Investing: 1月 2012

2012年1月27日星期五

Greece Deal May Offer Italy `Relief,' Luschini Says

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)

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O'Neill Sees China Growing by 7.5% This Decade

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

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Philadelphia-Area Manufacturing Increased to 7.3 in January

January 19, 2012, 12:21 PM EST By Timothy R. Homan

(Updates with markets in seventh paragraph.)

Jan. 19 (Bloomberg) -- Manufacturing in the Philadelphia region expanded at faster pace in January as employment picked up and factories grew more optimistic about business in the next six months.

The Federal Reserve Bank of Philadelphia’s general economic index increased to a three-month high of 7.3 from 6.8 in December, according to a report released today. Economists surveyed by Bloomberg News forecast the gauge would rise to 10.3. Readings greater than zero indicate expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.

Household and business demand, along with leaner inventories, are encouraging factories to bring on more employees and boost hours worked. At the same time, a possible recession in Europe and a weaker euro pose a risk to U.S. manufacturers’ overseas sales.

“The U.S. economy should grow moderately and that would support decent gains in manufacturing,” Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, said before the report. “How much that will continue is a question as we really don’t know yet the extent of the European downturn.”

Estimates in the Bloomberg survey of 56 economists ranged from 7 to 16.8.

Another report today showed jobless claims plunged by 50,000 to 352,000 last week, the lowest level since April 2008, according to Labor Department figures. The decline was the biggest since September 2005, when claims first surged then slumped in the aftermath of Hurricane Katrina.

Stocks Gain

Stocks gained after the claims figures, with the Standard & Poor’s 500 Index climbing 0.3 percent to 1,311.34 at 10:23 a.m. in New York. The yield on the benchmark 10-year Treasury note rose to 1.94 percent from 1.9 percent late yesterday.

The cost of living was little changed in December for a second month, the Labor Department also reported. The unchanged reading in the consumer-price index was less than the 0.1 percent gain median forecast of economists surveyed by Bloomberg. Costs excluding food and energy rose 0.1 percent last month as projected.

The Commerce Department said builders began work on fewer homes in December, reflecting a slump in multi-family unit construction. Home starts dropped 4.1 percent to a 657,000 annual rate.

The Philadelphia Fed bank’s employment index increased to 11.6, the highest level since May, from 11.5 in the prior month. The new orders measure fell to 6.9 from 10.7 in December. A measure of the average workweek climbed to 5 from 2.8.

Shipments and Prices

The shipments gauge decreased to 5.7 from 9.1 last month. The index of prices paid rose to 31.8 from 30.4 in December, and the measure of prices received advanced to 11.2 from 10.3.

The overall index isn’t composed of the individual measures, so some economists consider it a gauge of sentiment among manufacturers.

The group’s measure of the outlook for the next six months improved to 49 in January, the highest level since March, from a reading of 40 a month earlier.

The Philadelphia-area factory report follows data earlier this week from the Federal Reserve Bank of New York that showed manufacturing in the area expanded in January at the fastest pace in nine months.

Industrial Production

Industrial production in the U.S. rebounded last month, reflecting gains in demand for business equipment, automobiles and construction materials, figures from the Federal Reserve showed yesterday in Washington. Factory production, which makes up about 75 percent of total output, climbed by the most in a year.

Last year “proved to be a challenging environment, most notably with the difficulties in the European region,” Roger Wood, president and chief executive officer at Dana Holding Corp., said Jan. 10 at an auto industry conference in Detroit.

The head of the Maumee, Ohio-based maker of truck axles and frames said Europe will also play an important role this year. “Looking forward, we continue to foresee a mixed global outlook. We expect slow growth in North America and much better growth in both Asia and South America. We believe that Europe will continue to lag.”

--Editor: Vince Golle

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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2012年1月21日星期六

BofA's Asset Sales Sink Profits

January 19, 2012, 7:25 AM EST By Hugh Son

(Updates shares in the seventh paragraph.)

Jan. 18 (Bloomberg) -- Bank of America Corp.’s $33 billion of asset sales last year, designed to help meet international capital standards, may slice at least $2.8 billion from 2012 profit that the firm also needs to reach its target.

That’s probably more than the bank earned before taxes in all of 2011, a year marred by the worst quarterly loss for the Charlotte, North Carolina-based company. The amount, based on estimates compiled by Bloomberg, reflects the loss of income from divestments including a stake in a Chinese lender, a Canadian credit-card unit and an insurer of foreclosed homes.

“There are consequences to downsizing the balance sheet, and that’s lower interest income,” David Trone, an analyst at JMP Securities LLC, said in an interview. “Management gets into situations where they have to make uneconomic decisions. It reflects how intense the pressure is for them.”

Chief Executive Officer Brian T. Moynihan boosted asset sales at the second-biggest U.S. bank from $20 billion in 2010 to avoid issuing stock that would dilute current shareholders. He may end up doing that anyway: With fewer unwanted assets left to sell, Moynihan is now more reliant on earnings to generate capital. Selling shares or even crucial businesses can’t be ruled out if new mortgage losses wipe out profit.

“The risk of having to initiate core asset sales or a partial breakup of the company is rising with the persistent pressure on core earnings,” said Todd Hagerman, an analyst at Sterne Agee Group Inc. in New York, in a Dec. 21 note.

Selling Pieces

Moynihan, 52, started selling pieces of the bank as costs from shoddy loans inherited in the 2008 acquisition of Countrywide Financial Corp. soared to $40 billion. He faces another $12 billion to $32 billion in such expenses, according to a Jan. 5 note by Keith Horowitz, an analyst at Citigroup Inc. in New York, who rates the lender a “buy.” Trone, with a “market perform” rating, sees as much as $40 billion more.

While the lender probably can manage these charges over time, regulators could force Bank of America to raise capital, said a person with knowledge of the firm’s planning. The bank is more likely to choose a stock sale than sell a core business, particularly if shares rise above $10, said the person, who declined to be identified because the process is private. The stock rose 2.3 percent to $6.63 at 10:09 a.m. in New York.

Quarterly Results

Bank of America reports fourth-quarter results tomorrow. The firm may post pretax profit of $3.68 billion, according to the average of estimates by 13 analysts surveyed by Bloomberg. Full-year totals are likely to be much less because losses in the first nine months were $2.66 billion.

According to analysts’ estimates, Bank of America forfeited $1.5 billion a year in pretax earnings when it sold its non-U.S. credit-card unit. Also gone is the bank’s stake of about 10 percent in China Construction Bank Corp., that nation’s second- largest lender, which paid a $774 million annual dividend; the Balboa insurance unit, which contributed $410 million, and $75 million earned from shares in asset manager BlackRock Inc.

Jerry Dubrowski, a Bank of America spokesman, confirmed Bloomberg’s estimate of the income drop. He declined to say whether the bank would sell core assets or offer new shares to investors if pushed by regulators to raise more capital.

More earnings may have been sacrificed with the sale of private-equity stakes in NPC International Inc., the biggest U.S. Pizza Hut franchisee, and hospital operator HCA Holdings Inc. The company didn’t provide estimates on how much profit those holdings contributed.

‘Growth Company’

Moynihan told investors in March that the bank had returned to being a “growth company” and could earn $35 billion to $40 billion in pretax profit when businesses recover.

Showing how far Bank of America is from full recovery, the company probably made just $2.6 billion in pretax income for 2011, according to Bloomberg estimates, after a record second- quarter loss stemming from mortgage settlements. Analysts expect pretax profit of $16.2 billion in 2012 and $22.6 billion in 2013, about half of Moynihan’s target.

Bank of America needs the money to help reach higher levels of capital demanded by regulators as a cushion against losses from future financial crises. Under new and more stringent rules approved by the Basel Committee on Banking Supervision, the firm may have to retain more than $40 billion in earnings by 2019. The figure could drop if the bank sells more of its riskiest assets, which would cut the need for capital, Dubrowski said.

‘Earnings Power’

“It’s an important question for investors -- what’s their earnings power?” said Jefferson Harralson, an Atlanta-based analyst at KBW Inc. with a “market perform” rating on the lender. “What kinds of returns can shareholders expect?”

Bank of America, which held the title of biggest U.S. bank by assets until last year, is shrinking faster than rivals. It pared assets by $45 billion, to $2.2 trillion, in the first nine months of 2011. Citigroup contracted by $22 billion, to $1.9 trillion, over the same period, selling holdings including student loans.

Moynihan is seeking to make Bank of America a leaner, more focused company amid stagnant revenue and sluggish U.S. economic growth. In the process, he’s dismantling some of the more than $130 billion in acquisitions made by his predecessor, Kenneth D. Lewis, who was criticized by investors for overpaying when he bought Countrywide and Merrill Lynch & Co. as those firms were reeling toward collapse.

‘Hot Coals’

The divestments pushed the bank’s Tier 1 capital above 9 percent by the fourth quarter, more than double the level during the 2008 financial crisis. Tier 1 capital, which includes common stock, reserves and retained earnings, is a measure of a bank’s financial strength and ability to absorb unexpected losses. The lender used proceeds to trim debt, which reduces interest costs, Dubrowski said. Long-term debt declined by $50 billion to $399 billion as of Sept. 30, the bank said in November.

“What Moynihan has been doing must be as fun as walking on hot coals, but he keeps walking,” said Greg Donaldson, chairman of Evansville, Indiana-based Donaldson Capital Management LLC, which has $500 million in assets including Bank of America shares. “There’s a grudging, arm’s-length respect for him continuing to fight.”

Moynihan told employees at a town-hall meeting in October that he had largely completed his plan to spin off name-brand holdings. The company will now focus on cutting so-called risk- weighted assets, including mortgage-servicing contracts and credit-card loans, he said.

“We’re getting to the point where the franchise we have is in the condition we want it in,” Moynihan said at the time. “There are still non-core assets we’re getting rid of, but it’s loan portfolios, things of less note, and that will take place through the next 12 to 18 months.”

