Amazon, Samsung, Qualcomm, Kelllogg, Motorola: Intellectual Property

By Victoria Slind-Flor - Nov 16, 2011 12:01 PM GMT+0700

Amazon.com Inc. (AMZN), the world’s largest Internet retailer, and Discovery Communications Inc. settled their patent disputes over book readers and Internet shopping, according to court documents.

The companies filed requests yesterday to dismiss lawsuits in federal courts in Seattle and Wilmington, Delaware. Details of the agreement weren’t disclosed in the filings. Michelle Russo, a spokeswoman for Silver Spring, Maryland-based Discovery, said the company had no comment on the settlement.

The dispute began in March 2009, when Discovery claimed it had invented some basic technology used in Seattle-based Amazon’s popular Kindle book reader. Amazon hit back with accusations that Discovery’s online store infringed Amazon’s patents on ways consumers refine searches for products or obtain recommendations based on prior purchases.

Discovery, the owner of cable television’s Animal Planet and TLC, said it was seeking royalties on sales of the Kindle and Kindle 2 electronic book readers. The Discovery patent covers a way to distribute electronic text and graphics securely to subscribers and describes a “portable book-shaped viewer.” It was issued in November 2007, the same month that Amazon Chief Executive Officer Jeff Bezos began selling the Kindle.

Amazon began selling its newest version of the Kindle, the Fire tablet computer, yesterday. Officials with Amazon didn’t immediately return messages seeking comment.

The cases are Amazon.com Inc. v. Discovery Communications Inc. (DISCA), 09cv681, U.S. District Court for the Western District of Washington (Seattle); and Discovery Communications Inc. v. Amazon.com Inc., 09CV178, U.S. District Court, District of Delaware (Wilmington).

Wins Early Australia Trial on Apple Infringement Claim

Samsung Electronics Co., embroiled in patent disputes with Apple Inc. around the globe, won an early trial on its claim in Australia that the iPhone and iPad 2 infringe its patents on 3G wireless transmissions.

Australia Federal Court Justice Annabelle Bennett yesterday ordered that a trial on Samsung’s claims be held in March. Cupertino, California-based Apple had opposed an early trial, with its lawyer Stephen Burley saying the company needed more time to prepare the case and favored a hearing in August.

Samsung, the world’s biggest maker of smartphones last quarter, dropped its bid for a temporary injunction barring Apple from selling the iPhones and iPad 2 and instead is seeking an early hearing. The Australian trial will be a prelude for Samsung in its U.S. case before the International Trade Commission on similar claims, which Burley said will be heard in May and June.

Burley had sought to delay the Australian trial to August, after the ITC hearing. The ITC has the power to block imports of products found to infringe U.S. patents.

The world’s two biggest makers of smartphones and tablet computers have widened their litigation to Europe, Japan and Australia since Apple sued Samsung in the U.S. in April, claiming the Suwon, South Korea-based company “slavishly” copied the designs of iPhones and iPads.

Samsung and Apple had a “very close relationship” until April, Samsung’s lawyer Neil Young told the judge today, with Samsung adhering to an “informal policy” not to pursue patent claims to maintain the relationship.

That was terminated in April, Young said. Apple never sought to obtain a license from Samsung, although “other major players” have, he said, without identifying the companies.

Samsung sued Apple in Australia in September, claiming the iPhone 3GS, iPhone 4 and iPad 2 infringed its patents for wireless transmission. The lawsuit was in response to Apple’s request for a court order barring the sale of the Galaxy Tablet 10.1 in Australia, claiming the device infringed its patents. Bennett granted Apple’s request for an injunction on Oct. 13.

Samsung has appealed the ruling, with a hearing before the full court of the federal court scheduled for Nov. 25.

Samsung also sought an order from Bennett declaring that Apple’s patents, at issue in the Galaxy tablet dispute, be revoked. Samsung claims the Apple patents on touch screen technology, sliding to unlock, scroll bounce and scrolling photos aren’t new.

The case is: Apple Inc. (AAPL) v. Samsung Electronics Co. NSD1243/2011. Federal Court of Australia (Sydney).

Qualcomm Quizzed Again by EU Regulators Over Antitrust Complaint

Qualcomm Inc. (QCOM), the biggest maker of chips for mobile phones, was asked for information by European Union regulators investigating an antitrust complaint, two years after the EU dropped an investigation of the company.

The European Commission asked Qualcomm last month to supply “additional documents and information” related to a complaint filed last year by Icera Inc., a maker of wireless chips, the company said in a regulatory filing.

“We continue to cooperate fully with the commission’s preliminary investigation,” San Diego-based Qualcomm said in the filing.

The commission, the antitrust agency for the 27-nation EU, in 2009 dropped a four-year probe into the company that started after competitors complained the chipmaker was charging excessive royalties on patents. Qualcomm said last year the latest complaint is similar to previous ones.

Nvidia Corp. (NVDA), a maker of graphics chips, earlier this year bought closely held Icera for $367 million to add radio processors needed in phones and tablets.

Nvidia declined to comment immediately.

For more patent news, click here.

Trademark

Kellogg Gives to Mayan Archeology Group, Drops Trademark Dispute

Kellogg Co. (K), maker of Cocoa Puffs, Froot Loops and Rice Krispies cereals, made a $100,000 contribution to a non- governmental group involved with the protection of the Guatemalan biosphere, according to a joint statement released yesterday.

The contribution follows a trademark dispute in which the cereal-maker accused the Walnut Creek, California-based Maya Archeology Initiative, to quit using a toucan as a logo. Battle Creek, Michigan’s Kellogg claimed the rainbow-billed toucan trademark it used on its Froot Loops package was infringed by MAI’s logo featuring a toucan standing in front of a Mayan pyramid.

The dispute has been settled, MAI spokesman Sam Haswell said in an e-mail yesterday. In addition to making the donation, the cereal company has pledged to provide space on the back of one million Fruit Loops cereal boxes in the next year to help educate American children and their parents about the Maya culture.

He said the donation was made as the result of a “discussion about the Maya culture and the difficulties faced by Maya children in Guatemala” and was separate from the legal dispute. The donation will go toward the establishment of a cultural center in a rural area near Guatemala’s eastern border with Belize, a priority project for MAI.

The organization continues to use its toucan image. “So long as MAI doesn’t start selling cereal, our logo should be safe,” Haswell said.

Kellogg said its concern with MAI began when the group filed an application to register its toucan as a trademark.

“Trademark laws require we have conversations with any party seeking to trademark a similar design for commercial purposes or we risk losing Toucan Sam as Kellogg’s Froot Loops trademark, in use since 1963,” company spokeswoman Kris Charles said in an e-mail yesterday

After the two groups entered into discussion, “we worked with them to identify an approach to refuse their trademark application that will enable them to continue using their logo for their not-for-profit fundraising efforts,” she said.

Kellogg is “pleased to support MAI in its mission to protect and extend the rich history and culture of the Mayan people through our contributions toward their cultural center,” Charles said in the e-mail.

For more trademark news, click here.

Copyright

Google Friends Facebook Against Hollywood-Backed Piracy Bill

Google Inc. (GOOG) and Facebook Inc. are among Web companies warning that legislation aimed at combating online piracy may threaten the U.S. technology industry.

The House Judiciary Committee is scheduled to hold a hearing today on the Stop Online Piracy Act, a measure that would give the U.S. attorney general and copyright holders new powers to cut off financial support to “rogue websites” accused of trafficking in goods spanning knockoff watches to fake pharmaceuticals to pirated movies.

The House bill and a similar Senate measure have pitted the nation’s top Internet companies against the U.S. film and music industries, which want the government to halt counterfeiting and intellectual-property theft. Web companies say the proposed legislation would require them to police the Internet, jeopardizing the growth of online services.

The House measure, introduced by Judiciary Committee Chairman Lamar Smith, a Texas Republican, would let prosecutors seek court orders requiring U.S. Internet-service providers, search engines, payment processors and ad networks to block or cease business with websites linked to online piracy.

The Motion Picture Association of America, the Recording Industry Association of America and the U.S. Chamber of Commerce are among the supporters of the legislation.

A study released Nov. 2 by the International Intellectual Property Alliance, an advocacy group of content owners, found that the publishing, software, film, music and television industries added more than $930 billion to the U.S. economy in 2010.

The House bill has broad and vague language and may extend to legitimate websites that are accused of facilitating infringement, such as those letting users comment, post blogs or share video, said David Sohn, a senior policy counsel at the Washington-based Center for Democracy and Technology, in an interview.

The center is financed in part by the technology industry and got almost 12 percent of its 2010 funding from Web companies including Google, Facebook and Yahoo.

