Economic Calendar

Wednesday, February 15, 2012

Apple Overtakes Samsung as Smartphone Vendor

By Diana ben-Aaron - Feb 15, 2012 5:46 PM GMT+0700

Apple Inc. (AAPL) passed Samsung Electronics Co. to become the world’s biggest smartphone vendor in the fourth quarter on surging sales of its iPhone, Gartner Inc. said.

Almost a quarter of smartphones sold were iPhones as Apple’s market share rose to 23.8 percent from 15.8 percent a year earlier, the Stamford, Connecticut-based researcher said. Apple sold 35.5 million smartphones to consumers while Samsung sold 34 million, Gartner said.

Global sales of such handsets that use computerlike processors and can handle business e-mail and streaming video increased 47 percent to 149 million units. Apple’s sequential growth may slow this quarter as pent-up demand was largely sated by holiday sales, Roberta Cozza, a Gartner analyst based in Egham, U.K., said in an interview.

“The wild card for 2012 is China,” Cozza said. “If Apple closes a deal with China Telecom or China Mobile they could see their units double in that market.”

Gartner forecast 39 percent growth in smartphones this year, slowing from 58 percent last year. Google Inc.’s Android software ran on more than half of all smartphones sold, according to Gartner.

Nokia Declines

Nokia Oyj (NOK1V)’s smartphone market share fell to 12 percent, from about 30 percent a year earlier, putting it third, Cozza said. Nokia’s share declined as the Finnish company shifted its focus to Microsoft Corp.’s Windows Phone software and phased out the 10-year-old Symbian line.

The introduction of Nokia’s Lumia handsets didn’t stem a decline in Microsoft’s market share, which dropped to 1.9 percent from 3.4 percent in the fourth quarter, Gartner said. Cozza said she expects Windows Phone to reach an 8.6 percent share of smartphones by the end of the year.

Apple’s smartphone success made it the world’s third- largest vendor of handsets overall, passing LG Electronics Co., which fell to fifth place behind ZTE Corp. Nokia kept its position as the biggest vendor with a 23.4 percent share, narrowing its lead over Samsung Electronics Co. (005930) to 4 percentage points.

Gartner forecast overall mobile phone growth to be 7 percent this year, slowing from 11.1 percent in 2011.

To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net




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Yahoo-Alibaba Talks Falter

By Brian Womack - Feb 15, 2012 9:35 PM GMT+0700

Yahoo! Inc. (YHOO)’s board faced renewed shareholder pressure to make changes yesterday amid a breakdown in negotiations to sell its Asian assets, a deal that could generate more than $10 billion for the company.

Talks to divest a stake in Alibaba Group Holding Ltd. (ALIBABZ) and Yahoo’s Japanese operations have reached an impasse, according to a person briefed on the matter, who asked not to be identified because the discussions are private. The discussions had focused on a tax-efficient deal, though the parties may still pursue other approaches, the person said.

The failure to reach an agreement may put further strain on Yahoo’s board, which announced plans this month to replace some directors while it continues a review of the company’s strategic options. Shareholder Third Point LLC plans to nominate its own slate of directors to the board, saying the recent overhaul didn’t go far enough to soothe concerns about Yahoo’s prospects.

“The recently announced changes do not put the issuer on the right track towards maximizing shareholder value,” Third Point, a New York-based hedge fund run by Daniel Loeb, said in a filing yesterday. “Installing the hand-picked choices of the current board does nothing to allay investor fears that Yahoo is poised to repeat the errors of its past.”

After years of sluggish sales, a stagnant stock price and market-share losses to Facebook Inc. (FB) and Google Inc. (GOOG), Yahoo investors see the Asian sale as a way to earn a payday. Yahoo also spurned a $47.5 billion takeover bid from Microsoft Corp. in 2008, irking shareholders. The value of the Asian assets is about $11.5 billion, according to Sameet Sinha, an analyst at B. Riley & Co. in San Francisco.

Another Option?

Following the breakdown in discussions, representatives of Alibaba and Softbank Corp. (9984), co-owner of Yahoo Japan Corp. (4689), are prepared to explore another arrangement that would let Yahoo sell its Asian stakes, the person familiar with the matter said. Sunnyvale, California-based Yahoo, the biggest U.S. Web portal, is prepared to continue talks on deals that would create value for shareholders, a separate person said.

Yahoo’s stock fell 1 percent to $15.21 at 9:31 a.m. in New York. The shares had lost 9 percent of their value in the past year through yesterday. Alibaba.com Ltd. shares remained suspended in Hong Kong, as they have been since Feb. 9. There is no publicly traded debt on the company, according to data compiled by Bloomberg.

Confidence Not High

“It is certainly possible that this is a temporary impasse,” Clayton Moran, an analyst with Benchmark Co. in Delray Beach, Florida, said in a research note yesterday. However, “the complex nature of this deal and the past performance of Yahoo’s board both limit our confidence.”

Third Point said that while newly appointed directors Fred Amoroso and Maynard Webb bring technological expertise to Yahoo, the board needs to do more to address the company’s future. In last week’s shakeup, Yahoo said Chairman Roy Bostock and three other directors won’t stand for re-election. That followed the arrival of Chief Executive Officer Scott Thompson in January.

The hedge fund’s nominees are Harry Wilson, CEO of Maeva Advisors LLC; Michael Wolf, head of Activate Inc.; Jeffrey Zucker, former CEO of NBC Universal; and Loeb himself. In Third Point’s vision, the new board would exclude Patti Hart, head of the nominating and corporate governance committee, as well as the recently appointed directors and the members planning to exit, according to the filing.

‘Especially Disappointing’

Yahoo has engaged with many of its largest shareholders, including Third Point, since the announcement of the board changes last week, the company said in an e-mailed statement.

“We have received constructive suggestions from several of our major shareholders and, therefore, it is especially disappointing that Mr. Loeb has chosen a potentially disruptive path, just as the company is moving forward under new leadership to aggressively increase the value of Yahoo (YHOO) for the benefit of all of its shareholders,” the company said. “The nominating and corporate governance committee continues to review candidates and will make its recommendations to the full board in due course.”

Dana Lengkeek, a spokeswoman for Yahoo, didn’t return messages seeking comment on the discussions. Technology blog AllThingsDigital reported the breakdown of talks earlier.

Yahoo began a review of its options during the ouster of CEO Carol Bartz in September. The company said this month that the board weighed proposals for equity investments and failed to receive an attractive offer. Yahoo said then that it continues to discuss a possible sale of its holdings in Asia and that it’s devoting “significant resources to these discussions.”

Yahoo has considered a deal with Alibaba and Softbank that would cut its stake in Alibaba to about 15 percent from about 40 percent, a person familiar with the matter has said. Alibaba Group wanted to complete the terms of a loan of about $3 billion by the end of last week for a potential buyback of shares held by Yahoo, a person familiar with the matter said last week.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net; Jennifer Sondag at jsondag@bloomberg.net





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Stocks Flat as Industrials, Utilities Retreat

By Rita Nazareth - Feb 15, 2012 9:46 PM GMT+0700

U.S. stocks were little changed as declines in industrial and utility shares tempered optimism after China said it will get more involved in a solution for Europe’s sovereign debt crisis.

The Standard & Poor’s 500 Index added less than 0.1 percent to 1,350.99 at 9:46 a.m. New York time. The Dow Jones Industrial Average fell 26.95 points, or 0.2 percent, to 12,851.33.

Global equities rallied earlier as China pledged to invest in Europe’s bailout funds and sustain its holdings of euro assets. Stock futures pared gains amid concern that officials in Europe and Greece were moving further apart as they try to negotiate a bailout to help the nation avoid default.


In the U.S., output at factories rose 0.7 percent in January after a revised 1.5 percent gain in December that was the largest in five years, figures from the Federal Reserve showed today in Washington. A 2.5 percent decline in utility output caused total industrial production to be little changed, less than forecast. Manufacturing in the New York region expanded in February at the fastest pace since June 2010, according to a separate report.

