s West Qurna Field, Top Prize in Last-Day Bidding

December 12, 2009

By Anthony DiPaola and Kadhim Ajrash Dec. 12 (Bloomberg) — OAO Lukoil and partner Statoil ASA won the bidding for rights to develop the “super giant” West Qurna phase-two crude deposit, the largest offered to foreign investors in today’s second-round of bidding. The state-controlled oil companies from Russia and Norway offered to boost output at West Qurna to 1.8 million barrels a day for a fee of $1.15 per new barrel, according to data from the licensing round. The offer from Moscow-based Lukoil beat bids by groups headed by London-based BP Plc , Paris-based Total SA and Kuala Lumpur-based Petroliam Nasional Bhd., or Petronas. Iraq, which holds the world’s third-largest oil reserves, awarded two service contracts yesterday to develop fields holding 15 percent of its total reserves to groups led by Royal Dutch Shell Plc and China National Petroleum Corp. The government aims to boost output to more than 12 million barrels a day with contracts awarded in the two rounds, Oil Minister Hussain al-Shahristani said today in Baghdad. “There’s so much riding on West Qurna,” said Kyle Stelma, managing director for emerging markets at Washington and Dubai- based Dunia Frontier Consultants . The two-day auction can be considered a “qualified success,” following the West Qurna bidding, said Stelma, who advises clients operating in Iraq. West Qurna, 65 kilometers northwest of Basra and described as a “super giant” by Iraq’s Oil Ministry, is being developed in two licenses. The 12.9 billion barrels of oil reserves in West Qurna’s phase two make that deposit the biggest on offer in this bidding round, according to U.S. Energy Department data. Five Projects The five projects in today’s bidding were West Qurna-2, Garraf, Badra, Middle Furat, and Najmah. Petronas and Japan Petroleum Exploration Co., known as Japex, won Garraf, outbidding groups led by Turkish Petroleum Corp., known as TPAO, and PT Pertamina, Indonesia’s oil and gas company. OAO Gazprom led the only group bidding for rights to develop Iraq’s Badra oilfield. It won the contract after lowering its cost for the work. Sonangol SA, Angola’s state-run oil company, today agreed to Iraq’s terms to develop the Qaiyarah deposit after their initial bid was rejected yesterday. Sonangol also won rights to develop Iraq’s Najmah crude deposit, the last field to be auctioned in the round. Iraq received no bids today for the Middle Furat or Middle Euphrates field. Iraq’s first round of oil bidding was in June. In that round, Lukoil bid together with Houston-based producer ConocoPhillips for the first phase of West Qurna. Lukoil, Statoil “Russia has a long-standing relationship with Iraq,” Christopher Wheaton, who manages about $400 million at Allianz RCM’s Energy Fund, said yesterday. Statoil, which also bid for phase one of West Qurna in June, said it hoped to win in subsequent bidding. More than 35 companies were vying for service contracts to develop 10 fields in the second bid round. The first phase of West Qurna was awarded last month to Exxon Mobil Corp. and Shell after an initial failure to agree on terms during the country’s earlier bidding round in June. The first phase has about 8.7 billion barrels of reserves. Four groups, involving eight companies bid for West Qurna- 2. Exxon and Shell didn’t bid for the second phase. “It’s always been seen as the main prize in the second round,” said Samuel Ciszuk, an analyst at IHS Global Insight in London. ‘Low Hanging Fruit’ Iraq, the third-largest producer in the Organization of Petroleum Exporting Countries, is struggling to raise output from about 2.4 million barrels a day and to boost revenue from crude sales after six years of conflict destroyed the economy and infrastructure. “All of the low hanging fruit in the industry is gone,” Gianna Bern, president of Brookshire Advisory & Research Inc. in Flossmoor, Illinois, said in an e-mail. “The Supermajors and many national oil companies will still participate in bid rounds as the industry is forced to go wherever the reserves are located.” Iraq will hold a 25 percent stake in all field development licenses, with the remainder split between companies winning the bid. Bidders must accept service contracts with a flat fee for each barrel extracted, rather than production-sharing agreements in which they gain a stake in the crude produced. This means they are not positioned to benefit from a rise in oil prices. Majnoon The winning bids from yesterday’s auction show Shell and Malaysian partner Petroliam Nasional Bhd. , plan to boost output at the Majnoon field to 1.8 million barrels of output a day, from about 50,000 barrels a day now, earning a fee of $1.39 a barrel. The partners beat a rival bid by Total SA and CNPC. CNPC, Petronas and Total will boost production at Halfaya to 535,000 barrels a day, for a fee of $1.40 per barrel produced, beating groups led by Statoil, Italy’s Eni SpA and India’s Oil & Natural Gas Corp. Majnoon holds 12.6 billion barrels of oil reserves and Halfaya holds 4.1 billion barrels, according to U.S. estimates. The Rumaila field, with 17 billion barrels of reserves, was the biggest offered in bidding rounds this year. BP Plc and CNPC won that contract, which was the only one to be awarded during the first round in June. To contact the reporter on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net

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Brazil’s Economy Expands Less Than Forecast by All 39 Economists in Survey

December 10, 2009

By Andre Soliani and Helder Marinho Dec. 10 (Bloomberg) — Brazil’s economy grew at a slower pace than forecast in the third quarter, cementing expectations that the central bank will leave the benchmark interest rate at a record low in the coming months. Interest-rate futures fell after the National Statistics Agency said gross domestic product expanded 1.3 percent in the third quarter from the previous three months, surprising all 39 analysts in a Bloomberg survey. Second-quarter growth was revised to 1.1 percent, down from 1.9 percent. Policy makers signaled yesterday they will keep the benchmark rate at 8.75 percent during the first quarter of next year to bolster growth . Finance Minister Guido Mantega yesterday extended tax breaks that were expected to expire in December for at least another six months to ensure GDP expands 5 percent next year. He also announced an additional 80 billion reais ($45 billion) for the National Development Bank “Today’s figures widen the room for the central bank to keep the rate unchanged during the first half of next year,” Newton Rosa, chief economist at Sul America Investimentos, said in phone interview from Sao Paulo. “The economy is expanding at more moderate pace than the market was forecasting, therefore, it will ease inflation concerns.” The yield on the interest rate future contracts due January 2011, the most traded on the Sao Paulo stock exchange, fell 8 basis points to 10.38 percent at 8:46 a.m. New York time. The real gained 0.5 percent to 1.7526 per dollar from 1.7622 yesterday. Stocks rose 1.0 percent. Weaker Output Rosa expects the central bank to begin raising the so- called Selic rate after June. He said he would’ve brought forward his call had growth accelerated faster. Weaker industrial activity was the main brake on growth, he said. GDP dropped 1.2 percent from a year ago, less than the revised 1.6 percent contraction in the second quarter, the statistics agency said Rio de Janeiro. Economists expected a 0.2 percent decline, according to the median forecast in a Bloomberg survey. Economists expected quarterly growth of 2 percent. “Today’s figure explains why the government continued to grant tax breaks to spur investment and consumption,” said Diego Donadio, senior analyst at BNP Paribas in Sao Paulo. Donadio said he expects the central bank will begin tightening only in the first quarter of 2011. Policy makers voted unanimously yesterday to keep the benchmark rate at 8.75 percent yesterday for the third straight meeting, matching the forecasts of all 47 analysts surveyed by Bloomberg. ‘Strong Message’ “The remaining margin of idleness in productive factors” allowed board members led by President Henrique Meirelles to keep the rate unchanged, according to a statement. The level is “consistent” with a non-inflationary recovery “at the moment,” they said. “The central bank sent a strong message,” Roberto Padovani, chief economist at Banco WestLB do Brasil said in a phone interview yesterday from Sao Paulo. “Policy makers signaled they will remain where they are for quite awhile.” Recession Over Latin America’s biggest economy this year emerged from its first recession since 2003 after the government slashed taxes and pumped cash into the nation’s money markets while policy makers cut rates at five straight meetings. “The bank’s statement was quite dovish compared with the rate increases that are being priced in by interest rate-futures contracts,” said Andre Loes , chief economist at HSBC Bank in Sao Paulo. Economist estimates for 2010 inflation have risen in five of seven central bank surveys taken since the bank’s October meeting, though the outlook, at 4.48 percent, remains below the 4.5 percent midpoint of policy makers’ target range. Loes expects a rate increase in the second half of 2010. To be sure, “aggressive” fiscal spending puts pressure on the central bank to raise borrowing costs, said Douglas Smith , chief economist for the Americas at Standard Chartered Plc in New York. Smith expects the central bank to start raising interest rates by 50 basis points, or 0.50 percent, in March. “We could have some inflationary surprises in the second half of 2010 because of the monetary and fiscal stimulus in place,” Flavio Serrano , senior economist at Banco Espirito Santo de Investimento, said in a phone interview from Sao Paulo. ‘At the Moment’ Alvise Marino, emerging markets economist at IDEAglobal in New York, said the addition from previous statements of the phrase “at the moment” means policy makers are more sensitive to domestic economic indicators than they were during the global financial crisis. The signal “boosts the odds of an early rate hike,” he wrote in an e-mailed report. The central bank will keep the benchmark rate at 8.75 percent next year, Finance Minister Guido Mantega said yesterday. Companies will meet higher demand by stepping up investment, thus keeping inflation under control, he said. Annual inflation in November, as measured by the benchmark IPCA index, accelerated for the first time since February to 4.22 percent, the national statistics agency said yesterday. Economists expect the index to end 2010 at 4.48 percent, according to a Dec. 4 central bank survey of 100 economists. The same survey shows economists expect Brazil’s gross domestic product to expand 5 percent next year, more than twice as fast as the same survey taken a year ago. Policy makers will lift the so-called Selic rate to 9.23 percent by March, according to estimates based on overnight interest rate-futures contracts. Led by domestic demand , the economy expanded 1.9 percent in the second quarter from the April-June period. The expansion in the third quarter should be “quite strong” and growth this year should be “slightly positive,” Meirelles said Dec. 4. To contact the reporter on this story: Andre Soliani in Brasilia at asoliani@bloomberg.net Helder Marinho in Rio de Janeiro at hmarinho@bloomberg.net

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Old Brothels, Labs, Warehouses Show Melbourne Bars’ Colorful Past: Review

