Gallimaufry

[trysail]

"I must down to the seas again, to the lonely sea and the sky,
And all I ask is a tall ship and a star to steer her by,
And the wheel's kick and the wind's song and the white sail's shaking,
And a grey mist on the sea's face, and a grey dawn breaking."

-John Masefield
Sea Fever​

http://ih.constantcontact.com/fs066/1101271253888/img/213.jpg​

 

[trysail]

http://www.npr.org/2010/12/18/132163018/bones-found-on-island-could-be-amelia-earharts


Bones Found On Island Could Be Amelia Earhart's
by The Associated Press

December 18, 2010

The three bone fragments turned up on a deserted South Pacific island that lay along the course Amelia Earhart was following when she vanished. Nearby were several tantalizing artifacts: some old makeup, some glass bottles and shells that had been cut open.

Now scientists at the University of Oklahoma hope to extract DNA from the tiny bone chips in tests that could prove Earhart died as a castaway after failing in her 1937 quest to become the first woman to fly around the world.

"There's no guarantee," said Ric Gillespie, director of the International Group for Historic Aircraft Recovery, a group of aviation enthusiasts in Delaware that found the pieces of bone this year while on an expedition to Nikumaroro Island, about 1,800 miles south of Hawaii.

"You only have to say you have a bone that may be human and may be linked to Earhart and people get excited. But it is true that, if they can get DNA, and if they can match it to Amelia Earhart's DNA, that's pretty good."

It could be months before scientists know for sure — and it could turn out the bones are from a turtle. The fragments were found near a hollowed-out turtle shell that might have been used to collect rain water, but there were no other turtle parts nearby.

Earhart's disappearance on July 2, 1937, remains one of the 20th century's most enduring mysteries. Did she run out of fuel and crash at sea? Did her Lockheed Electra develop engine trouble? Did she spot the island from the sky and attempt to land on a nearby reef?

"What were her last moments like? What was she doing? What happened?" asked Robin Jensen, an associate professor of communications at Purdue University in West Lafayette, Ind., who has studied Earhart's writings and speeches.

Since 1989, Gillespie's group has made 10 trips to the island, trying each time to find clues that might help determine the fate of Earhart and her navigator, Fred Noonan.

Last spring, volunteers working at what seemed to be an abandoned campsite found one piece of bone that appeared to be from a neck and another unknown fragment dissimilar to bird or fish bones. A third fragment might be from a finger. The largest of the pieces is just over an inch long.

The area was near a site where native work crews found skeletal remains in 1940. Bird and fish carcasses suggested Westerners had prepared meals there.

"This site tells the story of how someone or some people attempted to live as castaways," Gillespie said Friday in an interview with The Associated Press. "These fish weren't eaten like Pacific Islanders" eat fish.

Millions of dollars have been spent in failed attempts to learn what happened to Earhart, a Kansas native declared dead by a California court in early 1939.

The official version says Earhart and Noonan ran out of fuel and crashed at sea while flying from Lae, New Guinea, to Howland Island, which had a landing strip and fuel.

Gillespie's book "Finding Amelia: The True Story of the Earhart Disappearance," and "Amelia Earhart's Shoes," written by four volunteers from the aircraft group, suggest the pair landed on the reef and survived, perhaps for months, on scant food and rainwater.

Gillespie, a pilot, said the aviator would have needed only about 700 feet of unobstructed space to land because her plane would have been traveling only about 55 mph at touchdown.

"It looks like she could have landed successfully on the reef surrounding the island. It's very flat and smooth," Gillespie said. "At low tide, it looks like this place is surrounded by a parking lot."

However, Gillespie said, the plane, even if it landed safely, would have been slowly dragged into the sea by the tides. The waters off the reef are 1,000 to 2,000 feet deep. His group needs $3 million to $5 million for a deep-sea dive.

The island is on the course Earhart planned to follow from Lae, New Guinea, to Howland Island, which had a landing strip and fuel. Over the last seven decades, searches of the remote atoll have been inconclusive.

After the latest find, anthropologists who had previously worked with Gillespie's group suggested that he send the bones to the University of Oklahoma's Molecular Anthropology Laboratory, which has experience extracting genetic material from old bones. Gillespie's group also has a genetic sample from an Earhart female relative for comparison with the bones.

The lab is looking for mitochondrial DNA, which is passed along only through females, so there is no need to have a Noonan sample.

Cecil Lewis, an assistant professor of anthropology at the lab, said the university received a little more than a gram of bone fragments about two weeks ago. If researchers are able to extract DNA and link it to Earhart, a sample would be sent to another lab for verification.

"Extraordinary claims require extraordinary evidence. That's why we're trying to downplay a lot of the media attention right now," Lewis said. "For all we know, this is just a turtle bone, and a lot of people are going to be very disheartened."

Under the best circumstances, the analysis would take two weeks. If scientists have trouble with the sample, that time frame could stretch into months, Lewis said.

"Ancient DNA is incredibly unpredictable," he said.

Other material recovered this year also suggested the presence of Westerners at the isolated island site:

— Someone carried shells ashore before cutting them open and slicing out the meat. Islanders cut the meat out at sea.

— Bottles found nearby were melted on the bottom, suggesting they had been put into a fire, possibly to boil water. (A Coast Guard unit on the island during World War II would have had no need to boil water.)

— Bits of makeup were found. The group is checking to see which products Earhart endorsed and whether an inventory lists specific types of makeup carried on her final trip.

— A glass bottle with remnants of lanolin and oil, possibly hand lotion.

In 2007, the group found a piece of a pocket knife but didn't know whether it was left by the Coast Guard or castaways. This year, it found the shattered remains of the knife, suggesting someone had smashed it to extract the blades. Gillespie speculated a castaway used a blade to make a spear to stab shallow-water fish like those found at the campsite.

Following Earhart's disappearance, distress signals picked up by distant ships pointed back to the area of Nikumaroro Island, but while pilots passing over saw signs of recent habitation, the island was crossed off the list as having been searched, Gillespie said.

In 1940, a British overseer on the island recovered a partial human skeleton, a woman's shoe and an empty sextant box at what appeared to be a former campsite, littered with turtle, clamshell and bird remains.

Thinking of Earhart, the overseer sent the items to Fiji, where a British doctor decided they belonged to a stocky European or mixed-blood male, ruling out any Earhart connection.

The bones later vanished, but in 1998, Gillespie's group located the doctor's notes in London. Two other forensic specialists reviewed the doctor's bone measurements and agreed they were more "consistent with" a female of northern European descent, about Earhart's age and height.

On their own visits to the island, volunteers recovered an aluminum panel that could be from an Electra, another piece of a woman's shoe and a "cat's paw" heel dating from the 1930s; another shoe heel, possibly a man's, and an oddly cut piece of clear Plexiglas.

The sextant box might have been Noonan's. The woman's shoe and heel resemble a blucher-style oxford seen in a pre-takeoff photo of Earhart. The plastic shard is the exact thickness and curvature of an Electra's side window.

The body of evidence is intriguing, but Gillespie insists the team is "constantly agonizing over whether we are being dragged down a path that isn't right."

 

[trysail]

http://noir.bloomberg.com/apps/news?pid=20601082&sid=aTiDUAOynrT8


Soros Gold Bubble at $1,384 as Miners Push Buttons
By Cam Simpson

Dec. 20 (Bloomberg) -- James Burton didn’t have a penny invested in gold of the $142.8 billion he managed as chief executive officer of the California Public Employees’ Retirement System in 2002. Why would he? The metal had been in a bear market for two decades.

Yet shortly after announcing his retirement from the largest public pension fund in the U.S., Burton agreed to fly to London to entertain a job offer from a mining companies trade group he had never heard of. Squishing across a rain-soaked British golf course in rented shoes in early June 2002, he listened to what sounded like a far-fetched idea: Selling gold as an investment to the masses.

It was time to get investors to buy a precious metal they’d shunned for a generation, Christopher Thompson, the World Gold Council’s new chairman, told him that day. The key was dividing bars of gold into securities tradable on the New York Stock Exchange. He wanted Burton to lead the effort, in no small part because of his connections with institutional investors. Gold was then trading at about $328 an ounce in London.

“I was convinced that there was a market for the man on the street who would buy a lot of gold if he could find an easy way,” says Thompson, 62, who at the time was also chairman of Johannesburg-based Gold Fields Ltd.

$1,431.25 an Ounce
Thompson bested Burton in match play on the 17th hole, convincing him to take the job as the World Gold Council’s CEO. What the two did next shows the role mining companies played in gold’s longest bull run in at least 90 years, reaching a record $1,431.25 an ounce on Dec. 7. Gold traded at $1,383.97 an ounce as of 10:30 a.m. Hong Kong time today.

Under the men’s leadership, a trust set up by the World Gold Council, which includes producers such as Barrick Gold Corp. and Newmont Mining Corp., won approval from the U.S. Securities and Exchange Commission for an exchange-traded product backed by bullion. It gave investors access to gold without the cost and hassle of taking physical delivery.

The fund, SPDR Gold Trust (pronounced Spider), now holds 1,299 metric tons of gold valued at about $57 billion, more than the Swiss central bank. Investors include the University of Notre Dame, the Texas teachers’ pension fund and a who’s who of hedge fund titans and money managers such as John Paulson’s Paulson & Co., Laurence Fink’s BlackRock Inc. and George Soros’s Soros Fund Management LLC.

Biggest Funds
Globally, the 10 biggest such funds now hold a combined 2,113 metric tons of gold, more than the official reserves accumulated by every country in the world save four: the U.S., Germany, Italy and France.

Their popularity has helped drive unprecedented gains for the precious metal, and some people, including analysts at Goldman Sachs Group Inc., say gold can go higher.

Soros, who made $1 billion betting against the British pound in 1992, called gold the “ultimate asset bubble” at the World Economic Forum’s January meeting in Davos, Switzerland, when the price of gold was at $1,087.10 an ounce. His fund held $664.8 million in gold-backed exchange-traded funds as of Sept. 30.

Gold’s rise resembles moves reached before the three big crashes of the last decade: the Nasdaq tech-stock bubble of 2000, the U.S. housing market bubble of 2005-2006, and the crude oil- price spike of 2008, according to data compiled by Bloomberg.

In a Dec. 14 interview, Jason Toussaint, the World Gold Council’s managing director for the U.S. and investment, pointed to a September report by the group arguing that the pace and increase of gold’s price isn’t comparable to the characteristics of recent bubbles. The metal’s rise is consistent with its long- run average when compared with other assets, including equity indexes and oil, the report said.

Parabolic Rise
History shows that when the price of an asset takes a parabolic climb like gold’s has, it’s eventually bound to crash, according to Mark Williams, an executive-in-residence and master lecturer at Boston University’s finance and economics department. And when it does it’s almost always the smaller, individual investors that get out too late, he said.

As much as half of the gold in exchange-traded funds may be held by individual investors, according to BlackRock, the world’s largest money manager.

“Your little guy is going to get hit by the doorknob on the way out,” Williams said.

Driving Social Change
Already gold’s record prices are driving wide-ranging social change around the world. In the remotest parts of Africa, villagers scrambling for ever more valuable flecks of gold risk death at the hands of mine security and parents squeezing gold wealth from ore have inadvertently poisoned their own children in the process. In India, where gold has cultural significance, parents are crushed they can’t buy their daughters as much gold jewelry as they wanted for their weddings.

The council declined to comment on the painful dividends.

When it worked to create the fund, one concern was that the exchange-traded product might contribute to a bubble. Burton and his investment team worried that too much success would shoot gold prices up too fast, resulting in a crash like the one that occurred in January 1980, he said. Back then the bubble burst in one day and took two decades to recover.

Pushing Every Button
Ultimately those engineering what would become SPDR Gold decided it wasn’t their job to worry about it.

“Our primary mission was to find every button we could push to stimulate demand,” Burton, 59, said in an interview in London. “We also knew that we had launched something that we could not control.”

Their timing was impeccable. They opened investment in a reputed safe asset to potentially millions of new investors just before the financial crisis of 2007 and 2008 and the ensuing global economic slowdown. Until then, bullion was viewed by many as a fringe holding for the rich with Swiss bank vaults or gold bugs who hoarded the metal beside canned food to hedge against Apocalypse.

“They were very patient and they tapped a real deep need in the ordinary investor to be able to buy and sell gold like a stock,” says Jeremy Siegel, a finance professor at the University of Pennsylvania’s Wharton School in Philadelphia.

‘Pivotal Moment’
The creation of the fund was a “pivotal moment,” said Scott Malpass, chief investment officer for Notre Dame in South Bend, Indiana. It provided a vehicle for investors that made gold readily available and cheap and easy to trade, he said.

He managed about $5.5 billion, as of the end of fiscal year 2009, in endowments and other funds for the school.

A gold skeptic, he began buying into SPDR Gold after Lehman Brothers Holdings Inc.’s collapse in 2008, acquiring about $111 million by July 1, 2009. The school held about $65.8 million in the fund as of Sept. 30, according to SEC records.

While the World Gold Council was not first in the world to develop an exchange-traded product backed by gold, bringing it to the U.S. market was crucial, Burton and Thompson say.

The fund, now called SPDR Gold, started trading in 2004 and led the way for exchange-traded products backed by commodities in the U.S. Of the $1.4 trillion in exchange-traded products worldwide at the end of November, $171.7 billion were backed by or linked to commodities, according to BlackRock.

Atomic number 79 on the periodic table, gold has captivated humans for at least 6,000 years, since goldsmiths fashioned it into decorative objects and jewelry on the coast of the Black Sea in what is today Bulgaria.

Malleable Metal
A malleable metal, gold isn’t really consumed. Virtually every ounce of gold that’s ever been mined is still around: an estimated 165,000 metric tons. Peter Bernstein, the late economic historian, cited a calculation that all of the world’s gold could be melted to fit into a single oil tanker in his 2000 best-selling history of the precious metal, “The Power of Gold.”

King Croesus first minted gold coins as money in the 6th century B.C. in what is now Turkey. By the 20th century, the U.S. and most nations had formally adopted a gold standard.

The price was effectively set at $35 an ounce until U.S. President Richard Nixon dropped the gold standard in August 1971, paving the way for a price explosion. Investors flocked to gold in the ensuing decade of financial and political turmoil. By January 21, 1980, they drove the price to a then-record $850 per ounce, equal to an inflation-adjusted $2,266 today. Gold crashed the next day.

By 2000, the mining industry faced the prospect of entering a third straight decade of a bear market for gold. SPDR Gold was born of that crisis.

Turkish Game Show
From its inception in 1987, the World Gold Council had concentrated on promoting gold jewelry, the industry’s traditional anchor. Very little was done to push gold as an investment, according to Kelvin Williams, executive director of marketing for AngloGold Ashanti Ltd. until 2006.

One of the council’s highest-profile investment campaigns involved a Turkish television game show aired in 2000. Contestants competed to win their weight in gold as two women paraded in skirts and bikini tops covered in coins.

Other promotions encouraged Muslims to use gold as a way to save for their once-in-a-lifetime pilgrimage to Mecca. The council also lobbied India and Italy to sell gold over the counter at post offices and banks.

The World Gold Council hired consulting firm Bain & Co. to review its operations. The mission grew by early 2002 to include a plan that would be dubbed “Project Sun” to study how to create an ETF, according to Thompson.

Wildest Dreams
The council would achieve its wildest dreams if a tradable security created demand for 900 tons of gold or $20 billion, Burton and Thompson say Bain told them. Bain declined to comment for this article.

Separately, Jeffrey M. Christian, the managing director of New York-based researcher CPM Group and adviser to several gold producers, wrote an open letter in January 2001 to the industry’s executives urging them to realize that “increases in investment demand for physical gold can have immediate and dramatic effects on gold prices.”

His research showed gold prices rose significantly only when investors purchased more than 529 metric tons in a year. He says mining executives were frustrated that their companies were wasting time and money on promoting jewelry sales.

“Mining companies were starving,” Christian says now. The major gold mining indexes, FTSE Gold Mines Index in London and the Philadelphia Gold & Silver Index, reached all-time lows in late 2000 and early 2001.

Fortune Cookie
Christopher Thompson was already a believer in the need to open up gold to investors when he joined the World Gold Council.

Unlike most of his mining counterparts, Thompson, who was born in Johannesburg, had a background in finance: in the U.S. he managed three closely-held funds that invested in gold-mining ventures.

In 1998 during dinner with his wife and children at a Chinese restaurant in Denver he cracked open a fortune cookie. The small slip of paper inside read: “You’ll go to Africa and take over the greatest gold mine there.”

A few months later he accepted a job as chairman and CEO of the newly created Gold Fields mining company, gaining a seat on the World Gold Council’s executive committee. Thompson framed the fortune and propped it on his desk in Johannesburg. He arrived with firm ideas about how to jump-start gold prices.

Bars and Coins
For starters, he says he understood that markets are made in the margin and the marginal players in the gold market were always investors. Getting them to buy gold was the challenge.

Two ways U.S. investors bought gold were inconvenient, Thompson says. Buying bullion bars meant paying commissions, storage costs and insurance, as well as exit fees to sell. Although less expensive, gold coins had higher fees for buying and selling, Thompson says.

Thompson says he resolved to get the World Gold Council to find a way to make buying gold easy.

Yet the council still clasped to gold jewelry after more than a decade of marketing campaigns inspired by the ubiquitous “A Diamond is Forever” advertisements from De Beers, the world’s biggest producer of the gems. In May 2001, the World Gold Council embarked on a new, $55 million effort called “Glow with Gold.” The council aimed to boost jewelry sales and rebrand the precious metal through advertisements, arguing gold’s brand had been muddied by the likes of golden credit cards and breakfast cereals.

It didn’t break the slump. The expense pushed the council into a deficit, according to Thompson and Burton. It also fueled debate about the group’s very existence.

‘Jeopardy’
“The future of the council was very much in jeopardy,” said Katherine Pulvermacher, who joined the council’s investment team in 2001.

The following April, the World Gold Council had a turbulent annual meeting in Melbourne, Australia, according to Thompson and Kelvin Williams.

Neither man will detail what happened, but it ended with Bobby Godsell, then chairman and CEO of what was then called AngloGold Ltd., stepping down as chairman of the World Gold Council and Thompson taking his place. Godsell, 58, did not return calls seeking comment.

Thompson wasted little time moving forward. He didn’t renew the contract of the then World Gold Council CEO with whom Godsell had led the “Glow with Gold” campaign.

401ks
During his rainy day golf match with Burton, he laid out his idea: Create a trust that would offer gold through shares sold on the New York Stock Exchange. The trust would divide ownership of a single, 400-ounce bar of gold into about 4,000 shares, which would rise or fall with gold’s spot price.

At the time, when millions of Americans had become comfortable investing through their 401ks, gold could be elevated to the same status as other assets, Thompson argued.

Nothing like it had been approved by the SEC.

“If you can’t get that done, you’ll be fired,’” Burton recalls Thompson saying. He accepted the challenge.

With the World Gold Council staff, Burton tracked and tested similar products in other markets first. The group offered its backing and some marketing support to Graham Tuckwell, an Australian natural resources consultant who on his own created the world’s first bullion-backed, exchange-traded fund and got it listed on the Australian Stock Exchange in 2003.

Tuckwell
Tuckwell, founder of London-based ETF Securities Ltd., struck on the idea after an acquaintance mentioned an oddball product in 2002: wine securities. They were “funny little things” that allowed shares of a particular vintage to be traded on a stock exchange, he says.

The World Gold Council and Tuckwell then got a similar product listed on the London Stock Exchange. And the World Gold Council supported a parallel South African project with Vladimir Nedeljkovic at Absa Capital.

Each success brought momentum and confidence, says Burton. The NYSE was the Holy Grail. It was the only market big enough to have a real impact, Thompson and Burton say.

It took two years and as much as $15 million on preparations and lawyers for Burton and his team to win approval, according to Burton, who is now a partner at California Strategies LLC, a public affairs consulting firm.

As they worked in 2003 and 2004 to shape an NYSE product that could pass muster with the SEC, Burton and the investment staff started gaming out what he called “threat scenarios.”

‘Perfect Storm Scenario’
What if the funds were so successful that gold went into a bubble?

“There was a potential perfect storm scenario where suddenly gold would fall into the clutches of hedge funds and momentum traders in very, very aggressive, leveraged plays, which could spike the price and then drop the floor out from underneath it,” Burton recalls of the talks.

“Our biggest concern was it would burn another generation of investors and you’d start the whole goddamned tale of tears over again,” he says.

At the SEC in Washington, the core concern was trying to understand an unregulated asset they knew very little about, says Robert Colby, then the agency’s deputy director of the Division of Trading and Markets.

They were conscious that approving the first commodities- based exchange-traded fund would open the floodgates to a wide range of similar investment vehicles, Colby says.

Chocolate Bars
The SEC would not approve new forms of securities until it was convinced they were not readily subject to manipulation, Colby says. Even though no one regulated trading in gold, the fact that many nations still held a significant portion of their reserves in gold helped the council win this point, he says.

On Nov. 18, 2004, Burton strode across the NYSE floor and tossed brokers chocolate bars wrapped in gold foil to resemble bullion. He and Thompson rang the opening bell together as the World Gold Council launched its exchange-traded fund under the name StreetTracks Gold Trust and the ticker symbol GLD. Bank of New York Co. acted as the trustee, while a unit of State Street Corp. marketed the fund.

When the trading stopped, the champagne flowed. The frenzy for gold among investors was instant.

In the eight days it traded that November, the new ETF attracted more investment for the month than all but two other funds offered on the NYSE, including mutual funds, according to data compiled at the time by the Financial Research Corp.

Fastest-Growing ETF
By the 30-day mark, the fund’s $1.29 billion made it the fastest growing exchange-traded fund in history, according to data published at the time by TrimTabs Investment Research of Santa Rosa, California, an independent research firm.

That was more than double the $610 million raised by the previous record holder, iShares Lehman bond fund, TrimTabs said.

“We were jubilant,” Pulvermacher says.

Thompson retired the next year. His successor, Pierre Lassonde, then president of Greenwood Village, Colorado-based Newmont, declared ETFs “our biggest success in 25 years, the biggest since the South African Krugerrand in the 1970s.”

The coins containing one troy ounce of gold gave millions of individual investors access to the gold market during its last significant run. The world anti-apartheid movement and the global gold slump combined to quash their sales in the 1980s.

Speaking at a private investment conference Sept. 27, 2005, at the Westin Hotel in Denver, Lassonde linked the rising investment demand from the fund to the rising price of gold and looked to a future in which his group used such funds to spur demand all over the world.