Reducing Branches

Bank of America could break up a segment of its retail- banking business if regulators required a capital raise, said Thomas Brown, CEO of New York-based Second Curve Capital LLC, in a Dec. 9 Bloomberg Television interview. In June, the bank told the Federal Reserve it could reduce branches to bolster finances in an emergency, said a person briefed on the discussions.

“There’s no question that Bank of America is worth a lot more broken up than it is today,” said Brown, a former Wall Street banking analyst and now a Bloomberg contributing editor.

Meanwhile, JPMorgan Chase & Co. CEO Jamie Dimon, 55, has said his firm, now the biggest U.S. bank by assets, would expand beyond its 5,508 locations to capture more deposits. Bank of America had 5,715 retail centers as of Sept. 30.

Merrill Lynch

Bank of America could also find a buyer for its wealth- management unit, whose 16,722 financial advisers each produce about $890,000 in annual revenue, Mike Mayo, a New York-based analyst at CLSA Ltd., said last week in an interview. Moynihan has said he won’t undo any part of the Merrill Lynch takeover, which gave the firm the opportunity to sell bank products to brokerage clients.

The CEO made other decisions last year that boosted capital while potentially shrinking profit for stockholders.

In August, Moynihan agreed to pay $300 million a year to Warren Buffett’s Berkshire Hathaway Inc. in exchange for a $5 billion investment. That deal includes the option for Berkshire to buy 700 million shares in the lender at $7.14, which could make him the biggest shareholder and dilute other investors.

The bank issued 400 million shares to investors in private exchanges for preferred securities in November and December. While the moves are dilutive, they lower interest payments, which benefits investors, the bank has said. The company has more than 10 billion shares outstanding.

New Shares

The lender may issue another $15 billion in stock this year to meet capital requirements, Matthew O’Connor, an analyst at Deutsche Bank AG in New York, said in a Jan. 4 note. Further share exchanges may happen in amounts “not expected to be material,” Bank of America said last month in a filing.

Moynihan risks further eroding his standing among investors if he issues more stock, after saying in August that the bank won’t “continue on a course of diluting our shareholders” as it had done after government bailouts in 2009.

Concern that Bank of America will issue new shares has plagued the stock, which sank 58 percent last year, the worst performance in the Dow Jones Industrial Average. This month, Bank of America has surged 17 percent, the most of the 30 companies in the Dow index, as investors bet that an improving U.S. economy will buoy earnings.

“All they have to do this year to have the stock rise significantly,” said KBW’s Harralson, “is show that the current share count is close to the eventual one.”

--With assistance from Donal Griffin in New York. Editors: Rick Green, Robert Friedman

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Rick Green at rgreen18@bloomberg.net

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Suze Orman, Debit-Card Dealer

By Karen Weise

“I am the personal financial expert of the world” Photograph by Shahar Azran/Polaris

“I love you!” a woman yells as personal finance guru Suze Orman enters the drab conference room at a Barnes & Noble in suburban New Jersey. Fans cheer and clap while a man in the front row tears up from excitement. Orman is here to preach the tough-love brand of financial advice that she’s been peddling for more than a decade through nine bestselling books, a highly rated CNBC show, and regular appearances on the old Oprah Winfrey Show. “You have got to be the masters of your own financial future,” she tells the 200-strong crowd. While the event coincides with a new paperback edition of her 10th book, The Money Class, that’s not the main focus of her talk. “You need more than books,” she says. “Now you need the tools.”

Orman has a particular tool in mind. Just a few days earlier she introduced her first financial product: a prepaid debit card emblazoned with her name. She sees her Approved Card as an alternative way for people who are fed up with—or don’t have—traditional checking accounts and credit cards to manage their cash. And if the most ambitious part of her plan succeeds, the card may eventually help users improve their credit scores.

Orman’s Approved Card, issued by Wilmington (Del.)-based Bancorp Bank, is in part designed to play the role of pestering mom. The basics are simple: People use electronic transfers or cash to load money onto their cards, then use them like regular debit cards, buying groceries or shopping online. The Orman touch comes in such features as automatic text message alerts sent to mobile phones that note the balance remaining on the card after each purchase. The card’s website has Orman issuing such sharply worded reminders as, “Before you make a purchase, you’d better be able to afford it—do you hear me?!”

Prepaid cards are the fastest-growing payment method, Federal Reserve data show. In 2010 people used them for $65 billion in transactions, compared with $48 billion in 2009, the industry newsletter Nilson Report says. Part of the cards’ appeal is that you can’t get into debt with them. “I think it’s a good idea to have a prepaid card rather than going out willy-nilly with a credit card,” says Glinda Kidd at the book signing.

Still, prepaid cards often come loaded with fees—and Orman’s is no exception. It has a standard $3 monthly charge. While there’s no cost to reload the card with direct deposits or automatic transfers from a checking account, people must pay up to $4.95 to put cash on the card at Western Union or MoneyGram locations. And if they load with cash rather than electronically, all ATM withdrawals cost $2. One free call to a customer service rep is included each month; extra calls are $2 each.

“What people don’t understand is the cost to do business,” says Orman in an interview. “If I could have given this to you for free, I would have.” Orman, who says she invested $1 million in the venture, declines to discuss how much money she might make from it. And she vows to train customers to keep their costs down. In videos on the card’s website, she explains the fees, warning that people who load their cards electronically can get cash from one of the 35,000 ATMs in the Allpoint network for free but will incur a $2 charge for using other ATMs—plus whatever fee the ATM operator imposes. “Why would you want to waste money like that?” she says in the video. “Don’t be lazy, and go to an Allpoint ATM.”

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Behind the BBW50

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

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Dimon, Blankfein Predict Market Rebound as Rivals Pull Back

January 19, 2012, 11:50 AM EST By Dawn Kopecki and Christine Harper

(Updates with today’s earnings reports, comment from Morgan Stanley’s finance chief starting in the second paragraph.)

Jan. 19 (Bloomberg) -- JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon and Goldman Sachs Group Inc. CEO Lloyd C. Blankfein predict Wall Street will rebound from 2011’s trading- revenue plunge. Rivals and analysts aren’t so sure.

Fourth-quarter earnings reported by the six largest U.S. banks show the industry suffered a third straight quarterly drop in combined trading and investment-banking revenue. On conference calls this week, analysts are pressing executives with a similar refrain: Is it a temporary rut or a lasting shift to smaller volumes, profits and pay?

“This is a big debate,” said Paul Miller, a former examiner for the Federal Reserve Bank of Philadelphia and an analyst at FBR Capital Markets in Arlington, Virginia. “A lot of bears are saying it is due to regulation and deleveraging, and some are saying it is cyclical. I think it’s some of both.”

Executives and analysts are focusing on whether stiffer regulations, capital rules and a weak economy may solidify a decline in revenue after the European debt crisis curbed trading volume and corporate dealmaking in last year’s second half. Credit Suisse Group AG, UBS AG and Royal Bank of Scotland Group Plc, which are all shrinking their investment banks, have announced plans to eliminate about 8,300 jobs since the start of November.

‘Snap Back’

“We’d all hoped that the headwinds to our business, including low levels of client activity, low interest rates, market volatility and political uncertainty around the world would subside,” Credit Suisse CEO Brady Dougan told analysts Nov. 1. The bank said that day it would cut about 1,500 jobs, in addition to 2,000 previously announced, and reorganize its securities unit after reporting third-quarter profit that missed analysts’ estimates. “It’s now clear, however, that these secular trends may persist for an extended period,” he said.

Dimon and Blankfein have since sought to reassure investors that markets and earnings from securities units will rebound.

“The world will snap back, and it will be a surprise, and it will be faster than people think,” Blankfein, 57, said at a Nov. 15 investor conference. Yesterday, Chief Financial Officer David Viniar echoed the remarks after the firm said trading revenue fell 25 percent from the third quarter to $3.06 billion.

“We are clearly in a cyclical downturn,” rather than a secular decline, Viniar said. “There is less activity that is cyclical. That will come back. I have no idea when, but it will come back.”

Dimon, 55, said investment banking is a volatile business in which volumes can swing by 50 percent daily.

‘Boom Again’

“It’s not a mystical thing,” he told reporters on a Jan. 13 conference call. “You just have to manage the business carefully and understand it’s going to have those kinds of swings. I don’t think the lower numbers are permanent. I think when things come back, these numbers will boom again.”

Equity issuance across the world fell to $163 billion in the last half of 2011, down 53 percent from the first six months, according to data compiled by Bloomberg. Corporate bond issuance also skidded amid the European crisis and a weaker- than-expected U.S. economy.

Government efforts to prevent banks from trading with their own money also have an impact that may last, said Charles Bobrinskoy, the Chicago-based vice chairman and director of research at Ariel Investments, which has about $5 billion under management and owns shares of New York-based Goldman Sachs, JPMorgan, Citigroup Inc. and Morgan Stanley.

“It’s a little of both -- it’s a little bit of secular, a little bit of cyclical,” he said.

Less Leverage

It doesn’t help that lawmakers and regulators are seeking to limit financial maneuvers that boosted or masked leverage in the past, such as off-balance-sheet conduits, variable-interest entities and collateralized debt obligations, said Richard Bove, an analyst at Rochdale Securities LLC in Lutz, Florida.

“There’s no more CLOs, CDOs, CDOs squared, CDOs cubed,” Bove said, referring to asset-linked securities and financial instruments at the heart of 2008’s U.S. financial crisis. “The leverage isn’t there and the market isn’t there. Banks can’t grow at the same rate.”

Citigroup reduced employees’ 2011 compensation to account for a temporary decline in trading volumes and investor appetite, CEO Vikram Pandit, 55, told analysts Jan. 17. The bank also restructured reserves and sold certain assets where it sees a permanent shift in the market, he said.

“There’s no magic answer,” Pandit said. “It’s very hard to parse out exactly what part of the activity we’re seeing is the cause of the cyclical situation versus how much is secular.”

BofA, Morgan Stanley

Citigroup, the third-biggest U.S. bank by assets, said Jan. 17 that net income dropped 11 percent as lower revenue from advising companies and trading securities led its investment bank to the first quarterly loss since 2008.

