(BN) U.S. Stocks Rise on Consumer Confidence as Italy Approves Plan

Bloomberg News, sent from my iPad.

U.S. Stocks Rise on Consumer Confidence as Italy Approves Plan

Nov. 11 (Bloomberg) -- U.S. stocks rallied, preventing a second straight weekly drop in benchmark indexes, as American consumer confidence topped estimates and Italy's approval of debt-reduction plans eased concern about Europe's debt crisis.

All 10 groups in the Standard & Poor's 500 Index rose as 487 stocks gained. Bank of America Corp. and Citigroup Inc. increased at least 2.4 percent as financial shares advanced. Caterpillar Inc. and Alcoa Inc. climbed more than 3.4 percent to pace gains among the biggest companies. Walt Disney Co. jumped 6 percent as the largest theme-park operator reported a 30 percent gain in profit, beating analysts' projections.

The S&P 500 added 2 percent to 1,263.85 at 4 p.m. in New York. The gauge has risen 0.9 percent since Nov. 4, preventing a second weekly drop. The Dow Jones Industrial Average advanced 259.89 points, or 2.2 percent, to 12,153.68. The Russell 2000 Index of small companies gained 2.6 percent. Trading volume dropped to about 6 billion shares, the lowest since July 25, as the Treasury market was shut for Veterans Day.

"Things are starting to settle back in," Philip Orlando, the New York-based chief equity market strategist at Federated Investors Inc., said in a telephone interview. His firm oversees about $355 billion. "The expectation was that Italy and Greece were going out of business. That was overdone. We're going to see some necessary austerity measures put in place," he said. "In the U.S., the economic numbers have absolutely turned the corner and are starting to accelerate."

Stocks extended their rally as the Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 64.2 this month, the highest since June. The median estimate of economists surveyed called for 61.5.

Italian Bond Yields

Earlier gains were driven by a drop in Italian bond yields as the nation's Senate approved budget measures in a bid to allow for a new government. In Greece, Lucas Papademos, a former vice president of the European Central Bank, was sworn in as premier of a unity government.

The Morgan Stanley Cyclical Index jumped 2.7 percent as investors became more optimistic that the global economic recovery would not be derailed by Europe's debt crisis. The Dow Jones Transportation Average added 2.8 percent, while the KBW Bank Index gained 2.1 percent.

Gauges of consumer discretionary, industrial and commodity shares in the S&P 500 had the biggest gains among 10 industries, rising more than 2.3 percent. Bank of America climbed 3 percent to $6.21, while Citigroup advanced 2.4 percent to $29.33. Caterpillar, the world's largest construction and mining- equipment maker, increased 4.3 percent to $96.13. Alcoa, the biggest U.S. aluminum producer, rose 3.4 percent to $10.60.

'Risk On'

"It's like investors hit the keystroke to risk on," Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion, said in a telephone interview. "The European situation is seemingly coming to some closure and a decent consumer confidence report brought investors to risk assets."

Walt Disney climbed 6 percent, the most in the Dow, to $36.70. Higher fees from pay-TV operators, advertising gains and improved results at resorts drove revenue and profit growth. Audience ratings for ESPN increased 13 percent in the quarter, according to Nielsen data provided by Barclays Capital. Disney resorts benefited from higher ticket prices and a new ship.

Nvidia Corp. advanced 3.5 percent to $14.98. The maker of graphics processors reported third-quarter sales and profit that topped analysts' estimates, lifted by demand for chips used by computer gamers and designers. Nvidia has been winning market share in sales of graphics processors for desktop PCs from Advanced Micro Devices Inc., according to Patrick Wang, an analyst at Evercore Partners Inc.

Single-Serve Brewers

Green Mountain Coffee Roasters Inc. rallied 6.9 percent to $43.71. The largest U.S. seller of single-serve brewers plunged 39 percent yesterday, the most ever, as sales trailed estimates. The stock before today had lost 63 percent since its peak in September amid scrutiny of its accounting practices from short sellers including David Einhorn, wiping out $11 billion of market value.

E*Trade Financial Corp. fell 4.1 percent, the most in the S&P 500, to $9.09. The board of the online brokerage rejected putting the company up for sale. Before today, the shares dropped 41 percent in 2011, more than its bigger rivals Charles Schwab Corp. and TD Ameritrade Holding Corp.

The brokerage hired Morgan Stanley in July to explore a sale and then replaced the bank with Goldman Sachs Group Inc. E*Trade, based in New York, initiated the review following a request by Citadel LLC, its biggest shareholder, to address "catastrophic losses" that have driven the shares down 96 percent since 2007.

'Strong Desire'

"A strong desire to sell was never present at E*Trade and if any offers were in fact on the table, they were not compelling enough to change that fact," Patrick O'Shaughnessy, a Chicago-based analyst at Raymond James & Associates Inc., said in a report today. "In our view, the pool of potential buyers is and always has been relatively small."

Molycorp Inc. slumped 14 percent to $33.45. The owner of the largest rare-earth deposit outside China cut its 2011 production forecast and posted third-quarter profit and revenue that missed analysts' estimates. Rare earths are 17 metals used in batteries, electric cars, wind turbines and other products.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Pennsylvania State May Be Downgraded by Moody’s in Wake of Abuse Scandal

Bloomberg News, sent from my iPad.

Penn State Debt May Be Cut by Moody's on Child Sex-Abuse Scandal

Nov. 11 (Bloomberg) -- Penn State University had its Aa1 revenue-bond rating placed on review for possible downgrade by Moody's Investors Service amid the investigation into a child sex-abuse scandal.

Moody's said it will examine the reputational and financial risk arising from the probe, after the Penn State football team's former defensive coordinator, Jerry Sandusky, was charged with sexually assaulting eight boys from 1994 to 2009.

About $1 billion of rated debt would be affected by a downgrade, according to the statement. The company said it will take several months to monitor events, including possible lawsuits, weaker student demand, decreased philanthropic support, changes in its relationship with the state and management moves. Aa1 is Moody's second-highest rating.

"While the full impact of these increased risks will only unfold over a period of years, we will also assess the degree of near- and medium-term risks to determine whether to downgrade," Moody's said in the statement.

A Penn State revenue bond maturing in March 2030 traded Nov. 9 at an average yield of 3.65 percent, down from 4.15 percent in a trade about a month earlier, according to data compiled by Bloomberg.

Penn State, with 96,000 students and more than 500,000 alumni, raised $195.3 million last year, up from $82 million in 1995, when former President Graham B. Spanier was appointed, according to the Council for Aid to Education, which tracks gifts. Spanier and football coach Joe Paterno were fired this week.

To contact the reporters on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net Greg Chang in San Francisco at gchang1@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Bank of America Says Regulators May Limit Transfer of Merrill Derivatives

Bloomberg News, sent from my iPad.

BofA Says Regulators May Limit Transfer of Merrill Contracts

Nov. 11 (Bloomberg) -- Bank of America Corp. may be prevented by regulators from shifting derivatives contracts into the books of a deposit-taking unit, potentially forcing the lender to hand over more collateral to counterparties.

The lender has designated the retail-deposit unit, Bank of America NA, as the new counterparty on some Merrill Lynch contracts after the company's credit ratings were cut in September, it said last week in a filing. The Federal Reserve and Federal Deposit Insurance Corp. have disagreed over the moves, and they are now discussing whether to allow future transfers, according to people with knowledge of the matter.

"Our ability to substitute or make changes to these agreements to meet counterparties' requests may be subject to certain limitations, including counterparty willingness, regulatory limitations on naming Bank of America NA as the new counterparty, and the type or amount of collateral required," the lender wrote in the quarterly regulatory filing.

At stake for Bank of America is the power to curb billions of dollars in collateral payments to counterparties that could be required after a credit-rating downgrade. The company, which has lost more than half its market value this year amid rising expenses from soured mortgages, is vulnerable to further rating cuts, the bank said in the Nov. 3 regulatory filing.

Limits on moving contracts from Merrill Lynch to the deposit unit could "adversely affect" results, the Charlotte, North Carolina-based bank said in the filing. The transfers lower collateral obligations because the retail unit still has a higher rating than the Merrill Lynch subsidiary after the Sept. 21 downgrades from Moody's Investors Service.