‘Enormous’ Impact
SPDR Gold is now listed in Japan, Hong Kong, Singapore and Mexico City. Gold prices took off, especially as more funds joined in the fray. Gold rose more than 58 percent in the 18 months after SPDR Gold started trading to more than $700 in May 2006, reaching a 25-year high, without adjusting for inflation.

“Big, enormous, large and ongoing” is how Dennis Gartman, an economist and editor of the Gartman Letter in Suffolk, Virginia, characterized the exchange-traded products’ impact on gold prices. Widespread concerns about the dollar, other currencies and monetary policy will continue channeling investor demand to gold for the foreseeable future, Gartman said.

Gold’s popularity shows how investors are snapping up hard assets as governments and central banks led by the Federal Reserve pump more than $2 trillion into the world financial system.

Goldman Forecast
Goldman Sachs analysts including Allison Nathan and Jeffrey Currie forecast in a Dec. 13 report that gold will rise to $1,690 in 12 months. Last year, investment overtook jewelry as the biggest source of demand for the first time in three decades and will retain the top spot this year, according to GFMS Ltd., a London-based research firm.

To meet the demand, mining companies pushed global gold production to a seven-year high in the first half of the year, according to GFMS. The industry’s total average cash cost to produce an ounce of gold rose 17 percent in that period as companies pushed to extract ore that would otherwise not make economic sense, GFMS said in a September report.

New York-based BlackRock runs one of the fastest growing bullion funds today. It carves roughly 100 shares from every ounce of gold, versus the 10 shares per ounce created by the World Gold Council ETF.

In so doing, iShares Gold Trust makes it possible for day traders or college students to play the gold market for about $13.44. That’s less than the cost of a 16-inch pepperoni pizza delivered to a dormitory in Chicago.

Day Trader
One such day trader is James “Pat” King, a 25-year-old Boston University finance graduate who started working out of the basement in his parents’ home in Lincroft, New Jersey, after he lost his job on Wall Street in August 2009.

King had invested in the SPDR Gold fund in April of that year on the advice of his father who was “very leery of the federal government and their ability to make money appear out of thin air,” he says. He’s holding that investment while he trades shares in BlackRock’s iShares Gold Trust more often, hoping to capitalize on the metal’s news-driven price swings.

He’s unsure how he’ll know when to sell his main gold holdings.

“There’s so much uncertainty in the underlying state of the macro economy,” he said. That translates into “a massive pouring into gold of money from the sidelines, even moms-and- pops and high net-worth individuals want a piece of it.”

‘Yellow Elephant’
World Bank President Robert Zoellick has suggested that Group of 20 nations should consider using gold as an international reference point of market expectations about inflation, deflation and future currency values as they reform the global monetary system.

“Gold is the yellow elephant in the room,” Zoellick said on Nov. 10. “Markets are already using gold as an alternative monetary asset because confidence is low.”

Byron Wien, vice chairman of Blackstone Advisory Partners LP, says he’s recommending institutional portfolios put 5 percent of assets in gold. That’s come as a shock to some clients. He says he’s been run out of conference rooms.

“People think it’s just another bubble or it isn’t real,” he said.

Wien says he sees gold reaching $1,500 within two years, although any potential price gain is less important than having a safety net. “I’m recommending gold as a kind of insurance policy against calamity in financial assets,” Wien, 77, said.

While Soros has called gold a bubble, he hasn’t gotten out of the market.

SPDR Gold was the Soros Fund’s largest single holding as of Sept. 30, according to a filing with the SEC. The fund acquired 5 million shares in the iShares Gold Trust, the filing shows.

‘Where Are You’
“It’s all a question of where are you in that bubble,” Soros, 80, said in a speech at a meeting organized by the Canadian International Council in Toronto on Nov. 15. “The current conditions of actual deflationary pressures and fear of inflation is pretty ideal for gold to rise.”

“The big negative is that too many people know this and a lot of hedge funds are very heavily exposed,” Soros continued. He declined an interview request for this article.

Siegel, the Wharton finance professor, says he’s skeptical about the metal over the long term, especially for retail investors. He believes they will have a harder time judging when to buy and sell.

His research shows gold has underperformed stocks, bonds, bills and even real estate over the long run. It has total real returns of just 0.6 percent per year since 1802, compared with 6.6 percent for stocks, 3.6 percent for bonds and 2.8 percent for bills. One of the only things gold has beaten is the dollar, said Siegel.

Unlike assets such as oil or wheat that are consumed based on economic factors, gold’s true value is difficult for ordinary investors to judge, Siegel said. Its worth is often determined by fears of inflation or financial collapse, he said.

“If you can judge how these investors will evaluate those fears, you will do well,” he said.

 

[trysail]

http://noir.bloomberg.com/apps/news?pid=20601087&sid=apOiFuxg7pIA&pos=7


Banks Best Basel as Regulators Dilute or Delay Capital Rules
By Yalman Onaran

Dec. 22 (Bloomberg) -- More than 500 representatives from 27 nations, including top regulators and central bankers, met dozens of times this year to hammer out 440 pages of new rules to govern the world’s banks.

What’s not in the documents published by the Basel Committee on Banking Supervision, and the escape hatches that are, may have more impact on how financial institutions will operate following a global credit crisis that led to $1.8 trillion in bank losses and writedowns.

The committee’s most significant achievement, members say, an agreement to increase the amount of capital banks need to hold, won’t go into full effect for eight years. Other measures that regulators had hoped would prevent future crises -- liquidity standards, a capital surcharge on the biggest lenders and a global resolution mechanism for failing firms -- were postponed, allowing banks to escape the toughest rules that would force them to change the way they do business.

“There will be changes, but not fundamental changes to the banking model,” said Sheila Bair, who as chairman of the U.S. Federal Deposit Insurance Corp. sits on the Basel committee’s top decision-making body. “Hopefully there’ll be some pressure for banks to get smaller and simpler.”

Bair, 56, is one of five U.S. representatives on the board. She has assailed bankers for exaggerating the impact of planned regulations in an effort to scare the public and politicians. In an interview in June, she questioned “whether regulators can place any reliance on industry analysis of the impact of proposals to strengthen capital rules.”

Bank Lobbying
Banks carried out a yearlong campaign to blunt international regulations, arguing that efforts to rein them in would curb lending and impede economic recovery. The lobbying effort was led by the Institute of International Finance, which represents more than 400 financial firms around the world and is chaired by Josef Ackermann, Deutsche Bank AG’s chief executive officer. Ackermann and other IIF members wrote hundreds of letters to the Basel committee, met with regulators and addressed forums from Seoul to Washington.

In June, the group published a report estimating that the proposed capital rules would result in 9.7 million fewer jobs being created and erase 3.1 percent of global economic growth -- estimates the Basel committee later challenged.

“There is no question that increased costs to banks of core capital and funding will have to be largely passed along, which inevitably will take a macroeconomic toll,” Ackermann, 62, said when he presented the report.

Battle Lines
Banks also reached out to their home regulators, arguing that some rules would disadvantage them more than other nations’ lenders. That helped draw the battle lines inside the Basel committee, according to an account pieced together from interviews with half a dozen members who asked not to be identified because the deliberations aren’t public. Germany, France and Japan led the push for softening rules proposed last December and stretching out their implementation. The U.S., U.K. and Switzerland opposed changes or delays.

The committee agreed in July to narrow the definition of what counts as bank capital, focusing on common equity, which includes money received for selling shares and retained earnings. During the crisis, other forms of capital permitted under current rules, such as future benefits from servicing mortgages and tax deferrals, failed to provide a buffer against losses. Those are mostly disallowed under Basel III, as the rules published last week are known.

Canada Switch
The capital requirements might have been stricter had it not been for Greece. Escalating concern that the country wouldn’t be able to service its debt, culminating in a May bailout by the European Union and a $1 trillion rescue package for other member states that may need it, darkened prospects for economic recovery. That led some committee members to bend to bank pressure, according to policy makers, central bankers and others involved in the process.

By September, when the committee met to set the actual capital ratios, the U.S. was pushing to require that banks have common equity equal to 8 percent of their risk-weighted assets, members said. It ended up at 7 percent, after Canada switched sides at the meeting, tipping the balance toward the German camp. Canada’s banks pressed their regulators to lower the ratio because they said they would be punished unfairly as healthy lenders that survived the crisis unscathed, the members said.

Even after being weakened, the new ratios and definitions would require banks to hold about $800 billion more capital, the committee said last week. Most lenders will be able to raise the money by retaining profits before the rules go into effect.

Leverage Ratio
In addition to pushing for a higher capital ratio, Bair also argued for a global leverage ratio that would cap banks’ borrowing -- something the U.S. has had on its books since the 1980s. In July, when the committee was debating how to define capital, the U.S. agreed to some easing in exchange for Germany and France accepting a leverage ratio, some members said.

Proponents of the leverage ratio, or equity as a percentage of liabilities, say it’s a more straightforward way to prevent lenders from becoming too indebted. Unlike capital ratios, which are based on risk-weighting and can be manipulated, the leverage ratio counts all assets regardless of their risk.

The more bankers borrow the more they can maximize profit per share, a yardstick for determining compensation. The more they borrow the higher the risk that a small decline in asset prices can wipe out equity and make the bank insolvent.

No Correlation
The Basel committee adopted a 3 percent leverage rule in July, meaning that for every $3 of capital, a bank can borrow no more than $97. While the percentage is tentative and subject to review before it goes into effect, it has since come under attack by banks in Europe and Asia, which say it will restrict their borrowing capacity and inhibit lending.

The EU may exclude the leverage ratio when it converts Basel rules into law next year. Several member nations have advocated dropping the rule, people close to the discussions said last month. A majority of the 27 EU countries oppose adopting the ratio, these people said.

“The argument is that this will restrain lending -- I hope our colleagues in Europe don’t buy into this,” Bair said in an interview earlier this month.

Recent academic research supports Bair. A July paper by Jeremy Stein, a professor of economics at Harvard University, and two colleagues looked at data going back to the 1920s and found no correlation between higher capital ratios and costlier lending by banks. An October paper by Anat Admati and three other professors at Stanford University concluded that increased equity levels don’t restrict lending.

‘Continuing Bickering’
“In the long run, higher capital has small impact on lending,” said Stein in an interview. “But banks don’t like to go out and get it. And regulators bought the banks’ arguments on this. They could have been tougher.”

Bair, who first advocated the idea of an international leverage ratio in a speech to committee members in Merida, Mexico, in 2006, said she still expects global adoption.

Barbara Matthews, managing director of BCM International Regulatory Analytics LLC, a Washington-based company that advises on financial regulation, said the leverage ratio may not make it in the end.

“Beyond tightening the definition of capital, nothing can be really counted as having been achieved,” Matthews, a former bank lobbyist, said of the Basel committee’s work this year. “There’s continuing bickering over liquidity and leverage regimes. They’re still studying too-big-to-fail issues, and it might be too late to finalize them as events take them over.”

$6 Trillion
The Basel committee, established in 1974, proposed its first liquidity standard, which would require banks to hold enough cash or easily cashable assets to meet their liabilities for up to a year. Running out of cash was behind the 2008 collapse of Bear Stearns Cos. and Lehman Brothers Holdings Inc. in the U.S. and Northern Rock Plc in the U.K.

After banks showed they’d have to raise as much as $6 trillion in new long-term debt to be in compliance, the committee delayed a final decision on the rule, setting up an “observation period” of four to six years. It will likely be revised, according to members.

“Liquidity is very important and still an outstanding issue,” said Douglas Elliott, an economics fellow at the Washington-based Brookings Institution and a former JPMorgan Chase & Co. banker. “They’re trying to do it in the next couple of years, but it could take many more years. Or it might never get done if it proves too contentious.”

Resolution Mechanism
Lehman’s collapse also showed the need for a cross-border mechanism to wind down failing banks that have a global reach. More than 80 proceedings against the firm, involving hundreds of subsidiaries worldwide, have complicated recovery by creditors and destroyed much of the value of its assets.

The Financial Stability Board, which includes most Basel committee members as well as finance ministers from the Group of 20 nations, struggled to come up with such a resolution mechanism this year. The FSB postponed a decision until next year after divisions among nations proved too wide to bridge, members said. The group has been unable to agree on how to distribute losses among countries when a global bank fails and how different legal jurisdictions can recognize a single authority to pay creditors, the members said.

Too Big to Fail
The FSB is also responsible for determining which banks are systemically important and whether to impose additional capital requirements on them. The group may propose setting up national resolution authorities, rather than an international body, members said. Instead of a global accord on a surcharge for the largest banks, it may suggest a menu of options.

“Nobody’s been able to fix too-big-to-fail around the world because nobody knows how to do it,” said Hal Scott, a Harvard Law School professor who also is director of the Committee on Capital Markets Regulation, a nonpartisan group of academics and business executives. “Even figuring out how to resolve giant banks nationally is tough. How can you do it internationally? That was the biggest lesson of the crisis, systemic risk, but that’s still unresolved.”

Many issues may never be resolved, said Frederick Cannon, co-director of research at Keefe, Bruyette & Woods Inc. in New York, a firm that specializes in financial companies. G-20 leaders meeting in Seoul last month sounded as if they were claiming victory for regulatory reforms, even if they weren’t completed, Cannon said.

“Before Seoul, I was expecting more reforms to be concluded next year,” he said. “But now, more and more, I believe this is what we’re getting, nothing more. They got a 7 percent common equity requirement -- the rest is all uncertain to ever happen.”

‘Glass Half Full’
Charles Goodhart, a former Bank of England policy maker and professor at the London School of Economics, said he is more optimistic that differences will be resolved in coming years.

“There is still lots to be done, but we haven’t lost the momentum,” Goodhart said. “We’re 50 percent of the way there. We need to see it as the glass half full.”

Bair, who is stepping down from her FDIC position when her term expires in June, said she hopes the reforms will continue after she leaves the Basel committee. One remaining challenge, she said, is the reliance on banks’ internal models for measuring risk.

While smaller banks use standard risk-weightings prescribed by Basel, the largest banks use their own formulas to determine how much risk to assign their assets in calculating capital ratios. That leads to wide variations in how risk-weighted assets are tallied, Bair said.

“We have to get beyond too much reliance on banks’ internal models, their own views on risk,” she said.

 

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Announcing the New deCODE

PR Newswire

REYKJAVIK, Iceland, January 21, 2010

REYKJAVIK, Iceland, January 21 /PRNewswire-FirstCall/ -- deCODE genetics ehf today emerged as a newly financed, private company focused on advancing the science of human genetics and its application to products and services that improve human health. The new company will be building on the scientific leadership in genetics it developed over more than a decade as a subsidiary of deCODE genetics, Inc. deCODE ehf was this week purchased from its former parent company by Saga Investments LLC, a consortium that includes Polaris Ventures and ARCH Venture Partners, two leading life science investors. deCODE will continue all of its operations and product lines in this field, including its deCODE diagnostics disease risk tests; deCODEme(TM) personal genome scans; and contract service offerings including genotyping, sequencing and data analysis. Going forward, deCODE will concentrate on translating its science into medically and commercially important products and services. The company will be led by a two-man executive committee comprised of Earl "Duke" Collier, previously an executive vice president at Genzyme Corp.,who will serve as CEO, and Kari Stefansson, who will serve as executive chairman and president of research.

deCODE operates the most productive human gene discovery engine in the world. It is driven by genetic and medical data from 500,000 participants from around the globe taking part in its gene discovery work; comprehensive genealogies linking the 140,000 Icelandic participants; a major CLIA- and CAP-certified genotyping and sequencing facility; and statistical and informatics tools for mining large datasets, for maximizing the information derived from genotyping and sequencing data, and for visualizing genetic and disease data in research, in the clinic, and for subscribers to its genome scans.

"deCODE has led the world in discovering variants in the sequence of the human genome that affect the risk of common diseases. Our resources and expertise have also enabled us to develop the leading analytical tools in the field, and we are putting all of this to work to provide unique value for patients, physicians and researchers. As we enter the era of sequencing entire genomes, we believe our ability to make sense of ever larger amounts of data will continue to keep us in the lead in discovery. And with our now solid financial backing and the splendid addition of Duke Collier to our management, we will be taking a lead in the translation of our science into powerful products and services." said Kari Stefansson.

"I am pleased to be joining Kari and the outstanding scientific team at deCODE," said Duke Collier. "deCODE combines world class science devoted to human genetics, unmatched access to genetic data, and a powerful set of tools for managing and analyzing this data. SNP genotyping, and now genomic sequencing, is taking human genetics into an ever expanding world of research, discovery and translation. With its scientific skill and industrial scale, analytical capacity, deCODE will be an invaluable partner to investigators, labs and companies working at the highest levels of sophistication in this exciting field. I am thrilled by the challenge and the opportunity."

About deCODE

Headquartered in Reykjavik, Iceland, deCODE is a global leader in analyzing and understanding the human genome. Using its unique expertise and population resources, deCODE has discovered key genetic risk factors for dozens of common diseases ranging from cardiovascular disease to cancer. deCODE employs its capabilities to develop DNA-based tests and personal genome scans to better understand individual risk and empower prevention. It also licenses its tests, intellectual property and analytical tools to partners, and provides comprehensive genotyping, sequencing and data analysis services to companies and research institutions around the globe. Through its CLIA- and CAP-certified laboratory deCODE offers DNA-based tests for gauging risk and empowering prevention of common diseases, including deCODE T2(TM) for type 2 diabetes; deCODE AF(TM) for atrial fibrillation and stroke; deCODE MI(TM) for heart attack; deCODE ProstateCancer(TM) for prostate cancer; deCODE Glaucoma(TM) for a major type of glaucoma; and deCODE BreastCancer, for the common forms of breast cancer. Through its pioneering personal genome analysis service deCODEme(TM), deCODE enables individuals to better understand their risk of dozens of common diseases and to learn about their ancestry and other traits. Visit us on the web at http://www.decode.com; at http://www.decodediagnostics.com; at http://www.decodeme.com; and on our blog at http://www.decodeyou.com.

deCODE genetics is a private company headquartered in Reykjavik, Iceland. It is owned by Saga Investments LLC, an investment consortium including Polaris Venture Partners and ARCH Venture Partners.

Contacts:

Edward Farmer
+354-570-2819
info@decode.is

Gisli Arnason
+354-570-1900
info@decode.is

Rick Leach
+1-616-296-1816
services@decode.com

 

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	Annual Returns  [Source: Vanguard Group and Ibbotson Associates]
	     *  S&P 500 Index
            ** Intermediate Term Treasury Bond
	
					
	Year	Cash	Bonds**Stocks*Inflation
					
	1960	2.7 	11.8 	0.5 	1.5 
	1961	2.1 	1.9 	26.9 	0.7 
	1962	2.7 	5.6 	(8.7)	1.2 
	1963	3.1 	1.6 	22.8 	1.6 
	1964	3.5 	4.0 	16.5 	1.2 
	1965	3.9 	1.0 	12.5 	1.9 
	1966	4.8 	4.7 	(10.1)	3.4 
	1967	4.2 	1.0 	24.0 	3.0 
	1968	5.2 	4.5 	11.1 	4.7 
	1969	6.6 	(0.7)	(8.5)	6.1 
	1970	6.5 	16.9 	4.0 	5.5 
	1971	4.4 	8.7 	14.3 	3.4 
	1972	3.8 	5.2 	19.0 	3.4 
	1973	6.9 	4.6 	(14.7)	8.8 
	1974	8.0 	5.7 	(26.5)	12.2 
	1975	5.8 	7.8 	37.2 	7.0 
	1976	5.1 	12.9 	23.8 	4.8 
	1977	5.1 	1.4 	(7.2)	6.8 
	1978	7.2 	3.5 	6.6 	9.0 
	1979	10.4 	4.1 	18.4 	13.3 
	1980	11.2 	3.9 	32.4 	12.4 
	1981	14.7 	9.5 	(4.9)	8.9 
	1982	10.5 	29.1 	21.4 	3.9 
	1983	8.8 	7.4 	22.5 	3.8 
	1984	9.9 	14.0 	6.3 	4.0 
	1985	7.7 	20.3 	32.2 	3.8 
	1986	6.2 	15.1 	18.5 	1.1 
	1987	5.5 	2.9 	5.2 	4.4 
	1988	6.4 	6.1 	16.8 	4.4 
	1989	8.4 	13.3 	31.5 	4.7 
	1990	7.8 	9.7 	(3.2)	6.1 
	1991	5.6 	15.5 	30.6 	3.1 
	1992	3.5 	7.2 	7.7 	2.9 
	1993	2.9 	11.2 	10.0 	2.8 
	1994	3.9 	(5.1)	1.3 	2.7 
	1995	5.6 	16.8 	37.4 	2.5 
	1996	5.2 	2.1 	23.1 	3.3 
	1997	5.3 	8.4 	33.4 	1.7 
	1998	4.9 	10.2 	28.6 	1.6 
	1999	4.7 	(1.8)	21.0 	2.7 
	2000	5.9 	12.6 	(9.1)	3.4 
	2001	3.8 	7.6 	(11.9)	1.6 
	2002	1.7 	12.9 	(22.1)	2.4 
	2003	1.0 	2.4 	28.7 	1.9 
	2004	1.2 	2.3 	10.9 	3.3 
	2005	3.0 	1.4 	4.9 	3.4 
	2006	4.8 	2.8 	15.8 	2.5 
	2007	4.8 	10.2 	5.5 	4.3 
	2008	2.1 	16.8 	(37.0)	0.1 
	2009	0.4 	(4.8)	26.5 	2.7 
	2010	0.1 	 7.6 	15.1 	1.1
        2011    0.1     13.2     2.1    3.0
        2012    0.0      3.6    16.0    1.7
        2013    0.0     (4.7)   32.4    1.5
        2014    0.0      6.4    13.7    0.7
        2015    0.0      1.8     1.4    0.7
        2016    0.3      2.4    12.0    1.6   YTD

Ibbotson

 

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http://noir.bloomberg.com/apps/news?pid=20601110&sid=aPA38vFvW6as


Australia Uranium Stocks ‘Undervalued’ on Pent-up Global Demand
By Shani Raja

Dec. 24 (Bloomberg) -- Uranium stocks, already trading at higher valuations than their national benchmark indexes, will rise further amid predictions the price of the fuel may surge as much as 30 percent, investors and analysts said.

Uranium prices, which last month climbed to the highest level in more than two years amid a pickup in demand from China, will rally as the global economic recovery spurs countries in Europe and Asia to increase purchases, they said.

Uranium spot prices rose 40 percent this year and 34 percent since the end of September to $62.50 a pound on Dec. 20, according to Roswell, Georgia-based Ux Consulting, which tracks the industry. Producers in Australia and Canada forecast demand for the metal will increase as countries, including India, expand their use of nuclear power to curb emissions from burning coal.

