Apple’s Cook Won Jobs’s Trust Early: Book

By Adam Satariano and Peter Burrows - Oct 22, 2011 6:48 AM GMT+0700
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Tim Cook, left, Chief Operating Officer, Apple CEO Steve Jobs and Phil Schiller, right, EVP Product Marketing, answers questions after Jobs introduced new versions of the iMac and iLife applications. Photographer: David Paul Morris/Getty Images

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Oct. 20 (Bloomberg) -- Bloomberg's Tom Giles talks about an authorized biography of Apple Inc. co-founder Steve Jobs to be released Oct. 24. Jobs, who died on Oct. 5, had secret treatments for pancreatic cancer while telling people he was cured, his biographer Walter Isaacson told CBS News's "60 Minutes," according to excerpts released today. Giles speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Video excerpts courtesy of CBS News. Source: Bloomberg)

Tim Cook, after joining Apple Inc. (AAPL) in 1998, quickly gained the trust of Steve Jobs, who had recently taken back control of the company, according to a biography of Jobs to be released on Oct. 24.

Jobs initially oversaw supply chain after he returned to Apple in 1997 following a 12-year hiatus. By turning that responsibility over to Cook, Jobs was able to focus on product vision and broader strategy, instead of the nitty-gritty of manufacturing and purchasing the parts needed to build a growing array of products.

“I trusted him to know exactly what to do,” Jobs told Walter Isaacson, author of “Steve Jobs,” published by CBS Corp. (CBS)’s Simon & Schuster. “He had the same vision I did, and we could interact at a high strategic level and I could just forget about a lot of things unless he came and pinged me.”

The authorized biography, based on more than 40 interviews with Jobs, gives fresh insight into the executive’s early interaction with Cook, who later succeeded him as CEO and is now running the world’s most valuable technology company. The book, purchased by Bloomberg, also highlights the central role played by Jonathan Ive, senior vice president of industrial design. Other details include the advice Jobs gave Larry Page soon after he was named CEO of Google Inc. (GOOG), one of Apple’s fiercest rivals.

Jobs considered Ive, who goes by Jony, his “spiritual partner” who was vital to product development, according to the book. Jobs said he set up Apple so that nobody could tell Ive what to do.

Collaborating With Ive

“He understands what we do at our core better than anyone,” Jobs said of Ive. “If I had a spiritual partner at Apple, it’s Jony.”

Jobs said he and Ive typically dreamed up Apple products, often having lunch together and collaborating on designs in Ive’s studio at Apple’s Cupertino, California, campus.

Cook, the son of a shipyard worker, oversaw Apple during Jobs’s three medical leaves as he battled a rare form of cancer that eventually claimed his life.

When Jobs came back from his first medical leave in 2004, he was “on a mission,” Cook told Isaacson.

“Even though he was now running a large company he kept making bold moves that I don’t think anybody else would have done,” Cook said.

When Jobs hired Cook away from Compaq Computer, Jobs was pressing the company to build so-called just-in-time factories, where products are built as orders come in, limiting the amount of inventory sits on shelves, which can hurt financial results.

Cook’s Overhaul

“I knew what I wanted and I met Tim, and he wanted the same thing,” Jobs said.

Cook sliced the number of key Apple suppliers to 24 from 100 and persuaded them to cut better financial deals or risk losing Apple’s business, according to the book. He also closed 10 of the company’s 19 warehouses to limit where inventory could build up. By September 1998, Cook had cut inventory down to six days, from about a month.

Cook, who majored in industrial engineering at Auburn University and earned a master’s of business administration from Duke University, said he knew within five minutes of meeting with Jobs that he wanted to work for Apple.

“My intuition told me that joining Apple would be a once- in-a-lifetime opportunity to work for a creative genius,” Cook said. “Engineers are taught to make a decision analytically, but there are times when relying on gut or intuition is most indispensable.”

‘Mow You Down’

The book paints a picture of Cook as someone who thrived under Jobs because he was calm and decisive, while shunning the limelight.

“Some people resent the fact that Steve gets credit for everything, but I’ve never given a rat’s ass about that,” Cook said. “Frankly speaking, I’d prefer my name never be in the paper.”

Another key to Cook’s success was learning when and how to disagree with Jobs.

“I realized very early on that if you didn’t express your opinion, he would mow you down,” Cook said. “He takes contrary positions to create more discussion, because it may lead to a better result. So if you don’t feel comfortable disagreeing, then you’ll never survive.”

While handling day-to-day operations while Jobs was away for a liver transplant in 2009, Cook said during a conference call that Apple would thrive whoever is at the helm.

Advice for Google’s Page

When he heard the remarks, Jobs didn’t know whether to be “proud or hurt that it might be true,” Isaacson wrote.

When Jobs returned from getting his transplant in Memphis that year, Ive and Cook met him at the airport.

While Jobs was a vigorous competitor, he also came to view himself as an elder statesman with a responsibility for giving advice to Google’s Page, Facebook Inc. CEO Mark Zuckerberg and other emerging technology executives, according to the book.

Soon after Google co-founder Page was named to replace Eric Schmidt, he sought advice from Jobs about being a better CEO.

“My first thought was, ‘F**k you,’” Jobs told Isaacson. Jobs was incensed over Google’s foray into smartphones. Jobs then reflected on how Hewlett-Packard Co. (HPQ) co-founder William Hewlett had helped him earlier in his career.

Jobs urged Page to sharpen Google’s focus and jettison products that put the company at risk of becoming like Microsoft Corp.

Giving Back

“I described the blocking and tackling he would have to do to keep the company from getting flabby or being larded with B players,” Jobs said of the meeting in his living room. “Figure out what Google wants to be when it grows up. It’s now all over the map. What are the five products you want to focus on? Get rid of the rest, because they’re dragging you down. They’re turning you into Microsoft.”

Jobs said he intended to advise other executives in the succeeding months.

“I will continue to do that with people like Mark Zuckerberg, too,” Jobs said. “That’s how I’m going to spend part of the time I have left. I can help the next generation remember the lineage of great companies here and how to continue the tradition. The Valley has been very supportive of me. I should do my best to repay.”

To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net; Peter Burrows in San Francisco at pburrows@bloomberg.net

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

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Groupon IPO May Value Stake Held by Chairman Lefkofsky’s at $2.3 Billion

By Lee Spears, Douglas MacMillan and Ari Levy - Oct 22, 2011 6:39 AM GMT+0700

Groupon Inc. founder and Chairman Eric Lefkofsky may parlay a $1 million check to co-founder Andrew Mason four years ago into a stake worth $2.3 billion when the daily-deal site sells shares to the public next month.

Lefkofsky owns 129.2 million common shares, according to the company’s prospectus, at least double the amount owned by Mason or fellow co-founder Bradley Keywell. New Enterprise Associates, the earliest venture backer, may see its $10 million investment grow more than 100-fold, to $1.57 billion.

Groupon’s market value would be about $11.4 billion following the IPO, less than half the size the company reportedly discussed with bankers earlier this year. Still, a decision to reject a buyout bid in 2010 from Google Inc. that would have valued the Chicago-based company at $6 billion may have paid off. At the high end of the price range, the founders’ combined 34 percent stake would be worth $3.9 billion on paper.

“We’re not where we were a few months ago, but we’re still talking about double what Google offered to pay,” said Anupam Palit, senior equity analyst at New York-based GreenCrest Capital Management LLC, which researches private companies.

Mason’s stake in Groupon may be valued at as much as $845 million, while Keywell’s share may reach $742 million, according to a regulatory filing today. Investors that have put money into Groupon since its inception have paid an average of 31 cents a share for their stakes, the filing shows. The high end of the $16 to $18 offering price range implies an average 58-fold gain for current holders.

Venture Backing

Venture capitalists have led more than $1.12 billion in investments in Groupon since 2008. New Enterprise Associates, which owns 87.5 million shares, paid $4.8 million in 2008. That investment valued the startup at about $30 million, filings show. The firm, which has offices in Chevy Chase, Maryland, and Menlo Park, California, invested another $10 million in November 2009, and received a $4.9 million dividend from the company the same month, according to the prospectus.

Accel Partners, with 33.2 million shares, may see its stake valued at as much as $598 million, according to the prospectus. Palo Alto, California-based Accel led a $30 million round in December 2009, in which New Enterprise Associates also bought shares, Groupon said in a statement at the time. Accel was the first venture investor in Facebook Inc.

Groupon’s implied market value, in addition to being almost twice as much as Google sought to pay for the company in December 2010, is more than double the implied valuation in the latest round of financing.

Voting Power

In January, Groupon raised $950 million from investors including Andreessen Horowitz, Battery Ventures, Greylock Partners, Kleiner Perkins Caufield & Byers and private-equity investor Silver Lake. That valued Groupon at about $4.75 billion, people with knowledge of the matter said at the time.

Bloomberg LP, the parent company of Bloomberg News, is an investor in Andreessen Horowitz.