Shifting Risk

"It's a game of 'move the risk,'" said Mark Williams, a former Federal Reserve examiner who lectures on financial-risk management at Boston University. "It makes sense for Bank of America, but the broader implication is that it makes the retail operations potentially riskier. If there is another downgrade, you have the possibility of falling off a credit cliff."

The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, people familiar with its position said Oct. 18. The FDIC, which would have to pay depositors in a failure, objected, the people said.

The other two major ratings firms, Standard & Poor's and Fitch Ratings, are re-evaluating Bank of America and may also cut its credit grades, the lender said in the quarterly filing. The full scope of damage from a credit-rating downgrade is "inherently uncertain" because it depends upon the behavior of counterparties and customers, the bank said.

Collateral Estimates

Derivatives are financial instruments used to hedge risks or for speculation. They're derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in the weather or interest rates. The contracts often require counterparties to post collateral in amounts that can increase if their creditworthiness deteriorates.

Bank of America's holding company -- the parent of both the retail bank and the Merrill Lynch unit -- held almost $75 trillion of the contracts at the end of June, according to data compiled by the Comptroller of the Currency. About $53 trillion, or 71 percent, were within Bank of America NA, according to the data, which represent the notional values of the trades. The company is the second-largest U.S. lender by assets.

In August, the bank said a two-level downgrade by all ratings companies would require it to post $3.3 billion in additional collateral and termination payments, based on agreements as of June 30. As of Sept. 30, counterparties were entitled to $4.9 billion beyond what the bank had posted, according to last week's filing. Of that, $3.2 billion resulted from the Moody's downgrade.

JPMorgan's Holdings

Bank of America also said the impact of further downgrades would be more severe than in previous projections. Another two- level cut could amount to $6.6 billion in collateral demands, based on Sept. 30 data, it said.

The firm held cash and securities collateral of $93 billion as of Sept. 30, and had posted $87.8 billion, about 30 percent more than the end of 2010.

Bank of America's rating is now four grades below the one Moody's assigned to JPMorgan Chase & Co., which became the biggest U.S. bank by assets this year, and a level below the rating given to Citigroup Inc., the No. 3 lender. JPMorgan's deposit-taking entity, JPMorgan Chase Bank NA, contained 99 percent of the New York-based firm's $79 trillion of notional derivatives, according to the OCC.

'Not FDIC Insured'

Andrew Gray, a spokesman for the FDIC and Barbara Hagenbaugh of the Federal Reserve declined to comment on Bank of America's filing.

Congressional Democrats including North Carolina Representative Brad Miller and Ohio Senator Sherrod Brown asked regulators last month whether they explored potential risks from the derivative moves. Eighteen lawmakers signed onto letters seeking information.

"These derivative trades are not FDIC insured," said Jerry Dubrowski, a Bank of America spokesman. "Other financial institutions hold higher derivative balances in their banking entities."

Bank of America Chief Financial Officer Bruce R. Thompson discussed the transfers on a conference call with analysts last month after Bloomberg News reported that federal regulators were at odds over the movements.

"We had worked very hard over the course of the last nine months to be prepared to the extent that we did receive a downgrade, and feel very good about the way that we've minimized the potential impact," he said on the Oct. 18 call. The moves are part of "the normal course of dealings that we've had with counterparties since Merrill Lynch and BofA came together."

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

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net Dan Kraut at dkraut2@bloomberg.net .

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Stocks in U.S. Gain on Consumer Confidence, Italy Debt-Reduction Measures

Bloomberg News, sent from my iPad.

U.S. Stocks Gain on Consumer Confidence, Italy; Euro, Oil Climb

Nov. 11 (Bloomberg) -- Stocks rallied, preventing a second straight weekly decline for the Standard & Poor's 500 Index, and commodities climbed as U.S. consumer confidence improved and Europe took steps to address its debt crisis. Italy's bonds gained and oil reached a three-month high.

The S&P 500 jumped 1.9 percent to close at 1,263.85 at 4 p.m. in New York, pushing it up 0.8 percent for the week and 0.5 percent in 2011. The MSCI All-Country World Index added 2.2 percent after falling 3.1 percent in the previous two days. The euro appreciated 1.1 percent to $1.3752, while the dollar slid versus 16 major peers. Italian 10-year bond yields declined 44 basis points to 6.45 percent. Oil rose to almost $99 a barrel, capping the longest streak of weekly gains since 2009.

U.S. equities extended an early rally after a gauge of consumer sentiment topped estimates in November, reaching the highest level since June and bolstering optimism before the holiday shopping season. Italy's Senate approved debt-reduction measures, paving the way for a new government led by former European Union Competition Commissioner Mario Monti, while Greece swore in Lucas Papademos to head a unity government.

"It's like investors hit the keystroke to risk on," Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion, said in a telephone interview. "The European situation is seemingly coming to some closure and a decent consumer confidence report brought investors to risk assets."

The S&P 500 rose for a second day, adding to yesterday's 0.9 percent advance that was triggered by a drop in jobless claims and a retreat in Italian bond yields from records. The S&P 500 has rebounded about 15 percent from a 13-month low on Oct. 3 as the Citigroup Economic Surprise Index for the U.S., which gauges whether data is beating or trailing estimates, climbed to a seven-month high.

Disney Surges

Walt Disney Co. rose 6 percent to lead the Dow Jones Industrial Average higher after fourth-quarter earnings exceeded estimates on growth in cable TV and U.S. resorts. Bank of America Corp. and Alcoa Inc. also rose at least 3.4 percent, helping lead the Dow up 259.89 points, or 2.2 percent, to 12,153.68.

About 6 billion shares changed hands on all U.S. exchanges, the slowest trading session since July 25. Treasury trading was closed for the Veterans Day holiday.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 64.2 this month, the highest since June, from 60.9 in October. The median estimate of economists surveyed by Bloomberg News called for a reading of 61.5.

The Stoxx Europe 600 Index climbed 2.4 percent as all 19 industries advanced. A gauge of European banks rebounded 3.6 percent following two days of losses as BNP Paribas SA of France and the Royal Bank of Scotland Group Plc jumped more than 5 percent. Telecom Italia SpA gained 5.3 percent after third- quarter profit beat analysts' estimates.

Yield Spreads

The extra yield investors demand to hold Italy's 10-year debt instead of German bunds, Europe's benchmark government securities, dropped 55 basis points to 456 after climbing to a euro-era record 575 basis points two days ago. The French-German spread narrowed 19 basis points to 150 after S&P corrected an erroneous message to subscribers yesterday that suggested the nation's AAA credit rating had been lowered.

The Greek two-year yield rose to a record of 111 percent. The cost of insuring European sovereign debt fell, with the Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments dropping 12 basis points to 333.

The euro strengthened against 12 of its 16 major counterparts. The U.S. currency fell against all 16, with the Dollar Index dropping 1 percent.

Crude oil rose 1.2 percent to $98.99, the highest since July, and capped a sixth straight weekly advance. Copper climbed 2.7 percent, the most in two weeks, to $3.4635 a pound. China, the biggest buyer of industrial metals, will focus on domestic growth to boost the world economy, Vice Finance Minister Wang Jun said in Honolulu.

The MSCI Emerging Markets Index rallied 1.8 percent, with Brazil's Bovespa surging 2.1 percent. The Hang Seng China Enterprises Index in Hong Kong advanced 1.3 percent, Hungary's BUX jumped 4.4 percent and Brazil's Bovespa gained 2.1 percent. The Kospi Index rose 2.8 percent after South Korea left interest rates unchanged, while India's Sensitive Index lost 1 percent as the nation's factory output slowed. Funds investing in developing-nation stocks took in $2.1 billion in the week ended Nov. 9, Citigroup Inc. said, citing data compiled by EPFR Global.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net Rita Nazareth in New York at rnazareth@bloomberg.net

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

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Asia Ascending Drives Obama Message as America’s First Pacific President

Bloomberg News, sent from my iPad.

Asia Rise Drives Obama Message as U.S.'s First Pacific President

Nov. 11 (Bloomberg) -- President Barack Obama, who calls himself "America's first Pacific president," is pressing Americans to think more about Asia -- and, in some ways, to think more like Asians do.

He's highlighting his administration's turn toward the Pacific by hosting the Asia-Pacific Economic Cooperation Summit in Hawaii on Nov. 12-13 and visiting Indonesia on Nov. 17-19 as the first U.S. president to participate in the East Asia Summit. In between the two meetings, he'll visit Australia to discuss expanded military ties.

