Facebook First-Quarter Profit Drops; Costs Almost Double

By Brian Womack - Apr 24, 2012 4:22 AM GMT+0700

Facebook Inc. (FB), the social network planning an initial public offering, said first-quarter profit fell 12 percent as operating costs almost doubled.

Net income fell to $205 million in the three months through March, Menlo Park, California-based Facebook said in a regulatory filing. Sales climbed 45 percent to $1.06 billion, a slowdown from 55 percent in the December period.

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Facebook in Hong Kong on February 2, 2012. Photographer: Aaron Tam/AFP/Getty Images

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April 23 (Bloomberg) -- Facebook Inc. said it will list its shares on Nasdaq OMX Group Inc.’s U.S. exchange, according to a regulatory filing. (Source: Bloomberg)

Expenses surged to $677 million, reflecting higher costs of helping marketers reach Facebook’s growing user base, which swelled by one-third to 901 million last quarter. New tools aimed at wringing more money from advertisers will probably have greater impact later this year, EMarketer Inc. said.

“This was a transition quarter for Facebook,” Debra Aho Williamson, an analyst at EMarketer, said in an e-mailed statement. New ad services and increased emphasis on mobile users “will likely have a more significant impact on the company’s revenues later in the year,” she wrote.

Facebook unveiled a new metric that showed monthly revenue per user climbed 6 percent to $1.21. The company valued its shares at $30.89 apiece at the end of January, up from $29.73 at the end of last year.

Facebook, which plans to raise $5 billion in the largest- ever Internet initial public offering, also disclosed new information about recent acquisitions. To finance the $1 billion purchase of Instagram, announced April 9, Facebook used 23 million shares and $300 million in cash.

Revenue from Advertisers

Chief Executive Officer Mark Zuckerberg is rolling out new advertising services to step up competition with Google Inc. (GOOG) and Yahoo! Inc. (YHOO) and generate higher sales from the advertisers eager to reach Facebook’s user base. During the first quarter, Facebook said it would add mobile advertising along with new ads to reach users when they log off the company’s website.

Facebook may seek an IPO valuation of $75 billion to $100 billion, people with knowledge of the matter have said.

Facebook said 82 percent of its revenue came from advertising last quarter, down from 83 percent in the preceding period. The company also derived less revenue from gaming company Zynga Inc. (ZNGA), which contributed 11 percent of the total in the quarter, down from 13 percent a year earlier.

The number of daily active users rose to 526 million, an increase of 41 percent from a year earlier. Facebook’s employee base rose 46 percent to 3,539 from a year earlier.

“Our costs are growing quickly, which could harm our business and profitability,” the company said in the filing. “Providing our products to our users is costly and we expect our expenses to continue to increase in the future as we broaden our user base, as users increase the number of connections and amount of data they share with us, as we develop and implement new product features that require more computing infrastructure, and as we hire additional employees.”

The company said it plans to list on the Nasdaq Global Select Market under the symbol “FB,” according to the regulatory filing.

Sales had risen 55 percent to $1.13 billion in the fourth quarter, and net income had climbed 20 percent.

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

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

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Social Security Fund to Run Out in 2035, Trustees Say

By Brian Faler - Apr 24, 2012 4:17 AM GMT+0700

The Social Security program will exhaust its trust fund in 2035 and have to start reducing benefits to senior citizens unless Congress intervenes, its trustees said.

That is three years sooner than projected in 2011 for the retirement benefits program, which serves 44 million people, the trustees said in an annual report today. Social Security’s disability program, which aids 11 million Americans, will run through its trust fund in 2016, two years earlier than predicted. The report attributed the fiscal stress in part to the weak economy.

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Social Security checks at the U.S. Treasury Philadelphia Finance Center. Photographer: Dennis Brack/Bloomberg

The combined Social Security trust funds would be depleted in 2033, three years earlier than projected. After that, incoming revenue will only be enough to cover three-quarters of scheduled benefits.

The main trust fund that supports the Medicare health-care program for the elderly will run dry in 2024, the report said.

The giant retirement programs are straining the U.S. government’s finances, and what to do about them is a central issue in the election-year debate between Democrats and Republicans as President Barack Obama seeks a second term.

Keep Programs ‘Whole’

“Millions of Americans rely on Social Security and Medicare for income and for health care, and millions more will do so in the future,” Treasury Secretary Timothy Geithner, one of the programs’ six trustees, said today. “These programs have the resources they need to fulfill their commitments to the American people for years to come. But what these reports also reinforce is that we must take steps to keep these programs whole for the future.”

House Republicans propose replacing Medicare with government subsidies to help seniors buy private insurance. Democrats and the Obama administration rejected that plan and have said they want to find ways to shore up the traditional program. Neither side has offered a plan for Social Security, which at a 2011 cost of $736 billion is the U.S. government’s largest single program.

Lawmakers traded shots over the report. House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, said “rather than work together to advance solutions, the president has opted to play politics with seniors’ care” by distorting “efforts to save and strengthen Medicare.”

‘Never Weakened’

House Minority Leader Nancy Pelosi, a California Democrat, said “despite the repeated efforts of Republicans to privatize Social Security and end the Medicare guarantee, these vital initiatives remain strong” and “Democrats will always ensure they are strengthened, never weakened.”

Republican presidential candidate Mitt Romney proposes raising the Social Security retirement age for younger people and indexing benefit increases for higher-income retirees to inflation instead of wages. For Medicare, he endorsed the House Republicans’ plan, authored by Ryan.

The slow economy harms the programs because when unemployment rises, fewer Americans pay the payroll taxes that support Social Security and Medicare. At the same time, some people unable to find work apply for Social Security benefits earlier than they had planned.

