Saturday, August 15, 2009

Noteworthy - Week of August 9th

Perhaps the biggest news of the week occurred going into the weekend when Colonial Bank, a regional bank with assets of $25 billion, was seized by regulators on Friday after it reached an agreement to sell its deposits and most of its assets to rival BB&T, which continues to grow amid others' peril. Colonial is the largest bank failure since Washington Mutual in September 2008 and is the 6th largest on record. The seizure of the regional bank is a sign that regulators may be giving up hope that some of them can be saved.

Swiss bank UBS and the IRS have settled its dispute over the disclosure of the bank's clients, although terms of the agreement have not yet been announced. Liechtenstein is in talks with Germany over transparency issues, and the UK has requested that its citizens come clean over their secret accounts in Liechtenstein.

Retail sales slide 0.1% in July, even with the positive effect from the "cash for clunkers" program, as consumers continued to rein in savings.

Reduced demand pushed electricity prices 40% lower during the 1st half of the year to $40/megawatt hour on average.

Consumer prices fell at its quickest rate on record in the Eurozone in July, even as Germany and France showed surprising signs of recovery during the second quarter.

U.S. food firms warned of a sugar shortage if the Obama administration doesn't ease import restrictions. The price of sugar is at a 28-year high, as droughts, especially in India, have affected the price of the commodity. A large coalition of food giants plan to draw attention to the government's "Cap and Trade" bill, stating that the bill could lead to higher food prices.

U.S. banks seek to gain $38.5 in overdraft charges this year, with most of the revenue coming from cash-strapped consumers. The amount is double the revenue produced in the year 2000. Bank policies are coming under fire by regulators and citizens alike.

Credit card companies are using a little known policy to cancel customer cards, as consumer delinquency rates continue to rise. The rule, which is perfectly legal, can be instituted if a customer is reevaluated as being too risky and has no bearing on the status the customer's current standing with the credit card company.

Distressed debt takeovers are soaring as companies head to bankruptcy court. Year-to-date, the deals have been valued at $84 billion, double the pace of 2008.

Distressed hotel loans have grown markedly in the past few months and many owners are participating in "jingle mail," otherwise known as sending their keys to their lender and walking away from their property.

The inspector general of the Department of Health and Human Services is investigating a conflict-of-interest allegation involving Janet Woodcock, the director of the FDA's Center for Drug Evaluation and Research.

Congress is retreating its proposed airplane purchases amid public outrage. Instead, Congress will seek only $220 million (from $550 million) for the purchase of one Gulfstream plane and three Boeing aircraft, which was originally requested by the Department of Defense.

President Obama defended the U.S.'s "Buy American" stance at a meeting with Canada and Mexico this week. Both countries are urging the U.S. to relinquish its protectionist policies.

The WTO ordered China to stop forcing U.S. owners of copyright material from having to deal only with state-controlled distribution companies, a ruling that could help the U.S. entertainment industry to fend of mass pirating in the world's most populous nation.

Two U.S. oil firms have been linked to by the U.S. government to a cross-border smuggling scheme, whereby thieves siphoned oil from Mexico's state-run oil company and brought them into the U.S.

U.S. Natural Gas Fund, a popular ETF, is considering moving to foreign exchanges in an attempt to avoid regulators' crackdown on speculation after the CTFC said last week that it plans to limit the size of natural gas derivatives contracts.

As TARP-funded entities struggle to please Pay Czar Kenneth Feinberg, Citigroup energy trader Andrew Hall has suggested a modification to his contract that would avert confrontation with the Obama administration. Hall made $100 million in 2008 and could make equal that amount in 2009 under his proposal.

The health care debate in the U.S. continues to flair as middle America finds its voice.

The Federal Bank of New York is in a hiring spree as its assets soar under Fed's purchasing program.

Representatives from the "Fastest Dying Cities" in America met this week in an attempt to figure how to deal with declining population and tax bases.


Secretary of State Clinton condemned Nigeria's election process and high levels of corruption and pledged U.S. support in bringing peace to the oil-rich nation at a town hall meeting in the country's capital of Abuja this week. Separately, the country took over five banks during the week that failed its stress tests.

The Americas:

Five Detroit public school system employees were charged with multiple felonies in an investigation into alleged corruption and loss of millions of dollars.

Charter schools are being heavily promoted in the U.S. to lift education.

Ebay and GM are teaming up to offer customers the ability to negotiate for new car sales online with dealers. Paypal, a division of eBay, launched a student account this week that is linked to the parent's Paypal account and would allow parents to transfer money to their childrens' accounts.