The S&P 500 yesterday closed about 1 percent away from its peak nine months ago of 1,363.61, which was the highest level since June 2008. The index has risen 7.4 percent this year as the U.S. economy showed signs of accelerating and European leaders moved closer to a solution on the region’s debt crisis.

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




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Germany Beats Fourth-Quarter Forecast, French Economy Grows

By Jana Randow and Mark Deen - Feb 15, 2012 5:57 PM GMT+0700

Germany and France performed better than economists forecast in the fourth quarter even as the sovereign debt crisis ravaged the economies of their smaller euro-area partners.

Gross domestic product in Germany, Europe’s largest economy, fell 0.2 percent from the third quarter, beating economists’ median prediction for a 0.3 percent decline. The Federal Statistics Office in Wiesbaden also revised third- quarter growth to 0.6 percent from 0.5 percent. The French economy, Europe’s second largest, grew 0.2 percent in the fourth quarter, confounding the median forecast for a 0.2 percent contraction.

The debt crisis has damped growth across Europe’s currency bloc and pushed Greece, Portugal, Belgium, Italy and the Netherlands into recession, defined as two consecutive quarters of declining GDP. Today’s data add to signs that Germany and France may avoid that fate. German investor confidence surged to a 10-month high in February, the ZEW Center for European Economic Research said yesterday.


“We expect the German economy to move roughly sideways in the first half of this year before gaining momentum from around the middle of the year, when European policy makers should have implemented the final measures to contain the sovereign debt crisis,” said Aline Schuiling, an economist at ABN Amro in Amsterdam.

The euro rose after the French and German GDP reports before declining to trade little changed at $1.3153 at noon in Frankfurt.

Euro-Area GDP

The Italian and Dutch economies both contracted 0.7 percent in the fourth quarter from the third. Austria and Spain also reported GDP declines. The 17-nation euro economy shrank 0.3 percent in the period, the European Union’s statistics office in Luxembourg said, less than the 0.4 percent drop forecast in a Bloomberg survey.

“The fourth quarter of 2011 was very weak, but we have seen a stream of both survey and hard data that seem to point to a stabilization in economic activity at a low level,” European Central Bank President Mario Draghi said last week.

European services and factory output increased in January for the first time in five months, according to a composite index of both industries.

In December, the ECB forecast economic growth of 0.3 percent this year and 1.3 percent in 2013. It will publish new projections in March.

Borrowing Costs

The debt crisis escalated in the fourth quarter, sending Italian and Spanish bond yields soaring. Those borrowing costs have fallen since the ECB injected a record 489 billion euros ($647 billion) into the banking system in December and governments agreed to greater budget discipline.

Greece, whose economy shrank 6.8 percent last year, has agreed to austerity measures needed to secure a second bailout package that will help it stave off default. Euro-area finance ministers nevertheless canceled a Brussels meeting slated for today, citing a lack of political assurances from Greek leaders to stick to the austerity pledges.

Ministers will instead hold a teleconference to prod Greece to do more to clinch the 130 billion-euro package along with about 100 billion euros of debt relief from private bondholders. Greece needs the aid to make a 14.5 billion-euro bond payment on March 20.

Recovery ‘Expected’

German truckmaker MAN SE (MAN), controlled by car manufacturer Volkswagen AG (VOW), said yesterday that sales and operating profit will decline in 2012 as the debt crisis discourages companies from investing.

“Although a recovery is expected in the second half of the year, we must work hard to achieve our goals,” Siemens AG (SIE) Chief Executive Officer Peter Loescher said on Jan. 24 after the company reported earnings that missed estimates.

From a year earlier, German GDP (GRGDPPGY) increased 1.5 percent in the fourth quarter. The statistics office said trade and household spending had negative impacts on growth, while investment, particularly construction, boosted GDP. A detailed breakdown for the quarter will be published on Feb. 24.

The German economy grew 3 percent last year while France’s expanded 1.7 percent.

French corporate investment and exports drove fourth- quarter growth, a boost for President Nicolas Sarkozy as he prepares to declare his bid for a second term later today.

Sarkozy’s economic credentials have been damaged in recent months as France was stripped of its AAA credit rating and jobless claims jumped to their highest in 12 years.

Investment is “rebounding, notably in the car industry,” Paris-based national statistics office Insee said. “Exports remained dynamic in the fourth quarter, helped mainly by the sale of transport products, while imports fell.”

To contact the reporters on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net; Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net




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China Pledges Sustained Euro Holdings With Plan to Invest in Bailout Funds

By Bloomberg News - Feb 15, 2012 4:48 PM GMT+0700

China pledged to invest in Europe’s bailout funds and sustain its holdings of euro assets, spurring gains in the currency and Asian stocks on optimism the region’s debt crisis will be overcome.

“China will always adhere to the principle of holding assets of EU sovereign debt,” People’s Bank of China Governor Zhou Xiaochuan said in Beijing today. “We would participate in resolving the euro debt crisis,” he said, echoing comments by Premier Wen Jiabao yesterday.

The remarks offer a carrot to European finance ministers, who are increasing pressure on Greece to deliver budget cuts in exchange for a second bailout. At stake for China is helping to stabilize the economy of its largest export market amid a global slowdown that has curtailed growth in Chinese shipments abroad.

“Wen and Zhou are giving the best support China can offer now, which is to send out positive messages such as promising not to cut euro assets and to buy European bonds to help bolster market confidence,” said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. who previously worked at the European Central Bank. “How much and when China will buy will depend on its foreign-exchange investment strategy -- when they find the pricing and exchange rate favorable.”

The MSCI Asia-Pacific Index of shares advanced 1.9 percent at 6:43 p.m. in Tokyo, heading for the biggest increase in a month. The euro strengthened 0.3 percent to $1.3168.

‘Sincere and Firm’

Zhou’s comments, made in a speech and question-and-answer session with students, came a day after Premier Wen Jiabao said the nation is willing to get “more deeply” involved in resolving Europe’s debt crisis, although the continent must send a clearer message to show how it’s working to strengthen its finances.


“China’s willingness to support Europe to cope with sovereign debt problems is sincere and firm,” Wen said at a joint press conference yesterday in Beijing with European Union President Herman Van Rompuy. “China is ready to get more deeply involved in participating in solving the European debt issue.”

Van Rompuy said he welcomed the interest China has shown in investing in European sovereign bonds and the region’s rescue fund. Meantime, back in Europe, finance ministers are slated today for a teleconference call to prod Greece to do more to qualify for another bailout.

Debt Crisis Spreading

Even as Premier Wen and Zhou spoke of their support for Europe, the central bank warned today the region’s debt crisis will not be solved in the short term and is spreading throughout the euro area.

The crisis could trigger systemic risks to the global economy, the PBOC said in a quarterly monetary policy report posted on its website, adding that major developed economies lack credible fiscal plans. The central bank didn’t specify when the report was prepared.

China expects “those highly indebted countries to strengthen fiscal consolidation, cut deficits and reduce debt risks in light of their national conditions,” Wen said yesterday. “We hope the EU will soon reach internal consensus, make the political decision and send to the international community a clearer and a stronger message of policy responses.”

Chinese officials are taking their message of support for Europe to the U.S. where Vice President Xi Jinping is on a five- day visit.

Right Time

The two countries have been in “close policy communication” on the European debt crisis, Vice Finance Minister Zhu Guangyao said at a briefing yesterday in Washington. “Both China and the U.S. hope that the financial stability and economic recovery will be restored in Europe at an early date,” he said.

In Beijing, Governor Zhou said that while the five BRICS countries - Brazil, Russia India, China and South Africa - all hold a “very positive attitude” toward helping Europe, they have to wait for the right time and right opportunity to invest.

China hopes for more “innovation” from Europe to provide more lucrative products that are “truly appealing” to Chinese investors, Zhou said, reiterating comments by Premier Wen.