Cost of Living

Also, the report said, a higher-than-expected 3.6 percent cost-of-living adjustment awarded last year to Social Security beneficiaries helped push up program costs. The trustees said they anticipate beneficiaries will be awarded a 1.8 percent increase later this year.

In addition to Geithner, the trustees are the secretaries of Labor and Health and Human Services, the Social Security administrator and two public representatives.

Social Security has two parts: the old-age and survivors insurance program, which supports senior citizens, and the disability insurance program. Each has a trust fund financed primarily by a payroll tax split between workers and employers. Medicare is funded through a combination of payroll taxes, beneficiaries’ premiums and general tax revenue.

Enrollment in the disability insurance program has soared in recent years. There will be 10.9 million beneficiaries this year, according to the report, up 64 percent since 2000.

Spending on the disability program last year totaled $132 billion, while it took in $106 billion, the trustees said. It had $154 billion left in its trust fund last year. Once that dries up, the report said, incoming revenue will cover only 80 percent of scheduled benefits.

“The DI program faces the most immediate financing shortfall of any of the separate trust funds,” the report said. “Thus lawmakers need to act soon to avoid reduced payments to DI beneficiaries four years from now.”

To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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Bullish, Bearish Forecasters Agree on Strong Dollar

By Lukanyo Mnyanda and Catarina Saraiva - Apr 24, 2012 1:16 AM GMT+0700

Chris Ratcliffe/Bloomberg News

The face of George Washington is seen on a U.S. one dollar note.

There’s at least one thing that bulls and bears on the U.S. economy agree on: the dollar, the most undervalued major currency in the world, is due to rise as Europe’s sovereign debt crisis threatens the global recovery.

Strategists who as recently as November were predicting the dollar would depreciate against currencies of the Group of 10 nations, now say it will climb by year-end. After weakening against all but the Mexican peso among its 16 most actively traded peers over the past decade, it has gained against 13 of them since February.

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April 23 (Bloomberg) -- James Ferguson, chief strategist at Westhouse Securities Ltd., talks about U.S. monetary policy, oil prices and the dollar. He speaks with Maryam Nemazee and Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)

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Strategists who as recently as November were predicting the dollar would depreciate against currencies of the Group of 10 nations, now say it will climb by year-end. Photographer: Daniel Acker/Bloomberg

Bulls say the dollar will benefit from increased U.S. hiring and an economy that’s projected to grow 2.3 percent this year, almost double the 1.26 percent for the Group of 10, according to Bloomberg surveys of economists. The currency will also gain if global and U.S. growth slows as Europe’s debt crisis worsens, boosting demand for dollar assets such as Treasuries as traditional havens from market turmoil diminish.

“We’ve become more bullish on the dollar because the economic prospects in the U.S. are improving,” Ken Dickson, an investment director of currencies at Standard Life Investments in Edinburgh, which manages about $235 billion, said on April 18 by telephone. “There are additional reasons including problems in the periphery, and a weaker euro is required to help the transition to a better economic situation in Europe.”

Calls Reversed

Scotland’s second-biggest money manager is “overweight” the dollar against the yen and the euro, meaning it owns a greater percentage denominated in the currency than is contained in benchmark indexes. The greenback may climb about 9 percent to $1.20 per euro in the next six months, Dickson said.

Currency analysts predict it will appreciate 1 percent versus other G-10 currencies by the end of this year, according to the average median estimates of strategists surveyed by Bloomberg, from a 4 percent drop expected in November.

It strengthened 0.7 percent to 81.52 yen last week and fell 1.1 percent to $1.3219 per euro. The dollar slid 0.5 percent to 81.10 yen as of 2:12 p.m. New York time, and appreciated 0.6 percent to $1.3136 per euro.

Currency strategists expect the dollar to advance to $1.30 per euro and 84 yen by year-end, based on the median estimate of at least 46 analysts compiled by Bloomberg. That compares with November estimates of $1.41 per euro and 80 yen.

Japan, Switzerland

Demand is being buoyed as central banks in Japan and Switzerland resist gains in their currencies, with both nations seeking to protect their exporters from rising prices for their goods. That leaves the dollar as the sole haven for investors seeking refuge from Europe’s crisis.

Japan has intervened to curb the yen’s 60 percent appreciation over the past decade. The currency surged to a post-World War II record of 75.35 per dollar in October before slipping about 8 percent. The Swiss National Bank imposed a 1.20 franc per euro ceiling on Sept. 6, and the franc has fallen 0.3 percent versus the dollar since the end of that month.

Global gross domestic product will expand 3.5 percent this year and 4.1 percent in 2013, the International Monetary Fund said last week in its World Economic Outlook, raising forecasts made in January from 3.3 percent for 2012 and 4 percent for next year. The U.S. will grow 2.1 percent this year and the euro area is projected to decline by 0.3 percent in 2012.

The euro zone’s $12.1 trillion economy is the world’s second-largest, after the U.S.’s $14.6 trillion, according to data compiled by Bloomberg.

Euro’s Risk

There’s a risk of the euro sliding to $1.25 “if sovereign funding conditions deteriorate significantly,” John Normand, the London-based head of currency strategy at JPMorgan Chase & Co., said April 19. “Our view is that the funding stress, although intense sometimes, is manageable” and the euro may rebound to $1.34 this quarter, he said in an interview.

While the dollar has benefited from its role as the world’s reserve currency, with 62 percent of global holdings, its value fell in foreign-exchange markets as the Federal Reserve printed $2.3 trillion to inject into the economy after the financial crisis began five years ago.

IntercontinentalExchange Inc.’s Dollar Index, which tracks the currency against those of six trading partners, tumbled 14 percent during the Fed’s two rounds of asset purchases, known as quantitative easing, or QE, between December 2008 and June 2011.