In speeches in the U.S., China, Japan, South Korea, India, Singapore and Indonesia, Obama has said his Asia focus is driven by today's economic and demographic trends, while his instincts about the continent are influenced by his birth in Hawaii and four boyhood years in Indonesia.

"The Pacific Rim has helped shape my view of the world," he said in Tokyo on Nov. 14, 2009. During his lifetime, he said, "The fortunes of America and the Asia-Pacific have become more closely linked than ever."

His attention to Asia also has a domestic political dimension. Since introducing his $447 billion jobs plan on Sept. 8, Obama has emphasized spending by China, South Korea and other nations on airports, infrastructure and teachers in an effort to build support for his own provisions, which face opposition from congressional Republicans.

Competition is 'Real'

He has pointed to China and India to stress another priority of his: Promoting science and technology education, to urge American parents, students, schools and companies to train more engineers.

In his Jan. 25 State of the Union address, Obama said the two nations have been "educating their children earlier and longer" with more math and science. China, he said, houses the world's fastest computer and largest private solar research facility.

"The competition for jobs is real," he said. "But this shouldn't discourage us. It should challenge us."

Since his first year in office, Obama has asked Americans to look beyond concerns about Chinese dominance or U.S. job losses and see a diverse region that can be a growing market for U.S. goods and services, yield stronger foreign policy alliances and help respond to global challenges such as climate change.

"I would never say that he's saying America should emulate Asia," said Satu Limaye, director of the Washington office of the East-West Center, a Honolulu policy center that studies U.S. relations with Asia-Pacific nations. "What he's saying is, 'We should take note of what is happening in other places,' and this is a call for us to become more competitive."

Export Boom

American companies are already sold on the region's importance: The U.S. exported $326.4 billion in 2010 to the Pacific Rim in goods and services, according to U.S. Census Bureau data, up from $254.6 billion in 2009. That exceeded American exports to the European Union or to Canada. From 2000 to 2010, exports to the Pacific Rim rose 71.5 percent.

Those include exports to Australia, Brunei, China, Hong Kong, Indonesia, Japan, South Korea, Macao, Malaysia, New Zealand, Papua New Guinea, the Philippines, Singapore and Taiwan.

Looking at a broader swath of Asia, the U.S. in 2009 exported $414 billion in goods and services to Asian countries, a 56 percent increase since 2001, according to the Asia 40 index of countries developed by the East-West Center's Asia Matters for America initiative. That index compiles data from the census, U.S. Department of Commerce and Institute of International Education.

Supporting U.S. Jobs

That 40-country region also accounted for 30 percent of total U.S. jobs supported by exports, or almost 850,000, in 2009. Students from the Asia-Pacific contributed $9 billion a year to the U.S. economy, and there were 350,000 Asian students studying in the U.S. in the 2008-09 academic year, according to the index, which includes countries in Northeast Asia, Southeast Asia and South Asia, as well as Australia and New Zealand. And 26 percent of the U.S.'s foreign-born population came from Asia.

Free-trade agreements among Asian nations are expanding, meanwhile, from six deals in 1995 to 70 now in force and 70 more under negotiation, according to the U.S. Chamber of Commerce. The U.S. has trade accords with Australia, Singapore and South Korea. The U.S.-Korea Free Trade Agreement, which Obama signed on Oct. 21, will boost American exports by as much as $10.9 billion in its first year in full effect, the U.S. International Trade Commission says.

Obama underlined his emphasis on Asia in 2009 by advocating replacing the Group of Eight economic forum, whose only Asian member is Japan, with the G-20, which also includes China, South Korea, India and Indonesia, as the world's key economic body.

State Dinners

Since then, three of Obama's five White House state dinners have honored Asian leaders -- Chinese President Hu Jintao, Indian Prime Minister Manmohan Singh and South Korean President Lee Myung-bak. He's made a major Asia trip each year.

"For a very long time, Asia was a region that Americans associated with outsourcing and with cheap labor and cheaper products here at home," White House deputy national security adviser Ben Rhodes said.

With the growth of middle classes beyond Japan and China, in South Korea, Thailand, Malaysia and Indonesia, "You're going to increasingly see U.S. job growth supported by exports to these countries," Rhodes said.

Obama thinks the U.S. has "an enormous stake" in the region's future and wants to convey that "our economic growth at home is going to be tied directly to our ability to be competitive in these markets."

Cooperate, Don't 'Collide'

"More is to be gained when great powers cooperate than when they collide," Obama told students in Shanghai on Nov. 16, 2009. It was on that Asia trip, during the stop in Tokyo, that he declared himself ���America's first Pacific president."

Speaking in the native tongue to a Jakarta crowd on Nov. 10, 2010, Obama said, "Indonesia is a part of me" and recalled running through fields with water buffalo and goats.

"A rising middle class here in Indonesia means new markets for our goods," he said. "Emerging economies like Indonesia have a greater voice and also bear a greater responsibility for guiding the global economy."

At a town hall event in Mumbai on Nov. 7, 2010, he described "a tug of war within the United States" between those threatened by globalization and those who accept a new global reality. For most of his life, he said, the U.S. was dominant enough to meet other countries "on our terms," and now "we've got to negotiate this changing relationship."

Saving Jobs

Obama brought South Korean President Lee to Detroit on Oct. 14 to a General Motors Co. plant to promote the trade agreement between the U.S. and South Korea. Lee told the workers the trade deal "is going to protect your jobs."

In an Oct. 11 speech, Obama said the sort of global envy once directed at the U.S. for the Hoover Dam is now being directed at the Chinese for the airport in Beijing.

"We can't compete that way, playing for second or third or fourth or eighth or 15th place," he said.

Obama's Asia focus meshes with the U.S. Chamber of Commerce, even as his domestic policies on taxes and spending often clash with the business community.

"Asia is the fastest-growing market in the world," said chamber spokesman J.P. Fielder.

Secretary of State Hillary Clinton said the U.S. should turn more resources to the region. In a piece on "America's Pacific Century" for this month's Foreign Policy magazine, Clinton wrote that a U.S. economic recovery "will depend on exports and the ability of American firms to tap into the vast and growing consumer base of Asia." The U.S. also must be engaged in military and other issues important to the region, she said.

"In Asia, they ask whether we are really there to stay, whether we are likely to be distracted again by events elsewhere, whether we can make -- and keep -- credible economic and strategic commitments, and whether we can back those commitments with action," Clinton wrote. "The answer is: We can, and we will."

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Gold Traders Most Bullish Since 2004 on Deepening Debt Crisis: Commodities

Bloomberg News, sent from my iPad.

Gold Traders Most Bullish Since '04 on Debt Crisis: Commodities

Nov. 11 (Bloomberg) -- Gold traders and analysts are the most bullish in at least seven years as investors accumulate metal at the fastest pace since August to protect their wealth from a widening European debt crisis.

Twenty-one of 22 surveyed by Bloomberg expect bullion to rise on the Comex in New York next week, the third consecutive increase and the highest proportion in data going back to April 2004. Holdings in exchange-traded products backed by gold rose 27.5 metric tons this week, within 1 percent of the record set almost three months ago, data compiled by Bloomberg show.

Gold exceeded $1,800 an ounce for the first time in seven weeks on Nov. 8 and hedge funds are holding their biggest bet on higher prices since mid-September, Commodity Futures Trading Commission data show. The metal is rebounding after tumbling as much as 20 percent in three weeks in September on demand for what are perceived as the safest assets. Almost $9 trillion was wiped off the value of global equities since May and yields on Italian and Greek bonds rose to euro-era records this week.

"Throughout history gold has protected people from the sort of turmoil that we're seeing," said Mark O'Byrne, the Dublin-based executive director of GoldCore Ltd., a brokerage that sells everything from quarter-ounce British Sovereigns to 400-ounce bars. It's "an important thing to own when there is this sort of volatility in stock markets and concern about currency devaluations."

Gold climbed 24 percent to $1,764.50 this year, heading for an 11th consecutive annual advance. It's the third-best performer behind gas oil and heating oil in the Standard & Poor's GSCI Index of 24 commodities, which rose 5 percent. The MSCI All-Country World Index of equities retreated 8.9 percent and Treasuries returned 8.6 percent, according to a Bank of America Corp. index.

Investor Concern

The gold survey has forecast prices accurately in 223 of 387 weeks, or 58 percent of the time.