Goldman Sachs said fourth-quarter net income fell 58 percent, as revenue slid 30 percent. JPMorgan, the biggest U.S. bank, said last week that net income decreased 23 percent as investment bank earnings fell. San Francisco-based Wells Fargo & Co., which relies least on trading among the six banks, said a focus on loans helped soften a 4 percent drop in revenue. Its profit rose 20 percent.

Bank of America Corp. reported a second consecutive quarterly loss today in its global banking and markets division, which includes trading and underwriting operations. The entire company swung to a $1.99 billion profit from a year-earlier loss as mortgage charges eased. Morgan Stanley lost $250 million during the quarter, as trading volumes and mergers and acquisitions fell.

‘Difficult Question’

“It’s either a slow cyclical recovery or secular, and I don’t think it’s clear what it is,” Morgan Stanley Chief Financial Officer Ruth Porat said today in a telephone interview. “However you look at it, it’s a slower growth environment.” Morgan Stanley has reduced headcount to account for the slower-than-expected recovery, she said.

The grim outlook for trading was a recurring topic on Goldman Sachs’ analyst call.

“Your revenue weakness recently, are you saying none of that is due to secular factors?” Mike Mayo, an analyst at independent research firm CLSA in New York, asked Viniar during the bank’s conference call. “It’s all cyclical? There’s no structural change that’s hurting your revenues?”

The market doesn’t seem any worse than the fall of 2008 or when the bubble in technology stocks burst years earlier, Viniar said in response to analysts’ questions. Still, he would never be so bold as to rule out a lasting change, he said.

“We’ve all been doing this for a long time and we’ve seen downturns before,” he said. “Every time you’re in one it feels like it’s never going to end and this world is different now.”

“So is it cyclical? Is it secular?” Viniar said. “It’s a very difficult question to answer.”

--With assistance from Michael J. Moore and Donal Griffin in New York. Editors: David Scheer, Dan Reichl

To contact the reporters on this story: Dawn Kopecki in New York at dkopecki@bloomberg.net; Christine Harper in New York at charper@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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Gibson v. The Government

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

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Future JPMorgan Dividends May Yield Over 4%

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

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S&P 500 Rises Most Since ’87 as Bernanke Helps Offset Europe

January 19, 2012, 12:55 PM EST By Inyoung Hwang and Whitney Kisling

Jan. 19 (Bloomberg) -- U.S. stocks are off to the best start in 25 years as investors speculate Federal Reserve Chairman Ben S. Bernanke has done enough to insulate the economy from Europe’s debt crisis.

The S&P 500 has gained 4 percent, the most since it rose 10 percent over the first 11 days in 1987, according to data compiled by Bloomberg. Stocks are overcoming earnings that trailed estimates by the widest margin in three years as improvements in hiring, manufacturing and car sales extend the biggest fourth-quarter advance since 2003.

Bernanke has left the target rate on overnight loans between banks unchanged since the end of 2008, the longest stretch since at least 1971, data compiled by Bloomberg show. The policy may push more investors toward equities after yields on 10-year Treasuries finished 2011 within a quarter-point of a record low and the economy grew at an estimated 3.1 percent rate last quarter, said John Carey of Pioneer Investments.

“It’s probably a good idea not to fight someone so much bigger than you are,” Carey, a Boston-based money manager at Pioneer, said in a telephone interview on Jan. 18. The firm oversees about $220 billion. “The Fed will probably stay on its course,” he said. “I haven’t heard any indication that the Fed is considering boosting interest rates, so stocks will look attractive from an income point of view.”

Worst to First

Four companies whose declines were among the 10 biggest in the S&P 500 last year are among the 10 largest gainers in 2012. Netflix Inc., the Los Gatos, California-based movie service, climbed 42 percent, and First Solar Inc. in Tempe, Arizona, is up 27 percent. Charlotte, North Carolina-based Bank of America Corp., which lost 58 percent in 2011, gained 22 percent this year, while Sears Holdings Corp. in Hoffman Estates, Illinois, rose 24 percent after losing 56 percent.

The S&P 500 advanced seven of the first eight days this year, something that has occurred eight times since 1900, data compiled by JPMorgan Chase & Co. show. The mean return those years was 16 percent, the data show.

About $460 billion has been added to the value of American shares this year and the S&P 500 reached an almost six-month high yesterday, as economic reports outweighed concern that downgrades for European nations would worsen the debt crisis. France was stripped of its top rating by S&P and banks suspended talks with Greece over restructuring.

Economic Growth

“Europe is important but it’s not the end of the world if they see a recession,” James Dunigan, who helps oversee $107 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a Jan. 17 phone interview. “We’re starting to see that modest economic growth expectation for this year.”

The average forecast for U.S. gross domestic product growth this year has been rising since October. From a low of 2 percent, the median estimate in a survey of 72 economists has climbed to 2.3 percent, including a 0.2-point increase on Jan. 12 that represented the biggest one-day gain since projections for 2012 began, according to data compiled by Bloomberg.

Optimism about the economy is helping investors shrug off fourth-quarter earnings that have trailed estimates. Profit fell short of analyst forecasts by an average of 4.3 percent among the eight S&P 500 companies that posted results in the first week of earnings season, the data show. Three other quarters with a worse first week of earnings season were in 2007 and 2008 as the economy was slipping into to the worst recession since the 1930s.

Five-Month High

The S&P 500 increased 1.1 percent to 1,308.04 yesterday, the highest level since July 26. It climbed 1.4 percent over four days last week, reaching a five-month high of 1,292.48 on Jan. 11 even after Microsoft Corp., the world’s biggest software maker, said personal computer sales were probably worse than forecast in the fourth quarter.

“This year isn’t going to be about earnings,” James Paulsen, who helps oversee about $333 billion as chief investment strategist at Minneapolis-based Wells Capital Management, said in a Jan. 17 phone interview. “There’s a lot of value in the market that could come just from people calming down about this recession, depression calamity. It’ll be about expanding that multiple.”

Combined S&P 500 profit is forecast to reach $104.76 a share in 2012, the highest level ever, according to data compiled by Bloomberg. The benchmark index is trading at 12.5 times forecast earnings. That compares with 13.4 at the beginning of 2011. The S&P 500’s average ratio in 2011 was 14.1 based on reported earnings. The five-decade mean is 16.4.

Unprecedented Stimulus

Central banks around the world have taken unprecedented measures to prevent the European debt crisis from triggering a global recession. European Central Bank President Mario Draghi last month unveiled plans to offer banks 36-month, 1 percent loans through two so-called longer-term refinancing operations, known as LTROs.

That combined with investor speculation of a third round of stimulus by the Fed and bets China’s central bank will ease monetary policy has fueled stock prices, according to Doug Noland, the money manager for Pittsburgh-based Federated Investors Inc.’s Prudent Bear Fund, which oversees $1.3 billion. It won’t last, he said.

“Markets over the years have become programmed to focus a lot on monetary stimulus,” Noland said in a Jan. 17 phone interview. “It’s a very dangerous reason to be buying equities. We saw in 2011 how QE2 didn’t have much fire power. We’ve seen European policy making repeatedly disappoint the markets.”

Target Rate Unchanged

Fed policy makers have left their target rate unchanged since the end of 2008, data compiled by Bloomberg show. The S&P 500 more than doubled from its low in March 2009 after Bernanke signaled in August 2010 the central bank would embark on a second round of asset purchases, known as quantitative easing, to boost the economy.

The index declined as much as 19 percent from its 2011 high in April through October last year as the program ended and concerns European leaders would fail to tame the region’s debt crisis escalated. It has since rebounded 19 percent.

Gross domestic product in the euro region will shrink by 0.2 percent this year, the median estimate in a survey of 21 economists surveyed by Bloomberg. The diverging outlooks are reducing lockstep price moves. The so-called 30-day correlation coefficient between the euro and S&P 500 fell 27 percent to 0.66 after reaching a record 0.91 in November.

Correlation Weakens

Speculation about whether European leaders would succeed in containing the credit crisis sent equity, currency and commodity markets up and down in unison last year. The relationship between U.S. stocks and the euro weakened after American unemployment fell to 8.5 percent from 9 percent and business activity as measured by the Chicago Purchasing Managers Index expanded at the fastest pace in seven months.

“A lot of people dismissed the original data in the fall as being backward looking,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, said in a telephone interview. His firm oversees $550 billion. “But when you started seeing jobless claims going down, it looked more and more like the U.S. had shrugged off a lot of the European contagion.”

Rallying stocks have done little to entice investors. Mutual funds that invest in U.S. equities posted $753 million in inflows for the week ending Jan. 11 after $7.1 billion in outflows during the first week of the year, Investment Company Institute data show. Customers pulled about $63 billion for the final three months of 2011, the data show.

The S&P 500 has gained an average 6.1 percent during presidential election years, compared with 4.4 percent in the years that follow, according to Bloomberg data going back to 1952. The index has posted a positive return for the last seven months of those years 87 percent of the time, data from the Stock Trader’s Almanac show.

“Committed bears have to pull in their claws a little,” according to Brian Barish, who helps oversee about $7 billion as Denver-based president of Cambiar Investors LLC. “On the more bullish side, corporate earnings continue to be very good and stocks in a lot of areas are quite undemanding in terms of their valuations,” Barish said in a Jan. 17 phone interview. “We could have a good year.”

--With assistance from Lu Wang in New York. Editors: Chris Nagi, Jeff Sutherland

To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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2012年1月20日星期五

Investing in Property and Looking For an Investment Loan

2012年1月19日星期四

Sarkozy Says EU downgrade 'Changes Nothing'

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

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Mitt Romney's Tax Savings

Photograph by Rick Friedman/CORBIS

By David J. Lynch, Lisa Lerer and Sabrina Willmer

When Mitt Romney conceded on Jan. 17 that he pays a tax rate of about 15 percent—far less than millions of wage earners whose votes he’s trying to win—he deflected criticism by employing what might be called the Ordinary Rich Guy Defense: Like a lot of people who are wealthy enough not to work, Romney said his income “comes overwhelmingly from investments made in the past.” That’s not quite the whole story. What he left out is that, because of the way he made his money, he is eligible to take advantage of a special tax provision that even some of his richest friends would envy.