Strategists who expect the dollar to decline say that while the U.S. unemployment rate is at the lowest in three years, payrolls increased by the least in five months in March and the Fed may introduce more QE before year-end.

Bernanke’s Assessment

More Americans than forecast filed applications for unemployment benefits in the week through April 14, a government report showed on April 19, adding to signs the improvement in labor-market conditions may be faltering.

Fed Chairman Ben S. Bernanke said last month that further “significant” improvements in employment would probably require a more-rapid expansion.

“Prospects of QE3 had never left the table,” said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., the world’s largest custodial bank, with more than $26 trillion in assets under custody and administration.

Woolfolk expects the dollar to weaken to $1.40 per euro and to appreciate to 90 yen by the end of the year.

“QE3 would send a signal that the Fed wants to continue to grow the balance sheet and continue with the foot on the accelerator in terms of monetary policy,” he said. “This would be viewed as negative for the dollar by the market.”

Easing Odds

The odds of more easing measures by the Fed are 50 percent or higher, the majority in a Bloomberg News survey of the 21 primary dealers that trade with the Fed showed this month.

Longer-term depreciation has left the dollar as the only G- 10 currency undervalued versus the euro, by 5.6 percent, based on an index by the Organization for Economic Cooperation and Development that uses relative costs of goods and services.

The dollar is too weak by 31 percent against the yen and 24 percent compared with its Canadian counterpart, according to the Paris-based OECD.

“The dollar is probably about 20 percent undervalued,” John Taylor, who manages about $4.5 billion as founder and chief executive officer of New York-based currency hedge fund FX Concepts LLC, said in an April 20 telephone interview. “It will be stronger against the euro and yen and even against the emerging markets.”

Central Bank Steps

Like the Fed, policy makers in Japan and Europe have taken steps to support their economies with fiscal stimulus.

The Bank of Japan is “committed” to monetary easing, Governor Masaaki Shirakawa said April 18 in a speech in New York. The European Central Bank issued about 1 trillion euros ($1.3 trillion) in three-year loans to area banks in two longer- term refinancing operations, or LTROs, in December and February.

New Fed stimulus may be sterilized, which would involve the simultaneous draining of cash from the banking system through the repurchase agreement market. The central bank is now replacing $400 billion in shorter-term holdings with longer-term debt in a program called Operation Twist that expires in June.

“The bias at this point is toward steady monetary policy in the U.S. relative to other central banks that could ease further,” Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York, said in an April 17 telephone interview. “The economy in the U.S. is going to be steady, so when we look at those trends elsewhere, we feel the dollar should benefit overall.”

Dollar Index Rally

Wells Fargo revised its year-end forecast for the dollar against the yen to 84 last week, after predicting 80 yen at the beginning of the year. It expects the greenback to end the year at $1.24 per euro.

The Dollar Index (DXY) has rallied more than 2 percent since the Fed announced the start of Operation Twist on Sept. 21. Indicators such as retail sales, manufacturing and consumer confidence signal a pickup in the recovery.

Consumer sentiment has been above 70 every month this year, according to the Thomson Reuters/University of Michigan index. The gauge averaged 64.2 during the last recession and 89 in the five years before the crisis. Retail sales rose 0.8 percent in March, exceeding the 0.3 percent median estimate of 81 economists surveyed by Bloomberg, Commerce Department data last week showed.

The ISM index of manufacturing activity jumped to 53.4 last month, from a two-year low of 51.4 reached in July. It is down from a high of 59.9 in January 2011.

Futures Bets

Bets on dollar gains are growing as Europe’s debt crisis, which started in Greece in October 2009, persists. Italy last week delayed its goal to balance the budget by one year to 2014, joining Spain in missing fiscal targets amid a worsening recession.

Hedge funds and other large speculators increased bets the dollar will rise against the euro to 118,125 contracts in the week ended April 17 from 101,364 the previous week, according to Commodity Futures Trading Commission data. Against the yen, futures traders are long the dollar by 57,803 contracts.

“We expect the U.S. economy to outperform a lot of Europe, therefore we look for the dollar to appreciate over the course of this year,” Sara Yates, a foreign-exchange strategist at Barclays Plc in London, who sees the dollar climbing to $1.25 in six months and $1.20 in a year, said in an interview on April 17. “It’s also the case that if we get euro-area risk really coming back to the fore, then the dollar will do well.”

To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editors responsible for this story: Daniel Tilles at dtilles@bloomberg.net; Dave Liedtka at dliedtka@bloomberg.net

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N.J. State Police Investigating Sports-Car ‘Death Race’

By Terrence Dopp and Elise Young - Apr 24, 2012 4:32 AM GMT+0700

New Jersey State Police are investigating whether troopers escorted a “Death Race” convoy of Porsches, Lamborghinis and Ferraris speeding at 100 miles per hour to Atlantic City.

Witnesses said they saw two cruisers on March 30 escorting a pack of sports cars, according to two complaints filed with the authority that runs the Garden State Parkway.

“It shouldn’t have happened; it was a dumb thing to do,” Republican Governor Chris Christie said in his first public comments on the matter. “Those people who made this mistake should be held accountable for it, and I’m sure they will.”

A witness, Wayne Gantt of Little Egg Harbor, dubbed the incident “Death Race 2012” in his complaint. The State Police cruisers had flashing lights on, and the sports cars were weaving in and out of traffic and had license plates covered with tape, according to the complaints.

Former New York Giants running back Brandon Jacobs was in the group, the Newark Star-Ledger said, citing an unidentified person with knowledge of the trip. Jacobs drove to Atlantic City last month, though it was unclear whether it was the occasion under investigation, his agent said today.