“Uranium spot prices have rallied strongly over the past few months on strong Chinese demand,” said Tim Schroeders, who helps manage $1 billion in Melbourne at Pengana Capital Ltd. “With an improving global economy, it’s not unreasonable to expect uranium demand to improve, to fuel increased economic activity.”

Uranium rose to the highest price in more than two years last month after China Guangdong Nuclear Power Co. agreed to long-term supply contracts with the world’s two largest producers, Denver-based pricing service TradeTech LLC said in a Nov. 26 report.

Nuclear Plants
China Guangdong, the country’s second-biggest builder of nuclear-power plants, agreed to buy 29 million pounds of uranium through 2025 from Cameco Corp., based in Saskatchewan, Canada, after striking a deal with the miner’s larger rival, Kazakhstan’s state-run Kazatomprom.

According to Jamie Coutts, a Singapore-based analyst at BGC Partners, a 30 percent gain in uranium prices next year isn’t unrealistic as China boosts purchases and after countries including France indicated they will increase nuclear-power generation, while Malaysia and Vietnam outlined plans to build their first nuclear plants.

Pengana’s Schroeders is more reticent about that figure.

“Whilst an expectation of higher uranium prices is not unreasonable, a 30 percent rise within 12 months from current levels would surprise,” he said.

Uranium stocks have had a mixed performance this year, with Cameco, the world’s No. 2 producer, soaring 18 percent in Toronto through yesterday, while Energy Resources of Australia Ltd., controlled by Rio Tinto Group, has plunged 53 percent in Sydney.

Top Picks
Coutts said among his top picks in Australia in the industry are Paladin Energy Ltd., which produces the metal in Africa and has climbed 18 percent this year in Sydney through yesterday, and Extract Resources Ltd., which has risen 7 percent and isn’t yet producing.

Paladin traded at 63 times estimated earnings as of the close of trading yesterday, compared with 14 times for Australia’s benchmark S&P/ASX 200 Index, while Energy Resources, even after this month forecasting as much as an 83 percent decline in profit for the year, traded at 25 times. Cameco traded at 38 times estimated earnings in Toronto, compared with 18 times for Canada’s Standard & Poor’s/TSX Composite Index.

“Investors have to do their homework and find out which stocks really have the upside and are most leveraged to an increase in uranium prices,” Coutts said. “But when you look overall at the supply-demand metrics of the sector, it really does become a compelling case for higher prices.”

Spot Prices
Both Paladin and Extract’s businesses are more tied to potential gains in uranium spot prices because of the nature of the contracts the companies negotiated, Coutts said. Others, for instance Energy Resources, have sealed more longer-term deals that are less influenced by potential gains in spot prices, he said.

While Energy Resources, which sells uranium to utilities in Asia, Europe and North America, has signed long-term contracts, the prices it gets are still influenced by spot prices, Lyndon Fagan, a Sydney-based analyst at Royal Bank of Scotland Group Plc said earlier this year.

Most uranium is currently delivered under term contracts, according to Eric Webb, Senior Vice President of Information Services at Ux Consulting.

“Many contracts today are combination offers, although you do still have a few pure market-related ones,” he said.

Paladin Energy’s Chief Executive Officer John Borshoff told analysts last month that the company expects uranium prices will keep rising after China “piled up” contracts. Last week, the company said it acquired uranium assets for C$260.9 million ($258.4 million) from Fronteer Gold Inc. in a deal that gives the Canadian company 52.1 million Paladin shares.

Atomic Expansion
China and India are leading the biggest atomic expansion since the decade after the 1970s oil crisis in order to reduce air pollution and power their economies. Chinese uranium demand may rise to 20,000 tons annually by 2020, more than a third of the 50,572 tons mined globally last year, according to the World Nuclear Association.

Macquarie Group Ltd. reported last month that Chinese uranium imports had increased, especially between June and September.

Vietnam’s government said in June the country plans to build as many as 13 nuclear-power plants with a capacity of 16,000 megawatts by 2030, and that it welcomes overseas assistance.

Malaysia is considering building two 1,000-megawatt nuclear-power plants to start operations in 2021 and 2022 respectively, state news agency Bernama reported this week, citing Energy, Green Technology and Water Minister Peter Chin.

Romania, Lithuania and the U.K. plan to build new nuclear plants, while France and Finland are already doing so. Italy plans a return to atomic energy after more than two decades.

Nuclear energy accounts for about a third of electricity production in the European Union, where 14 nations have atomic- power plants.

 

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Is this fucked up or what? Goddamn I hate bigtime college football. This kind of crap is shameful and ought to be embarassing.


_________________________________

http://noir.bloomberg.com/apps/news?pid=20601109&sid=akhcpbvIiGvU&pos=14


College Football Winners Still Lose as Bowl Costs Exceed Payout
By Curtis Eichelberger

Dec. 23 (Bloomberg) -- Rutgers University celebrated its 8- 4 record last football season with a trip to the St. Petersburg Bowl in Florida. Big East Conference schools got stuck with a $740,000 bill.

The Scarlet Knights’ story isn’t unique in college football. Payouts for all but the biggest bowl games seldom match teams’ expenses, and the rest of the schools in the conference have to subsidize them, according to financial records obtained by Bloomberg News using open records laws.

There were 33 bowls played last year, not including the national championship game. At least 13 schools spent more to play in the game than their conferences received in compensation. According to figures from public universities where open-records laws apply, those losses totaled more than $3.8 million, even as taxpayer subsidies for athletic departments are on the rise and athletic programs are falling deeper in debt.

“Bowls have become network-owned, commercial enterprises, in some cases, pitting average teams in money-losing bowls for the benefit of a few,” said Charles E. Young, 79, president emeritus at the University of Florida and a member of the Knight Commission on Intercollegiate Athletics. “I think the losses are higher than anyone knows.”

League commissioners including Wright Waters of the Sun Belt Conference, who are usually responsible for negotiating the money-losing bowl agreements, say these games aren’t about profit; they’re meant to promote the school and give athletes a chance to experience postseason play.

Find Balance
“At what point does the projected economic impact of a bowl reach the point where you say, ‘This makes sense, it’s a win-win,’” said New Mexico State Athletic Director McKinley Boston. “As opposed to, ‘You win, I subsidize your tourism business, and the economic impact is great for you, but it destroys everybody else’s budget.’”

This year, there will be 34 postseason bowl games excluding the national championship, ending Jan. 9 with the Fight Hunger Bowl. The championship game, pitting Auburn University against the University of Oregon, will be played the following day in Glendale, Arizona.

The five games comprising the Bowl Championship Series are the most lucrative. Six conferences -- the Atlantic Coast, Big East, Big Ten, Big 12, Pac-10 and Southeastern -- are under contract to send their champions to those bowls; each received $18.9 million last season, according to Bill Hancock, executive director of the Prairie Village, Kansas-based BCS.

Schools that play in lower-paying bowls burn up some of the money that is coming into the conference from the richest ones.

Rutgers’s Bill
The Big East, for instance, received $400,000 for Rutgers’s participation in the St. Petersburg Bowl last season, according to college sports’ governing body, the National Collegiate Athletic Association. It cost the Scarlet Knights $1.14 million to attend, according to Rutgers financial records. The league pools money from all of its bowl appearances, pays expenses to the teams that played in them, then divides the rest among all schools.

The difference in what Rutgers earned for the league by appearing in the bowl and what it spent to go came out of that pool, reducing the cut that each school got when the money is split up. Big East Commissioner John Marinatto wouldn’t disclose the formula the league uses to determine how much each university gets from bowl payouts.

According to Rutgers’s financial records, the conference gave the New Brunswick, New Jersey, school a $1.33 million revenue-sharing check -- based on the BCS distribution, bowl payouts and conference television revenue.

The Big East also booked losses from South Florida’s appearance in the International Bowl ($428,000) and Connecticut’s appearance in the Papajohns.com Bowl ($430,000), university records said.

Bowl Losses
Other examples of bowls where participants spent more to attend than they earned for their conferences in the payout include the New Mexico Bowl, where Fresno State spent $390,000 more than the Western Athletic Conference received; the Texas Bowl, where Missouri spent $467,000 more than the Big 12 Conference received; and the New Orleans Bowl, where Middle Tennessee State University’s appearance cost the Sun Belt Conference at least $50,000.

“I buy television, and I buy bowl access,” Sun Belt Commissioner Waters said in an interview. “I do it for the exposure for our schools and the enhancement of recruitment, and all the things that go with additional TV and bowl opportunities.”

An NCAA report released in August for fiscal year 2008-09 said 14 athletic departments of the 120 schools in college football’s bowl subdivision had an operating profit, down from 25 in 2006-07 and 2007-08.

Growth in athletic revenue slowed to 5.8 percent in 2008- 09, from 17 percent the previous year, while median expenses grew 10.9 percent, compared with 5.5 percent a year earlier, the report said.

Rutgers Debt
Rutgers is an example of a school that spent its way to national prominence, playing in five straight bowl games, while mired in debt.

The Scarlet Knights’ athletic department received almost half its $58.5 million in revenue in 2008-09 from state subsidies and student fees, with $17.9 million coming from the university and $7.8 million in student fees. The school cut six sports teams to reduce expenses in 2007. None of its programs were profitable in the fiscal year ended 2009, according to the school.

Rutgers Athletic Director Tim Pernetti said attending bowl games helps him build his football program and neither he nor the conference wants to give them up. Instead, they’ll look more closely at expenses.

“The best-case scenario is the payouts going up,” Pernetti said in an interview. “But we also have to focus on keeping our budget tight and constantly look for ways to trim costs.”

This year, Rutgers finished 4-8 and won’t play in a bowl.

Change Unlikely
Former Stanford Athletic Director Ted Leland, now vice president for external relations at the University of the Pacific in Stockton, California, says the system isn’t likely to change.

“It’s too late to put any kind of controls on the conferences anymore,” Leland said in an interview. “Everyone’s economic interests from the coaches to the commissioners are aligned now and they all benefit from playing in a bowl game.”

Leland notes that teams can qualify for a bowl with a 6-6 regular-season record and a losing conference mark. Texas A&M (6-6 overall, 3-5 in the Big 12), Minnesota (6-6, 3-5 in the Big Ten) and UCLA (6-6, 3-6 in the Pac 10) were among eight teams that played in a bowl game last year without posting a winning record.

Bowl Participants
This year, 14 schools will play in a bowl game after finishing 6-6. Illinois, Georgia and Tennessee are among them.

“If you are a conference commissioner and vote not to go to a bowl game, you’d lose your job,” Leland said. “The athletic director would be viewed as disloyal to the football program and to the coaches who want their bonuses.”

The NCAA says the responsibility of signing contracts with bowls falls directly on the conferences. The NCAA has no plans to require bowls to increase payouts enough to cover teams’ expenses, something that would probably decrease the number of bowls, said Nick Carparelli Jr., chairman of the organization’s bowl licensing subcommittee and Big East Conference associate commissioner.

Requiring bowl owners to reimburse school expenses would be foolish because they’d have no control over those costs, said Pete Derzis, senior vice president and general manager of ESPN Regional Television. The Walt Disney Co.-owned network televised 73 percent of bowl games last year and owned seven, according to the company.

‘Arbitrary’ Number
“I don’t think we would be willing to meet some arbitrary expense line-item that some institution submits,” Derzis said in an interview. “Our expectation is that the conferences know what they need to make their business work.”

Bowls have their roots in promoting tourism. Michigan played Stanford in 1902 in what would become the Rose Bowl in an effort by organizers to show off Pasadena, California’s weather to Easterners, according to the Rose Bowl’s history.

Today, hosts still benefit. The New Orleans Bowl in Louisiana last year, where 30,228 people watched Middle Tennessee defeat Southern Mississippi, had an economic impact of $15 million, according to the New Orleans Convention and Visitors Bureau. The five BCS games in January 2009 had an economic impact of about $1.2 billion on the host cities (Miami, New Orleans, Pasadena and Glendale), according to the BCS website.

Ticket Sales
The Mid-American Conference had negotiated an agreement with the Little Caesars Pizza Bowl where their school’s payout was based solely on how many tickets it could sell, Ohio University Associate Athletic Director Dan Hauser said in an interview.

The Athens, Ohio, school received 10,000 tickets valued at $450,000. It sold 2,181 tickets, generating $98,150, for a game in Detroit about 278 miles north, at 1 p.m. the day after Christmas.

Since its expenses were $164,464, the school lost $66,314 playing in the game, according to university records.

“There was a cost, but this is our business,” Hauser said. “We’re about getting kids to the postseason in every sport, men’s and women’s. And they all cost money.”

Extra Practice
Athletic directors like Rutgers’ Pernetti and Idaho’s Rob Spear say one of the biggest advantages in playing a bowl game is the extra two weeks of practice coaches get to work with underclassmen. The NCAA limits the number of practices a team can have each season, but gives bowl teams an additional two weeks.

“Where it really made the difference was this spring,” Spear said in an interview. “We are getting into more homes and we’ve been able to talk to better caliber student athletes. Does that mean we’ll get that kid at the end of the day? I don’t know, but at least it opens the door.”

Bowls also mean payouts to coaches and administrators.

Rutgers paid $186,250 to the coaching staff for its participation in the St. Petersburg Bowl, including $50,000 to head coach Greg Schiano. Non-football staff received another $89,517. Pernetti didn’t get a bonus, according to the school.

Pernetti said even the greatest supporters of money-losing bowls are being forced to consider the expense of playing in the games.

“There has not been an AD meeting with the commissioner and league where we have not discussed the issue,” Pernetti said. “We talk about it constantly.”

 

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A time series of the steepness of the U.S. Treasury yield curve ( spreads between the yields-to-maturities of the 20, 10, 5 and 1-year constant maturity Treasury securities ):

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=34214&category_id=0&recession_bars=On&width=1000&height=600&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=false&fo=ve&id=GS20_DGS1,GS10_DGS1,GS5_GS1&transformation=lin_lin,lin_lin,lin_lin&scale=Left,Left,Left&range=Max,Max,Max&cosd=1953-04-01,1953-04-01,1953-04-01&coed=2010-12-23,2010-12-23,2010-11-01&line_color=%230000FF,%23FF0000,%23006600&link_values=,,&mark_type=NONE,NONE,NONE&mw=4,4,4&line_style=Solid,Solid,Solid&lw=3,4,4&vintage_date=2010-12-27_2010-12-27,2010-12-27_2010-12-27,2010-12-27_2010-12-27&revision_date=2010-12-27_2010-12-27,2010-12-27_2010-12-27,2010-12-27_2010-12-27&mma=0,0,0&nd=_,_,_&ost=,,&oet=,,&fml=a-b,a-b,a-b&fq=Monthly,Monthly,Monthly&fam=avg,avg,avg&fgst=lin,lin,lin​

 

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http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aAFx83VZp0SU


Out of Lehman’s Ashes Wall Street Gets Most of What It Wants
By Christine Harper

Dec. 28 (Bloomberg) -- Wall Street’s biggest banks, whose missteps caused a global financial crisis and economic slowdown two years ago, were more agile when it came to countering the political and regulatory response.

The U.S. government, promising to make the system safer, buckled under many of the financial industry’s protests. Lawmakers spurned changes that would wall off deposit-taking banks from riskier trading. They declined to limit the size of lenders or ban any form of derivatives. Higher capital and liquidity requirements agreed to by regulators worldwide have been delayed for years to aid economic recovery.

“We continue to listen to the same people whose errors in judgment were central to the problem,” said John Reed, 71, a former co-chief executive officer of Citigroup Inc., who estimated only 25 percent of needed changes have been enacted. “I’m astounded because we basically dropped the world’s biggest economy because of an error in bank management.”

The last two years have been the best ever for combined investment-banking and trading revenue at Bank of America Corp., JPMorgan Chase & Co., Citigroup, Goldman Sachs Group Inc. and Morgan Stanley, according to data compiled by Bloomberg. Goldman Sachs CEO Lloyd Blankfein, 56, and his top deputies are in line to collect more than $100 million in delayed 2007 bonuses -- six months after paying $550 million to settle a fraud lawsuit related to the firm’s behavior that year. Citigroup, the bank that needed more taxpayer support than any other, has a balance sheet 14 percent bigger than it was four years ago.

Army of Lobbyists
Wall Street’s army of lobbyists and its history of contributions to politicians weren’t the only keys to success, lawmakers, academics and industry executives said. The financial system’s complexity gave bankers an advantage in controlling the narrative and dismissing the ideas of would-be reformers as infeasible or dangerous. A revolving door between government and banking offices contributed to a mind-set that what’s good for Wall Street is good for Main Street.

To make their case, bankers and lobbyists characterized proposed regulations as stifling innovation, competitiveness and economic growth. They said the industry had learned its lessons and that firms were adopting changes voluntarily to be more transparent and accountable. Successful companies shouldn’t be punished for the sins of those that failed, they said.

“It is important to look beyond the rhetoric and ask the tough questions about underlying structural changes that promote responsible reforms and stability to our financial system, yet support the ability of financial firms to innovate and serve the needs of families and employers,” Timothy Ryan, CEO of the Securities Industry and Financial Markets Association, an industry lobbying group, wrote in a Feb. 5 op-ed piece for the Washington Post.

‘Culture of Greed’
That argument resonated with lawmakers under pressure to boost a fragile economy and bring down an unemployment rate that has hovered near 10 percent since August 2009, its highest level in more than a quarter of a century.

“The big financial industry has convinced a lot of people, particularly in Congress and on the regulatory side, that they bring value to the economy with new instruments and new approaches,” said Byron Dorgan, a Democratic senator from North Dakota who is retiring this year. “Anybody who wants to do things that seem aggressive is called a radical populist.”

U.S. President Barack Obama was elected in 2008, weeks after Lehman Brothers Holdings Inc. collapsed in the largest bankruptcy and the Federal Reserve and government provided unprecedented support to insurance company American International Group Inc. as well as nine of the largest banks. Obama, who raised $15 million on Wall Street, promised that his administration would “crack down on the culture of greed and scheming” that he said led to the financial crisis.

Geithner, Summers
While Obama vowed to change the system, he filled his economic team with people who helped create it.

Timothy F. Geithner, 49, who had been responsible for overseeing banks including Citigroup while president of the Federal Reserve Bank of New York, became Treasury secretary and named a former Goldman Sachs lobbyist as his chief of staff. Lawrence H. Summers, 56, who is stepping down as Obama’s National Economic Council director, opposed derivatives regulation and supported the 1999 repeal of the Depression-era Glass-Steagall Act, which separated commercial and investment banking, when he served as deputy Treasury secretary and Treasury secretary in President Bill Clinton’s administration.

‘Free Pass’
“It was very clear by February 2009 that the banks were going to get a free pass,” said Simon Johnson, a former chief economist for the International Monetary Fund who is now a professor at the Massachusetts Institute of Technology’s Sloan School of Management. “You could see from the hiring of Tim Geithner and from the messages that he and his team were putting out that this was going to go very badly.”

Even when changes were advocated by people who couldn’t be characterized as radical populists, their ideas were dismissed as unrealistic, misinformed, advancing ulterior motives or damaging to U.S. competitiveness.

Such tactics helped bat back suggestions from billionaire hedge fund manager George Soros and Berkshire Hathaway Inc. Vice Chairman Charles Munger that regulators ban purchases of so-called naked credit-default swaps -- contracts that allow speculators to profit if a debt issuer defaults.

Geithner was an early opponent of any such ban, arguing at a March 2009 House Financial Services Committee hearing that it wasn’t necessary and wouldn’t help.

“It’s too hard to distinguish what’s a legitimate hedge that has some economic value from what people might just feel is a speculative bet on some future outcome,” he said.

‘Unbelievably Complicated’
Dorgan, 68, who offered an amendment to the Dodd-Frank bill that would have banned such swaps and who wrote a 1994 article for Washington Monthly warning about the dangers posed by over-the-counter derivatives, said supporters in Congress backed down because they didn’t get pressure from their constituents.

“The debate that’s necessary on these subjects is a debate that is so unbelievably complicated that the larger financial institutions have always controlled the narrative,” Dorgan said. “Even things that were fairly mild were contested as anti-business and going to injure and ruin the economy.”

Instead Dodd-Frank gave regulators at the Commodity Futures Trading Commission and the Securities and Exchange Commission the responsibility of writing rules governing the $583 trillion market in over-the-counter derivatives. The law, named after Connecticut Senator Christopher Dodd and Massachusetts Representative Barney Frank, requires that most derivatives be traded on third-party clearinghouses and regulated exchanges.

Private Swaps
The CFTC withdrew a proposed rule on Dec. 9 after at least one commissioner, Scott O’Malia, a former aide to Republican Senator Mitch McConnell, objected. The rule would have required dealers of private swaps to quote prices to all market users before trades could be executed on an electronic system. A new version, approved Dec. 16, will save dealers billions of dollars, according to Moody’s Investors Service, because they will be able to limit price information to select participants.

An amendment requiring banks to spin out their swaps-dealing operations into separately capitalized units, so they wouldn’t have access to government backstops, made it into the Dodd-Frank bill. It was diluted at the end to exempt interest-rate and foreign-exchange contracts that make up more than 90 percent of the derivatives held by U.S. banks.

Banks were also allowed to trade derivatives used to hedge their own risks and given up to two years to trade other types of derivatives, such as credit-default swaps that aren’t standard enough to be cleared through a central counterparty.

Too Big
A suggestion that banks deemed too big to fail should be broken up or made small enough to fail -- an idea backed by former Federal Reserve Chairman Alan Greenspan, Bank of England Governor Mervyn King and hedge-fund manager David Einhorn -- also failed to win support from U.S. policy makers, as bank executives argued that size alone didn’t make a company risky and that it could be essential for banks to compete.

Jamie Dimon, JPMorgan’s CEO, said in a January 2010 interview that most of the financial firms that collapsed during the crisis were narrowly focused investment banks, insurers, mortgage brokers or thrifts, not big integrated conglomerates.

“A lot of companies are big because they’re required to be big because of economies of scale,” he said.

Glass-Steagall
The closest the Obama administration came to trying to limit the size of banks was in January, when the president proposed levying a fee on financial firms with assets of more than $50 billion. The idea was never adopted by Congress. Instead, it supported Geithner’s plan for a so-called resolution authority that would give regulators the ability to manage an orderly wind-down of a large financial company. Critics say the authority is unlikely to work in practice because regulators won’t have power over a bank’s international operations.

“The resolution authority as drawn up by Dodd-Frank does not apply to the megabanks and doesn’t apply to JPMorgan Chase, nor can it because that authority only applies to U.S. domestic financial entities,” said MIT’s Johnson, a Bloomberg contributor. “If anything, it’s gotten worse because we have fewer big banks. The ones that remain are undoubtedly too big to fail.”