Maria Pallante, director of the U.S. Copyright Office, and representatives of Google, Mastercard Inc. (MA), Pfizer Inc. (PFE), the MPA and the AFL-CIO were scheduled to testify at today’s House hearing.

For more copyright news, click here.

Trade Secrets/Industrial Espionage

Motorola Engineer Stole Trade Secrets, U.S. Tells Judge

An ex-Motorola Inc. software engineer should be found guilty of stealing trade secrets from the company to benefit a business in China and that nation’s military, a U.S. prosecutor told a federal judge.

Hanjuan Jin, the former employee, faces as many as 15 years in prison if she is convicted on three counts of stealing secrets to benefit a foreign government. She also faces three trade-secret theft charges with a maximum sentence of 10 years.

“The government asks that you deliver the verdict that the evidence overwhelmingly supports,” Assistant U.S. Attorney Sharon Fairley said yesterday in her closing arguments to U.S. District Judge Ruben Castillo in Chicago.

Jin was indicted in 2008, one year after had she returned to the Schaumburg, Illinois-based company from a medical leave of absence and then quit. U.S. customs agents stopped her at Chicago’s O’Hare International Airport on Feb. 28, 2007. She was carrying more than 1,000 Motorola documents, $30,000 and a one- way ticket to China.

Jin waived her right to a trial by jury. Castillo will determine whether the U.S. has met its burden of proof beyond a reasonable doubt. The trial began Nov. 7.

Jin’s lawyer, John Murphy, told the judge she isn’t guilty.

“The government saw this case in a very specific way from the very first day,” Murphy, a member of the Chicago Federal Public Defender’s Office, said in his closing argument.

That viewpoint, he said, was based on the O’Hare incident in which officials became suspicious about the amount of U.S. currency she was carrying and the nature of the documents in her possession.

“They made the determination from that point, that Ms. Jin was a spy,” Murphy said.

The case is U.S. v. Jin, 08-cr-192, U.S. District Court, Northern District of Illinois (Chicago).

To contact the reporter on this story: Victoria Slind-Flor in Oakland, California, at vslindflor@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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OWS Protesters Can’t Reverse Eviction: Judge

By Chris Dolmetsch, Christopher Palmeri and Katie Spencer - Nov 16, 2011 12:01 PM GMT+0700

“Occupy Wall Street” protesters lost a bid to overturn their eviction and the removal of tents and structures from a lower Manhattan park where they had been demonstrating 24 hours a day for eight weeks.

New York State Supreme Court Justice Michael Stallman, responding to a request that he reverse the eviction, ruled the protesters didn’t show “they have a First Amendment right to remain in Zuccotti Park along with their tents, structures, generators and other installations.”

The ruling may complicate demonstrators’ plans to mark the two-month anniversary of the movement tomorrow with calls on its website to “shut down Wall Street” and “occupy the subways.” The protesters said they’ll seek to “confront Wall Street with the stories of people of the frontlines of economic injustice,” then gather at transit hubs at the start of the evening rush across the city’s five boroughs.

New York police pushed into the park early yesterday morning, forcibly removing demonstrators who had been camping there to protest unemployment, income inequality and the financial industry.

The New York eviction may signal a turning point for the movement as municipal officials seek to curtail sister protests that have sprung up in cities including Oakland, California, Portland, Oregon, and Salt Lake City and in other countries, including Australia where protesters were ordered today to remove their tents from a park in Melbourne’s city center.

Officials in New York and elsewhere have cited local ordinances, health and crime as reasons to curtail or end similar demonstrations.

“Conditions at the park had deteriorated to the point that serious concerns about crime, fire hazards and public health needed to be addressed,” Sheryl Neufeld, senior counsel with the New York City Law Department, said in an e-mailed statement. She said protesters will be allowed to return without tents, tarps and sleeping bags.

Park Reopened

The park was reopened yesterday afternoon, with a few dozen people waving American flags while some played instruments or sang “We Shall Not Be Moved.” No tents or sleeping bags were visible as police searched protesters when they entered.

“The court’s ruling vindicates our position that First Amendment rights do not include the right to endanger the public or infringe on the rights of others by taking over a public space,” Mayor Michael R. Bloomberg said yesterday in an e-mailed statement. “Zuccotti Park will remain open to all who want to enjoy it, as long as they abide by the park’s rules.”

The New York Civil Liberties Union said it will review the court decision and explore ways to proceed, Executive Director Donna Lieberman said in a statement.

The NYCLU is “deeply concerned about the NYPD’s heavy- handed tactics” during the eviction, and the union will work to make sure police are held accountable for misconduct, she said.

First Amendment

“The First Amendment sets a floor -- not a ceiling -- for determining whether the government should accommodate free expression,” Lieberman said. “There is no reason why the Bloomberg administration cannot embrace a more expansive understanding of freedom of speech and allow the protesters and their tents back into Zuccotti Park in a way that is consistent with public safety and health.”

The judge ruled that the owner of the park has the “right to adopt reasonable rules that permit it to maintain a clean, safe, publicly accessible space.” He wrote that “even protected speech isn’t equally permissible in all places and at all times.”

Cas Holloway, the city’s deputy mayor for operations, argued in court papers that “the unsafe and unsanitary conditions and the substantial threat to public safety as determined by the police and fire departments” will return if the protesters take over the park as before.

“We’ll have a very large discussion on how to move forward,” said Cecilia McMillan, a 23-year-old graduate student and protester in Zuccotti Park who said she had been working with “Occupy Wall Street” since August. “I’m sure some people will stay in the park.”

New Location

McMillan said options being considered include occupying the park in shifts or moving to a new location. Connie Pankratz, a spokeswoman for the city’s Law Department, said in an e-mailed statement that while the park is open 24 hours a day, “people cannot sleep overnight in the park.”

Zuccotti Park is a privately owned public-access plaza that must be open to the public and maintained for public use every day of the year under a city special permit, according to the court decision. After the Occupy Wall Street protests began, Brookfield Office Properties Inc., the owner of the park, announced rules that prohibited camping, the erection of tents, lying on the ground and benches, and the use of sleeping bags, the judge wrote.

“I’m gratified Judge Stallman recognized the right of Brookfield to have rules that allow Zuccotti Park to be a clean, safe and fully accessible place,” said Douglas Flaum, a lawyer for the company.

‘A Pretext’

“This was not about public health and safety,” said Yetta Kurland, a lawyer for the protesters. “This was a pretext to shut down the occupation.” She said they haven’t yet decided whether to appeal the decision.

Protesters have sued the city, Mayor Bloomberg and the New York City Police Department for civil rights violations tied to earlier arrests. The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.

“I’m very disappointed,” said Peter Mueller, a 25-year- old illustrator who said he has camped out at the park. “I believe tents are an expression of our First Amendment rights. I would hope there would be some redress.”

“That hurts,” said Ray Lewis, a 59-year-old retired police captain from Philadelphia who now lives in upstate New York, when told about the ruling. He was protesting in his old uniform. “Anyone who is willing to sleep out in this weather is working from a deep, heartfelt place and the court should have acknowledged that.”

Within the Rules

New York City police and Brookfield were acting within the rules that govern privately owned public spaces when they evicted the protesters, Real Estate Board of New York President Steven Spinola said.

“The whole purpose of the plaza is for it to be available to the general public for their use,” Spinola said. “If a park is no longer available because of one particular group, then there would be a violation taking place.”

New York City is home to more than 500 privately owned public spaces, or POPS, which must remain open 24 hours a day unless special permission is granted by the city’s planning commission, one reason why protesters were initially allowed to stay overnight at Zuccotti Park.

The concept of POPS dates back to 1961, when the planning commission created zoning laws that allowed developers to get around building-size restrictions as long as they opened a public space as well.

Prohibiting Tents

Since the protests started in September, signs prohibiting tents, tarps and camping have gone up at the park.

Brookfield Chief Executive Officer Ric Clark sent the mayor a letter requesting that the city “enforce the law” at the park and remove tents, sleeping bags and other materials. Conditions “have deteriorated to the point where safety is an urgent issue,” the letter said, citing crimes such as rape, assault, theft, drug peddling and harassment.

Jerold Kayden, a professor of urban planning at Harvard University and founder of the Advocates for Privately Owned Public Spaces, said there are no rules that would allow the park to remain closed into the future.

“The owners are allowed to adopt rules for managing their space,” Kayden said in an interview at a New York City Department of City Planning conference yesterday. “That doesn’t mean closing it to the public, but it does mean managing the kinds of activities that might occur in that space.”

Constitutional Right

Kayden said that if the protesters claim they have a constitutional right to occupy the space, they will face an “uphill climb.” The First Amendment’s protection of free speech applies to government action. Private companies such as Brookfield are generally not covered by its limitations.