While the three co-founders will collectively own more than a third of Groupon’s common stock, they will also share more than 58 percent of the voting power by virtue of the Class B shares they own, which carry 150 votes apiece. Class A stockholders get a single vote per share.

Groupon traces its roots back to a $1 million check Lefkofsky gave to Mason in 2007 to convince him to drop out of graduate school and found a company called The Point, a site that helps people raise funds and build petition lists for activism. That inspired Mason to try another site, Groupon, based around the idea of collective buying.

While Internet companies have seen their shares surge following U.S. IPOs this year, and LinkedIn Corp.’s stock is almost double its offering price, they have not all held their value. Online music provider Pandora Media Inc.’s stock has dropped 5.4 percent since its IPO, while Yandex NV, the owner of Russia’s most popular search engine, has trimmed its gains to 6 percent. At one point, Yandex had climbed as much as 55 percent.

To contact the reporters on this story: Lee Spears in New York at lspears3@bloomberg.net; Douglas Macmillan in New York at dmacmillan3@bloomberg.net; Ari Levy in San Francisco at alevy5@bloomberg.net.

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

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DirecTV Threatens to Pull Fox Channels

By Alex Sherman - Oct 22, 2011 3:14 AM GMT+0700

DirecTV (DTV), the largest U.S. satellite- TV provider, is threatening to pull more than 25 channels owned by News Corp.’s Fox Networks to “mitigate the madness” of programming price increases by content providers, a company executive said.

Fox is asking DirecTV to pay 40 percent more for channels including FX, National Geographic and several regional sports networks, according to DirecTV Executive Vice President Derek Chang. DirecTV will remove the channels from its package offerings by Nov. 1 if Fox doesn’t lower its asking price, Chang said in an interview today.

DirecTV is the latest company to spar with content providers about programming price increases. Cablevision Systems Corp. (CVC) and Verizon Communications Inc.’s FiOS pulled the Tennis Channel last month after the network asked for “significantly higher” fees. In October 2010, Cablevision paid Fox what it called “an unfair price” for World Series games after a two- week blackout.

“We continue to talk to Fox and we’re not opposed to paying reasonable increases, but 40 percent is certainly out there,” Chang said. “These are challenging economic times. We’re trying to protect our customers.”

Chang said the El Segundo, California-based company “applauds” other pay-TV operators that have taken similar public stands against content providers.

‘Bad Faith Tactics’

Fox released a statement last night citing DirecTV’s use of “bad faith tactics” in going public with threats to remove the stations. Chang said a statement posted last night on a DirecTV website about the fee increase was intended to alert customers that the channels may disappear.

“The stakes are high since DirecTV has about 19 million subscriber homes, a little under 20 percent of News Corp. (NWSA)’s market that it would lose audience and advertising dollars for,” said David Joyce, an analyst at Miller Tabak & Co. in New York.

Fox said it has proposed keeping its stations on DirecTV as negotiations continue. Chang says talks are ongoing.

“Our hope is to continue to negotiate with Fox to come to a deal to keep these channels up. That’s the best thing for all our customers. That being said, the gap is significant and if we can’t close it, we have to deal with reality,” Chang said.

News Corp.’s chief operating officer, Chase Carey, was DirecTV’s chief executive officer from 2004 to 2009.

DirecTV rose 1 percent to $46.42 at the close in New York. The shares have risen 16 percent this year. New York-based News Corp. rose 2.1 percent to $17.20 and has gained 18 percent this year.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net.

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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EU Confronts Deteriorating Greek Economy as Six-Day Crisis Marathon Starts

By James G. Neuger and Stephanie Bodoni - Oct 22, 2011 1:01 AM GMT+0700

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Oct. 21 (Bloomberg) -- Christina Romer, former head of President Barack Obama's Council of Economic Advisers and a Bloomberg contributing editor, Arnab Banerji, chief investment officer at Collabrium Capital, Dan Wiener, chief executive officer at Adviser Investments, and Daron Acemoglu, professor of economics at the Massachusetts Institute of Technology, talk about the European sovereign debt crisis. They speak with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

European finance ministers grappled with an assessment that Greece’s economy is deteriorating as they began a six-day battle to stave off a default and shield banks from the fallout.

A review by European and International Monetary Fund experts showed Greek bond writedowns of 60 percent and more official aid would still leave the country with a debt load bigger than its annual economic output by 2020.

Finance ministers braced for “tough” talks at a crisis- management marathon running until Oct. 26, as pressure mounted to stamp out debt woes that threaten to infect the global economy. Aid of 256 billion euros ($354 billion) for Greece, Ireland and Portugal have failed to stabilize markets or prevent the turmoil spreading to France, co-anchor with Germany of the European economy.

Europe’s international image is “disastrous,” Luxembourg Prime Minister Jean-Claude Juncker told reporters before the Brussels meeting. “We’re not really giving a great example of a high standing of state governance.”

Juncker, chairing today’s talks, cancelled the normal post- meeting press conference. Finance ministers from all 27 European Union countries meet tomorrow. EU and euro-area leaders gather on Oct. 23, to be capped by another euro summit on Oct. 26.

The negotiations “will be tough and the situation is serious,” Dutch Finance Minister Jan Kees de Jager said. “We really need to step up efforts, make extra reforms, extra cuts and strict agreements on budgets.”

Stocks, Euro

European and U.S. stocks, the euro, and bonds of struggling countries rose today on speculation that European leaders will find a cure. The Stoxx Europe 600 Index advanced 2.5 percent. The euro added 0.7 percent to $1.3877.

With President Barack Obama stressing the “urgency” of a fix, the search for solutions was snagged by a falling-out between Germany and France, the tandem at the heart of the crisis response ever since the new Greek government discovered a wider-than-expected budget hole in October 2009.

With French bond premiums at euro-era highs, French President Nicolas Sarkozy is campaigning for a European Central Bank role in boosting the firepower of the 440 billion-euro rescue fund, a measure opposed by Germany.

German Finance Minister Wolfgang Schaeuble denied a Berlin- Paris rift, saying Germany pushed back decisions originally slated for Oct. 23 to give the government time to consult lawmakers.

‘Not Stuck’

“France and Germany are not at all stuck in their positions,” Schaeuble said.

Seven options are on the table for leveraging the fund, known as the European Financial Stability Facility. Germany and the ECB have ruled out granting it a banking license, the most potent option.

“New ones are coming into the process because smart people are looking for creative options,” Austrian Finance Minister Maria Fekter said in an interview. “None of the models are amazingly better than the others.”

One way under consideration to break the deadlock is by keeping the EFSF going instead of replacing it with a planned permanent fund, two people familiar with the discussions said yesterday.

The resulting combination of the EFSF and 500 billion-euro European Stability Mechanism would deliver 940 billion euros to impress the markets, the people said. A consensus is emerging to start the ESM in mid-2012, a year ahead of schedule, they added.

‘Turn for the Worse’

The meeting’s start was overshadowed by the report by the European Commission, ECB and IMF that pointed to “a turn for the worse” in Greece.

Divisions over the handling of Greece were thrown into relief by the report, which was obtained by Bloomberg News. It contained a footnote that the ECB, which has lobbied against writedowns, “does not agree” with the inclusion of the bond- loss scenarios.

Officials are considering five scenarios to update a July agreement that foresaw 21 percent losses on Greek debt for private bondholders, people familiar with the deliberations said. They range from sticking with a voluntary swap to a so- called hard restructuring that forces investors to exchange Greek bonds for new ones at 50 percent of their value, the people said.

Greek Needs

A deepening recession and delays in enacting budget cuts have raised Greece’s financing needs by at least 20 billion euros since July, when euro leaders hammered out a 159 billion- euro package, the people said.

“Given still-delayed market access, large scale additional official financing requirements would remain, estimated at some 114 billion euros,” according to the auditors’ report, dated today. “To get the debt down further would require a larger private sector contribution” of at least 60 percent to reduce debt below 110 percent of gross domestic product by 2020.

The government in Athens forecasts the debt load next year at about 172 percent of GDP.

“The situation in Europe is very difficult,” Finnish Finance Minister Jutta Urpilainen said. “Our meeting tonight will be also difficult.”

The ministers signed off on on the payout of its 5.8 billion-euro share of an 8 billion-euro loan to Greece. It’s the sixth installment of a 110 billion-euro package awarded in May 2010.

Greek lawmakers clinched that payment by passing fresh austerity measures yesterday, as hooded protesters threw rocks and battled riot police outside the parliament in Athens.

The skepticism outside Europe of a soft landing for Greece was captured by Brazilian Finance Minister Guido Mantega. Speaking in Campinas, Brazil, today, Mantega said “the numbers still won’t add up. A restructuring of Greek debt is inevitable. The debt is very big to be sustainable.”

To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net Stephanie Bodoni in Brussels at sbodoni@bloomberg.net

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

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Dollar Drops to Post WWII Low Against Yen

By Catarina Saraiva - Oct 22, 2011 4:14 AM GMT+0700

The dollar dropped to a post-World War II low against the yen and fell versus most major currencies on speculation Europe is moving closer to resolving its debt crisis and the Federal Reserve may seek further monetary easing.