Another Jaunt?

“Yes, he went down to Atlantic City in a group that included a police escort,” Justin Schulman, Jacobs’s Irvine, California-based agent representative, said in a telephone interview. “I don’t know, nor does he know, if that was his caravan.”

Jacobs, 29, was released in March by the Giants after seven seasons. He signed a one-year contract in April with the San Francisco 49ers.

The complaints filed with the New Jersey Turnpike Authority, which oversees the 148-mile (238-kilometer) Turnpike and 173-mile Parkway, spurred the investigation, said State Police Lieutenant Stephen Jones. He declined in a telephone interview today to go into specifics of the allegations.

Gantt, who didn’t return a voice-mail message left at his home, said in his complaint that “the state is very lucky no one was killed.”

“I had the great pleasure today of nearly being killed by, not one, but two, Lamborghinis traveling in excess of 110 mph in a NJSP-escorted ‘caravan’ of approximately 30 exotic vehicles all traveling well over 100 mph,” Gantt wrote in a March 30 complaint provided by the Turnpike Authority.

‘Above the Law’

John W. Kennedy reported the pack of cars on April 1, according to his complaint.

Kennedy said he and his wife were traveling to Atlantic City when the caravan approached as he drove in the left lane. After pulling over, he said, he saw many cars struggle to get out of the way of the police-led pack. Once in town, Kennedy said he spotted one of the drivers parked and removing the tape from his plates.

“I felt bad for all of the drivers pulled over during the trip, because it was obvious that the authorities were abetting others to break the laws,” Kennedy said in the complaint. “Some remain above the law.”

Kennedy, a vice president for Cofely Airport Services and a Madison resident, said in a telephone interview today that he didn’t want to discuss the incident.

“I sent a complaint based on an observation,” Kennedy said. “The fact that it was leaked was very disappointing to me.”

The Death Race incident was reported earlier by the Star- Ledger.

It’s not the first time speed has drawn scrutiny to the state police. A trooper driving then-Governor Jon Corzine at 91 miles per hour on the parkway in April 2007 caused a near-fatal crash. Corzine was the front passenger of the sports utility vehicle and wasn’t wearing a seatbelt. The trooper was sanctioned after an investigation found that he could have prevented the wreck.

Christie said the new investigation left him chagrined.

“I just shook my head, but what are you going to do?” he said. “It’s a completely ridiculous story.”

To contact the reporters on this story: Terrence Dopp in Newark at tdopp@bloomberg.net; Elise Young in Trenton at eyoung30@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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Bo Xilai Clan Links Included Citigroup Hiring of Elder Son

By Bloomberg News - Apr 23, 2012 2:13 PM GMT+0700

Among the Citigroup Inc. (C) bankers gathered in Hong Kong on Aug. 11, 2006, with the mayor of the northeastern Chinese city of Tieling to discuss investments in an industrial park was the son of a powerful China princeling.

Li Wangzhi, who had joined Citigroup after earning a master’s degree at Columbia University, was the first son of Bo Xilai, according to two schoolmates of Li and repeated on an online publication affiliated with the Ministry of Culture. Extended family members of Bo, then commerce minister and now ousted Chongqing Communist Party boss, have also had positions in such firms as alternative-energy company China Everbright International Ltd. (257), according to data compiled by Bloomberg.

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In this photo provided by Tang Baiqiao, Li Wangzhi is identified as standing back row far right, while Tang Baiqiao is back row far left. Source: Tang Baiqiao via Bloomberg

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April 11 (Bloomberg) -- Patrick Chovanec, an associate professor at Tsinghua University's School of Economics and Management, discusses Bo Xilai's suspension from his Chinese Communist Party posts after an investigation led to his wife being arrested on suspicion of murdering a U.K. citizen. He speaks from Beijing with Caroline Hyde on Bloomberg Television's "First Look." (Source: Bloomberg)

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Wang Lijun, former chief of Chongqing Public Security Bureau. Wang is now under investigation following his flight in February to the U.S. consulate in Chengdu. Photographer: Feng Li/Getty Images

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Former Chinese Communist Party Secretary of Chongqing Bo Xilai. Photographer: Nelson Ching/Bloomberg

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Former Chongqing Communist Party Secretary Bo Xilai, right, is accompanied by his wife Gu Kailai at his father's funeral in Beijing, China, on Jan. 17, 2007. Source: AP Photo/Kyodo News/China Foto Press

While the accumulation of influence is commonplace among relatives of politicians worldwide, the Bo family fortune of at least $136 million may fuel perceptions of corruption in the Communist Party and deepen social tensions over China’s widening wealth gap. The party has sought to cordon off from politics the investigations of Bo and his second wife, arrested on suspicion of murder, with an official commentary stating that the inquiry is solely a matter of law.

“The danger for them, the Chinese, is that the whole of the Politburo and their Central Committee colleagues will be exposed as a new property-owning class,” said Roderick MacFarquhar, a Harvard University professor who focuses on Chinese politics. “It’s already got out of hand. The problem for the regime is that it is now out in the public sphere.”

Multiple Names

Bo Xilai’s relatives built their assets in a nation where per-capita income ranks 121st out of 215 countries, according to the World Bank. They set up offshore companies and used multiple names, making it more difficult to track their titles and business dealings. Companies in Dalian and Chongqing, where Bo Xilai held office, were among the beneficiaries of their investments, corporate filings in Hong Kong and the U.S. show.

Li Wangzhi, 34, is the son of Bo Xilai by Li Danyu, Bo’s wife from a marriage that ended in divorce. Bo’s son with second wife Gu Kailai, named Bo Guagua, 24, studies at Harvard University in Cambridge, Massachusetts. Two of Gu Kailai’s four sisters had at least a combined $126 million in disclosed share holdings and proceeds from real-estate investments, Bloomberg News reported on April 14.