Owners of POPS can impose reasonable rules on the spaces as long as the rules don’t restrict activities that would normally take place, such as eating or lingering, according to the Department of City Planning website.

Under current zoning codes, POPS are intended to provide “light, air, breathing room and green space” at high-density commercial and residential properties, according to the planning department’s website. Owners pay taxes on the spaces and are responsible for maintaining them and keeping them safe.

‘Winter’s Coming’

Alice Sutter, a 63-year-old retired nurse who had been volunteering at a medical tent set up in Zuccotti Park, said the court ruling will create, rather than end, a health hazard.

“Now that winter’s coming they’re going to need those tents and sleeping bags,” Sutter said in an interview. “They’re going to need them for their health and safety.”

Angie Richards, 18, who also worked at the medical tent and said she is training to be an emergency medical technician, said “they can’t change the law just because they don’t like what we’re doing.”

Park protester Ann Ward, 34, a hair stylist assistant from Fort Lauderdale, agreed, saying “You can’t evict an idea.”

In Melbourne, about 80 protesters remained at the Treasury Gardens park in “solidarity” with demonstrators in New York, said Carl Scrase, a spokesman for Occupy Melbourne, in telephone interview.

Dozens of officers encircled the Treasury Gardens site this morning as city council officials demanded demonstrators remove any structures, cooking equipment and bedding, protesters said.

The council order “overrides our constitutional right to free speech and public assembly,” Scrase said. Danielle Murnane, a spokeswoman for the Victoria Police Department, said the council had ordered tents be removed from the site.

The case is In the Matter of the Application of Jennifer Waller v. City of New York, 11112957, New York State Supreme Court, New York County (Manhattan).

To contact the reporters on this story: Chris Dolmetsch in New York State Supreme Court in Manhattan at cdolmetsch@bloomberg.net; Christopher Palmeri in Zuccotti Park in lower Manhattan at cpalmeri1@bloomberg.net; Katie Spencer in New York at katiespencer14@bloomberg.net.

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Mark Tannenbaum at mtannen@bloomberg.net; Kara Wetzel at +1-212-617-5735 or kwetzel@bloomberg.net

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Paulson Said to Cut Risk in Main Hedge Funds

By Kelly Bit - Nov 16, 2011 12:01 PM GMT+0700

John Paulson, the billionaire hedge- fund manager having his worst year, is cutting risk in his hedge funds further as the European sovereign-debt crisis roils markets, according to two people briefed on the matter.

The New York-based firm, which has $28 billion in assets, has cut the so-called net exposure in its main hedge funds to 30 percent, Paulson told investors on Nov. 14, according to the people, who asked not to be identified because the company is private. That number stood at 60 percent about four months ago.

The firm is reducing its bullish bets across all funds until there is more certainty that Europe can contain its debt crisis, Paulson said at the Metropolitan Museum of Art in New York, part of a two-day annual meeting for investors. Paulson’s biggest funds, Advantage Plus and Advantage, which have $11 billion in combined assets and aim to profit from corporate events such as takeovers and bankruptcies, fell 44 percent and 29 percent this year through October, respectively.

His Recovery Fund, which invests in assets Paulson believes will benefit from a long-term economic upturn, slumped 25 percent in 2011.

Armel Leslie, a spokesman for Paulson & Co., declined to comment on the annual meeting.

Net exposure is calculated by subtracting the percentage of a hedge fund’s short positions, or bets on falling securities, from its longs, or wagers on rising stocks and bonds. Paulson said on a conference call with investors in July that he had cut bullish investments to 60 percent from 81 percent and may pare risk further.

Citigroup, Sino-Forest

Paulson, 55, has been betting on an economic recovery by the end of 2012, fueling his bullishness on U.S. banking stocks that contributed to this year’s losses.

Citigroup Inc., Paulson’s fifth-largest stock holding in the third quarter, according to data compiled by Bloomberg, fell 41 percent this year through yesterday. The firm sold about 8.4 million shares of New York-based Citigroup last quarter, according to a regulatory filing. Bank of America Corp., the firm’s 12th-largest stock position, slumped 54 percent in 2011. Paulson added 3.88 million shares of Charlotte, North Carolina- based Bank of America last quarter.

Paulson lost $468 million in June on Sino-Forest Corp., the Chinese forestry company accused by short-seller Carson Block of overstating timberland holdings. The hedge fund, previously the largest investor in the stock, sold the entire stake that month after Sino-Forest shares plunged 71 percent in two days.

The firm received less than 8 percent in year-end redemption requests for all its funds by the end of last month, which means withdrawal orders totaled about $2 billion.

Clients were permitted to pull a maximum of 25 percent of assets, or about $7 billion. Paulson and his employees account for about half of the firm’s capital.

Hedge funds declined 2.9 percent this year through Oct. 31, based on Bloomberg’s aggregate index, as global stocks tumbled amid a worsening European debt crisis and the threat of a U.S. recession. The MSCI All-Country World Index of global stocks fell 3.9 percent, including reinvested dividends.

To contact the reporter on this story: Kelly Bit in New York at kbit@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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Google Said to Add Sony to New Music Service

By Andy Fixmer and Brian Womack - Nov 16, 2011 7:38 AM GMT+0700

Google Inc. (GOOG) reached an agreement to offer songs from Sony Corp. (6758) for a new music service being announced tomorrow, a person with knowledge of the situation said, leaving Warner Music Group as the lone holdout.

Vivendi SA (VIV)’s Universal Music Group and EMI Group, the other two major record labels, have already signed on, said two people, who weren’t authorized to speak publicly.

Google plans to open a music-download store that allows copies of songs to be stored online and played from multiple devices, three people said yesterday. Songs will cost 99 cents to $1.29, though Google may offer discounts, said one person.

Warner Music Group hasn’t agreed because of pricing and piracy concerns, two people have said.

Google, the owner of the biggest Internet search engine, has expanded into music, television and movies as it seeks to bolster sales of devices running its Android mobile software.

The company, based in Mountain View, California, sent out invitations last week for a music event tomorrow in Los Angeles. Google also seeks rights for its Google+ social-network users to share music with each other, the people said. The moves put it in competition with Apple Inc. (AAPL)’s iTunes online store.

Randall Sarafa, a spokesman for Google, declined to comment.

Google rose 0.6 percent to $616.56 at the close today in New York trading. The shares have climbed 3.8 percent this year.

The Wall Street Journal reported Google’s deal with Sony earlier.

To contact the reporters on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net; Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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Dell’s Quarterly Sales Miss Estimates in Focus on Higher-Margin Equipment

By Aaron Ricadela - Nov 16, 2011 6:32 AM GMT+0700
Enlarge image

Michael Dell, chairman and chief executive officer of Dell Inc. Photographer: Tony Avelar/Bloomberg

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Nov. 15 (Bloomberg) -- Shaw Wu, analyst at Sterne Agee & Leach Inc., talks about third-quarter revenue at Dell Inc. The third-largest maker of personal computers reported sales that missed estimates, even as its focus on higher-margin technology boosted profit. Wu speaks with Lisa Murphy and Julie Hyman on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Dell Inc. (DELL), the third-largest maker of personal computers, reported sales that missed estimates, even as its focus on higher-margin technology boosted profit.

Third-quarter revenue declined to $15.37 billion, Round Rock, Texas-based Dell said today in a statement. Analysts had projected $15.7 billion on average, according to Bloomberg data. Net income rose to $893 million, or 49 cents a share, from $822 million, or 42 cents, a year earlier. Excluding some costs, profit was 54 cents a share, topping the 47-cent estimate.

Dell, once the world’s biggest PC maker, has ceded market share and concentrated on more profitable corporate technology, including servers, services and networking. Dell also tempered its revenue outlook for the rest of year, citing sluggish sales in the U.S. and Europe. A shortage of computer disk drives, caused by flooding in Thailand, presents another challenge.

“It is severe,” said Brian Marshall, an analyst at ISI Group Inc. in San Francisco, who has a “neutral” rating on Dell. The flooding may cause disk costs to climb, even if Dell doesn’t run into shortages, he said. “I don’t think they’re going to have problems getting supply. I do think they’ll have problems with pricing.”

Dell fell 1.5 percent to $15.40 in late trading after the report. The shares, up 15 percent this year, had closed at $15.63 in New York.

‘A Bit Lighter’

Slow consumer sales in developed countries and weak orders from the U.S. government hurt demand last quarter, Dell Chief Financial Officer Brian Gladden said in an interview.

“The revenue did come in a bit lighter than expected,” he said.

Revenue will increase 1 percent to 5 percent this fiscal year, which ends in January, Dell said. Growth is “trending” to the lower end of that range, the company said. Analysts had predicted sales growth of 2 percent.

While the flooding may result in higher disk-drive costs, lower memory-chip prices are helping PC makers rein in expenses, said Chris Whitmore, an analyst at Deutsche Bank in San Francisco.