While gold is benefiting from mounting investor concern that European nations will default on their debt, other commodities may drop because slower growth will curb demand for raw materials. Traders expect copper, raw sugar and soybeans to decline next week and are equally divided on corn, separate Bloomberg surveys showed.

The 27.5 tons of gold added to ETPs this week is the most since Aug. 19 and investors bought 40.9 tons this month, the most since July. Combined holdings of 2,312.1 tons are now valued at $131.2 billion and exceed the reserves of all but four central banks, data compiled by Bloomberg show. The record of 2,330 tons was set Aug. 18.

All-Time High

Money managers raised their combined net-long position in U.S. futures and options by 6.8 percent to 148,279 contracts in the week ended Nov. 1, CFTC data show. Wagers were a record 253,653 contracts in August, a month before prices climbed to an all-time high of $1,923.70.

Prices slumped in September as the decline in equity markets obliged some investors to sell their bullion to cover those losses. Global stocks slipped to the lowest level in almost three weeks yesterday.

"The major risk is that a sharp decline in global stock markets will lead to renewed margin calls and fund liquidations," said Adrian Day, president of Adrian Day Asset Management in Annapolis, Maryland. That may prompt "many managers to sell gold, a highly liquid asset."

Gold may reach $1,950 by the end of the first quarter, according to the median estimate of eight of the 10 most- accurate forecasters tracked by Bloomberg over the past two years. The survey was carried out at the end of October.

Technical Charts

Technical indicators suggest the rally that began in September has further to go. While gold jumped 15 percent since reaching an 11-week low Sept. 26, its 14-day relative-strength index is at 57, below the level of 70 that indicates to some who study technical charts that the metal is poised to drop.

Gold priced in euros is doing even better, rising 4.6 percent this month compared with a 2.3 percent gain for dollar- denominated bullion. Dennis Gartman, the Suffolk, Virginia-based economist and editor of the Gartman Letter, owns gold priced in euros and wrote yesterday that it reduces volatility.

Commodities as measured by the S&P GSCI gauge are heading for their weakest performance since 2008. Demand for everything from crude oil to aluminum to wheat contracted that year as nations contended with the worst global recession since World War II. The International Monetary Fund is anticipating no return to that slump, forecasting economic growth of 4 percent in 2012, unchanged from this year.

Eleven of 21 traders and analysts surveyed by Bloomberg expect copper to fall next week. The metal for delivery in three months, the London Metal Exchange's benchmark contract, declined 22 percent to $7,523.75 a ton this year.

Nine Surveyed

Raw-sugar futures dropped 11 percent since reaching a one- month high on Oct. 17 to 25.37 cents a pound on ICE Futures U.S. in New York. Prices declined 21 percent this year. Six of nine people surveyed expect prices to drop next week.

Eighteen of 30 surveyed anticipate declines in soybeans. Out of 29 corn traders and analysts, 11 said prices will rise and the same amount predicted a retreat. Corn increased 3.3 percent to $6.4975 a bushel in Chicago this year, while soybeans fell 16 percent to $11.7725 a bushel.

"At the moment, it seems that everything is dependent on the sovereign debt crisis in the euro zone," said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt. "If it's escalating we will probably see much lower commodity prices in general. Gold should still be well supported."

 Gold survey results: Bullish: 21 Bearish: 1 Hold: 0 Copper survey results:  Bullish: 9 Bearish: 11 Hold: 1 Corn survey results: Bullish: 11 Bearish: 11 Hold: 7 Soybean survey results: Bullish: 8 Bearish: 18 Hold: 4 Raw sugar survey results: Bullish: 2 Bearish: 6 Hold: 1 White sugar survey results: Bullish: 3 Bearish: 5 Hold: 1 White sugar premium results: Widen: 2 Narrow: 4 Neutral: 3 

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) U.S. Stock Futures Advance as Concern on Italy, France Debt Yields Eases

Bloomberg News, sent from my iPad.

U.S. Stock Futures Rise as Concern on Italy, France Debt Eases

Nov. 11 (Bloomberg) -- U.S. stock futures rose, signaling the Standard & Poor's 500 Index will gain for a second day, as borrowing costs dropped in Italy and France, tempering concern about the euro area's debt crisis.

Bank of America Corp., the second-largest U.S. lender, climbed 1.7 percent in early New York trading. Nvidia Corp. jumped 4.4 percent after posting earnings that topped analysts' estimates.

S&P 500 futures expiring in December rose 0.6 percent to 1,244.8 at 6:47 a.m. in New York, indicating that the benchmark measure will extend its rebound from the 3.7 percent slump on Nov. 9. Dow Jones Industrial Average futures expiring the same month gained 60 points, or 0.5 percent, to 11,915 today.

"The fact that Italian bond yields have continued to recede has helped ease investor concerns over an immediate escalation in the debt crisis," said Joshua Raymond, chief market strategist at City Index in London. "It could be folly to read today's gains as investment sentiment changing with still so much at risk in the euro zone. As such, gains remain fragile."

The S&P 500 rebounded yesterday from its worst drop since August as jobless claims fell. A retreat in Italian bond yields and the naming of a new prime minister in Greece eased concern that the euro area's crisis will escalate. The S&P 500 has still slipped 1.1 percent this week.

Italian Bond Yields

Italian bonds climbed today before the nation's Senate votes on debt-reduction measures designed to shore up investor confidence in the euro area's third-biggest economy. French securities rose, outperforming benchmark German debt.

The yield on 10-year Italian bonds fell 29 basis points to 6.60 percent, extending yesterday's 36 basis-point drop. The French-German spread tightened 5 basis points to 164 basis points, after reaching a euro-era record 170 basis points yesterday.

Bank of America increased 1.7 percent to $6.13 in early New York trading after the shares dropped 2.1 percent yesterday.

Nvidia climbed 4.4 percent to $15.10 in New York after the maker of graphics chips reported third-quarter sales and profit that topped analysts' estimates, lifted by demand for chips used by computer gamers and designers.

Walt Disney Co. increased 3.1 percent to $35.70 in German trading. The owner of Mickey Mouse and Marvel Entertainment LLC posted fourth-quarter earnings per share of 59 cents, exceeding the average analyst estimate of 55 cents.

A report from Reuters/University of Michigan, scheduled for 9:55 a.m. New York time, may show that consumer confidence increased in November, according to a survey of 67 economists.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Oil Riches Pile on China Doorstep as Clashes Delay Drilling (1)

Bloomberg News, sent from my iPad.

Oil Riches Pile on China Doorstep as Clashes Delay Drilling

Nov. 11 (Bloomberg) -- To China, the world's biggest energy consumer, another Saudi Arabia of oil may lie beneath the ocean to its south. Escalating regional tensions mean large-scale drilling may be slipping further into the future.

The South China Sea may hold 213 billion barrels of oil, or 80 percent of Saudi Arabia's reserves, according to Chinese studies cited in 2008 by the U.S. Energy Information Agency. The world's second-largest economy claims "indisputable sovereignty" over most of the sea, including blocks off Vietnam that Exxon Mobil Corp. and Russia's Gazprom OAO are exploring.

Disputes have strained China's ties with its neighbors and tensions rose this year as Vietnam said oil survey boats were harassed by Chinese vessels. The friction threatens maritime security in one of the world's busiest shipping lanes and may be discussed at a two-day summit of Asia-Pacific leaders hosted by U.S. President Barack Obama in Honolulu starting tomorrow.

"China is the elephant in the room at the moment, so like it or not, you cannot ignore it," said Lin Boqiang, director of the independent China Center for Energy Economics Research at Xiamen University in Fujian province. "Countries at the rim of the South China Sea are under pressure to find a practical way to deal with its presence -- not to anger or challenge it."

The sea lies south of mainland China at the western extreme of the Pacific Ocean, and while it borders several nations China claims a huge expanse. That's based largely on a historical map that predates the founding of the People's Republic in 1949. There are hundreds of islands, many disputed.

China-Vietnam Clash

Chinese and Vietnamese military forces clashed in the Paracel Islands in 1974 and the Spratly Islands in 1988. The region, marked by China's "nine-dotted line" to delineate its territorial claims, extends hundreds of miles south from its Hainan Island to equatorial waters off the coast of Borneo, and overlaps with areas claimed by Brunei, Malaysia and Taiwan.