Task Force

China sent a task force to investigate claims Bo and his family hold assets in Hong Kong, the South China Morning Post said, citing unidentified sources. The Financial Times reported separately that Bo ally Zhou Yongkang, a member of the Communist Party’s top body, is being probed over disciplinary violations.

The website of Tieling, a city in China’s rust belt, shows Bo’s elder son to be one of the attendees at the 2006 meeting. He was registered with Hong Kong’s Securities and Futures Commission as an employee of Citigroup Global Markets Asia Ltd. in 2005 and 2006. Richard Tesvich, a spokesman for Citigroup in Hong Kong, declined to comment.

Tieling served as a jumping-off point for another of Bo Xilai’s entourage, now also fallen from power: Wang Lijun. In 2008, Wang followed Bo Xilai to Chongqing, where as the top cop for an urban region of 29 million he won plaudits for his crackdown on crime.

Wang is now under investigation following his flight in February to the U.S. consulate in Chengdu, which set off the chain of events that led to Bo’s downfall and Gu Kailai’s arrest on suspicion in the murder of U.K. businessman Neil Heywood.

Modest Pay

The Bo clan’s wealth contrasts with his modest official remuneration. As the Communist Party boss of Chongqing, he rated a salary of about 10,000 yuan ($1,585) a month, according to a report on the website of the Communist Party’s official People’s Daily newspaper. The son of one of the original revolutionaries who founded Communist China, Bo is one of the so-called princeling class.

Chinese legislators have amassed outsized assets, with the wealth of the richest 70 members of the National People’s Congress amounting to $90 billion last year, 12 times the combined wealth of the 660 top officials in the U.S. government, Bloomberg News reported Feb. 27.

In Bo’s clan, elder son Li and Bo Xilai’s elder brother, Bo Xiyong, a vice chairman at China Everbright, helped manage companies with offshore registrations from Mauritius in the Indian Ocean to the British Virgin Islands in the Caribbean. Bo Xiyong also goes by the name Li Xueming.

Columbia Degree

Li Wangzhi graduated from Columbia’s School of International and Public Affairs in New York in 2003 with a master’s degree in international affairs, according to school records. He has also used the names Brendan Li, which appears in a filing with the U.S. Securities and Exchange Commission, and Li Xiaobai, which is on a posting on a Peking University- affiliated website.

Tang Baiqiao, 44, a classmate of Li Wangzhi’s at Columbia, said Li told him he was the son of Bo Xilai. Having such a powerful official as a father opened doors for Li, even as he seemed to dislike his parent, Tang said in an interview at his office in Flushing in the Queens borough of New York.

Tang, president of the Democracy Academy of China, which promotes human rights, also identified a photograph on the website of the Entrepreneur Club of Peking University as that of Li Wangzhi. The accompanying profile has the name Li Xiaobai. The biography, in Chinese, matches publicly available details about Li, including his work at Citigroup.

Exclusive Club

Du Hongjiang, who attended Peking University at the same time as Li, also confirmed in a phone call that Li was Bo Xilai’s son. Like Li, Du is a member of the Entrepreneur Club of Peking University, an exclusive association that includes Robin Li, chief executive officer of search engine Baidu Inc. (BIDU) and billionaire Huang Nubo.

From Columbia, Li started a career in private-equity investing that focused on companies based in Dalian. His father was mayor of the northeastern port city from 1993 to 2000, according to Bo Xilai’s official biography on the Xinhua News Agency.

A Brendan Li is listed as managing director for a Mauritius-registered company, Laoniu Investment Limited Co., according to U.S. Securities and Exchange Commission records. Li Wangzhi set up the Laoniu Fund, according to the Entrepreneur Club website. Laoniu Investment is an arm of the fund.

In a reference to Li’s parents, a Macquarie Capital Securities Limited report from July 2011 says: “Their son, Li Wangzhi (Brandon Li), is a graduate of Columbia University in New York and currently pursues a business career in Beijing and Dalian.”

Nasdaq Listing

SEC records from 2010 show that Laoniu Investment was part of a group of more than 10 entities that in 2007 bought a 15.6 percent share of HiSoft Technology International Ltd. (HSFT), a Nasdaq- listed information technology company based in Dalian.

Li is also linked to Chong’er Investment and Consultancy Co. by office and e-mail addresses. Chong’er was a Chinese prince in the seventh century B.C. who fled his home in the ancient state of Jin, modern-day Shanxi province and the ancestral home of the Bo, Li and Gu families, because his father made his half-brother the crown prince. Chong’er eventually fought back and took the crown.

Chong’er Investment shared an address with Laoniu, though a visit showed the companies no longer occupy the offices in western Beijing listed in SEC filings. Chong’er has a second address, appearing on job recruiting websites, that matches that of Hacheers Fund, of which Li is a partner, according to his profile page on the Entrepreneur Club website. The website of the Peking University Career Center provides a Chong’er e-mail account for Hacheers job applicants.

Family Tension

Family tensions may again be signaled in Li Wangzhi’s use of the name Li Xiaobai on the Entrepreneur Club site. The moniker uses the same Chinese characters as the name of another seventh-century B.C. prince who successfully fought his brother to succeed their father.

Li in July 2008 formed a Hong Kong company, Laoniu Xuelong Holdings Ltd, and was listed in Hong Kong company records as a director along with Fumio Higashi, president of Daito Kaiun Sangyo Co., a Kagoshima, Japan-based shipping company. The owners were Higashi and a Tortola, British Virgin Islands-based company using the Chinese name Yue Yi (BVI) Ltd., Hong Kong company filings show.