“Memory pricing has just been fantastic for the box makers,” said Whitmore, who recommends buying Dell shares.

Tighter Focus

Under Chief Executive Officer Michael Dell, the company is winnowing its line of consumer products and focusing on small and medium-size businesses and government agencies, which account for more than half its sales. Dell now ranks behind Hewlett-Packard Co. and Lenovo Group Ltd. in the PC industry, down from first place in 2006.

The company plans to keep making acquisitions to expand in hardware and software for corporate and government data centers, its CEO said at a company conference last month. The diversification beyond desktop and laptop computers comes as PC sales ebb. Market research firm IDC cut its shipment forecast on Nov. 10, citing the Thailand flooding.

Rising waters have swamped industrial parks where companies such as Western Digital Corp. and Toshiba Corp. make about a quarter of the world’s disk drives. The flood has caused drive prices to increase by $10 to $25, Seagate Technology Plc Chief Executive Officer Steve Luczo said in a interview this month.

Dell has loaded up on disk-drive inventory, helping mitigate the shortage.

“It’s still a pretty fluid situation,” Gladden said.

To contact the reporters on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net

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

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BofA’s Moynihan Says ‘New Normal’ in Retail Banking Won’t Be as Profitable

By Hugh Son and Maryellen Tighe - Nov 16, 2011 5:26 AM GMT+0700

Bank of America Corp. (BAC) Chief Executive Officer Brian T. Moynihan said that slow economic growth and new regulations mean that the “new normal” in retail banking won’t be as profitable as before.

The second-biggest U.S. lender by deposits is cutting costs and seeking to sell more services to existing clients to adjust, Moynihan said today at a conference in New York. The Charlotte, North Carolina-based company loses money doing business with many households at its consumer-banking operation, he said.

“It’s going to be a smaller platform, it won’t be quite the same as it was at Bank of America and around the industry,” Moynihan, 52, said at the conference. “We have 42 million retail customers, many of those don’t contribute or overcome their cost-to-serve.”

Bank of America and JPMorgan Chase & Co. (JPM), the biggest U.S. lender, and No. 3-ranked Wells Fargo & Co. are seeking ways to replace revenue after regulators limited debit-card fees and overdraft charges. A plan by Bank of America to charge debit- card users $5 a month was abandoned, and Moynihan said that managers “learned from the experience.”

The CEO’s strategy is to broaden relationships with its 8 million so-called preferred clients, who have about three- quarters of the unit’s deposits and are 1.5 times as profitable as the retail group. The bank gives these clients incentives by removing monthly service fees on checking accounts for those who use a Bank of America credit card, mortgage or Merrill Lynch brokerage account.

Profit Decline

“What happens to those people who don’t have a lot of money at the bank?” asked Anton Schutz, president of Mendon Capital Advisors Corp., in an interview today with Bloomberg Radio’s Pimm Fox. “The bank’s going to ask for a fee in return for providing a service.”

Profit at the deposits unit slipped 33 percent to $1.05 billion in the nine months ended Sept. 30. Checking account services cost the industry about $300 annually per person, said Bart Narter, a senior banking analyst at consulting firm Celent. Most depositors with less than $3,000 aren’t profitable for banks without fees including overdraft charges, he said.

“Much of the profitability is going to involve a lower expense base and a deeper wallet share per customer,” Moynihan said. The company is also focusing on serving small businesses and added 500 bankers in this area in 2011 and seeks to hire 1,000 more next year, he said.

Federal Reserve governors and regional presidents projected that gross domestic product, adjusted for inflation, will rise by 2.5 percent to 2.9 percent next year, compared with a range of 3.3 percent to 3.7 percent from the prior forecasts in June.

Job Cuts

Moynihan aims to cut about $5 billion in annual costs by the end of 2013, mostly by trimming about 30,000 jobs in retail banking and support operations. Even with the changes, consumer banking is unlikely to return to earlier profits, the firm said today in a slideshow presentation.

Moynihan’s initiative, dubbed Project New BAC, is now examining areas including global markets, commercial banking and corporate banking for cost-cutting. Those businesses have lower headcount than the retail units.

The CEO is selling businesses and assets to comply with new capital rules that require a bigger buffer against losses. The company lost more than half its market value this year on concern that expenses from faulty mortgages may force it to issue new stock. The firm rose 8 cents to $6.13 at 4 p.m. New York time.

Moynihan, who took over at the start of 2010 from Kenneth D. Lewis, said the bank is ahead of schedule on plans to bolster its balance sheet and meet new international standards. The company will reduce its $399 billion in long-term debt by at least $70 billion by the end of 2013, he said.

‘Bouncing Along’

Housing prices have stabilized and are “bouncing along a bottom” as the market clears a backlog of unsold homes and foreclosures, Moynihan said. Delinquencies are coming down in Bank of America’s portfolio, he said.

Moynihan has repeatedly told investors the bank wanted to avoid a share sale that would dilute their holdings. This month, the lender disclosed it may issue as many as 400 million common shares and $3 billion of senior notes to buy back preferred securities that have declined in value.

The bank said yesterday it would divest most of its remaining stake, or about 10.4 billion shares, in China Construction Bank Corp. this month after selling about 13 billion shares in August to bolster capital.

To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net; Maryellen Tighe in New York at mtighe6@bloomberg.net.

To contact the editor responsible for this story: Rick Green at rgreen18@bloomberg.net

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AMR Tumbles to Lowest Since 2003 as Pilots Weigh American’s Contract Offer

By Mary Schlangenstein - Nov 16, 2011 4:21 AM GMT+0700

American Airlines parent AMR Corp. (AMR) tumbled to its lowest closing price since 2003 after trying to end a five-year stalemate with a contract proposal that offers pilots smaller pay increases than they had sought.

The Allied Pilots Association said today it was reviewing the plan as its board began a three-day meeting, and declined to comment further. Fort Worth, Texas-based American urged the union to permit members to vote on the offer, saying it was “time to close this chapter.”

The two sides are split over compensation and the extent of flying that other carriers might do for American. With AMR directors gathering tomorrow for their last scheduled session of 2011, the lack of a pilot accord to help cut costs rekindled speculation the company may seek bankruptcy protection.

“We regard the achievement of competitive pilot wage and benefit levels as key to American’s long-term survival,” William Warlick, a credit analyst at Fitch Ratings in Chicago, said in a report today. He said a contract on terms similar to American’s plan is “essential if the carrier is to move toward a sustainable operating profile in 2012 and beyond.”

AMR dropped 10 percent to $1.92 in New York trading, its lowest price since March 28, 2003. Today’s plunge was the most in six weeks and pushed the shares’ decline to 75 percent this year.

Union Evaluation

Tom Hoban, an APA spokesman, said the pilots wouldn’t publicly discuss the contract offer until the union’s board and negotiators finish evaluating it. American, the third-largest U.S. airline, has said it needs lower labor expenses to compete with its biggest peers as parent AMR heads toward a fourth straight annual loss in 2011. The pilot talks began in 2006.

Jeff Kauffman, a Sterne Agee & Leach Inc. analyst in New York, cut his AMR rating to “neutral” from “buy” because “labor progress appears to be hitting a wall” with its pilots.

“The company continues to whittle away its liquidity as we enter a high cash-burn time of year,” Kauffman said in a note to investors. AMR ended the third quarter with $4.3 billion in unrestricted cash and short-term investments. The company has said bankruptcy isn’t “a goal or preference.”

Under the airline’s contract proposal, any new jets with more than 50 seats would be flown by American’s own pilots. Current rules call for regional unit American Eagle to fly aircraft of that size, along with a limited number of 70-seat jets.

Wage Scale

The offer would set separate pay rates and rules for pilots on aircraft of fewer than 125 seats, creating a “B” wage scale.

American also wants to expand a so-called code-share agreement with Alaska Airlines to fill gaps in its U.S. West Coast network. It would start similar relationships with US Airways Group Inc. (LCC) on a Boston-New York-Washington shuttle where flight limits prevent American from adding its own service, and with JetBlue Airways Corp. (JBLU) in New York, so the carriers would be able to book American passengers on those flights.

The proposal was posted on American’s labor website late yesterday after one day of negotiations following a weekend break. Hoban, the union spokesman, said Nov. 13 that the two sides were separated by a “wide gulf” on pay.

American’s View

“APA negotiators haven’t offered viable responses to numerous options that company negotiators have suggested as possible solutions,” American said yesterday. “Instead of waiting and letting more precious time slip by, the company elected to put a comprehensive proposal on the table.”

Pilots are a bellwether work group in industry labor talks, and American is focusing on the APA while also negotiating with unions for flight attendants and mechanics. AMR has said it has an $800 million annual labor-cost disadvantage to its biggest U.S. peers.