The euro advanced for a fourth day against the dollar, in the longest stretch of gains since July, before two European summits over the next five days. South Africa’s rand and Australia’s dollar rallied as stocks and commodities increased, boosting demand for higher-yielding assets. The dollar remained lower versus the yen as Fed Vice Chairman Janet Yellen said new purchases of securities may be appropriate.

“Clearly the dollar is weaker against the euro on speculation that there is going to be a happy ending to the debt crisis,” said Greg Salvaggio, senior vice president of capital markets at the currency trader Tempus Consulting Inc. in Washington. “There’s a risk-on feeling in the market.”

The yen appreciated 0.7 percent to 76.29 versus the dollar at 5 p.m. in New York after touching a record high 75.82. The euro rose 0.8 percent to $1.3896, extending its weekly gain to 0.1 percent. The euro rose 0.1 percent to 105.97 yen.

The dollar dropped before meetings in Europe this weekend as bets that the U.S. currency would rally dropped from the highest level in more than a year.

“There’s broad-based dollar selling,” said Robert Sinche, global head of currency strategy at Royal Bank of Scotland Group Plc in Stamford, Connecticut. “It could just be a market that’s long of dollars and short of risk and other currencies. It’s Friday, and people are uncomfortable going into the weekend with those positions.”

Dollar Bets

Hedge funds and other large speculators pared their net long dollar positions to 126,628 in the week ended Oct. 18 after reaching 132,835 in the prior week, the most since June 2010, according to Commodity Futures Trading Commission data released today. The figures measure futures contracts on dollar bets against the euro, yen, Australian, Canadian and New Zealand dollars, pound, Swiss franc and Mexican peso.

Canada’s dollar rose for a second straight day, advancing 0.9 percent to C$1.0066 versus the greenback as the nation’s annual inflation rate rose more than forecast last month.

The consumer price index increased 3.2 percent in September from a year earlier, Statistics Canada said. The median forecast of economists was for another 3.1 percent rise.

South Africa’s rand was the best performer among the 16 most-traded currencies tracked by Bloomberg, rising 1.8 percent to 8.0408 versus the dollar as stocks and commodities gained. Australia’s currency appreciated 1.4 percent to $1.0376.

Rally in Stocks

The Standard & Poor’s 500 Index increased 1.9 percent, and the Thomson Reuters/Jefferies CRB Index of raw materials added 1.1 percent.

Yellen said in a Denver speech that a third round of large- scale securities purchases might be warranted if necessary to boost a U.S. economy challenged by unemployment and financial turmoil, boosting speculation the central bank will start a third round of asset buying aimed at reviving U.S. growth. The comments followed Fed Governor Daniel Tarullo’s call yesterday for a resumption of large-scale purchases of mortgage bonds.

While almost three years of near-zero interest rates from the Fed and $2.35 trillion of asset purchases helped pull the U.S. economy out of a recession, concern is rising that gross domestic product may soon start to shrink.

Germany’s Stance

The euro rose against the dollar today as German officials said there are several possible ways of involving the International Monetary Fund to boost the firepower of the European Financial Stability Facility, the region’s rescue fund, to fight the euro-region debt crisis.

Germany favors using an insurance model to leverage EFSF funds or deepening cooperation with the IMF to expand EFSF resources, a German government official said in Berlin today, speaking on condition of anonymity.

France retreated in a clash with Germany over how to expand the power of Europe’s bailout fund. France’s view that the fund should get a banking license enabling it to borrow from the European Central Bank, “is not a definitive point of discussion for us,” French Finance Minister Francois Baroin told reporters.

Euro finance ministers meet today, followed by ministers from all 27 European Union countries tomorrow. EU and euro-area leaders gather on Oct. 23, to be capped by another euro summit Oct. 26.

The yen’s surge today came after it set a record on Aug. 19, which followed a 4.51 trillion-yen ($59 billion) intervention earlier in the month by Japan. The nation has intervened in the foreign-exchange markets three times in the past 13 months to weaken the yen. The currency is up 6.5 percent against the dollar in 2011.

‘Any Sneeze’

“People are just so flat that any sneeze like one macro fund coming in and putting a position on can move the market,” said Andrew Cox, a strategist at Citigroup Inc. in New York. “Currencies were hitting stop losses to the topside with the risk relief including the yen. It’s not a yen-specific move.”

Japan’s government will add 2 trillion yen to the 8 trillion yen in foreign-exchange reserves being shifted to the state-run Japan Bank for International Cooperation to aid exporters and spur acquisitions overseas, a document shows.

A further 2 trillion yen will be allocated to encourage investment in domestic plants and to hire workers, according to another document obtained from two government officials who declined to be identified because the plan isn’t public.

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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Obama: U.S. Troops Will Exit Iraq This Year

By Margaret Talev and Roger Runningen - Oct 22, 2011 3:55 AM GMT+0700

President Barack Obama announced that all U.S. troops will be out of Iraq by the end of the year, fulfilling a campaign promise and ending one of the longest conflicts in U.S. history.

“After nearly nine years, America’s war in Iraq will be over,” Obama said at the White House today. American soldiers “will cross the border out of Iraq with their heads held high, proud of their success, and knowing that the American people stand united in our support for our troops.”

The president spoke after conducting a video conference with Iraqi Prime Minister Nouri al-Maliki. Obama said both governments agreed on the next stage in the relationship as the U.S. withdraws its remaining 41,000 troops in Iraq.

Obama’s opposition to the war was a central element in his rise to national prominence, and his vow to bring U.S. troops home was a building block of his 2008 campaign for president.

The U.S. had been negotiating on the terms of an accord with the government of Iraq on whether to keep some U.S. forces there past the end of 2012. The current U.S. agreement with Iraq for keeping troops in the country, negotiated in 2008 under President George W. Bush, expires at the end of this year.

Both governments have said that Iraq needs help with external security and with the continued training and development of its security forces. A sticking point has been U.S. insistence that its troops have immunity from prosecution in Iraqi courts.

Training and Equipment

Obama said discussions will continue on how the U.S. might help train and equip Iraqi forces.

Brian Katulis, a senior fellow at the Center for American Progress, a policy research organization in Washington, said “a large U.S. footprint” in Iraq will remain, given the staffing level at the U.S. embassy and the number of private security contractors.

“I would be surprised if they’re doing anything that would diminish their plans for ongoing security assistance and police training, which will be run under the State Department,” Katulis said.

Denis McDonough, deputy White House national security adviser, said the U.S. got “exactly what we needed to protect our security interests” in negotiating with Iraq.

Iran Issue

He said the withdrawal by the U.S. won’t embolden Iran, which borders Iraq, to seek to expand its influence in the region. The U.S. sees “an Iran that is weaker and is more isolated,” he said.

Obama said the final stage of withdrawals marks a larger transition as the U.S. also draws down troop levels in Afghanistan.

“The tide of war is receding,” he said. That will allow a stronger focus on the U.S. economy, he said.

“After a decade of war the nation that we need to build and the nation that we will build is our own, an America that sees its economic strength restored just as we’ve restored our leadership around the globe,” Obama said.

There have been 3,525 U.S. personnel killed in action in Iraq; an additional 957 died of other causes. More than 32,000 have been wounded. The war has cost at least $752 billion, including training for Iraqis and related diplomatic missions, the nonpartisan Congressional Budget Office said in January.

U.S. military units have been steadily pulling out of Iraq since reaching a peak of almost 170,000 in 2007.

Policy Critics

The troop-withdrawal announcement came under fire from critics of Obama’s policies in the region.

Republican presidential candidate Mitt Romney said in a statement that the withdrawal represents an “astonishing failure to secure an orderly transition in Iraq,” and said it could put U.S. gains in the war at risk.

“The unavoidable question is whether this decision is the result of a naked political calculation or simply sheer ineptitude in negotiations with the Iraqi government,” he said.

Arizona Senator John McCain, Obama’s opponent in the 2008 election, said the withdrawal “marks a harmful and sad setback for the United States in the world.”

McCain, a prominent voice in his party on defense matters, said military commanders have told him the Iraqi military still needs assistance from U.S. forces.

Democratic Base

Among members of the Democratic Party’s base, who have been disappointed by compromises such as the removal of a government- run “public option” from his health-care overhaul and budget deals with congressional Republicans, the withdrawal from Iraq is an achievement the Obama campaign can point to in seeking to raise enthusiasm for his re-election bid.

For Democrats “it’s a significant moment because it delivers on a core promise of the campaign,” said Chris Lehane, who was press secretary to former Vice President Al Gore’s 2000 presidential campaign.

Obama, as a state senator in Illinois, opposed the 2002 congressional resolution authorizing the U.S. invasion, calling it a “dumb war” in a speech to a rally in Chicago. That later became a highlight of the political biography that fueled enthusiasm for him as public sentiment turned against the war.