The nation has been wooed by European leaders to help fund the temporary European Financial Stability Facility and its permanent successor, the European Stability Mechanism.

More Details

China is considering funding options for the EFSF and the ESM through the International Monetary Fund, Wen said on Feb. 2 after meeting German Chancellor Angela Merkel in Beijing. Officials previously said they needed more details on any plan to contribute funds.

Zhou said today that China can channel its investments through three avenues. The central bank can participate through foreign-exchange reserves it manages and a second option is support from China Investment Corp., the country’s sovereign- wealth fund.

The third source of help could come from financial institutions including China Development Bank and Export-Import Bank of China, and other institutional investors including Chinese enterprises, Zhou said.

China, which holds the world’s largest foreign-exchange reserves of $3.18 trillion, has previously signaled it wants to diversify the holdings away from U.S. dollar-denominated assets. The country doesn’t publicly disclose a breakdown of its reserves.

Maintain Investment

The PBOC has “always had confidence in the euro’s outlook” and as China’s foreign-exchange reserves have increased, the nation has “adjusted and increased the proportion of investment in the euro,” Zhou said.

Government leaders have “expressed clearly” through the Group of 20 nations that China will not reduce the proportion of its investment in euro assets during the global financial crisis and European debt crisis, Zhou said.

Moody’s Investors Service cut the debt ratings of six European countries on Feb. 13, including Italy, Spain and Portugal, and said it may strip France and the U.K. of their top Aaa ratings, citing Europe’s debt crisis.

Spain was downgraded to A3 from A1 on Feb. 13, Italy to A3 from A2 and Portugal to Ba3 from Ba2, all with negative outlooks. Slovakia, Slovenia and Malta also had their ratings lowered.

To contact Bloomberg News staff for this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net




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European Stocks Rise on China Pledge; BNP, Heineken Gain After Earnings

By Tom Stoukas - Feb 15, 2012 9:04 PM GMT+0700

European stocks climbed as China pledged to help resolve the region’s debt crisis and companies from BNP Paribas SA (BNP) to Heineken (HEIA) NV reported earnings that beat analysts’ estimates.

BNP Paribas, France’s largest bank, and Heineken, the world’s third-biggest brewer, rose more than 3 percent. Clariant (CLN) AG advanced 4.5 percent after earnings exceeded projections and the chemical maker said it may sell its textile and paper units.

The Stoxx Europe 600 Index added 0.6 percent to 264.16 at 2:03 p.m. in London, paring an earlier gain of 1 percent amid speculation a Greek aid package could be delayed until after April elections. The gauge has rallied 8 percent this year as U.S. economic data improved and optimism grew that the euro area will contain its sovereign-debt crisis.

“China has pledged to contribute to the bailout fund, which not only could increase the firepower available but might also persuade other countries like Japan, Russia, oil-rich states and possibly even the U.S. to actively take part in combating the crisis,” said Markus Huber, head of German sales trading at ETX Capital in London.

China pledged to invest in Europe’s bailout funds and sustain its holdings of euro assets. The commitment offers an incentive to European finance ministers, who are increasing pressure on Greece to deliver budget cuts in exchange for a second bailout.

China Assistance

“China will always adhere to the principle of holding assets of EU sovereign debt,” People’s Bank of China Governor Zhou Xiaochuan said in a speech in Beijing today. “We would participate in resolving the euro debt crisis,” he said, echoing comments by Premier Wen Jiabao yesterday.

National benchmark indexes gained in 14 of the 18 western European markets today. France’s CAC 40 added 0.4 percent and Germany’s DAX rose 0.7 percent. The U.K.’s FTSE 100 Index was little changed.

Euro-area finance ministers canceled a Brussels meeting slated for today and will hold a teleconference instead to prod Greece to do more to clinch an aid package worth 130 billion euros ($171 billion) along with about 100 billion euros of debt relief from private bondholders. Greece needs the aid to make a 14.5 billion-euro bond payment on March 20.

Antonis Samaras, the leader of Greece’s second-biggest political party, said today he and his party New Democracy were committed to the implementation of terms and conditions for a second financing package for the country.

‘Playing With Fire’

Stocks pared earlier gains as Reuters reported that policy makers are examining delays to a second bailout program for Greece. Greek Finance Minister Evangelos Venizelos said that Europe’s wealthier countries are “playing with fire” by toying with the idea of expelling it from the euro area.

Europe’s economy shrank less than economists forecast in the fourth quarter as a better-than-predicted performance in Germany and France helped mitigate the region’s first contraction since 2009. Gross domestic product in the 17-nation euro area fell 0.3 percent from the prior three months, the first drop since the second quarter of 2009, the European Union’s statistics office said today.

BNP Paribas rallied 4.9 percent to 35.16 euros as fourth- quarter net income declined to 765 million euros from 1.55 billion euros a year earlier. That beat the 587 million-euro average estimate of 10 analysts surveyed by Bloomberg.

Banks Advance

Bank shares were the top gainers in the Stoxx 600, adding 2.4 percent as a group. Societe Generale (GLE) SA rose 3.4 percent to 22.64 euros after three days of losses, while Credit Agricole SA (ACA) gained 1.7 percent to 4.96 euros. UBS AG (UBSN) advanced 1.2 percent to 13.06 Swiss francs. Banca Monte Dei Paschi di Siena SpA (BMPS) rallied 8.3 percent to 33 euro cents and UniCredit SpA (UCG) increased 3 percent to 4.19 euros. Royal Bank of Scotland Group Plc (RBS) added 2.5 percent to 27.32 pence.

Heineken increased 3 percent to 37.65 euros after the brewer reported annual profit that beat estimates and unveiled new cost-saving targets.

Clariant gained 4.5 percent to 12.92 francs after saying it may sell or find other strategic options for business units generating 1 billion francs ($1.09 billion) in revenue as it moves away from commodity products. Finding the right option for the textile-chemical, paper specialties and emulsions units is a mid- to long-term goal, the Muttenz, Switzerland-based company said today.

Danone, TUI

Danone (BN) advanced 1.6 percent to 49.78 euros. The world’s biggest yogurt maker reported a 4.5 percent gain in 2011 earnings, helped by growth in infant nutrition and bottled water products.

TUI AG (TUI1), the owner of Europe’s largest travel company, rose 4.6 percent to 6.50 euros after saying it will sell a stake in Hapag-Lloyd and may dispose of its remaining holding in the shipper in an initial public offering.

ING Groep NV (INGA) added 2.9 percent to 6.76 euros. Capital One Financial Corp. (COF)’s planned purchase of ING’s U.S. online bank won approval from the Fed, clearing the way for the credit-card lender to add about $80 billion in deposits.

Puma SE rose 2.5 percent to 245.75 euros after Europe’s second-largest sporting goods maker reported profit that beat analysts’ estimates and its own projection and forecast growth in sales and earnings in each of the next two years. Rival Adidas AG (ADS) gained 2.5 percent to 59.23 euros.

TomTom NV (TOM2), Europe’s biggest maker of portable navigation devices, soared 7.5 percent to 4.21 euros after saying it plans to introduce the HD Traffic service to China.

Swisscom AG (SCMN), Switzerland’s biggest phone company, fell 2.6 percent to 358.10 francs after predicting lower revenue in 2012 and posting its first quarterly loss in almost a decade on a writedown of Italian fixed-line unit Fastweb SpA.

National Bank of Greece SA (ETE), the country’s largest lender, sank 6.7 percent to 2.65 euros, dropping for a second day. Alpha Bank SA and EFG Eurobank Ergasias dropped 6.5 percent to 1.58 euros and 6 percent to 1.10 euros respectively.