December 9, 2009

Review by Robert Fenner Dec. 9 (Bloomberg) — Fancy a martini amid the trappings of a turn-of-the century opium den? Or perhaps a nip of Grey Goose vodka in a former laboratory? And how about an Ethiopian beer at a bar named after a brothel owner from the 19th century? Welcome to Melbourne’s bars, where barkeeps have reclaimed empty warehouses, workshops and buildings in graffiti-lined laneways that snake between the city’s main thoroughfares. Most popped up in the past decade, when the city’s liquor licensing rules changed to make it easier for smaller joints to open, and virtually all nod to the past in some way. My guests and I started off our exploration of the city’s watering holes at Madame Brussels , a rooftop bar that offers views of the Victorian state Parliament. Making your way past the pre-theater dinner crowd of the ground-floor restaurant and a Japanese karaoke bar on the second, customers emerge into a pastel-hued garden party, complete with grass, trellising, and a gazebo — and that’s indoors. Out on the terrace, waiters dressed straight out of the 1920s with cream slacks, waistcoats and flat caps, serve beer, wine and carafes of Sangria. Eschewing the Pimms of the raucous table next to us, we ordered Yebisu beer from Japan (A$8, $7.30) and St. George (A$9) from Ethiopia, with the latter promising a donation to charity. Both were cold, crisp and refreshing, although not nearly as chilly as the plunging evening temperature. Fear not though, our attentive waiter offered blankets, necessary in a city known for its capricious climate. Opium Den After a few cozy beers under our pastel-colored blankets, we decided to move on, two blocks south, to Gin Palace . As the name suggests, this subterranean bar specializes in martinis. With low lighting, tasseled drapes, quiet alcoves and well-worn sofas, it mimics the decadence of an old gentleman’s club and the imagery of a 19th-century opium den. My guest and I ordered the Luis Bunuel surrealist martini (A$17.50), inspired by the Spanish-born filmmaker who clearly felt “the drier the better” when it came to his liquor. The gin, antique shaker and glasses are frozen for two days before being shaken over ice with a drop or two of Noilly Prat vermouth and some Angostura bitters for a pink hue. The result is a powerful, dry drink that would do the filmmaker proud, dominated by the gin whose frozen state ensures minimal dilution when mixed with ice. A small but well-chosen wine list, selection of beers and up-market bar snacks (anchovies and olives, aged cheese) add to the opulence, while dim lighting adds to the mystique. Graffiti, Garbage We decided to move on so we didn’t get too comfortable. Through a graffiti-covered alleyway dotted with the garbage bins of nearby Chinese restaurants, we found the Croft Institute , a venue often packed despite its covert location. We took a table that resembled a laboratory bench in the street-level main bar, surrounded by neon-lit display cases full of beakers, test tubes and other equipment I haven’t seen since my high school chemistry class. Spirits are the specialty here, with a nip of Yamazaki 12- year-old single-malt Japanese whisky costing A$14.50, while a mint julep sets you back A$16. With a dance floor a couple of levels up and bathrooms in between that look like a ward from “ One Flew Over the Cuckoo’s Nest ,” Croft somehow creates a cool, if slightly creepy vibe. With the remaining night hours shrinking fast, we pondered our next move and decided on a meal at Supper Inn, which serves Cantonese food until 2:30 a.m. Refueled by spicy calamari and barbequed suckling pig, we decided on a nightcap. Prison-Yard Chic The nearby Section-8 beckoned, where a couple of shipping containers make up the bar in a fenced-off confine that looks more like a prison yard than chic city bar. Unfortunately, it was closing time there, so it was on to the six-story Curtin House, home to a collection of bars and restaurants, the owner’s apartment and a Kung Fu academy. Once home to the headquarters of the Australian Communist party, the building now houses Cookie Bar on the first level, which serves drinks and Thai food, and Toff in Town restaurant on the second, an eatery and live-music venue that serves tapas in train carriage cabins until 5 a.m. We went past both to the Rooftop bar. Lacking some of the more lavish options of downstairs, the level-six bar (which doubles as an open-air cinema in summer) affords views over Melbourne’s retail and commercial district. With cold beers in hand we could gaze upon the headquarters of BHP Billiton Ltd., the world’s largest mining company, built behind the facade of a former hospital: the best place to finish a night’s travel through Melbourne’s bars and industrial past. Croft Institute, 21 Croft Alley, Melbourne, http://www.thecroftinstitute.com.au , Tel: +613-9671-4399; Madame Brussels, Level 3, 59-63 Bourke Street Melbourne, http://www.madamebrussels.com , Tel: +613-9228-2775; Gin Palace, 10 Russell Place, Melbourne, http://www.ginpalace.com.au , Tel: +613-9654-0533. Curtin House, 252 Swanston Street, Melbourne. Supper Inn, 15 Celestial Avenue, Melbourne. The Bloomberg Questions Cost? A$10 – A$25 per drink. Sound level? Croft Institute is loud; could carry on a conversation at the others. Date place? Only at Gin Palace. Inside tip? For groups, ask for the parlor at Madame Brussels. Private room? Only at Madame Brussels. Rating: Croft Institute **, Madame Brussels ***, Gin Palace **, Curtin House ** (Robert Fenner writes for Bloomberg News. Opinions expressed are his own.) To contact the reporter on this story: Robert Fenner in Melbourne rfenner@bloomberg.net

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Deterioration Slows in U.S. States’ Tax Collections: Chart of the Day

December 8, 2009

By Pete Young Dec. 8 (Bloomberg) — A slowdown in the deterioration of tax collections may make it easier for U.S. states to close $350 billion in budget deficits forecast in the next two years. The CHART OF THE DAY shows taxes for 44 states declined at a slower rate in the third quarter, the best performance in six months, according to data from the Rockefeller Institute of Government in Albany, New York. The gap between state revenue and spending will widen to $350 billion in the next two years, the Center on Budget and Policy Priorities said last month. More than 40 states have cut spending, and more than 30 increased taxes or fees, the Washington-based center said. “The worst is hopefully behind us,” Lucy Dadayan , a senior policy analyst who co-wrote the Rockefeller report with Donald Boyd , said in an interview. “If you’re comparing to last year, yes, it’s going to be better, but if you’re comparing to pre-recession, it’s still bad.” Third-quarter tax collections slid 10.7 percent to $119.7 billion compared with a year earlier, after falling 16.6 percent in the second quarter. Personal income tax collections, which fell 27.5 percent in the second quarter from a year earlier, lost 11.4 percent in the third quarter. Sales taxes, down 9.5 percent in the second quarter, were off 8.2 percent in the third. To contact the reporter on this story: Pete Young in New York at pyoung13@bloomberg.net .

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Tiger Woods Remains Silent for Second Day About One-Car Accident, Injury

November 29, 2009

By Nancy Kercheval Nov. 28 (Bloomberg) — Tiger Woods refused to meet with Florida police for the second day after he was injured in a car accident that caused as much as $8,000 damage to his sport- utility vehicle. Officers from the Florida State Highway Patrol haven’t seen Woods since he crashed into a fire hydrant and tree as he left his driveway at 2:25 a.m. local yesterday, Sgt. Kim Montes said. Woods, the No. 1 player in the World Golf Rankings , was taken to a hospital for treatment of facial cuts before the investigating officer arrived. “We were asked by his agent to come back (Sunday),” Montes said in a telephone interview. “The law does not require him to make a statement, but this is an opportunity to give his side to move the investigation forward.” Montes said police action on these types of minor crashes routinely is completed in one day. Investigators will review the Orange County Sheriff’s office 911 tapes, which may be released as early as tomorrow if they are deemed to be not pertinent to the probe, Montes said. Woods’s 2009 Cadillac Escalade was towed from the scene of the crash in his community of Windermere, Florida, for “safekeeping” and awaits pickup, Montes said. The left front hit the fire hydrant, while the right front struck the tree. Total damages were set at $5,000 to $8,000, she said. Police want to know how both back passenger windows were shattered, Montes said. Neither the front window nor the driver’s side windows were damaged. Golf Club Woods’s wife, Elin, used a golf club to break out windows in the car to free her husband, Windermere police told the Associated Press yesterday. The back window of the car wasn’t broken as previously reported, Montes said. Woods’s playing status is unknown. He is scheduled to play in the Chevron World Challenge in Thousand Oaks, California, next week. Woods is host of the tournament, which is not part of the U.S. PGA Tour’s regular season and attracts most of golf’s top players. He last played two weeks ago, winning the Australian Masters in his first appearance in that country since 1998. This season, Woods won six times in 17 events after undergoing reconstructive surgery on his left knee following his 2008 U.S. Open victory. He also had three runner-up finishes among his 14 top 10s in a year in which he failed to win one of golf’s four major titles for the first time in five years. Woods led the U.S. Tour with $10.5 million in earnings, and ended the season by capturing the yearlong FedEx Cup title for the second time. The championship also included a $10 million bonus. $1 Billion With that bonus, Woods became the first athlete to surpass the $1 billion mark in career earnings, Forbes magazine reported in October, citing its own calculations of Woods’s golf and endorsement earnings. In this year’s majors, Woods tied for sixth at the Masters Tournament and U.S. Open. He then missed the cut for weekend play at the British Open, only his second missed cut at a major in his professional career. His best chance to add to his list of 14 major titles came at the PGA Championship in August. While Woods led the field after 54 holes at Minnesota’s Hazeltine National Golf Club, he wasn’t able to fend off Y.E. Yang and lost for the first time as a pro when holding the lead going into the final round. Woods lives in the Windermere community in Orange County, Florida, with his wife and two children. He is building a new home on Florida’s Jupiter Island. To contact the reporter on this story: Nancy Kercheval in Washington at nkercheval@bloomberg.net .