Today’s announcement bolsters Obama’s ability to draw distinctions with Republican challengers on a national security record that also includes the killing of Osama bin Laden and a military intervention that helped rid the world of Muammar Qaddafi, Lehane said.

Still, the impact on Obama’s re-election campaign is likely to be minimal, Lehane said.

“At the end of the day, there’s one omnipresent, overhanging issue: the economy,” he said.

To contact the reporters on this story: Margaret Talev in Washington at mtalev@bloomberg.net; Roger Runningen in Washington at rrunningen@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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Fed’s Yellen: QE3 May Be Warranted

By Scott Lanman and Jennifer Oldham - Oct 22, 2011 2:56 AM GMT+0700
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Job seekers wait in line to meet with recruiters at a job fair hosted by Illinois State Senator Dan Kotowski and the Illinois Department of Employment Security on September 15, 2011 in Park Ridge, Illinois. Photographer: Scott Olson/Getty Images

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Janet Yellen, vice chairman of the U.S. Federal Reserve. Photographer: Joshua Roberts/Bloomberg

Federal Reserve Vice Chairman Janet Yellen said a third round of large-scale securities purchases might become warranted if necessary to boost a U.S. economy challenged by unemployment and financial turmoil.

The central bank should also give “careful consideration” to Chicago Fed President Charles Evans’s proposal to tie the near-zero interest-rate pledge to specific levels of unemployment and inflation, Yellen said today in a speech in Denver.

The remarks signal Fed officials may be prepared to delve further into unprecedented monetary territory and take criticism inside and outside the central bank for expanding the balance sheet. Fed policy makers are struggling to lower unemployment that’s been stuck near 9 percent or higher for 30 months without boosting inflation that’s already close to the central bank’s long-run goal.

“Securities purchases across a wide spectrum of maturities might become appropriate if evolving economic conditions called for significantly greater monetary accommodation,” Yellen said in prepared comments to the annual meeting of the Financial Management Association International.

The U.S. recovery is “disappointingly slow,” which leaves the economy “vulnerable to downside shocks,” Yellen said. Job growth is likely to remain “tepid in the coming months,” and the chance that Europe’s sovereign-debt crisis may pressure U.S. financial companies is “particularly worrisome,” Yellen said.

Adverse Developments

“The potential for such adverse financial developments to derail the recovery creates, in my view, significant downside risks to the outlook,” said Yellen, 65, an economist who has been Chairman Ben S. Bernanke’s top lieutenant in Washington for one year. She previously served as president of the San Francisco Fed.

Stocks remained higher after the speech, with the Standard & Poor’s 500 Index up 1.4 percent to 1,232.48 at 3:48 p.m. in New York. Yields on 10-year Treasuries were up 2 basis points, or 0.02 percent, to 2.21 percent from yesterday.

Fed officials are divided over whether and how to ease policy further after two decisions to lower borrowing costs with unconventional tools. Options include a third round of securities purchases and making the near-zero interest-rate pledge more specific. Dissenters including Philadelphia Fed Chief Charles Plosser say loosening policy harms the central bank’s credibility.

Fed Pledge

In August, the Fed pledged to hold interest rates near zero until at least mid-2013, and last month the central bank said it would swap $400 billion of short-term debt in its portfolio for longer-term securities in order to bring down interest rates, a strategy dubbed Operation Twist by economists and the “maturity extension program” by the Fed.

Yellen said the scale of Operation Twist “is necessarily limited by the amount of our holdings of shorter-term securities” and that buying such a large portion of long-term Treasuries “could potentially have adverse effects on market functioning.”

As a result, buying securities with varying maturities may eventually be warranted, she said without giving a timeframe or specifying the type of asset.

Yesterday, Fed Governor Daniel Tarullo, who’s backed all of Bernanke’s policy decisions for almost three years, said the central bank should consider resuming large-scale purchases of mortgage bonds to boost economic growth and help combat a “crisis” in employment.

Record Stimulus

Evans and Eric Rosengren of Boston have also urged the policy-setting Federal Open Market Committee to increase its record stimulus. Evans is calling for the Fed to keep the target for the benchmark U.S. interest rate near zero until either unemployment falls below 7 percent or the medium-term inflation outlook rises above 3 percent.

Evans’s plan is “potentially promising” and “could be helpful in facilitating public understanding of how various possible shifts in the economic outlook would be likely to affect the anticipated timing of policy firming,” Yellen said today.

At the same time, the approach has “potential pitfalls,” including the chance that “such thresholds could potentially be misunderstood as conveying the committee’s longer-run objectives rather than the conditions surrounding the likely onset of policy firming,” Yellen said.

More Asset Purchases

Rosengren said in an Oct. 19 interview with CNBC that “if the economy were to be weaker than most people are forecasting, that would certainly be cause for doing additional monetary policy,” and more asset purchases are “certainly a possibility.”

The August and September FOMC decisions provoked dissents from three policy makers, the most disagreement during Bernanke’s almost six years as chairman. One of those policy makers, Minneapolis Fed President Narayana Kocherlakota, said today that the Fed’s decision-making this year “has introduced a lack of clarity about its monetary policy mission.”

Additional asset purchases would constitute a third round of so-called quantitative easing after the Fed bought $2.3 trillion in housing and government debt in two rounds from December 2008 to June 2011.

Any decision to expand the Fed’s $2.86 trillion balance sheet may also spark a fresh wave of political criticism from Republicans. Most of the party’s presidential candidates have found fault with Bernanke or the Fed; Texas Governor Rick Perry said printing more money may be “treasonous.” Republican lawmakers, including House Speaker John Boehner of Ohio, sent a letter to Fed officials last month urging them to forgo additional easing.

Economic Outlook

The economy expanded at a 1.3 percent annual pace in the second quarter after a 0.4 percent rate in the first three months of the year, according to the Commerce Department. Analysts surveyed by Bloomberg this month projected a 2 percent rate of growth in the third quarter, based on the median estimate; the government will release its first estimate on Oct. 27.

Economic growth, after an annual pace of less than 1 percent in the first half of 2011, is likely to be “noticeably stronger” in the second half, with inflation “more moderate,” Yellen said, citing lower commodity prices and increased auto production and sales.

“Unfortunately, however, a range of other, more persistent factors also appear to be restraining the recovery,” Yellen said. “Moreover, financial market conditions have deteriorated, on net, in recent months, intensifying some of the headwinds facing the economy.”

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net.

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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S&P 500 Caps Longest Weekly Gain Since Feb.

By Rita Nazareth - Oct 22, 2011 4:00 AM GMT+0700
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Trader F. Hill Creekmore, left, and specialist Joseph Mastrolia on the floor of the New York Stock Exchange on Oct. 18, 2011. Photographer: Richard Drew/AP

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Oct. 21 (Bloomberg) -- James O'Sullivan, chief economist at MF Global Inc., talks about market sentiment over the European sovereign-debt crisis and outlook for this weekend's meeting of euro-region leaders. He speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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Oct. 21 (Bloomberg) -- Christian Schulz, a senior economist at Joh Berenberg Gossler & Co., talks about the role of governments and the European Central Bank in resolving the sovereign-debt crisis. He speaks with Maryam Nemazee and Linda Yueh on Bloomberg Television's "The Pulse." (Source: Bloomberg)

U.S. stocks advanced, giving the Standard & Poor’s 500 Index its longest streak of weekly gains since February, amid speculation of an agreement to contain Europe’s debt crisis and further Federal Reserve stimulus.

Morgan Stanley and Wells Fargo & Co. (WFC) added at least 2.1 percent as European lenders rallied. Alcoa Inc. (AA) and Boeing Co. (BA) rose more than 2.8 percent, pacing gains in companies most-tied to the economy. McDonald’s Corp. (MCD) climbed 3.7 percent after profit jumped as lower-priced items boosted U.S. store sales. Honeywell International Inc. (HON) advanced 5.8 percent as a recovery in commercial aerospace helped earnings climb 44 percent.

The S&P 500 increased 1.9 percent to 1,238.25 as of 4 p.m. New York time, the highest level since Aug. 3. The gauge rose 1.1 percent since Oct. 14, gaining for a third straight week. The Dow Jones Industrial Average climbed 267.01 points, or 2.3 percent, to 11,808.79 today, erasing its 2011 decline.

“There’s a sense that Europe will come out with something that will calm down imminent fears of the crisis escalating out of control,” James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $360 billion, said in a telephone interview. “Markets are also digesting Federal Reserve lip service given to additional quantitative easing moves. However, it appears most investors are unsure whether additional easing is needed.”

Gains accelerated after the S&P 500 climbed past 1,233.10, its intraday peak on Oct. 18. A burst of trading in E-Mini S&P 500 futures occurred at that level, according to data compiled by Bloomberg. Volume jumped to 31,774 contracts at 10:17 a.m. New York time, the most for any minute of the day at that point. Three rallies since the U.S. government was stripped of its AAA credit rating by S&P have stopped around 1,220.