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

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



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Stocks, Commodities Rise on China Aid Pledge

By Stephen Kirkland and Lynn Thomasson - Feb 15, 2012 9:32 PM GMT+0700
Enlarge image Asia Stocks Rise

Pedestrians are reflected in an electric stock board in Tokyo, Japan. Photographer: Tomohiro Ohsumi/Bloomberg

Feb. 15 (Bloomberg) -- Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management Ltd., talks about the outlook for global stocks and his investment strategy. Do also discusses Europe's debt crisis. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Feb. 15 (Bloomberg) -- John Ricciardi, head of investment at Kestrel Partners LLP, talks about the European economy and his investment strategy. He speaks with Linzie Janis and Owen Thomas on Bloomberg Television's "Countdown." (Source: Bloomberg)

Feb. 15 (Source: Bloomberg) -- Andrew Su, chief executive officer of Compass Global Markets in Sydney, talks about the outlook for the European sovereign debt crisis and its implications for global financial markets. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

Feb. 15 (Bloomberg) -- Andrew Colquhoun, Hong Kong-based head of Asia-Pacific sovereigns for Fitch Ratings, talks about the outlook for the European debt crisis and its implications for Asia. Colquhoun also discusses China's sovereign credit rating. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)


Stocks climbed and commodities rallied to a six-month high after China said it will get more involved in Europe’s bailout effort. European equities pared gains and the euro weakened on concern officials won’t be able to reach an agreement to give assistance to Greece.

The MSCI All-Country World Index (MXWD) added 0.6 percent at 9:30 a.m. in New York, following a 0.4 percent drop yesterday. The Standard & Poor’s 500 Index gained 0.2 percent. The euro slipped 0.2 percent to $1.3104. The cost of insuring against default on European government bonds gained for a sixth day. The S&P GSCI Index rose 0.8 percent as cocoa, silver and heating oil led gains among 18 of 24 commodities.

China, which holds the world’s largest currency reserves, can provide help through avenues including the central bank and its sovereign wealth fund, said People’s Bank of China Governor Zhou Xiaochuan. The euro-area economy shrank less than analysts anticipated last quarter, and earnings for BNP Paribas (BNP) SA and Heineken NV beat estimates. A Federal Reserve report showed manufacturing in the New York region expanded in February at the fastest pace since June 2010.

“China could make Europe’s problems go away,” said Peter Jolly, head of market research at National Australia Bank Ltd. in Sydney. “They have the funds. To the extent that China will participate in the European solution, it takes away some of the flight to quality in Treasuries.”

Increasing Pressure

European finance ministers are increasing pressure on Greece to deliver budget cuts in exchange for a 130 billion euros ($171 billion) rescue package. The ministers canceled a Brussels meeting slated for today on concern about the lack of assurances from Greek leaders to stick to spending cuts. They will hold a teleconference instead. The euro erased earlier gains after Reuters reported that policy makers are examining delays to a second bailout program for Greece until after the nation holds elections in April.

The S&P 500 erased yesterday’s 0.1 percent drop. The Fed Bank of New York’s general economic index increased to 19.5 this month from 13.5 in January and exceeded all forecasts in a Bloomberg News survey or economists.

The Stoxx Europe 600 Index gained 0.7 percent as more than three shares advanced for every one that declined. BNP Paribas, France’s largest bank, rallied 5.6 percent. Heineken, the world’s third-biggest brewer, climbed 3.1 percent.

European Growth

The euro weakened 0.4 percent versus the yen. The currency strengthened earlier after the European Union said gross domestic product in the euro area fell 0.3 percent from the prior three months, the first drop since the second quarter of 2009. Economists forecast a 0.4 percent drop, the median of 42 estimates in a Bloomberg survey showed.

The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed 11.2 basis points to 343.5.

The S&P GSCI climbed 0.8 percent to the highest since Aug. 2. Oil in New York rose 1 percent to $101.76 a barrel.

MSCI Emerging Markets Index (MXEF) climbed 1.3 percent. Chinese stocks listed in Hong Kong gained 2.4 percent and benchmark indexes in South Korea and Taiwan advanced more than 1 percent. Russia’s Micex Index added 1.2 percent. The BSE India Sensitive Index, or Sensex, rose 2 percent.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net

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




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Europe ’Plays With Fire’ as Greek Rescue Hits Barrier

By James G. Neuger and Eleni Chrepa - Feb 15, 2012 9:48 PM GMT+0700

Greece said that Europe’s wealthier countries are “playing with fire” by toying with the idea of expelling it from the 17-nation euro area as talks over a second aid program ran into new obstacles.

Finance Minister Evangelos Venizelos leveled the accusation after a decision slated for tonight on aid totaling 130 billion euros ($171 billion) was postponed until at least Feb. 20 and possibly until after a full-time Greek government emerges from elections later in the year.

“We are continually faced with new terms,” Venizelos told reporters in Athens today. “In the euro area, there are plenty who don’t want us anymore. There are some playing with fire, domestically and abroad. Some are playing with torches and some are playing with matches. But the risk is equally great.”

Two years after pledging to pull Greece back from the brink, European leaders are torn between pouring more aid into the struggling economy or risking an unprecedented national bankruptcy that might force the country out of the euro and prompt renewed market tumult.

Tonight’s euro finance meeting was canceled late yesterday and replaced with a conference call at 5 p.m. Brussels time. Luxembourg Prime Minister Jean-Claude Juncker, chairman of the euro panel, now targets a Greek aid decision at the previously scheduled Feb. 20 meeting.

‘Very Strict’ Conditions

“Ultimately the question is whether Greece has political will to sort out their economy and fulfill the conditions,” Finnish Finance Minister Jutta Urpilainen told reporters in Helsinki. She spoke of “very strict” attitudes in creditor countries.

The official loans, supplemented by about 100 billion euros of debt relief from private bondholders, have been in the works since July. Each day lost brings Greece closer to a March 20 bond redemption when it must come up with 14.5 billion euros or become the first country in the euro’s 13-year history to default.

The postponement is “very worrying” and “reflects a growing concern among some euro-area countries that Greece will not abide by the conditions of the second bailout package,” said Nicola Mai, an economist at JPMorgan Chase (JPM) Bank in London. “It appears that some euro-area countries are willing to let Greece default.”

Tensions over Greece pushed the euro down 0.2 percent to $1.3105 at 3:25 p.m. in Brussels. Meantime, evidence mounted that the euro’s guardians have made progress ring-fencing Greece’s woes. Portugal raised 3 billion euros today, selling debt maturing in up to 12 months after increasing the amount to meet investor demand.

Greek Cuts

Greece’s caretaker Cabinet, led by Prime Minister Lucas Papademos, yesterday met Europe’s demand for 325 million euros in savings by making cuts to defense, public investment and local authorities, two government officials said.

The head of Greece’s second-biggest political party, New Democracy’s Antonis Samaras, sought to meet a second demand today by providing a signed pledge to back the “objectives, targets and key policies” of the austerity program.

Samaras, seeking early April elections, left open the possibility of “modifications” to Greek policies to promote growth. The head of the rival socialist party, former Prime Minister George Papandreou, dispatched his own written pledge, NET TV reported.

Greece has depleted its credibility by missing targets for deficit reduction, economic reforms and asset sales that were set when it obtained a 110 billion-euro aid package in May 2010. As a result, the once-taboo notion of a departure or expulsion from the euro zone has crept into the mainstream political debate.

‘Horror Movie’

“We cannot give anyone a pretext or motive to apply such a scenario that would prove to be a horror movie not just for Greece but for the world economy,” said Venizelos.

Also unclear was whether the European Central Bank, buyer of 219.5 billion euros of weaker countries’ bonds in the past two years, would contribute to debt relief in the new package.

Euro statutes bar the central bank from financing governments. One workaround would be for the ECB to funnel profits from its Greek holdings back through its national branches to euro governments.

The central bank probably spent about 47 billion euros to buy Greek bonds with a face value of 60 billion euros, yielding potential profits of 13 billion euros, according to Juergen Michels, chief European economist at Citigroup in London.