American reached an agreement in principle yesterday with the Transport Workers Union representing 180 flight dispatchers. The carrier announced a similar accord on Oct. 26 with the TWU group for 10,400 baggage handlers and other airport ground workers. Both plans require ratification votes.

Bargaining with pilots stalled late last week, with the APA objecting to the company’s proposals as American made what it said were “significant” movements toward the union position in several areas.

Union’s View

According to the union, the company is proposing a “concessionary contract” that would save at least $100 million a year before any benefits from expanding code-share flights.

“As pilots look at the components of the proposal, there may be some who describe it as concessionary,” American said on its website. “The reality is that in virtually every area of the proposal, we have offered industry-leading terms.”

To help resolve differences, American offered two options on pivotal points such as compensation, productivity, pension and benefits.

Under one of American’s proposed pay plans, pilots would get a 4 percent average raise on the date the contract is signed, followed by a 3 percent boost after 15 months, and increases of 2 percent after 30 months and again after 45 months.

The second option offers a 5 percent average increase at signing, followed by a 4 percent jump after 12 months, a 2 percent increase after 24 months and 3 percent after 36 months.

Pilots had sought a 10 percent signing bonus, followed by 7 percent raises in each of the next three years.

“I don’t see us moving off that figure,” Hoban said on Nov. 13. “It’s a pretty reasonable offer.”

New union accords, including one for the 8,700 APA- represented pilots, are the final piece of a plan to return AMR to profit and make American competitive, according to the airline.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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Buffett: Returns ‘Terrific’ as U.S. Workers Suffer

By Andrew Frye - Nov 16, 2011 1:02 AM GMT+0700

Warren Buffett, who invested $23.9 billion in the third quarter at his Berkshire Hathaway Inc. (BRK/A), said shareholders of U.S. companies are enjoying prosperity that eludes workers struggling with high unemployment rates and lower home values.

“The return on equity, on tangible equity, for American business today is terrific, overall,” Buffett said in an interview posted today on the website of Berkshire’s Business Wire unit. “Housing is still in the depression of the fall of 2008. It has not come back at all.”

Buffett, 81, is adding to his stock portfolio, repurchasing shares of Omaha, Nebraska-based Berkshire and investing in a collection of subsidiaries that span power production and insurance to consumer goods and luxury travel. The chief executive officer said the U.S. housing market will be healthy “in a few years” without forecasting exactly when the slump will end.

Real estate has defied prior predictions of rebound from Buffett, who said in February 2010 that “within a year or so, residential housing problems should largely be behind us.” The median price of a single-family home decreased in the third quarter from a year earlier in 111 metropolitan areas out of the 150 measured, the National Association of Realtors said in a report this month.

Housing “doesn’t hurt corporate profits that much in most areas,” Buffett said. “But the American worker is not doing well.”

Trains, Candy

The property-market slump has hurt Berkshire’s brick and carpeting businesses, while results improved at units including the Burlington Northern Santa Fe railroad, See’s Candies and Business Wire, which distributes press releases. The interview was conducted Sept. 30 with Business Wire CEO Cathy Baron Tamraz to commemorate the unit’s 50th anniversary.

Buffett has drawn down Berkshire’s cash this year to fund investments including the takeover of engine-additives maker Lubrizol Corp. and the purchase of more than $10 billion of stock in International Business Machines Corp. Berkshire’s third-quarter profit declined 24 percent to $2.28 billion as Buffett’s equity derivative bets produced a loss.

“We have been coming back,” Buffett said of the U.S. economy. “Employment has lagged.”

Gross domestic product, the value of all goods and services produced, rose at a 2.5 percent annual rate in the third quarter, up from 1.3 percent in the prior three months, Commerce Department figures showed last month. The jobless rate has been stuck around 9 percent or higher for more than two years. Hourly wages adjusted for inflation were down 1.8 percent in the 12 months ended in September.

‘My Class Has Won’

Buffett, the world’s third-richest person, reiterated his call for increased taxes on the wealthy.

“Through the tax code, there has been class warfare waged, and my class has won,” Buffett said. “It’s been a rout. You have seen a period where American workers generally have gone no place, and where the really super rich as a group increased their incomes five for one in this rarefied atmosphere.”

Berkshire owns a residential real estate broker in addition to units that produce building materials such as Acme bricks, Benjamin Moore paint and Shaw carpets. The housing market and residential construction won’t recover until household creation outstrips the supply of homes, Buffett said.

“We had the greatest binge in housing that this country or probably any country has seen,” Buffett said. “When you have a huge bubble in the biggest asset that most people have and that bubble pops, and people have borrowed against that asset and everything, you’re not going to get over it in a day or a year or a month.”

To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net

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

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Asian Stocks Swing Between Gains, Losses Before Italy Unveils Government

By Yoshiaki Nohara - Nov 16, 2011 7:22 AM GMT+0700 .

Asian stocks swung between gains and losses as U.S. retail sales beat estimates while Italian bond yields rose amid concern Italy’s new government will struggle to trim its debt and prevent Europe’s crisis from spreading.

Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, fell 1.3 percent. Hyundai Motor Co. (005380), South Korea’s biggest carmaker by market value, rose 0.9 percent. BHP Billiton Ltd. (BHP), the Australian oil producer, rose 0.9 percent after oil approached $100 a barrel.

The MSCI Asia Pacific Index slipped 0.2 percent to 117.51 as of 9:20 a.m. in Tokyo, after swinging between gains and losses at least six times. The measure fell 0.9 percent yesterday.

“The U.S. seems to be back on the recovery path, which is very helpful because it’s the biggest economy in the world and it fixes sentiment in a big way,” said Prasad Patkar, who helps manage about $1 billion at Platypus Asset Management Ltd. in Sydney. “Investors around the world would be happy if Europe doesn’t export its toxicity.”

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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U.S. Stocks Rise on Italy Optimism as Retail Sales Top Estimates

By Rita Nazareth - Nov 16, 2011 4:32 AM GMT+0700

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Nov. 15 (Bloomberg) -- Jeffrey Palma, global equity strategist at UBS Securities LLC, talks about the outlook for the U.S. equity market and investment strategy. He speaks with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

U.S. stocks rose, rebounding from earlier losses, on speculation Italian Prime Minister designate Mario Monti will succeed in forming a new government to battle the debt crisis and after growth in retail sales beat estimates.

Technology and industrial shares had the biggest gains among 10 groups in the Standard & Poor’s 500 Index, rising at least 0.5 percent. Intel Corp. (INTC) spurred a rally in semiconductor companies, climbing 2.9 percent, after Warren Buffett’s Berkshire Hathaway Inc. said it invested in the world’s largest chipmaker. Wal-Mart Stores Inc. (WMT) slumped 2.4 percent as profit at the world’s biggest retailer trailed analysts’ forecasts.

The S&P 500 gained 0.5 percent to 1,257.81 at 4 p.m. New York time, rebounding from a loss of 0.6 percent. The Dow Jones Industrial Average advanced 17.18 points, or 0.1 percent, to 12,096.16. About 6.3 billion shares changed hands on U.S. exchanges, 24 percent below the three-month average.

“It was good to hear about retail sales,” Randy Bateman, chief investment officer of Huntington Asset Management in Columbus, Ohio, said in a telephone interview. His firm oversees $14.5 billion. “People are getting tired of hearing about Europe. They are trying to resolve their issues. With Mario, Italy has an economist. Europe will muddle through.”

Equities recovered as Monti, an economist and former adviser to Goldman Sachs Group Inc., said he’s “convinced” that the country can overcome the current crisis as he prepares to meet with President Giorgio Napolitano tomorrow to present his new government. Stocks had fallen earlier after Spainn’s borrowing costs rose at an auction. Italian 10-year yields topped 7 percent and rates on French, Belgian, Spanish and Austrian debt rose to euro-era records above German bunds.

Retail Sales

Benchmark gauges also rose after the U.S. Commerce Department reported a 0.5 percent increase in retail sales, compared with the median economist forecast that called for 0.3 percent growth. The Federal Reserve Bank of New York’s general economic index showed growth for the first time since May. Goldman Sachs Chief Executive Officer Lloyd Blankfein said the economy will rebound “faster than people think.”

“When the market isn’t focused on Europe, it will focus on stronger U.S. data,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, said in an e- mail. His firm oversees $550 billion. “Retail sales are starting the quarter stronger than anyone would have estimated back in August at the depth of the recession fears.”

The Morgan Stanley Cyclical Index added 0.4 percent, after slumping 1.1 percent earlier, on speculation about an economic rebound. The Dow Jones Transportation Average rose 0.8 percent.