Even before Obama took office in January 2009, former Federal Reserve Chairman Paul A. Volcker, an economic adviser to the president-elect, was calling for clear distinctions between banks that take deposits and make loans and those that engage in riskier capital markets businesses. The recommendation, a modern version of Glass-Steagall, was put forward in a report by the Group of 30, an organization of current and former central bankers, financial ministers, economists and financiers whose board Volcker chairs.

Volcker Rule
Reed, the former Citigroup co-CEO, and David Komansky, a former CEO of Merrill Lynch & Co., were among those who said publicly that they regretted having played a role in overturning Glass-Steagall. Both of their former companies were crippled by investments in mortgage-linked securities during the crisis, and Merrill was sold to Bank of America in a hastily reached agreement the same weekend Lehman Brothers went bankrupt.

“We have to think of the original reasons why Glass-Steagall was brought down in the first place, and that is the U.S. banks were competing with large, universal banks around the world,” Goldman Sachs CEO Blankfein said in a March 2009 interview with Bloomberg Television. “So I don’t think we’d turn the clock back.”

The idea was left out of Geithner’s original financial regulation proposals and didn’t gain much support until January, after a Republican upset a Democrat in a Massachusetts senate race. Obama and his economic team, including Volcker, then announced they were supporting a so-called Volcker rule that would ban proprietary trading at regulated banks and prohibit them from owning hedge funds and private equity funds.

Proprietary Trading
E. Gerald Corrigan, a former New York Fed president who worked under Volcker at the Fed and is now a managing director at Goldman Sachs, told a Senate hearing that banks shouldn’t be prevented from owning and sponsoring hedge funds or private equity funds because they promote “best industry practice.” He urged a distinction between proprietary trading and “market making” for clients or hedging related to such market making.

In the final version of Dodd-Frank, the Volcker rule ended up looking much more like the Corrigan rule. Banks were allowed to own or sponsor hedge funds and private equity funds and even to invest in them as long as their holdings didn’t account for more than 3 percent of the bank’s capital or 3 percent of the fund’s capital.

The ban on proprietary trading exempted dealing in government and agency securities. Regulators were charged with deciding what other types of trading would be considered proprietary and which would be deemed market-making.

Volcker was disappointed with the final version, according to a person with knowledge of his views.

Dodd-Frank
Goldman Sachs Chief Financial Officer David Viniar, who told analysts in January that “pure walled-off proprietary trading” accounted for about 10 percent of the firm’s revenue, said in October that the company had closed one such business and was waiting to see if the rules would require other changes.

While the Dodd-Frank Act is the most sweeping financial legislation in decades, creating a consumer-protection office for financial products and a council of regulators charged with monitoring systemic risk, it won’t fundamentally change a U.S. banking system dominated by six companies with a combined $9.4 trillion of assets, MIT’s Johnson said.

‘Falls Short’
The law won’t prevent lenders with federally guaranteed deposits from gambling in the derivatives markets, though it will place restrictions on some types of contracts and require more transparent trading and central clearing. It does little to solve the danger posed by leveraged firms reliant on fickle markets for funding.

“It’s not my point to say that the legislation enacted is worthless,” said Dorgan. “It requires more transparency and disclosure and a series of things that are useful, even though it falls short of what I think should have been done.”

The Treasury Department takes a more positive view. The law “fundamentally changes the landscape of our financial regulatory system for the better,” said Steven Adamske, a Treasury spokesman, in an e-mailed statement.

“The Obama administration and Secretary Geithner fought hard to enact a tough set of reforms that reins in excessive risk on Wall Street, protects the economic security of American families on Main Street, and makes certain taxpayers are never again put on the hook for the reckless acts of a few irresponsible firms,” Adamske said. “It also creates a safer, more transparent derivatives market through comprehensive reform, bans risky pay practices, and it puts in place the strongest consumer protections in history.”

2,300 Reasons
The biggest financial companies increased their spending on lobbying in the first nine months of 2010 as they sought to influence the legislative outcome, according to Senate records. JPMorgan’s advocacy spending grew 35 percent, to $5.8 million from $4.3 million, while Goldman Sachs’s jumped 71 percent to $3.6 million.

Banks had “2,300 pages worth of reasons” for spending, said Scott Talbott, a lobbyist at the Financial Services Roundtable, which represents the largest lenders and insurance firms, referring to the size of the Dodd-Frank bill. “The issues on Capitol Hill required more attention.”

‘Always There’
Spending during 2010 probably played only a small role in the ability of financial companies and trade groups to influence legislators, according to Anthony J. Nownes, a political science professor at the University of Tennessee in Knoxville whose books on the role of lobbyists include “Total Lobbying: What Lobbyists Want (and How They Try to Get It)” (Cambridge University Press).

“The idea that they stepped up their activity has some truth, but the larger truth is that they always spend a lot of money and this was no exception,” Nownes said. “They’re always there, their viewpoints are always heard and it is a cumulative effect -- they’ve been saying the same things for years and years and years.”

Even as they were spending more on lobbying, the largest U.S. banks cut their political giving for the 2010 elections. Of the 10 biggest financial firms, only Goldman Sachs, MetLife Inc. and the U.S. subsidiary of Deutsche Bank AG spent more from their political action committees during the 2009-2010 election cycle than they did in 2007-2008, according to Federal Election Commission filings.

Talbott said the decrease was partly because of the economic slump, and also because some members of Congress refused to take donations from banks that received federal funds during the crisis.

Orszag, Lubke
The financial industry is adept at hiring people with experience in Congress and government, which gives it an edge in understanding the best tactics to use, Nownes said. This month Citigroup recruited former Obama administration budget director Peter Orszag as a vice chairman in its global banking business, and Goldman Sachs hired Theo Lubke from the New York Fed, where he oversaw efforts to make the derivatives market safer.

Research shows that lawmakers are more susceptible to lobbying on issues that are complex, technical or economic, which benefits the banks, Nownes said.

“This certainly was a huge advantage for them, especially in designing some of the more intricate details of this piece of legislation,” he said. “The more technical and complex, the bigger the informational advantage they have.”

Tax on Bonuses
Even in areas that weren’t technical, such as bonuses, the financial industry was able to resist tough regulation.

With polls showing strong popular support for limits on pay, former British Prime Minister Gordon Brown pressed for a tax on banker bonuses and one on financial transactions to deter speculative trading.

Obama didn’t go that far. Instead, the administration appointed Washington lawyer Kenneth Feinberg to review pay for the 100 top executives at firms receiving “exceptional assistance” from the Troubled Asset Relief Program. Feinberg ordered cuts at Bank of America, Citigroup and AIG, as well as at two bankrupt car companies and their finance divisions.

The administration, while opposing any pay caps, urged regulators to require changes that would better align compensation with risk, such as paying bonuses in restricted stock. Several banks responded by raising bankers’ salaries. So far this year, five Wall Street banks -- Bank of America, JPMorgan, Citigroup, Goldman Sachs and Morgan Stanley -- have set aside more than $91 billion for salaries and bonuses.

Money ‘Paralyzes’
In early 2010, Virginia Senator James Webb and California Senator Barbara Boxer, both Democrats, proposed an amendment to a jobs bill that would have imposed a 50 percent tax on any bonuses above $400,000 collected in 2009 by executives at banks that received at least $5 billion in TARP funds.

The U.S. Chamber of Commerce, which opposed the tax, urged senators to reject the idea because it “would likely hamper efforts to resolve the ongoing financial crisis, restore economic growth, spur job creation and is likely unconstitutional.” The bill never made it to a vote.

“Neither party wanted to touch that issue,” Webb said at the Washington Ideas Forum on Oct. 1. “Quite frankly, the way that money affects the political process sometimes paralyzes us from doing what we should do.”

In a Bloomberg News National Poll conducted Dec. 4 through Dec. 7, 71 percent of Americans said big bonuses should be banned this year at Wall Street firms that took taxpayer bailouts, and 17 percent said bonuses above $400,000 should be subject to a one-time 50 percent tax. Only 7 percent of the respondents said they consider bonuses a reflection of Wall Street’s return to health and an appropriate incentive.

Protecting Stockholders
Reed, the former Citigroup executive, said he didn’t understand why lawmakers gave so much credit to arguments made by financial-industry participants whose job it is to put the interests of their shareholders above any concern for the safety of the financial system.

“I’m surprised that the people in Washington think that the stockholders are the people that they should protect,” Reed said. “It would seem to me that the people who should be protected are the overall banking system and the many, many, many companies that depend on it.”

 

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http://noir.bloomberg.com/apps/news?pid=20601202&sid=akgS7Fb6dBcg


Doctors Getting Rich With Fusion Surgery Debunked by Studies
By Peter Waldman and David Armstrong

Dec. 30 (Bloomberg) -- Suffering from an aching back, truck driver Mikel Hehn went to see surgeon Jeffrey Gerdes in 2008. The St. Cloud, Minnesota, doctor diagnosed spinal disc degeneration, commonly treated with physical therapy, and said surgery wasn’t called for.

Unhappy with the answer, Hehn turned to Ensor Transfeldt, a surgeon at Twin Cities Spine Center in Minneapolis. Transfeldt performed fusion surgery on Hehn, screwing together three vertebrae in his lower spine.

Fusion aims to limit painful spine movements. This one didn’t work out. Two years later, the pain in Hehn’s neck, lower back, buttocks and thighs is so bad that he can’t hold a job and seldom leaves home, he said in an interview.

“There’s days when I just can’t take it and the tears run,” said Hehn, 52, who lives in Sartell, Minnesota. He said he takes oxycodone for pain, Soma to sleep, Lexapro for depression and Imitrex for headaches.

Hehn’s surgery generated a $135,786 bill from Abbott Northwestern Hospital in Minneapolis, feeding a national boom in costly fusion surgeries. It also illustrates how spine surgeons have prospered from performing fusions, which studies have found to be no better for common back pain than physical therapy is -- and a lot more dangerous.

The number of fusions at U.S. hospitals doubled to 413,000 between 2002 and 2008, generating $34 billion in bills, data from the federal Healthcare Cost and Utilization Project show. The number of the surgeries will rise to 453,300 this year, according to Millennium Research Group of Toronto.

Unnecessary Surgeries
The possibility that many of these and other surgeries are needless has gotten little attention in the debate over U.S. health care costs, which rose 6 percent last year to $2.47 trillion. Unnecessary surgeries cost at least $150 billion a year, according to John Birkmeyer, director of the Center for Healthcare Outcomes & Policy at the University of Michigan.

“It’s amazing how much evidence there is that fusions don’t work, yet surgeons do them anyway,” said Sohail Mirza, a spine surgeon who chairs the Department of Orthopaedics at Dartmouth Medical School in Hanover, New Hampshire. “The only one who isn’t benefitting from the equation is the patient.”

The Twin Cities Spine bill for Hehn’s surgery was $19,292, his medical records show. The firm received $8,978 after an insurance discount, $7,742 of it for Transfeldt’s services. Hehn’s insurer paid after his bid for workers’ compensation coverage was denied on grounds he wasn’t injured on the job.

Royalties, Consulting Fees
Another beneficiary was Medtronic Inc., which makes products for spinal surgery, including Infuse, a bone-growing material widely used in fusions. Infuse accounted for $17,575 of Abbott Northwestern’s charges, Hehn’s medical bills and insurance records show.

Infuse, approved by the U.S. Food and Drug Administration in 2002, had sales of $840 million last year.

Medtronic paid six of the 10 Twin Cities Spine surgeons -- including Transfeldt -- $1.75 million in royalties and consulting fees in the first nine months of this year. It also makes other financial contributions to the firm.

“Product usage is not a part of any development or consulting relationship” between Medtronic and doctors, said Brian Henry, a company spokesman.

Eleven Twin Cities Spine fusion patients, most of whom tried to get or hold onto coverage benefits through the Minnesota Workers’ Compensation Court of Appeals, said in interviews that the surgery did nothing to relieve their back pain, and in several cases left them worse off than before.

Hooked on Morphine
The patients illustrate the costs and risks of fusion surgery. They are not a scientifically representative sample of Twin Cities Spine patients, the majority of whom the firm says are happy with the treatment they receive.

One of the 11 died of a methadone overdose when his pain worsened after surgery and he couldn’t afford prescription painkillers, his mother said. Another patient said he is hooked on morphine to ease the burning sensation in his back where screws and rods were implanted in an operation that cost his insurer $60,000.

Twin Cities Spine performs fusions on patients with conditions the surgery doesn’t treat effectively, said Brian Nelson, an orthopedic surgeon and medical director of a Minneapolis clinic that stresses exercise for back pain. Nelson said he used to perform fusions and has been in the operating room with at least three of the 10 Twin Cities Spine surgeons.

“I have a lot of respect” for the practice and its surgical skills, Nelson said. “But we have a fundamental disagreement. I think there are too many people being fused.”

Risk Warnings
Payments by medical-device makers pose an “irresistible” temptation to tailor treatment to more-lucrative procedures, said Eugene Carragee, chief of spine surgery at Stanford University in Palo Alto, California. “There is precious little in human nature to suggest this proposition is unlikely.”

Twin Cities Spine believes in a “conservative course of treatment in the vast majority of cases,” according to an e- mailed statement from Lisa Arrington, the practice’s marketing director. There are some people for whom surgery is appropriate, she wrote, and numerous patients “have experienced successful outcomes from spinal fusion procedures,” regaining functionality. The operations “reduced pain and improved their quality of life,” she said.

The firm declined to comment on individual patients, and did not make the doctors who treated them available for comment. Twin Cities Spine surgeons routinely warn of potential surgical risks, including nerve damage, blood clots and the need for more surgery, according to letters provided by several patients.

Degenerative Disc Disease
Financial relationships with medical companies are disclosed to patients and do not influence whether surgery is performed, according to the statement from Arrington. Royalties are not received by Twin Cities Spine doctors on devices they use in surgery, the e-mail said.

Fusion has helped spine surgeons become the best paid doctors in the U.S. Their average annual salary is $806,000, more than three times the earnings of a pediatrician, according to the American Medical Group Association, a trade organization for doctor practices.

One of the most common causes of back pain is degenerative disc disease, or the breakdown in the soft, puck-shaped cushions between the vertebrae. Pain also comes from a condition called stenosis, or the narrowing of the spinal canal, which can be caused by bulging discs or arthritis.

Narcotics For Pain
British and Norwegian researchers found fusion no better than physical therapy for disc-related pain in three studies, totaling 473 patients, published in the journals Spine, Pain and the British Medical Journal between 2003 and 2006. A 2001 Swedish study of 294 patients in Spine found fusion better than physical therapy that was less structured than the kinds used in the other studies.

Rates of complications from surgery in three of the European studies -- including bleeding, blood clots, and infections -- were as high as 18 percent. None reported complications from physical therapy. The four studies are cited in journals as the only head-to-head, randomized comparisons between the two treatments.

In a U.S. study in Spine in 2007, surgeons reported fusion was successful in only 41 percent of 75 patients suffering from lower-back disc degeneration. Success measures included pain reduction. Two years earlier in the same journal, surgeons found a 47 percent success rate among 99 patients, 80 percent of which were taking narcotics for pain two years later. Both studies compared fusion to artificial disc replacement in trials submitted to the FDA.

Evidence ‘Lacking’
Evidence that fusion is better than a simpler procedure called decompression for stenosis is “lacking,” a study in the Journal of the American Medical Association found earlier this year. The study also found that fast-growing complex fusions -- those joining more than three vertebrae -- carried a 5.6 percent risk of life threatening complications, more than double the 2.3 percent rate for decompression, which usually involves cutting away damaged discs or bone pressing on spinal nerves.

Twin Cities Spine performs 3,000 spine surgeries a year, 1,300 of them fusions, and accounts for 75 percent of the spine operations at Abbott Northwestern, according to Daryll Dykes, a surgeon in the practice. More than 4,000 spine procedures a year are performed at Abbott Northwestern, the most of any U.S. hospital, according to its website.

The practice generates big bills. Medica Health Plans, one of Minnesota’s largest insurers, says it pays a median of $26,021 for back surgeries performed by Twin Cities Spine, including hospital and doctor fees. The medians range between $12,814 and $23,546 for all other spine and orthopedic practices in the area, Medica says.

Porsches, Ferrari, Mercedes
One Twin Cities Spine surgeon, Manuel Pinto, 56, earned $1.85 million from the practice in 2007, according to filings in his divorce proceedings that year. He told state superior court in Minneapolis that he and his wife’s assets included two Porsches; a Ferrari 430 coupe; a Mercedes Benz; two other cars; three boats and proceeds from the $1 million sale of a farm where the Pintos bred Lusitano horses.

Pinto’s 7,185-square-foot house presides over a wooded promontory on Lake Minnetonka. Valued at $4 million in 2007, the house has a swimming pool and 50 yards of beach.

In addition to Transfeldt, Pinto is one of the six surgeons who receive payments from Medtronic. The others are Francis Denis, Timothy Garvey, Joseph Perra and James Schwender.

Schwender, 44, earned $1.2 million from the practice and $440,000 from royalties and consulting in 2008, divorce filings show. Schwender bought his lakefront home outside Minneapolis for $2.6 million in 2005, according to real estate records.

‘90 Percent Success’
Twin Cities Spine performed 1,100 lumbar, or lower-back, fusion surgeries in 2009, Dykes said. Of those, he added, 380 patients had degenerative disc disease and another problem such as stenosis, and 282 had degenerative disc disease alone.

Twin Cities Spine doesn’t have any scientifically validated studies on the success of fusion for those in the latter group, Dykes said. He called them “the controversial patients.”

Spinal fusion on back-pain patients is performed as a last resort after less invasive treatments fail, he said. Measuring outcomes has been difficult because researchers, doctors and payers can’t agree on criteria for success, he said.

“Living Well With Back Pain,” a 2006 consumer guide produced by Twin Cities Spine and published by HarperCollins, states that, “With proper patient selection and optimal surgical techniques, the success rate for spinal fusion surgery for back pain is now about 90 percent.”

Two-Level Surgery
A letter from Pinto to patient Robin Washburn in 2005 said surgery offered “a very good chance” of success, adding that a “good to excellent outcome” would mean at least a 70 percent reduction in pain.

Two spinal fusion surgeries later, her back is worse than ever, said Washburn, who is 40 and a 911 dispatcher in Grand Rapids, Minnesota. Washburn’s insurer, Blue Cross Blue Shield of Minnesota, paid $80,000 for the two procedures.

“Before it was annoying. Now, it’s pain every day, all day, worse when it’s cold,” she said in an interview.

Ninety-eight percent of Twin Cities Spine’s post-operative patients who responded to a 2009 survey would choose or recommend the group for surgical care, according to Arrington’s e-mailed statement. She said about a third of patients responded to the survey.

Patients that the practice recommended to Bloomberg News for interviews reported being happy with their surgeries. One of them, Jody Rasmusson, 48, of Minneapolis, underwent her second spinal surgery in three years by Dykes in October 2009. One year after the two-level fusion and decompression, the shooting pain in her back and legs was gone, said Rasmusson, a bank customer- service agent. A level is the space between two vertebrae; a two-level surgery means three vertebrae were fused.

Playing Football
Before Robert Gumatz, 60, had a five-level spinal fusion by Dykes in November 2009, the grain-company manager had so much back and hip pain he was losing the use of his legs, he said. He had stopped playing soccer with his kids and taking nightly walks with his wife. A year later, “I can play tackle football if I want to,” said Gumatz, of Oakdale, Minnesota. “I know I’m an exception. I have no pain.”

For 50 years, surgery was a calling at Twin Cities Spine. Led by surgeon John H. Moe, a pioneer in correcting scoliosis, or abnormally curved spines, the group’s doctors rebuilt the twisted backs of children with polio and other malformations -- vertebra by vertebra.

They traveled at least 90 days a year, often paying their own way, to show doctors around the world how to mend childhood spinal deformities, said David Bradford, who spent 20 years at the practice before becoming chair of orthopedics at the University of California at San Francisco in 1991.

Adapting Fusion
At home, Bradford said surgeons operated weekly at Gillette Children’s Hospital in St. Paul, Minnesota, usually for free. “‘It was just what you did; that’s why we became doctors,” said Bradford, now a professor and chair emeritus at UCSF’s spine center. “We weren’t in medicine to make gazillions.”

While senior surgeons continue to research and treat crippling disease, Pinto and other protégés have also adapted the fusion techniques Moe pioneered to surgery for common back pain, said Robert Winter, the firm’s research director.

Twin Cities Spine surgeons published articles on fusion techniques for back pain and presented results at professional meetings. Its financial relationship with Medtronic, the largest maker of spinal implants in the U.S., began as early as 2002, when, according to a deposition by Pinto, he began receiving money from the company, which is based in Fridley, Minnesota.

Medtronic Money
In addition to the $1.75 million it paid the six Twin Cities Spine surgeons this year, Medtronic and three other device companies give the practice a total of $100,000 to $500,000 for a fellowship program, Arrington said. Twin Cities Spine calls it the largest such program in the country and says it has trained 140 spine surgeons.

Medtronic also has disclosed contributing $150,000 in 2008 to a non-profit that Schwender heads to spread the use of minimally invasive surgical devices. The contribution represented 95 percent of the non-profit’s expenses that year, according to the organization’s latest-available tax filings.

In 2004, Pinto was seeing Jean Kingsley, 57, a patient who had had two previous fusion surgeries and was still suffering back pain. Pinto told her, according to a hospital report he wrote, that more “surgical treatment could provide her with some relief of her pain” if her symptoms “were extremely severe, unrelenting” and had “failed extensive conservative care,” which “appeared to be the case.”

Not Negligent
Her third operation, a daylong procedure by Pinto in September of that year, fused 13 vertebrae along her entire spine and was a disaster. Kingsley, of Milaca, Minnesota, returned home paralyzed from the waist down, according to hospital records in a lawsuit she brought against Pinto. A jury in Minnesota state court found earlier this year that Pinto was not negligent in the case.

The judge awarded $46,616 in attorney’s fees to Pinto, which Kingsley said she can’t pay. She has appealed the decision. Her case is a “unique set of events for which even in retrospect there is no obvious explanation that one can prove,” Pinto said in his 2008 deposition, in which he estimated he performed 400 to 500 back surgeries a year.

Abbott and Twin Cities Spine billed a combined $239,000 for the surgery, Kingsley’s records show. Insurer Medica says it paid about a third of that amount after a discount.

Kingsley arrived home in a wheelchair, wore a diaper for two and a half years and had a home health aide visiting to bathe her in bed, she said in a deposition in the case. As her condition improved, she said she was able to move short distances with the aid of leg braces and a walker.

