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Monday, December 28, 2009


Shanghai leads gains in Asian share markets
Asian share markets rose Monday, with Tokyo's Nikkei reaching its highest level in four months and Shanghai's market getting support from official comments that the government will not quickly unwind stimulus efforts. Japan's Nikkei 225 rose 1.3%, China's Shanghai Composite climbed 1.5% and South Korea's Kospi Composite inched up 0.2%. Hong Kong's Hang Seng gave up 0.2%, while markets in New Zealand, Australia and India were closed for holidays. The Wall Street Journal (28 Dec.)

Pimco's El-Erian says economic rally is unsustainable
Stocks have soared 66% since hitting lows in March, the pace of home sales is increasing and the unemployment rate is dropping. However, Pacific Investment Management Co. CEO Mohamed El-Erian warned that the situation in the U.S. is not sustainable. "We're on a sugar high," El-Erian said. "It feels good for a while but is unsustainable." InvestmentNews/The Associated Press (27 Dec.)

10-year Treasuries fall as investors anticipate inflation
Investors are cooling to U.S. Treasuries as they get ready for the return of inflation. Yields on 10-year Treasuries moved up to their highest level in more than four months, with investors expecting demand for government debt to decline as the economy recovers. David Greenlaw, chief fixed-income economist at Morgan Stanley, said benchmark 10-year notes will climb to 5.5%. That will drive interest rates on 30-year fixed-rate home mortgages to 7.5% to 8%, close to their highest level in a decade, Greenlaw said. Bloomberg (28 Dec.)

Berkshire Hathaway dropped 21,000 workers this year
A regulatory filing confirms that Warren Buffett's Berkshire Hathaway did not escape the consequences of the U.S. economic downturn. The Omaha, Neb., firm, including its retail and manufacturing units, is ending the year with 21,000 fewer workers than at the conclusion of 2008. That amounts to an 8.6% reduction in its workforce. Bloomberg (24 Dec.)

Commentary: U.S. lawmakers push debt backstop for banks
Legislation that is making its way through Congress would guarantee banks' debt, despite the issue of moral hazard. U.S. lawmakers are concerned that banks will struggle to borrow during an economic downturn. While the concern is understandable, a permanent debt backstop would take the financial system in the wrong direction, columnist Peter Eavis writes. "What's needed are far-reaching changes that make bank funding far safer and protect the taxpayer, not put them on the hook," Eavis says. The Wall Street Journal (28 Dec.)

U.S. lawmakers consider reinstating Glass-Steagall Act
U.S. lawmakers from both parties are warming to the idea of reimposing portions of the Glass-Steagall Act, a 1933 law that separated investment-banking activities from commercial-banking operations. Doing so could have wide-ranging repercussions for financial institutions. The idea of reviving Glass-Steagall has sparked debate about whether the act could have prevented the financial crisis or help sidestep future issues. Bloomberg (27 Dec.)

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