Technology Rally

Technology shares in the S&P 500 rose 1.3 percent. Intel gained 2.9 percent to $25.34. Apple Inc. (AAPL), the world’s biggest technology company by market value, added 2.5 percent to $388.83. Dell Inc. (DELL) advanced 2 percent to $15.63 before reporting quarterly results after U.S. exchanges closed. The shares slumped 1.8 percent to $15.35 after the close of regular trading at 4:27 p.m. as revenue missed estimates.

Computer and software makers may extend gains after a gauge of the industry surged to the highest ratio versus the S&P 500 in more than nine years, according to Brown Brothers Harriman & Co.

The level of the Technology Select Sector SPDR Fund (XLK), an exchange-traded fund that tracks companies including Apple and International Business Machines Corp. (IBM), divided by the SPDR S&P 500 ETF Trust was 0.2128 on Oct. 17, the highest since January 2002, data compiled by Bloomberg show. The figure fell to 0.2069 as of yesterday.

Enough Momentum

The advance by the technology fund suggests the industry may have enough momentum to rise further, said Ari Wald, a New York-based technical strategist at Brown Brothers. Technology shares posted the second-best performance after utilities among the S&P 500’s 10 groups, losing 0.8 percent, over the past six months. The broader benchmark index fell 6.4 percent.

“We broke out to the upside recently, showing relatively strong demand,” Wald said in a telephone interview yesterday. “That’s a pretty good sign, especially that it’s able to post relative gains during this period of market volatility.”

The KBW Bank Index of 24 stocks rose 0.5 percent after falling as much as 1.2 percent earlier today.

Bank of America Corp. (BAC) climbed 1.3 percent to $6.13. The second-largest U.S. bank by assets is ahead of schedule on plans to bolster its balance sheet and meet new international standards, Chief Executive Officer Brian T. Moynihan said today at a conference. Separately, the lender said net credit card write-offs and delinquencies declined in October from September.

Wal-Mart Slumps

Wal-Mart lost 2.4 percent to $57.46. It didn’t pass higher prices charged by suppliers along to customers struggling with persistent unemployment, Bill Simon, Wal-Mart’s U.S. chief, said. That hurt gross profit margin, or the percentage of net sales left after subtracting the cost of goods sold, which shrank to 24.6 percent, narrower than the 24.8 percent estimate of Colin McGranahan at Sanford C. Bernstein & Co.

“The miss on weak gross margins was not expected, and that is new news,” McGranahan said in an e-mail. “The stock is down on the incremental news as more negative than expected.” He rates the shares “market perform.”

Energy shares had the only decline in the S&P 500 among 10 industries, falling 0.2 percent. Chevron Corp. (CVX) slumped 2.7 percent, the most in the Dow, to $103.27. The company said it appears to have halted a leak at the Frade project offshore Brazil after plugging a well. It said it has seen a significant decrease in the amount of oil seeping from the development.

American Airlines parent AMR Corp. (AMR) tumbled 10 percent to $1.92, the lowest price since March 2003, after trying to end a five-year stalemate with a contract proposal that offers pilots smaller pay increases than they had sought. The Allied Pilots Association said today it was reviewing the plan as its board began a three-day meeting, and declined to comment further. AMR urged the union to permit members to vote on the offer.

LinkedIn Corp. slumped 4.6 percent to $74.86 after saying shareholder Bain Capital Ventures will sell all of its 3.71 million shares of the professional-networking website in a secondary stock offering.

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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Bernanke Bludgeons China With Inflation as Currency War Intensifies: Books

By James Pressley - Nov 15, 2011 7:00 AM GMT+0700
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The cover jacket of "Currency Wars," by James Rickards. The book is published by Portfolio/Penguin. Source: Portfolio via Bloomberg

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James Rickards is the author of "Currency Wars," published by Portfolio/Penguin. Source: Portfolio via Bloomberg

We’re in the throes of Currency War III, and Ben Bernanke has won the first offensive by flooding China with inflation.

If this sounds like a geeky online game, recall how Chinese prices surged after the Federal Reserve unleashed its quantitative easing in 2009 and 2010, one of many moves James Rickards parses in his somber book, “Currency Wars.”

“It was the perfect currency-war weapon and the Fed knew it,” he says, describing how the Fed’s expanding money supply forced China to print more yuan to maintain its peg to the dollar. “China was now importing inflation from the United States through the exchange-rate peg after previously having exported its deflation to the United States.”

Enough was enough, as President Barack Obama has now summed up the U.S. view that the yuan remains undervalued.

Rickards, whose CV includes stints at Citibank Inc. and Long-Term Capital Management LP, has written one of the scariest books I’ve read this year. Though I was tempted at first to dismiss him as alarmist, his intelligent reasoning soon convinced me that we have more to fear than fear itself.

Part history, part primer and analysis, the text covers topics ranging from the “misuse of economics” to complexity theory. The pieces, although disparate, fit together snugly, as in one of those mystery jigsaw puzzles that come with clues in lieu of cover art. The picture that emerges is dark yet comprehensive and satisfying.

War Game

Chapter One aptly sets the stage with a behind-the-scenes look at the Pentagon’s first financial war game, which opened on a rainy day in March 2009 at the Warfare Analysis Laboratory halfway between Washington and Baltimore. Rickards describes how he helped design the exercise and recruited two Wall Street pros, Steve Halliwell and Bill O’Donnell, to participate alongside platoons of economists, intelligence officials and military analysts.

Together, the threesome conspired to lob a heat-seeking missile into the battlefield: Without warning, the Russian Central Bank announced it was transporting its gold to Switzerland and issuing a new gold-backed currency through a London bank. Russian oil and gas exports would henceforth be paid for in the new currency, not dollars. By the end of the game, the U.S. was the biggest loser.

Massive National Debts

None of this is, unfortunately, as fanciful as it might appear. Industrial nations inflicted two vicious rounds of currency devaluation on the planet in the 20th century, as Rickards reminds us. The first, in the 1920s and ‘30s, led to military conquests by Nazi Germany and imperial Japan. The second fed a brutal inflationary spiral in the 1970s.

Both episodes, for all their differences, began with vast, unpayable national debts, the same burden that now cripples leading industrial countries from the U.S. to Japan, as Rickards says. Today, as yesterday, countries are attempting to devalue their way out of trouble. Following the strategy of beggar-thy- neighbor, the U.S., Europe, China and Japan all want to weaken their currencies. The flaw in the tactic should be clear. “Not everyone could cheapen at once,” Rickards writes. “The circle still could not be squared.”

What will this war mean for the power and prestige of the dollar, the world’s dominant currency? Rickards runs through four scenarios, which he ominously dubs the Four Horsemen of the Dollar Apocalypse.

Race to the Bottom

The most optimistic prediction, he says, is the one Barry Eichengreen anticipates in his book “Exorbitant Privilege” -- that of a world heading toward a multipolar system in which the dollar competes with the euro and the yuan. The flaw with this model, Rickards argues, is that healthy competition could devolve into an unhealthy race to the bottom by central banks seeking to lock in regional dominance.

The darkest outcome would be chaos: a “catastrophic collapse of investor confidence” into panicked selling of dollars and dollar-denominated securities.

Rickards is less than impressed by suggestions that the dollar can be replaced as the dominant currency with Special Drawing Rights issued by the International Monetary Fund. In the end he holds out the most hope, as you may have guessed, for a return to some form of gold standard.

His arguments for a “flexible” gold standard are too nuanced to summarize here, though he takes pains to distance himself from hard-line gold bloggers and the botched interwar “gold exchange standard” implicated in the Great Depression. All he’s asking, really, is whether central bankers should be allowed to print unlimited amounts of money.

Ideological Hurdles

“There is an unwillingness, rooted in ideology, to explore ways to reconcile the demonstrated stability of gold with the necessity for some degrees of freedom in the management of the money supply to respond to crises and correct mistakes,” he writes. “A reconciliation is overdue.”

A fair point, though I found myself distracted a few pages later by a table presenting implied gold prices based on various measurements of money supply. The top value per ounce: $44,552.

Which makes me wonder: Has Rickards been stuffing his mattress with bullion?

“Currency Wars: The Making of the Next Global Crisis” is published by Portfolio/Penguin (288 pages, $26.95). To buy this book in North America, click here.

(James Pressley writes for Muse, the arts and leisure section of Bloomberg News. The opinions expressed are his own.)

To contact the writer on the story: James Pressley in Brussels at jpressley@bloomberg.net.

To contact the editor responsible for this story: Manuela Hoelterhoff at mhoelterhoff@bloomberg.net.

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Goldman’s Blankfein: Growth to ‘Snap Back’

By Christine Harper - Nov 16, 2011 1:56 AM GMT+0700

Goldman Sachs Group Inc. (GS), the fifth- biggest U.S. bank, is preparing for a faster global economic rebound than most forecasters expect, Chairman and Chief Executive Officer Lloyd C. Blankfein said.