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Nadal Turns Focus to Defending Davis Cup After ATP Finals Challenge Fails

November 25, 2009

By Danielle Rossingh Nov. 26 (Bloomberg) — Rafael Nadal turned his attention to Spain’s defense of its Davis Cup tennis title and next season after he was ousted from the ATP World Tour Finals. Nadal’s chances of making the semifinals of the season- ending tournament ended last night with his 6-1, 7-6 (7-4) group-match loss to Nikolay Davydenko at London’s O2 arena. The Spaniard, who entered the eight-man event with a chance to get back the No. 1 ranking from Roger Federer , will depart as the world No. 2 after falling to 0-2 following his opening loss to Robin Soderling . He’ll play one more match in London before Spain hosts the Czech Republic in the Dec. 4-6 Davis Cup final. “I am ready to practice hard,” Nadal, 23, told reporters. “I have motivation to play another time my best tennis.” Nadal’s two losses this week come at the end of a season that started with victory in Melbourne, where he reduced Federer to tears after beating the Swiss in five sets to win his first Australian Open. After that, his run of four French Open titles was ended by Soderling, while tendonitis in both knees forced him to pull out of Wimbledon. He aggravated an abdominal injury upon returning that hampered him at the U.S. Open. The injuries and time away left him short on confidence and intensity in the latter part of the season, he said. “I feel a little bit more tired on court than before probably because I didn’t have this continuation in this second half of the year,” Nadal said. “When I play a few tough points, I feel more tired to play the next ones. That’s very important in this sport. I don’t know how far I am from my best.” Last night against Davydenko, Nadal showed flashes of the form that took him to six Grand Slam titles at the age of 22. First Set Nadal lost the first set 6-1 as his serve deserted him and his trademark top-spin ground strokes missed their targets. He fought back from 4-2 down to lead 5-4 in the second set, as the 17,500-strong crowd cheered every point he won. The comeback wasn’t enough, though. Davydenko produced 27 winners — 15 more than Nadal — and won 14 points on the 16 occasions he rushed to the net in a victory that tied their career meetings at 4-4 . The Russian apologized to the crowd for ousting Nadal in a court-side interview after the match. “I’m sorry,” Davydenko said. “I know they support Nadal and want to see him through to the semifinals.” Soderling yesterday became the first player to qualify for the final four by beating defending champion Novak Djokovic of Serbia. Nadal will play third-ranked Djokovic tomorrow in his final match and said he’ll hit the practice courts the following day to get ready for the Davis Cup final in Barcelona. “That’s the way for me, the only way to improve the situation,” Nadal said. “That’s what I did all my life: work.” To contact the reporter on this story: Danielle Rossingh at the O2 arena through the London sports desk at drossingh@bloomberg.net

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Cincinnati’s Kelly Is Favored to Replace Weis as Head Coach of Notre Dame

November 25, 2009

By Erik Matuszewski Nov. 25 (Bloomberg) — University of Cincinnati coach Brian Kelly is the favorite on online gambling sites to take over as football coach at the University of Notre Dame if Charlie Weis is fired. Weis, who has a 35-26 record at the South Bend, Indiana, school over five seasons, has guided the Fighting Irish to a 6-5 record this year heading into the final regular-season game against Stanford University this weekend. Weis said on Nov. 22 it would be hard to argue with a decision to fire him. In addition to Kelly, who is listed as an even-money favorite at Bodog.com , Florida’s Urban Meyer and Stanford’s Jim Harbaugh were asked by media whether they would be interested in following coaches such as Knute Rockne , Frank Leahy , Ara Parseghian and Lou Holtz . “This is the silly season, you know?” Kelly said. “The truth is, this happens every year.” Openings at a program such as Notre Dame’s don’t come along every year, though. The Irish rank third in college football history with 837 wins, have 11 consensus national championships and have produced seven Heisman Trophy winners. Kelly, who has led Cincinnati to a 10-0 record in his third season, is listed at BetUS.com, as the 5-6 favorite. Season Finale Harbaugh, whose Stanford team hosts Notre Dame in this week’s regular-season finale, is given 7-2 odds, according to Antigua-based Bodog . Meyer has 4-1 odds of replacing Weis even though he’s won two of the past three national titles at Florida and said earlier this week that he plans to remain with the Gators as long as they’ll have him. Other coaches listed by Bodog are the University of Oregon’s Chip Kelly at 9-2, Oklahoma’s Bob Stoops at 10-1 and Iowa’s Kirk Ferentz at 14-1. Cincinnati’s Kelly, 48, said he’s being mentioned as a possible candidate at Notre Dame because many people don’t think his current post is a “destination job.” While the Bearcats lead the Big East Conference, they’re fifth in the Bowl Championship Series rankings, the second-lowest among the six undefeated teams at college football’s top level. Harbaugh, 45, has led Stanford to a 7-4 record in his third season and plans to return to the Cardinal next year. I’m “only interested in the one I have,” Harbaugh said during a news conference. “And (I’m) not going to talk about any other job but my own.” Ex-NFL Coaches Costa Rica-based BetUS.com lists Meyer as the second choice at 3-1, followed by Harbaugh at 4-1, and Oregon’s Kelly and Boise State’s Chris Peterson at 5-1. Stoops has odds of 8-1, Ferentz is 12-1, and former NFL coach Mike Shanahan of the Denver Broncos is 20-1. Jon Gruden , the former coach of the NFL’s Tampa Bay Buccaneers and Oakland Raiders, has 30-1 odds at BetUS.com. Gruden attended high school in South Bend and his father was an assistant under former Notre Dame coach Dan Devine. Notre Dame last won a national championship in 1988. Since then, the program has been in a decline. The Irish have won only one of their past 10 bowl games and are 16-20 the past three seasons under Weis. “If they decide to make a change, I’d have a tough time arguing that,” Weis said after last week’s overtime loss to Connecticut that dropped Notre Dame to 6-5. Athletic Director Jack Swarbrick has said a decision on Weis’s job will come after the season. A loss to Stanford this week would give the Irish their third straight regular season without a winning record. To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net

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Brazil’s Real Is `Most Overvalued’ Currency as Cash Pours In, Goldman Says

November 25, 2009

By Paulo Winterstein and Camila Fontana Nov. 25 (Bloomberg) — Brazil’s real is the “most overvalued” currency as a “wall of money” coming into Latin America’s biggest economy may overwhelm government efforts to curb its rally, said Goldman Sachs Group Inc. While the real has underperformed other currencies after the government imposed a 2 percent tax on foreign purchases of equity and fixed-income assets on Oct. 19, the effectiveness of the levy “remains to be seen” and further appreciation may prompt controls, Goldman Sachs economist Thomas Stolper wrote. “After some initial success with capital controls, real appreciation appears to be on the rise again,” Stolper wrote in a note to clients. The real has gained 34 percent this year, making it the second-best performer in the world after the Seychelles rupee. The currency slipped 0.3 percent to 1.7359 per U.S. dollar at 10:37 a.m. in New York. A quickening economic recovery and the nation’s link to growing demand for commodities from emerging markets such as China have led to “unprecedented amounts” of overseas capital flowing into the country, Stolper wrote. Inflows reached $17.6 billion in October, compared with $6 billion to $8 billion in previous months, he wrote. Those inflows, together with increased government spending and expanding access to credit, will likely create problems for policy makers as they try to combat inflation to ease pressure on exporters, Stolper wrote. Credit Expansion Brazil’s economy is undergoing a “gradual” expansion of credit, Tulio Maciel , deputy head of the central bank’s economic department, said today in Brasilia. The credit-to-gross domestic product ratio reached 45.9 percent in October, from 45.7 percent in September, Maciel said. The ratio may climb to 47 percent by yearend, he said. Total outstanding bank loans rose 1.4 percent in October from the previous month, the central bank said. State and non-state bank lending climbed 15.3 percent from the same month last year. “Growing inconsistencies in the Brazilian policy mix likely amplify the appreciation pressures, in particular the combination of expansionary fiscal (particularly through current spending), credit, and incomes policies,” Stolper wrote. These factors may force the central bank to raise interest rates from a record low as inflation climbs to the upper limit of its target next year, Stolper said. “This in turn would lead to further appreciation pressures in the current global environment and hence potentially trigger the need for ever blunter measures to curb capital inflows.” Brazil Controls Brazil last week began taxing the issuance of depositary receipts in international markets in a bid to prevent companies from selling shares abroad rather than locally. Economic Policy Secretary Nelson Barbosa said the move would “balance” out distortions caused by the so-called IOF tax that was imposed Oct. 19 in a bid to stem a currency rally. Policy makers will increase the benchmark interest rate to 10.5 percent next year from the current 8.75 percent, a central bank survey of about 100 economists released this week showed. Brazil’s economy resumed growth in the second quarter after its first recession since 2003. The real is the most overvalued based on the bank’s Goldman Sachs Dynamic Equilibrium Exchange Rate. The median forecast for the currency by the end of this year and next is 1.70 per dollar, according to a Bloomberg survey with 18 financial institutions. The real will remain near 1.7 per U.S. dollar for a “long time,” said Jose Francisco de Lima Goncalves, the chief economist of Banco Fator SA. To contact the reporters on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net ; Camila Fontana Correa in Sao Paulo at cfontana@bloomberg.net

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U.K. Economy Probably Shrank 0.3% in Third Quarter After Revised Estimate

November 25, 2009

By Brian Swint Nov. 25 (Bloomberg) — The U.K. economy shrank less than previously estimated in the third quarter as the longest recession on record eased, a survey of economists shows. Gross domestic product probably fell 0.3 percent from the second quarter, less than the 0.4 percent drop reported on Oct. 23, according to the median of 28 economists’ forecasts in a Bloomberg News survey. The Office for National Statistics will release its second estimate at 9:30 a.m. today in London. “The shrinkage looks a bit overdone,” said Alan Clarke , an economist at BNP Paribas SA in London. “Other surveys are showing output isn’t nearly as downbeat. I wouldn’t be surprised to see it eventually put close to zero.” The Bank of England this month expanded its bond purchase plan by 25 billion pounds ($41 billion) after the economy’s third-quarter contraction took policy makers and economists by surprise. Governor Mervyn King said yesterday the bank has been encouraged by signs of a recovery even if it isn’t “particularly strong.” A revision higher may help Prime Minister Gordon Brown as he tries to erode Conservative Leader David Cameron’s lead in opinion polls in time for the election, due by June. An Ipsos Mori poll in the Observer on Nov. 22 showed the Conservatives with a six-point lead, the least since December. Recovery Lags The U.K.’s recovery has lagged behind that of the U.S. and the euro area, which have both returned to growth. Data yesterday showed Germany’s economic growth accelerated in the third quarter, while the U.S. economy expanded at a 2.8 percent annual rate, less than the government reported last month. The Bank of England forecasts Britain will exit recession in the fourth quarter. The economy will expand 2.2 percent in 2010 and 4.1 percent in 2011, according to policy makers’ projections published on Nov. 11. Unemployment rose at the slowest pace in 18 months in October, retail sales rose for a second month and the inflation rate increased more than expected, to 1.5 percent. The bank aims to keep inflation at 2 percent. Policy makers may pause asset purchases after the 200 billion pounds they have pledged to spend by February, Monetary Policy Committee member Adam Posen indicated yesterday. “One hopes that we are coming to the end of the large-scale quantitative easing exercise,” he told lawmakers. GDP ‘Surprise’ Policy maker Andrew Sentance said in a speech on Nov. 16 that the “surprise” gross domestic product estimate may be revised later, and that such data can be “particularly unreliable” at an economic turning point. “It will take some time before there is a widespread perception that we’re out of recession,” Sentance said in an interview with Bloomberg Television. “But the broad balance of evidence is that the U.K. economy has started to grow in the second half of this year.” By contrast, David Blanchflower , who left the rate-setting panel in June, said on Oct. 26 that “there’s every prospect” that the third quarter GDP figure could be revised down. Banks are still working to shore up their finances after government-led bailouts of Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc during the 2008 financial crisis. Lloyds said yesterday it plans to raise a record 13.4 billion pounds in the country’s biggest rights offering. None of the economists surveyed predicted a downward revision in today’s data. Six of them forecast the estimate will remain unchanged, 19 said it will change to a 0.3 percent drop and three said that it will be 0.2 percent. The report today will show any revisions to output indicators on services, manufacturing and construction, and a breakdown of spending during the third quarter. The statistics office will release a further GDP estimate on Dec. 22. To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net .