‘I’m Paralyzed’
Today, Kingsley lives alone after the 2008 death of her husband. She said she takes medication for depression and doesn’t do “much of anything,” usually watching television and reading, and lives off Social Security benefits from her husband’s death. “Now I don’t feel any pain,” Kingsley said in an interview. “I’m paralyzed.”

Pinto co-authored a study in Spine in 2009 on 125 of his patients who had, like Kingsley, undergone fusions of four or more vertebrae. The study, which a Twin Cities Spine fellow presented at six surgical conferences around the globe, concluded that patients with extensive degenerative pain “can be successfully treated with surgical intervention.”

The Pinto study showed why back-pain patients should avoid spinal fusions, said Stanford University’s Carragee. The paper tracked progress in only 80 of the 125 surgical patients; “what happened to the other 45 patients?” Carragee asked.

Lifting a Keg
Twenty-seven of the 80 patients needed a second surgery, while about 40 percent of the patients had complications, including 5 percent of the men who suffered permanently diminished sexual function, Carragee said.

“This should make you pretty cautious about doing this kind of stuff,” he said.

Twin Cities Spine, in its statement, said Pinto’s study was the first to report on such extensive fusion surgery for degenerative back pain, an operation it said “is in no way comparable” to less complicated procedures.

Schwender first performed fusion surgery on Catherine Engels in May 2001, after finding she had a herniated disc. She came to see him again on June 4, 2003, complaining of sharp back pain, her medical records show.

Engels, now 50, received Schwender’s support for a workers’ compensation claim, in which she said she injured her back lifting a keg at a liquor store where she worked in July 2000. Schwender said in a deposition that the incident was “a significant contributing factor” to Engels’s back problems.

‘Constant, Sharp Pain’
The workers’ compensation judge rejected her claim, finding “multiple significant inconsistencies” between her and Schwender’s testimony, on one side, and the medical records submitted by six doctors Engels saw before Schwender, on the other. Two of those doctors said Engels hadn’t attributed her back pain to any specific injury, and others said Engels attributed the pain to lifting patio brick, the judge found.

Schwender operated a second time on Engels in January 2004, removing the screws and rods he’d put in her spine and decompressing the spinal canal. It didn’t help. By then, Schwender told Engels, the rods and screws had shifted and caused permanent nerve damage, she said in an interview. Now she has “constant, sharp pain” down her left leg, treated with drugs and a neurostimulator in her back designed to send out current that interferes with pain signals.

“I went through with fusion thinking it would be the cure- all,” Engels said. “It wasn’t.”

OxyContin, Hydrocodone, Elavil
Dan Bebault was suffering from lower back and leg pain when he visited Twin Cities Spine’s Garvey in May 2006. Garvey discussed surgery with him and told him he’d “likely” be able to return to light work three to six months afterwards, according to Bebault and notes Garvey made on the case. “He pretty much talked me into it,” Bebault said.

The fusion took place in August that year. When Bebault returned to see Garvey five months later, he said, his life was falling apart. The pain had spread to his neck and arms, and OxyContin, hydrocodone and Elavil weren’t helping much. Bebault’s wife had left him after the surgery; he hadn’t worked in four years.

Garvey wasn’t sympathetic, said Bebault, a 53-year-old former machinist who lives in Brooklyn Park, Minnesota. “He said my life was like an old country-western song and he didn’t want to hear about it,” Bebault said in an interview at his home. “He said come back if I want more surgery.”

Methadone Overdose
Additional fusion surgery for Bebault’s neck “would be an option,” Garvey’s chart notes from this time say. Bebault, now reunited with his wife and on Social Security disability, decided against more surgery and quells the pain in his back and neck with 120 milligrams a day of morphine, plus occasional vicodin, valium and amitriptyline, an anti-depressant.

He said he feels “withdrawals” when his morphine wears off, shaking and sweating. His surgery cost his former employer’s workers’ compensation insurer $48,633; Garvey’s fee was $5,870.

“The patient is like a piece of meat; everybody’s making money off the guy,” Bebault said.

Garvey did a three-level spinal fusion on Ross Tamminen in April 2006. Six months later, Tamminen, a heavy-equipment operator, reported severe pain again in his back and legs, according to documents from a case in state workers’ comp court.

As a treatment option, Garvey proposed more surgery to examine the fusion site, remove the implants in Tamminen’s spine, and perform decompression. His employer’s insurer denied a coverage request, saying surgery wasn’t warranted, according to court filings.

The rest of the story comes from Tamminen’s mother, Barbara Grove. Denied federal disability benefits and in intractable pain, Tamminen ran out of money for painkillers, she said, and began taking methadone obtained through friends.

He died of an overdose on June 20, 2008, 26 months after spinal fusion. He was 41.

 

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http://www.theatlantic.com/magazine/archive/2010/12/dirty-coal-clean-future/8307/1/


Dirty Coal, Clean Future
By James Fallows

... we would all like to think that wind, solar, and conservation will solve the problem for us,” David Mohler of Duke Energy told me. “Nothing will change, our comfort and convenience will be the same, and we can avoid that nasty coal. Unfortunately, the math doesn’t work that way.”

The math he has in mind starts with the role that coal now plays around the world, and especially for the two biggest energy consumers, America and China. Overall, coal-burning power plants provide nearly half (about 46 percent this year) of the electricity consumed in the United States. For the record: natural gas supplies another 23 percent, nuclear power about 20 percent, hydroelectric power about 7 percent, and everything else the remaining 4 or 5 percent. The small size of the “everything else” total is worth noting; even if it doubles or triples, the solutions we often hear the most about won’t come close to meeting total demand. In China, coal-fired plants supply an even larger share of much faster-growing total electric demand: at least 70 percent, with the Three Gorges Dam and similar hydroelectric projects providing about 20 percent, and (in order) natural gas, nuclear power, wind, and solar energy making up the small remainder. For the world as a whole, coal-fired plants provide about half the total electric supply. On average, every American uses the electricity produced by 7,500 pounds of coal each year.

Precisely because coal already plays such a major role in world power supplies, basic math means that it will inescapably do so for a very long time. For instance: through the past decade, the United States has talked about, passed regulations in favor of, and made technological breakthroughs in all fields of renewable energy. Between 1995 and 2008, the amount of electricity coming from solar power rose by two-thirds in the United States, and wind-generated electricity went up more than 15-fold. Yet over those same years, the amount of electricity generated by coal went up much faster, in absolute terms, than electricity generated from any other source. The journalist Robert Bryce has drawn on U.S. government figures to show that between 1995 and 2008, “the absolute increase in total electricity produced by coal was about 5.8 times as great as the increase from wind and 823 times as great as the increase from solar”—and this during the dawn of the green-energy era in America. Power generated by the wind and sun increased significantly in America last year; but power generated by coal increased more than seven times as much. As Americans have read many times, Chinese companies are the world’s leaders in manufacturing solar panels, often using technology originally developed in the United States. Many of the panels are used inside China for its own rapidly growing solar-power system; still, solar energy accounts for about 1 percent of its total power supply. In his book PowerHungry, Bryce describes a visit to a single coal mine, the Cardinal Mine in western Kentucky, whose daily output supports three-quarters as much electricity generation as all the solar and wind facilities in the United States combined. David MacKay, of the physics department at Cambridge University in England, has compiled an encyclopedia of such energy-related comparisons, which is available for free download (under the misleadingly lowbrow title Sustainable Energy—Without the Hot Air). For instance: he calculates that if the windiest 10 percent of the entire British landmass were completely covered with wind turbines, they would produce power roughly equivalent to half of what Britons expend merely by driving each day...

*****​

...The most advanced of today’s “ultra-supercritical” coal-fired plants, which operate at very high temperatures and pressures to maximize the efficiency of combustion, convert up to 48 percent of the coal’s potential energy to electric power; the rest is lost as heat. “Subcritical” plants typically have efficiencies in the mid-30s. The costliest and most advanced technology is an improvement—but not a breakthrough. A breakthrough is what it would take to move beyond reliance on coal.

“I know this is a theological issue for some people,” Julio Friedmann of Lawrence Livermore said. “Solar and wind power are going to be important, but it is really hard to get them beyond 10 percent of total power supply.” He pointed out the huge engineering achievement it has taken to raise the efficiency of solar photovoltaic cells from about 25 percent to about 30 percent; whereas “to make them useful, you would need improvements of two- or threefold in cost,” say from about 18 cents per kilowatt-hour to 6 cents. He recited a skeptic’s line used about the Carter administration’s clean-energy programs—“You’re not going to run a steel plant with solar panels”—and then made a point that summarized the outlook of those who have decided they can best wage the climate fight by working on dirty, destructive coal.

“It is very hard to go around the world and think you can make any difference in carbon-loading the atmosphere without some plan for how people can continue to use coal,” Friedmann said. “It is by far the most prevalent and efficient way to generate electricity. People are going to use it. There is no story of climate progress without a story for coal...

*****​

more...

 

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http://chart.finance.yahoo.com/z?s=TROW&t=5y&q=l&l=off&z=l&c=%5EGSPC&p=s&a=v&p=s&lang=en-US&region=US

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wishlist

 

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http://chart.finance.yahoo.com/z?s=TROW&t=1y&q=l&l=off&z=l&c=%5EGSPC&p=s&a=v&p=s&lang=en-US&region=US

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wishlist

 

[trysail]

http://noir.bloomberg.com/apps/news?pid=20601208&sid=aIdG__1Ty0sc


By Rita Nazareth and Lynn Thomasson

Jan. 3 (Bloomberg) -- ...The Russell 2000 Index, comprised of stocks with a median market value of $528.5 million, rose 25 percent in 2010, beating the S&P 500 by 13 percentage points. The return left the benchmark gauge for American equity at the lowest valuation ever compared with the small-cap measure, according to data compiled by Bloomberg.

Increases in smaller companies that are more dependent on U.S. demand have preceded faster economic growth and the biggest equity rallies of the last two decades, data compiled by Bloomberg show. With the S&P 500 trading at half the price- earnings ratio of the Russell 2000...

The S&P 500’s book value, a measure of corporate assets minus liabilities, shows larger stocks are the cheapest on record relative to smaller companies. The S&P 500 was valued at 2.22 times net assets, compared with 2.04 for the Russell 2000 on Dec. 27...

Thus, with the S&P 500 close of 1257.54 on 27 December, its derived book value would therefore be $566.46.

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Dec. 31 (Bloomberg) -- The table below ranks indicated dividend yields of companies in the Standard & Poor's 500 Index by industry as of today. The yield is calculated by taking the latest declared dividend, annualized and divided by the stock price. Payout ratios are calculated based on latest quarterly dividend paid divided by earnings

* - Dividend is paid out annually.
** - Dividend is paid out semi-annually.
na = Payout ratio is not applicable if the denominator is negative. Data may
not be available.

                                       Indicated   Declared   Payout   
Ticker           Name                  Div. Yld(%)  Div.($)   Ratio(%)  
============================================================================
Automobiles & Components               1.41                  22.2

JCI   Johnson Controls Inc             1.67       0.16       19.5  
HOG   Harley-Davidson Inc              1.16       0.10       24.9  

Banks                                  1.36                  29.0

HCBK  Hudson City Bancorp Inc          4.70       0.15       59.3  
PBCT  People's United Financial Inc    4.40       0.15      212.4  
MTB   M&T Bank Corp                    3.24       0.70       46.1  
BBT   BB&T Corp                        2.27       0.15       49.5  
CMA   Comerica Inc                     0.94       0.10       15.3  
USB   US Bancorp                       0.74       0.05       11.0  
PNC   PNC Financial Services Group I   0.66       0.10        6.9  
WFC   Wells Fargo & Co                 0.65       0.05        8.2  
MI    Marshall & Ilsley Corp           0.58       0.01         na  
HBAN  Huntington Bancshares Inc/OH     0.58       0.01       10.0  
RF    Regions Financial Corp           0.58       0.01         na  
KEY   KeyCorp                          0.45       0.01        5.5  
FITB  Fifth Third Bancorp              0.27       0.01        4.3  
ZION  Zions Bancorporation             0.16       0.01         na  
STI   SunTrust Banks Inc               0.14       0.01        5.9  

Capital Goods                          1.81                  62.4

LMT   Lockheed Martin Corp             4.37       0.75       47.6  
RTN   Raytheon Co                      3.26       0.38       22.0  
GE    General Electric Co              3.08       0.14       41.5  
NOC   Northrop Grumman Corp            2.92       0.47       28.2  
BA    Boeing Co/The                    2.58       0.42       37.1  
ITW   Illinois Tool Works Inc          2.54       0.34       37.2  
HON   Honeywell International Inc      2.51       0.33       47.1  
MMM   3M Co                            2.43       0.53       33.9  
EMR   Emerson Electric Co              2.40       0.34       45.7  
GD    General Dynamics Corp            2.37       0.42       24.5  
TYC   Tyco International Ltd           2.35       0.23       38.3  
MAS   Masco Corp                       2.34       0.07      870.0  
ETN   Eaton Corp                       2.29       0.58       35.8  
LLL   L-3 Communications Holdings In   2.26       0.40       19.2  
SNA   Snap-On Inc                      2.24       0.32       37.8  
UTX   United Technologies Corp         2.16       0.42       30.9  
ROK   Rockwell Automation Inc          1.95       0.35       38.2  
ITT   ITT Corp                         1.92       0.25      383.5  
DOV   Dover Corp                       1.88       0.28       23.1  
CAT   Caterpillar Inc                  1.88       0.44       76.7  
DE    Deere & Co                       1.68       0.35       27.8  
COL   Rockwell Collins Inc             1.65       0.24       25.0  
GWW   WW Grainger Inc                  1.56       0.54       25.1  
FAST  Fastenal Co                      1.40       0.42       82.6**
PH    Parker Hannifin Corp             1.35       0.29       17.7  
GR    Goodrich Corp                    1.32       0.29       21.1  
PLL   Pall Corp                        1.29       0.16       26.1  
FLS   Flowserve Corp                   0.98       0.29       15.6  
CMI   Cummins Inc                      0.95       0.26       17.7  
PCAR  PACCAR Inc                       0.84       0.12       27.4  
FLR   Fluor Corp                       0.76       0.12       14.2  
IR    Ingersoll-Rand PLC               0.59       0.07        8.4  
ROP   Roper Industries Inc             0.57       0.11       10.7  
TXT   Textron Inc                      0.34       0.02        6.8  
DHR   Danaher Corp                     0.17       0.02        2.0  
PCP   Precision Castparts Corp         0.09       0.03        1.8  

Commercial & Professional Services     3.02                  63.3

RRD   RR Donnelley & Sons Co           6.06       0.26      100.6  
PBI   Pitney Bowes Inc                 5.97       0.36       82.1  
WM    Waste Management Inc             3.69       0.34       61.1  
IRM   Iron Mountain Inc                3.00       0.19       61.4  
RSG   Republic Services Inc            2.67       0.20       57.2  
AVY   Avery Dennison Corp              1.88       0.20       34.3  
EFX   Equifax Inc                      1.78       0.16        7.8  
CTAS  Cintas Corp                      1.75       0.49      149.8* 
DNB   Dun & Bradstreet Corp            1.72       0.35       30.8  
RHI   Robert Half International Inc    1.68       0.13       48.3  

Consumer Durables & Apparel            1.86                  39.8

LEG   Leggett & Platt Inc              4.70       0.27       84.8  
MAT   Mattel Inc                       3.25       0.83       82.6* 
VFC   VF Corp                          2.90       0.63       26.6  
HAS   Hasbro Inc                       2.07       0.25       22.3  
SWK   Stanley Black & Decker Inc       2.02       0.34       45.7  
WHR   Whirlpool Corp                   1.92       0.43       41.6  
NKE   NIKE Inc                         1.45       0.31       32.4  
FO    Fortune Brands Inc               1.25       0.19       56.8  
DHI   DR Horton Inc                    1.25       0.04       23.6  
NWL   Newell Rubbermaid Inc            1.11       0.05       48.3  
COH   Coach Inc                        1.07       0.15       23.5  
LEN   Lennar Corp                      0.86       0.04       24.6  
RL    Polo Ralph Lauren Corp           0.36       0.10        4.6  

Consumer Services                      1.77                  35.3

HRB   H&R Block Inc                    5.09       0.15        7.1  
MCD   McDonald's Corp                  3.18       0.61       88.6  
DRI   Darden Restaurants Inc           2.73       0.32       58.1  
YUM   Yum! Brands Inc                  2.03       0.25       33.1  
SBUX  Starbucks Corp                   1.60       0.13       35.5  
WYN   Wyndham Worldwide Corp           1.60       0.12       14.1  
IGT   International Game Technology    1.37       0.06       69.1  
WYNN  Wynn Resorts Ltd                 0.98       8.00       59.0  
CCL   Carnival Corp                    0.87       0.10       31.8  
MAR   Marriott International Inc/DE    0.84       0.09       17.5  
DV    DeVry Inc                        0.50       0.12       10.0**
HOT   Starwood Hotels & Resorts Worl   0.49       0.30         na* 

Diversified Financials                 1.27                  24.6

NYX   NYSE Euronext                    4.01       0.30       61.2  
FII   Federated Investors Inc          3.67       0.24       55.7  
NTRS  Northern Trust Corp              2.02       0.28       44.0  
IVZ   Invesco Ltd                      1.86       0.11       34.0  
MCO   Moody's Corp                     1.74       0.12       18.1  
AXP   American Express Co              1.69       0.18       19.6  
TROW  T Rowe Price Group Inc           1.68       0.27       41.2  
CME   CME Group Inc                    1.43       1.15       31.4  
SCHW  Charles Schwab Corp/The          1.40       0.06       57.7  
AMP   Ameriprise Financial Inc         1.25       0.18       13.7  
BK    Bank of New York Mellon Corp/T   1.19       0.09       17.6  
BEN   Franklin Resources Inc           0.90       0.25       13.2  
LUK   Leucadia National Corp           0.86       0.25         na* 
GS    Goldman Sachs Group Inc/The      0.83       0.35       10.9  
MS    Morgan Stanley                   0.73       0.05       74.0  
LM    Legg Mason Inc                   0.66       0.06        8.2  
JPM   JPMorgan Chase & Co              0.47       0.05        4.9  
COF   Capital One Financial Corp       0.47       0.05        2.8  
DFS   Discover Financial Services      0.44       0.02        3.1  
JNS   Janus Capital Group Inc          0.31       0.04       24.5* 
BAC   Bank of America Corp             0.30       0.01        3.6  
STT   State Street Corp                0.09       0.01        0.9  

Energy                                 1.19                  29.8

SE    Spectra Energy Corp              4.00       0.25       82.7  
COP   ConocoPhillips                   3.23       0.55       26.7  
CVX   Chevron Corp                     3.14       0.72       38.2  
MRO   Marathon Oil Corp                2.71       0.25       25.5  
XOM   Exxon Mobil Corp                 2.40       0.44       31.8  
WMB   Williams Cos Inc/The             2.03       0.12       39.0  
EQT   EQT Corp                         1.96       0.22       89.8  
OXY   Occidental Petroleum Corp        1.88       0.46       25.8  
SUN   Sunoco Inc                       1.48       0.15       27.8  
MUR   Murphy Oil Corp                  1.48       0.28       26.0  
CHK   Chesapeake Energy Corp           1.16       0.07        9.2  
BHI   Baker Hughes Inc                 1.06       0.15       25.4  
SLB   Schlumberger Ltd                 1.01       0.21       16.6  
HAL   Halliburton Co                   0.88       0.09       16.9  
VLO   Valero Energy Corp               0.86       0.05        9.7  
NBL   Noble Energy Inc                 0.83       0.18       13.4  
CNX   Consol Energy Inc                0.82       0.10       83.9  
DVN   Devon Energy Corp                0.82       0.16       16.2  
DO    Diamond Offshore Drilling Inc    0.76       0.75       61.5  
EOG   EOG Resources Inc                0.68       0.15       64.9  
NOV   National Oilwell Varco Inc       0.66       0.11       10.3  
BTU   Peabody Energy Corp              0.53       0.09        8.4  
HES   Hess Corp                        0.52       0.10        2.8  
APA   Apache Corp                      0.50       0.15        6.7  
HP    Helmerich & Payne Inc            0.49       0.06        7.6  
APC   Anadarko Petroleum Corp          0.48       0.09        6.3  
MEE   Massey Energy Co                 0.45       0.06       15.4  
RRC   Range Resources Corp             0.36       0.04       69.3  
COG   Cabot Oil & Gas Corp             0.32       0.03       80.0  
EP    El Paso Corp                     0.29       0.01        5.3  
QEP   QEP Resources Inc                0.22       0.02        4.9  
PXD   Pioneer Natural Resources Co     0.09       0.04        4.3**

Food & Staples Retailing               2.02                  27.7

SVU   SUPERVALU Inc                    3.67       0.09       27.7  
SYY   Sysco Corp                       3.54       0.26       49.2  
WMT   Wal-Mart Stores Inc              2.24       0.30       31.8  
SWY   Safeway Inc                      2.13       0.12       36.4  
KR    Kroger Co/The                    1.89       0.10       32.7  
WAG   Walgreen Co                      1.78       0.17       28.0  
COST  Costco Wholesale Corp            1.13       0.20       28.5  
CVS   CVS Caremark Corp                1.00       0.09       14.5  
WFMI  Whole Foods Market Inc           0.79       0.10         na  

Food Beverage & Tobacco                3.09                  51.2

MO    Altria Group Inc                 6.18       0.38       69.8  
RAI   Reynolds American Inc            6.00       0.49       68.9  
LO    Lorillard Inc                    5.48       1.12       62.4  
PM    Philip Morris International In   4.38       0.64      182.5  
CAG   ConAgra Foods Inc                4.07       0.23      100.5  
KFT   Kraft Foods Inc                  3.68       0.29       67.4  
HNZ   HJ Heinz Co                      3.64       0.45       57.2  
CPB   Campbell Soup Co                 3.36       0.29       33.7  
K     Kellogg Co                       3.17       0.41       44.1  
GIS   General Mills Inc                3.16       0.28       29.7  
PEP   PepsiCo Inc/NC                   2.95       0.48       39.7  
DPS   Dr Pepper Snapple Group Inc      2.80       0.25       41.3  
HSY   Hershey Co/The                   2.71       0.32       40.4  
KO    Coca-Cola Co/The                 2.69       0.44       49.5  
SLE   Sara Lee Corp                    2.63       0.12      113.8  
SJM   JM Smucker Co/The                2.44       0.40       31.9  
MKC   McCormick & Co Inc/MD            2.40       0.28       33.8  
TAP   Molson Coors Brewing Co          2.22       0.28       20.3  
ADM   Archer-Daniels-Midland Co        2.01       0.15       27.8  
HRL   Hormel Foods Corp                1.99       0.26       23.1  
CCE   Coca-Cola Enterprises Inc        1.92       0.12       12.7  
BF/B  Brown-Forman Corp                1.84       1.00       28.4  
MJN   Mead Johnson Nutrition Co        1.47       0.23       43.4  
TSN   Tyson Foods Inc                  0.91       0.04        7.0  