Private equity executives such as Romney, who spent 15 years running Bain Capital, arrange to receive much of their compensation in the form of “carried interest.” This enables them to treat what would be work income for most people, taxed at rates up to 35 percent, as capital gains, taxed at just 15 percent. “It’s a method of converting one’s labor into capital gains in a way that’s unusual outside the investment management industry,” says Victor Fleischer, an associate law professor at the University of Colorado at Boulder whose 2007 paper on the topic helped spur calls in Congress to change the law. “Ordinary people wouldn’t be able to do this.”

For months, Romney dodged questions about his effective tax rate. “I paid the taxes required under the law,” he said on Jan. 11. That only increased curiosity. On Jan. 17, Romney conceded his effective rate was “probably” close to 15 percent. Though he retired from Bain in February 1999, Romney negotiated a settlement that has allowed him to continue benefiting from the firm’s lucrative private equity funds and to invest alongside them in so-called co-investment vehicles, both of which generate income taxed at the 15 percent rate. The tax code’s treatment of income from partnerships in private equity, hedge funds, and real estate development means that some of the richest people in the country are taxed as if they made the wages of a bus driver or health aide. Last year three founders of the Washington-based Carlyle Group each earned $275,000 in salary. But they took home $134 million apiece in distributions from their funds, according to a Securities and Exchange Commission filing, making them eligible to pay low rates on much of their compensation.

Private equity firms gather large sums from pension funds, universities, and wealthy individuals, and typically use the money to acquire privately held companies or subpar units of public companies. After improving the companies’ performance, often while working in hands-on management roles or serving on the board of directors, they sell their acquisitions to other investors or take them public. The tax code treats those gains as if the private equity partners were risking their own money—like average Americans who invest in mutual funds—instead of counting it as salary for running or advising the companies they acquire. In most cases, the private equity firms put up only a sliver of the fund’s capital.

In May 2004, Bain circulated a private-placement memorandum to investors for “Bain Capital Fund VIII.” Marked confidential, the document boasted that Bain had completed more than 200 deals as of March 2004. The firm’s first six funds had realized an 82 percent return, according to the document. In all, 274 investors signed on to the fund, including Romney and his wife, Ann, and pension funds for Texas teachers and Pennsylvania state employees.

The VIII fund, registered in the Cayman Islands, shows how special tax provisions allowed Romney to accumulate wealth both while running Bain and in the 13 years since he left the firm. The Romneys received more than $1 million from the fund in 2010, according to his most recent financial-disclosure form. Though Bain put up just 0.1 percent of the $3.5 billion fund’s capital, it drew 30 percent of the profits once investors were repaid their initial investment, better than the industry standard of 20 percent and a reflection of the firm’s stellar track record. The fund’s investment successes included the parent company of Dunkin’ Donuts, which paid investors a $500 million dividend after a successful November 2010 refinancing. A month later, the initial public offering of FleetCor Technologies in Norcross, Ga., brought in an additional $61 million.

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‘Criminal Club’ Charged in $62 Million Trading Scheme on Dell

January 19, 2012, 12:06 PM EST By Patricia Hurtado and Bob Van Voris

Jan. 19 (Bloomberg) -- Seven men, including fund managers and analysts, were charged by the U.S. with forming a “criminal club” of friends and co-workers who reaped almost $62 million from insider trading in Dell Inc. shares.

Manhattan U.S. Attorney Preet Bharara alleged that the scheme included one trade that earned a $53 million illegal windfall for Level Global Investors LP co-founder Anthony Chiasson and his fund. The insider-trading ring, which involved five different hedge funds and investment firms, is the largest identified by the U.S. to date to involve a single stock, federal authorities said.

Chiasson, Todd Newman, a portfolio manager formerly at Diamondback Capital Management LLC, Jon Horvath, a hedge fund analyst in New York, and Danny Kuo, a fund manager for Whittier Trust Co. in South Pasadena, California, were taken into federal custody yesterday, said Janice Fedarcyk, head of the Federal Bureau of Investigation’s New York office.

The charges “paint a stunning portrait of organized corruption on a grand scale,” Bharara said yesterday at a news conference. “It describes a circle of friends who essentially formed a criminal club, whose purpose was profit and whose members regularly bartered lucrative inside information. It was a club where everyone scratched everyone else’s back.”

Galleon Group Scale

The U.S. said the illegal profits earned as a result of the scheme were almost of the same “magnitude of fraud we proved in the Galleon Group insider trading scheme,” Bharara said.

A five-year insider-trading probe by Bharara’s office and the FBI has resulted in charges against 63 people, Fedarcyk said. More than 50 have pleaded guilty or been convicted after trial since 2009, including Galleon Group LLC co-founder Raj Rajaratnam.

Rajaratnam, was found guilty in May and is serving 11 years in prison, the longest ever for insider trading. He made $72 million from his illicit tips, evidence showed. Several other technology company employees and fund managers have been convicted of receiving nonpublic information as a result of the probe.

At yesterday’s press conference, Bharara displayed a flowchart placing Sandeep Goyal, a former Dell employee, at the center of the ring. According to the U.S., an unnamed person in the Dell investor-relations department passed secret earnings information to Goyal, who passed it on to Jesse Tortora of Diamondback.

Circle of Friends

Tortora, Horvath, Kuo and Spyridon “Sam” Adondakis, a Level Global analyst, were friends who shared inside information on public technology companies, including Dell, prosecutors said. The ring traded the information in 2008 and 2009, according to the U.S.

Tortora passed the inside information on Dell to Newman before the computer maker announced its first- and second- quarter 2008 earnings, according to the U.S. Newman made $3.8 million in illegal profits for his hedge fund from trading on the information, according to the U.S. Tortora also passed tips to Kuo, Horvath and Adondakis.

Adondakis passed the Dell information to his colleague Chiasson and others at Level Global, according to the charging documents. They allegedly traded on the tips for $57 million in illegal profits.

Adondakis, Tortora and Goyal pleaded guilty last year to securities fraud and conspiracy charges that were unsealed yesterday, Bharara said. They are cooperating with the government’s investigation, he said.

‘More Disturbing’

Robert Khuzami, the head of enforcement at the U.S. Securities and Exchange Commission, which filed a related suit yesterday against the defendants, said the cases describe actions “far more disturbing” than insider trading committed by someone who obtains one illegal tip.

The actions by the SEC and prosecutors “lay bare an organized network of analysts and fund managers who set up and used a corrupt network to obtain inside information,” Khuzami said. “These cases, along with Galleon and expert networking cases, reflect systemic dishonesty and exposes a deeply-embedded level of corruption.”

Horvath, 42, is an analyst at Connecticut-based hedge fund Sigma Capital Management LLC, said a person with knowledge of the matter who wasn’t authorized to speak because the information wasn’t public. He was arrested by the FBI yesterday at his home in Manhattan, the U.S. said, and released on a $750,000 bond after a court appearance before U.S. Magistrate Judge James Cott in New York.

‘Honesty and Integrity’

“Throughout a more than 10-year career as a respected investment analyst, Jon Horvath has conducted himself with honesty and integrity,” Horvath’s lawyer, Steven Peikin, said after court. “He has done nothing wrong,’” and the charges against him “will be shown to be meritless,” Peikin said.

Chiasson, 38, used inside information to win for his Level Global fund what the U.S. said was a single “enormous bet” of $53 million on Dell earnings, prosecutors claimed.

“This is the largest single trade ever charged in the Southern District in an insider-trading case,” Assistant U.S. Attorney David Leibowitz said yesterday at a bail hearing, referring to the federal jurisdiction that includes Wall Street.

Greg Morvillo, Chiasson’s lawyer, argued that Leibowitz was attributing to his client trades made by others at Level Global.

Chiasson’s Bail

Chiasson, who turned himself in to U.S. authorities yesterday morning, was released on $2.5 million bond to be secured by $1.25 million in cash or property and three co- signers. Morvillo said in court that his client is innocent of the charges.

“He will be here to defend these charges, whether it’s tomorrow, next month or next year,” Morvillo told Cott.

Newman, 47, was released on a $3 million bond after appearing in U.S. District Court in Boston yesterday.

Kuo, 36, who was arrested yesterday in California, was released on $300,000 bond after appearing in federal court in Los Angeles.

Newman of Needham, Massachusetts, Chiasson of New York, Horvath of New York and Kuo of San Marino, California, are each charged with one count of conspiracy to commit securities fraud and one count of securities fraud. They face as long as 25 years in prison if found guilty, prosecutors said.

Goyal is a former junior technology analyst at Neuberger Berman, said Alexander Samuelson, a company spokesman. Goyal left the firm this month. Goyal, who didn’t trade on the information, was paid about $175,000, by Tortora through an intermediary, for the tips, Bharara said. Goyal worked for Dell at its corporate headquarters in Round Rock, Texas, from 2003 until the summer of 2006, prosecutors said.

Justine Harris, a lawyer for Adondakis; Jessica Margolis, who represents Goyal; Alfred Pavlis, who represents Newman; and Ralph Caccia, who represents Tortora, didn’t return phone messages seeking comment yesterday.

FBI Searches

In November 2010, FBI agents from New York and Boston executed search warrants at the offices of Level Global and Diamondback, hedge funds founded by former employees of SAC Capital Advisors LP.

Level Global told clients last February that it was shutting down -- eight years after David Ganek and Chiasson founded the hedge fund -- because of the U.S. probe.

Steven Goldberg, a spokesman for New York-based Level Global, didn’t return a call seeking comment on the arrests.

Diamondback, in a letter to investors yesterday, said it has cooperated with U.S. authorities. It said Newman left the firm after the 2010 search and Tortora resigned in April 2010.

Civil Complaint

The SEC’s civil insider-trading complaint was filed in Manhattan federal court against all seven men, Diamondback Capital and Level Global. In addition to the alleged Dell insider trades, the SEC claims members of the ring traded on inside information about chipmaker Nvidia Corp. Level Global made at least $15.6 million in illegal profits on its Nvidia trades, the agency claimed.