‘Least Resistance’

“The path of least resistance is higher,” Christopher Verrone, head of technical analysis at New York-based Strategas Research Partners, said in a phone interview. “I’m interested to see what happens in the 1,260-1,270 range. That is when we’ll get more information on how durable this advance is.”

France retreated in a clash with Germany over how to expand the power of Europe’s bailout fund after the first meeting in a six-day marathon intended to solve the debt crisis. France’s view that the fund, the European Financial Stability Facility, should get a banking license enabling it to borrow from the European Central Bank, “is not a definitive point of discussion for us,” French Finance Minister Francois Baroin told reporters today in Brussels. “What matters is what works.”

‘Comprehensive’ Plan

French President Nicolas Sarkozy and German Chancellor Angela Merkel are scheduled to meet tomorrow in Brussels before a summit the next day and a follow-up leaders’ gathering on Oct. 26 to nail down what they’ve called a “comprehensive” plan.

“While we won’t get a definitive response from the Europeans this weekend on how best to deal next with their debt crisis, officials are still holding out hope that just a few extra days will complete the job,” Peter Boockvar, an equity strategist at Miller Tabak & Co., wrote in a note today.

American banks rallied following gains in European lenders. Morgan Stanley (MS) rose 2.5 percent to $17.02. Wells Fargo added 2.1 percent to $26.31.

Investors also reacted to comments from Fed Governor Daniel Tarullo, who late yesterday called for resuming large-scale purchases of mortgage bonds, boosting chances of a third round of asset buying aimed at reviving growth. Today, Fed Vice Chairman Janet Yellen said a third round of large-scale securities purchases might become warranted if necessary.

‘High Hurdles’

“While the hurdles for QE3 remain high, it’s still on the table as an option,” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion, said in a telephone interview. “It becomes a question of whether or not it’s effective.”

The Morgan Stanley Cyclical Index of companies most-tied to the economy rose 3 percent. The Dow Jones Transportation Average, a proxy for the economy, added 2.2 percent. Alcoa, the largest U.S. aluminum producer, advanced 2.8 percent to $10.23. Boeing climbed 3.4 percent to $64.59.

Earnings reports have also gained investors’ attention today. Profit for S&P 500 companies will climb 16 percent in the third quarter and rise 18 percent to a record $99.25 for all of 2011, according to analyst estimates compiled by Bloomberg. About three quarters of the S&P 500 companies that reported results since Oct. 11 beat analysts’ estimates.

McDonald’s added 3.7 percent to $92.32. Chief Executive Officer Jim Skinner has sought to draw American diners with low- priced menu items, such as the $1 McDouble burger, as the nation’s 9.1 percent unemployment rate saps consumer confidence. Sales in the U.S. were driven by fruit smoothies, Chicken McNuggets and breakfast foods, the company said.

Honeywell Climbs

Honeywell climbed 5.8 percent to $51.28 as the company also increased its full-year forecast. Honeywell and other U.S. manufacturers have posted earnings growth this year amid a slowing economy by keeping costs in check and expanding abroad. Aerospace sales rose 8 percent in the quarter, the company said.

Seagate Technology Plc (STX) surged 28 percent, the most since it went public in 2002, to $15.42. ThinkEquity LLC analysts said that the maker of disk drives may gain market share from rival Western Digital Corp. due to recent Thai floods.

Energy and raw material producers gained as the S&P GSCI Index of commodities advanced 1 percent. Freeport-McMoRan Copper & Gold Inc. (FCX) gained 5.2 percent to $36.58. ConocoPhillips (COP) added 2.2 percent to $71.83.

General Electric Co. (GE) slid 1.9 percent, the biggest decline in the Dow, to $16.31 as tighter profit margins in industrial businesses from energy to aviation overshadowed third-quarter growth led by the finance unit.

Transport Companies

Companies transporting holiday merchandise may outperform the stock market as a rise in consumer spending indicates seasonal shopping may be better than forecast.

Retailers were cautious when they placed orders this summer amid concerns the economy was “falling apart” and headed for a double-dip recession, said David Ross, a Baltimore-based transportation analyst at Stifel Nicolaus & Co. Even though September retail sales rose the most in seven months, shares of trucking and airfreight companies still reflect pessimistic forecasts, he said.

“There is a greater chance of a positive holiday-shopping surprise than a negative one,” said Ross, who maintains “buy” ratings on United Parcel Service Inc. (UPS) and Old Dominion Freight Line Inc. If retailers are caught short after under-ordering, the peak shipping period -- typically July through September -- will occur later, he 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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Groupon Seeks $11.4B Market Value in IPO

By Douglas MacMillan and Lee Spears - Oct 21, 2011 11:48 PM GMT+0700

Groupon Inc., the largest online- coupon site, is seeking a valuation of $11.4 billion in its U.S. initial public offering, less than half the $25 billion it considered earlier this year after internal missteps and stock- market swings left some investors leery of the stock.

The Chicago-based company is offering 30 million shares of Class A common stock at $16 to $18 apiece, a regulatory filing today showed. At the high end of the range, Groupon would raise $540 million, compared with the $750 million it filed to raise in June. The total valuation is based on 632.8 million outstanding common shares after the offer.

The lower valuation reflects waning investor demand, said Michael Holland, chairman of Holland & Co. Since filing to go public, Groupon has drawn regulatory scrutiny, restated results and lost executives. The company delayed plans to pitch the offering to investors in September as stock markets sank and it needed time to address regulators’ questions about an unconventional accounting method, people with knowledge of the matter said then.

“Investor perception of Groupon’s attractiveness has deteriorated significantly, as evidenced by the price,” said Holland, whose New York firm oversees more than $4 billion. “It’s not a favored time to be coming to market with an IPO, so if they want to persist and come to market, they’re going to have to meet buyers’ demands.”

Meetings With Investors

The company is set to meet with investors as soon as the week of Oct. 24 to gauge demand for the IPO, people familiar with the matter have said. The offering is set for completion on Nov. 3, Bloomberg data show.

Groupon’s IPO would be only the fourth in the U.S. since the beginning of September as slumping stocks and high volatility made it difficult to go public. Still, companies have continued to file for offerings this year, leading to the biggest U.S. backlog in a decade as of the end of last quarter, according to Renaissance Capital LLC, the Greenwich, Connecticut-based IPO research and investment firm.

The IPO will leave almost 5 percent of Groupon’s common shares public as the coupon provider follows Internet companies including LinkedIn Corp. and Pandora Media Inc. in offering less than one-tenth of their stock to the public. A so-called “low float” limits the amount of shares available to meet investor demand, boosting the stock price.

Price to Sales

The high end of Groupon’s offering range would value the company at almost 9 times sales over the last 12 months, calculated using financial results disclosed in the filing. That’s less than half the price-to-sales multiple of about 24 for LinkedIn, Bloomberg data show. Shares of the Mountain View, California-based professional-networking site have almost doubled since LinkedIn debuted in May.

Pandora Media Inc., the online music provider that went public in June, is valued at about 12 times sales over the past four quarters, Bloomberg data show.

Groupon’s value may be difficult for investors to predict “given it’s a new business model where long-term profitability and margin levels are unclear,” said Jack Neele, a fund manager at Robeco Groep NV, which had the equivalent of about $208 billion under management at the end of last year.

All of the shares in the offering are being sold by Groupon, which will use the estimated net proceeds of about $479 million, its filing shows. Groupon may use the cash for acquisitions, the filing said.

Early Discussions

Executives met with bankers to discuss an IPO valuing the company at as much as $25 billion, people with knowledge of the discussions said in March. Groupon announced a $950 million round of financing, including venture-capital and private-equity investment, after rejecting a $6 billion takeover bid from Google Inc. in December.

Groupon reported revenue of $430.2 million in the three months through September, an increase of 9.6 percent from the quarter that ended in June. That represents slower growth than in the second quarter, when sales rose 33 percent sequentially.

The net loss in the third quarter narrowed to $10.6 million from $49 million a year earlier, according to the filing. The net loss in the nine months ended Sept. 30 was $238.1 million.

The number of subscribers to Groupon’s e-mail list climbed 24 percent during the third quarter to 142.9 million, the filing showed. The company said a total of 29.5 million people had purchased its coupons as of the end of September.

Morgan Stanley (MS), Goldman Sachs Group Inc. (GS) and Credit Suisse Group AG (CSGN) are leading Groupon’s offering. The stock will trade on the Nasdaq Stock Market under the symbol GRPN.

To contact the reporters on this story: Douglas Macmillan in New York at dmacmillan3@bloomberg.net; Lee Spears in New York at lspears3@bloomberg.net

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

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Payrolls Declined in 25 U.S. States, Led by NC Q By Bob Willis - Oct 21, 2011 9:43 PM GMT+0700

By Bob Willis - Oct 21, 2011 9:43 PM GMT+0700

Payrolls fell in 25 U.S. states in September, led by North Carolina and Ohio, a sign the weakness in the job market is broad-based.