Central bankers have agreed “that we don’t wish to make a profit on Greece,” ECB council member Luc Coene of Belgium said Feb. 13 in remarks that were embargoed until today. “So when we distribute profit from a given year to the Belgian state, we will provide a breakdown of what’s due to Greece and it’s then up to the government to decide how to use it.”

To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Eleni Chrepa in Athens at echrepa@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net






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Obama Meeting With Xi May Set Tone for Future U.S.-China Ties

By Margaret Talev and Dune Lawrence - Feb 15, 2012 7:13 AM GMT+0700

President Barack Obama told Chinese Vice President Xi Jinping that China’s growing influence brings with it responsibility to work toward “balanced” trade and to recognize the aspirations of all people for greater rights.

Obama met today with the man who is in line to become China’s top leader next year as both nations seek to ease tension over trade imbalances and China’s currency valuation. The U.S. also is prodding China toward greater cooperation on confronting the regime in Syria as well as thwarting Iran’s pursuit of a nuclear weapon.

Vice President Joe Biden openly criticized some China policies even as he welcomed Xi at a State Department luncheon following meetings at the White House.

Addressing Xi before a guest list of lawmakers from both parties and U.S. business executives, Biden said the U.S.-China business relationship can only work “if the game is fair.” Biden said the U.S. “strongly disagreed” with China’s veto with Russia of a United Nations resolution against Syria on Feb. 4.

Xi, through an interpreter, said the U.S.-China relationship will grow through dialogue and “not protectionism.” Obama, in his late morning meeting with Xi in the Oval Office of the White House, said the U.S. welcomes “China’s peaceful rise” and that he expected relations between the world’s two biggest economies will continue on a “cooperative track.”

Increased Responsibility

“With expanding power and prosperity also comes increased responsibility,” Obama said, citing need for a “balanced trade flow” and “recognizing the aspirations and rights of all people.”

Xi said he wants to “deepen mutual understanding” and cooperation with the U.S.

His arrival in Washington follows Obama’s moves to reassert U.S. power and influence in the Asia-Pacific region and as China has emerged as one of the foreign policy issues in the U.S. presidential election campaign.


Republican presidential hopefuls have ramped up criticism of China on currency manipulation, intellectual property protection and for the hurdles the state sets up for U.S. businesses. They accuse Obama of not standing up enough to China’s rising economic and military power.

Bipartisan Commission

The chairmen of the bipartisan Congressional-Executive Commission on China today released a statement asking Xi to end a crackdown on dissidents that began a year ago, release all political prisoners and protect freedom of expression, religion and assembly. The co-chairmen, Representative Chris Smith, a New Jersey Republican, and Senator Sherrod Brown, an Ohio Democrat, also called on China to end currency manipulation and unfair trade practices.

At today’s luncheon at the State Department, Biden told Xi that China’s rise “did not occur in a vacuum” and was cultivated by an international system that is “grounded in rules” that all countries must follow.

During his meeting with Xi at the White House, Obama repeated the U.S. stance that China’s currency remains undervalued and that more progress must be made to let it rise, according to an administration official who wasn’t authorized to discuss the talks on the record.

China’s yuan hit 6.2884 per dollar on Feb. 10, the strongest level since the country unified the official and market exchange rates at the end of 1993. The yuan dropped 0.04 percent to close at 6.2996 per dollar in Shanghai, according to the China Foreign Exchange Trade System, amid concern that Europe’s slowing economies will cut purchases from China.

Trade Deficit

The U.S.-China trade deficit was $295 billion last year, $23 billion wider than a year earlier, and the imbalance is a main source of friction between the two countries.

Obama yesterday asked Congress in his next budget for $26 million and at least 50 people for a new panel to investigate unfair trade practices by China and other countries.

Biden said he and Obama brought Syria up with Xi in their meetings today. He also said the U.S. is concerned about worsening human rights conditions in China. “We see our advocacy for human rights as a fundamental aspect of our foreign policy,” Biden said.

Xi said China has made “tremendous” strides on human rights and that the government takes seriously people’s demands.

Lunch Guests

Guests at the lunch included Henry Kissinger, the former secretary of state and national security adviser to President Richard Nixon when the U.S. opened relations with China in the 1970s; Lloyd C. Blankfein, chairman and chief executive officer of Goldman Sachs Group Inc. (GS); John Watson, chief executive officer of Chevron Corp. (CVX); Robert Iger, chief executive officer of Walt Disney Co. (DIS); Jeffrey Katzenberg, chief executive officer of Dreamworks Animation (DWA); and Muhtar Kent, chief executive officer of Coca-Cola Co. (KO)

Xi’s agenda also includes meetings at the U.S. Chamber of Commerce in Washington and in Iowa and California later this week. Tomorrow he’ll meet with congressional leaders.

His trip may be most important for developing relationships between Xi and Washington’s military and political leaders that could shape U.S.-China relations for the next decade, said Obama administration officials and foreign policy specialists.

“In Asia, generally, but in China certainly, relationships matter, and high-level relationships particularly matter,” said Daniel Russel, senior director for Asian affairs on the White House National Security Council. “Building a relationship with the official in China who seems likely destined to be a central figure in the Chinese political system for years to come obviously is important.”

Strategic Concerns

While the economic relationship is most prominently featured in the domestic U.S. political debate, Obama’s other concerns include China’s role in putting pressure on regimes in Iran, North Korea and Syria.

As Xi visited the White House, Chinese Foreign Ministry spokesman Liu Weimin said at a briefing in Beijing today that China believes the most pressing task concerning the dispute over Iran’s nuclear program is to resume talks as soon as possible. Iran is willing to resume talks, Liu said, speaking after Assistant Foreign Minister Ma Zhaoxu visited Iran.

Obama used an Asia-Pacific trip last November to send signals that the U.S. was beefing up its military and diplomatic posture in China’s backyard and helping other Asian nations band together to make demands of China.

Russel and other White House aides said they didn’t expect major breakthroughs on this trip, in part because Xi isn’t yet China’s top official.

To contact the reporters on this story: Margaret Talev in Washington at mtalev@bloomberg.net; Dune Lawrence in Washington at dlawrence6@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net




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Amazon Said to Have Fewer Prime Subscribers Than Estimated; Shares Decline

By Edmund Lee and Danielle Kucera - Feb 15, 2012 8:09 AM GMT+0700

Amazon.com Inc. (AMZN)’s Prime service, a linchpin of its effort to keep customers loyal and fuel long- term profit, has attracted fewer than half as many members as analysts estimate, three people familiar with the matter said.

As of October, 3 million to 5 million people subscribed to Prime, a program begun in 2005 that provides two-day shipping for $79 a year, said the people, who asked not to be named because the figures are private. Amazon is working to reach 7 million to 10 million in the next 12 to 18 months, the people said. Analysts have pegged the current number at 10 million or more, with expectations for it to climb higher this year.

The slower adoption of Prime adds to concerns about Amazon’s revenue growth. The Internet retailer posted sales of $17.4 billion last quarter, trailing the $18.3 billion predicted by analysts. While the Prime service increases Amazon’s shipping costs, it’s seen as a way to lock in customers and prod them to shop more, according to ChannelAdvisor Corp. Fewer Prime users would mean there are fewer of Amazon’s most dedicated customers.

“A Prime customer is much more likely to start and end a search and purchase on Amazon without bothering to check other channels,” said David Spitz, president of the Morrisville, North Carolina-based firm, which supplies e-commerce software to retailers. The subscribers spend three to four times more than regular customers, said Spitz, who had estimated that Prime had about 10 million to 12 million members.

Mary Osako, a spokeswoman at Seattle-based Amazon, declined to comment on the number of Prime members.

Kindle Promotion

Amazon, the world’s largest Internet retailer, has begun promoting Prime by offering free trial memberships to buyers of the Kindle Fire tablet computer. The October figures don’t include the impact of that promotion because the Fire didn’t go on sale until Nov. 14. Even so, JPMorgan Chase & Co. estimated that Prime had already reached 13 million by Sept. 30.