Health Care Equipment & Services       1.24                  19.8

BAX   Baxter International Inc         2.44       0.31       32.3  
MDT   Medtronic Inc                    2.42       0.23       42.9  
CAH   Cardinal Health Inc              2.02       0.20       23.1  
BDX   Becton Dickinson and Co          1.93       0.41       29.2  
UNH   UnitedHealth Group Inc           1.39       0.12       10.9  
SYK   Stryker Corp                     1.33       0.18       17.6  
PDCO  Patterson Cos Inc                1.30       0.10       22.2  
ABC   AmerisourceBergen Corp           1.17       0.10       15.8  
MCK   McKesson Corp                    1.02       0.18       18.2  
BCR   CR Bard Inc                      0.78       0.18       13.2  
DGX   Quest Diagnostics Inc/DE         0.74       0.10        8.6  
XRAY  DENTSPLY International Inc       0.58       0.05       35.7  
AET   Aetna Inc                        0.13       0.04        3.2* 
CI    CIGNA Corp                       0.11       0.04        3.9* 

Household & Personal Products          2.87                  49.6

KMB   Kimberly-Clark Corp              4.19       0.66       57.7  
CLX   Clorox Co                        3.46       0.55       54.8  
AVP   Avon Products Inc                3.03       0.22       56.6  
PG    Procter & Gamble Co/The          3.00       0.48       44.1  
CL    Colgate-Palmolive Co             2.64       0.53       42.2  
EL    Estee Lauder Cos Inc/The         0.94       0.75       42.4* 

Insurance                              1.93                  41.5

CINF  Cincinnati Financial Corp        5.04       0.40       41.7  
MMC   Marsh & McLennan Cos Inc         3.07       0.21      101.6  
TRV   Travelers Cos Inc/The            2.59       0.36       16.7  
ALL   Allstate Corp/The                2.52       0.20       29.5  
CB    Chubb Corp                       2.48       0.37       20.3  
AFL   Aflac Inc                        2.14       0.30       19.3  
ACE   ACE Ltd                          2.12       0.33       16.6  
PRU   Prudential Financial Inc         1.97       1.15       18.4* 
XL    XL Group Plc                     1.82       0.10       43.2  
PFG   Principal Financial Group Inc    1.69       0.55      113.4* 
AIZ   Assurant Inc                     1.67       0.16       12.2  
MET   MetLife Inc                      1.66       0.74      213.3* 
UNM   Unum Group                       1.53       0.09       13.7  
AON   AON Corp                         1.30       0.15       29.0  
TMK   Torchmark Corp                   1.07       0.16        8.8  
HIG   Hartford Financial Services Gr   0.76       0.05        3.4  
LNC   Lincoln National Corp            0.73       0.05        1.2  
L     Loews Corp                       0.64       0.06       44.8  

Materials                              1.70                 117.0

MWV   MeadWestvaco Corp                3.80       0.25       36.0  
DD    EI du Pont de Nemours & Co       3.30       0.41      102.7  
NUE   Nucor Corp                       3.26       0.36      487.1  
BMS   Bemis Co Inc                     2.79       0.23       41.5  
PPG   PPG Industries Inc               2.62       0.55       34.5  
EMN   Eastman Chemical Co              2.24       0.47       18.8  
VMC   Vulcan Materials Co              2.23       0.25      303.6  
APD   Air Products & Chemicals Inc     2.15       0.49       38.3  
SEE   Sealed Air Corp                  2.03       0.13       26.9  
IFF   International Flavors & Fragra   1.95       0.27       27.8  
PX    Praxair Inc                      1.90       0.45       36.9  
IP    International Paper Co           1.84       0.12       13.6  
DOW   Dow Chemical Co/The              1.75       0.15       33.2  
SHW   Sherwin-Williams Co/The          1.71       0.36       21.9  
FCX   Freeport-McMoRan Copper & Gold   1.68       0.50       12.0  
MON   Monsanto Co                      1.61       0.28       52.8  
ARG   Airgas Inc                       1.60       0.25       31.5  
ECL   Ecolab Inc                       1.39       0.17       20.7  
ATI   Allegheny Technologies Inc       1.29       0.18     1770.0  
AKS   AK Steel Holding Corp            1.24       0.05       20.5  
NEM   Newmont Mining Corp              0.98       0.15       13.8  
SIAL  Sigma-Aldrich Corp               0.96       0.16       20.8  
AA    Alcoa Inc                        0.79       0.03       50.0  
CLF   Cliffs Natural Resources Inc     0.71       0.14        6.4  
FMC   FMC Corp                         0.62       0.12       10.9  
BLL   Ball Corp                        0.58       0.10        4.0  
X     United States Steel Corp         0.34       0.05         na  
CF    CF Industries Holdings Inc       0.29       0.10       39.6  

Media                                  1.68                  30.1

TWX   Time Warner Inc                  2.65       0.21       45.6  
MDP   Meredith Corp                    2.64       0.23       40.9  
MHP   McGraw-Hill Cos Inc/The          2.58       0.23       19.0  
TWC   Time Warner Cable Inc            2.42       0.40       39.5  
WPO   Washington Post Co/The           2.05       2.25       24.5  
OMC   Omnicom Group Inc                1.74       0.20       34.3  
CMCSA Comcast Corp                     1.71       0.09       30.4  
VIA/B Viacom Inc                       1.52       0.15       18.7  
CVC   Cablevision Systems Corp         1.47       0.12       32.8  
GCI   Gannett Co Inc                   1.07       0.04        9.4  
DIS   Walt Disney Co/The               1.07       0.40       77.4* 
CBS   CBS Corp                         1.05       0.05       11.0  
NWSA  News Corp                        1.03       0.07       25.4**
SNI   Scripps Networks Interactive I   0.58       0.07       12.3  

Pharmaceuticals, Biotechnology & Lif   3.49                  95.6

LLY   Eli Lilly & Co                   5.59       0.49       41.6  
BMY   Bristol-Myers Squibb Co          4.99       0.33       57.7  
PFE   Pfizer Inc                       4.57       0.20      166.1  
MRK   Merck & Co Inc                   4.22       0.38      342.4  
ABT   Abbott Laboratories              3.70       0.44       76.3  
JNJ   Johnson & Johnson                3.49       0.54       43.5  
PKI   PerkinElmer Inc                  1.08       0.07       31.0  
AGN   Allergan Inc/United States       0.29       0.05        6.3  

Real Estate                            3.18                  62.4

HCN   Health Care REIT Inc             5.79       0.69      210.3  
HCP   HCP Inc                          5.06       0.47      149.8  
PCL   Plum Creek Timber Co Inc         4.49       0.42         na  
VTR   Ventas Inc                       4.05       0.54       76.9  
KIM   Kimco Realty Corp                3.98       0.18       58.7  
EQR   Equity Residential               3.50       0.46       57.5  
SPG   Simon Property Group Inc         3.21       0.80       55.2  
AVB   AvalonBay Communities Inc        3.16       0.89       89.8  
PSA   Public Storage                   3.15       0.80       47.0  
PLD   ProLogis                         3.12       0.11       68.8  
VNO   Vornado Realty Trust             3.11       0.65       47.6  
BXP   Boston Properties Inc            2.31       0.50       46.3  
AIV   Apartment Investment & Managem   1.54       0.10       23.8  
WY    Weyerhaeuser Co                  1.05       0.05         na  
HST   Host Hotels & Resorts Inc        0.22       0.01        4.1  

Retailing                              1.68                  48.5

GPC   Genuine Parts Co                 3.19       0.41       49.0  
HD    Home Depot Inc                   2.71       0.24       46.4  
JCP   JC Penney Co Inc                 2.47       0.20      106.8  
LTD   Ltd Brands Inc                   1.92       3.00       79.2  
JWN   Nordstrom Inc                    1.89       0.20       37.8  
GPS   Gap Inc/The                      1.78       0.10       20.5  
LOW   Lowe's Cos Inc                   1.76       0.11       38.1  
BBY   Best Buy Co Inc                  1.75       0.15       27.4  
TGT   Target Corp                      1.67       0.25       33.1  
TIF   Tiffany & Co                     1.58       0.25       57.3  
SPLS  Staples Inc                      1.57       0.09       22.4  
TJX   TJX Cos Inc                      1.34       0.15       15.9  
RSH   RadioShack Corp                  1.33       0.25       41.4* 
FDO   Family Dollar Stores Inc         1.23       0.15       27.7  
ANF   Abercrombie & Fitch Co           1.20       0.17       30.9  
EXPE  Expedia Inc                      1.11       0.07       11.1  
ROST  Ross Stores Inc                  1.00       0.16       15.4  
M     Macy's Inc                       0.79       0.05      211.8  

Semiconductors & Semiconductor Equip   2.28                  29.6

MCHP  Microchip Technology Inc         4.01       0.34       61.0  
INTC  Intel Corp                       3.42       0.18       59.4  
NSM   National Semiconductor Corp      2.90       0.10       28.7  
LLTC  Linear Technology Corp           2.64       0.23       38.4  
KLAC  KLA-Tencor Corp                  2.55       0.25       27.1  
ADI   Analog Devices Inc               2.32       0.22       29.2  
XLNX  Xilinx Inc                       2.20       0.16       24.4  
AMAT  Applied Materials Inc            1.98       0.07       19.9  
TXN   Texas Instruments Inc            1.60       0.13       16.5  
BRCM  Broadcom Corp                    0.73       0.08       12.4  
ALTR  Altera Corp                      0.67       0.06        8.5  

Software & Services                    1.60                  26.2

PAYX  Paychex Inc                      4.00       0.31       83.7  
ADP   Automatic Data Processing Inc    3.10       0.36       60.0  
MSFT  Microsoft Corp                   2.30       0.16       25.3  
TSS   Total System Services Inc        1.82       0.07       29.6  
IBM   International Business Machine   1.77       0.65       22.8  
CSC   Computer Sciences Corp           1.61       0.20       25.0  
WU    Western Union Co/The             1.51       0.07       16.6  
V     Visa Inc                         0.85       0.15       14.2  
FIS   Fidelity National Information    0.72       0.05       11.2  
CA    CA Inc                           0.65       0.04        9.0  
ORCL  Oracle Corp                      0.64       0.05       13.5  
MA    Mastercard Inc                   0.27       0.15        3.9  

Technology Hardware & Equipment        1.42                  19.5

MOLX  Molex Inc                        3.08       0.17       35.4  
HRS   Harris Corp                      2.21       0.25       19.3  
QCOM  QUALCOMM Inc                     1.53       0.19       35.3  
XRX   Xerox Corp                       1.48       0.04       25.3  
JBL   Jabil Circuit Inc                1.41       0.07       14.1  
TLAB  Tellabs Inc                      1.19       0.02       13.3  
GLW   Corning Inc                      1.03       0.05        9.9  
HPQ   Hewlett-Packard Co               0.76       0.08       21.0  
APH   Amphenol Corp                    0.11       0.01        1.9  

Telecommunication Services             6.12                 190.2

FTR   Frontier Communications Corp     7.76       0.19      639.5  
WIN   Windstream Corp                  7.16       0.25      140.8  
CTL   CenturyLink Inc                  6.25       0.72       95.1  
T     AT&T Inc                         5.86       0.43       21.5  
VZ    Verizon Communications Inc       5.48       0.49      156.5  
Q     Qwest Communications Internati   4.19       0.08       88.0  

Transportation                         1.45                  28.6

UPS   United Parcel Service Inc        2.59       0.47       50.7  
NSC   Norfolk Southern Corp            2.29       0.36       29.6  
R     Ryder System Inc                 2.09       0.27       35.4  
UNP   Union Pacific Corp               1.65       0.38       21.0  
CSX   CSX Corp                         1.61       0.26       21.9  
CHRW  CH Robinson Worldwide Inc        1.45       0.29       40.1  
EXPD  Expeditors International of Wa   0.73       0.20       44.1**
FDX   FedEx Corp                       0.52       0.12       13.3  
LUV   Southwest Airlines Co            0.14       0.00        1.6  

Utilities                              4.49                  78.8

FE    FirstEnergy Corp                 5.91       0.55      186.8  
POM   Pepco Holdings Inc               5.90       0.27      290.5  
PGN   Progress Energy Inc              5.70       0.62       50.5  
TEG   Integrys Energy Group Inc        5.57       0.68      261.6  
DUK   Duke Energy Corp                 5.51       0.24       71.0  
AEE   Ameren Corp                      5.49       0.39       60.4  
PPL   PPL Corp                         5.33       0.35       56.1  
NI    NiSource Inc                     5.22       0.23      191.5  
AEP   American Electric Power Co Inc   5.10       0.46       36.6  
EXC   Exelon Corp                      5.06       0.53       41.2  
PNW   Pinnacle West Capital Corp       5.05       0.53      126.8  
CNP   CenterPoint Energy Inc           4.95       0.20       66.9  
DTE   DTE Energy Co                    4.94       0.56       58.1  
ED    Consolidated Edison Inc          4.82       0.59       48.0  
SO    Southern Co                      4.75       0.46       46.5  
ETR   Entergy Corp                     4.69       0.83       31.3  
SCG   SCANA Corp                       4.66       0.47       59.5  
TE    TECO Energy Inc                  4.61       0.20       85.5  
D     Dominion Resources Inc/VA        4.59       0.49       46.5  
CMS   CMS Energy Corp                  4.48       0.21       23.9  
PEG   Public Service Enterprise Grou   4.36       0.34       30.5  
XEL   Xcel Energy Inc                  4.29       0.25       37.5  
NEE   NextEra Energy Inc               3.85       0.50       28.5  
PCG   PG&E Corp                        3.82       0.46       69.5  
GAS   Nicor Inc                        3.71       0.47      161.8  
OKE   Oneok Inc                        3.45       0.48       88.5  
EIX   Edison International             3.31       0.32       20.0  
NU    Northeast Utilities              3.20       0.26       45.2  
CEG   Constellation Energy Group Inc   3.12       0.24       66.4  
SRE   Sempra Energy                    2.98       0.39       71.8  
WEC   Wisconsin Energy Corp            2.71       0.40       41.6  
AYE   Allegheny Energy Inc             2.46       0.15       22.1

 

[trysail]

http://noir.bloomberg.com/apps/news?pid=20601110&sid=abwM6ehjycQk


Lap Dancers, Cheap Sperm Expose Hidden Secrets of Prices: Books
by James Pressley

Jan. 4 (Bloomberg) -- Sperm is cheap. Lap dancers get bigger tips when they’re not on the pill. And China’s one-child policy helped inflate the housing bubble.

These tantalizing observations can be found in “The Price of Everything,” Eduardo Porter’s energetic tour of the daily cost-benefit analysis called life.

Human existence is all about tradeoffs: We choose a $2,500 bottle of Romanee-Conti Burgundy or the house white; we trade the freedom of singlehood for the companionship of marriage.

“Every choice we make,” Porter writes, “is shaped by the prices of the options laid out before us -- what we assess to be their relative costs -- measured up against their benefits.”

Porter, a member of the New York Times editorial board, finds value where others see garbage. A child in New Delhi can make 20 to 30 rupees a day -- 45 to 67 U.S. cents -- picking through dumps (and risking her health) for plastic bottles that many Americans wouldn’t bother returning to the supermarket for the nickel deposit. Rich or poor, we humans weigh prices against opportunity and risk.

“The price we put on things -- what we will trade for our lives or our refuse -- says a lot about who we are,” he says.

Each chapter riffs on the main theme: the Price of Things, the Price of Life, the Price of Happiness and so on. Though short on firsthand reporting, the book smoothly synthesizes economic research and anecdotal evidence.

Krug Printing
We’re reminded, for example, of why a $39.99 computer printer looks cheap: The manufacturer sells black ink cartridges for $14.99, color for $19.99. Ninety percent of printing is done with ink costing $4,731 a gallon (3.785 liters), Porter writes, citing a study by PC World.

“You might as well fill your ink cartridges with 1985 vintage Krug champagne,” he says.

As for the lap dancers, University of New Mexico psychologists found that those who weren’t on the pill earned far more during the most fertile phase of their menstrual cycle. Oddly, neither the dancers nor their patrons knew that the cycle influenced their tips.

A chapter on the Price of Women explains why polygamy proved popular down through history: Though both sexes seek to perpetuate their genes, “males need only invest a dollop of sperm in this endeavor, while females must produce an egg, carry and nourish the embryo.”

So males try to mate with as many females as possible. Females, facing greater costs, seek partners who can provide the resources needed for the next generation’s survival.

Missing Girls
Biases against women carry heavy consequences. China’s one- child policy, for example, has created a gross imbalance between the sexes. With so many female embryos aborted, the country will by 2020 have 135 men of marriage age for every 100 potential brides, according to estimates by Harvard economists.

As ever in economics, one thing has triggered another. The sex ratio prompted households to save more in hopes of giving their sons an edge in the marriage market, research suggests. China’s savings rate, which stood at 54 percent in 2008 according to World Bank data, contributed to its $2.6 trillion in foreign-exchange reserves. The glut gushed through the financial system, helping to keep interest rates low and to inflate the housing bubble.

Porter hop-scotches from the Price of Work and the Price of Faith to the Price of the Future. This gives the book sweep, as he explores why we misprice nature (by polluting it), tolerate illegal immigrants (cheap farmhands and cleaners), and believe that the price of life is incalculable (even though government agencies do the math).

Rethinking ‘Priceless’
The approach also leaves the impression that he conducted much of his research on the Internet. More than once, I found myself comparing the book to William Poundstone’s “Priceless,” a narrower look at how companies exploit psychology to extract extra cash from consumers.

Poundstone, unlike Porter, develops the theme through old- fashioned reporting and winsome storytelling. He lacks exotic dancers, however.

Still, both authors escape Oscar Wilde’s definition of a cynic, who famously “knows the price of everything and the value of nothing.”

“The Price of Everything: Solving the Mystery of Why We Pay What We Do” is from Portfolio/Penguin in the U.S. and from Heinemann in the U.K. (296 pages, $27.95, 11.99 pounds).

 

[trysail]

It's but a matter of time before several things happen: 1) the lights go out ( i.e., German electricity supply become unreliable ), 2) German industry becomes uncompetitive due to its astronomical electricity prices, and 3) Germany gets a hard lesson in TANSTAAFL.

California is going to have a similar nightmare.

Why is it there such a strong correlation between extreme environmentalists and innumeracy?


____________________

http://noir.bloomberg.com/apps/news?pid=20602099&sid=aHjwE4nRTpiw


Merkel’s Nuclear Plan Earns Derision as Clean Power Costs Climb
By Jeremy van Loon

Jan. 5 (Bloomberg) -- The solar panels on Tommy Clever’s house in Berlin generate enough electricity on sunny days to run his washing machine, vacuum cleaner and other appliances, with a bit left over to help power the region’s factories and offices.

Clever likes the arrangement. He gets 51 euro cents ($0.68) per kilowatt-hour for any electricity his solar rooftop feeds back into the grid, which is about 10 times the wholesale price paid to coal or nuclear plant owners. The payment rate, mandated by the government, stays in effect for 20 years and gives him an annual return of about 9 percent on his investment in the photovoltaic setup, Bloomberg Markets magazine reports in its February issue.

“It’s been better than putting money in the bank,” the 39-year-old environmental consultant says.

Such subsidies have made Germany a green-power success story. It gets more than 17 percent of its electricity from wind turbines, solar arrays and other renewable resources, up from about 6 percent a decade ago, according to the German Renewable Energy Federation. The country has adopted new clean technologies more quickly than any nation except Denmark, its smaller neighbor to the north; it has more wind turbines installed than any country other than the U.S. and China and the most solar power generation in the world.

What’s more, the renewable-energy industry has been one of the biggest sources of new jobs in Germany in the past decade and has been boosting exports.

Nuclear Extension
Now, Chancellor Angela Merkel is expressing concern that the cost might hurt the competitiveness of German industry. To hold power prices in check, she plans to keep existing nuclear plants in the mix for longer, abandoning a deadline set by the previous government to retire all of the country’s reactors by 2022. Environmentalists, political opponents and even some people within her own party say Merkel is backpedaling from Germany’s green-power goals.

“Her policy is all about delaying an important transition to renewable energy that Germany’s future prosperity will depend on,” says Matthias Adolf, a lecturer on international relations and energy at Berlin’s Free University.

The government enacted the new program for the electricity industry in September. It was the first major energy initiative Merkel had put forward since taking power in 2005 and the first change of course since renewable-power legislation was passed in 2000.

Price Supports
While Merkel preserved the preferential pricing, known as a feed-in tariff, that has encouraged the installation of solar panels such as Clever’s and the construction of wind farms, her critics say she’s setting the incentives too low. Tariffs for new projects can be adjusted by the government as a way of controlling the pace of new facility construction and reacting to changes in the relative costs of renewable energy versus fossil fuels.

The price supports for solar power were cut three times in 2010. The above-market payments to wind and solar generators are passed through to consumers in their electricity bills.

Merkel says her plan strikes a balance, protecting German manufacturers such as Siemens AG and Volkswagen AG from rising electricity costs that might make their exports noncompetitive, while also continuing to add green power.

“I think we can say our energy system will be the most efficient and environmentally friendly in the world,” Merkel said on Sept. 6.

Juergen Trittin, a leader of the Green Party, which was a partner in the government when the push for renewables began in earnest a decade ago, says German job growth depends on the continued expansion of wind and solar.

Green Power Jobs
“We should be getting out of nuclear power faster and relying more on renewable energy, which has led us to an export surplus,” he said in a speech to the country’s parliament in October.

About 340,000 workers in Germany are employed in the making and installation of wind turbines, solar panels and other clean- energy equipment. That workforce has doubled since 2004, according to the environment ministry. The robust domestic market for wind and solar has helped German companies such as Siemens develop clean technologies that sell around the world.

Still, despite the growth in exports, employment in Germany’s clean-energy businesses remains sensitive to changes in government policy, says Claudia Kemfert, head of the energy and environment department at DIW Berlin, an economic research institute.

‘Right Policy’
“Supporting renewables is the right policy from an economic perspective, despite the high initial costs,” Kemfert says. “The renewable industry is the only industry in Germany that reported an increase in revenue over the past three years.”