Employers cut staff by 22,200 in North Carolina last month and by 21,600 in Ohio, according to Labor Department data issued today in Washington. The report also showed the jobless rate decreased in 25 states. Nevada continued to lead the nation in unemployment with a rate of 13.4 percent.

The economy needs to generate faster sustained job growth to lower unemployment and spur the consumer spending that makes up about 70 percent of the economy. A Labor Department report on Oct. 7 showed employers added 103,000 payrolls last month, almost half of them telecommunications workers returning from a strike, and the jobless rate was 9.1 percent for a third month.

“The majority of states will likely continue to grapple with a high unemployment for the foreseeable future as economic activity stagnates,” Anika Khan, an economist at Wells Fargo Securities Inc. in Charlotte, North Carolina, said before the report. “A genuine recovery will not likely begin until employment and income growth stabilize.”

After Nevada, the jobless rate was highest in California at 11.9 percent and Michigan at 11.1 percent.

The biggest job gains last month occurred in Florida, where employers boosted payrolls by 23,300. Employment in Texas rose by 15,400 workers and increased in Louisiana by 14,100.

Over the past 12 months, 47 states gained jobs, while two, Delaware and Georgia, showed a decline.

Elevated Unemployment

Unemployment has exceeded 8 percent since February 2009, the longest stretch of such elevated joblessness since monthly records began in 1948. Through September, the economy had recovered about 2.09 million of the 8.75 million jobs lost as a result of the 18-month recession that ended in June 2009.

Payrolls grew an average 96,000 a month in the July-to- September period, about the same as in the second quarter and down from 166,000 in the first three months of the year.

Sustained increases of around 200,000 a month are needed to bring unemployment down about a percentage point over a year, according to Eric Green, chief market economist at TD Securities Inc. in New York.

Political infighting over the budget and mounting fear of a default in Europe caused the Standard & Poor’s 500 Index to plummet 16 percent from July 22 to Aug. 22, prompting companies and consumers to cut back. The Federal Reserve last month announced more unconventional measures to boost growth while President Barack Obama is campaigning to get Congress to approve elements of a new jobs proposal the Senate shelved last week.

Cutting Payrolls

Businesses slashing staff include Bank of America Corp. The Charlotte, North Carolina-based lender is cutting 30,000 jobs, including at its unit servicing mortgages.

Some companies will see more hiring. Ford Motor Co.’s U.S. hourly workers this week voted 63 percent in favor of a four- year contract that creates 12,000 new jobs and gives each as much as $10,000 in payments this year, according to the United Auto Workers.

State and local employment data are derived independently from the national statistics, which are typically released on the first Friday of every month. The state figures are subject to larger sampling errors because they come from smaller surveys, making the national figures more reliable, according to the government’s Bureau of Labor Statistics.

                 Payrolls, Unemployment by State  ===========================================================                  Unemp.    Change in Nonfarm Payrolls from: State             Rate    1 Month    6 Months    1 Year =========================================================== Nevada             13.4%     1,800        300     11,000 California         11.9%    11,800     52,500    250,700 Michigan           11.1%   -14,200      1,700     65,300 South Carolina     11.0%    -1,000        200     16,100 Florida            10.6%    23,300     52,700     93,500 Mississippi        10.6%     7,300       -400      9,700 North Carolina     10.5%   -22,200    -26,800      9,700 Rhode Island       10.5%    -1,700       -600          0 Georgia            10.3%    -7,100    -17,500    -22,300 Illinois           10.0%     1,600     -9,400     44,400 Alabama             9.8%     2,900       -600      2,800 ==============================================================                  Unemp.       Change in Nonfarm Payrolls from: State             Rate    1 Month    6 Months    1 Year ============================================================== Tennessee           9.8%     6,300     13,000     28,800 Kentucky            9.7%    -2,900      3,000     23,200 Oregon              9.6%      -600       -600     27,000 New Jersey          9.2%   -11,100     13,200     17,700 Arizona             9.1%    10,400     33,200     57,700 Ohio                9.1%   -21,600      9,200     66,800 Washington          9.1%    -4,400      8,800     44,800 Idaho               9.0%       600       -600      7,900 Connecticut         8.9%     3,400      3,700     10,400 Indiana             8.9%     7,800    -12,300      6,800 Missouri            8.7%    -4,000    -11,100        900 Texas               8.5%    15,400     85,900    248,500 Arkansas            8.3%    -1,600     -5,000     10,600 Colorado            8.3%    -3,900     14,500     23,100 Pennsylvania        8.3%   -15,800       -100     48,300 West Virginia       8.2%    -1,000      1,900      3,900 Delaware            8.1%    -1,300     -6,200     -6,100 ==============================================================                  Unemp.       Change in Nonfarm Payrolls from: State             Rate    1 Month    6 Months    1 Year ============================================================== New York            8.0%     8,800     67,500     98,100 Wisconsin           7.8%   -12,400     -4,100     21,200 Montana             7.7%       300      6,700      7,400 Alaska              7.6%       900        900      5,300 Maine               7.5%     3,000      3,100      6,900 Maryland            7.4%     6,800     18,600     12,300 Utah                7.4%      -400     23,000     35,200 Massachusetts       7.3%    -2,300     23,200     48,700 Louisiana           6.9%    14,100     40,100     44,900 Minnesota           6.9%    -7,400     24,300     38,200 Kansas              6.7%         0     11,600      7,900 New Mexico          6.6%    -5,700     -1,300      2,700 Virginia            6.5%    -4,700    -19,100      2,000 Hawaii              6.4%     6,300      2,600      9,700 Iowa                6.0%    -5,700      2,700     18,000 Oklahoma            5.9%      -800     23,000     43,100 Vermont             5.8%       700     -1,100      6,200 ==============================================================                  Unemp.       Change in Nonfarm Payrolls from: State             Rate    1 Month    6 Months    1 Year ============================================================== Wyoming             5.8%       900      7,800      8,400 New Hampshire       5.4%    -5,400        600      5,300 South Dakota        4.6%       600      3,600      3,100 Nebraska            4.2%     1,500     11,000     21,500 North Dakota        3.5%     1,400      9,500     20,000 =============================================================== NOTE: All figures seasonally adjusted. 

To contact the reporters on this story: Bob Willis in Washington at bwillis@bloomberg.net;

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Jobs Threatened ‘Thermonuclear War’ on Google

By Peter Burrows - Oct 21, 2011 11:01 AM GMT+0700

Apple Inc. (AAPL) co-founder Steve Jobs said he was “willing to go thermonuclear war” on Google Inc. (GOOG)’s Android software, saying that its features amounted to “grand theft,” the Associated Press reported.

Jobs, then Apple’s CEO, said he would “spend every penny of Apple’s $40 billion in the bank, to right this wrong,” according to the AP’s account of his biography, “Steve Jobs,” by Walter Isaacson. Jobs died on Oct. 5.

Tension between the two companies escalated as Google used the Android operating system to follow Apple into the burgeoning market for smartphones. The rivalry forced Eric Schmidt, then CEO of Google, to resign from Apple’s board in 2009.

“I’m going to destroy Android, because it’s a stolen product,” Jobs said in the book, according to the AP. “I’m willing to go thermonuclear war on this.”

The authorized biography, due to be released on Oct. 24, also sheds new light on Jobs’s combat against cancer. The executive had secret treatments for the disease even though he was telling people he was cured, Isaacson told CBS News.

Jobs regretted the decision to initially refuse surgery for pancreatic cancer, Isaacson told CBS News’s “60 Minutes,” according to interview excerpts released yesterday.

“He said, ‘I didn’t want my body to be opened ... I didn’t want to be violated in that way.’ He’s regretful about it,” Isaacson said. “I think that he kind of felt that if you ignore something, if you don’t want something to exist, you can have magical thinking ... We talked about this a lot.”

Putting Off Surgery

Jobs had a slow-growing form of pancreatic cancer and put off surgery for nine months while he sought out spiritual and dietary therapies against the advice of his wife, Isaacson said. Once he had the surgery he told his employees about it while playing down the seriousness of his condition, CBS said.

“I will not require any chemotherapy or radiation treatments,” Jobs wrote in an Aug. 1, 2004, e-mail from his hospital bed to employees of Cupertino, California-based Apple. He said then that he was cured after having successful surgery to remove a cancerous tumor from his pancreas.

In a commencement speech at Stanford University in June 2005, he said that he’d been diagnosed “about a year ago.” He didn’t mention the nine-month delay.

Doctors told Jobs that his illness was “curable” through an operation, Jobs said in that address.

“I had the surgery, and thankfully, I’m fine,” he said.

Steve Dowling, a spokesman for Apple, declined to comment. The interview, conducted by correspondent Steve Kroft, will be broadcast on Oct. 23. The network posted a 1 minute, 25 second- long excerpt. “Steve Jobs” was published by Simon & Schuster, also owned by New York-based CBS.