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Low Interest Rates Could fuel Speculative Financial Bubble: Federal Reserve

November 24, 2009

WASHINGTON — The Federal Reserve doesn’t expect the recovery will be strong enough to quickly drive down the jobless rate, and acknowledged its efforts to keep the rebound going could feed a new speculative bubble. Record-low interest rates “could lead to excessive risk-taking in financial markets,” according to documents released Tuesday of the Fed’s closed-door meeting earlier this month. It also could cause consumers, investors and businesses to worry about inflation taking off. Although Fed officials saw the current likelihood of that as “relatively low,” they pledged to “remain alert to these risks.” At the Nov. 3-4 meeting, Fed Chairman Ben Bernanke and his colleagues kept the target range for its bank lending rate at zero to 0.25 percent. Fed policymakers also pledged to hold rates at such super-low levels for an “extended period,” to ensure the recovery gains traction. Most analysts predict that means rates will stay where they are through the rest of this year and into part of 2010. On the economy, the Fed expects the unfolding recovery will be gradual, as modest growth keeps the nation’s unemployment rate elevated over the next several years. Most Fed policymakers said it could take “five or six years” for the economy and the labor market to be consistently healthy. High unemployment, slow income growth and hard-to-get credit will weigh on consumer spending “for some time to come,” the Fed said. Troubles in the commercial real-estate market also will restrain the recovery, according to minutes of the November meeting. Fed officials expected the pace of the recovery “would be rather slow, relative to historical experience.” Recoveries after steep economic downturns are usually robust, the Fed said. In updated economic projections, the Fed said the economy’s contraction for all of this year won’t be as deep as it thought in a forecast released in the summer. That’s because the second half of this year is shaping up better than anticipated. Under a range of new projections, the economy will shrink 0.5 percent or be flat this year. The old forecast called for a contraction of anywhere from 0.6 to 1.6 percent. Growth next year should turn out slightly better than the Fed previously projected_ ranging from 2 to 4 percent – up from 0.8 to 4 percent. But that won’t be enough to quickly drive down the unemployment rate, which now stands at 10.2 percent. It’s only the second time in the post-World War II period the rate has topped 10 percent. The central bank predicted the jobless rate could hover between 8.6 and 10.2 percent next year, based on a range of forecasts from Fed policymakers. It’s a tad better than its previous forecast, where the Fed said the jobless rate could rise as high as 10.6 percent. The postwar high was 10.8 percent at the end of 1982 when the country had suffered through a severe recession. Looking ahead to 2011, the Fed said the unemployment rate could drop to anywhere from 7.2 to 8.7 percent. That would still be considered well above normal, which is between 5 and 6 percent. “Most members projected that over the next couple of years, the unemployment rate would remain quite elevated,” according to the Fed minutes. Inflation, meanwhile, should stay under control, the Fed said. Prices this year should increase between 1 and 1.7 percent, and rise a bit higher next year. The new projections were little changed from the old forecast. The new projections buttressed economists’ beliefs that Fed policymakers won’t be in any rush to boost rates. “So long as unemployment remains high and inflation expectations subdued, the Fed has little desire to lift rates,” said Sal Guatieri, economist at BMO Capital Markets. “Since the November meeting, Fed speakers have turned decidedly dovish” likely because unemployment spiked to 10.2 percent just days after that gathering.

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Favre-Led Vikings’ Game Against Cardinals Moved to Prime Time on Dec. 6

November 24, 2009

By Aaron Kuriloff Nov. 24 (Bloomberg) — The Brett Favre -led Minnesota Vikings’ game against the Arizona Cardinals’ Dec. 6 has been moved to prime time on NBC as part of the National Football League’s flexible schedule. That day’s match-up between the Miami Dolphins and New England Patriots will now take place at 1 p.m., while the three- time NFL most-valuable player and his Vikings take the field at 8:20 p.m. New York time, the Dolphins said in a news release. Favre’s only other prime-time appearance this season, the Vikings’ 30-23 win over the Green Bay Packers last month, produced the most-watched show in cable history, drawing 21.8 million viewers to Walt Disney Co.’s ESPN. Almost 30 million tuned in to the second game between the two teams this month, making it the second most-watched Sunday NFL telecast for News Corp.’s Fox Sports. The Cardinals, who lost to the Pittsburgh Steelers in last season’s Super Bowl, lead the National Football Conference West division with a 7-3 record. The 9-1 Vikings are first in the NFC North, after acquiring quarterback Favre in the offseason. “While we would have liked the national exposure by playing the Patriots on Sunday night, we know our fans will enjoy attending the 1:00 game in what should be ideal weather conditions,” Dolphins Chief Executive Officer Mike Dee said in the release. The league’s flexible scheduling creates marquee match-ups for the Sunday night games on General Electric Co .’s NBC during the season’s final seven weeks. To contact the reporter on this story: Aaron Kuriloff in New York at akuriloff@bloomberg.net .

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Pujols Wins MVP Award, Joining Musial, DiMaggio With Three or More Titles

November 24, 2009

By Erik Matuszewski Nov. 24 (Bloomberg) — Albert Pujols of the St. Louis Cardinals unanimously won his third National League Most Valuable Player award, joining a group of players that includes seven Hall of Fame members. Pujols won for the second straight year after leading Major League Baseball with 47 home runs and 124 runs scored. He’s the sixth unanimous NL MVP winner and first since 2002, when Barry Bonds claimed the fifth of his record seven awards. The 29-year-old first baseman received all 32 first-place votes and 448 points in balloting by the Baseball Writers’ Association of America. Hanley Ramirez of the Florida Marlins was second with 233 points. Pujols is the 10th player to win at least three MVP awards, joining Bonds (seven), and Yogi Berra , Roy Campanella , Joe DiMaggio , Jimmie Foxx , Mickey Mantle , Stan Musial , Mike Schmidt and Alex Rodriguez (three each). All of the previous three-time winners are in the Hall of Fame except for Bonds, whose eligibility period has yet to start, and Rodriguez, who plays for the New York Yankees. Pujols, who also won the award in 2006, is the sixth player to repeat as NL MVP , joining Bonds, Schmidt, Dale Murphy , Joe Morgan and Ernie Banks . Cardinals’ Slugger Pujols maintained his streak of batting at least .300 with 30 home runs and 100 runs batted in every season he has been in the major leagues. For the third time in four years, he led all major leaguers with a 1.101 on-base plus slugging percentage, which is widely considered the best gauge of offensive production by ranking a player’s ability to hit for power and get on base via hits or walks. He had a .327 batting average and was third in the majors with 135 RBI as the Cardinals won the NL Central Division title. His RBI total and 47 homers were each two off his career highs set in 2006. Pujols has finished in the top five of the NL MVP voting in eight of his nine seasons in St. Louis and has three runner-up finishes to go with his three wins. Ramirez, the Marlins’ shortstop, hit .342 with 24 homers, 101 runs scored, 106 RBI and 27 stolen bases. Ryan Howard of the Philadelphia Phillies, the 2006 NL MVP, was third after hitting .279 with 45 homers and 141 RBI. Prince Fielder of the Milwaukee Brewers was fourth. He hit a career-best .299, tied Howard for the major-league lead with 141 RBI and was second to Pujols with 45 homers, 356 total bases and a .602 slugging percentage. Other Awards The NL MVP was the last of the annual awards presented by the baseball writers. Minnesota Twins catcher Joe Mauer was voted the American League MVP yesterday, getting 27 of 28 first-place votes to beat Yankees teammates Mark Teixeira and Derek Jeter . Zack Greinke of the Kansas City Royals was the AL Cy Young winner, while Tim Lincecum of the San Francisco Giants was named the NL’s top pitcher for the second year in a row. Mike Scioscia of the Los Angeles Angels was selected the AL Manager of the Year and Jim Tracy of the Colorado Rockies earned NL honors. Rookie of the Year awards went to Oakland Athletics relief pitcher Andrew Bailey in the AL and Marlins outfielder Chris Coghlan in the NL. Two writers from each city with a team voted for the awards. To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net

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`Problem’ Banks in U.S. Rose to 16-Year High in Third Quarter, FDIC Says

November 24, 2009

By Alison Vekshin Nov. 24 (Bloomberg) — U.S. “problem” lenders climbed to the most in 16 years and the Federal Deposit Insurance Corp.’s fund protecting customers against bank failures slipped into a deficit in the third quarter, the agency said. The FDIC had 552 banks with $345.9 billion in assets on the confidential problem list as of Sept. 30, a 33 percent increase from 416 lenders with $299.8 billion in assets at the end of the second quarter, the regulator said today. The agency’s insurance fund had a negative $8.2 billion balance, its first deficit since 1992. “Today’s report shows that while bank and thrift earnings have improved, the effects of the recession continue to be reflected in their financial performance,” FDIC Chairman Sheila Bair said at a Washington news conference. Regulators are closing banks at the fastest pace in 17 years, seizing 124 banks so far this year amid loan losses stemming from the collapse of the mortgage market in 2007. Fifty banks failed in the third quarter, double the full-year total of 25 that collapsed during 2008. FDIC-insured banks reported net income of $2.8 billion in the third quarter compared with a $4.3 billion loss in the second quarter. “Earnings remain weak,” Bair said. “Eroding loan quality continues to have the greatest impact on industry earnings compared to a year ago.” Insurance Fund The insurance fund fell to negative $8.2 billion, from $10.4 billion in the previous quarter. The fund balance reflects $38.9 billion set aside to cover losses from bank failures in the next year, the agency said. The FDIC is asking banks to prepay three years of premiums on Dec. 30 to raise $45 billion for the fund. Banks in the third quarter reserved $62.5 billion for loan losses, an increase from $51.2 billion in the year-earlier period, the FDIC said. “Bank problems tend to lag the economy,” James Chessen , chief economist at the American Bankers Association, told reporters today. “It’s still going to take a period of time until banks can put all these losses behind them and move on to make better, more secure loans.” The Washington-based FDIC insures deposits at 8,099 institutions with $13.2 trillion in assets. The agency’s insurance fund reimburses customers for deposits of as much as $250,000 when a bank fails. Restructuring Rules Congress has proposed restructuring the FDIC’s authority as part of legislation to overhaul financial regulations. The measure would let the agency dissolve large non-bank financial firms whose collapse in bankruptcy would disrupt the economy. The FDIC has such authority over commercial banks and thrifts. The congressional plan would prevent the government from taking ad hoc steps to support firms, such as last year’s $700 billion bank bailout. Senate Banking Committee Chairman Christopher Dodd , a Connecticut Democrat, on Nov. 10 proposed stripping the FDIC’s powers to regulate state banks and merging that authority into a single federal bank regulator. The U.S. Office of Thrift Supervision , the regulator of savings and loans, will release third-quarter data today. To contact the reporter on this story: Alison Vekshin in Washington at avekshin@bloomberg.net .

