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Trading Now

Wednesday, December 9, 2009


Japan slashes Q3 GDP growth from 4.8% to 1.3%
Correcting a miscalculation of corporate investment, Japan revised its third-quarter GDP growth to an annualized 1.3%, down from an earlier report of 4.8%. The change unnerved stock traders, already worried about whether Japan will recover in the face of persistent deflation and a rising Japanese yen against the U.S. dollar. The revision raised questions about whether expansion in the export sector truly is stimulating domestic demand, as reported earlier. "We'll need to re-examine that," said Keisuke Tsumura, a parliamentary secretary at the Cabinet Office. Bloomberg (08 Dec.)

Report: Value of U.S. homes decreases less than last year
A decline in the value of U.S. homes slowed dramatically this year compared with 2008, according to an analysis from Zillow Real Estate Market Reports. During the first 11 months of this year, houses dropped $489 billion in value, compared with $3.6 trillion for 2008. The decrease brought with it a drop in the rate of negative home equity, according to the analysis. Reuters (09 Dec.)

Obama presses for hiring incentives, small-business tax cut
Additional infrastructure spending, lower taxes for small business and financial incentives for employers to add workers are some of the proposals offered by U.S. President Barack Obama to fight rising unemployment. He also asked Congress to approve a "cash for caulkers" initiative that would provide money to improve the energy efficiency of houses. Obama left it largely to Congress to fill in the details, including how much to spend on the programs. The Washington Post (09 Dec.)

Report: Dubai World subsidiary already bailed out once
Nakheel, Dubai World's property subsidiary, received one bailout from the government of Dubai, United Arab Emirates, that saved it from a $6 billion loss, according to documents obtained by The Times. During the first half of this year, Nakheel posted a loss of more than $3.5 billion, according to the documents. The Dubai Financial Support Fund provided a substantial contribution to Dubai World, and much of it might have been handed over to Nakheel, the Dubai Department of Finance said. The Times (London) (09 Dec.)

Shaky sovereign debt becomes obstacle to economic rebound
The deteriorating financial condition of several governments is raising concern among investors. Fitch Ratings' decision to downgrade Greek debt to the lowest in the eurozone could mark the beginning of a major challenge to the monetary union. Companies controlled by Dubai, United Arab Emirates, took an even bigger hit from Moody's Investors Service. All of this raises a question about Russia's hope to borrow in foreign currency on the international market, the first time it would do so since 1998, when it defaulted on government-issued debt. The Wall Street Journal (09 Dec.)

*no healthcare until we are ALL in the federal plan. Why am I paying for these guys to get the best possible care while I have none? Cause I'm STUPID!
Senate Democrats tentatively set aside public option in health reform
Cautiously announcing agreement on health care legislation, U.S. Senate Majority Leader Harry Reid, D-Nev., said a final Senate vote is drawing near. The deal comes after six days of intense negotiations between five moderates and five liberals, who were told by Reid to work out their differences regarding the public option. Senators pushing for government-run insurance said they will go along with dropping the plan if other coverage options replace it and beefed-up regulation is imposed on insurers. The Washington Post (09 Dec.)

Mortgage-modification failures trigger anger in Congress
Ineffectiveness of the Making Home Affordable program is fueling frustration in Congress. The Obama administration's initiative offers to cut mortgage payments to 31% of a borrower's income, but the help is not reaching many who need it, government and industry officials told the House Financial Services Committee. "All of these banks have got to do better," said U.S. Rep. Al Green, D-Texas. "If you don't do better at some point, you're going to force Congress to take drastic action." The Washington Post (09 Dec.)

*in case you were wondering why the longest rally on air
Credit market could be at risk if stocks plummet
Corporate borrowing may suffer if the stock market dips, Matthew Craft writes, explaining that depleted investor confidence could send bond yields soaring and make borrowing very pricey. "So long as interest rates stay low and the U.S. Treasury is able to get favorable long-term rates at auctions, corporate bonds would be the asset of choice for investors chasing yield," Craft writes. Forbes (12/2)

*that's right. Banks will have to make money the old fashioned way: EARN IT!
JPMorgan says derivatives changes to hit banks' revenue
JPMorgan Chase estimated that derivatives regulation and increased competition in the market will result in banks losing tens of billions of dollars in revenues each year. JPMorgan's senior management forecast that the bank could lose as much as $3 billion annually if proposals to force more derivatives trades through exchanges and clearing are implemented. International Financing Review (12/5)

*Bankers whine about every rule that may come down the pike. But where do they whine when they crash our financial system? The same government that they don't want making any rules. Help us help us...
Bankers warn about liquidity rules, living wills
The Basel Committee for Banking Supervision is expected to issue proposals for an overhaul of liquidity rules and ways to deal with major financial institutions that have become "too big to fail". Meanwhile, bankers warned that proposals that would require large banks to develop living wills and increase their liquid-asset holdings in local subsidiaries could damage London and New York as global financial hubs. Financial Times (tiered subscription model) (12/9)

Wells Fargo taking a risk by delaying TARP repayment
Wells Fargo is signaling that it wants to repay $25 billion it received under the Troubled Asset Relief Program through profits, and not by making a big equity offering like Bank of America did last week. The gambit could leave Wells Fargo the only big bank still under government supervision. Investors also will be looking to see how much capital remains once TARP funds are repaid by Wells. The Wall Street Journal (12/9)

*why aren't his constituents running him out of town is what I want to know.
Analysis: Frank challenged by base on regulatory reform
House Financial Services Committee Chairman Barney Frank, D-Mass., is coming off as defensive in explaining how he handled the creation of a package of bills that will radically overhaul how the nation's financial system is regulated, Michael Hirsh writes in a Newsweek commentary. "Now he finds himself second-guessed by his liberal supporters over what he says is the biggest challenge of his career: reining in Wall Street," Hirsh writes. Frank abruptly ended an interview with Hirsh when he thought the writer was accusing him of coddling the big banks. Newsweek (12/5)

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