Disclosure Timing

Jobs probably should have told shareholders that he had cancer when it was first diagnosed, said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. From a governance perspective, how he decided to treat the illness was up to him, Elson said.

“He probably should have disclosed it, and everyone would have assumed he would do everything he could to keep himself alive,” said Elson. “The question is whether he misled people because he himself was misled, or did he do it on purpose. I tend to give wide latitude on these things. No one wants to believe they’re dying.”

The biographer said that Jobs, who was adopted, met the man who turned out to be his biological father without knowing who he was.

Jobs’s Search

Jobs found his biological mother and sister, the novelist Mona Simpson, according to Isaacson. Simpson then identified their father, Abdulfattah “John” Jandali, who managed a coffee shop.

Jandali told Simpson he wished she had met him earlier, when he ran a bigger Mediterranean restaurant in Silicon Valley. She hadn’t told him Jobs was his son.

“Everyone used to come there,” Jandali told Simpson, according to Isaacson. “Even Steve Jobs used to eat here. Yeah, he was a great tipper.”

“60 Minutes” will broadcast a voice recording of Isaacson interviewing Jobs about his decision to ask Simpson to keep his identity private.

“When I was looking for my biological mother, obviously, you know, I was looking for my biological father at the same time, and I learned a little bit about him and I didn’t like what I learned,” Jobs said. “I asked her to not tell him that we ever met ... not tell him anything about me.”

To contact the reporter on this story: Peter Burrows in San Francisco at pburrows@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net; Tom Giles at tgiles5@bloomberg.net

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S&P 500 Rises to August Levels on Europe Optimism

By Rita Nazareth - Oct 21, 2011 9:44 PM GMT+0700

U.S. stocks advanced, sending the Standard & Poor’s 500 Index toward the highest level since August, on speculation European leaders are moving closer to an agreement to contain its sovereign debt crisis.

Bank of America Corp. (BAC) and Morgan Stanley rallied at least 1.9 percent, following gains in European lenders. McDonald’s Corp. (MCD), the world’s biggest restaurant chain, added 2.8 percent after profit jumped 8.6 percent as U.S. store sales increased. Honeywell International Inc. (HON) rose 4.6 percent as a recovery in commercial aerospace helped earnings climb 44 percent.

The S&P 500 added 1.7 percent to 1,236.52 as of 10:42 a.m. New York time, the highest on a closing basis since Aug. 3, two days before S&P stripped the U.S. of its AAA credit rating. The benchmark gauge was up 1 percent this week. The Dow Jones Industrial Average advanced 198.14 points, or 1.7 percent, to 11,739.92 today, erasing its 2011 decline.

“The market is really looking for something to grasp as the European saga continues,” Malcolm Polley, who oversees $1.1 billion as chief investment officer at Stewart Capital in Indiana, Pennsylvania, said in a telephone interview. “They are saying that -- we may have a resolution. We don’t know that it will be the case because we’ve heard that story before. Hopefully they will finalize it.”

Gains accelerated after the S&P 500 climbed past 1,233.10, its intraday peak on Oct. 18 and the highest level since Aug. 4. Three rallies since the U.S. government was stripped of its AAA credit rating by S&P have stopped around 1,220, data compiled by Bloomberg show.

Burst of Trading

A burst of trading in E-Mini S&P 500 futures occurred after the index reached 1,233.10, according to data compiled by Bloomberg. Volume jumped to 31,774 contracts during 10:17 a.m. New York time, the most for any minute of the day at that point.

“The path of least resistance is higher,” Christopher Verrone, head of technical analysis at New York-based Strategas Research Partners, said in a telephone interview. I’m interested to see what happens in the 1,260-1,270 range. That is when we’ll get more information on how durable this advance is.’’

European finance ministers meet in Brussels today to lay the groundwork for an Oct. 23 gathering of government leaders that had been the deadline for a solution to the debt crisis. A further summit was scheduled for Oct. 26 yesterday after Germany and France said the European Union needs more time to seal a “global and ambitious” accord. In the U.S., Federal Reserve Governor Daniel Tarullo said the central bank should consider resuming purchases of mortgage bonds to boost growth.

‘Want Satisfaction’

“While we won’t get a definitive response from the Europeans this weekend on how best to deal next with their debt crisis, officials are still holding out hope that just a few extra days will complete the job,” Peter Boockvar, an equity strategist at Miller Tabak & Co., wrote in a note today. “Markets are assuming something. Whether what is put in place actually works or not is a different discussion, markets just want satisfaction now.”

American banks rallied following gains in European lenders. Bank of America added 1.9 percent to $6.60. Morgan Stanley (MS) rose 3.4 percent to $17.18.

Investors also monitored third-quarter earnings reports. Profit for S&P 500 companies will climb 17 percent in the third quarter and rise 18 percent to a record $99.27 for all of 2011, according to analyst estimates compiled by Bloomberg yesterday. About three quarters of the S&P 500 companies that reported results since Oct. 11 beat analysts’ estimates.

McDouble Burger

McDonald’s added 2.8 percent to $91.51. Chief Executive Officer Jim Skinner has sought to draw American diners with low- priced menu items, such as the $1 McDouble burger, as the nation’s 9.1 percent unemployment rate saps consumer confidence. Sales in the U.S. were driven by fruit smoothies, Chicken McNuggets and breakfast foods, the company said.

Honeywell climbed 4.6 percent to $50.67 as the company also increased its full-year forecast. Honeywell and other U.S. manufacturers have posted earnings growth this year amid a slowing economy by keeping costs in check and expanding abroad. Aerospace sales rose 8 percent in the quarter, the company said.

Seagate Technology Plc (STX) surged 21 percent to $14.64. The world’s largest maker of computer disk drives reported first- quarter earnings excluding some item of 34 cents a share, beating the average analyst estimate by 8.3 percent, Bloomberg data show. The company had its rating raised at ThinkEquity Partners and Robert W. Baird & Co.

Energy, Raw Materials

Energy and raw material producers gained as the S&P GSCI Index of commodities advanced 2 percent. Alcoa Inc. (AA), the largest U.S. aluminum producer, rose 2.1 percent to $10.16. ConocoPhillips (COP) added 2.1 percent to $71.71.

General Electric Co. (GE) dropped 1.5 percent to $16.38 even as earnings climbed in the third quarter as the finance unit’s gains blunted tighter profit margins in the energy business.

Companies transporting holiday merchandise may outperform the stock market as a rise in consumer spending indicates seasonal shopping may be better than forecast.

Retailers were cautious when they placed orders this summer amid concerns the economy was “falling apart” and headed for a double-dip recession, said David Ross, a Baltimore-based transportation analyst at Stifel Nicolaus & Co. Even though September retail sales rose the most in seven months, shares of trucking and airfreight companies still reflect pessimistic forecasts, he said.

“There is a greater chance of a positive holiday-shopping surprise than a negative one,” said Ross, who maintains “buy” ratings on United Parcel Service Inc. (UPS) and Old Dominion Freight Line Inc. If retailers are caught short after under-ordering, the peak shipping period -- typically July through September -- will occur later, he 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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Stocks Gain in Europe Before Debt Summit; U.S. Futures, Commodities Climb

By Andrew Rummer - Oct 21, 2011 5:58 PM GMT+0700

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Oct. 21 (Bloomberg) -- Steve Brice, chief investment strategist at Standard Chartered Plc, talks about the outlook for a European rescue fund to fight the region's debt crisis, and its potential implications for financial markets. Brice speaks with Susan Li on Bloomberg Television's "First Up."(Source: Bloomberg)

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Oct. 21 (Bloomberg) -- Uwe Parpart, head of research at Reorient Financial Markets Ltd., talks about Europe's sovereign debt crisis and its implications for Asian economies and financial markets. Parpart speaks in Hong Kong with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

European stocks, U.S. index futures and commodities advanced amid speculation policy makers are moving closer to a deal to contain the euro-area debt crisis. The euro and Italian bonds pared losses.

The Stoxx Europe 600 Index climbed 0.9 percent at 11:57 a.m. in London, paring a weekly loss. Standard & Poor’s 500 Index futures added 0.4 percent. Copper jumped 4 percent after slumping 6.6 percent yesterday. The euro slipped 0.2 percent to $1.3759 after depreciating as much as 0.6 percent. The yield on Italian 10-year government bonds dropped to 5.95 percent.

European finance ministers meet in Brussels today to lay the groundwork for an Oct. 23 gathering of government leaders that had been the deadline for a solution to the debt crisis. A further summit was scheduled for Oct. 26 yesterday after Germany and France said the European Union needs more time to seal a “global and ambitious” accord.

“Markets have pretty much discounted a poor outcome coming into this so the potential for a short-term rally or surprise on the upside is definitely there,” Steve Brice, chief investment strategist at Standard Chartered Plc in Singapore, said in a Bloomberg Television interview.