In addition to the jobs argument, Kemfert and others say Germany will benefit as renewables replace coal, gas and oil that are mostly imported and subject to price swings.

Environment Minister Norbert Roettgen says expansion of wind and solar will provide Germany with cheap power by mid- century, when fossil fuels become scarce and expensive. Roettgen, from Merkel’s Christian Democratic Union, wanted the energy plan to tilt more in favor of renewables. Economy Minister Rainer Bruederle and members of his Free Democratic Party lobbied for a longer life span for the country’s nuclear plants and more-aggressive cuts in the preferential pricing for clean-energy installations.

Merkel’s plan includes a goal of adding as much as 25,000 megawatts of wind turbines in the North Sea and the Baltic. That would be a lot of generation: The 17 nuclear plants in operation in Germany today have a total capacity of about 21,500 megawatts and produce almost a quarter of the country’s power.

Offshore Wind
Adding offshore wind facilities would represent a next step for Germany, which lags behind Denmark and the U.K. in this category. The giant turbines anchored to the seabed require a bigger upfront investment -- and the likely involvement of large power producers such as RWE AG. Critics of Merkel’s plan question whether it provides sufficient support to get these facilities built.

Nuclear power is unpopular in Germany, even as neighboring France relies on reactors for three-quarters of its electricity and is building more. The 1986 explosion and fire at the Chernobyl plant in Ukraine, which sent up a plume of radiation that rmeached much of Europe, turned public opinion against the technology.

Only about a third of Germans believe that delaying the retirement of nuclear units is necessary to help with the transition to renewables, according to a survey commissioned by environmental group Greenpeace and conducted by TNS Emnid.

Nuclear, No Thanks
“We don’t need a nuclear extension,” says Olaf Hohmeyer, a professor of energy economics at the University of Flensburg. “It’s merely a license to print money.”

Hohmeyer says Germany could generate all of its power using renewables by 2050. As long as nuclear plants are providing cheaper power to the grid, the incentive to build the offshore wind-power projects, in particular, will be inadequate, he says.

The country’s largest utilities, E.ON AG and RWE, along with Karlsruhe-based Energie Baden-Wuerttemberg AG and a unit of Sweden’s Vattenfall AB, operate the country’s nuclear plants. They will earn about 6 billion euros ($8 billion) in extra profit for every year’s delay in the retirement of their reactors, according to estimates from the environment and resources department of the RWI economic institute in Essen. About half of that money will go to the government to support new power generation.

“Chancellor Merkel’s energy policy is being written by Juergen Grossmann, not by the cabinet,” the Green Party’s Trittin told the Parliament, referring to the chief executive officer of RWE.

Special Tariffs
The Greens and the Social Democratic Party created the system of special tariffs to support wind and solar a decade ago, when they were together in a coalition government. They also enacted the deadline to phase out nuclear power and plan to sue to keep Merkel from delaying the plant retirements.

Most reactor waste is still stored in temporary casks near each nuclear plant, which adds to the concerns that Germans have about the technology. Any permanent disposal for highly radioactive waste is at least two decades away, as the country struggles to choose and prepare an appropriate site, says Wolfram Koenig, president of the German nuclear safety regulator.

One advantage of nuclear power is that it emits almost no greenhouse gases. Germany is subject to the carbon dioxide emission reductions that the European Union promised under the Kyoto Protocol climate treaty. Keeping the country’s reactors online longer means that growth in renewable generation can be used to retire coal plants. Power demand grows by almost 1 percent each year, even though the German population is shrinking.

‘Shape the Transition’
“Continued use of nuclear energy will help us to shape the transition to the renewable age in an ecologically and economically sensible fashion,” Economy Minister Bruederle says.

Electricity costs are already steep in Germany. Residential consumers in 2009 paid the second-highest average rate among the 27 members of the EU: 22.9 euro cents per kilowatt-hour, less than the 25.5 cents paid in Denmark but 39 percent more than the EU average of 16.5 cents.

While the tab for subsidizing renewable power is still a small part of a typical monthly electric bill -- less than the price of a Starbucks cappuccino -- that slice is growing. A surge in solar-cell installations in 2010 means that the total cost of the feed-in tariffs will jump 72 percent in 2011, according to calculations by the owners of Germany’s high- voltage transmission system.

46 Billion Euros
Support for solar power alone may cost 46 billion euros from 2000 to 2030, according to a study by the Wuppertal Institute for Climate, Environment and Energy.

While these costs are high, they aren’t yet crippling, and Merkel aims to keep it that way. Spain’s support for solar power, by contrast, has become a nightmare for the government.

Spain, which was trying to mimic Germany’s approach, set the tariffs too high, and too much new generation got built. The country is now reneging, cutting feed-in tariffs that investors were promised.

In addition to the concern that the price supports won’t be set high enough to get new clean-power facilities built, some energy experts and environmentalists complain that Merkel is doing little to integrate renewable-energy facilities into the electricity grid.

‘Huge Transition’
“There is no plan for this huge transition,” says Sven Teske, a Greenpeace researcher.

While Clever benefits from the ability to sell excess power to electricity distributors, Germany’s promotion of renewable energy may erode profits at E.ON, RWE and other large power producers. Their nuclear units, designed to operate at full output around the clock, are a poor complement to wind and solar, which are intermittent and depend on daylight and favorable weather.

Sometimes when breezes blow strongly and wind turbines generate ample power, reactor owners have to pay distributors to take their electricity, University of Flensburg’s Hohmeyer says. With permission to keep reactors online for longer, big electricity producers have every incentive to slow the investment in renewables such as offshore wind, he says.

Germany’s chances of continuing to lead the world in renewable energy may depend on whether Merkel really has struck the proper balance.

 

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Chinese J-20 Stealth Fighter In Taxi Tests

Jan 3, 2011
By Bill Sweetman

China’s first known stealth aircraft just emerged from a secret development program and was undergoing high-speed taxi tests late last week at Chengdu Aircraft Design Institute’s airfield. Said to be designated J-20, it is larger than most observers expected—pointing to long range and heavy weapon loads.

http://www.aviationweek.com/media/images/defense_images/Fighters/J-20Stealth-China-ViaChineseInternet.jpg​

Its timing, Chengdu’s development record and official statements cast doubt on U.S. Defense Secretary Robert Gates’s 2009 prediction (in support of his decision to stop production of the Lockheed Martin F-22) that China would not have an operational stealth aircraft before 2020.

The debut of the J-20 was announced in a November 2009 interview on Chinese TV by Gen. He Weirong, deputy commander of the People’s Liberation Army Air Force. The general said a “fourth-generation” fighter (Chinese terminology for a stealth fighter) would be flown in 2010-11 and be operational in 2017-19.

The J-20 is a single-seat, twin-engine aircraft, bigger and heavier than the Sukhoi T-50 and the F-22. Comparison with ground-service vehicles points to an overall length of 75 ft. and a wingspan of 45 ft. or more, which would suggest a takeoff weight in the 75,000-80,000-lb. class with no external load. That in turn implies a generous internal fuel capacity. The overall length is close to that of the 1960s General Dynamics F-111, which carries 34,000 lb. of fuel.

The J-20 has a canard delta layout (like Chengdu’s J-10) with two canted, all-moving vertical stabilizers (like the T-50) and smaller canted ventral fins. The stealth body shaping is similar to that of the F-22. The flat body sides are aligned with the canted tails, the wing-body junction is clean, and there is a sharp chine line around the forward fuselage. The cant angles are greater than they are on the Lockheed Martin F-35, and the frameless canopy is similar to that of the F-22.

The engines are most likely members of the Russian Saturn AL-31F family, also used on the J-10. The production version will require yet-to-mature indigenous engines. The inlets use diverterless supersonic inlet (DSI) technology, first adopted for the F-35 but also used by Chengdu on the J-10B—the newest version of the J-10—and the Sino-Pakistani JF-17 Thunder.

The main landing gears retract into body-side bays, indicating the likely presence of F-22-style side weapon bays ahead of them. The ground clearance is higher than on the F-22, which would facilitate loading larger weapons including air-to-surface munitions. Chinese engineers at the Zhuhai air show in November disclosed that newly developed air-to-ground weapons are now required to be compatible with the J-20.

Features at the rear of the aircraft—including underwing actuator fairings, axisymmetrical engine exhausts and the ventral fins—appear less compatible with stealth, so the J-20 may not match the all-aspect stealth of the F-22. There are two possible explanations for this: Either the aircraft seen here is the first step toward an operational design, or China’s requirements do not place as much stress on rear-aspect signatures.

The major open question at this point is whether the J-20 is a true prototype, like the T-50, or a technology demonstrator, with a status similar to the YF-22 flown in 1990. That question will be answered by whether, and how many, further J-20s enter flight testing in the next 12-24 months.

Developing an effective multi-mission stealthy aircraft presents challenges beyond the airframe, because it requires a sensor suite that uses automated data fusion, emission control and low-probability-of-intercept data links to build an operational picture for the pilot without giving away the aircraft’s own location.

A rapid development program would be a challenge for China’s combat aircraft industry, which is currently busy: The J-10B, FC-17 and Shenyang’s J-11B and carrier-based J-15 are all under development. However, the progress of China’s military aviation technology has been rapid since the first flight of the J-10 in 1996, owing to the nation’s growing economy and the push by the People’s Liberation Army for a modernized military force in all domains. Before the J-10, China’s only indigenous production combat aircraft were the Shenyang J-8 and Xian JH-7, reflecting early-1960s technology from Russia and Europe.

Engine development has lagged airframe development, with reports that the Shenyang WS-10 engine, slated to replace Russian engines in the J-11B, has been slow to reach acceptable reliability and durability levels. That may not be surprising, given that high-performance engine technology is founded on specialized alloys and processes that often have no other uses. (The existence of the J-11B, essentially a “bootleg” version of the Su-27, has been a strain on relationships between the Russian and Chinese industries.)

Progress with avionics may be indicated by the advent of the J-10B, with new features that include a canted radar bulkhead (normally associated with an active, electronically scanned array antenna), an infrared search-and-track system, and housings for new electronic warfare antennas.

One question that may go unanswered for a long time concerns the degree to which cyberespionage has aided the development of the J-20. U.S. defense industry cybersecurity experts have cited 2006—close to the date when the J-20 program would have started—as the point at which they became aware of what was later named the advanced persistent threat (APT), a campaign of cyberintrusion aimed primarily at military and defense industries and characterized by sophisticated infiltration and exfiltration techniques.

Dale Meyerrose, information security vice president for the Harris Corp. and former chief information officer for the director of national intelligence, told an Aviation Week cybersecurity conference in April 2010 that the APT had been little discussed outside the classified realm, up to that point, because “the vast majority of APT attacks are believed to come from a single country.”

Between 2009 and early 2010, Lockheed Martin found that “six to eight companies” among its subcontractors “had been totally compromised—e-mails, their networks, everything,” according to Chief Information Security Officer Anne Mullins.

The way in which the J-20 was unveiled also reflects China’s use and control of information technology to support national interests. The test airfield is located in the city of Chengdu and is not secure, with many public viewing points. Photography is technically forbidden, but reports suggest that patrols have been permitting the use of cell phone cameras. From Dec. 25‑29, these images were placed on Chinese Internet discussion boards, and after an early intervention by censors—which served to draw attention to the activity—they appeared with steadily increasing quality. Substantial international attention was thereby achieved without any official disclosures.

 

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Goldman Efforts to Burnish Image May Be Undermined by Facebook
By Christine Harper

Jan. 7 (Bloomberg) -- Just as Goldman Sachs Group Inc. prepares to unveil business standards aimed at improving its reputation after settling fraud charges last year, the Facebook Inc. stock sale to clients shines new light on the firm’s potential conflicts of interest.

In pitching as much as $1.5 billion in stock in the closely held social-networking company to wealthy investors, Goldman Sachs disclosed that it might sell or hedge its own $375 million investment without warning clients. The company’s disclosures didn’t reveal that one of its star fund managers, Richard A. Friedman, rejected the deal as inappropriate for his clients.

Chief Executive Officer Lloyd C. Blankfein, 56, created a business standards committee last May after the U.S. Securities and Exchange Commission sued Goldman Sachs for fraud. The SEC alleged that the firm misled investors in a 2007 mortgage-linked investment by failing to inform them of a hedge fund’s plan to bet against the investment. The committee’s report, which could be released as soon as next week, will address how the company can “reinforce the firm’s client focus and improve upon the transparency of our activities,” according to a May statement.

“The committee was undertaken in the hope and the commitment to do some things that were going to help restore and improve trust,” said James Post, a professor at Boston University’s School of Management who focuses on corporate governance and ethics. Instead, “people are going to look at it and say do those standards seem credible in light of the Facebook deal?”

Stephen Cohen, a spokesman for the New York-based firm, declined to comment.

SEC Inquiry
The SEC has asked Goldman Sachs for information about the offering, according to a person familiar with the matter who spoke on condition of anonymity. The firm disclosed the SEC’s inquiry in a package sent to potential investors, said a person who has seen the document. SEC spokesman John Nester declined to comment. The New York Times reported the SEC inquiry yesterday.

At the heart of the problem for Goldman Sachs is that it -- like most securities firms -- treats some clients differently from others. While funds such as Friedman’s Goldman Sachs Capital Partners serve as a fiduciary, requiring they make only the best possible investments for clients, the rest of the firm can sell investors anything deemed “suitable” -- a threshold easily overcome if the buyer is wealthy enough to be defined as a sophisticated investor.

“It’s certainly a Goldman Sachs problem, but it’s also an industry problem,” said Michael Farr, president and founder of Washington-based Farr, Miller & Washington LLC, which manages $725 million, including shares in Goldman Sachs. “Having an obligation to your shareholders as an investment bank to remain profitable means that you’re going to be making money off of your clients, and so there is an inherent conflict.”

ACA Lawsuit
In response to the SEC suit, Goldman Sachs argued that it was under no obligation to inform the investors about the fund’s plan because they were “among the most sophisticated mortgage investors in the world” and capable of making their own decisions about the assets. In July, the firm settled the case with the SEC by paying $550 million and admitting a “mistake” in omitting the disclosure.

Yesterday ACA Financial Guaranty Corp., one of the investors that lost money in the Goldman Sachs Abacus deal at the heart of the SEC’s suit, sued the firm in New York State Supreme Court in Manhattan for at least $120 million. The bond insurer accused Goldman Sachs of “egregious conduct” and said the firm deceived ACA into believing that the hedge fund, Paulson & Co., was investing alongside ACA when in fact it was planning to bet against the Abacus vehicle. Michael DuVally, a spokesman for Goldman Sachs, declined to comment about the suit.

Senate Grilling
Soon after the SEC filed its case, members of the U.S. Senate’s Permanent Subcommittee on Investigations grilled Goldman Sachs executives, employees and former employees for more than 10 hours in a public hearing in which they questioned how the firm justified selling investments to clients it was betting against. Among the questions was whether Goldman Sachs’s mortgage department felt it should put clients’ best interests first. The responses tried to make it clear that the division didn’t act as a fiduciary.

“We should work with clients to help them achieve their objectives,” Daniel L. Sparks, a former head of Goldman Sachs’s mortgage division, told the Senate panel at the April 27 hearing. “That doesn’t mean that we’re always going to have the same view on a particular investment.”

The hearing sparked a debate about whether brokers and derivatives traders should be required to act as fiduciaries for their clients. In the end, the Dodd-Frank Act didn’t include a requirement to do so, instead calling on the SEC to study whether changes are necessary.

‘Undermines and Erodes’
“As long as you have these different standards operating, the clients are going to bear the responsibility of asking their adviser which standard are you treating me under?” said Boston University’s Post. “It undermines and erodes the trust that might otherwise exist between the client and the adviser.”

That problem is unlikely to be solved by whatever Goldman Sachs’s business standards committee report proposes, Post said.

Goldman Sachs said in May that it would release the committee’s report publicly after the company’s board meeting in mid-December. The committee’s co-heads are E. Gerald Corrigan, the former Federal Reserve Bank of New York president who has worked for Goldman Sachs since 1994, and J. Michael Evans, the company’s vice chairman and chairman of Goldman Sachs Asia.

The committee, comprised of 17 people who work for the firm, was already facing skepticism from investors and clients as a public relations maneuver.

“It’s mostly PR, which I guess is relevant because they live in an increasingly regulated world, so they need to keep PR on their side,” said Benjamin Wallace, an analyst at Grimes & Co. in Westborough, Massachusetts, which manages about $900 million. “I don’t think it changes anyone’s opinion of them.”

 

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La Nina to Extend Into Second Quarter, Bureau Says
By Wendy Pugh

Jan. 12 (Bloomberg) -- A La Nina event, which has brought deadly floods to Australia’s north and withered corn and soybean crops in Argentina, may extend into the second quarter of this year, according to the Bureau of Meteorology.

“The La Nina will last well into autumn at least,” David Jones, head of climate monitoring and prediction at the bureau, said by phone from Melbourne. “The start to 2011 in eastern Australia is expected to continue to be wet,” he said. Autumn in Australia is from March to May.

Flooding in Australia’s Queensland state has killed 23 people and left 67 missing with waters in Brisbane expected to peak tomorrow in what may be the city’s worst flood since 1893. Rubber prices have soared to a record as rains have soaked plantations in Southeast Asia, while dry weather linked to the La Nina event is stressing corn and soybean crops in Argentina.

“We would expect it to last another few months and most likely, but not definitely, start to decline thereafter,” Jones said. Most computer climate models were suggesting the event, one of the strongest on record, would slowly break down in the coming months, he said.

Rubber for June delivery in Tokyo reached a record 450.2 yen a kilogram ($5,409 a metric ton) before trading at 448.3 yen at 3:20 p.m. local time. Corn on the Chicago Board of Trade dropped 0.2 percent to $6.06 a bushel after reaching a 29-month high of $6.34 on Jan. 3. Soybeans this month touched $14.09, the most since August 2008.

Disaster Zone
An area bigger than Texas and California making up more than 75 percent of Queensland has been declared a disaster zone. The death toll doubled Jan. 10 as a flash flood smashed through Toowoomba, tearing away cars, roads, homes and people. The rain that closed coal mines, cut railways and forced the Australian dollar down may cost the economy A$7 billion ($6.9 billion), Ausbil Dexia Ltd. estimated.

The La Nina, a cooling of the tropical Pacific Ocean, is near its peak and probably will last through the Northern Hemisphere spring, the U.S. Climate Prediction Center said Jan. 6 in a statement.

Argentina’s soybean production, the world’s third-largest, is forecast to drop 13 percent to about 48 million tons in the current crop because of a lack of rainfall, Argentina’s soybean group Acsoja said Jan. 10.

The Kansas wheat crop this year faces an increased probability of a major drought, based on correlations between production and La Nina events, indicated by the Southern Oscillation Index, or SOI, Australia & New Zealand Banking Group Ltd. said in an e-mailed report this week.

Lower Output
“A strongly positive SOI has skewed the odds that Kansas and U.S. hard red winter production will be significantly lower,” the bank said. The SOI, which tracks fluctuations in air pressure between Darwin and Tahiti, reached its highest December value on record last month, according to the Bureau of Meteorology.

La Ninas can be followed by an El Nino, which typically brings dry weather to eastern Australia, neutral conditions or another La Nina, the Bureau of Meteorology’s Jones said.

“We would certainly like to see another couple of months of data to make more robust predictions for this year,” he said.

La Ninas occur on average every three to five years and can last nine to 12 months, according to the U.S. National Oceanic and Atmospheric Administration. The event can intensify hurricane development in the Atlantic Ocean and also bring more snow to the eastern U.S. and drier conditions to Texas.

 

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Analysts Prove Hazardous as Contrarian Stocks Surge
By Matt Walcoff and Lynn Thomasson

Jan. 10 (Bloomberg) -- Following the advice of equity analysts may be perilous for your profits.

Companies in the Standard & Poor’s 500 Index that analysts loved the most rose 73 percent on average since the benchmark for U.S. equity started to recover in March 2009, while those with the fewest “buy” recommendations gained 165 percent, according to data compiled by Bloomberg. Now, banks’ favorites include retailers and restaurant chains, the industry that did best in last year’s rally and that are more expensive than the S&P 500 compared with their estimated 2011 profits.

Investors who look at the analysts as a contrary indicator are buying shares of utilities, which pay the highest dividends after telephone stocks, and banks, whose earnings are likely to grow three times as fast as the S&P 500 this year. Don Wordell, a fund manager at Atlanta-based RidgeWorth Capital Management Inc., says equities that Wall Street firms rate lowest are more likely to beat the market.

“When you have a stock that has 15 analysts covering it and it has 15 buys, I can’t imagine it has much outperformance left,” said Wordell, whose $1.64 billion RidgeWorth Mid-Cap Value Equity Fund topped 98 percent of peers in the past five years. “You’ve got a stock that has 15 sells on it, you’re set up there to have some strong outperformance.”

The S&P 500 completed the sixth straight weekly advance on Jan. 7. It has gained 88 percent to 1,271.50 since March 9, 2009, Bloomberg data show. The index slumped 0.1 percent to 1,269.75 today.

Netflix, Cummins
The benchmark index for American stocks rallied 13 percent in 2010. Consumer shares such as Netflix Inc., the Los Gatos, California-based movie service that posted the biggest gain on the S&P 500, rising 219 percent, led the advance, along with industrial companies like Cummins Inc., the Columbus, Indiana- based engine maker that advanced 140 percent.

Analysts said health-care and technology companies would win in 2010. Instead, they had two of the three smallest rallies among 10 industries in the S&P 500, gaining less than 10 percent. The stocks analysts liked least, banks and real estate firms, rose 19 percent and 28 percent, respectively, in 2010.

S&P 500 companies with the most “buy” ratings gained 8.7 percent in 2010, while the ones with the fewest jumped 20 percent, the data show. Bloomberg assigns each analyst rating a number ranging from 1 for “sell” to 5 for “buy.” For this article, stocks with at least five ratings on Dec. 31 were divided into three groups by average rating. Only rankings from analysts who still cover the companies were counted.

Stimulus Spending
The Federal Reserve’s unprecedented stimulus, including a program to buy $600 billion in bonds, to lower unemployment and boost growth spurred stocks whose earnings are most tied to the economy, such as Cleveland-based iron producer Cliffs Natural Resources Inc., which gained 69 percent. Earnings for S&P 500 companies rose 32 percent in 2010, analysts estimate, the fastest growth since 1994.

Tony Butler, a New York-based pharmaceutical analyst for Barclays Plc, told clients to buy Pfizer Inc. and Whitehouse Station, New Jersey-based Merck & Co. last year. New York-based Pfizer, the largest U.S. drugmaker, slipped 3.7 percent in 2010, while No. 2 Merck dropped 1.4 percent.