Peter Neiman, of Wilmer Hale, a lawyer for Diamondback Capital, declined to comment on the SEC lawsuit. MaryJeanette Dee, a lawyer for Level Global, didn’t immediately return a voice-mail message left at her office seeking comment on the suit.

During the trial last year of James Fleishman, a former executive at Primary Global Research LLC, witnesses testified that he helped employees of technology companies pass nonpublic information to his expert-networking firm’s fund manager clients. Fleishman was convicted of conspiracy charges related to insider trading.

One witness, Mark Anthony Longoria, a former Advanced Micro Devices Inc. employee, described how he passed secret tips and other information about his company to fund managers, including Adondakis.

Primary Global

Bob Nguyen, a former Primary Global analyst who pleaded guilty and agreed to cooperate with the U.S., testified at Fleishman’s trial that Tortora was a client of Fleishman’s who got nonpublic information about technology companies through the Mountain View, California-based research firm.

Daniel Devore, a former global supply manager of Dell, pleaded guilty and is cooperating with the U.S. insider-trading investigation.

The criminal case is U.S. v. Newman, 12-00124, U.S. District Court, Southern District of New York (Manhattan). The civil case is Securities and Exchange Commission v. Adondakis, 12-00409, U.S. District Court, Southern District of New York (Manhattan).

--With assistance from Saijel Kishan, Katherine Burton and Edmund Lee in New York, Janelle Lawrence in Boston and Edvard Pettersson in Los Angeles. Editors: Andrew Dunn, Peter Blumberg

To contact the reporters on this story: Patricia Hurtado in New York federal court at pathurtado@bloomberg.net; Bob Van Voris in New York federal court at rvanvoris@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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2012年1月12日星期四

Citigroup Lobbyist Casts Doubt on Obama’s Recess Appointment

January 11, 2012, 10:56 PM EST By Donal Griffin

Jan. 11 (Bloomberg) -- Citigroup Inc.’s lobbyist said President Barack Obama’s decision to make Richard Cordray head of the new financial watchdog agency wasn’t a “recess” appointment and may face a court challenge.

Naming Cordray to run the Consumer Financial Protection Bureau while the Senate held “pro forma” sessions left the White House open to legal action, especially from financial firms facing new rules, Candida Wolff, Citigroup’s executive vice president for global government affairs, said in an interview today.

“I don’t think this was a recess appointment,” said Wolff, who was chief lobbyist for President George W. Bush and now represents the third-biggest U.S. bank by assets. “I struggle with the fact that a session is still a session, and you can have business within that session.” Cordray’s authority to oversee non-banks and non-financial companies “will probably be one area where I can see action,” she said.

Obama had drawn fire for using his power to make appointments while Congress is out of session. Obama installed Cordray, a former Ohio attorney general, as consumer bureau director on Jan. 4, drawing objections from Republicans who opposed the agency’s creation. Senate members met every few days specifically to block recess appointees.

Court Challenges

“Legal challenges to the appointment are likely to come from every quarter -- from individuals to community and labor groups to possibly even Congress,” Wolff said in comments posted on the New York-based bank’s website. “Will the rules, regulations and proposals coming out of the bureau be stuck in limbo for the foreseeable future, and what impact will such uncertainty have on those who must decide how to comply with their rulings?”

Wolff said she’s not aware of any litigation planned by Citigroup or the American Bankers Association, the industry’s Washington lobby. Citigroup supports the goal of more transparency, choice and control for banking customers, according to Molly Millerwise Meiners, a Citigroup spokeswoman. She declined to comment on Cordray’s appointment as a matter of company policy.

“We’re not weighing in on the political arguments,” Wolff said in the interview. “We’re weighing into some of the questions that have to be resolved.”

Citigroup received a $45 billion U.S. bailout during the financial crisis, which has since been repaid.

White House Response

“The Senate has effectively been in recess for weeks, and is expected to remain in recess for weeks,” White House spokesman Eric Schultz said in a statement. Lawyers who advised President Bush also rejected pro-forma sessions, said Schultz, who called them a “sham” designed to keep Obama from doing his job. “Gimmicks do not override the president’s constitutional authority to make appointments to keep the government running,” he said.

Wolff is a lawyer whose career included a stint as deputy staff director for the Senate Republican Policy Committee, according to an April 2011 Citigroup statement when she joined the bank. She wondered on Citigroup’s website whether Cordray’s elevation -- as well as three recess appointments to the National Labor Relations Board -- would further damage relations between Republicans and Obama while setting a precedent for future contentious hires.

“If things weren’t tense before, the political stakes have been upped,” Wolff wrote. “Add to that a hostile election-year environment and even the most non-controversial piece of legislation may not make it in 2012.”

Maurice “Hank” Greenberg, who led bailed-out insurer American International Group Inc. for almost four decades until he was ousted in 2005, called Cordray’s appointment unconstitutional. Greenberg, 86, is chairman and chief executive officer of insurer C.V. Starr & Co.

“The president’s stuck his finger in the eye of Congress,” Greenberg told Betty Liu today on Bloomberg TV’s “In the Loop.” “You need the approval of the Senate for that appointment. It was bypassed. That doesn’t lead for a great relationship.”

--With assistance from Phil Mattingly, Hans Nichols and Kathleen Hunter in Washington and Noah Buhayar in New York. Editors: Rick Green, Steve Dickson

To contact the reporters on this story: Donal Griffin in New York at dgriffin10@bloomberg.net;

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

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2012年1月11日星期三

Business Travelers in Vegas: A Survivor's Guide

By Teddy Wayne

Elvis impersonators. The Hangover, part I. Exotic dancers all somehow named Cinymin. Las Vegas is nothing if not a classy town, and you’re headed there for a three-day convention. Yet what if you’re a happily married guy who prefers eight hours of sleep to five-card stud, Tulsa over Tao Nightclub, stripping paint to strippers? You still need to network and give the impression that you’re a high-roller to your more hedonistic colleagues and boss. Fret not: herewith, a field guide for the reluctant businessperson forced to endure the blinding sights, deafening sounds, and rotting smells of Sin City. All without maxing out your credit card or racking up enough expenses to get you fired.

And remember: Comportment is permitted to be looser here than at other conventions, but keep in mind that what happens in Vegas doesn’t necessarily stay in Vegas in the era of digital cameras and Facebook.

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Balanced Investment Strategy For Portfolio Management

Asia Stocks Fall as World Outlook Damps China Easing Speculation

January 12, 2012, 12:30 AM EST By Jonathan Burgos

Jan. 12 (Bloomberg) -- Asian stocks fell, with a regional benchmark index snapping three days of gains, as weaker Japan trade data added to evidence of a global slowdown, damping speculation that lower inflation in China may result in looser monetary policy.

Sony Corp., Japan’s biggest exporter of consumer electronics, fell 2.5 percent after the nation’s current-account surplus narrowed. QBE Insurance Group Ltd. plunged 13 percent in Sydney after saying 2011 profit dropped as much as 50 percent. Infosys Ltd., India’s second-largest software exporter, tumbled after cutting its sales forecast. Zoomlion Heavy Industry Science & Technology Co., a Chinese construction machinery maker, gained 1.6 percent in Hong Kong.

The MSCI Asia Pacific Index dropped 0.4 percent to 115.9 as of 1:54 p.m. in Tokyo, with three shares falling for every two that rose. The gauge advanced 1.7 percent in the past three days amid bets that China will ease monetary policy. The MSCI Asia Pacific excluding Japan Index was little changed after rising as much as 0.3 percent.

“If inflation keeps coming down, it increases the likelihood that China will deem it appropriate to continue to ease monetary policy,” said Will Seddon, who helps oversee $300 million at White Funds Management in Sydney. “The market has largely digested the possibility of a recession in Europe.”

Regional Indexes

China’s Shanghai Composite Index fell 0.2 percent, reversing gains of as much as 0.8 percent as the nation’s inflation cooled for a fifth straight month in December. Hong Kong’s Hang Seng Index slipped 0.1 percent, after advancing as much as 0.6 percent earlier.

Japan’s Nikkei 225 Stock Average slipped 0.9 percent. Australia’s S&P/ASX 200 Index lost 0.2 percent, with QBE Insurance as the main drag, according data compiled by Bloomberg.

South Korea’s Kospi Index added 0.3 percent and the BSE India Sensitive Index dropped 0.7 percent as Infosys declined.

Futures on the Standard & Poor’s 500 Index slid 0.1 percent today. The gauge was little changed in New York yesterday. The U.S. economic expansion improved last month across most of the country, while hiring was limited and housing remained stagnant, the Federal Reserve said in its Beige Book business survey.

Japanese exporters slid as the nation’s current-account surplus shrank 86 percent from a year earlier as slowing growth in China and Europe and the appreciation of the yen damped demand for Japanese products.

Japan’s Exporters

Sony, the maker of Bravia televisions and PlayStation game consoles, dropped 2.5 percent to 1,316 yen. Toyota Motor Corp., the world’s biggest carmaker by market value, dropped 1.4 percent to 2,589 yen. Canon Inc., the No. 1 camera maker, slipped 1.4 percent to 3,240 yen.

Infosys sank 6.7 percent to 2,636.55 rupees. The company reduced its full-year forecast for sales in dollar terms, citing weaker demand in developed economies including Europe.

The MSCI Asia Pacific Index gained 2.1 percent this year through yesterday, compared with a 2.8 percent advance by the S&P 500 and a 2.2 percent increase by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.2 times estimated earnings on average, compared with 12.3 times for the S&P 500 and 10 times for the Stoxx 600.

QBE Insurance tumbled 13 percent to A$11.30 in Sydney, the biggest decline on the regional benchmark index. The company said 2011 profit fell as much as 50 percent on record natural disaster claims and losses on bond investments.