$1.3 Trillion

European governments may deploy as much as 940 billion euros ($1.3 trillion) to fight the debt crisis, two people familiar with the discussions said yesterday. Negotiations on combining the EU’s temporary and permanent rescue funds as of mid-2012, while scrapping a ceiling on bailout spending, accelerated this week after efforts to leverage the temporary fund ran into European Central Bank opposition and provoked the French-German clash.

About five shares advanced for every one that fell on the Stoxx 600, helping the gauge pare its weekly loss to 1.5 percent. UniCredit SpA and BNP Paribas SA, the biggest banks in Italy and France, led a rebound in financial shares, climbing more than 2.5 percent.

The increase in S&P 500 futures indicated the U.S. gauge will rise for a second day. Microsoft Corp. (MSFT) slipped 0.7 percent in pre-market New York trading after the world’s largest software maker reported per-share earnings that were in line with analysts’ predictions.

Copper gained for the first day this week, to $7,005 a metric ton, after falling 11 percent the previous four days. Arabica coffee jumped to $2.35 a pound, with inventories of the beans at the lowest since March 2000, according to ICE Futures U.S. in New York.

Qaddafi Death

Brent oil in New York fell 0.2 percent to $109.54 a barrel. Libya’s state-run National Oil Corp. said Muammar Qaddafi’s death will help the return of crude output.

The MSCI Emerging Markets Index climbed 0.3 percent, after yesterday’s 2.7 percent drop. South Korea’s Kospi Index (KOSPI) added 1.8 percent on speculation company earnings will withstand a slowing global economy. The Shanghai Composite Index retreated 0.6 percent, capping the benchmark index’s steepest weekly drop in five months, on speculation slowing economic growth and the nation’s tighter monetary policies are hurting earnings.

The franc gained 0.4 percent against the euro and 0.2 percent versus the dollar. The Dollar Index, which tracks the U.S. currency against six trading partners, slipped less than 0.1 percent for a fourth day of losses.

Italy’s 10-year bond yield dropped five basis points to 5.95 percent. Spanish 10-year bonds snapped a nine-day decline, with yields falling two basis points to 5.50 percent.

ECB Bond Buying

The ECB bought small amounts of Spanish and Italian government debt today, according to two people with direct knowledge of the transactions, who asked not to be identified because the deals are confidential.

The cost to insure against default on French debt rose for a second day with credit -default swaps increasing two basis points to 191, according to data provider CMA. Contracts on Germany climbed two basis points to 93, Italy was up 5 basis points to 461 and Spain added two to 388.5 basis points.

“There’s a lot of information and a lot of uncertainty whether this weekend’s meeting will come out with a definitive plan,” said Stephen Halmarick, the Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The market is still very unsure and very uncertain.”

German business confidence fell to a 16-month low in October as the euro region’s worsening debt crisis threatened to push the economy into recession. The Munich-based Ifo institute’s business climate index, based on a survey of 7,000 executives, dropped to 106.4, the lowest since June 2010, from 107.4 in September.

S&P said in a report today that France is among euro-region sovereigns likely to be downgraded in a stressed economic scenario. The ratings of Spain, Italy, Ireland and Portugal would also be reduced by one or two levels in either of two stress scenarios, the New York-based ratings firm said.

To contact the reporter on this story: Andrew Rummer in London at arummer@bloomberg.net

To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net

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Berlusconi’s Bank Choice Risks France Tensions

By Lorenzo Totaro - Oct 21, 2011 2:34 PM GMT+0700

Italian Prime Minister Silvio Berlusconi’s surprise nomination of Ignazio Visco to run the Bank of Italy sets up a possible clash with French President Nicolas Sarkozy over the composition of the European Central Bank’s Executive Board.

Berlusconi chose Visco, a 30-year veteran of the Bank of Italy, to succeed Mario Draghi, who is to become president of the ECB when Jean-Claude Trichet’s term ends this month. The Italian premier had indicated he might choose ECB Executive Board member Lorenzo Bini Smaghi for the post, which would free up a seat on the ECB’s decision-making board for a Frenchman.

Sarkozy had made removing Bini Smaghi from the board a condition of his support for Draghi’s ECB candidacy, which was key to convincing German Chancellor Angela Merkel to back the Italian for the top ECB post. Bini Smaghi had refused to resign from the Executive Board before the end of his term in 2013. Berlusconi will have the chance to explain his decision to Sarkozy at a European Union summit in Brussels on Oct. 23.

“You wonder how in these musical chairs they’re going to make room for Bini Smaghi,” said Riccardo Barbieri, chief European economist at Mizuho International Plc in London. “There must have been conversations with the people involved in the process that would lead to the rebalancing that France was looking for on the ECB board.”

Political Paralysis

Visco’s nomination to a six-year term ends a four-month deadlock over Draghi’s successor that reflected divisions in the government at a time when Berlusconi is struggling to convince investors that he can act to tame the euro-region’s second- biggest debt after Greece. Berlusconi is under pressure to maintain good relations with Draghi as the ECB has been backstopping Italian bonds since August after yields rose to euro-era records on concern Italy would be engulfed by the region’s debt crisis.

The nomination of Visco, 61, comes with the yield on Italy’s 10-year bond at 6.04 percent, the highest since the before the ECB started buying Italian debt on Aug. 8. Berlusconi’s inability to decide on a Bank of Italy governor, four months after Draghi secured the ECB nomination, highlighted the political gridlock that has hampered Italy’s response to the spread of the debt crisis and fueled the jump in borrowing costs.

Other Candidates

Berlusconi and Finance Minister Giulio Tremonti clashed over the appointment, with the premier initially backing Bank of Italy Director General Fabrizio Saccomanni, the candidate favored by Draghi, and Tremonti preferring Treasury Director General Vittorio Grilli, newspaper Il Sole 24 Ore reported on Sept. 28.

Grilli, who is from Milan, was also supported by Umberto Bossi, leader of the Northern League, which holds the key to Berlusconi’s parliamentary majority, who said he preferred Grilli because he was a “Milanese.”

Choosing Visco allows Berlusconi to appease Draghi and Italian President Giorgio Napolitano, who had pushed for an internal candidate, rather than a political appointee. He also can partially satisfy Tremonti by denying the post to Saccomanni, Draghi’s favored choice for the position, newspapers including La Repubblica reported today. The choice leaves the issue of Bini Smaghi unresolved.

‘Victory’ for Draghi

Members of the government and opposition leaders praised the decision. “With the nomination of Ignazio Visco, Draghi has had another success and the independence of the Bank of Italy was maintained, even if a little tarnished,” said Italo Bocchino, secretary of the Future and Liberty for Italy party.

Berlusconi on Oct. 18 said that Bini Smaghi was on his “shortlist,” the only Bank of Italy candidate he cited by name that day. Berlusconi decided that he would nominate Bini Smaghi for the position yesterday, a deputy minister in his government said on condition of anonymity. The premier appears to have changed his mind after meetings with top members of his Cabinet, including Tremonti and Bossi, last night in Rome.

“You have the whole Bini Smaghi thing coming back to the fore,” Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London, said in an e-mail. “The French obviously feel they should have a French member” on the board, “and this nomination doesn’t solve the problem.”

Defending Independence

Amid pressure from France and Italy to step down, Bini Smaghi said in a speech at the Vatican on June 16 that ECB officials must have “personal independence, which ensures the security of tenure of the members of the decision-making bodies for the whole term of office.” An ECB spokesman, asking not to be identified in line with policy, declined to comment last night on Bini Smaghi.

When EU leaders confirmed Draghi, 64, to succeed Trichet on June 24, Berlusconi pledged to nominate his successor the following week. Visco, a former chief economist at the Paris- based Organization for Economic Cooperation and Development, wasn’t among the three candidates he cited by name: Bini Smaghi, Saccomanni and Grilli.

Visco hails from Naples, a southern city often criticized by the Northern League for its organized crime and chronic garbage problems. Still, Roberto Calderoli, one of the Northern League’s Cabinet members, praised Visco last night as a solid economist with the “pragmatic” qualities of a northern Italian, Ansa newswire reported.

Calls for Reform

Visco is one of three deputy directors-general at the Bank of Italy. He started his career at the central bank in 1972 and holds a degree in economics from the University of Rome and a doctorate from the University of Pennsylvania.

In his most recent public comments before the Senate in Rome on Aug. 30, Visco called for structural moves to overhaul Italy’s economy, whose growth has lagged behind the euro-area average for the past decade, after the government approved 54 billion euros ($74 billion) in austerity measures to help tame debt of about 120 percent of gross domestic product.

The spending cuts and tax increases “will have inevitable restrictive effects on the economy,” Visco said. “The growth in international commerce is unlikely to return quickly to the high levels of before the crisis. We therefore risk a period of stagnation, which will slow the reduction of the debt.”

The Bank of Italy’s Board of Directors is set to meet Oct. 24 to give a non-binding opinion on Visco’s candidacy to Italian President Giorgio Napolitano, who must give final approval before Visco gets the job.

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net

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

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