That year Laoniu invested an undisclosed amount in another Dalian company, Dalian Xuelong Industrial Group Co. Daito lists Xuelong as its representative in Dalian. Daito ships “stress- free” black cattle bred by Dalian Xuelong, which, according to Daito’s website, are massaged while listening to classical music.

Phone Off

Li wasn’t available when telephoned at law firm Beijing Zhongjing, where legal directories list him as a partner. No one was at home when a reporter visited a Beijing residence listed for Li in Hong Kong company filings. A mobile phone number given to Bloomberg by a former business associate reached a phone that was turned off over three days. Li didn’t respond to an e-mail message sent to an address on the Entrepreneur Club website.

Like Li Wangzhi, Bo Xilai’s oldest brother, Li Xueming, 64, has used an alternative name.

His biography on the website of the Chinese People’s Political Consultative Conference, an advisory body to China’s legislature, shows a balding man with eyes similar to those of his younger, more famous, sibling.

The same bald man was identified in photos and a July 2010 online video on the official website of Zhangye City in western China’s Gansu province as Bo Xiyong, deputy general manager of parent company China Everbright Group.

Everbright International spokeswoman Olivia Wang said the company was looking into Li’s identity.

Immortal Patriarch

Bo Xiyong is the oldest son of Bo Yibo, a former vice premier of China who died in 2007. The family patriarch was one of the so-called eight immortals who helped steer China after the 1966-1976 Cultural Revolution.

In 2010 and 2011, Li Xueming sold 12 million shares in China Everbright International, cashing out HK$43.2 million ($5.6 million), according to Hong Kong Exchange filings. That left options to sell 10 million shares, according to the company’s latest annual report, valued at HK$36.9 million.

Singapore and Hong Kong corporate filings reviewed by Bloomberg News show shared addresses, shareholders and directors in both cities, as well as the British Virgin Islands and Beijing, that indicate Bo Xiyong and Li Xueming are the same person.

Property Development

Li Xueming was a director of HKC Holdings Ltd. (190), a Hong Kong-based property developer and investor, from March 1999 to June 2011, according to the company’s annual reports. The company’s 2010 annual report shows it owns properties across China, from Tianjin in the north to Chongqing, which Bo Xilai led until last month, in the southwest.

At HKC, Li Xueming received a HK$100,000 annual stipend, according to the company’s 2010 annual report. He had no major role in the company and did not have any shares, said Sam Wong, a senior vice president, in a telephone interview.

“I’ve never seen him at board meetings” over the last five years, Wong said. “The reason he was here was because China Everbright owned HKC a long time ago, and they wanted him to be a director.”

Bo Xilai also has two younger brothers, Bo Xicheng and Bo Xining, according to a journal of Communist Party history. Bo Xicheng is chairman of Beijing Liuhexing Hotel Management Co. and former chief of the Beijing Municipal Bureau of Tourism, according to a transcript of an online interview Bo Xicheng had with the official People’s Daily website in 2007.

Bo Xicheng also served as an independent director of Citic Securities Co. (600030), a Beijing-based brokerage, from July 2003 to May 2006, according to the company’s 2006 annual report.

Bo Xicheng’s office in Beijing is accessible only through a small parking garage. A woman who opened the steel door a crack said Bo wasn’t there, before closing it quickly.

To contact Bloomberg News staff for this story: Michael Forsythe in Beijing at mforsythe@bloomberg.net; Wenxin Fan in Shanghai at wfan19@bloomberg.net; Dune Lawrence in New York at dlawrence6@bloomberg.net; Vinicy Chan in Hong Kong at vchan91@bloomberg.net; Natasha Khan in Hong Kong at nkhan51@bloomberg.net; Yidi Zhao in Beijing at yzhao7@bloomberg.net; Ben Richardson in Hong Kong at brichardson8@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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U.S. Stocks Join Global Slump on Europe’s Political Woes

By Rita Nazareth - Apr 24, 2012 3:41 AM GMT+0700

U.S. stocks joined a global selloff as political uncertainty in France and the Netherlands intensified concern about Europe’s sovereign debt crisis.

Bank of America Corp. fell 2.2 percent, following a drop in European lenders, as Dutch Prime Minister Mark Rutte offered to quit after lawmakers split over austerity and French President Nicolas Sarkozy lost the first round of his re-election bid. Monsanto (MON) Co. and U.S. Steel Corp. (X) slid at least 1.8 percent as European and Chinese manufacturing shrank. Wal-Mart Stores Inc. (WMT) retreated 4.7 percent amid a bribery probe in Mexico.

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Trader Michael Zicchinolfi, right, on the floor of the New York Stock Exchange on April 23, 2012. Photographer: Richard Drew/AP Photo

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April 24 (Bloomberg) -- Quintin Price, global chief investment officer of fundamental equities at BlackRock Inc., talks about global stocks and bonds. Price also discusses Europe's sovereign debt crisis and China's economy. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

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April 23 (Bloomberg) -- Jonathan Golub, chief U.S. market strategist at UBS Securities LLC, talks about U.S. corporate earnings and the outlook for markets. Golub speaks with Erik Schatzker, Stephanie Ruhle, Scarlet Fu and Sara Eisen on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

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April 23 (Bloomberg) -- Bloomberg's Dominic Chu breaks down the earnings reports from S&P 500 companies where 84 percent of the 101 companies to report saw their earnings beat analyst estimates. He speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

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April 23 (Bloomberg) -- Bloomberg’s Stephanie Ruhle, Adam Johnson and Matt Miller report on today’s ten most important stocks including Pfizer, Xerox and Wal-Mart de Mexico. (Source: Bloomberg)

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Kellogg, the biggest U.S. cereal maker, plunged 6.6 percent in pre-market trading. Photographer: Daniel Acker/Bloomberg

The Standard & Poor’s 500 Index fell 0.8 percent to 1,366.94 at 4 p.m. New York time, near its highest level of the day. The Dow Jones Industrial Average slid 102.09 points, or 0.8 percent, to 12,927.17. The Russell 2000 Index retreated 1.5 percent to 791.85. About 6.6 billion shares changed hands on U.S. exchanges, or 2.5 percent below the three-month average.