“I don’t think that we can conclude that this slowdown is secular rather than cyclical change,” Blankfein, 57, said today at an investor conference in New York hosted by Bank of America Corp. (BAC)’s Merrill Lynch unit. “The world will snap back and it will be a surprise and it will be faster than people think. I don’t know when that will be and we will gear ourselves accordingly.”

Goldman Sachs, which was the most profitable securities firm in Wall Street history before converting to a bank in 2008, last month reported its second quarterly loss in 12 years as a publicly traded company. The stock dropped 41 percent this year through yesterday to $99.29, below the company’s $120.41 tangible book value per share at the end of September.

Blankfein, while noting that the firm is cutting costs and adapting to changing regulation and slower economic growth, said he is wary of overreacting by assuming the world has permanently changed. He reminded investors that Goldman Sachs reported record earnings in 2009 following a quarterly loss in 2008, in part because competitors pulled away from making markets for clients.

“We’re managing our costs, obviously, but we’re not thinking necessarily that there’s such a radical, structural change,” he said. “We want to be in shape for the upturn.”

Volcker Rule

Blankfein said he expects Goldman Sachs’s clients and other “end-users” of investment-banking services to inform regulators of their concerns about the Volcker rule, which limits banks from trading on their own behalf and from investing in private-equity and hedge funds. Clients are concerned the regulations could reduce market liquidity and make trading more expensive, he said.

“As people weigh the costs to themselves, I think the intensity will rise,” he said. “I think user groups will chime in and make their interests known. In fact I’m sure of it.”

People familiar with the situation said last week that Goldman Sachs and Morgan Stanley were considering holding some of the loan promises they make to clients at the original cost instead of at the market cost. Asked to comment on a newspaper report on the deliberations, Blankfein reiterated the firm’s belief in the importance of mark-to-market accounting. He said the firm had had a debate on how to mark unfunded loan commitments to market.

Mark to Market

“From time to time we evaluate how we are marking certain kinds of things,” Blankfein added. “Somebody picked up on something, eavesdropped on a partial conversation or something and were, I guess, tapping into a conversation we were having specifically about how -- how, not will -- how you mark unfunded commitments that tend not to be drawn down just when they’re in the money.”

Blankfein has spoken at the annual Bank of America Merrill Lynch Banking and Financial Services Conference every year beginning in 2006, when he was named chairman and CEO. Guy Moszkowski, the Bank of America analyst who covers Goldman Sachs, cut his recommendation on the stock to “neutral” from “buy” in March.

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

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New York Police in Riot Gear Clear ‘Occupy’ Protesters From Zuccotti Park

By Esmé E. Deprez and Alison Vekshin - Nov 16, 2011 5:09 AM GMT+0700

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Nov. 15 (Bloomberg) -- Bloomberg's Kenzie Delaine reports from New York City about efforts by police to remove Occupy Wall Street protesters from Lower Manhattan's Zuccotti Park. He speaks with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)

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Nov. 15 (Bloomberg) -- Brittany Robinson, an Occupy Wall Street protester, talks about reasons for joining the demonstration and outlook for the movement. She speaks on Bloomberg Television's InBusiness With Margaret Brennan." (Source: Bloomberg)

New York City police in riot gear swept into a Lower Manhattan park early today to remove Occupy Wall Street demonstrators who had been camping there for more than eight weeks to protest income inequality.

Zuccotti Park will remain off-limits to protesters who want to camp there in tents and sleeping bags. Demonstrators lost a bid to return to the park with those items when state Supreme Court Judge Michael Stallman lifted a temporary restraining order late this afternoon, ruling that the city had the power to rid the plaza of the protesters’ gear.

Hundreds had gathered around metal barricades surrounding the park near the World Trade Center site for hours after the police ouster, awaiting the outcome of the court hearing.

“I’m very disappointed,” said Peter Mueller, a 25-year- old illustrator who said he has camped out at the park. “I believe tents are an expression of our First Amendment rights. I would hope there would be some redress.”

Police and the park’s owners told protesters at 1 a.m. local time that they could re-enter the park after city workers cleared it, only if they returned without the tents, tarps and sleeping bags they had used to establish a continuing presence.

“The First Amendment protects speech,” Bloomberg said in a press conference at City Hall. “It doesn’t protect the use of tents and sleeping bags to take over a public space.” The prolonged presence of demonstrators in the confined area had begun to pose a health and safety risk to protesters and the public, he said.

‘Looking at Alternatives’

About 50 security officers employed by the park’s owner, Brookfield Office Properties Inc., stationed themselves within the emptied and barricaded park, supported by dozens of police officers. Protesters vowed to continue to voice opposition to what they describe as policies favoring the rich, even if they are forced to another site.

“We’ll set up camps somewhere else,” said Mark Bray, a spokesman for the group. “We’re looking at alternatives.” Demonstrators may return to Zuccotti Park to stage a sit-in soon, he said.

The action followed moves that shut camps in Oakland, California, and Portland, Oregon. In these cities, mayors cited crime, poor sanitary conditions and local merchants’ complaints to justify evictions of protesters from similar encampments, saying public safety concerns outweighed the demonstrators’ free-speech claims.

New York police had avoided a confrontation with demonstrators in the park near the World Trade Center site since Brookfield postponed clearing sections for cleaning in mid- October. They have camped there since Sept. 17.

‘Dangerous’ Conditions Cited

“Conditions in Zuccotti Park had become dangerous, unhealthy and unsafe,” said Richard Clark, Brookfield’s chief executive officer, in a statement. “These risks were unacceptable and it would have been irresponsible to not request that the city take action. Further, we have a legal obligation to the city and to this neighborhood to keep the park accessible to all who wish to enjoy it, which had become impossible.”

In Toronto, protesters that have set up camp in St. James Park near Toronto’s financial district over the past 31 days are receiving eviction notices today, according to news network CP24. Demonstrators outside St. Paul’s Cathedral in London held a press conference today to express support for Occupy Wall Street and called for a protest outside the U.S. embassy.

The New York police operation came after organizers announced they would mark the two-month anniversary of the movement on Nov. 17, intending to “shut down Wall Street” and “occupy the subways.”

‘Our Spaces’

“Some politicians may physically remove us from public spaces -- our spaces,” activists said in a statement released at 2:25 a.m. local time. “You cannot evict an idea whose time has come.”

Occupy camps nationwide have protested economic disparity, decrying high foreclosure and unemployment rates that affect average Americans while the bankers and financial executives award themselves bonuses with a taxpayer-funded bailouts.

About 220 people were in the park when police using loudspeakers told protesters to leave or face arrest, said Police Commissioner Raymond Kelly. About 142 people were arrested inside the park and more than 50 outside, Kelly told reporters after the mayor’s press conference. Most arrests were for trespassing and disorderly conduct, Kelly said.

Ydanis Rodriguez, a Democratic City Councilmember from northern Manhattan, became one of those arrested, said Yetta Kurland, an attorney with the New York City Chapter of the National Lawyers Guild, in an e-mailed news release.

“Those who were arrested wanted to be arrested,” Kelly said. “There was an awful lot of taunting and getting into police officers’ faces.”

‘Destroyed Everything’

Police broke down tents and “destroyed everything” while forcibly removing protesters who had locked arms, said Chris Porter, 26, a welder from Indiana who joined the protest in the park about a month ago.

“We have been in constant contact with Brookfield and yesterday they requested that the city assist it in enforcing the no sleeping and camping rules in the park,” Bloomberg said in a statement before the press conference. “But make no mistake -- the final decision to act was mine.”

The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.

The one-square block space hosted a medical tent, kitchen area serving three meals a day, library, comfort station doling out underwear, sweaters, pants and blankets, and tables offering media outreach and legal guidance.

Hundreds of protesters arrested last month during a demonstration on the Brooklyn Bridge are scheduled to start appearing in court today to face disorderly conduct charges.

‘99 Percent’

Before today, more than 900 people had been charged in connection with the protests since mid-September, including about 700 arrested during the Oct. 1 bridge demonstration, according to police.

The demonstrators refer to themselves on signs and in slogans as “the 99 percent,” a reference to Nobel Prize- winning economist Joseph Stiglitz’s study showing the richest 1 percent control 40 percent of U.S. wealth.

Oakland police cleared a downtown encampment yesterday after a slaying on Nov. 10. Police in Portland evicted campers at Chapman and Lownsdale squares on Nov. 13 after two people suffered drug overdoses. Salt Lake City banned protesters from staying overnight at Pioneer Park on Nov. 11 after a person was found dead at the camp that morning.