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`Chockablock Full’ Planes Rile Holiday Fliers as Fees Pare Airline Losses

November 24, 2009

By Mary Schlangenstein and Mary Jane Credeur Nov. 24 (Bloomberg) — Americans will pack planes and struggle to stow carry-on bags as they fly over the Thanksgiving holiday. For U.S. airlines , that’s all good. Record fees to check luggage and new charges of as much as $20 each way on peak travel days will make Thanksgiving a bright spot in a year when waning demand spurred the biggest capacity cuts since 1942 among carriers including Delta Air Lines Inc. “Virtually all of them should make money,” said George Hamlin , president of Hamlin Transportation Consulting in Fairfax, Virginia. The number of seats sold will be “very high, fares are not at their lowest, and fuel is not exorbitant.” For passengers, the rest of this month will magnify the 2009 squeeze of fewer flights, fuller cabins and added costs on top of their tickets. Travelers will pay extra on Nov. 29 and 30, the Sunday and Monday after the Nov. 26 holiday, as carriers apply the first seasonal surcharges for busy flying periods. “Airlines are antagonizing customers to such an extent that I’m almost ready to tell my son to take the Greyhound bus, and that’s a 14-hour ride,” said biotech researcher David Lilienfeld, 52, whose son, Sam, will fly home to San Francisco from Reed College in Portland, Oregon. The industry is counting on fees to help pare 2009 losses that totaled about $3 billion through September among the nine biggest U.S. carriers, led by Atlanta-based Delta and AMR Corp.’s American Airlines . In the second quarter, the latest period with available data, baggage fees tripled to $669.6 million, according to the U.S. Transportation Department. New Approach Adopting seasonal surcharges marks a break with airlines’ usual practice of increasing average holiday fares by dropping their cheapest tickets. Adding a surcharge is easier than boosting prices for select days, according to the carriers. Airlines have said they lack the power to raise fares amid a 17-month slump in U.S. air traffic as consumers compare prices on the Web. Instead, carriers have focused on tacking on fees that kick in after passengers have booked their travel. While the Washington-based Air Transport Association trade group projects a 4 percent drop in Thanksgiving travelers from a year earlier, consumers probably won’t feel much elbow room. Big carriers have been eliminating flights all year, helping them put more people on each plane. Southwest Airlines Co. , for example, filled 79.4 percent of its seats in October, up from 70.4 percent a year earlier. Full Bins “Airplanes are going to be chockablock full,” said David Swierenga , president of consultant AeroEcon in Round Rock, Texas. “Overhead storage space is going to be at a premium. It’s going to be hard to find a place for that rollie.” Passengers checking bags this week will pay as much as $25 for the first one and $30 for the second, $5 more than in 2008. Paying in person rather than online may cost $5 more. The seasonal surcharges that start Nov. 29 will apply to as many as 41 days through May 28 on some airlines, according to researcher Bestfares.com in Arlington, Texas. American and UAL Corp.’s United Airlines were among the carriers unveiling the fees in September. Such charges “might not have made news or been any kind of issue at all for passengers if travelers hadn’t also had to swallow bag fees and more over the past year and a half,” said Rick Seaney , chief executive officer of Dallas-based travel Web site FareCompare.com. Survival Strategy Fees amount to a survival strategy for airlines struggling to raise ticket prices. Economic headwinds “are anything but behind us,” Jim May , CEO of the Air Transport Association, said in a Nov. 9 statement. The Bloomberg U.S. Airlines Index of 13 carriers plunged 28 percent this year through yesterday, lagging behind a 22 percent surge for the Standard & Poor’s 500 Index. US Airways Group Inc. posted the worst decline, tumbling 60 percent. Consumers who booked in advance for round-trip domestic flights for Thanksgiving paid an average of about $361, or 5 percent less than a year earlier, according to Web site Travelocity.com. Those savings vanish after adding on fees for luggage and other charges. Reserving certain seats will cost as much as $30 on some carriers, and snacks or meals will be $3 to $10. There are fees for Wi-Fi access and, in some cases, entertainment such as movies or television. The charges could add $100 a person on round-trip flights. ‘Watch Out’ “There are a lot of fees that you’ve got to watch out for,” said Henry Harteveldt , a senior analyst at Forrester Research Inc. in San Francisco. “It’s not uncommon to see people getting very careful about pooling luggage to pay only one fee for one checked bag, bringing food onboard, and so on.” Alice Berman, 79, and her husband, George, 82, a retired flutist, are adopting that strategy for their visit with their son’s family in Atlanta. The Sarasota, Florida, couple will fly on Thanksgiving morning, a lighter travel day, to save on airfare and pack fewer clothes so they only have to check one piece of luggage. “Everyone carries bags with them so they won’t have to pay the fees,” Alice Berman said. “It’s so hectic to even get on the plane.” Flying at this time of year “has always been a hassle,” Harteveldt said. At the same time, airlines can count on passengers putting up with the indignities because Thanksgiving is “perhaps the ultimate home-and-hearth holiday,” he said. That’s how Lilienfeld, the San Francisco father, sized up the trip for his son, a college freshman. The elder Lilienfeld estimated he’ll spend about $30 in luggage fees as well as pay for his son’s onboard snacks. “You don’t have much choice if you want to see your family for Thanksgiving,” he said. To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net ; Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net .

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Distressed Sales Of Global Commercial Property Up In 3Q – RICS (The Forex Market)

November 23, 2009

LONDON (Dow Jones)–Distressed sales of commercial property continued to rise around the world in the third quarter of the year, and are expected to increase again in the fourth quarter, as business lending remains subdued, with the U.S. reporting the second largest quarterly increase for the second straight quarter, a survey showed Tuesday.

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Joe Mauer Wins American League MVP Award Over Mark Teixeira, Derek Jeter

November 23, 2009

By Mason Levinson Nov. 23 (Bloomberg) — Minnesota Twins catcher Joe Mauer was named the American League’s Most Valuable Player after winning his second straight batting crown while leading his team to the playoffs. Mauer earned 27 of 28 first-place votes and 387 total points in balloting by the Baseball Writers’ Association of America. Mark Teixeira of the New York Yankees was second with 225 points, followed by teammate Derek Jeter , who had 193. Miguel Cabrera of the Detroit Tigers had the only other first- place vote and finished fourth with 171 points. Mauer, 26, who played in 138 games after missing 22 with a lower-back injury, batted .365. He added 28 home runs and 96 runs batted in, both career highs, for the Twins, who won the AL Central Division with an 87-76 record. The Twins were swept by the eventual-champion Yankees in the first round of the playoffs. Voting for the award was done prior to the postseason, where Mauer batted .417. Mauer, 26, won his second straight Gold Glove Award this month as the best fielding catcher in the AL and Silver Slugger Award as the best hitting AL catcher. Jeter, 35, also won a Gold Glove for his play at shortstop last season, batting .334 with 18 homers and 107 runs scored for the Yankees, whose 103-59 record was the best in Major League Baseball. Jeter was a runner-up to Mauer’s teammate Justin Morneau in voting for the 2006 AL MVP . Teixeira, 29, led the AL in RBI with 122 and shared the league lead in homers with 39, tying Tampa Bay’s Carlos Pena . Teixeira, playing his first season with the Yankees, had 107 runs scored, a .292 batting average and a Gold Glove performance at first base. Cabrera, 26, hit .324 with 34 homers and 103 RBI in his second season with the Tigers. To contact the reporter on this story: Mason Levinson in New York at mlevinson@bloomberg.net .

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Federer, Murray Open ATP’s Season-Ending Finals With Three-Set Victories