The Philippines will propose a new initiative to settle disputes in the South China Sea at a meeting of the Association of Southeast Asian Nations next week, Foreign Affairs Secretary Albert del Rosario said Oct. 26. President Benigno Aquino will also meet with U.S. Secretary of State Hillary Clinton in Manila this month and discuss maritime security with Obama at the East Asia summit in Bali on Nov. 18, del Rosario said Nov. 9.

The U.S. set off China's ire in 2010 when Clinton, speaking at a regional summit in Hanoi, called resolving the competing claims to the sea "a leading diplomatic priority." That drew a rebuke from Chinese Foreign Minister Yang Jiechi, who said internationalizing the incident with U.S. involvement "can only make matters worse and more difficult to solve."

Security Alliances

"There are challenges facing the Asia-Pacific that demand America's leadership, from ensuring freedom of navigation in the South China Sea to countering North Korea's provocations and proliferation activities to promoting balanced and inclusive economic growth," Clinton said in Honolulu yesterday.

The U.S. has longstanding security alliances with countries including Australia, Japan, South Korea, and the Philippines, which it aims to enhance, and faces a balancing act as it seeks to deepen regional integration. Nations such as the Philippines and Vietnam are simultaneously attracted by Chinese commerce and concerned by what they consider Chinese belligerence. The U.S., likewise, sees China as both partner and rival.

Obama is hosting the annual 21-nation Asia-Pacific Economic Cooperation summit in Honolulu Nov. 12-13 before visiting Australia and attending the East Asia Summit Nov. 18-19.

Foreign Drillers

Vietnam and the Philippines reject China's map as a basis for joint development of oil and gas resources, and have pushed forward oil and gas exploration projects in blocks which also lie within areas claimed by China. In March, Chinese ships chased away a vessel off the Philippines. Chinese vessels in June rammed the cables of a survey ship doing work for Vietnam, the second such incident in a month.

"Where we've seen these assertive -- verging on aggressive -- actions from Chinese vessels of one stripe or another, the common factor is a determination not to see the other countries going ahead unilaterally to explore and produce oil or gas if China is not involved," said Euan Graham, senior fellow at the S. Rajaratnam School of International Studies in Singapore.

Talisman Energy Inc., a partner of state-owned Vietnam Oil & Gas Group, aims to begin drilling next year in a block that China had already awarded to a U.S. rival and protected with gunboats. Talisman's blocks 133 and 134, about 300 kilometers (186 miles) from Vietnam, are known as WAB-21 in China, which awarded them in 1992 to Crestone Energy Corp. Crestone is now owned by Houston-based Harvest Natural Resources Inc.

Exxon's Discovery

Exxon, the world's most valuable company, discovered oil and gas in a field off Vietnam, the Wall Street Journal reported Oct. 25. Companies including Malaysia's Petroliam Nasional Bhd., Russia's Gazprom, Paris-based Total SA and London-based Premier Oil Plc have also found oil in the South China Sea, according to the report.

China warned foreign energy companies against exploration in the area after Exxon's discovery, Hong Lei, spokesman of the Chinese foreign ministry, said Oct. 31.

India's state-run Oil & Natural Gas Corp. and PetroVietnam signed Oct. 12 a three-year deal that aims to boost the countries' investment in exploration and production. On the same day, D.K. Sarraf, managing director of unit ONGC Videsh Ltd., said the company may bid in an auction of nine offshore blocks being offered by Vietnam that will close Jan. 26.

"China should denounce this agreement as illegal," an editorial published by the state-run People's Daily said Oct. 14. "Once India and Vietnam initiate their exploration, China can send non-military forces to disturb their work, and cause dispute or friction to halt the two countries' exploration."

Saudi Arabia

Chinese estimates of oil reserves cited by the U.S. energy agency compare with 264.5 billion barrels of proven reserves held by Saudi Arabia at the end of last year, data from the BP Statistical Review of World Energy show.

The region may hold 2 quadrillion cubic feet of natural gas. That's more than five times the 350.8 trillion cubic feet of gas held in North America, according to BP.

The Chinese numbers dwarf a 2010 United States Geological Survey assessment of the entire Southeast Asia region which calculated a mean undiscovered reserves estimate of 21.6 billion barrels of oil and 299 trillion cubic feet of gas, including onshore deposits.

"There are definitely oil and gas deposits in the South China Sea, but there's no confirmation how much until actual drilling happens," said Hooman Peimani, Principal Fellow at the National University of Singapore's Energy Institute. "It's essential for China to ensure it ends up with as large chunks of assets as it can get in its vicinity."

Chinese Consumption

China surpassed the U.S. as the world's largest energy user last year, using 2.4 billion tons of oil equivalent. Consumption climbed 11.2 percent, the fastest among the world's major economies, according to BP.

Chinese companies have announced about $53 billion of bids for overseas oil and gas assets since the beginning of last year to meet the energy needs of the world's most populous nation.

For Vietnam and the Philippines, the revenue and energy security from offshore hydrocarbon reserves would help boost economic growth. For China, delays to a final resolution of territorial claims may prove more fruitful in the longer term.

"Time will only make China much stronger, both economically and militarily, and increase its chances of grabbing a bigger share of the pie," Lin said. "We all know when the elephant moves, it shakes the room."

To contact the reporters on this story: Nick Heath in Hanoi at nheath2@bloomberg.net Rakteem Katakey in New Delhi at rkatakey@bloomberg.net Guo Aibing in Hong Kong at aguo10@bloomberg.net

To contact the editors responsible for this story: Amit Prakash at aprakash1@bloomberg.net Andrew Hobbs at ahobbs4@bloomberg.net .

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Invisible Run on Banks Becoming Conversation With Italian Yields Above 7%

Bloomberg News, sent from my iPad.

Invisible Bank Run Becomes Conversation With 7% Italy Yield

Nov. 11 (Bloomberg) -- Italy's highest bond yields since the birth of the euro are reverberating through the financial system of Europe's biggest debt issuer, driving lenders to seek record amounts of central bank financing.

Italian banks borrowed 111.3 billion euros ($152 billion) from the European Central Bank at the end of October, up from 104.7 billion euros in September and 41.3 billion euros in June, Bank of Italy data show. The five biggest lenders -- UniCredit SpA, Intesa Sanpaolo, Banca Monte dei Paschi di Siena SpA, Banco Popolare SC and UBI Banca ScpA -- accounted for 61 percent of the country's use of ECB resources in September, almost double the share in January.

After punishing Greece, Ireland and Portugal for their rising debt loads, the bond market is now targeting Italy, pushing bonds yields in the euro zone's third-largest economy above 7 percent as the nation's lenders prepare to refinance $120 billion of debt maturing next year. Italy's $2 trillion in liabilities exceed those three countries combined, plus Spain.

"The banks are deleveraging on a tightrope," Alberto Gallo, a credit strategist at Royal Bank of Scotland Group Plc in London, said in an interview. The slump in Italy's bonds, which sent the 10-year yield soaring to as high as 7.48 percent Nov. 9, is reducing the value of fixed-income securities held by banks, eroding their value as collateral for loans, Gallo said.

Bill Rates

Bond investors charged the nation an interest rate of 6.087 percent yesterday to buy 5 billion euros of one-year bills, the highest in 14 years. Greece, Ireland and Portugal sought a bailout from the ECB, the European Union and the International Monetary Fund after their bond yields rose amid the region's sovereign debt woes.

The crisis that's engulfing Italy and other so-called peripheral countries is also spreading to Europe's richer economies. Credit-default swaps protecting against a French default jumped to a record 203 basis points yesterday, before falling back to 200, according to CMA prices. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments was at 337 basis points, compared with an all-time high 358 on Sept. 23.

As Italy's government faces collapse after Prime Minister Silvio Berlusconi promised to resign once Parliament approves austerity measures, deputy finance ministers meeting at the Asia-Pacific Economic Cooperation forum in Hawaii this week expressed concern over the danger Europe poses to the world economy.

European 'Firewall'

U.S. Treasury Undersecretary for International Affairs Lael Brainard said European officials must speed up construction of a "firewall" to protect countries that have sound policies. The 17-nation euro has weakened 4 percent since Oct. 27.

International Monetary Fund fiscal monitors are due to visit the Italian capital, and European Union Economic and Monetary Affairs Commissioner Olli Rehn says he wants answers to "very specific questions" on economic pledges by the weekend. U.K. Prime Minister David Cameron said Italian interest rates are "getting to a totally unsustainable level."