“You scratch your head and wonder, ‘Which part of this am I missing that the market is getting right?’” Butler said. His picks generated a 13 percent return in the past year, beating the average 8.9 percent gain from analysts following the industry, according to data compiled by Bloomberg.

Health-Care Miss
Analysts recommended health-care stocks on speculation the government would fail to pass legislation overhauling the industry, according to Butler. U.S. President Barack Obama signed his health-care policy into law on March 23, imposing fees on drugmakers and mandating insurance coverage.

Banks have been among the lowest-rated stocks in the S&P 500 even as they gained 172 percent since the rally began in March 2009. Sixteen lenders in the index may report average earnings growth of 44 percent in the 2011 as business recovers from the worst financial crisis since the Great Depression, forecasts compiled by Bloomberg show.

An improving economy and fewer write-offs for bad loans led to a surge in regional bank stocks last year, said Kevin St. Pierre, an analyst at Sanford C. Bernstein & Co. He recommended shares of Zions Bancorporation, a Salt Lake City-based lender that jumped 89 percent in 2010. The company started last year as the eighth lowest-rated stock in the S&P 500.

‘Easy and Safe’
“Throughout most of ‘09 and early 2010, it was very easy and safe to be negative on the financials,” said St. Pierre in an interview from New York. “Many analysts in different sectors said, ‘I’m not going to catch these falling knives.’ Knives were falling all over the place at the end of ‘09.”

Following St. Pierre’s recommendations in the past year would have generated a return of 17 percent, exceeding the 1 percent average increase from analysts following the industry, data compiled by Bloomberg show.

Analysts couldn’t foresee that changes to financial regulations would threaten profits at larger lenders, driving investors to smaller ones, said David A. George, a bank analyst at Robert W. Baird & Co. in St. Louis.

“A year ago today, financial regulatory reform was not even on people’s radar,” said George, ranked fourth by returns among 34 analysts who cover Wells Fargo & Co., according to data compiled by Bloomberg. “Going into 2010, a lot of investors were positioned in big banks. With the increased political and regulatory scrutiny, you saw money come out of those names and into the regionals.”

Missing Gains
At the end of 2009, George had “neutral” ratings on Zions, KeyCorp, SunTrust Banks Inc., M&T Bank Corp. and Marshall & Ilsley Corp. Each gained at least 26 percent in 2010.

Analysts are also bearish in 2011 on S&P 500 utilities, which offer a collective dividend yield of 4.32 percent, according to data compiled by Bloomberg. That’s more than twice the 1.86 percent yield of the S&P 500. Only telephone companies, at 5.17 percent, pay more.

Merchant generators, which sell power in wholesale markets, will be hurt by falling natural-gas prices, while traditional regulated utilities are expensive relative to forecast profit, said Michael S. Worms, a New York-based utilities analyst at Bank of Montreal. Southern Co., the largest U.S. electricity producer by market value, trades for 16 times estimated 2011 earnings, compared with 13.4 for the S&P 500.

‘Almost Fairly Valued’
“The bottom line is gas prices are down, and they will hurt the merchants,” said Worms, who has a “market perform” rating on 25 of the 29 companies he covers. “On the regulated side, I guess you can say they are almost fairly valued.”

Priceline.com Inc. and Darden Restaurants Inc. are among the S&P 500 companies analysts favor most, helping give so- called consumer discretionary stocks the second-highest average rating among 10 industries in the index behind health care. The stocks rallied as the economy gained momentum and U.S. retailers reported higher-than-estimated sales in November.

The measure of 79 stocks including hotel operators and restaurant owners rallied 26 percent last year, exceeding gains from the index’s nine other main industries. The group now is valued at 1.1 times sales, the highest since 2000, according to data compiled by Bloomberg.

“Our main reason for optimism is that the economy has gained its footing and spending is picking up on the corporate side,” said Matt Arnold, an analyst at Edward Jones & Co. in Des Peres, Missouri, who has 10 “buy” ratings and 6 “holds” on consumer companies. “That could yield some improvement on the employment front and in consumer spending, which will find its way down to retailers.”

Unemployment Rate
Spending is unlikely to bounce back enough to help the stocks given that the unemployment rate is within 0.7 percentage points of the 26-year high set in October 2009, said Paul Lejuez, a New York-based analyst at Nomura Holdings Inc. U.S. payrolls increased 103,000 in December, compared with the median forecast of 150,000 in a Bloomberg News survey, Labor Department figures showed Jan. 7. The jobless rate fell to 9.4 percent, partly reflecting a shrinking workforce.

“With unemployment where it is, we are not out of the woods here,” said Lejuez, who has 11 “neutral” or “reduce” ratings out of 18 stocks and downgraded Gap Inc. to “neutral” from “buy” on Jan. 7. “There’s too much complacency out there in terms of people assuming everything is great.”

Priceline, the second-largest online travel agency, trades at 46 times reported profit, the most expensive level since 2004. The Norwalk, Connecticut-based company gained 83 percent last year. Analysts’ estimates show Orlando-based Darden, owner of the Olive Garden restaurant chain, will increase profit excluding some items by 13 percent this year, compared with the S&P 500’s projected growth of 14 percent.

“The problem with stocks that are loved by everyone is that there’s no one left to buy them,” said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $550 billion. “It’s hard to make money if you’re in the consensus.”

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‘Pension Envy’ Vexes Underfunded Public Workers
by Chris Farrell

Jan. 12 (Bloomberg) -- Mention pensions and until recently most people pictured a secure income in old age, leisurely trips and visits from grandchildren. That assumes they were lucky enough to have a pension.

But their eyes would quickly glaze over if the conversation steered toward years-of-service formulas, funding ratios and other arcane workings of retirement funds.

No more. The deteriorating condition of many state and local government pension funds has grown into an impassioned topic for cable talk shows. The financial meltdown and recession made apparent what many experts have long known: Too many municipalities routinely underfunded their pension plans while the future cost of their retirement payout promises swelled.

Take Illinois. It has funded only 54 percent of its public pension liability, according to the Pew Center on the States. The financing gap of $54.4 billion bill is more than three times the payroll for current workers in the state’s retirement plan.

The generosity of many public pensions is an incendiary topic, with taxpayers potentially on the hook for billions in unfunded promises.

“These are structural issues and not just a reflection of where we are at in the economic cycle,” says Joshua Rauh, a professor of finance at Northwestern University’s Kellogg School of Management. Adds Robert Clark, an economics professor at North Carolina State University: “The next decade will be one of fundamental reform in public sector pensions.”

Fixed Obligations
Reform won’t be easy. In most cases state and city pension obligations can’t be changed for existing workers. Those employees will continue to earn their promised benefits throughout their government careers, although some states are trying to tinker at the margin, such as by changing cost-of- living payments. Municipalities can renegotiate pensions in Chapter 9 bankruptcy. (In contrast, companies can freeze promised benefits and modify retirement plans.)

Public pension reform will mostly impact new hires. According to current political discussions, if the 401(k) is good enough for private sector employees, it’s fine for the public workers. Yet three decades after their launch, the drawbacks of 401(k)s are increasingly apparent.

“There is certainly ‘pension envy’ and the answer is, let’s go to the lowest common denominator,” says Alicia Munnell, director of the Center for Retirement Research at Boston College. “That doesn’t make sense.”

The pressure for change offers a real chance at designing a better 401(k)-type plan.

‘Ripe for Reform’
Pension experts agree that unlike private-sector 401(k) plans, public-sector programs should offer a very limited menu of broad, low-fee investment choices; mandatory worker participation; a required employer match; and low-cost inflation-hedged annuity options to guarantee a fixed income in retirement. It’s an approach private employers may eventually want to follow.

“I have grown increasingly frustrated that this is boiling down to a debate of taxpayer versus government workers,” says Jeffrey Brown, finance professor at the University of Illinois at Urbana-Champaign. “Public pensions are ripe for reform and it’s a real opportunity for everyone.”

A majority of government workers are covered by “defined benefit” plans. These are the blue-chip pensions from days past, where the employer bears all the investment risk and commits to a fixed based on compensation and years of service. A dwindling number of private employers offer defined-benefit plans, which are costly to run and entail onerous obligations to retirees.

Bearing Risk
Companies instead are embracing comparatively cheaper defined-contribution plans, especially the 401(k). In these, employees decide how much money to invest and where to invest it, depending on the limits established by law and the choices offered by the employer. Companies may kick in a matching contribution, but employees bear all the investment risk.

Among the 100 largest U.S. corporations, 58 offer new employees only a defined contribution pension, compared with 10 in 1998, according to a 2010 survey by consultants Tower Watson. Only 17 of the companies surveyed offered a defined-benefit plan, down from 67 in 1998.

To be sure, most public employees have the option of participating in a defined-contribution plan, but it’s usually supplementary to a defined-benefit pension. The 401(k) is the bedrock savings plan in the private sector and increasingly it’s the only option available through employers.

The realization is dawning that the future tab for state and local defined-benefit pensions is even bigger than expected. That’s because most public plans assume 7 percent to 8.5 percent earnings on investments while finance economists convincingly argue that returns of 3 percent to 5 percent are more realistic.

Unfunded Liabilities
The lower estimate swells the amount state and local governments may have to kick in to pay retirees. Assuming all state pension liabilities were frozen as of June 2009, unfunded liabilities would increase to $3 trillion at a more conservative rate, almost double the $1.8 trillion shortfall under standard public pension practice, according to Northwestern’s Rauh and Robert Novy-Marx, a finance professor at the University of Rochester.

“It isn’t a viable funding model,” says Olivia Mitchell, a professor of insurance and risk management at the University of Pennsylvania’s Wharton School.

One complication of replacing pensions with 401(k)-type plans for new government employees is that many state and local workers aren’t part of Social Security. They weren’t included in the federal retirement program when it was created in 1935 and, while growing numbers have been brought into the system since then, about a third still aren’t participants.

Retirement Floor
“If you have Social Security you have a floor, and the private sector would have had a much more difficult time making the shift from defined benefit to defined contribution without Social Security,” Rauh says. “If the only thing workers have is a 401(k) plan they have a great deal of risk.”

The solution seems to be either bringing all new state and local workers into Social Security or keeping defined-benefit plans for those workers while slashing the payout until it mirrors the income replacement ratios of Social Security.

With Social Security or a shrunken, fully funded pension plan as the base, the improved 401(k)-like portion could be modeled after the U.S. government’s Thrift Savings Plan. It’s a voluntary 401(k)-type program open to all federal employees. Fees are a razor thin .028 percent, or 28 cents per $1,000 of investment. However, any state and local government version would require participation and an employer contribution.

Another widely admired model is TIAA-CREF, which manages retirement plans for higher education. It offers plans that require contributions from employers and employees. Some or all of the money may be converted into a low-cost guaranteed annuity with a 3 percent minimum annual interest rate.

The annuity-like option with the inflation hedge may combine the best of defined-contribution and defined-benefit plans, says Zvi Bodie, a professor of finance and economics at Boston University.

Right now, the prospects for a reasoned overhaul of public pensions seems remote. Yet public officials have an opportunity to create a better retirement savings plan. Done right, the private sector could well follow the public sector’s lead.

 

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http://noir.bloomberg.com/apps/news?pid=20601110&sid=afczgKwlUGhk


China to Let Companies Invest Overseas Using Yuan
By Bloomberg News

Jan. 13 (Bloomberg) -- China will let companies invest overseas in yuan in the latest move to expand the currency’s international role and curb dependence on the dollar.

The rules effective since Jan. 6 cover non-financial companies in places where a yuan trade settlement program is taking place, the central bank said on its website today.

The pilot program is “another important step on the way to internationalize the yuan,” said Dariusz Kowalczyk, a Hong Kong-based economist at Credit Agricole. “Time will tell” whether foreign recipients of investment will accept the currency, he said. currency, he said.

Premier Wen Jiabao is encouraging greater use of the yuan for international trade and investment to reduce reliance on dollars as the Federal Reserve prints money to support the U.S. economy. International trade transactions settled in yuan rose to a record 126.5 billion yuan ($19 billion) in the third quarter of last year, the central bank said in November.

“This represents another step to open the capital account after allowing selected foreign banks to buy Chinese domestic bonds,” said Kowalczyk.

Mergers, Acquisitions
Investment covered by the new rules includes mergers and acquisitions, the central bank said in today’s statement.

The program will be “conducive” to the development of Hong Kong’s offshore yuan market, Norman Chan, the chief executive of the Hong Kong Monetary Authority, said in a statement today.

In the first 11 months of last year, China’s non- financial outbound investment totaled $47.6 billion, according to Commerce Ministry figures.

The program may get traction in places “more receptive” to the yuan, such as Hong Kong, Southeast Asian nations and Russia, said Dong Xian’an, Beijing-based chief economist at Industrial Securities Co. Chinese companies may find U.S., European and Japanese businesses unwilling to accept the currency, “at least initially,” Dong said.

In a separate move, authorities are allowing residents of Wenzhou, a city of about 8 million people in the coastal province of Zhejiang, to make direct investments overseas, according to a local government statement on Jan. 7. Capital outflows may help China to limit asset bubbles and inflation.

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http://noir.bloomberg.com/apps/news?pid=20601110&sid=a5A2A6js8aU8


U.S. Clients May Become Global Pariahs, Oldest Swiss Bank Says
By Warren Giles

Jan. 13 (Bloomberg) -- U.S. citizens may become global “pariahs” when a law forcing foreign banks to report their accounts takes effect, according to Switzerland’s oldest bank.

Americans “risk becoming pariahs of the global banking system through the fault of their own government,” Konrad Hummler, managing partner of Wegelin & Co., said in the copy of a speech presented today in the Swiss capital, Bern.

The U.S. law will require all foreign financial companies to supply information on American clients to the Internal Revenue Service and withhold 30 percent of U.S. interest and dividend payments from account holders who provide inadequate information to determine their U.S. status. The Foreign Accounts Tax Compliance Act will complicate offering services to clients with U.S. links when it takes effect in two years, Hummler said.

“The risks run by financial intermediaries promising to respect these rules are considerable,” said Hummler, who is also chairman of the Swiss Private Bankers Association.

St. Gallen-based Wegelin, founded in 1741, advised clients 16 months ago to sell U.S. assets because extended reporting requirements may saddle investors with tax obligations for themselves or their heirs. Wegelin, which is an unlimited partnership, has said that it can’t afford the risk of increased liabilities at time when American tax authorities are cracking down on international banks.

Implementation of the law risks costing the U.S. more than it will generate over 10 years, Hummler said. It’s unclear whether Swiss banks will be allowed to sign such agreements with the IRS under Swiss law, he said.

Criticisms
“We still don’t know whether these criticisms will be taken into consideration or on the contrary, ignored by the American administration,” Hummler said.

Banks have been lobbying for an easing of the rules since the law, known as FATCA, was incorporated into jobs legislation enacted in March. Now diplomats are stepping into the campaign, with countries including Switzerland, the U.K. and Canada weighing in with the Treasury.

According to the Joint Committee on Taxation, the law is estimated to bring in $8.7 billion in revenue to the U.S. over 10 years -- an amount banks and governments say is relatively low compared with the expense of complying with the law.

The Obama administration pushed for the measure in the wake of the political firestorm arising from the case against UBS AG, which in 2009 settled U.S. government claims that the Zurich- based bank helped thousands of rich Americans hide their money offshore.

Wegelin, along with Geneva-based Pictet & Cie. and Lombard Odier Darier Hentsch & Cie., is one of 13 banks in Switzerland in which partners collectively own and have unlimited liabilities for commitments made by the bank.

Switzerland manages an estimated 27 percent of the world’s privately held offshore wealth.

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Illness ( Swindlers, papershufflers, neurosurgeons and generals )
http://noir.bloomberg.com/apps/news?pid=20601208&sid=apfvTgWe5GC8

 

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http://noir.bloomberg.com/apps/news?pid=20601110&sid=aC2.VsiaGYCI


Container Ship Rates Rally as Fuel Prices Rise
By Alaric Nightingale and Kyunghee Park

Jan. 19 (Bloomberg) -- Container vessels are sailing at the slowest speeds in at least two years to save on fuel costs, driving up freight rates and the shares of shipbuilders.

The global fleet of about 4,660 carriers moved at an average of 11.44 knots last month, 7.4 percent less than a year earlier and the lowest since Bloomberg began compiling the data from AISLive in May 2008. Sailing more slowly saves fuel, the price of which has more than doubled in two years, and curbs the availability of ships, shoring up income for owners.

While rates for dry bulk carriers hauling coal are at their lowest since 2009 and those for oil tankers fell 90 percent in a year, container costs more than doubled in 12 months, an index from the Hamburg Shipbrokers’ Association shows. With trade growth forecast by the International Monetary Fund to weaken in 2011 and oil prices 16 percent higher than a year earlier, owners have little incentive to speed up.

“Slow steaming is going to bring the biggest change to the shipping industry since World War II,” said Lee Sokje, an analyst at Mirae Asset Securities Co. in Seoul, whose recommendations on Hyundai Heavy Industries Co. and Samsung Heavy Industries Co., the world’s biggest yards, earned investors at least 63 percent in a year, data compiled by Bloomberg show. “It was only last year there was concern of oversupply but now we may have to worry about undersupply.”

Forward freight agreements traded by brokers and used to speculate on or hedge future shipping costs anticipate container prices will keep rising. Rates will average about $2,135 a box this year on the benchmark Shanghai-to-U.S. West Coast route, or 8 percent more than now, according to the derivative contracts from London-based Freight Investor Services Ltd.

Three-Year Drop
A shortage of capacity may reverse a three-year drop in orders for new ships, which stand at 464 from a peak of 1,245 in January 2008, according to Lloyds Register-Fairplay data. Fifty percent of those contracts are at yards in South Korea, with China holding another 37 percent. Samsung Heavy, Hyundai Heavy and Daewoo Shipbuilding & Marine Engineering Co. have a combined total of 157, the data show.

Shares of Daewoo Shipbuilding jumped 13 percent in Seoul trading this year, and Ulsan, South Korea-based Hyundai Heavy gained 10 percent. Samsung Heavy climbed 5.8 percent. Based on Sokje’s 12-month share estimates, made in April and still valid, Samsung Heavy will advance another 20 percent, Daewoo Shipbuilding 28 percent and Hyundai Heavy 10 percent.

A.P. Moeller-Maersk A/S, operator of the world’s biggest fleet of container vessels, rose 5.4 percent in Copenhagen trading. Twenty out of 23 analysts covering the company, based in the Danish capital, rate it a “buy.”

Slow Steaming
By November, slow steaming had effectively reduced the capacity of the container fleet by 4.4 percent, Alphaliner, a shipping database company owned by Paris-based AXSMarine, said in a report that month.

That’s helping buoy freight rates as growth in world trade slows. An index for six types of container vessels gained 1.3 percent in December, ending two consecutive monthly declines, according to the Hamburg Shipbrokers’ Association. The gauge is 135 percent higher than a year ago.

The Baltic Dry Index of costs for carrying commodities such as coal and iron ore by sea fell 19 percent to 1,432 points this year, for a 12-month decline of 57 percent, data from the Baltic Exchange in London show. Rates for supertankers carrying oil on the benchmark Saudi Arabia-to-Japan route dropped 66 percent to $8,985 a day this year.

World Trade
World trade will probably expand by 7 percent this year, compared with more than 11 percent in 2010 and the average 5.7 percent rate during the last three decades, according to IMF data compiled by Bloomberg.

The world’s liner ships move about 60 percent of the value of global seaborne trade, or more than $4 trillion of goods a year, according to the World Shipping Council, a group representing owners with offices in Washington and Brussels. Some 90 percent of global trade moves by sea, according to the Round Table of International Shipping Associations.

The largest container carriers are longer than the Eiffel Tower, stretching about 367 meters (1,200 feet) and hauling as many as 14,000 steel boxes, according to data from Lloyd’s Register-Fairplay.

Marine fuel, known as bunkers, cost $543.50 a metric ton on Jan. 14 in Singapore, a key refueling point, according to data compiled by Bloomberg. That’s 30 percent more than in May and the highest since October 2008.

Higher Oil
Futures traders are anticipating higher oil costs through at least the next eight years, according to contracts traded on the New York Mercantile Exchange. Crude for next month traded at $91.34 a barrel late yesterday and changed hands at $96.50 for delivery a year after that, bourse data show.

The largest ships burn 320 tons of fuel a day when traveling at full speed, according to Soren Andersen, vice president for vessel management at Maersk Line, the container unit of A.P. Moeller-Maersk. That can drop to 40 tons when they sail as slowly as possible, saving owners about $27 million a year, the executive said.

A new vessel with a carrying capacity of 13,000 containers costs about $130 million, according to estimates from Braemar Shipping Services Plc, the world’s second-largest publicly traded shipbroker.

Owners will weigh fuel savings against the cost of a new vessel when choosing their response to any shortage.

“If you have a choice between building a new ship or speeding up, you will build the ship,” said Copenhagen-based Andersen. “I don’t realistically see it being possible to go back to normal speeds.”

Baltic Dry Index: BDIY:IND
http://www.bloomberg.com/apps/quote?ticker=BDIY:IND
http://www.bloomberg.com/apps/chart?h=200&w=280&range=1y&type=gp_line&cfg=BQuoteComp_10.xml&ticks=BDIY%3AIND&img=png

New Container Index: CTEXIDEX:IND
http://noir.bloomberg.com/apps/quote?ticker=CTEXIDEX:IND
http://www.bloomberg.com/apps/chart?h=200&w=280&range=1y&type=gp_line&cfg=BQuoteComp_10.xml&ticks=CTEXIDEX%3AIND&img=png

New ConTex is a Container Ship Time Charter Assessment Index. It is a company-independent index which is calculated as an equivalent weight of percentage change from six ConTex assessments, which are for the classes of Type 1100 TEU, Type 1700 TEU, Type 2500 TEU, Type 2700, Type 3500 and Type 4250. The index starting point is 1000. New ConTex is compiled by a group of international operating brokers and is updated twice a week. The data source is Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V. (VHSS), the Hamburg Shipbroker's Association. As of May 11 2010, ConTex index expanded to include new size ranges (Type 2700, Type 3500 and Type 4250) and was renamed New ConTex.


VESLCTIS:IND Container In Service Tot
http://noir.bloomberg.com/apps/quote?ticker=VESLCTIS:IND
http://www.bloomberg.com/apps/chart?h=200&w=280&range=1y&type=gp_line&cfg=BQuoteComp_10.xml&ticks=VESLCTIS%3AIND&img=png


BITRPGJP:IND BALTIC DIRTY TANKER RT 3
http://noir.bloomberg.com/apps/quote?ticker=BITRPGJP:IND

 

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