‘Falling Knife’

“There won’t be too many brave investors stepping in to catch this falling knife,” Peter Esho, Sydney-based chief market analyst at City Index Ltd., a London-based provider of trading services in bonds, stocks and commodities, said in a note. “The number of catastrophes in such a short period of time have finally caught up to hurt the group’s bottom line.”

Chinese construction companies and machinery makers advanced after China’s inflation cooled to a 15-month low and producer-price gains were the smallest in two years in December, leaving the government more room to support growth as a global slowdown hurts exports.

Zoomlion Heavy gained 1.6 percent to HK$9.58 in Hong Kong. China Communications Construction Co., a builder of transport infrastructure, increased 2.2 percent to HK$6.85.

Solar energy producers surged after the China said it plans to start developing 3 gigawatts of solar power capacity in the five years through 2015.

GCL-Poly Energy Holdings Ltd., a Chinese producer of polysilicon used in solar panels, jumped 14 percent to HK$2.50. Trony Solar Holdings Co Ltd., a panel maker, climbed 8.3 percent to HK$1.17.

OCI Co., a South Korean supplier of polysilicon, surged 15 percent to 255,000 won in Seoul, the most on the MSCI Asia Pacific Index. Unit OCI Solar Power said it plans to build 400 megawatts of solar energy projects for CPS Energy in Texas.

--Editors: Nick Gentle, Jim Powell

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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Roach Sees China Better Placed Than India to Withstand Slowdown

January 12, 2012, 1:33 AM EST By Michael Heath

Jan. 12 (Bloomberg) -- China has scope to loosen fiscal and monetary policy, making it better placed than India to weather a global economic slowdown, said Stephen Roach, non-executive chairman of Morgan Stanley Asia.

China is bringing inflation under control and has a small budget deficit, Roach said in an interview today with Bloomberg Television. In contrast, India has a currency under pressure, an “inflation problem” and a large fiscal shortfall, he said.

India’s “got its hands tied: It can’t cut interest rates because of the inflation and currency issues, and it’s got no leeway to increase its budget deficit,” Roach said. “India is in a much tougher place right now than China in the midst of this weaker global economy.”

Roach’s views differ from those yesterday of Nouriel Roubini, the co-founder and chairman of Roubini Global Economics LLC who called China’s growth model “challenged” and said India is “positioned well.” The two developing economies account for more than a third of the world’s population.

The International Monetary Fund is preparing a “substantial” cut to global economic projections that in September showed China and India leading the world’s recovery this year.

Prime Minister Manmohan Singh’s efforts to bolster the Indian economy have been hampered by corruption scandals, inflation and the decision last month to stall the easing of foreign investment rules in multibrand retail.

Indian Inflation

Indian central bank Deputy Governor Subir Gokarn said last week the Reserve Bank is “very concerned” about the impact on inflation from the rupee, Asia’s worst-performing currency in the past year after sliding 13 percent.

Roubini said yesterday that China’s growth model “is now challenged” because the U.S. can no longer be the consumer of first and last resort. “Unless China changes its growth model there’s even a risk of a hard landing in the next couple of years,” he said

“In relative terms, India is actually positioned well,” Roubini said in an interview with Bloomberg UTV in New Delhi. At the same time, the pace of “structural reforms” in India has been “mediocre” and unless India pushes ahead with those changes, economic growth in “absolute terms” will “disappoint,” he said.

India’s economy expanded 6.9 percent in the third quarter of 2011 and the Reserve Bank paused rates last month after a record 13 increases since mid-March 2010, as the benchmark gauge of inflation dropped to a one-year low of 9.11 percent in November.

China’s Growth

Roach said today that China is “very serious about engineering a shift” from an investment- and export-led economy to consumer-driven growth.

“You’ll be pleasantly surprised at the progress they make in building out a consumer-led growth model,” he said. “I’m of the view that we can look for positive surprises from China not negative surprises.”

The IMF is scheduled to release revised global projections on Jan. 24. Olivier Blanchard, the Washington-based fund’s chief economist, said in a Bloomberg Television interview last week that with European growth “very close to zero at this point,” there would be a “substantial” cut to the most recent 2012 global expansion estimate of 4 percent.

--With assistance from Susan Li in Hong Kong. Editor: Brendan Murray, Sunil Jagtiani

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net

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Vietnam Signals Rate Cuts as Asia’s Fastest Inflation Eases

January 12, 2012, 12:40 AM EST By Bloomberg News

Jan. 12 (Bloomberg) -- Vietnam signaled that it may cut policy interest rates to “more suitable” levels after the first quarter and weaken the dong this year as Asia’s fastest inflation eases.

“The central bank will adjust policy rates to more suitable levels, aiming to help ease the average level of market interest rates,” central bank Governor Nguyen Van Binh said at a press conference yesterday.

Vietnam faces a trade deficit, risks in the banking sector and slowing economic growth as the global recovery falters. While Indonesia and Thailand have cut borrowing costs in recent weeks to shield expansion, the World Bank and International Monetary Fund said last month Vietnam may undermine progress toward economic stability if it loosens monetary policy too soon.

“Based on recent policy statements they’ve made and the fact that inflation is slowing and growth is weakening, and given the pressures they’re under, I would be 99 percent sure that he meant that the next adjustment in rates would be down,” Gareth Leather, a London-based economist at Capital Economics, said after Binh’s comments.

Vietnam needs to show credibility by sustaining stabilization efforts, Victoria Kwakwa, the World Bank’s country director in the nation, said yesterday in an interview in Hanoi.

“They have the opportunity to show that they are breaking with the past,” she said. “Vietnam is now about sticking with macro-stability when it is needed and not just throwing it to the wind when we have pulled back from the edge of the cliff.”

Weakening Currency

Consumer-price growth in 2012 may be less than 12 percent at worst and 8.5 percent to 9 percent in a “good” scenario, Binh said at an economic conference yesterday in the capital, compared with 18.13 percent in December.

Vietnam’s dong weakened 7.4 percent against the dollar last year, including a devaluation of about 7 percent in February. The currency climbed 0.1 percent to 21,013 per dollar yesterday. The VN Index of stocks closed up 0.8 percent.

“We believe that 2012 will be a hard year, a challenging year for Vietnam’s economy,” Binh said. “Slowing inflation is a prerequisite for interest rates to drop, but it doesn’t always happen like that.”

Purchases of dollars and gold by Vietnamese seeking stores of value have put pressure on the dong. Binh said the currency will gradually depreciate 2 percent to 3 percent this year.

The nation will also focus in the first quarter on easing bank liquidity challenges, including through restructuring five to eight lenders, Binh said.

Asset Quality

The banking sector is showing signs of stress and asset quality remains a “concern” given “unusually high” credit growth in recent years, the World Bank said last month.

Last year, the State Bank of Vietnam unveiled plans to create a three-tiered financial industry dominated by 15 lenders as part of efforts to allay concerns over the banking system.

Credit in Vietnam expanded 13 percent in 2011, Binh said. The nation targets a balance of payments surplus of $3 billion in 2012 and enough foreign-exchange reserves to cover 12-15 weeks of imports by 2015, he also said.

Vietnam’s inflation rate in December moderated from 19.83 percent in November. It remains the fastest in a basket of 17 Asia-Pacific economies tracked by Bloomberg.

If inflation eases to 9 percent, deposit rates will fall to 10 percent to 11 percent, Binh said. Interest rates will be stable in the three months through March, he said.

The State Bank of Vietnam cut its repurchase rate to 14 percent from 15 percent in July last year. The refinancing rate is 15 percent and the discount rate is 13 percent.

The economy, a production hub for companies such as Intel Corp., grew 5.89 percent in 2011, down from 6.78 percent in 2010.

--Diep Ngoc Pham, Nick Heath, Nguyen Dieu Tu Uyen and Jason Folkmanis, with assistance from Nguyen Kieu Giang in Hanoi. Editors: K. Oanh Ha, Sunil Jagtiani, Jake Lloyd-Smith

To contact Bloomberg News staff for this story: Diep Ngoc Pham in Hanoi at dpham5@bloomberg.net; Nick Heath in Hanoi at nheath2@bloomberg.net; Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net; Jason Folkmanis in Hanoi at folkmanis@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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Asian Stocks Swing Between Gains, Losses on U.S., Europe Concern

January 11, 2012, 1:32 AM EST By Jonathan Burgos and Yoshiaki Nohara

Jan. 11 (Bloomberg) -- Asian stocks swung between gains and losses as optimism about the U.S. economy tempered concern Europe’s debt crisis is worsening ahead of a German bond sale.

James Hardie Industries SE, a supplier of building materials that gets most of its sales in the U.S., climbed 3 percent in Sydney. AU Optronics Corp., a supplier of liquid crystal displays to companies including Nokia Oyj and Dell Inc., gained 4.4 percent in Taipei. China Unicom (Hong Kong) Ltd. fell 3.3 percent amid concern competition will increase among mainland carriers.

“There are more positive signs particularly on employment and consumer,” spending in the U.S., said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The outlook in the U.S. is for modest growth this year, and that’s better than Europe. Expectations are Europe will be in a recession.”

The MSCI Asia Pacific Index slid 0.1 percent to 115.98 as of 2:30 p.m. in Tokyo, with five shares rising for every four that fell. The gauge advanced 0.9 percent last week as manufacturing growth from China to the U.S. bolstered confidence in the global economy.

Australia’s S&P/ASX 200 Index increased 0.9 percent. Hong Kong’s Hang Seng Index was little changed. Japan’s Nikkei 225 Stock Average rose 0.2 percent. South Korea’s Kospi Index lost 0.5 percent.

China Inflation

China’s Shanghai Composite Index decreased 0.6 percent, heading for its first decline in four days, on concern inflation will hamper the government’s ability to ease lending curbs. A report due to be released tomorrow will probably show consumer prices rose 4 percent in December.

Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The gauge rose 0.9 percent in New York yesterday as global equities rallied amid bets that China will ease monetary policy to spur growth in the world’s second-largest economy.

Exporters advanced as U.S. employers hired 4.15 million workers in November, 107,000 more than in the prior month, the Labor Department said yesterday. A survey by Chief Executive magazine showed confidence among American CEOs rose last month to the highest level since May.