November 22, 2009

By Danielle Rossingh Nov. 23 (Bloomberg) — Roger Federer and Andy Murray were both tested before winning their opening group matches at the ATP World Tour Finals in London. Top-ranked Federer fought back to beat Fernando Verdasco of Spain 4-6, 7-5, 6-1 last night in front of 17,500 spectators at the O2 arena — the biggest crowd for a tennis match in the U.K. Britain’s Murray earlier opened the season-ending event by defeating U.S. Open champion Juan Martin del Potro 6-3, 3-6, 6-2. “It was close,” Federer said in a televised courtside interview. “There’s no easy matches really.” Federer, the winner of a record 15 Grand Slam singles titles, is seeking to become the first player since Ivan Lendl in 1989 to reclaim the year-end No. 1 ranking after losing it the previous year. Second-ranked Rafael Nadal of Spain finished 2008 as the No. 1 player in the ATP rankings. The ATP Finals are played in a round-robin format, with eight players split into two groups. The top two from each section advance to the semifinals. Novak Djokovic of Serbia today opens the defense of his title against Russia’s Nikolay Davydenko in Group B. Nadal faces Robin Soderling , the Swede who this year handed him his first defeat at the French Open. Federer began his match against Verdasco with a double fault and dropped his opening service game to love. With the Swiss struggling to find his rhythm and making basic errors, Verdasco targeted his opponent’s backhand and took his first set against Federer in four meetings with a backhand pass. Set-point Smash Federer improved in the second set, cutting down his errors to win his first two service games to love. He converted his first set point with a smash to take the second set 7-5. Verdasco hit a backhand wide to hand Federer a 2-0 lead in the deciding set and the Swiss held serve to love before breaking again to take control of the match. With Verdasco’s resistance broken, Federer won with a service winner. “I had a bit of a struggle early on,” Federer said. “He was tough. I got a little bit lucky maybe to get through in the second set. At the end in the third set I played great.” In yesterday’s first Group A match, fourth-ranked Murray raced to a 5-0 lead against Del Potro, who was treated for a nosebleed during a medical timeout after three games. Serving to stay in the set, Del Potro, at 21 the youngest man in the top 10 , saved two set points as his ground strokes began to find the lines. He held serve for 5-1, getting himself on the scoreboard after 29 minutes. The fifth-ranked Argentine took the next two games, fending off three more set points. Serving at 5-3, Murray converted his seventh set point when Del Potro failed to return a forehand. Forehand Winners Del Potro broke early in the second set. Murray, cheered on by the home crowd, struggled to counter Del Potro’s powerful forehands, and his opponent took the set with a cross-court shot, one of 14 forehand winners for the Argentine in the match. Murray broke serve in the second game of the final set as Del Potro sent a backhand wide. Watched by Federer and Nadal, Murray raced to a 5-2 lead and sealed the victory with his eighth backhand winner. “When I got close to winning at the end of the match, the atmosphere was excellent,” Murray said. “That’s going a make a big difference going into the next couple of matches.” The Scot now leads Del Potro, who ended Federer’s run of five straight U.S. Open titles, 5-1 in their career head-to-head. Murray faces Federer in Group A tomorrow having won six of their nine meetings . “Andy has been one of the guys I played the most,” Federer told reporters. “I hope we can live up to the expectations and play another good one.” To contact the reporter on this story: Danielle Rossingh at the O2 arena through the London sports desk at drossingh@bloomberg.net

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Giants Win First Game in Five as Jets Lose 3rd Straight; Colts, Saints Win

November 22, 2009

By Dex McLuskey Nov. 22 (Bloomberg) — The New York Giants beat the Atlanta Falcons 34-31 to snap a four-game losing streak, while the Indianapolis Colts and New Orleans Saints won to remain the only undefeated teams in the National Football League. The Giants won on a 36-yard field goal by Lawrence Tynes three minutes, 54 seconds into overtime after Atlanta tied the game with a touchdown with 35 seconds to play. The Saints eased to a 38-7 win at Tampa Bay and the Colts beat Baltimore 17-15. New York improved to 6-4 by winning for the first time in its past three games at Giants Stadium in East Rutherford, New Jersey, while Atlanta fell to 5-5. The Giants, coming off a bye last week, had slumped to 5-4 after winning the first five games of the season. “We were miserable around here for a month,” Giants coach Tom Coughlin said in a news conference. “It’s nice to win.” It’s the first time in 13 meetings between the Giants and Falcons that the visitors have lost. New York beat Atlanta for the first time in six games at Giants Stadium. Tynes got a 39-yard field goal for the only score of the opening quarter and Atlanta went ahead 7-3 less than a minute into the second quarter on Jason Snelling’s seven-yard scoring run. The Giants retook the lead midway through the second quarter when Kevin Boss caught a 28-yard pass from Eli Manning , who threw for a career-high 384 yards and three touchdowns. Manning again connected with Boss for a four-yard score with 18 seconds left in the first half to make it 17-7. Snelling’s Second Score Snelling blasted into the end zone from a yard out for his second touchdown on Atlanta’s opening drive of the second half, and the Giants retaliated three minutes later on two-yard run by Brandon Jacobs to take a 24-14 lead. Jason Elam made a 25-yard field goal on Atlanta’s next drive to draw the Falcons within seven points before the Giants scored from three yards on a pass from Manning to Madison Hedgecock three minutes into the fourth quarter. Atlanta again made it a one-score game with six minutes remaining when Eric Weems caught a four-yard touchdown pass from Matt Ryan , and an 11-yard scoring reception by Tony Gonzalez sent the game into overtime. The Giants got the first possession and secured the win eight plays later after moving to Atlanta’s 18-yard line. Other Results In other Week 11 games, it was Dallas 7, Washington 6; Detroit 38, Cleveland 37; Green Bay 30, San Francisco 24; Kansas City 27, Pittsburgh 24 in overtime; Jacksonville 18, Buffalo 15; and Minnesota 35, Seattle 9. Also today, St. Louis is at Arizona, New England hosts the New York Jets, Oakland travels to Cincinnati and Denver plays at San Diego. Philadelphia hosts Chicago tonight, while Tennessee is at Houston tomorrow. Ahead of the Eagles’ game at the Bears, the Giants moved into second place in the National Football Conference East Division, one game behind the Cowboys. It took the Colts less than four minutes to take a 7-0 lead at M&T Bank Stadium in Baltimore as they went 87 yards in seven plays on the opening drive that culminated in Dallas Clark making a one-handed touchdown catch. Baltimore took a 9-7 lead with three first-half field goals by Billy Cundiff from 46, 44 and 38 yards before the Colts regained the advantage 1:28 before the interval on a five-yard touchdown run by Joseph Addai . Baltimore Leads Cundiff’s 36-yard kick seven seconds before halftime cut the Colts’ advantage to two points and, after a scoreless third quarter, Baltimore went 15-14 ahead with 10 minutes to play on the kicker’s fifth field goal, from 20 yards. The Colts secured the win on their next drive when Matt Stover got a 25-yard field goal. The Colts have now won 19 straight regular-season games stretching back to an Oct. 27, 2008, and are two shy of matching the Patriots’ NFL record. Peyton Manning has now led the Colts to six consecutive wins over Baltimore (5-5). At Raymond James Stadium in Tampa, Florida, the Buccaneers opened a 7-0 first-quarter lead before the Saints ran off the next 38 points to remain unbeaten. Robert Meachem caught two of Drew Brees’s three touchdown passes in the first half and Mike Bell had a pair of rushing touchdowns in the second half for the Saints (10-0). Josh Freeman threw three interceptions as Tampa Bay fell to 1-9. To contact the reporter on this story: Dex McLuskey in Dallas at dmcluskey@bloomberg.net

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Federer Fights Back to Beat Verdasco at ATP Finals in London; Murray Wins

November 22, 2009

By Danielle Rossingh Nov. 22 (Bloomberg) — Roger Federer rallied to beat Fernando Verdasco in three sets and win his first group match at the ATP World Tour Finals in London. Top-ranked Federer, a four-time winner of the season-ending event on the men’s tennis tour, won 4-6, 7-5, 6-1 in the second Group A singles match in front of a sellout crowd of 17,500 at the O2 arena . Fourth-ranked Andy Murray earlier beat U.S. Open champion Juan Martin Del Potro 6-3, 3-6, 6-2. Verdasco, an Australian Open semifinalist in January, has yet to win a match against the record 15-time Grand Slam champion in four meetings. Federer this season became the first man to win 15 major singles titles by beating Andy Roddick at Wimbledon. The 28- year-old Swiss is seeking to become only the second player since Ivan Lendl in 1989 to reclaim the year-end No. 1 ranking after losing it the previous year. Second-ranked Rafael Nadal of Spain ended 2008 as the No. 1 player in the ATP rankings. To contact the reporter on this story: Danielle Rossingh at the O2 arena through the London sports desk at drossingh@bloomberg.net

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U.S. Stocks Fall as Technology Outlook Worsens; Intel, Dell Shares Tumble

November 21, 2009

By Sapna Maheshwari Nov. 21 (Bloomberg) — U.S. stocks fell, halting a two-week advance, as a worsening outlook for technology company earnings added to concern that the eight-month rally in equities outpaced the prospects for economic growth. Intel Corp . dropped 2.9 percent, the steepest retreat in the Dow Jones Industrial Average, as Bank of America Corp. said computer-chip supply may overwhelm demand. Dell Inc. tumbled 7.2 percent after profit decreased by more than half. Stocks also slid as yields on Treasury three-month bills turned negative for the first time since financial markets froze last year. Metals producers rose as gold climbed to a record and the dollar fell. The Standard & Poor’s 500 Index lost 0.2 percent this week to 1,091.38 after gaining 5.5 percent in the first two weeks of November. The Dow average added 47.69 points, or 0.5 percent, to 10,318.16, led by Merck & Co. and Pfizer Inc. The Russell 2000 Index dropped 0.3 percent to 584.68. “It is normal for stocks to pull back after such a strong run,” said Lawrence Creatura , a Rochester, New York-based money manager at Federated Investors Inc., which oversees $390 billion. “It’s reasonable for investors to take a pause when they’re faced with such a broad variety of uncertainties.” Six of 10 industries in the S&P 500 fell this week. The index retreated from a 13-month high on Nov. 17 as yields on Treasury three-month bills turned negative amid concern the rally in risk assets has outpaced growth prospects. The S&P 500 has rallied 61 percent from a 12-year low on March 9, pushing its price to about 22 times the reported earnings of its companies, the highest level since 2002. Dell Retreats Dell fell 7.2 percent to $14.29. The company, which lost its standing as the world’s second-biggest computer seller to Acer Inc., reported a 54 percent drop in third-quarter net income to $337 million, or 17 cents a share, as sales slid 15 percent to $12.9 billion. Analysts on average predicted profit of 27 cents a share and sales of $13.1 billion. Intel , the world’s largest chipmaker, and Texas Instruments Inc. , the second-biggest U.S. chipmaker, dropped after being cut to “neutral” from “buy” at Bank of America. The bank cut its outlook for the semiconductor industry to “negative” from “positive,” sending technology stocks to the steepest drop of 10 industries in the S&P 500. Intel lost 2.9 percent to $19.24 and Texas Instruments slid 2.8 percent to $24.74. SanDisk Falls SanDisk Corp. , the world’s largest maker of flash-memory cards used in digital cameras and mobile phones, dropped 7.8 percent to $20.24. Technology shares have rallied 52 percent so far this year, compared with a 21 percent gain in the S&P 500. The shares have also outperformed the S&P 500 since March 9, advancing 76 percent. Raw-materials producers rallied 1.4 percent, the second- most among the 10 industries in the S&P 500, as commodity prices rose, led by gold and copper. “If the economy is turning, which it is, industrials and materials should continue to do better,” said David Katz , who oversees $1.2 billion at Matrix Asset Advisors in New York. “Materials might be the better gainer because of their gold exposure.” Barrick Gold Corp. rose 2.5 percent to $43.98 and Freeport- McMoRan Copper & Gold Inc. added 3.7 percent to $84.57 as bullion climbed to a record $1,153.40 an ounce on Nov. 18. The precious metal has fallen only once this month as investors speculated the dollar will extend its steepest plunge since 1986, boosting gold’s appeal as an alternative investment. Commodities Rally The Reuters/Jefferies CRB Index of 19 raw materials added 2 percent, rebounding from three weeks of losses. The gain outpaced a 0.4 percent advance in the Dollar Index , a six- currency gauge of the currency’s strength. Consumer discretionary stocks dropped 1.1 percent, the second-steepest decline among 10 industries. Target Corp. fell 3.1 percent to $47.46 as the second-biggest U.S. discount chain said it is planning for a “modest” decrease in fourth-quarter comparable-store sales. Home Depot Inc. slumped 0.6 percent to $27.18 after the largest U.S. home-improvement retailer posted third-quarter profit that fell 8.9 percent as homeowners curbed large purchases and professional contractors spent less. Sprint Nextel Corp. climbed the most in the S&P 500, rising 21 percent to $3.76. The third-largest U.S. mobile-phone carrier rallied after it finished paying off a $4.5 billion loan, helping lower expenses to counter a shrinking subscriber base. Earnings Beat Estimates About 80 percent of S&P 500 companies that have reported third-quarter results beat analysts’ predictions, including Sears Holdings Corp., Ltd. Brands Inc. and GameStop Corp. this week. That exceeds the record pace of 72.3 percent for the period ended in June, data compiled by Bloomberg show. Hewlett-Packard Co. and Deere & Co. are among 10 companies in the S&P 500 scheduled to report results next week. A report will probably show sales of existing U.S. homes increased in October to the highest level in more than two years, spurred in part by a tax credit that lured first-time buyers, according to the median estimate of economists surveyed by Bloomberg. Exchanges will be closed on Nov. 26 for the Thanksgiving holiday and trading will end at 1 p.m. New York time the next day. The benchmark index for U.S. stock options fell 5 percent, declining for the third straight week. The VIX, as the Chicago Board Options Exchange Volatility Index is known, dropped to 22.19. The index, which is known as Wall Street’s fear gauge, is down from a record 80.86 in November 2008 yet above its 20.28 average over its 19-year history. To contact the reporters on this story: Sapna Maheshwari at smaheshwar11@bloomberg.net .