While Kindle Fire users get a free trial of the service, they must opt in if they want to continue using it. Amazon Chief Financial Officer Thomas Szkutak said on a conference call in January that it was too early to tell how many trial users were converting to subscriptions, though “early stats that we’re seeing we like a lot.”

Amazon shares fell less than 1 percent to $191.30 today. The stock has climbed 11 percent this year.

‘All You Can Eat’

The company began Prime seven years ago as a way for customers to get speedy unlimited shipping for a low annual fee. Chief Executive Officer Jeff Bezos called it an “all-you-can- eat” service that would make Amazon more convenient for shoppers while boosting costs in the short term. In February 2011, the company added a video-streaming service to the product, letting customers watch TV shows and movies over the Internet.

Amazon has struck deals with Viacom Inc. (VIAB) and News Corp. (NWSA) to add more video content, stepping up competition with Netflix Inc.’s Internet service. Netflix has more than 23 million streaming customers.

Analysts at Citigroup Inc., Needham & Co. and Robert W. Baird & Co. had all estimated that Prime reached at least 10 million members. Amazon doesn’t disclose figures for Kindle sales, Prime subscribers, or the amount of videos, books and other content Kindle users purchase over the device. That makes it difficult for analysts and investors to come up with accurate projections and make investment decisions, said Colin Gillis, an analyst at BGC Partners LP in New York.

Missing Data

“It drills home the point that you’re paying a premium valuation for this company and key pieces of their economics aren’t disclosed,” he said. Amazon trades at 139.6 times its trailing 12-month earnings, compared with 14.5 times for Apple Inc. (AAPL), according to data compiled by Bloomberg.

Even with less adoption than expected, the Prime promotion has weighed on Amazon’s shipping costs. Those expenses jumped 55 percent to $4 billion last year, dwarfing the $1.55 billion Amazon gets in shipping fees from customers.

Amazon has increased spending on distribution and fulfillment centers in recent years. That investment has put pressure on the company to earn a return on Prime customers, said Gillis, who recommends selling Amazon shares.

“Prime drives more use, but you don’t know how much more use it drives,” he said. “Amazon needs to rationalize its fulfillment.”

To contact the reporters on this story: Edmund Lee in New York at elee310@bloomberg.net; Danielle Kucera in San Francisco at dkucera6@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net





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Berkshire Adds DirectTV, Liberty Media Stakes

By Noah Buhayar - Feb 15, 2012 5:58 AM GMT+0700

Berkshire Hathaway Inc. (BRK/A) boosted its stake in DirecTV and added holdings of Liberty Media Corp. and DaVita Inc. after billionaire Warren Buffett hired stock picker Ted Weschler to help manage investments.

Weschler oversaw investments in all three firms while running Peninsula Capital Advisors LLC, the hedge fund he wound down after agreeing to join Omaha, Nebraska-based Berkshire.

Buffett, 81, hired Todd Combs and Weschler to help him pick stocks as he bets the safest and most profitable way to invest is by buying whole companies or their equity. The billionaire investor drew down Berkshire’s cash hoard last year to buy engine-additives maker Lubrizol Corp., a preferred stake in Bank of America Corp. (BAC) and common shares of International Business Machines Corp. (IBM), leaving his firm with about $34.8 billion in cash at the end of September.

“He would like to get that down to closer to $20 billion,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business, in an interview before the filing was released. “Berkshire itself is generating free cash flow of about a billion a month,” which may fund stock picks, he said.

Buffett has said he’ll focus on managing Berkshire’s largest stockholdings, such as a stake in Wells Fargo & Co. (WFC), and count on Combs and Weschler to make smaller investments. Combs, 41, who joined Buffett’s firm in 2010, last year added holdings in companies such as MasterCard Inc. (MA), the world’s second-biggest payments network, Intel Corp., and Dollar General Corp. Berkshire said in September that Weschler, 50, would join the company this year.

Exxon Mobil

Berkshire reported no holding of Exxon Mobil Corp., the world’s largest energy company, compared with about 420,000 shares of the company at the end of September.

Berkshire had 1.7 million shares of Liberty Media and 2.7 million shares of dialysis-facility owner DaVita. Liberty Media closed at $85.59 in New York trading today, and DaVita at $84.75. The filing was released after 4 p.m. in New York.

The stake in DirecTV climbed to 20.3 million shares from about 4.2 million at the end of September. DirecTV closed at $45.85 today.

According to a separate filing, Berkshire held about 410 million shares, or 7.7 percent, of San Francisco-based Wells Fargo. Buffett reported a stake of about 359 million shares of the lender at the end of 2010, according to his annual report to shareholders for that year.

‘First Class’

Wells Fargo, the largest U.S. home lender, posted record fourth-quarter profit of $4.11 billion last month and beat analysts’ estimates as mortgage financing improved.

Berkshire’s filings are monitored by analysts and investors for insight into Buffett’s strategy. The firm seeks to “increase its ownership of first-class businesses” with a preference for buying them outright, Buffett said in an article posted on Fortune magazine’s website last week. When a company can’t be purchased, Berkshire seeks to buy equity stakes, he said.

Buffett contrasted this approach with investments in gold or U.S. Treasuries. Bonds are subject to inflation risk which can erode value over the long run, while making money from gold relies on an expanding pool of “fearful” buyers, he wrote. Investments in companies face fewer limitations, he said.

“Over any extended period of time this category of investing will prove to be the runaway winner among the three we’ve examined,” Buffett wrote. “More important, it will be by far the safest.”

The Standard & Poor’s 500 Index climbed 11 percent in the fourth quarter and 7.4 percent since the end of last year. Berkshire increased its pace of investing in the third quarter of last year when stock markets plunged following S&P’s decision to cut the U.S. top credit rating.

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

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





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Berkshire Adds DirectTV, Liberty Media Stakes

By Noah Buhayar - Feb 15, 2012 5:58 AM GMT+0700

Berkshire Hathaway Inc. (BRK/A) boosted its stake in DirecTV and added holdings of Liberty Media Corp. and DaVita Inc. after billionaire Warren Buffett hired stock picker Ted Weschler to help manage investments.

Weschler oversaw investments in all three firms while running Peninsula Capital Advisors LLC, the hedge fund he wound down after agreeing to join Omaha, Nebraska-based Berkshire.

Buffett, 81, hired Todd Combs and Weschler to help him pick stocks as he bets the safest and most profitable way to invest is by buying whole companies or their equity. The billionaire investor drew down Berkshire’s cash hoard last year to buy engine-additives maker Lubrizol Corp., a preferred stake in Bank of America Corp. (BAC) and common shares of International Business Machines Corp. (IBM), leaving his firm with about $34.8 billion in cash at the end of September.

“He would like to get that down to closer to $20 billion,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business, in an interview before the filing was released. “Berkshire itself is generating free cash flow of about a billion a month,” which may fund stock picks, he said.

Buffett has said he’ll focus on managing Berkshire’s largest stockholdings, such as a stake in Wells Fargo & Co. (WFC), and count on Combs and Weschler to make smaller investments. Combs, 41, who joined Buffett’s firm in 2010, last year added holdings in companies such as MasterCard Inc. (MA), the world’s second-biggest payments network, Intel Corp., and Dollar General Corp. Berkshire said in September that Weschler, 50, would join the company this year.

Exxon Mobil

Berkshire reported no holding of Exxon Mobil Corp., the world’s largest energy company, compared with about 420,000 shares of the company at the end of September.

Berkshire had 1.7 million shares of Liberty Media and 2.7 million shares of dialysis-facility owner DaVita. Liberty Media closed at $85.59 in New York trading today, and DaVita at $84.75. The filing was released after 4 p.m. in New York.

The stake in DirecTV climbed to 20.3 million shares from about 4.2 million at the end of September. DirecTV closed at $45.85 today.