Homeless Issue

“The people who originally founded the encampments are either no longer there or no longer in control,” Oakland Mayor Jean Quan said yesterday in a telephone interview. “In part of clearing the camp, we moved a lot of the homeless -- they were about half of the residents.”

Deaths, sexual assaults, drug dealing and theft in the tent cities threaten public safety, officials said. The camps have drawn the homeless, street youths and a criminal element, some officials said.

“In the past few days, the balance has tipped,” Portland Mayor Sam Adams said in a Nov. 10 statement. “We have experienced two very serious drug overdoses, where individuals required immediate resuscitation in the camp.”

To contact the reporters on this story: Esmé E. Deprez in New York at edeprez@bloomberg.net; Alison Vekshin in San Francisco at avekshin@bloomberg.net;

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

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Romney Two-Way Race Now Four-Way Republican Dead Heat in Iowa

By John McCormick - Nov 15, 2011 12:00 PM GMT+0700

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Nov. 15 (Bloomberg) -- Herman Cain, Ron Paul, Mitt Romney and Newt Gingrich are in a dead heat as the top choices for Iowans likely to attend the Jan. 3 Republican presidential caucuses, according to a Bloomberg News poll. The poll shows Cain at 20 percent, Paul at 19 percent, Romney at 18 percent and Gingrich at 17 percent among the likely attendees. Hans Nichols reports on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

Herman Cain, Ron Paul, Mitt Romney and Newt Gingrich are in a dead heat as the top choices for Iowans likely to attend the Jan. 3 Republican presidential caucuses.

A Bloomberg News poll shows Cain at 20 percent, Paul at 19 percent, Romney at 18 percent and Gingrich at 17 percent among the likely attendees with the caucuses that start the nominating contests seven weeks away.

Economic issues such as jobs, taxes and government spending are driving voter sentiment, rather than such social issues as abortion and gay marriage, the poll finds. Only about a quarter of likely caucus-goers say social or constitutional issues are more important to them, compared with 71 percent who say fiscal concerns.

The poll reflects the race’s fluidity, with 60 percent of respondents saying they still could be persuaded to back someone other than their top choice, and 10 percent undecided. Paul’s support is more solidified than his rivals, while Cain’s is softer. All of the major contenders have issue challenges to address.

“In Iowa, it’s long been a two-person race between Romney and someone else,” said J. Ann Selzer, president of Selzer & Co., which conducted the poll for Bloomberg. “It is now a four- person race between Romney and three someone elses.”

No Exciting Choices

Poll participant Nate Warwick, 34, a machine operator at a packaging factory who lives in Story City, Iowa, is leaning toward Romney, primarily because he thinks he has the best chance of defeating President Barack Obama in 2012. Still, he’s not excited about his choices.

“There’s nobody out there who is really grabbing my attention, wholly,” he said. “I don’t think the Republican Party has a candidate that can beat Obama right now.”

Texas Governor Rick Perry and Minnesota Representative Michele Bachmann, who both once were strong contenders in polls of the Republican race, have seen support plummet. Perry, who is running ads in Iowa, gets 7 percent support in the Bloomberg survey; Bachmann, who won the Iowa Straw Poll in August, is backed by 5 percent.

Former U.S. Senator Rick Santorum of Pennsylvania, who has spent the most time campaigning in Iowa, is at 3 percent. Former Utah Governor Jon Huntsman Jr., who isn’t competing in Iowa, is backed by 1 percent.

Better Barometers

Polls in Iowa and New Hampshire -- site of the nation’s first primary -- are better barometers of the candidate field than national surveys because voters in those states are paying more attention and are aware of their early role in shaping the Republican race.

The Bloomberg Iowa poll has a margin of error of plus or minus 4.4 percentage points and was taken Nov. 10-12. Selzer & Co. is the same West Des Moines-based firm that conducts the Iowa Poll for the Des Moines Register newspaper.

The concern about economic issues comes even as Iowa is doing better than other states. Buoyed by rising farm commodity and land prices, its unemployment rate is 6 percent, below the national average of 9 percent.

Iowa’s economic improvement, as measured by the Bloomberg Economic Evaluation of States Index, was ranked the 10th best nationally between the fourth quarter of 2008 and the second quarter of 2011. The index uses housing, jobs, tax and stock price data for its rankings.

A Romney Opening

The focus on the economy presents an opening for Romney, the former Massachusetts governor who in his campaign has spotlighted his background as a business executive. Romney has shown signs he may engage more directly in Iowa, a state where he invested $10 million in his 2008 presidential bid only to be rejected by social conservatives who rallied behind former Arkansas Governor Mike Huckabee in that year’s caucuses.

“Iowa apparently is not looking for the next Huckabee this time around,” Selzer said.

Romney’s support consists of 41 percent who backed him in 2008, the survey found, which means “the majority of his support comes from newcomers to his camp,” Selzer said.

Among tax plans tested in the poll, a version that generally reflects Romney’s proposal to make former President George W. Bush’s tax cuts permanent and then work toward an overhaul wins the greatest support, backed by 32 percent. Cain’s so-called 9-9-9 plan is considered the best approach by 24 percent, while Perry’s flat-tax proposal is viewed that way by 14 percent.

Health Care Vulnerability

One area where Romney, 64, is vulnerable is his backing as governor support of a health insurance mandate in Massachusetts that is similar to the one in the federal health-care overhaul passed by Congress last year. More than half -- 58 percent -- of likely caucus participants said support of such a mandate would “rule out” their backing. In debates, Romney has said he would not impose a national mandate and would repeal the federal law.

There’s good news in the poll for Paul, 76, a Texas congressman who has attracted ardent supporters. Among likely caucus-goers who say their minds are made up, Paul leads with 32 percent, followed by Romney at 25 percent and Gingrich, a former House speaker, at 17 percent.

Among Paul supporters who backed him in the 2008 caucuses, 69 percent are still with him now.

Poll participant Sarah Stang, 78, a retired teacher who lives in Osage, Iowa, said she switched parties four years ago so she could vote for Paul.

“He doesn’t want to raise taxes on us middle- and low- income people,” she said, adding that she “loves” his challenges to the Federal Reserve. “They have way too much power. They should let the marketplace do what it’s supposed to,” she said.

Cain Support Dips

Support for Cain, 65, a former businessman who has been accused of sexually harassing four women in the 1990s, has dipped in Iowa by three percentage points since a similar survey done Oct. 23-26 by the Des Moines Register.

In the Bloomberg poll, 29 percent of likely caucus participants say they believe Cain’s denials, while 37 percent are waiting for more information. More than a quarter are skeptical of his answers to the harassment allegations or don’t believe him. Cain does better among men than women in the poll, 23 percent to 15 percent.

More than two-thirds of likely caucus participants say they wouldn’t rule out a candidate just because he had been accused of sexual harassment.

Gingrich Gains

Gingrich’s campaign appears to be benefiting from Cain’s recent struggles.

The former Georgia congressman suffered an early political setback when more than a dozen of his staff members -- including his national co-chairman and campaign manager -- resigned in June following discord over strategy.

Poll participant Tom Anderson, 63, a retired union carpenter from Sigourney, Iowa, said he is backing Gingrich after deciding against Perry and Cain.

“He’s a smart guy and a problem-solver,” said Anderson.

Still, almost half of respondents say they would rule out a candidate who has been married three times and had an extramarital affair. Gingrich, 68, is in his third marriage. And in a March 2007 interview with a Christian group, Focus on the Family, he admitted to having had an extramarital affair.

Perry, 61, also has a stumbling block with caucus-goers. The poll found that 42 percent of likely Iowa caucus attendees said the Perry-signed Texas law allowing children of illegal immigrants to pay in-state tuition rates would rule out their support. Even so, Perry, at 16 percent, and Paul, at 17 percent, ranked highest as candidates that “would do the most” to stop illegal immigration.

Voter Contacts

Although the top candidates are spending less time in Iowa than prior election cycles, likely caucus participants are hearing from them on a regular basis.

Almost a fifth say they have been contacted by six or more of the campaigns through e-mail, direct mail, telephone or by someone coming to their door during the past year. Forty-four percent say they have been contacted by three to five campaigns.

Paul’s campaign leads for voter contact, with about two thirds of respondents saying they’ve heard from his campaign, followed by 61 percent who said they’ve been reached by Bachmann’s campaign.

Bachmann, 55, isn’t getting much benefit from those interactions, converting to supporters just six percent, according to the poll. In contrast, Gingrich’s campaign has made direct contact with 29 percent of likely caucus participants, and converted a third of them to his cause.

-- With assistance from Ilan Kolet in Ottawa, Canada. Editor: Jeanne Cummings, Don Frederick

To contact the reporter on this story: John McCormick in Chicago at jmccormick16@bloomberg.net

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

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