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Indonesia Pension Fund, Manulife Plan to Buy Stocks, Cut Bond Allocation

November 18, 2009

By Lilian Karunungan and Berni Moestafa Nov. 19 (Bloomberg) — PT Jaminan Sosial Tenaga Kerja and PT Manulife Asset Management, which together manage $10.4 billion in Indonesia, plan to buy stocks and reduce their allocations to bonds next year as economic growth accelerates. Jamsostek, as the nation’s state-pension fund is known, will raise its equity holdings to 18 percent from 15 percent, and lower the share of bonds to 46 percent from 50 percent, Investment Director Elvyn Masassya said in an interview in Jakarta. PT Manulife said it intends to increase equities to 60 percent in its flagship balanced fund from 55 percent and reduce bonds to 40 percent in six months or more. “We look to increase our exposure to equities on any weakness,” Raymond Gin , chief investment officer at PT Manulife, which manages $2.4 billion in Indonesia, said in an interview yesterday in Jakarta. “The economy is resilient. With a population of 230 million people, with low levels of leverage, the growth potential is enormous.” The benchmark stock index of shares soared 82 percent, the second best in Asia and rupiah-denominated bonds have returned 20 percent, the biggest gainer in the region, as President Susilo Bambang Yudhoyono won re-election in July. Bank Indonesia maintained its benchmark interest rate at a record-low 6.5 percent for a third straight month on Nov. 4 after cutting it 3 percentage points from December. Jamsostek, Indonesia’s biggest fund with $8 billion under management, forecasts the Jakarta Composite index will rise 21 percent to a record 3,000 points in 2010 as initial public offerings and low deposit rates spur local investors to shift money to equities. It climbed 0.4 percent to 2,484.23 yesterday. Focus on Infrastructure PT Manulife, Indonesia’s second-biggest privately held asset manager, favors PT Astra International , the nation’s biggest auto retailer, and PT ACE Hardware Indonesia , the dominant home improvement retailer. It is part of Toronto-based Manulife Financial Corp., North America’s largest insurer. Yudhoyono intends to achieve growth of 7 percent by the end of his second five-year term in 2014 and accelerate infrastructure projects such as power plants, roads and ports. The government expects Southeast Asia’s biggest economy to expand 4.3 percent this year and as fast as 5.5 percent next year. “In the coming five years, we will focus on infrastructure sectors,” said Masassya. “They will get support from the government. By 2014, we expect economic growth of 7 percent.” Interest Rate Outlook Policy makers will likely keep interest rates low and increase spending to support the economic recovery, he said. “For institutional investors like us, the interest rates are not so attractive so we will allocate some of the funds for stocks,” Masassya said. Bank Indonesia may only raise its reference rate to 7 percent as inflation quickens, he said. Jamsostek, which expects to increase its asset size by $1 billion next year, would prefer to place money in government five-year bonds, the most liquid part of the bond curve, so that it can shift funds to new issues when yields rise, he said. Five-year government bonds were little changed yesterday. The yield on the 11 percent note due in October 2014 was at 9.27 percent, down from the year’s high of 13.48 percent on March 3, according to the Inter Dealer Market Association. “It’s not a good time for us to buy because the coupon rate is very low,” Masassya said. “Better wait and allocate more to stocks.” To contact the reporter on this story: Lilian Karunungan in Jakarta at at lkarunungan@bloomberg.net ; Berni Moestafa in Jakarta at bmoestafa@bloomberg.net .

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Saks, Target Remain `Cautious’ on Demand After Earnings Exceed Estimates

November 17, 2009

By Cotten Timberlake and Lauren Coleman-Lochner Nov. 17 (Bloomberg) — Saks Inc. , the U.S. luxury retail chain, and Target Corp. , the second-largest discount chain, said they remain cautious about demand after reporting third-quarter earnings that beat analysts’ estimates. New York-based Saks reported today an unexpected profit of 1 cent a share in the period ended Oct. 31, its first in more than a year, after reducing inventories and expenses to counter a sales decline. Target said average transaction sizes shrank in November and fourth-quarter comparable-store sales may fall after third-quarter earnings rose more than analysts projected. “Generally, retailers are beating profit estimates on cost cuts,” David Abella , a portfolio manager with Rochdale Investment Management LLC in New York, said in a telephone interview today. “The sales outlook is still tough for the fourth quarter, but there is at least some hope that they are slowly improving.” Abella helps manage $2.5 billion in assets, including Target and TJX Cos. shares. The rate of sales declines is abating at Saks and Dillard’s Inc. , the Little Rock, Arkansas-based department-store chain, after the highest unemployment rate in 26 years and falling home values crimped consumer spending. Target, based in Minneapolis, said today it remains cautious about the current quarter and expects a “highly promotional” holiday season. November sales “provide additional justification for being cautious in this uncertain environment,” Chairman and Chief Executive Officer Gregg Steinhafel said on a conference call. TJX Earnings TJX , the owner of the T.J. Maxx and Marshalls clothing- store chains, said today that third-quarter profit rose on higher sales and increases in customer traffic. It raised its fourth-quarter earnings forecast to as much as 71 cents a share, matching the average analysts’ estimate in a Bloomberg survey. Saks rose 26 cents, or 4.1 percent, to $6.67 at 4 p.m. in New York Stock Exchange composite trading. The shares have gained 52 percent this year. Target fell $1.52, or 3 percent, to $48.77. TJX dropped 61 cents to $38.91, while Dillard’s jumped 8.9 percent to $14.51. Saks’ third-quarter income of $1.93 million compared with a loss of $43.7 million, or 32 cents, a year earlier. Analysts predicted a loss of 11 cents a share, the average of nine estimates compiled by Bloomberg. The retailer cut inventories by 21 percent during the third quarter and reduced selling, general and administrative expenses by 10 percent to $162.6 million. Charles Grom , an analyst with JPMorgan Chase & Co. in New York, estimated those expenses at $172.1 million. He rates the shares “neutral.” Saks ‘Cautious’ Saks’ sales at stores open at least a year dropped 10 percent. The retailer reduced its forecast for those sales to a decline in the “high-single digits” in percentage terms for the second half, from a drop of “mid-to-high single digits.” Saks said in a statement it is “cautious about the environment” for next year. “The current economic and retail environment remain uncertain,” Saks Chairman and Chief Executive Officer Stephen Sadove said on a conference call with investors and analysts. “It’s a fragile period for everyone in this industry.” At Target, third-quarter net income advanced to $436 million, or 58 cents a share, from $369 million, or 49 cents, a year earlier. Analysts anticipated earnings of 50 cents a share, the average of estimates in a Bloomberg survey. Sales at stores open at least a year declined 1.6 percent, in line with figures Target provided on Nov. 5. TJX, Dillard’s At Framingham, Massachusetts-based TJX, net income climbed 47 percent to $347.8 million, or 81 cents a share, from $235.8 million, or 54 cents, a year earlier. Sales rose 10 percent to $5.24 billion. Analysts predicted profit of 78 cents and sales of $5.18 billion, the average of estimates in a Bloomberg survey. Dillard’s swung to a profit of $8 million in the period from a loss of $56 million a year earlier, according to a statement today. Excluding a tax benefit, it was a loss of 3 cents a share, beating analysts’ average projection for a 51- cent loss. Dillard’s trimmed inventory and reduced expenses in the quarter, expanding its gross margin by 420 basis points. Total revenue declined 9.9 percent to $1.36 billion, in line with analysts’ estimates. To contact the reporter on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net

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Saks, Target Remain `Cautious’ on Demand After Earnings Exceed Estimates