According to a separate filing, Berkshire held about 410 million shares, or 7.7 percent, of San Francisco-based Wells Fargo. Buffett reported a stake of about 359 million shares of the lender at the end of 2010, according to his annual report to shareholders for that year.

‘First Class’

Wells Fargo, the largest U.S. home lender, posted record fourth-quarter profit of $4.11 billion last month and beat analysts’ estimates as mortgage financing improved.

Berkshire’s filings are monitored by analysts and investors for insight into Buffett’s strategy. The firm seeks to “increase its ownership of first-class businesses” with a preference for buying them outright, Buffett said in an article posted on Fortune magazine’s website last week. When a company can’t be purchased, Berkshire seeks to buy equity stakes, he said.

Buffett contrasted this approach with investments in gold or U.S. Treasuries. Bonds are subject to inflation risk which can erode value over the long run, while making money from gold relies on an expanding pool of “fearful” buyers, he wrote. Investments in companies face fewer limitations, he said.

“Over any extended period of time this category of investing will prove to be the runaway winner among the three we’ve examined,” Buffett wrote. “More important, it will be by far the safest.”

The Standard & Poor’s 500 Index climbed 11 percent in the fourth quarter and 7.4 percent since the end of last year. Berkshire increased its pace of investing in the third quarter of last year when stock markets plunged following S&P’s decision to cut the U.S. top credit rating.

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

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





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Santorum’s Electability Pitch Undermined by 2006 Senate Re-Election Loss

By Julie Hirschfeld Davis - Feb 15, 2012 12:44 AM GMT+0700

Rick Santorum, the former senator who is surging in the Republican presidential race, often says he’s the only candidate in the contest “that has actually won a swing state.”

Yet six years ago, as he sought a third Senate term in Pennsylvania, Santorum proved he can also lose in such a politically competitive state -- and lose big.

Santorum’s last race -- an 18 percentage point defeat in 2006 -- raises questions about his appeal to independent voters who could help decide the national election in November, as well as to Republicans who will determine who gets the party’s nomination.

Santorum’s loss was “the largest defeat by a Republican United States senator seeking election or re-election in modern Pennsylvania history,” said G. Terry Madonna, a and public affairs professor at Franklin & Marshall College in Lancaster, Pennsylvania and director of the school’s poll.

“Santorum was putting an emphasis on the cultural issues, which didn’t sit well with independent, suburban swing voters in this state,” Madonna said.

Poll Results

Opposition to gay marriage and abortion rights do have appeal in Republican primaries, and have contributed to Santorum’s recent rise. A Pew Research Center for the People and the Press poll of Republican and Republican-leaning voters conducted Feb. 8-12 and released yesterday found Santorum edging out Romney for the nomination, with support from 30 percent compared with 28 percent for the former Massachusetts governor. Santorum trailed Romney by 17 points in a comparable poll a month ago.

Santorum’s 2006 loss came after he was accused by Democrats of being hypocritical for moving his family to suburban Virginia, yet still claiming a property tax deduction and tuition reimbursement in Pennsylvania. The school district where his Penn Hills home was located paid $55,000 to reimburse the online education of his children through the state’s Cyber Charter School program, according to the Pittsburgh Post- Gazette. The state repaid the district in a legal settlement after a Democratic school board member challenged the reimbursement.

It was an issue that resonated with voters and echoed charges Santorum, 53, raised when he won his initial race for the U.S. House in 1990 by attacking his opponent for having moved to Virginia and lost touch with Pennsylvanians.

‘Hypocrisy’


Bob Casey, Santorum’s 2006 Democratic opponent and the son of a former Pennsylvania governor, said at a general-election debate that “this issue is as much about hypocrisy as it is about residency.”

Casey, 51, is seeking his second term this year.

Santorum’s political image was also a factor in his unsuccessful campaign.

After starting his career as a fiscal conservative who emphasized lower taxes and government spending, Santorum had by 2006 become as well known for his opposition to abortion and gay marriage.

He caused a stir in 2003 when, during an interview with the Associated Press, he made graphic comments while discussing his views about homosexual acts. He said they were wrong, along with “other, what I would consider to be, acts outside of traditional heterosexual relationships.”

“In every society, the definition of marriage has not ever, to my knowledge, included homosexuality,” Santorum said in the April 7, 2003 interview, according to a transcript released by the AP. “That’s not to pick on homosexuality. It’s not, you know, man on child, man on dog, or whatever the case may be.”

Views on Family

Santorum had also attracted attention with his 2005 book “It Takes a Family” -- a literary rebuttal of former first lady Hillary Clinton’s book “It Takes a Village” -- in which he argued that the government should promote the family.

“The radical feminists succeeded in undermining the traditional family and convincing women that professional accomplishments are the key to happiness,” Santorum wrote, in a passage that was interpreted by some critics as a suggestion that women shouldn’t work.

Casey used the point against Santorum in his campaign, running a television advertisement featuring a woman saying Santorum should come to her house and explain to her and her husband how they could survive on a single income. Santorum has since said his point was that society should value the time mothers spend at home as much as their time at work -- and that the same goes for fathers.

Casey also opposes abortion rights, so that issue didn’t offer a clear dividing line between the two.

Grim Political Climate

Santorum and his allies say his 2006 defeat had less to do with his personal or political liabilities and more to do with a grim environment for Republicans, suffering by association with then-President George W. Bush.

Bush’s Gallup approval rating was 36 percent, compared to 56 percent disapproval, on Election Day, amid widespread discontent about the Iraq war. When that dynamic combined with low turnout, the Republican Party suffered a half-dozen Senate losses -- and control of the chamber. Santorum lost by the largest margin, followed by Senator Mike DeWine in nearby Ohio, who was beaten by 12 points. The other Republican incumbents were defeated by margins of less than 10 percent.

“I lost an election in the worst election year for Republicans in the history of our state,” Santorum told CNN on Jan. 2.

Campaign Successes

Drew Cantor, a former aide at the Republican Conference, a Senate group that helps develop political messages, said Santorum’s victories in two House races in “heavily Democratic districts,” along with his 1994 and 2000 Senate race wins --the second in a year when Bush lost the state -- “say far more about Rick Santorum and his ability to connect with voters of all stripes than anything.”

“One race does not a record make, and every campaign Rick has waged has resulted in success other than 2006, a disastrous political cycle” for Republicans, Cantor said.

Democratic strategists argue it was Santorum himself --more than Republicans broadly -- that Pennsylvania voters repudiated.

“Some of the reasons that he’s been so popular among the conservative base are some of the same reasons he sort of wore out his welcome in Pennsylvania,” said Charlie Lyons, a Harrisburg-based former Senate aide and adviser to Casey. “The Democratic wave might have contributed to the margin of victory, but in my view, it didn’t contribute to the fact that he lost, because he started out behind and could never catch up.”

Demographic Group Losses

In the end, Santorum lost among most demographic groups except born-again or evangelical Christians, and did particularly poorly among women, who made up more than half the electorate and voted for Casey by a margin of 61 percent to 39 percent for Santorum.

Yesterday’s Pew poll shows Santorum running behind President Barack Obama in a head-to-head matchup, 53 percent to 44 percent. Obama leads Romney in the poll, 52 percent to 44 percent.

“The impression that people have -- the moderate and swing voters have -- is that he’s too conservative for them, said Andrew Kohut, president of the Pew Research Center. “In a general election, I haven’t seen any poll, anywhere that’s shown Santorum matching up well against Obama.”

That includes in his home state of Pennsylvania. A Pittsburgh Tribune-Review/WPXI-TV poll conducted Feb. 2-6 found Obama beating Santorum there, 47 percent to 43 percent.