“Markets are realizing that messy European national politics could aggravate already complex economic and financial conditions,” Mohamed El-Erian, the chief executive officer of Pacific Investment Management Co., said in an e-mail today. His company is manager of the world’s largest bond fund.

Equities from Hong Kong (HSI) to Paris and Sao Paulo slumped as the Dutch prime minister ran out of room to maneuver after budget talks with Geert Wilders’s Freedom Party collapsed, triggering doubts about his country’s ability to retain its AAA credit rating. French President Sarkozy and challenger Francois Hollande will be in a second round of elections, vying to lead a country split over measures to end a debt crisis.

Economic Data

Economic concern grew as euro-area manufacturing fell and data indicated China’s production will contract for a sixth month. Today’s drop trimmed this year’s gain in the S&P 500 to 8.7 percent, which had been driven by better-than-estimated economic and corporate data. Earnings per share have topped forecasts at 84 percent of S&P 500 companies that reported results since April 10, according to data compiled by Bloomberg.

“The financial markets are correcting, but they will do better later in the year,” said Byron Wien, the vice chairman of Blackstone Advisory Partners LP, whose parent, New York-based Blackstone Group LP, is the world’s biggest private-equity firm. “The U.S. is closer to self-sustaining momentum.” Wien has a forecast of 1,500 for the S&P 500 at the end of 2012, which would imply a 9.7 percent advance.

Economists surveyed by Bloomberg say that Federal Open Market Committee members, who begin a two-day meeting tomorrow, will likely keep monetary policy on hold as the U.S. shows signs of strength following record accommodation.

Tied to Economy

All 10 groups in the S&P 500 fell today. The Morgan Stanley Cyclical Index of companies most-tied to economic growth lost 1 percent. The Dow Jones Transportation Average, a proxy for the economy, declined 0.9 percent. A measure of homebuilders in S&P indexes tumbled 2.3 percent.

American banks joined a 3 percent drop in a gauge of European lenders. Bank of America declined 2.2 percent to $8.18. The shares have risen 47 percent this year. Citigroup Inc. (C) decreased 1.9 percent to $33.25.

A measure of commodity shares in the S&P 500 dropped 1.4 percent. Monsanto, the world’s largest seed company, slid 1.8 percent to $75.74. U.S. Steel, the country’s largest producer of the metal by volume, lost 2.7 percent to $28.22.

Hedge funds cut their bets on higher commodity prices by the most in four months on mounting concern that Europe’s debt crisis will derail global growth and curb demand for raw materials. Money managers lowered net-long positions across 18 U.S. futures and options by 11 percent to 898,022 contracts in the week ended April 17, the most since Dec. 20, data from the Commodity Futures Trading Commission show.

Bribery Probe

Wal-Mart slumped 4.7 percent, the most in the Dow, to $59.54. Its probe of possible bribery in Mexico may prompt executive departures and steep U.S. government fines if it reveals senior managers knew about the payments and didn’t take strong enough action, corporate governance experts said.

Kellogg Co. (K) tumbled 6.1 percent to $50.70. The largest U.S. maker of breakfast cereal cut its full-year earnings forecast, citing weaker-than-expected results in the first quarter.

Chief Executive Officer John Bryant said Kellogg faced “more significant challenges” in Europe and some categories in the U.S. in the first quarter than was expected. Net sales in the first quarter declined about 1.3 percent while earnings of $1 a share were unchanged from a year earlier, Kellogg said.

“We are obviously disappointed with the performance of the company,” Bryant said in the statement.

Apple’s Results

Apple Inc. (AAPL), which reports results tomorrow, fell 0.2 percent to $571.70, after swinging between gains and losses. Since rising to a record on April 9, the shares have lost 10 percent as some investors speculated Apple may not be able to keep growing at the pace that made it the most valuable technology company. On average, the analysts surveyed by Bloomberg estimate fiscal second-quarter earnings of $9.96 a share for the company.

Profits at the maker of iPhones and iPads have beaten analysts’ estimates 97 percent of the time since 2003, Birinyi Associates Inc. said in a note today. The stock rises by an average 2.6 percent from the close prior to earnings to 8 a.m. the next day, the data showed.

Quarterly reports scheduled for this week also include economic bellwether United Parcel Service Inc. (UPS) and AT&T Inc., the largest U.S. phone company. Caterpillar Inc., the world’s biggest maker of construction and mining-equipment, and Amazon.com Inc. (AMZN), the world’s largest Internet retailer, are due to announce their results.

Higher Estimates

The analysts surveyed by Bloomberg raised their first- quarter earnings estimates for S&P 500 companies. Per-share profits grew 3.3 percent in the first three months of the year, Bloomberg data showed on April 20. That’s up from the previous week’s projection for a 1.7 percent increase. Earnings per share will grow 8.8 percent during all of 2012, the data show.

SunTrust Banks Inc. (STI) jumped 2.8 percent to $23.23. The eighth-largest U.S. lender by deposits reported first-quarter profit that beat analysts’ estimates.