November 17, 2009

By Cotten Timberlake and Lauren Coleman-Lochner Nov. 17 (Bloomberg) — Saks Inc. , the U.S. luxury retail chain, and Target Corp. , the second-largest discount chain, said they remain cautious about demand after reporting third-quarter earnings that beat analysts’ estimates. New York-based Saks reported today an unexpected profit of 1 cent a share in the period ended Oct. 31, its first in more than a year, after reducing inventories and expenses to counter a sales decline. Target said average transaction sizes shrank in November and fourth-quarter comparable-store sales may fall after third-quarter earnings rose more than analysts projected. “Generally, retailers are beating profit estimates on cost cuts,” David Abella , a portfolio manager with Rochdale Investment Management LLC in New York, said in a telephone interview today. “The sales outlook is still tough for the fourth quarter, but there is at least some hope that they are slowly improving.” Abella helps manage $2.5 billion in assets, including Target and TJX Cos. shares. The rate of sales declines is abating at Saks and Dillard’s Inc. , the Little Rock, Arkansas-based department-store chain, after the highest unemployment rate in 26 years and falling home values crimped consumer spending. Target, based in Minneapolis, said today it remains cautious about the current quarter and expects a “highly promotional” holiday season. November sales “provide additional justification for being cautious in this uncertain environment,” Chairman and Chief Executive Officer Gregg Steinhafel said on a conference call. TJX Earnings TJX , the owner of the T.J. Maxx and Marshalls clothing- store chains, said today that third-quarter profit rose on higher sales and increases in customer traffic. It raised its fourth-quarter earnings forecast to as much as 71 cents a share, matching the average analysts’ estimate in a Bloomberg survey. Saks rose 26 cents, or 4.1 percent, to $6.67 at 4 p.m. in New York Stock Exchange composite trading. The shares have gained 52 percent this year. Target fell $1.52, or 3 percent, to $48.77. TJX dropped 61 cents to $38.91, while Dillard’s jumped 8.9 percent to $14.51. Saks’ third-quarter income of $1.93 million compared with a loss of $43.7 million, or 32 cents, a year earlier. Analysts predicted a loss of 11 cents a share, the average of nine estimates compiled by Bloomberg. The retailer cut inventories by 21 percent during the third quarter and reduced selling, general and administrative expenses by 10 percent to $162.6 million. Charles Grom , an analyst with JPMorgan Chase & Co. in New York, estimated those expenses at $172.1 million. He rates the shares “neutral.” Saks ‘Cautious’ Saks’ sales at stores open at least a year dropped 10 percent. The retailer reduced its forecast for those sales to a decline in the “high-single digits” in percentage terms for the second half, from a drop of “mid-to-high single digits.” Saks said in a statement it is “cautious about the environment” for next year. “The current economic and retail environment remain uncertain,” Saks Chairman and Chief Executive Officer Stephen Sadove said on a conference call with investors and analysts. “It’s a fragile period for everyone in this industry.” At Target, third-quarter net income advanced to $436 million, or 58 cents a share, from $369 million, or 49 cents, a year earlier. Analysts anticipated earnings of 50 cents a share, the average of estimates in a Bloomberg survey. Sales at stores open at least a year declined 1.6 percent, in line with figures Target provided on Nov. 5. TJX, Dillard’s At Framingham, Massachusetts-based TJX, net income climbed 47 percent to $347.8 million, or 81 cents a share, from $235.8 million, or 54 cents, a year earlier. Sales rose 10 percent to $5.24 billion. Analysts predicted profit of 78 cents and sales of $5.18 billion, the average of estimates in a Bloomberg survey. Dillard’s swung to a profit of $8 million in the period from a loss of $56 million a year earlier, according to a statement today. Excluding a tax benefit, it was a loss of 3 cents a share, beating analysts’ average projection for a 51- cent loss. Dillard’s trimmed inventory and reduced expenses in the quarter, expanding its gross margin by 420 basis points. Total revenue declined 9.9 percent to $1.36 billion, in line with analysts’ estimates. To contact the reporter on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net

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Royals’ Greinke Is Favored to Win AL Cy Young Over Hernandez, Sabathia

November 17, 2009

By Erik Matuszewski Nov. 17 (Bloomberg) — Zack Greinke of the Kansas City Royals is the odds-on favorite to win the American League Cy Young Award, according to Internet gambling Web site BetUS.com . Greinke, 26, had a 2.16 earned run average this season, the lowest for any Major League Baseball starting pitcher. The right-hander was 16-8 for a Royals team that went 65-97 and tied for the second-worst record in the AL. Greinke is listed as a 1-5 favorite to win the Cy Young as the AL’s best pitcher when the award is presented today, according to Costa Rica-based BetUS, meaning a winning $100 wager would return only $20 along with the initial bet. The previous Kansas City pitchers to win the award were Bret Saberhagen (1985, 1989) and David Cone (1994). Greinke was the Royals’ first-round draft pick in 2002 and four years ago had a league-leading 17 losses. This season he logged six complete games, including three shutouts, and was third in the majors with 242 strikeouts in 229 1/3 innings. Felix Hernandez of the Seattle Mariners is the second choice with odds of 7-2, followed by CC Sabathia of the New York Yankees at 4-1. Hernandez had a 19-5 record with a 2.49 ERA, while Sabathia was 19-8 with a 3.37 ERA. Justin Verlander of the Detroit Tigers has 5-1 odds and Josh Beckett of the Boston Red Sox is at 7-1. To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net

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Buffett’s Berkshire Discloses Holdings in Exxon Mobil, Nestle, Travelers

November 17, 2009

By Andrew Frye Nov. 17 (Bloomberg) — Warren Buffett’s Berkshire Hathaway Inc. took stakes in Exxon Mobil Corp. and Nestle SA , betting on the world’s biggest oil and food companies. Berkshire held about 1.28 million Exxon shares and 3.4 million American depositary receipts of Nestle at the end of the third quarter, the Omaha, Nebraska-based company said in a regulatory filing yesterday. The stake in Irving, Texas-based Exxon would be worth about $95 million, based on yesterday’s stock price, while the Nestle holding would be valued at $161.5 million. Berkshire also raised its stake in Wal-Mart Stores Inc. , the largest retailer. “Berkshire is increasingly looking for companies that are world-leading brands,” said Tom Russo , partner at Gardner Russo & Gardner, which holds shares in Berkshire and Vevey, Switzerland-based Nestle. Buffett is drawing down Berkshire’s cash hoard to invest in some of the world’s biggest firms as credit markets improve. The $2.23 billion spent on stocks in the three months ended Sept. 30 is the most in a year and allowed Berkshire to add a stake in insurer Travelers Cos. and increase its holding of Wells Fargo & Co. Buffett agreed this month to take over Burlington Northern Santa Fe Corp. , the No. 1 U.S. railroad, for $26 billion . “They are all very unique and strong franchises,” said Mohnish Pabrai , founder of Irvine, California- based Pabrai Investment Funds, which owns shares in Berkshire and San Francisco-based Wells Fargo. “The equity bets are tending to be ones which can be held for a very long period of time.” Stocks Rally Berkshire, whose U.S. stock portfolio was valued at $56.5 billion at the end of the third quarter, is benefiting from the biggest rally in the Dow Jones Industrial Average since 1933. The addition of Exxon and New York-based Travelers gives Berkshire equity stakes in 11 of the Dow’s 30 companies. The 113-year-old Dow has surged 59 percent since March 9, the steepest run-up over the same number of days since 1933, according to data compiled by Bloomberg. Travelers , which was added to the Dow this year, has gained 58 percent over that period, while Exxon is up 15 percent to give the firm a market value of about $353 billion. “Exxon has probably the lowest cost structure in the industry, which I know is attractive to Buffett,” said Philip Weiss , a senior analyst at Argus Research Corp. “No matter where oil prices go, Exxon always fares better.” Stock picks by Buffett, the second-richest American, are watched by mutual funds and individuals looking for clues about his investment strategy. Berkshire’s biggest stockholding is an investment in Coca-Cola Co. worth about $10.7 billion. The firm’s holding in Walmart rose 90 percent in the third quarter and is valued at about $2 billion. Long-Term Advantage “Buffett buying more indicates that Walmart has a long- term competitive business advantage,” David Katz , who oversees $1.2 billion, including Walmart shares, at Matrix Asset Advisors in New York, said by telephone. “This fits exactly into what Warren Buffett likes: growth businesses where you’re not paying a lot.” Walmart, based in Bentonville, Arkansas, increased profit 3.2 percent in the quarter that ended Oct. 31 by reducing inventories 4.1 percent and boosting revenue 1.1 percent to $99.4 billion. It is accelerating efforts to curb expenses amid falling food prices and the worst U.S. unemployment rate in 26 years, Chief Executive Officer Mike Duke told analysts Nov. 12. “A terrible market or a terrible economy is your friend,” Buffett said at a forum in New York last week, when asked whether the stock market rally was unwarranted, given the recession. “It’s a terrible mistake to look at what’s going on in the economy today and decide whether to buy or sell stocks.” Wells Fargo Berkshire, already the largest shareholder in Wells Fargo, increased holdings of the bank by 3.6 percent to 313.4 million shares in the third quarter. The biggest-U.S. home lender has more than tripled from lows in March. Buffett has said he told students that month that if he had to put all his net worth into one stock, Wells Fargo “would be the stock.” Berkshire continued to cut its holdings in No. 2 U.S. oil refiner ConocoPhillips, trimming its stake about 11 percent in the three months ended Sept. 30. A decline in the value of the stake contributed to Berkshire’s worst quarterly loss in at least two decades in the first three months of 2009. Buffett called the investment a “major mistake” after building the shares with oil prices near their peak last year. Berkshire showed no stake in Eaton Corp. , the Cleveland- based maker of circuit breakers and fuel pumps. Buffett’s company held 2 million shares three months earlier. The firm cut holdings of NRG Energy Inc. , the second-largest power producer in Texas, by 17 percent to 6 million. WellPoint, SunTrust Berkshire reduced its stake in WellPoint Inc. , the largest U.S. health insurer by membership, by 3 percent to 3.39 million shares. The stake in Atlanta-based SunTrust Banks Inc. was cut by 3.9 percent in the three months to 3.07 million shares. Berkshire disclosed a stake of 3.63 million shares in trash hauler Republic Services Inc. Will Flower , a spokesman for Phoenix-based Republic, said the investment was “a good fit” with Berkshire’s strategy. Exxon spokesman Rob Young , Wal-Mart’s John Simley , Travelers spokesman Shane Boyd and Eaton’s Hilary Spittle declined to comment. The filing omits information about some transactions because Buffett is permitted to keep them confidential for now. The U.S. Securities and Exchange Commission sometimes allows companies to withhold data from the public to limit copycat investing while a firm is building or cutting a position. Berkshire disclosed that it had a stake in Exxon as of June 30, a holding not announced in the second-quarter report. Buffett’s reported portfolio doesn’t list stocks he’s not required to disclose, including non-U.S. holdings. To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net .

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