To contact the reporter on this story: Julie Hirschfeld Davis in Washington at jdavis159@bloomberg.net

To contact the editor responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net




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U.S. Stocks Pare Losses on Optimism Greece to Commit to EU Plan

By Rita Nazareth - Feb 15, 2012 4:08 AM GMT+0700

Feb. 14 (Bloomberg) -- Sales at U.S. retailers climbed in January as Americans took advantage of post-holiday discounts. The 0.4 percent gain followed little change in December that was initially reported as a 0.1 percent increase, Commerce Department figures showed today. Michael McKee and Betty Liu report on Bloomberg Television's "In the Loop." (Source: Bloomberg)

Feb. 15 (Bloomberg) -- Kirk Hartman, the Los Angeles-based chief investment officer at Wells Capital Management, talks about the European sovereign debt crisis, the outlook for global stocks and his investment strategy. Hartman speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)


U.S. stocks pared losses in the last half hour of trading amid optimism Greek leaders will commit to austerity measures needed for a second bailout.

The Standard & Poor’s 500 Index slid 0.1 percent to 1,350.50 at 4 p.m. New York time, trimming an earlier decline of as much as 0.8 percent. The Dow Jones Industrial Average rose 4.24 points, or less than 0.1 percent, to 12,878.28 today.

Stocks recovered after Reuters reported that Greece’s Conservative Party leader will deliver a letter of commitment to lenders tomorrow, citing a government source.

Stocks slumped earlier amid data showing that U.S. retail sales rose 0.4 percent in January, half the 0.8 percent forecast of economists in a survey. European finance ministers canceled a meeting scheduled for tomorrow as Luxembourg Prime Minister Jean-Claude Juncker said he has yet to receive the political assurances from Greek lawmakers about austerity measures required for the 130 billion euros ($170 billion) bailout.

The S&P 500 yesterday closed less than 1 percent away from its peak nine months ago of 1,363.61, which was the highest level since June 2008. The Morgan Stanley Cyclical Index of 30 stocks dropped 1.3 percent amid concern about economic growth. The index surged 11 percent in January (CYC) as the U.S. economy showed signs of accelerating and European leaders moved closer to a solution on the region’s debt crisis.

‘Very Choppy’

“The thing with a lot of the economic data is that it’s just very choppy,” Paul Simon, chief investment officer at Tactical Allocation Group LLC in Birmingham, Michigan, said in a phone interview. His firm oversees $1.6 billion. “You’ve had a significant run-up in the market and you haven’t really had any significant pullback. We approached the highs of 2011 and that’s going to be a resistance in the very, very short term.”

Dividend-paying stocks are still a “winning theme” for investors even though they have gotten off to a relatively slow start this year, according to Gina Martin Adams, a strategist at Wells Fargo Securities LLC.

While the Standard & Poor’s 500 Dividend Aristocrats Index rose 4.2 percent for the year through yesterday, the gain was 2.6 percentage points smaller than the S&P 500’s advance. By contrast, the indicator fared better than the S&P 500 in the past two years, its first back-to-back wins since 2002. The index is comprised of companies that have raised payouts for at least 25 consecutive years, relative to the S&P 500.

Payout ratios suggest companies can distribute plenty more money to shareholders, Martin Adams wrote yesterday in a report. She noted that dividends equal 27 percent of S&P 500 earnings, the lowest figure in more than a century, according to data compiled by Yale University Professor Robert Shiller.

“Companies may be only just beginning to catch on to the fact that investors are keenly interested in dividend-paying stocks,” the report said.

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





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Greece Struggles to Win Aid Package

By James G. Neuger - Feb 15, 2012 6:01 AM GMT+0700

European officials ratcheted up the pressure on the Greek government to deliver budget cuts in exchange for a second bailout as they insisted that default is not an option.

Finance ministers canceled a Brussels meeting slated for today and will hold a teleconference instead to prod Greece to do more to clinch an aid package worth 130 billion euros ($170 billion) along with about 100 billion euros of debt relief from private bondholders. Greece needs the aid to make a 14.5 billion-euro bond payment on March 20.

“The risk of a disorderly default has risen,” Thomas Costerg, a London-based economist at Standard Chartered Bank, said yesterday in an e-mail. “The timetable is already over- stretched to cover the March redemption and gives no room for maneuver or additional delay. The question remains whether we have reached the point of no return for Greece. I don’t think it’s the case yet, but we’re dangerously close to it.”

Two years after pledging to pull Greece back from the brink, European leaders are torn between pouring more aid into the struggling economy or risking an unprecedented national bankruptcy that might force the country out of the euro and prompt renewed market tumult.

“The decision was the result of an evaluation by the head of the eurogroup, Jean-Claude Juncker, that there weren’t sufficient elements of consensus to be sure that a meeting would be successful,” Italian Prime Minister Mario Monti said late yesterday on Sky Italy Television.

Greek Pledges

After Juncker cancelled the gathering, citing the lack of political assurances from Greek leaders to stick to austerity pledges, a government official in Athens said the leaders of Greece’s two biggest political parties, New Democracy’s Antonis Samaras and Pasok’s George Papandreou, will today provide the written commitments demanded.

The euro erased a loss of as much as 0.8 percent on the news of the Greek politicians’ pending promises. The currency traded at $1.3129 at 5:55 p.m. in New York.

Meantime, evidence mounted that the euro’s guardians have made progress ring-fencing Greece’s woes. Italy yesterday sold 6 billion euros of bonds at lower borrowing costs as investors shrugged off a downgrade of its credit rating by Moody’s Investors Service.

Speaking on ZDF television, German Finance Minister Wolfgang Schaeuble said Feb. 13 that if efforts to prop up Greece come to naught, “we’re better prepared than two years ago.”

Bailout Limit

Finance Minister Jan Kees de Jager of the Netherlands, one of four AAA rated states left in the euro area, pushed back against suggestions from Athens that the aid bill will be 15 billion euros higher than planned.

“We agreed upon 130 billion,” De Jager told Dutch RTL television yesterday. “If now it seems more is needed, we should explore other ways.”

Greece’s prospects hinged on Prime Minister Lucas Papademos’s Cabinet finding 325 million euros of the extra budget cuts demanded by European governments and the International Monetary Fund as conditions for fresh loans.

The Cabinet late yesterday agreed to trim pensions at state-owned companies and banks by 300 million euros, according to an official who declined to be named. Parties backing Papademos’s interim government also need to endorse the savings.

Creditor governments also want Greece’s feuding political parties to pledge planned cuts in writing, no matter who takes power in elections due in coming weeks.

Greece has depleted its credibility by missing targets for deficit reduction, economic reforms and asset sales that were set when it obtained a 110 billion-euro aid package in May 2010.

Euro Exit

As a result, the once-taboo notion of a departure or expulsion from the euro zone has crept into the mainstream political debate.

“If they don’t do this, they exclude themselves from the euro zone and the impact on the other countries now would be less important than maybe a year ago,” Luxembourg Finance Minister Luc Frieden said at the Atlantic Council in Washington this week.

Also unclear was whether the European Central Bank, buyer of 219.5 billion euros of weaker countries’ bonds in the past two years, would contribute to debt relief in the new package.

Euro statutes bar the central bank from financing governments. One workaround would be for the ECB to funnel profits from its Greek holdings back through its national branches to euro governments.

ECB Holdings

“These bonds were acquired at an average price that is below face value,” ECB Executive Board member Benoit Coeure told Liberation newspaper in an interview published yesterday. “If there is a profit, as with all monetary holdings, it should be distributed to the states. They can use it to contribute to sustainability of Greece’s debt.”

The central bank probably spent about 47 billion euros to buy Greek bonds with a face value of 60 billion euros, yielding potential profits of 13 billion euros, according to Juergen Michels, chief European economist at Citigroup in London.

Representatives of Greece’s private creditors had planned to travel to Brussels in expectation of progress on the “voluntary” debt-relief accord that was another condition for the official aid.

“Policy makers are still scrambling, and markets have gotten used to it, but there is still a general feeling that the Greece situation will not have a happy ending regardless of what they agree to,” said Jay Mueller , who manages about $3 billion of bonds at Wells Fargo (WFC) Capital Management in Milwaukee.

To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net





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