--Editors: Nick Gentle, John McCluskey

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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Hedge Funds Sit Out Rally

January 10, 2012, 5:37 AM EST By Nikolaj Gammeltoft

Jan. 10 (Bloomberg) -- Rallying stocks have done little to entice professional money managers back to U.S. equities.

A gauge of hedge-fund bullishness measuring the proportion of bets that shares will rise climbed to 44.5 last week from 43.9 at the end of 2011, holding close to the lowest level since 2009, according to International Strategy & Investment Group. Compared with the price of the Standard & Poor’s 500 Index, managers’ so-called net exposure is close to the lowest since June 2008, the ISI data show.

Speculators have been cutting equities since the index peaked in February 2011 at 54.2, concerned Europe’s credit crisis will spread and curb global economic growth. They stayed bearish after October when the S&P 500 began a 17 percent rally that has restored $2 trillion to the value of American equities.

“Hedge funds have made massive mistakes,” George Feiger, chief executive officer of Contango Capital Advisors Inc., the San Francisco-based wealth management arm of Zions Bancorporation, said in a telephone interview on Jan. 6. He manages $3.3 billion at Contango and Western National Trust Co. “We are less and less willing to invest with these people because at the point when you need them the most, they’re worth the least.”

Investors have struggled to profit amid record stock market volatility. Hedge funds, largely unregulated investment vehicles that aim to make money whether markets rise or fall, lost 4.9 percent last year as fear that the European sovereign-debt crisis would spread deterred them from buying risky assets including stocks, according to the Bloomberg aggregate hedge- fund index.

Stocks Declines

The MSCI All-Country World Index slid 9.4 percent in 2011 while fixed-income securities worldwide returned 5.89 percent last year, Bank of America Merrill Lynch indexes show.

The S&P 500 rebounded from last year’s lowest level on Oct. 3 as data on manufacturing, construction and employment spurred speculation the U.S. economy is accelerating. The benchmark index for American equities fell 0.04 point in 2011, the 10th best performance among the world’s stock markets, data compiled by Bloomberg show. The index lost 7.2 percent in September.

ISI’s index, based on a survey of 35 mostly U.S. hedge funds with about $84 billion under management, tracks net exposure on a zero through 100 scale. Readings of zero show “maximum” short selling, or the sale of borrowed equities with the hope of profiting by buying them at lower prices later, while 100 means “maximum” bullish bets. At 50, hedge funds are deploying a “normal” ratio of long to short investments.

‘It Is Unusual’

“It is unusual for hedge funds in our survey to remain as cautious on net exposure as they have, given the size of the move in stocks since the summer,” Oscar Sloterbeck, managing director at New York-based ISI, said in an e-mail on Jan. 6.

Hedge funds have reason to be cautious as the euro-zone debt crisis and the U.S. budget debate threaten global economic growth, according to Steve Shafer, chief investment officer at Covenant Global Investors.

“It’s very sensible to have this low level of exposure,” Shafer, who helps manage $315 million at the Oklahoma City-based hedge fund, said in a phone interview yesterday. “The problem is that the low exposure creates the potential for whipsaw, which hurt of lot of hedge funds last year. You get pounded in September and then you miss out on October.”

The S&P 500 rose 1.6 percent to 1,277.81 last week, its second-best start of a year since 2006, as reports on manufacturing from America to China bolstered optimism about the global economy. It added 0.2 percent to 1,280.7 yesterday.

Buying of equities by hedge funds that have missed out on gains amid an improving economy and record corporate earnings may help propel stock prices this year, said Tim Hartzell of Houston-based Sequent Asset Management.

“The hedge funds are risk takers and they need to come back,” Hartzell, who oversees about $350 million as chief investment officer at Sequent, said in a phone interview Jan. 6.

--With assistance from Kelly Bit in New York. Editors: Chris Nagi, Michael P. Regan.

To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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Geithner Presses China on Currency, Seeks Support on Iran

January 11, 2012, 1:23 AM EST By Ian Katz and Cheyenne Hopkins

(Updates with Geithner comment in third paragraph.)

Jan. 11 (Bloomberg) -- U.S. Treasury Secretary Timothy F. Geithner will urge Asia’s two biggest economies to cut Iranian oil imports and seek to narrow differences with China on trade and currency disputes on a visit to Beijing and Tokyo this week.

Geithner, who today holds talks with Premier Wen Jiabao, Vice President Xi Jinping and Vice Premier Li Keqiang, arrived in Beijing yesterday and met Chinese Vice Premier Wang Qishan. In Japan, he is due to meet with Prime Minister Yoshihiko Noda and Finance Minister Jun Azumi tomorrow.

“On economic growth, financial stability around the world, on nonproliferation, we have what we view as a very strong cooperative relationship with the government and we are looking forward to building on that,” Geithner said at the start of his meeting with Xi.

Wang, appearing with Geithner yesterday, said the two countries “have a lot of issues to talk about in the areas of economy, finance, trade and investment.”

“Apart from the bilateral aspect, we are also having important cooperation in the multilateral and global arena in the areas of economy, finance, trade policies and also G-20 related affairs,” Wang said.

Geithner will probably encounter resistance in China, which disagrees with U.S. assertions that its currency is undervalued and is sparring with the Obama administration over trade in goods from chicken to steel. At the same time, he may seek to avert a public split at a time when a likely European slide to recession is already clouding the global economic outlook.

Treasury Bills

“These are the world’s second- and third-largest economies and the two biggest holders of Treasury bills,” said Stephen Myrow, a U.S. Treasury official during the administration of George W. Bush and now managing director of ACG Analytics Inc., a Washington investment research firm. “These are relationships that need to be continually nurtured.”

China is the largest foreign holder of U.S. government securities, with $1.13 trillion in October. Japan is second among foreign nations with $979 billion.

A plea to cut back on Iranian oil, tied to the Obama administration’s sanctions last month aimed at that country’s nuclear program, may not resonate with Chinese officials, intelligence and foreign-affairs analysts said.

“China will be less OK with it than Japan,” Matthew Levitt, a former financial intelligence official at the Treasury Department who is now at the Washington Institute for Near East Policy, said in an interview. “But neither wants to be seen as rogue.”

Iranian Oil

The two countries are the largest importers of Iranian oil, with China accounting for 22 percent and Japan buying 14 percent of Tehran’s crude oil exports during the first half of last year, according to the U.S. Energy Information Administration. As a group, the European Union buys 18 percent of Iran’s oil exports.

Wen, China’s premier, will visit Saudi Arabia, the United Arab Emirates and Qatar from Jan. 14 to Jan. 19, China’s foreign ministry said yesterday.

Wen will attend a conference in Abu Dhabi and make a speech about China’s energy policy, Foreign Ministry spokesman Liu Weimin said in a statement on the ministry’s website. Wen will hold talks with leaders of the three nations during his six-day visit and “promote the development of China-Arab relations and relations with the Islamic world,” Liu said.

Trade Rules

In China, Geithner may tell officials that they need to follow through on pledges to shift the world’s second-largest economy more toward domestic demand and away from exports, William Cline, a senior fellow at the Peterson Institute for International Economics in Washington, said in an interview Jan. 9. The real value of the yuan “needs to rise by 10 to 20 percent,” he said.

President Barack Obama plans to form a government task force to monitor China’s compliance with U.S. trade rules, the Wall Street Journal reported yesterday, citing unidentified people familiar with the matter.

The panel will include officials from the Treasury, Commerce and Energy departments, and the U.S. Trade Representative’s office, it said. An announcement of the enforcement task force is expected later this month, the newspaper said in its online edition.

Substantially Undervalued

The Treasury Department said Dec. 27 in its twice-yearly report on global currencies that the yuan is substantially undervalued and the U.S. will “press for policy changes that yield greater exchange-rate flexibility.” China’s state-run Xinhua News Agency replied in a commentary that the U.S. should move beyond the “useless, meaningless” quarrel over the exchange rate.

The yuan closed at 6.3150 in Shanghai yesterday, little changed from 6.3146 on Jan. 9, according to the China Foreign Exchange Trade System. The currency is allowed to trade 0.5 percent on either side of the daily fixing. In Hong Kong’s offshore market, the yuan slipped 0.03 percent to 6.3159.

China’s growth may slow to 8.5 percent this year, down from 9.2 percent in 2011, according to the median estimate of economists in a Bloomberg News survey. The central bank lowered the required reserve ratio for banks for the first time in almost three years in December to encourage lending, a shifting of its stance from fighting inflation as price pressures ease.

Record Earthquake

The Treasury secretary arrives in Japan as that nation copes with a fading rebound from the aftermath of a record earthquake in March 2011. Gross domestic product probably shrank 0.1 percent in the three months through December, the third contraction in four quarters, according to estimates by the Japan Center for Economic Research, an independent analysis group in Tokyo.

Prime Minister Noda’s administration has overseen record sales of yen to counter exchange-rate appreciation that has prompted companies including Nissan Motor Co. and Panasonic Corp. to plan shifting some operations abroad. The U.S. Treasury criticized the currency intervention in a report last month, saying Japan should instead focus on domestic policy initiatives.

“Geithner may be looking for input from America’s key trading partners in Asia on how to promote a sustainable recovery in world economic demand,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd., said in an e-mail. “He may want to hear directly as well in face-to- face meetings on just how worried are China and Japan officials about the outlook for their own domestic economies.”

WTO Panel

Commerce may also be on the agenda. The U.S. Trade Representative asked the World Trade Organization last month to establish a panel that will seek a settlement in a conflict with China over duties on American poultry.

China set a duty of as much as 105.4 percent last year on U.S. broiler-chicken products. About 300,000 workers and farmers have been hurt by China’s actions, Trade Representative Ron Kirk said in September.

The chicken-import dispute may add to tensions between the world’s two largest economies, which have clashed over access to each others’ markets for products including steel pipes, tires, movies and music. The WTO rejected in September China’s appeal of a ruling that backed U.S. duties on Chinese tire imports.