The extra yield investors demand to hold Italian 10-year debt rather than German bunds rose to a euro-era record 5.53 percentage points on Nov. 9 before falling back to 4.78 percentage points.

Italy's top 32 banking firms have about 88 billion euros, or 3.2 percent of their liabilities, maturing in 2012, according to the Bank of Italy. Next year's maturities coincide with about 307 billion euros of the government's debt coming due, the most ever, according to data compiled by Bloomberg.

Broader Funding

Italian lenders are seeking to broaden their sources of funding. Corrado Passera, the chief executive officer of Intesa Sanpaolo SpA, said on Nov. 8 the bank can do without wholesale funding for all of next year, and rely on deposits and bonds it sells to individual customers.

Retail funding made up 54.1 percent of the Italian banking system's total as of June, compared with 48.8 percent in the rest of the euro zone, according to the Bank of Italy.

The cost of that money increased 0.4 percentage point, or 40 basis points, to 1.7 percent in the nine months ended Sept. 30 as the funding mix shifted to products such as repurchase agreements and fixed-term deposits that pay clients more, central bank data show.

Italian banks' share of ECB lending rose to about 19 percent of the total in October, according to the Bank of Italy. That's up from 15 percent, or 91 billion euros, in September, the data show.

Likely Recession

"The Italian banks are trapped," said Roger Doig, a London-based analyst at Schroders Plc, which manages about $58 billion in fixed-income assets. "They are where they are and that's with the Italian sovereign. The austerity required if the sovereign wants to remain in the euro zone means there's going to be a recession, which will mean losses for the banks."

Default swaps tied to the senior debt of UniCredit, a proxy for the cost of funding at Italy's biggest lender, jumped 150 basis points this month to 502 basis points, approaching the record 504 reached in September. Contracts on Intesa Sanpaolo, the second-largest, jumped 129 to 467, also close to an all-time high, according to CMA in London.

Five-year contracts on Italy rose to a record 571 basis points on Nov. 9, up from 445.5 at the end of last month and 239 at the beginning of 2011, according to CMA. The price was 556 basis points today.

Credit-default swaps typically decrease as investor confidence improves and rise as it deteriorates. They pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

'Assuming Italy Fails'

"The market is pricing in an Italy event and assuming that Italy fails," said Patrick Lemmens, a senior money manager who helps oversee about $13 billion, including Intesa Sanpaolo shares, at Robeco Groep in Rotterdam.

Household deposits in Italy still are expanding "at a moderate pace," according to the Bank of Italy. That's a contrast to withdrawals seen in Greece, Ireland and Portugal.

The annual rate of decline in Irish private-sector deposits was 10.5 percent at the end of September, according to that nation's central bank. In Greece, deposits fell 2.9 percent in September for a net outflow of 6.29 billion euros, the biggest one-month drop since the start of the crisis, according to Manos Giakoumis, research director at Euroxx Securities SA, an Athens- based brokerage.

Increasing Reliance

Italy's lenders started increasing their reliance on the ECB in July, when end-of-month borrowings from the central bank minus the amount deposited reached 58.8 billion euros, according to John Raymond, an analyst at CreditSights Inc. in London. Before that, net borrowings from the ECB ranged from 9 billion euros to 30 billion euros, he said.

The amount surged to a record 87 billion euros at the end of October, according to Raymond, citing Bank of Italy figures.

"This is all symptomatic of what's going on around the banks," Raymond said. "Everything hinges on the sovereign."

RBS economists forecast a recession in Italy in the fourth quarter, and expect the economy to contract 0.2 percent in 2012. The government's austerity packages, totaling 124 billion euros and including cuts to health care, pensions and regional subsidies, are adding to the recession risk, said RBS's Gallo.

Italian institutions can borrow what they need in the ECB's refinancing operations, paying the current policy rate of 1.25 percent as long as they have the required collateral. Lenders have "ample availability" of ECB-eligible assets, according to the Frankfurt-based central bank, and can help themselves by ensuring the assets are suitable as security.

Intesa Sanpaolo said it's looking to increase ECB-eligible assets to 100 billion euros from the current 83 billion euros.

The ability to fund at the ECB is vital for Italy's banks that can't access markets, though the central bank is keen to wean borrowers from its support. The ECB applies a discount on securities used as collateral to protect itself against loss.

"Italian banks have been crushed in the carnage in the government bond market," said Suki Mann, a strategist at Societe Generale SA in London. "It could get worse."

To contact the reporters on this story: John Glover in London at johnglover@bloomberg.net Elisa Martinuzzi at emartinuzzi@bloomberg.net

To contact the editors responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net Edward Evans at eevans3@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Bill Clinton Offers Obama a Surplus of Ideas: Michael Kinsley

Bloomberg News, sent from my iPad.

Bill Clinton Offers Obama a Surplus of Ideas: Michael Kinsley

Nov. 11 (Bloomberg) -- It is easy to imagine President Barack Obama's delight upon hearing that former President Bill Clinton was writing a book of analysis and solutions for all of our current problems.

Since leaving office, Clinton has been surprisingly good in following the maxim about what you should do if you can't say something nice. (He was even pretty good about it during the George W. Bush era.) Clinton does take a bit too much pleasure in reminding us that "in my administration we had four surplus budgets" -- so much pleasure that he repeats the point in the book at least nine times, by my count. But who can blame him for that? About Obama, Clinton is tact itself, saying only that he disagrees with the incumbent's policy on nuclear power. (Obama is for. Clinton is aginst.) Oh, and he thinks the administration's mortgage refinancing policy could be simpler.

Clinton's book is called "Back to Work: Why We Need Smart Government for a Strong Economy." In it, he settles once and for all the question of which of our most recent Ivy-educated presidents is the biggest policy wonk. It's George W. Only kidding. The prize clearly goes to Clinton, whose riveting discussion of the various options for repatriation of income earned by American companies in foreign countries (characteristically, he has a third-way solution that should appeal to reasonable people on both sides of this vexing issue) could drive millions to say, "Where's the remote? I wonder if President Obama is on Anderson Cooper."

A Shiv

So if you're looking for gossip, stick to the recent Republican offerings (Rumsfeld, Rice, Cheney). Here there is only policy. The one shiv I detected is inserted into the tender flesh of Vice President Joe Biden. It's short and easy to miss. "Vice President Biden -- whose speeches provided much of the same information and made many of the same arguments mine did." This totally superfluous aside, in a chapter on the 2010 campaign, can only be a veiled reference to Biden's withdrawal from the 1988 presidential race after Maureen Dowd of the New York Times noted the similarity between his stump speech and a speech given by British Labour Party head Neil Kinnock. This episode is largely forgotten. Or it was until Clinton reminded us of it. Maybe it's true that the Clintons are angling for a job switch between Biden and Hillary, although Bill specifically denies it in the book, and I don't see how this helps in any event. "I'm always glad to be in Joe Biden's company," Clinton writes. Maybe not this week.

Actually, if you're looking for a tour of the economic landscape -- debt, trade, mortgages, taxes, banks, bailouts, Social Security, Medicare and (have I mentioned?) four years of government surpluses under President Bill Clinton -- you could do a lot worse than reading this book. Clinton is a good teacher, an excellent explainer of complex subjects. And he tells it pretty straight.

His solutions, though, are something else. They tend to be small-bore (some of them a big bore, too, yuk yuk) and suspiciously win-win. We can reform health care in ways that improve care and save money, too. We can increase foreign aid in a way that will please both liberals and "well-intentioned" conservatives. And so on. For example, what should we do about the Tricare health insurance program for veterans? Easy: "We could switch to a sliding scale based on income ... as long as we do it without putting more burdens on veterans returning from combat with bleak job prospects or disability conditions, including post-traumatic stress disorder and other wounds sustained in service to our nation." Next problem? "Now let's look at Social Security. Is it broke? Technically, no, but there is a cash flow problem."

Clinton's Weakness

Even the best-intentioned conservatives may smirk at Clinton's weakness for a tax credit. Has he ever seen one he didn't like? Immediately after a high-minded discussion of how "Democrats and Republicans should work together to amend the corporate tax laws ... by broadening the tax base through the elimination and tightening of credits and deductions," Clinton writes: "I think we should keep the research and development incentive and increase it." Needless to say, "It will more than pay for itself." I incent. You deduct. He has loopholes.