Film makers are starting to tackle the cheap renting options for its products. Warner Bros. is intitating a 28-day delay on new releases to Redbox machines and is demanding a more lucrative deal with Netflix, following a growing trend of Hollywood producers. Redbox is suing the film makers over access to their releases.

Barnes and Noble is buying its college textbook sibling, Barnes and Nobles College Booksellers Inc., from chairman Leonard Riggio for $596 million in an effort to bolster its revenue.

J.C. Penney's quarterly sales fell 7.9% but cost cutting rose the firm's profit to nearly break-even. Abercrombie and Fitch plans to cut more prices as it fends off the recession. Urban Outfitters' profits sank 14% in the second quarter but the firm beat expectations.

Las Vegas Sands Corp was able to amend its $3.3 billion Macau credit facility this week, the company said. The amendment will give the casino owner a higher interest rate for its loan but also more flexibility in selling minority stakes in its operations.

Dole Foods registered with the SEC on Friday for an IPO. The largest producer, marketer and distributor of fresh fruit and vegetables has been held privately since 2003 by David Murdock.

Boeing is downplaying continued trouble with its revolutionary 787 Dreamliner. The firm disclosed further structural issues with the fuel efficient airliner on Friday. Meanwhile, rival Airbus is struggling with capital in developing its A350 long-haul aircraft.

Having finally adopted the approach of thinking locally to act globally, Walmart is seeing serious growth abroad.

In a change of events, Republic Airway Holdings appears to be the top-dog in the bidding for Frontier Airlines' assets, as the Indianapolis-based regional airline outbid Southwest Airlines this week.

Frank DiPascali, a key lieutenant of Bernie Madoff's ponzi-scheme, pleaded guilty to 10 criminal charges and stated that the operation "was all fake; it was all fictitious" during a statement to a judge in a lower Manhattan court room this week.


Earthquakes and typhoons struck large parts of Southeast Asia this week, wreaking havoc on Taiwan, mainland China, Japan and the Philippines.

North Korea released a South Korean that had crossed into the demilitarized zone more than four months ago in a continued sign that the Communist country is serious in starting international negotiations.

China National Petroleum and CNOOC Ltd have proposed to pay $17 billion for all of Repsol YPF SA's stake in YPF, its Argentine unit, in what would be the biggest foreign investment yet by the Chinese.

Australian mining company, Felix Resources Ltd, accepted a $2.95 billion takeover bid by Yanzhou Coal Mining Co.

Duke Energy signed a memorandum of understanding with China Huaneng Group to develop technology for clean coal and the capture and storage of greenhouse gases.

China is abandoning plans to force an internet filtering software on it citizens, instead giving them the option of voluntarily adding the software to their personal computers.

China's GDP growth slowed slightly in July as banks tightened new loans; however, most indicators showed that a strong recovery is underway in China.

The move of large financial institutions into micro loans has caused a credit bubble in some Indian slums.

Aung San Suu Kyi was sentenced to an additional 18 months house arrest after an uninvited American swam across a lake near her house and stayed with her. Ms. San Suu Kyi has been under house arrest for 14 of the last 20 years due to her outspoken support for democracy in the authoritarian nation of Myanmar. Later in the week, U.S. Senator Jim Webb (D-VA) became the first U.S. official to meet with the Junta, as he secured the release of that same American, who was sentenced to 7 years in jail (although many expected the country to deport him instead). Mr. Webb also was granted an hour with Ms. San Suu Kyi.


Volkswagen concluded its purchase of Porsche this week, as the Wolfburg (Germany) company agreed to pay up to $4.7 billion for a 42% stake in the sports car maker, ending what has been a wild 10-month relationship between the two automakers.

Poland and Slovakia appear to be recovering, although South Central European nations continue to struggle.

Middle East:

The U.S. is pushing Afghan farmers to plant crops other than poppies. In a new $300 million effort, the U.S. will attempt to develop the infrastructure of the country and will sell fruit seeds and livestock to farmers at a heavy discount.


Australia's economy is growing faster than anticipated, causing its central bank to revise its GDP forecasts upward for the third and fourth quarters of 2009. Its recovery also makes Australia likely to be one of the first nations to start raising interest rates, a prediction that has caused its currency to increase markedly versus the dollar during the past few weeks.


Supply continues to weigh on wheat prices but demand could offset supply over the longer term.

India is struggling with a massive drought, which has pushed staple commodities there much higher in recent months.

Et Cetera:

This week's Barron's "Up & Down Wall Street" by Alan Albelson.

Barron's review of this week's market news and its preview of next week's market events.

WSJ Weekend Report: "The New American Dream: Renting"

Legendary guitar innovator Les Paul died this week.

Popular 80s film director John Hughes also passed away this week.

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