Geithner hasn’t been to China since March 2011 and to Japan since November 2010. Treasury officials traveling with him include Lael Brainard, undersecretary for international affairs; Robert Dohner, deputy assistant secretary for Asia; and David Loevinger, senior coordinator for China affairs.

Foreign Sanctions

Obama signed into law Dec. 31 a defense-spending bill that includes a provision that would impose sanctions on foreign financial institutions that conduct transactions with the Central Bank of Iran.

The law gives the administration flexibility by allowing it to waive sanctions for as long as 120 days at a time if the president determines they would threaten national security. Iran threatened last month to shut the Strait of Hormuz, a transit point for one-fifth of oil traded worldwide, if sanctions are imposed on its crude exports.

“The regular economic and trade relations and energy cooperation between China and Iran has nothing to do with the nuclear issue,” Chinese Vice Foreign Minister Cui Tiankai told reporters in Beijing Jan. 9. “We should not mix issues with different natures.”

Chinese officials aren’t “as committed to a unified position with the United States, don’t philosophically agree the sanctions should hurt the Iranian people or the Iranian economy,” said Kenneth Katzman, an Iran specialist for the nonpartisan Congressional Research Service.

--With assistance from Hans Nichols, Indira Lakshmanan, Michelle Jamrisko and William McQuillen in Washington, Kevin Hamlin in Beijing. Editors: Kevin Costelloe, Gail DeGeorge

To contact the reporters on this story: Ian Katz in Washington at ikatz2@bloomberg.net; Cheyenne Hopkins at Chopkins19@bloomberg.net.

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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Twinkie Maker on Verge of Bankruptcy Filing

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

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Merkel, Sarkozy to Move Forward on Euro Rescue Plan

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Treasury PR Omits Projected TARP Losses

January 11, 2012, 12:05 AM EST By Noah Buhayar

(Updates with daily report on website in fifth paragraph.)

Jan. 10 (Bloomberg) -- The U.S. Treasury Department has highlighted projected gains while omitting estimated losses in press releases about federal bailouts, according to the U.S. Government Accountability Office.

Treasury statements from the past two years that discuss the $700 billion Troubled Asset Relief Program’s profitable investments sometimes include the projected gains for taxpayers, according to a report yesterday from the GAO, a watchdog that works for Congress. The expected costs have been omitted from statements about TARP investments that may be unprofitable, including the government’s stake in insurer American International Group Inc., according to the GAO.

“This inconsistent disclosure of lifetime cost estimates raises concerns about the consistency and transparency of Treasury’s press releases and suggests a selective approach that focuses on reporting program lifetime income and not lifetime costs,” according to the GAO report.

The overall projected cost for TARP has declined since the program was authorized in 2008, as banks including Goldman Sachs Group Inc. and Citigroup Inc. repaid rescue funds at a profit for taxpayers. The Treasury, led by Secretary Timothy F. Geithner, predicted a $70 billion cost as of Sept. 30, down from $78 billion a year earlier, according to the GAO.

Future press releases on TARP investments will link to Treasury’s monthly reports about estimated lifetime costs and gains, Tim Massad, the department’s assistant secretary for financial stability, wrote in a letter to the GAO. The department’s website also includes a daily report on TARP disbursements and income and annual financial statements.

Some Treasury press releases have noted costs to taxpayers. A June statement detailing the government’s exit from Chrysler Group LLC cited the automaker’s repayment of more than $11.2 billion and said that Treasury was unlikely to fully recover the remaining $1.3 billion of funds committed to the company.

--Editors: Dan Kraut, Dan Reichl

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net.

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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Wall Street Said to Weigh Junior Banker Pay Freeze

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

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Wall Street Weighs Pay Freeze for Junior Bankers

January 11, 2012, 12:46 AM EST By Jeffrey McCracken and Christine Harper

Jan. 10 (Bloomberg) -- Wall Street’s biggest firms, facing a slump in investment-banking revenue, are considering freezing compensation levels for some junior bankers, according to people familiar with the deliberations.

Credit Suisse Group AG is likely to suspend its practice, an industry norm, of boosting pay automatically each year for analysts, associates and vice presidents within the investment- banking division, a person with direct knowledge of the decision said. While those employees will get their regular annual salary increases, bonuses probably will be lowered to keep total pay flat from a year earlier, said the person, who requested anonymity because the plan isn’t public.

Goldman Sachs Group Inc. and JPMorgan Chase & Co. are being watched by competitors for signs the companies are planning similar moves, said people at four other firms. Cutting pay can be perilous if your rivals don’t because it’s easier for junior bankers to defect, draining a future generation of talent. Wall Street firms may make the change en masse only if one or more of their biggest rivals act first, the people said.

“There’s always the risk that people may go across the street for a better deal,” said Joseph Sorrentino, a managing director in New York at Steven Hall & Partners, an executive- compensation consultancy. Among junior bankers “you have some potential future stars and you want to make sure you keep them engaged and keep them happy and performing.”

JPMorgan, which doesn’t plan to alter its practices, may change course if other firms do so, a person briefed on its decisions said.

Starting Salaries

Base pay for junior bankers typically increases automatically by about 15 percent to 20 percent, akin to a unionized salary scale, as they work a year and move up a so- called class. Younger bankers, who typically comprise about 75 percent of the investment-banking workforce of the biggest Wall Street firms, often start with a $200,000 annual salary and can expect $240,000 or $250,000 in the second year, said two senior bankers.

JPMorgan’s investment bank, which includes equity and fixed-income trading, had 26,615 employees as of Sept. 30. Goldman Sachs, with 34,200 employees, doesn’t break out how many work in each division.

A banker typically spends three to four years as an associate and then three years as a vice president before he can be named director. Top-producing vice presidents in their third year, sometimes called a VP-3, could get $600,000 to $700,000 in total compensation, said a senior Wall Street banker.

Top Tier

At Deutsche Bank AG, senior executives are evaluating whether to cut or freeze pay for the top tier of vice presidents as a way to pare all junior-banker pay, said a person familiar with the matter.

Jennifer Zuccarelli, a spokeswoman for JPMorgan, declined to comment, as did Lucas van Praag at Goldman Sachs, Victoria Harmon at Zurich-based Credit Suisse and John Gallagher at Deutsche Bank, based in Frankfurt. JPMorgan and Goldman Sachs are both based in New York.

The review of junior-banker pay focuses on investment- banking divisions and not lower-level employees in equity or fixed-income trading departments, the people said.

Associate compensation continued to rise in the wake of the financial crisis, the executives said. Starting pay for each position also increased, so a first-year associate job that paid $200,000 a year rose to $210,000 for the next person to fill the slot. With compensation pools down this year at almost all Wall Street banks, climbing associate pay has caused a squeeze on pay for senior managers, said a banker involved in such decisions.

More Transparent

Pay among junior bankers tends to be more transparent and aligned with peers at competing firms than it is for senior bankers, the people said, partly because the newest employees still talk with former classmates. Word of lower entry-level pay at one bank can hinder recruiting at top business schools, which is why the biggest banks rarely consider such pay freezes.

A plunge in trading revenue last year, stagnating economic growth and Europe’s sovereign-debt crisis have forced Wall Street’s most senior bankers to rethink their pay practices as they seek to cut costs. Part of the calculus is determining whether the downturn in bank profits represents a permanent shift or a temporary phenomenon tied to the 2008 financial crisis and recession.

Compensation at the biggest banks may fall 20 percent to 60 percent this year, depending on the firm and the job, senior bankers said. Mergers-and-acquisitions bankers may face pay cuts at the lower end of that range and those in fixed income or trading could see higher reductions, senior bankers said.

Dimmed Prospects

Most of the biggest U.S. banks will inform employees about bonuses and compensation at the end of this month. Bank of America Corp., for example, will tell employees their compensation starting Jan. 26, said a person familiar with the matter. The new pay rates typically take effect in February.

Goldman Sachs and Morgan Stanley, the major U.S. banks most reliant on trading, had their earnings estimates cut this month as a weak fourth quarter dimmed prospects for a capital-markets rebound in the first half of 2012.

JPMorgan Cazenove analysts led by Kian Abouhossein cut earnings outlooks for investment banks for 2011, 2012 and 2013, citing worsening conditions in fixed income and equities. In a Jan. 6 note to clients, the analysts lowered their Goldman Sachs 2012 earnings estimate by 19 percent and Morgan Stanley’s figure by 17 percent.

Investment-banking and trading revenue probably has dropped in each of the past two years. In 2011, global stock offerings plunged 29 percent from 2010 and U.S. bond issuance fell 6.7 percent as companies delayed plans to raise capital, according to data compiled by Bloomberg.

Final Decisions

Fixed-income trading revenue at U.S. banks may fall 12 percent from the third quarter, minus accounting adjustments, while equities drop 10 percent and investment-bank revenue remains unchanged, David Trone, an analyst at JMP Securities, wrote in a Dec. 16 report.

Some large European banks won’t make final decisions on bonuses and compensation until early next month, allowing them to tweak plans based on what their rivals determine in January, executives at those firms said.

Pay increases have traditionally been automatic because “there are traditionally very long hours in terms of the amount of work and this is another way to try to boost their morale and signify that they’re a strong part of the firm and that they’re appreciated,” said Steven Hall’s Sorrentino.

Deutsche Bank won’t announce internally in North America its bonus and compensation decisions until at least the first week of February, said a person familiar with the matter, who predicted bonuses to be down there 30 percent to 50 percent. Barclays Capital, a unit of London-based Barclays Plc, is likely to hold off until the second or third week of February, a person familiar with the matter said.

Kerrie-Ann Cohen, a Barclays Capital spokeswoman, declined to comment.

--With assistance from Dawn Kopecki in New York. Editors: Peter Eichenbaum, Steve Dickson

To contact the reporters on this story: Jeffrey McCracken in New York at jmcracken3@bloomberg.net; Christine Harper in New York at charper@bloomberg.net

To contact the editors responsible for this story: Jennifer Sondag at jsondag@bloomberg.net; David Scheer at dscheer@bloomberg.net

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