Amylin Pharmaceuticals Inc. (AMLN) rallied 14 percent to $26.06. The maker of the diabetes drugs Bydureon and Byetta is seeking a buyer after rejecting an unsolicited bid from Bristol-Myers Squibb Co., two people with knowledge of the matter said.

Barnes & Noble Inc. (BKS) advanced 18 percent to $13.41. Jana Partners LLC, a hedge fund that has pushed for companies to sell off assets, disclosed a 12 percent stake in the largest U.S. bookstore chain.

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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Lamborghini Introduces Urus, Its First SUV in Two Decades

By Chris Reiter and Siddharth Philip - Apr 23, 2012 2:31 PM GMT+0700

Lamborghini SpA unveiled its first sport-utility vehicle in almost two decades as the Italian supercar maker looks to expand its lineup to tap rising demand from emerging markets.

The Volkswagen AG (VOW) unit unveiled the concept SUV, called the Urus, in Beijing yesterday before this week’s auto show in the Chinese capital. Lamborghini sees potential sales of 3,000 vehicles a year for the SUV, Chief Executive Officer Stephan Winkelmann said at a company presentation. A final decision to produce the vehicle hasn’t been made, he said.

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The Lamborghini SpA Urus sport-utility concept vehicle is unveiled during a Volkswagen AG event in Beijing on April 22, 2012. Photographer: Nelson Ching/Bloomberg

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April 23 (Bloomberg) -- Lamborghini SpA unveiled its first sport-utility vehicle in almost two decades as the Italian supercar maker looks to expand its lineup to tap rising demand from emerging markets. The Volkswagen AG unit unveiled the concept SUV, called the Urus, in Beijing yesterday before this week’s auto show in the Chinese capital. Mark Barton reports on Bloomberg Television's "First Look." (Source: Bloomberg)

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April 23 (Bloomberg) -- Stephan Winkelmann, chief executive officer of Lamborghini SpA, talks about the unveiling of a concept sport-utility vehicle called the Urus. He speaks from the Beijing Auto Show with Linzie Janis on Bloomberg Television's "Countdown." (Source: Bloomberg)

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April 23 (Bloomberg) -- Bloomberg's Erik Schatzker reports that Lamborghini SpA unveiled its first sport-utility vehicle in almost two decades as the Italian supercar maker looks to expand its lineup to tap rising demand from emerging markets. He speaks on Bloomberg Television's "Inside Track." (Source: Bloomberg)

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April 23 (Bloomberg) -- Bloomberg's Stephen Engle reports from the Beijing Auto Show on the outlook for China's auto market, which includes more than 100 domestic carmakers and countless joint ventures with foreign players. Volvo Car Corp., the Swedish carmaker owned by China’s Zhejiang Geely Holding Group Co., said it plans to more than double its number of models to compete with Volkswagen AG’s Audi and BMW AG in the world’s largest automobile market. (Source: Bloomberg)

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Stephan Winkelmann, chief executive officer of Lamborghini SpA, speaks at the unveiling of the Urus sport-utility concept vehicle during a Volkswagen AG event in Beijing on April 22, 2012. Photographer: Nelson Ching/Bloomberg

“If you’re going to enter a new segment, you have to remain true to your core values,” said Winkelmann. “Our core values are uncompromising, extreme and Italian.”

The sportscar maker joins Bentley Motors Ltd. and Fiat SpA (F)’s Maserati in super-sizing their supercars a decade after Porsche broke with tradition and rolled out the Cayenne in 2002. The German maker of the 911 sports car now counts on the SUV for half its deliveries.

Demand for luxury SUVs is forecast to climb 49 percent in China to 265,200 vehicles in 2015, almost three times the 18 percent growth in global sales for those vehicles, according to IHS Automotive.

“The SUV market is one of the fastest growing segments in China,” said Namrita Chow, an analyst with IHS Automotive based in Shanghai. “Everybody is pushing the SUV segment and therefore you have the likes of Maserati and Lamborghini bringing in models in the segment.”

China Growth

Lamborghini projects China sales to grow between 5 percent and 10 percent, in line with VW projections for the market as whole, said Christian Mastro, the carmaker’s Asia Pacific head. Daimler AG (DAI) Chief Executive Officer Dieter Zetsche is even more bullish, today projecting 2012 growth in the premium segment in China of 15 percent to 20 percent.

Bentley, another Volkswagen luxury brand, displayed its own SUV concept at the Geneva auto show last month. China became the company’s biggest market in the first quarter after sales surpassed deliveries in the U.S. for the first time, according to Chong Got, executive director of Bentley China.

Maserati will start production in 2013 of a Jeep-based SUV, currently called the Kubang, while Ferrari SpA last year added the 260,000-euro ($344,000) FF family car, its largest model.

Rambo Lambo

Porsche, which expects to double global sales to 200,000 units by 2018, counts China as its largest market for the Panamera four-door sports car and the Cayenne. The carmaker expects the number of Chinese dealerships to reach 60 by the end of the year from 41 now, Bernhard Maier, the Stuttgart, Germany- based carmaker’s sales chief, told reporters in Beijing yesterday.

Lamborghini discontinued the boxy LM002 SUV -- dubbed the Rambo Lambo -- in 1993 after a failed effort to make military vehicles. If the new concept SUV is built, it could come to market in 2016 or 2017, Winkelmann said today.

“We decided after a deep analysis in different segments that this is the perfect fit for our brand,” Winkelmann said in a Bloomberg TV interview. “We used to produce only two-door super-sports cars like the Aventador and the Gallardo, but this car is really making the difference for our brand.”

To contact the reporters on this story: Chris Reiter in Berlin at creiter2@bloomberg.net; Siddharth Philip in Mumbai at sphilip3@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net; Chad Thomas at cthomas16@bloomberg.net.

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