Post-presidency, Clinton may be spending too much time hanging with CEOs. That may explain his apparent fascination with the repatriation of foreign profits. He would permit U.S. corporations to bring profits earned overseas back to the U.S. with no tax at all, provided they spend the money on creating "new jobs" in the U.S. (To be fair, President Obama also proposes trading favors for new jobs. Defining a "new job" and enforcing the distinction will itself create many new jobs.) Companies that don't want to play can pay a 15 percent or 20 percent tax instead, "with the money going to seed an infrastructure bank." I don't know what an infrastructure bank is exactly (although I can guess), but it sounds like self- parody.

Elsewhere, if I read him right, Clinton seems to be advocating evasion or outright violation of our solemn commitments under the treaty creating the World Trade Organization. "Do we seriously think our competitors wouldn't find a way" to weasel out of these obligations? If that's his attitude, why did he sign the agreement creating the WTO in 1994?

In a chapter titled "Why We Need Government," Clinton has an excellent list of what he believes are the purposes of government, starting with national security and ending (fearlessly) with tax collection. No. 2 and No. 3 are helping the poor (or those who would be poor if we didn't help) and guaranteeing opportunity for all. Then No. 4 is "economic development," which includes tax breaks and subsidies to certain people and institutions, and incentives for certain kinds of behavior that Clinton is so fond of. It seems to me that government is very good at No. 2 and No. 3, and lousy at No. 4. It should stick to what it's good at.

But never mind all that. Did you know that the Clinton administration ran four years of budget surpluses?

(Michael Kinsley is a Bloomberg View columnist. The opinions expressed are his own.)

To contact the writer of this article: Michael Kinsley at mkinsley@bloomberg.net .

To contact the editor responsible for this article: Francis Wilkinson at fwilkinson1@bloomberg.net .

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) MF Global Clients Left With Few Options as Bankruptcy Keeps Assets Frozen

Bloomberg News, sent from my iPad.

MF Global Customers Have Few Options, Can't Get Cash or Answers

Nov. 11 (Bloomberg) -- Ted Monjure, a 48-year-old Manhattan trader who has $27,252 frozen in a former MF Global Inc. account, said he is considering pulling his money out of his three other trading accounts.

"I'm a high net-worth person, and I don't want to see $1 million get smoked by another misunderstanding," Monjure said, recounting how he'd thought the Securities Investor Protection Corp. covered any losses due to a meltdown such as that at MF Global. He's now been told SIPC may not cover the money because it was in a futures account and faces months of uncertainty as he files a claim seeking recoveries.

Monjure is one of many customers who can't access cash in the segregated accounts they once thought were safer than bank deposits and just as accessible. Frustrated by a lack of legal options to reclaim frozen funds and dead-end inquiries to call centers and hotlines since MF Global's Oct. 31 bankruptcy, many are not able to trade and say they've lost faith in retail brokerages and the regulatory system.

More than 150,000 customer accounts were frozen Oct. 31, with $5.45 billion affected, the day after a unit of the New York-based brokerage reported a "material shortfall" in customer funds that are required to be segregated under rules of the U.S. Commodity Futures Trading Commission.

Collapse

MF Global listed $39.7 billion in debt and $41 billion in assets and said it has about $26 million in cash in its Oct. 31 filing. Jon Corzine, the former co-chief executive officer of Goldman Sachs Group Inc., quit as MF Global's CEO on Nov. 4. CFTC Chairman Gary Gensler has recused himself from the agency's investigation.

About $593 million of MF customer funds are unaccounted for, according to a person with knowledge of regulatory probes into the firm's collapse.

SIPC is a private, government-sponsored company that insures brokerage accounts for up to $500,000 in securities with $100,000 for cash in case the brokerage firm goes bankrupt. While SIPC covers losses in stocks and bonds, it doesn't cover commodity futures contracts unless defined as specific property under certain conditions.

While the brokerage's parent, MF Global Holdings Inc., filed for bankruptcy to apportion returns to creditors, a trustee, James W. Giddens, took over to liquidate the brokerage.

Mayhem

MF Global's bankruptcy, the eighth largest ever, is causing mayhem for customers that may exceed that suffered by Lehman Brothers Holdings Inc.'s brokerage customers. Though Lehman's bankruptcy, the largest in U.S. history, sent the world financial system into a tailspin, at least its brokerage customers benefitted from Barclays Plc's takeover of its accounts on Lehman's second day in court.

A transfer of MF Global's accounts to qualified clearing firms began almost immediately, with a lawyer for Giddens saying accounts with open positions would be moved with 60 percent of their collateral, leaving 40 percent to MF Global or other parties who might have legal claim to it. As of Nov. 10, dozens of customers had said they still hadn't gotten their funds, and ICE, or IntercontinentialExchange Inc. had written a letter to the bankruptcy court asking for immediate release of customer cash.

"We didn't think we were just customers," said David Rosen, a 32-year-old energy broker who works at the New York Mercantile Exchange. "We're the ones in the pits providing liquidity so everyone around the world can trade these products."

Organizing

Rosen is organizing exchange members to consider their legal options, and said his group will look to recover money from the bankrupt estate before considering who else they might be able to sue.

The CME said in court papers it has $2.5 billion of MF Global's total $5.45 billion in customer segregated funds on deposit. The effect of frozen collateral has already been felt; Volume for agricultural futures contracts traded on the CME and CBOT was 705,273 on Oct. 31, less than the 867,591 30-day average, and down 71,106 from the prior day.

"Though many of the decisions going forward are beyond our control we are working very closely with the regulators and the Trustee to represent our customers' interests," said CME spokesman Michael Shore.

A stampede to pull funds out of collateral accounts or a boycott of the exchanges could ripple through the markets, affecting farmers as well as hedge funds, said Ashmead Pringle, president of Grain Service Corp., an introducing broker for grain elevator operators who are looking to hedge against price fluctuations with futures contracts. Grain Service Corp. has filed court papers seeking information about MF Global's liquidation on behalf of its clients.

Judge Glenn

Butler has requested that U.S. Bankruptcy Judge Martin Glenn in Manhattan lift the so-called stay that protects companies in bankruptcy from lawsuits and other actions that can let one creditor withdraw money before another. Butler said customers of the brokerage unit should come before all other creditors, as their money was held in supposedly segregated accounts. Butler's request will be heard Nov. 22.

James L. Koutoulas, chief executive of Typhon Capital Management in Chicago, said his fund has lost one client who wasn't a customer of MF Global, and most others are in limbo because their funds -- totaling $55 million -- are tied up. Koutoulas, a lawyer, is working with Northwestern University law professor J. Samuel Tenenbaum on behalf of any MF Global clients and hopes to put together a group that can seek representation on the five-person creditors committee along with JPMorgan Chase & Co., Wilmington Trust and Elliott Management Corp., all of whom have interests are averse to those of customers.

No, Wait

"If there's a dispute as to whether it's house or client money and five people are saying it's the house's money, we need someone there to say 'No, wait. Maybe it's the client's money and our money is at risk," Koutoulas said.

Timothy Butler, a lawyer whose filed a lawsuit on behalf of three commodities traders seeking the return of 85 percent of their $2.5 million in combined frozen funds, said he's taking on new clients and hopes if his suit is successful it will recover that amount for all customers with all-cash accounts. Because the $593 million shortfall is about 11 percent, customers should be able to get 85 percent back up front, he said.

Butler has requested that U.S. Bankruptcy Judge Martin Glenn in Manhattan lift the so-called stay that protects companies in bankruptcy from lawsuits and other actions that can let one creditor withdraw money before another. Butler said customers of the brokerage unit should come before all other creditors, as their money was held in supposedly segregated accounts. Butler's request will be heard Nov. 22.

Shortfall

Giddens has said he can't release funds immediately because the trustee's job is to distribute assets equally among all customers. Kent Jarrell, a spokesman for Giddens, said the trustee simply doesn't have the authority to make transfers until its teams of forensic accountants have confirmed whether the shortfall is greater or less than $593 million.

Even when forensic accountants have located money, there may still be disputes among clearinghouses and banks about whose it rightfully is, Jarrell said.

"We can't give out money we won't have at the end of the game," he said.

Legal obstacles to quick recovery of the frozen cash could also include concern about whether some customers aren't entitled to be repaid as much as others, and customers who transferred money out of their accounts prior to the bankruptcy could be subject to clawback rules, Butler noted.

Cash Locked Up

Those like Monjure who liquidated their positions on the day of the Oct. 31 bankruptcy to avoid a drawn-out recovery process, said they feel aggrieved because they had to sell at a loss and can't get any of their cash. Customers who still had open positions have been transferred to new brokerages with about 60 percent of their cash collateral, and now FACE margin calls for the rest, which is locked up at the MF Global accounts.

Jarrell said customers with open accounts were transferred while those with all cash accounts were not because, "moving the open positions could avoid market disruptions and allow customers to have some sort of choice of what to do with the positions."

"We can't distribute cash because we have to know what the amount of segregated cash held for customers is and verify the claims against that pool of segregated cash," he said.

Legal options are less clear for those who have not just frozen cash, but margin calls, Butler said; "people can't understand how the new margin is being calculated. Some people say they're getting less than 60 percent transferred, others say they're getting 80 percent," he said.

Prudence Doesn't Pay

The people who were most prudent are being hurt the worst, said Don Miller, 50, a member of the CME since 2004 who works remotely from his home in the area Boston and has more than $2 million at risk, including his business and retirement accounts.

"Some people put a little in for margin, those of us who don't believe in excessive leverage put more in for our activity in the course of providing market liquidity than we need," Miller said. "Because of the segregated aspect, that money is supposed to be safer than with a bank."

"My trading business and my life have come to a complete stop," said Miller, who has a $30,000 college bill for his daughter coming due.

Sacred Cow

The CME reviewed MF Global's accounts the week of Oct. 24, and found them to be in compliance. MF Global didn't report any transfers until early morning Oct. 31, suggesting the firm "made subsequent transfers of customer segregated funds in a manner that may have been designed to avoid detection," said Shore, the CME spokesman.

"The clock's ticking," said Kurt Schacht, managing director in the market integrity division of the CFA Institute, the largest association of investment professionals. "Whether there's a crisis of confidence depends on how this one turns out -- a lot of people in this country view their money in a money market account, at a depository institution as safe and protected."

Schacht, 57, who said he lost money with MF Global, called the experience "humbling" given his role, and his 25 years of trading with MF Global and its predecessor.

Schacht said he hasn't been able to find out what exactly SIPC will guarantee. "There's no one you can actually talk to get it figured out," said Schacht, who described finally getting through to a live person on a hotline only to find they could answer only pre-set questions.

Even with his role in developing ethical standards for investors, Schacht says he doesn't see an easy explanation of what went wrong or how to prevent it from happening again. "I think we need to figure out what happened before we come up with a safeguard against this."

The bankruptcy case is MF Global Holdings Ltd., 11-bk- 15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The brokerage case is In re MF Global Inc., 11-ap- 2790, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) ECB as Lender of Last Resort Would End Crisis for Silva (1)

Bloomberg News, sent from my iPad.

ECB as Lender of Last Resort Would End Crisis for Silva

Nov. 11 (Bloomberg) -- The European Central Bank can stop the spread of the continent's financial crisis with "foreseeable, unlimited" purchases of Italian and other government bonds, Portuguese President Anibal Cavaco Silva said.

"The European Central Bank has to go beyond a narrow interpretation of its mission and should be prepared for foreseeable intervention in the secondary market, not as the central bank has done up to now," Cavaco Silva said yesterday in an interview at Bloomberg headquarters in New York. He said government leaders are unlikely to move fast enough to find solutions.

"It has to be able to be a lender of last resort," said Cavaco Silva, 72, who as Portugal's prime minister presided over the 1992 signing of the Maastricht Treaty, which cleared the way for the euro common currency. "It has to be a foreseeable, unlimited intervention."

Italian 10-year bond yields this week climbed to a euro-era record of 7.48 percent, surging past the 7 percent level that led Greece, Ireland and Portugal to seek international bailouts. Ten-year Italian rates were recently at 6.63 percent after yesterday's successful auction of one-year bills.

Such ECB purchases in the secondary market "would stop speculation, would stop doubts about the future value of those Italian or Spanish or Portuguese or Irish bonds," the president said. "The real firewall is in the European Central Bank."

He said the ECB won't convince investors of its commitment if it continues "as the central bank has done up to now, saying 'I don't like it, but I'm forced to buy some Italian bonds.'"

ECB Response

ECB Governing Council member Klaas Knot of the Netherlands said yesterday the central bank can't do "much more" to stem the 17-nation euro region's debt crisis.

Knot is the latest ECB policy maker to signal the central bank is unwilling to significantly ramp up its bond purchases to calm financial markets. ECB Executive Board member Peter Praet of Belgium and council member Jens Weidmann of Germany have also said the ECB cannot legally buy bonds to bail out a debt- strapped member state.

The cost of insurance against default on Italian government bonds eased to 569 basis points yesterday from the previous day's record 571. That compares with 1,072 basis points for Portuguese debt, 749 for Irish bonds and 93 for German bunds.

Investors are demanding 964 basis points, or 9.64 percentage points, in additional interest today for Portuguese 10-year debt relative to comparable German debt, down from a record 1,071 basis points in July.

Raising Taxes

Portugal is raising taxes, cutting pensions, and reducing government workers' pay to comply with the terms of the 78 billion-euro ($106 billion) aid package it received from the European Union and the International Monetary Fund in May. Portugal is committed to meeting terms of the bailout, though the country's austerity should be eased by bringing capital requirements on Portuguese banks in line with rules for other countries' lenders, Cavaco Silva said.

By forcing Portuguese banks to lift Core Tier 1 capital levels to 9 percent by year-end, while other European banks have until mid-2012, the bailout is imposing unnecessary hardship on the economy, the president said.

"The deleveraging is too strong and too fast," said Cavaco Silva. "It would be reasonable to be more gradual, and we hope the troika will understand this," referring to the EU, IMF and ECB officials who review Portugal's compliance. It's not a renegotiation of the bailout agreement, he said, adding "no, not at all, that's not a question."

University of York

Cavaco Silva, an economist with a doctorate from the University of York in England, entered politics as finance minister in 1980 and 1981. He won the leadership of the Social Democratic Party in 1985 and served as prime minister from that year until 1995, the longest tenure of any democratically elected prime minister in Portugal.

He won the presidency in 2006, sharing the stage with Socialist Prime Minister Jose Socrates, whose minority government fell in March after he failed to win support for deficit-cutting measures.

Prime Minister Pedro Passos Coelho, a Social Democrat elected in June, is committed to reducing the budget deficit to 5.9 percent of gross domestic product in 2011 from last year's 9.8 percent, and to 4.5 percent in 2012 before returning to the 3 percent limit set by the EU for countries using the euro.

'Indiscipline and Irresponsibility'

Passos Coelho yesterday said the ECB shouldn't pay for some countries' "indiscipline and irresponsibility," and that there isn't sufficient consensus in Europe to change the central bank's mandate. The ECB's interventions as they stand have guaranteed some financial stability, he said in parliament.

Portugal's economy will shrink 3 percent next year, the European Commission forecast yesterday. It would be one of only two countries with declines in GDP, the other being Greece with a 2.8 percent drop, the commission said, while the euro area expands 0.5 percent. Portuguese GDP is forecast to fall 1.9 percent this year, the commission said.

The country's benchmark PSI-20 Index has tumbled 27 percent this year, compared with a 14 percent decline in the Stoxx Europe 600 Index and a 23 percent drop in Italy's FTSE MIB Index.

Portugal's government, which forecasts a 2.8 percent GDP decline for next year, sees a 1.2 percent recovery in 2013, paving the way for it to return to the markets when the three- year bailout program ends. Whether that will happen on time is impossible to predict, Cavaco Silva said.

European Summit

"I can't say that Portugal will be able to go to the market at the end, nobody can say that," he said. "Nobody could anticipate what is happening now in Italy."

Still, according to decisions at a European summit in June, Portugal will qualify for continued aid as long as it's complying with the terms of the bailout agreement, the president said. He's confident Europe's leaders will make decisions in the future that will get the region through the crisis, he said.

"I used to say that at the end, in the 25th hour, the wisdom of the leaders would come up," Cavaco Silva said. "It has always been like that."

To contact the reporter on this story: Jim Silver in New York at jsilver@bloomberg.net

To contact the editor responsible for this story: Brad Skillman at bskillman1@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad