Merkel Unhurt by Spat as Germany Elects President From the East

By Tony Czuczka and Patrick Donahue - Mar 18, 2012 6:01 AM GMT+0700

Chancellor Angela Merkel is set to vote for a German president she rejected once already, shrugging off the setback to focus on state elections and crisis-fighting steps that are more likely to shape her chances of a third term.

The probable election today of Joachim Gauck, 72, a former pastor and East German anti-communist activist, would mean Europe’s biggest economy is headed for the first time by both a chancellor and president who grew up behind the Iron Curtain.

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Germany's Chancellor Angela Merkel. Photographer: Michele Tantussi/Bloomberg

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German President Joachim Gauck, who had been a pro-democracy activist in East Germany. Photographer: Johannes Eisele/AFP/Getty Images

The vote also enables Merkel to dodge a conflict in her coalition that failed to dent her record-high approval ratings. Three state elections and a decision due by the end of the month on whether to back an expanded financial firewall against the crisis are her immediate challenges.

“She’s like Teflon,” Carsten Brzeski, an economist at ING Groep in Brussels, said in an interview. “Everything that could have been blamed on her hasn’t affected her at all.” Merkel “has shown that she can sit things out.”

A special federal assembly is due to convene in Berlin at noon today for the presidential election, the second vote for the mainly ceremonial post in less than two years. Gauck was the main opposition candidate in 2010, when he lost to Christian Wulff, Merkel’s pick. Wulff quit on Feb. 17 to face a criminal probe that may lead to corruption charges. He denies any wrongdoing.

The only other candidate this time is Beate Klarsfeld, 73. The German-born Nazi hunter living in Paris was nominated by the anti-capitalist Left party. With Merkel’s coalition and two opposition parties backing Gauck, his election is assured.

Stasi Hunter

Gauck, the son of a sailor who was sent to a Soviet Gulag for more than three years in the 1950s, grew up in the Baltic Sea port city of Rostock and became a leading figure of East Germany’s anti-communist opposition in 1989. He later gained a reputation as Germany’s leading “Stasi hunter” for his work in overseeing the opening of millions of files kept by informants of the communist-era Ministry of State Security.

“The central issue in the public life of Joachim Gauck has been that of freedom and responsibility,” Merkel said Feb. 20 when she announced his candidacy. “That’s what connects me to him personally, despite our differences.”

After expressing reservations about the opposition’s pick of Gauck, Merkel backed down last month when the Free Democrats, her junior coalition ally, supported him. By retreating and moving on, she tamped down a domestic distraction as European leaders were struggling to craft a second bailout for Greece.

Latest Poll Scores

An Emnid poll on March 11 showed national support for her bloc at 36 percent, a level last exceeded in 2008. Her FDP ally, which has seen voter support collapse amid leadership changes and a split over its stance on euro bailouts, had 3 percent backing after almost 15 percent in 2009. The main opposition Social Democrats had 28 percent and the Greens 14 percent.

“She checked it off the list in a hurry,” Manfred Guellner, head of the Berlin-based Forsa polling firm, said of the Gauck spat. “It didn’t harm the high approval she enjoys. When Merkel is alone on the stage saving the euro, that’s when she scores points.”

Next stop for Merkel is Saarland, where voters cast ballots on March 25 in the first of three German state elections this year. It’s followed by votes in the northern state of Schleswig- Holstein on May 6 and North Rhine-Westphalia, Germany’s most populous region, which with almost a quarter of the country’s 82 million people is a bellwether for the respective parties’ national fortunes before the federal election in 2013. While not yet scheduled, that vote will probably also take place in May.

Grand Coalition Redux

Merkel’s position is a turnaround from last year, when her national coalition was defeated or lost votes in all seven state elections as Germany’s involvement in the crisis stemming from Greece made it the biggest contributor to euro-region bailouts.

Polls now show the CDU and Social Democrats in a dead heat in Saarland, suggesting the CDU and SPD will ally to govern the region bordering France and Luxembourg in a “grand coalition,” mirroring Merkel’s first-term government.

That’s a constellation Germans like because they favor cooperation among the two biggest parties rather than conflict, making another grand coalition a possible outcome of the next national election in 18 months, Forsa’s Guellner said.

With the Free Democrats decimated, Merkel reached out to the opposition to agree on the presidential candidate, who is elected by a 1,240-member assembly of national lawmakers and state delegates that meets at the Reichstag building in Berlin.

The chancellor’s majority in the assembly has narrowed to as little as two seats from 21 seats in 2010, when Wulff defeated Gauck, according to election website wahlrecht.de.

To contact the reporters on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net; Patrick Donahue in Berlin at pdonahue1@bloomberg.net

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

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Lagarde Says World Can’t Be Lulled Into Sense of Security

By Bloomberg News - Mar 18, 2012 9:22 AM GMT+0700

International Monetary Fund Managing Director Christine Lagarde urged policy makers to be vigilant as oil prices, debt levels, and the risk of slowing growth in emerging markets threaten global economic stability.

“Optimism should not give us a sense of comfort or lull us into a false sense of security,” Lagarde said today at a speech in Beijing at the China Development Forum. “We cannot go back to business as usual.”

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Christine Lagarde, managing director of the International Monetary Fund, speaks during a news conference in Beijing, China, on Thursday, Nov. 10, 2011. Photographer: Adam Dean/Bloomberg *** Local Caption *** Christine Lagarde

The IMF last week approved a 28 billion-euro ($36.6 billion) loan for Greece as part of a 130 billion euro second bailout by the European Union that requires more austerity and an overhaul of its economy. Greece completed the world’s largest sovereign-debt overhaul and agreed to deeper spending cuts to obtain new funds as it faces a fifth year of recession.

“The measures that were proposed are ambitious and it will be important to focus on steady rigorous implementation of the situation on the ground,” Lagarde said about Greece. “We have made important steps forward.”

Brent crude oil futures have rising 18 percent this year on concern Iran’s standoff with the West over its nuclear program will escalate into military action in a region that holds 54 percent of global petroleum reserves. Increased gasoline prices threaten to slow consumer spending in the U.S., tempering the recovery in the world’s largest economy.

Oil prices are “becoming a threat to global growth,” Lagarde said. “I think it’s a major threat.”

Praising China

Lagarde praised China’s rising leadership role in the world economy, while saying the world’s second-biggest economy must “continue shifting the drivers” of growth toward domestic consumption and away from investment and exports. China’s leadership should work to improve standards of living, she said.

The IMF chief said March 8 that the fund may raise its growth forecast for the U.S. on signs the recovery is picking up in new forecasts to be released in about a month.

“I wouldn’t be surprised if it was upward compared with our previous forecast of 1.8” percent for 2012, she said in an interview on the “Charlie Rose” show broadcast on PBS and Bloomberg Television.

The Washington-based IMF in January cut its global growth forecasts for this year and next and warned that the European debt turmoil could tip the world into another recession if it were to worsen. The fund has been seeking $600 billion from its members to be able to allow an increase in lending resource of $500 billion, to protect the world from consequences of the European debt crisis.

While euro nations have pledged about $200 billion, Group of 20 officials meeting in Mexico last month sided with the U.S. and said any decision on more funding hinges on the euro area delivering more of its own financial firepower first.

To contact Bloomberg News staff for this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net

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

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U.S. Citizen Freed After Nine-Month Iraq Detention, UN Sa

By Nick Taborek and Flavia Krause-Jackson - Mar 18, 2012 4:24 AM GMT+0700

A U.S. citizen was handed over to the United Nations mission in Iraq by two Iraqi legislators, the UN said in an e-mailed statement.

The man had been held in detention for about nine months by an Iraqi group, the UN said in the statement, without identifying the group. The U.S. State Department said in an e- mailed statement an American was transferred to the U.S. Embassy in Baghdad from the UN mission in Iraq.

The UN and the State Department declined to identify the American. He was handed over today by Deputy Speaker of the Council of Representatives, Quasay Al-Suhail, and Maha al-Douri, a member of the Iraqi Parliament, according to the UN.

The Iraqi news agency Al Sumaria reported that the man was handed over by followers of the anti-U.S. Iraqi Shiite cleric Moqtada al-Sadr.

Without identifying himself, the man spoke at a press conference outside the Green Zone in Baghdad today, the Associated Press reported.

Iraqi lawmakers displayed U.S.-issued military and contractor ID cards that identified him as Randy Michael Hultz, the Associated Press reported. The Al Sumaria report said the man’s name is Randy Michael Hill, 59, a retired member of the U.S. military.

At the press conference the man gave few details of what he described as a “kidnapping,” or how he was treated while captured, according to AP. The man was taken into the Green Zone and turned over to the UN mission immediately after the press conference, AP said.

The kidnappers, the man said during the press conference, were from the Promised Day Brigade, a branch of the Mahdi Army, a militia that is controlled by al-Sadr, according to the AP.

The Al Sumaria report, citing al-Douri, said the man was freed after the withdrawal of U.S. troops from Iraq “to give a message about Iraq’s good intentions and to say that Iraq restored its sovereignty.”

To contact the reporter on this story: Nick Taborek in Washington at ntaborek@bloomberg.net

To contact the editor responsible for this story: Ann Hughey at ahughey@bloomberg.net

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Goldman Sachs Board Must Act on Smith Op-Ed, Ex-Partner Writes

By Christine Harper - Mar 18, 2012 6:00 AM GMT+0700

Goldman Sachs Group Inc. (GS)’s directors must investigate a former employee’s allegations about a change in the firm’s culture, Jacki Zehner, who was a partner when she left the firm in 2002, wrote on her blog.

Zehner said she doesn’t know Greg Smith, the derivatives salesman whose New York Times op-ed piece blamed Chief Executive Officer Lloyd C. Blankfein and President Gary D. Cohn for fostering a “toxic and destructive” environment, causing Smith to quit last week. Zehner, who worked at Goldman Sachs for 14 years, wrote that she’s heard from “many people” in the past few years that the firm is emphasizing profits over character.

“These are very serious accusations from a credible person in my view and I hope it does indeed provide a ‘wake-up’ call to the board of directors,” wrote Zehner, who was the first female trader promoted to partner and is married to a former partner. She is now CEO and president of Women Moving Millions, a non- profit supporting the advancement of women and girls worldwide.

“It is the board that is accountable to shareholders and before they take another paycheck I hope they ask a heck of a lot of questions and get honest answers,” Zehner, 47, wrote in her March 16 commentary.

Blankfein, 57, and Cohn, 51, who have held their current roles since 2006, responded to Smith’s op-ed with a memo expressing disappointment with his assertions and cited a survey of employees that found most disagree. Still, “if an individual expresses issues, we examine them carefully and we will be doing so in this case.”

‘Verbal Hand Grenade’

David Wells, a spokesman at Goldman Sachs, declined to comment beyond the contents of the memo.

Janet Tiebout Hanson, who left Goldman Sachs after almost 14 years in 1993 and in 1997 founded the women’s networking firm 85 Broads, wrote her own blog response to Smith’s op-ed piece, calling it a “cowardly act.”

“By tossing a verbal hand grenade on his way out the door, he sullied the reputations of the vast majority of the people at the firm who work and live by the highest possible professional standards every single day,” wrote Hanson, who was the first woman at Goldman Sachs to be promoted into sales management. “He is just a quitter who never gave management an opportunity to respond before he verbally strafed the entire firm in print.”

Seek Some Answers

Hanson, 59, said she was “delighted” to become a Goldman Sachs client when she started an asset-management firm, Milestone Capital, in 1995. Milestone Capital had an “awesome relationship” with the fixed-income trading desks at Goldman Sachs, which she said was partly responsible for its growth the next five years.

“Greg Smith got his 15 minutes of lame fame, which is all it is,” she added.

In Zehner’s blog post, she said the board should decide how to respond to Smith’s accusations after they get some answers.

“If those answers are that the kind of behavior reported by Mr. Smith is not the norm, then they would have done their job, this story will fade and Goldman will go about its business for another 143 years,” she wrote. “If the answers are the opposite, heads should roll.”

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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Goldman Op-Ed Writer Got $150 for Unsolicited Critique

By Edmund Lee - Mar 17, 2012 2:38 AM GMT+0700

The New York Times (NYT), drawing criticism for running an op-ed by a former Goldman Sachs Group Inc. (GS) executive attacking the bank, said the piece was one of thousands of unsolicited submissions it receives weekly.

“We got it by e-mail,” New York Times editorial page editor Andrew Rosenthal said in a telephone interview. Smith was paid about $150 for his submission, a typical amount, said a person with direct knowledge of the situation who declined to be identified because the information isn’t public. The newspaper pays varying amounts for its op-eds, except to public figures or politicians, the person said.

Wall Street, including Morgan Stanley (MS) Chief Executive Officer James Gorman, has faulted the newspaper for publishing an op-ed piece based on the view of one among more than 30,000 Goldman Sachs employees. All the facts that could be checked were checked in Smith’s submission, Rosenthal said.

“The purpose of the op-ed page is to air an important position,” Rosenthal said. “We’re saying, ‘This is interesting,’ and by the way, ‘interesting,’ very often means it’ll make you crazy.”

In the March 14 op-ed that explained why he was quitting, Greg Smith called Goldman Sachs’s culture “toxic and destructive.”

Goldman Sachs Chairman and CEO Lloyd Blankfein rebutted Smith’s claims in a letter to employees the same day, saying his assertions didn’t reflect the New York-based bank’s values and how the “vast majority” of its employees think about their firm.

Piece Merited Publication

Morgan Stanley’s Gorman said he told staff not to circulate the op-ed.

“I was surprised that anyone would run an op-ed piece based upon the view of a single employee,” Gorman said today at an event in New York hosted by Fortune magazine.

Smith was identified by the newspaper as an executive director and head of the bank’s U.S. equity derivatives business in Europe. While Smith wasn’t among the most senior executives at Goldman Sachs, his screed against the firm’s culture merited publication, Rosenthal said.

Rosenthal declined to say when Smith’s letter was received and how long it took for the editorial staff to verify the submission. The majority of op-ed pieces are commissioned, or from writers who have previously written for the section, he said.

“Very few come over the transom queue,” Rosenthal said. “Some of them famously have -- this is one of them.”

To contact the reporter on this story: Edmund Lee in New York at elee310@bloomberg.net

To contact the editor responsible for this story: Ville Heiskanen at vheiskanen@bloomberg.net

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George Clooney Arrested at Sudan Protest in Washington

By Tom Schoenberg - Mar 17, 2012 11:01 AM GMT+0700

George Clooney, the Academy Award- winning movie actor, was arrested outside the Sudanese Embassy in Washington while protesting attacks by the African nation’s government on its southern regions and blocking of humanitarian aid.

Clooney, 50, was taken into custody yesterday and charged with crossing a police line, a misdemeanor, according to George Ogilvie, a Secret Service spokesman. He was taken to a police station for processing, Ogilvie said.

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Actor and activist George Clooney is handcuffed by a member of the US Secret Service for trespassing upon the Sudanese Embassy in Washington, D.C. on March 16, 2012. Photographer: Paul J. Richards/AFP/Getty Images

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March 16 (Bloomberg) -- Actor George Clooney was arrested today during a protest outside the Sudanese embassy in Washington. He’s been charged with crossing a police line, a misdemeanor, according to George Ogilvie, a Secret Service spokesman. (Source: Bloomberg)

He paid a $100 penalty and was released, according to Gwendolyn Crump, a police spokeswoman.

Sixteen others arrested in the group that was protesting included NAACP President Benjamin Jealous, Martin Luther King III and Democratic U.S. representatives Jim Moran and Jim McGovern, according to Ogilvie.

The Hollywood star testified March 14 before the Senate Foreign Relations Committee claiming the Sudanese government was killing its own people and blocking aid to the Nuba mountains and the Blue Nile regions.

That evening, he was among the guests invited by President Barack Obama to a state dinner honoring U.K. Prime Minister David Cameron.

Clooney, at the Senate hearing, described a visit this month to southern Sudan where he witnessed hundreds of people seeking to hide in caves from Sudanese bombings.

Senate Testimony

“The south has all of its oil and the north has the pipelines and refineries,” he told senators. “For years, the north has been taking the oil and keeping most of the profits, buying bombs and rockets and using them on Darfur, the Blue Nile, Abyei and the Nuba mountains.”

Clooney won the Oscar for best actor in a supporting role in 2005 for his performance in “Syriana.” He has been nominated once for directing, twice for screenwriting and three times for best actor in a leading role, according to the motion picture Academy.

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.

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

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Dow Halts Seven-Day Rally as Oil Gain Bolsters Concern

By Rita Nazareth - Mar 17, 2012 3:36 AM GMT+0700

The Dow Jones Industrial Average (INDU) snapped a seven-day gain after an increase in oil and consumer prices sparked inflation concern as the economy improves.

Energy (S5ENRS) shares had the biggest advance among 10 groups in the Standard & Poor’s 500 Index. Noble Corp. and Chesapeake Energy Corp. (CHK) increased more than 2.5 percent. The Bloomberg U.S. Airlines Index slumped 3 percent amid expectations about higher fuel prices. Bank of America Corp. jumped 6.1 percent, surging 23 percent in four days. Apple Inc. ended almost unchanged as the company started selling the new iPad.

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Traders work at the New York Stock Exchange (NYSE) on March 15, 2012. Photographer: Scott Eells/Bloomberg

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March 16 (Bloomberg) -- Bloomberg's Pimm Fox and Deborah Kostroun report on the performance of the U.S. equity market today. The Dow Jones Industrial Average snapped a seven-day gain after an increase in oil and consumer prices sparked inflation concern as the economy improves. (Source: Bloomberg)

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March 16 (Bloomberg) -- Robert Doll, chief equity strategist at BlackRock Inc., talks about the outlook for U.S. stocks and his investment strategy. He speaks with Trish Regan, Adam Johnson and Stephanie Ruhle on Bloomberg Television's "Street Smart." (Source: Bloomberg)

The S&P 500 advanced 0.1 percent to 1,404.17 at 4 p.m. New York time, capping a fifth week of gains. The benchmark measure has risen 2.4 percent since March 9, the biggest weekly advance in 2012. The Dow dropped 20.14 points, or 0.2 percent, to 13,232.62, after rallying to the highest level since December 2007. About 8.1 billion shares changed hands on U.S. exchanges today, or 21 percent above the three-month average.

“The bugaboo in the background is oil prices,” said Madelynn Matlock, who helps oversee about $14.6 billion at Huntington Asset Advisors in Cincinnati. “I filled up my car yesterday and it hurts. Things are improving at a slow, but steady pace. If oil prices pop up, it will be different story.”

Equities were little changed as the cost of living rose in February by the most in 10 months, reflecting a jump in gasoline. Confidence among consumers unexpectedly fell in March, a sign rising fuel costs may be starting to weigh on economic prospects. Treasury Secretary Timothy F. Geithner said yesterday rising oil prices show “we still face a dangerous and uncertain world” and there’s no easy way to lower gasoline costs.

Best Since 1998

The S&P 500 is still on pace for the best first quarter since 1998 (SPX), after rallying 12 percent, amid better-than- estimated economic and corporate reports. It trades at 14.5 times reported earnings, the highest valuation level since July while still below the average since 1954 of 16.4 times earnings.

“It’s a bit of acrophobia,” said John Manley, chief equity strategist for Wells Fargo Advantage Funds in New York, citing potential investors’ fear after the S&P 500 rose to the highest level since 2008. His firm oversees $209 billion. “The market has just gone up pretty quickly. Meantime, slow and slightly improving has been the way to look at the economy.”

Energy shares gained, while airlines slumped as oil traded above $107 a barrel. Noble (NE) surged 4.8 percent to $41.25. Chesapeake Energy added 2.5 percent to $25.06. Exxon Mobil Corp. (XOM) advanced 0.4 percent to $86.44. US Airways Group Inc. (LCC) lost 5.7 percent to $7.15. United Continental Holdings Inc. (UAL) declined 2.2 percent to $19.95.

Financial Shares

Financial (S5FINL) shares in the S&P 500 rose 0.3 percent as a group. The index surged 6.2 percent in four days following dividend increases by banks including JPMorgan Chase & Co. Bank of America jumped 6.1 percent, the most in the Dow, to $9.80. Wells Fargo & Co. lost 0.5 percent to $33.89.

American International Group Inc. (AIG) fell 0.2 percent to $28.03, after rising as much as 1.1 percent earlier today. The insurer’s repayment of $1.6 billion to the U.S. Treasury Department pushed the government’s portion of recouped financial-bailout money to 80 percent, said a Treasury official familiar with the matter.

Apple (AAPL) ended almost unchanged at $585.57, after briefly rising above $600 yesterday. The 9.7-inch iPad, unveiled on March 7, is the biggest upgrade yet to Apple’s tablet before Microsoft Corp. (MSFT) introduces new software for competing devices.

Generating demand with the model is important for Apple to fend off competition from devices using Google Inc. (GOOG)’s Android operating system and the $199 Kindle Fire from Amazon.com Inc. (AMZN) that’s popular among cost-conscious buyers.

Higher Forecasts

The S&P 500, which yesterday rose above 1,400 for the first time in almost four years amid better-than-estimated economic data, may extend its gain to 1,470, according to Credit Suisse Group AG’s Andrew Garthwaite. He lifted his forecast for the index at the end of 2012 from a previous projection of 1,400, citing increasing risks for bonds and momentum in global earnings.

“The prospects for economic growth are pretty good,” Michelle Gibley, director of international research at San Francisco-based Charles Schwab Corp., said in a telephone interview. Her firm has $1.81 trillion in client assets. “Near term, you could see some volatility in stocks because the run has been so strong. Longer term, the outlook looks good.”

The benchmark measure has “healthy intermediate-term momentum” that helped it recover from a slump at the beginning of the month and may drive it higher, MKM Partners LP’s chief market technician said.

‘Breakout’

The market may be staging a “breakout” after matching its 2011 highs last week, MKM Partners’ Katie Stockton said, citing the momentum indicator known as Moving Average Convergence/Divergence. A second-straight weekly close above 1,370 today would confirm the trend and open the way to an increase to 1,440, Stockton said in a phone interview yesterday.

“I’m bullish on the market from an intermediate perspective based largely on momentum and this breakout that appears to be under way,” Stockton said. “The fact that the S&P 500 has managed to exceed resistance at the 2011 high tells us that breakout should overrule any negative set-up otherwise.”

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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Sears To Close 62 Stores by July to Reduce Costs

By Leslie Patton and Lauren Coleman-Lochner - Mar 17, 2012 3:32 AM GMT+0700

Sears Holdings Corp. (SHLD), the department-store chain controlled by hedge fund executive Edward Lampert, plans to close 62 retail stores in the first half of this year to reduce expenses.

The closings include 43 Sears Hometown stores, 10 Sears Hardware stores and 9 The Great Indoors stores, the Hoffman Estates, Illinois-based company said in a filing with the U.S. Securities and Exchange Commission on March 14. The company, which also owns the Kmart chain, had 4,010 stores as of Jan. 28.

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A customer enters a Sears store in Peru, Illinois. Photographer: Daniel Acker/Bloomberg

Lampert, who is Sears’s chairman and controls about 60 percent of its shares, is spinning off units to generate cash and closing stores after the company posted its largest quarterly loss in at least nine years. Sears said last month it planned to raise as much as $770 million by selling 11 store sites and separating some smaller-format businesses.

Chris Brathwaite, a Sears spokesman, declined to provide a list of the 62 stores to be closed or specify when the stores will shut down. Brathwaite said in an e-mail that he didn’t know how many jobs may be affected because most of the closing stores are independently owned and operated.

Sears fell 1.1 percent to $82.55 at the close in New York. The shares have more than doubled this year after plunging 56 percent in 2011.

Sears also disclosed in the filing that Lampert’s ESL Investments Inc. agreed with an undisclosed financial institution to buy a stake in contracts that pay suppliers for their accounts receivable with Sears should the company seek protection from creditors.

Planned Closings

The retailer last year announced a plan to close 120 Kmart and Sears full-line stores that would generate as much as $170 million in cash from sales of inventory and leasing or sales of the locations.

The company had $747 million in cash and near-cash items at the end of the fourth quarter, about 45 percent less than a year earlier.

To contact the reporters on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net; Lauren Coleman-Lochner in New York at llochner@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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Afghan Shooting Suspect Bales Arrives at U.S. Prison

By Gopal Ratnam and Tony Capaccio - Mar 17, 2012 11:20 AM GMT+0700

Spc. Ryan Hallock, 28th Public Affairs/U.S. Army

Staff Sgt. Robert Bales, 1st platoon sergeant, Blackhorse Company, 2nd Battalion, 3rd Infantry Regiment, 3rd Stryker Brigade Combat Team, 2nd Infantry Division, in 2011.

U.S. Army Staff Sergeant Robert Bales, the suspect in the killings of at least 16 Afghan civilians, arrived yesterday at the U.S. military’s prison in Kansas, the Army said.

The Pentagon for the first time named the 38-year-old sniper, without indicating he has yet to be charged in the case. After being held in Afghanistan and then Kuwait, Bales was flown to Fort Leavenworth in Kansas, where he will be placed in special housing in his own cell, according to an e-mailed Army statement.

Women and children were among the victims of the March 11 shootings in two villages in southern Afghanistan. The attacks threaten to erode U.S.-Afghan relations, drain remaining U.S. and European popular and political support for the war and add pressure to speed troop withdrawals.

Bales was on his first tour in Afghanistan after three in Iraq. He serves in the Army’s 2-3 Infantry, 3rd Stryker Brigade Combat Team of the 2nd Infantry Division, based at Joint Base Lewis-McChord in Washington state.

Bales served a total of 37 months during his three tours in Iraq and has been awarded three Army Good Conduct medals, six Army Commendation medals and two Meritorious Unit Commendations, according to the Army’s statement. He completed a two-year associate degree, qualified as a sniper in 2008, and also completed a Warrior Leaders Course that year, the Army said.

He arrived in Afghanistan on Dec. 3 after his last Iraq tour ended in June 4, 2010. His time at home was about average for troops who have deployed to Iraq and Afghanistan. Increasing such “dwell time” has been an Army goal since the Iraq war began.

Generally ‘Mild-Mannered’

The soldier’s Seattle lawyer, John Henry Browne, described his client at a news conference on March 15 without naming him. He portrayed a soldier who was “in general mild-mannered” with “a very strong marriage” and two children. Browne, who couldn’t be reached for comment yesterday, was quoted by the Associated Press as confirming that Bales is his client.

After sustaining a concussive head injury and losing part of a foot during his tours in Iraq, the soldier and his family were disappointed when he was sent to Afghanistan in December, Browne said.

“It would be fair to say that he and the family were not happy that he was going back,” Browne told reporters yesterday at his office in Seattle. “The brigade was told that they would not be redeployed.”

A soldier in the same unit in southern Afghanistan had been “gravely injured” a day before the shootings, an incident that affected everyone in the unit, Browne said.

The stress of a fourth combat deployment, a troubled marriage and alcohol use may have triggered the killing spree, according to a U.S. official briefed on the case who spoke on condition of anonymity during the investigation.

Browne denied that alcohol use or domestic discord played a role.

To contact the reporters on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net; Gopal Ratnam in Washington at gratnam1@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

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Apple Hits Pause as Austin Digs Deeper to Net Texas Plant

By David Mildenberg and Amanda J. Crawford - Mar 16, 2012 7:53 AM GMT+0700

Apple Inc. (AAPL) may spurn Austin and go to the Phoenix area to build an operations center that Texas Governor Rick Perry said last week would bring 3,600 jobs to his state’s capital, according to an Austin official.

Arizona’s biggest metropolitan area remains an alternative for the Cupertino, California-based maker of iPhones, iPads and Macintosh computers, Kevin Johns, Austin’s director of economic growth and redevelopment services, said after a City Council hearing on Apple’s expansion plans.

“There is no doubt we would be neck and neck and provide anything Austin could provide and then some,” Mesa Mayor Scott Smith said. He said his city, just east of Phoenix, was among Arizona sites being weighed for an Americas operations center.

Austin’s council is scheduled to vote March 22 on an $8.6 million incentive, adding to a $21 million state grant and whatever Travis County, which includes Austin, can offer to Apple, which is sitting on almost $100 billion in cash or equivalents. The company’s top tax and government affairs executives met with the council today to discuss the incentives.

“We’re just trying to respond to what seems to be a very fair evaluation of a couple of cities,” Johns said. “We’re offering $8.6 million in tax abatement and in return we expect to receive more than $14 million in benefits, so it is very good for them and very good for us.”

‘Looking Forward’

The company is “looking forward to building a new campus in Austin, which will more than double the size of our workforce there over the next decade,” according to a statement from Kristin Huguet, a spokeswoman. The company has about 3,500 workers in the Austin area today and won’t comment on competition between sites, she said.

Perry, a Republican who bowed out of the race for the 2012 presidential nomination in January, trumpeted “Apple’s commitment to create these new jobs in Texas” in a March 9 statement. The governor said the company’s $304 million investment was made “in exchange” for the state’s offer of $21 million from the Texas Enterprise Fund over 10 years.

The deal was “contingent upon the finalization of contracts and a local incentive agreement” with Austin and the county, according to the governor’s statement. The city’s incentives would be in the form of property tax relief over a period of 14 years, Johns said. He said Travis County is considering a tax abatement plan smaller than Austin’s.

Record Price

Apple, the world’s most valuable company with a market capitalization of $546 billion today, reached a record $600.01 a share before settling at $585.56 on Nasdaq at 5:20 p.m. New York time. The company has about 64,400 employees worldwide.

The company’s Austin area workers are mostly in sales, administrative and finance for the Americas region, Johns said.

Apple’s expansion would create 650 new full-time jobs with an average salary of $63,950 by the end of January 2015, with another 2,985 jobs added through 2021, according to an Austin report. The company would build a 200,000 square-foot structure, followed by an 800,000 square-foot expansion as market conditions warrant, Johns said.

“I can’t get into the incentives that were offered but the state of Arizona was interested in securing this facility,” said Matthew Benson, a spokesman for Governor Jan Brewer, a Republican. “It sounds like they’ve identified Austin as their site, which is not surprising since they have an existing site” there.

Rejected Site

A site in Phoenix was rejected by Apple because the company said it would be too difficult to get permission to build on the property, which is controlled by the state land department, said Dave Krietor, the deputy city manager. He said Mayor Greg Stanton learned of the interest in the location and made efforts to work with Apple about two weeks ago.

“It was too late,” Krietor said. “They already had selected Austin.”

The Texas Enterprise Fund has invested $443.4 million since its creation in 2003, generating more than 62,000 new jobs, Perry said in the March 9 statement. Arizona has a $25 million deal-closing fund established last year with the creation of the Arizona Commerce Authority.

To contact the reporter on this story: David Mildenberg in Austin, Texas at dmildenberg@bloomberg.net; Amanda J. Crawford in Phoenix at acrawford24@bloomberg.net.

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

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Most Asian Stocks Climb as U.S. Jobs Data Buoys Exporters

By Kana Nishizawa and Yoshiaki Nohara - Mar 16, 2012 9:14 AM GMT+0700

Most Asian stocks rose, with a regional benchmark index set to gain for a 12th week in 13 weeks, after U.S. jobs and manufacturing data added to signs the world’s biggest economy is recovering, boosting the outlook for Asian exporters.

Li & Fung Ltd. (494), a clothes and toys supplier to Wal-Mart Stores Inc., rose 4 percent in Hong Kong. Gree Inc. (3632), a Japanese social networking site, rose 4.1 percent in Tokyo after Citigroup Inc. said its shares are suffering from “excessive” regulatory concerns. Hyundai Wia Corp., an auto parts maker, slumped 5.1 percent in Seoul after its shares were offered at discount by South Korean automakers. BHP Billiton Ltd. (BHP), the No. 1 Australian oil producer, slipped 0.8 percent in Sydney after crude prices fell yesterday.

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March 16 (Bloomberg) -- Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp in Cleveland, talks about the outlook for U.S. stocks and allocation strategy. McCain speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

The MSCI Asia Pacific Index rose 0.02 point, or less than 0.1 percent, to 127.89 as of 11:07 a.m. in Tokyo, set to gain for the 12th week in 13. About nine stocks climbed for every seven that fell, with six of the gauge’s 10 industry groups advancing.

Japan’s Nikkei 225 Stock Average (NKY) rose 0.2 percent. Australia’s S&P/ASX 200 Index (AS51) dropped 0.1 percent and South Korea’s Kospi Index slid 0.2 percent.

Hong Kong’s Hang Seng Index advanced 0.3 percent, while the Shanghai Composite Index (SHCOMP), which tracks the bigger of China’s stock exchanges, gained 0.8 percent.

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; 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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Malaysia Said to Prepare for Potential Election in May or June

By Manirajan Ramasamy - Mar 16, 2012 9:21 AM GMT+0700

Malaysia’s government is discussing the possibility of an early election in May or June, ahead of the due date in early 2013, according to four officials who spoke on condition of anonymity because the talks are private.

Prime Minister Najib Razak is scheduled to speak on March 26 to as many as 4,000 information ministry staff, who help oversee elections, the government officials said. One date proposed for the contest is June 3, according to three of the officials.

The ruling National Front coalition is seeking to extend its 55 years in power, and an early vote would allow Najib to take advantage of rising public approval after the government announced cash handouts and vowed to overhaul security laws. Satisfaction with Najib’s leadership rose to 69 percent last month from 59 percent in August, according to a poll by the Merdeka Center for Opinion Research.

“All signs seem to be pointing toward an election at the end of May or early June,” Ong Kian Ming, a political analyst at UCSI University in Kuala Lumpur, said by phone. “It’s the best timing for Najib. If he does wait longer there may be other scandals that emerge and the goodwill that he’s enjoying from the budget handouts given out earlier this year may be lost.”

Election Sweeteners

While Najib has offered election sweeteners, he is also grappling with a potential scandal after a member of the ruling party said she’ll resign from the Cabinet amid a corruption probe against her husband. Shahrizat Abdul Jalil will step down next month as minister for women, family and community, according to the Star newspaper.

Najib had already sparked speculation of an early vote when he said in December that preparations had begun for the contest. His budget announced in October featured cash payments to low- income families.

Malaysia will also announce plans for a minimum wage this month, a government official said earlier this week. Najib’s cabinet has yet to complete the plan, according to the official.

Najib’s rising popularity has reduced the risk of a surprise election result such as one that occurred in 2008 and led to a stock market sell-off, according to a March 13 report from Bank of America Merrill Lynch. In 2008, the ruling National Front lost a third of its seats.

Stock Rise

Since Najib took office in April 3, 2009, the benchmark FTSE Bursa Malaysia KLCI Index (FBMKLCI) has risen 74 percent compared with a 47 percent gain for the MSCI Asia Pacific index.

“The Prime Minister is focused on delivering prosperity, security and democracy for all Malaysians and will call an election when the time is right for the country,” a Malaysian government spokesperson said by e-mail.

Malaysia’s opposition leader Anwar Ibrahim was acquitted of sodomy charges in January that he claimed were politically motivated. He pledged to “clamor for reform” in a bid to unseat Najib after the verdict.

Gross domestic product may expand 5 percent to 6 percent this year, Najib said in the annual budget speech on Oct. 7. The economy expanded by 5.1 percent last year, the government said Feb. 15.

Before 2008, the worst showing for the National Front was in 1969, when candidates representing urban ethnic Chinese and rural Islamic opposition groups won more than a third of seats in Parliament. Ethnic Chinese victory marches prompted a backlash from Malay groups that led to emergency rule.

Najib’s father, Abdul Razak, took over as prime minister in 1970 and responded by creating an affirmative-action policy that gave Malays educational, housing and job preferences.

To contact the reporter on this story: Manirajan Ramasamy in Kuala Lumpur at rmanirajan@bloomberg.net

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

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Yen Poised for Weekly Loss Against Most Peers on U.S. Data, BOJ

By Monami Yui and Kristine Aquino - Mar 16, 2012 9:29 AM GMT+0700

The yen headed for a weekly drop against most peers as signs of growth in the U.S. economy and prospects for further stimulus by Japan’s central bank prompted investors to seek higher-yielding assets.

The greenback traded 0.9 percent from an 11-month high versus the yen before U.S. data today that may show industrial production increased and consumer sentiment improved. The Australian and New Zealand dollars were set for a weekly gain against the yen after stocks rallied globally yesterday, boosting demand for riskier assets. Most Bank of Japan (8301) board members said easing steps taken last month were “appropriate,” policy meeting minutes released today showed.

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The Japanese currency has fallen 1.2 percent this week, set for a sixth-straight decline. Photographer: Tomohiro Ohsumi/Bloomberg

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March 15 (Bloomberg) -- Derek Halpenny, European head of currency research at Bank of Tokyo-Mitsubishi UFJ Ltd., talks about currency strategy for the yen, dollar and Swiss franc. He speaks with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)

“I’d have to say the momentum is still firmly for a weaker yen,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp. (WBC) “The BOJ’s easing stance definitely seems to have at least contributed to the upswing in dollar- yen.”

The yen was little changed at 83.45 per dollar as of 11:26 a.m. in Tokyo from the close yesterday, when it touched 84.18, the weakest level since April 13. The Japanese currency has fallen 1.2 percent this week, set for a sixth-straight decline. It rose 0.1 percent to 109.19 per euro, set for a 0.9 percent drop since March 9. The dollar traded at $1.3084 per euro from $1.3080 yesterday and $1.3123 on March 9.

Australia’s currency was unchanged at 87.96 yen, set for a weekly advance of 0.9 percent. New Zealand’s kiwi dollar bought 68.60 yen from 68.45 yen yesterday and 67.74 on March 9.

The Standard & Poor’s 500 Index (SPX) of shares rose 0.6 percent yesterday, while the MSCI World Index rallied 0.7 percent. The MSCI Asia Pacific Index remained higher after a three-day gain.

BOJ Easing

The BOJ unexpectedly expanded its asset purchase program by 10 trillion yen ($120 billion) and set an inflation goal of 1 percent at its meeting that concluded on Feb. 14. One board member said the central bank should aim for 2 percent inflation, minutes showed.

The BOJ on March 13 expanded loans designed to boost long- term growth. On the same day, the Federal Reserve raised its outlook for U.S. growth, predicting unemployment “will decline gradually.

The dollar has risen against 15 of its 16 major counterparts this week as signs of strength in the U.S. economy reduced the chance for a third round of bond purchases -- known as quantitative easing or QE3 -- by the Fed to spur growth.

Industrial output at U.S. factories, mines and utilities climbed 0.4 percent in February, according to the median of economists surveyed by Bloomberg News before today’s data release. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to a one-year high of 76 in March, a separate poll showed ahead of the figures due today.

Reduced QE Risks

‘‘We are, for the most part, quite positive on the U.S. dollar in the coming weeks,’’ said Westpac’s Callow. ‘‘People in general are saying QE3 risks have receded and I think that’s fair.”

The dollar has strengthened 1.1 percent in the past month, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-market currencies. The euro rose 0.6 percent, while the yen sank 5.1 percent, the worst performer.

The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, was little changed at 80.282 today. The gauge, which is 57.6 percent weighted to movements in the euro, touched 80.738 yesterday, the strongest since Jan. 18.

The greenback’s 14-day relative strength index against the yen was at 75 today, having held above 70 since March 9. Some traders see RSI levels above 70 as a sign an asset may reverse direction. The euro’s RSI versus the yen was at 69 yesterday.

“The dollar-yen looks to be nearing its peak,” said Minori Uchida, a senior analyst in Tokyo at Bank of Tokyo- Mitsubishi. “The dollar has been too strong and the yen has been too weak, leading to some selling in the pair. I expect the dollar-yen to stay around the 83 level for a while.”

To contact the reporter on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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Oil, Won Advance on U.S. Growth Optimism; China’s Stocks Climb

By Lynn Thomasson and Ben Sharples - Mar 16, 2012 9:30 AM GMT+0700

Crude oil rose for the first time in three days and the won strengthened before U.S. data that may show consumer confidence rose to a one-year high and factory output increased. Shares of Chinese companies gained on upbeat earnings reports.

Oil added 0.4 percent to $105.53 a barrel as of 11:20 a.m. in Tokyo. The won rose 0.3 percent versus the dollar. The MSCI Asia Pacific Index (MXAP) and futures on the Standard & Poor’s 500 Index were little changed. The Shanghai Composite Index advanced 0.8 percent. Australian bond risk fell to a seven-month low.

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South Korea 10,000 won notes are arranged for a photograph in Seoul, South Korea. Photographer: SeongJoon Cho/Bloomberg

The S&P 500 climbed above 1,400 for the first time since 2008 yesterday after jobless claims matched the lowest level in four years and manufacturing in the New York region expanded at the fastest pace since June 2010. Most Bank of Japan board members said easing steps taken last month were “appropriate,” according to minutes of their last policy meeting.

“The U.S. appears to have established a pretty good base for growth,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The economic news is good. We’re headed in the right direction and that’s certainly a positive for oil.”

The MSCI Asia Pacific Index has gained 0.8 percent this week, the 12th advance in 13 weeks. The gauge’s 12 percent rally this year has pushed valuations to 15.1 times estimated profit, the highest level since May 2010, Bloomberg data show.

The Nikkei 225 Stock Average fell 0.3 percent today, Australia’s S&P/ASX 200 Index lost 0.1 percent and South Korea’s Kospi Index declined 0.2 percent. The Hang Seng Index rose 0.1 percent.

Zoomlion, BoCom

Zoomlion Heavy Industry Science & Technology Co., China’s biggest crane-maker, rallied 4.9 percent in Hong Kong after reporting profit that jumped 73 percent in 2011. Bank of Communications Co. climbed 2.3 percent in Hong Kong after the lender said yesterday it plans to raise 56.6 billion yuan ($8.9 billion) in the world’s biggest share sale since May.

“We spend a lot of time monitoring U.S. data and the way it’s developing positively over the past few months is very encouraging,” said Angus Gluskie, who manages more than $350 million at White Funds Management in Sydney. “We are moving into the start of a more favorable upward spiral.”

The dollar has risen against 14 of its 16 major counterparts this week as signs of strength in the U.S. economy reduced the likelihood of a third round of bond purchases -- known as quantitative easing or QE3 -- by the Federal Reserve to spur growth. The yield on 30-year Treasuries climbed 24 basis points since March 9, set for the biggest weekly gain since August 2009. The rate was little changed today at 3.42 percent.

U.S. industrial output climbed 0.4 percent in February, according to the median forecast of economists surveyed by Bloomberg before data today. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment may have reached 76 in March, a seventh monthly increase, projections show.

To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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Warmth Expected Across U.S. for Next Three Months, U.S. Says

By Brian K. Sullivan - Mar 16, 2012 1:57 AM GMT+0700

A streak of above-normal temperatures that led to the fourth-warmest U.S. winter on record is expected to continue for the next three months, the National Oceanic and Atmospheric Administration said.

NOAA said the southern states of Louisiana, Alabama and Mississippi will have the highest chance of warm weather from March through May. The forecast was part of a report that said Texas may get drought relief and that the risk of spring river flooding will be the lowest in four years.

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Students near Harvard Square in Cambridge on March 11, 2012. Photographer: Dina Rudick/The Boston Globe via Getty Images

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The Sexy Black Guys Dancing performers on March 13, 2012 in New York City. Photographer: Mario Tama/Getty Images

Temperatures around the U.S. have been as high as 35 degrees Fahrenheit (19.4 Celsius) above normal in the past week, with 400 record highs set yesterday, said Laura Furgione, deputy director of the National Weather Service.

“We’re already feeling May-like warmth in parts of the country this week,” Furgione said in a conference call by U.S. weather agencies with reporters.

Warmer temperatures across the U.S. in the last three months has “decimated the market” for natural gas, said Stephen Schork, president of Schork Group in Villanova, Pennsylvania, and reduced the need for all types of energy for heating. The trend is expected to continue through May in the eastern U.S. as well as the Southwest.

The natural gas market looks for cold air in Illinois during the winter and hot weather in Texas during the summer when gauging weather impact, said Teri Viswanath, director of commodity markets strategy at BNP Paribas in New York.

Watching Natural Gas

Those two areas make good barometers because natural gas is their primary fuel for heating and cooling, she said. In the mid-Atlantic region and Northeast, a wider variety of fuels is used to heat homes.

Natural gas for April delivery fell 0.5 cent, or 0.2 percent, to settle at $2.279 per million British thermal units on the New York Mercantile Exchange. The futures, which are down 24 percent this year, fell to $2.204 on March 13, the lowest intraday price since Feb. 15, 2002.

“We obviously have a glut in the supply,” said Schork. “Without any significant cooling demand or air-conditioning demand, the glut will persist through this summer and will continue to weigh on price.”

A snowstorm in the Northeast at the end of October bolstered predictions by some forecasters that the U.S. would be in for a frigid winter. The cold weather never materialized, and with increasing production and weak industrial demand, gas inventories soared.

Warm Winter

This winter in the contiguous U.S. was the warmest since the record winter of 2000, the climate center said. Meteorologists designate winter as being from Dec. 1 to Feb. 29. The calendar start to spring is based on the equinox.

Winter wheat has begun to break out of dormancy across the Midwest and Plains, and corn planting is ahead of schedule in the South, said MDA EarthSat Weather in Gaithersburg, Maryland.

Less snow across the contiguous U.S. and drier soil mean most of the U.S. faces a normal or below-normal risk of spring flooding, Furgione said.

“This is the first time in four years without a high risk of major flooding,” Furgione said.

The Ohio River Valley and Louisiana have an elevated risk of high water, Furgione said. They aren’t expected to face anything close to the record flooding that swept down the Ohio and Mississippi rivers last year.

The report also said parts of northeastern Texas, Oklahoma and Kansas may get some relief from a severe drought. However, a large part of the southern U.S. from California to Florida is still struggling with drought and that is expected to continue, said David Brown, director of NOAA’s Southern Regional Climate Services.

“The historic magnitude means recovery from the drought will be a very slow process,” Brown said on the conference call.

Brown said the drought caused $6.5 billion in agricultural losses in Texas and Oklahoma last year and led to wildfires that burned 4 million acres in Texas alone.

To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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Trump Goes Bottom-Fishing for Golf Courses

By Christine Harvey - Mar 16, 2012 3:16 AM GMT+0700

Mirek Towski/FilmMagic for Laura Davidson Public Relations/Getty Images

Trump International Golf Course, Raffles Resort.

Investors from Donald Trump to luxury homebuilder Toll Brothers Inc. (TOL) are wagering there’s money to be made buying golf courses after a building boom fueled by Tiger Woods’s popularity led to a glut.

Standalone 18-hole golf properties in the U.S. sold for a median price of $3 million through the third quarter of 2011, which is about the threshold for a luxury apartment in Manhattan. That’s down from $4.5 million in 2006, according to data from real-estate broker Marcus & Millichap.

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Donald Trump, chairman and president of The Trump Organization. Photographer: Mannie Garcia/Bloomberg

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Tiger Woods hits his approach shot on the sixth hole during the final round of the World Golf Championships-Cadillac Championship on the TPC Blue Monster at Doral Golf Resort And Spa on March 11, 2012 in Miami. Photographer: Scott Halleran/Getty Images

“Lack of financing is really causing a discount to value and investors are taking advantage,” Steven Ekovich, Florida- based director of Marcus & Millichap National Golf & Resort Properties Group, said in a telephone interview. “Golf courses may never be as cheap as they are today.”

Prices slumped after lenders including General Electric Co. (GE) stopped financing courses and investors in commercial mortgage backed securities retreated amid losses on deals made at the height of the property bubble. The number of courses in the U.S. has declined every year since 2006, according to the National Golf Foundation. That follows two decades of expansion, including a surge starting in the late-1990s fueled by excitement about the emergence and dominance of Woods over the sport.

“They built too many courses during the Tiger Boom and now they’re closing and disappearing,” said Trump, who announced last month he’s purchasing the Doral Golf Resort & Spa in Miami for $150 million out of bankruptcy. The resort features five courses on 800 acres, including the Blue Monster, and about 700 hotel rooms. “At some point enough will disappear that golf will be a really good business.”

Tiger Wins Masters

There are about 16,000 golf courses in the U.S. and approximately 1,100 of those opened since 2000, according to the Jupiter, Florida-based National Golf Foundation.

The sport’s popularity soared after Woods won the 1997 Masters Tournament at Augusta National Golf Club in Augusta, Georgia. In 2000, when an unprecedented 400 courses were opened, Woods captured the U.S. Open in Pebble Beach, California, by a record 15 strokes. When Woods, 36, is in contention to win a tournament, television ratings typically surge by as much as 50 percent, according to Nielsen Co. figures.

The golfer hasn’t won a U.S. PGA Tour event since September 2009 as his career has been derailed by extramarital affairs and injuries. He withdrew from the Cadillac Championship at the Doral Golf Resort in Miami last weekend with a strained left knee and Achilles.

Building Boom

The number of U.S. courses overall has declined by about 350 since 2006 with closures outpacing new development, according to National Golf Foundation figures.

The building boom in the 1990s was fueled primarily by increasing demand for golf, rising American affluence and entrepreneurs that built thousands of high-end real estate and premium public courses, Greg Nathan, a senior vice president for the National Golf Foundation, said in an e-mailed statement. Woods’s popularity and sporting success “has only marginal validity,” as an explanation for the building surge, he said.

Peter Nanula, a former corporate lawyer and member of private-equity firm Warburg Pincus LLC, has up to $50 million to buy golf properties that he intends to revamp and sell within five to seven years.

Nanula Bids

Nanula, the former chief executive officer of Arnold Palmer Golf Management, started Concert Golf Partners in 2010. The investment firm made its first course purchase in July when it bought Heathrow Country Club’s golf course and racquet club for $4.5 million. The Lake Mary, Florida club, located in Northern Orlando, was previously sold in 1996 for $20 million, the Orlando Sentinel reported, citing Seminole County court records.

“Mortgages are gone, so buyers are paying in cash and the value of properties keeps getting lower and lower,” said Nanula, who’s currently bidding on four properties.

Declining home values also are pushing the price of golf courses lower as many are attached to housing developments where homeowners are delinquent on their loans or in foreclosure, Marcus & Millichap’s Ekovich said.

Homes values fell 4 percent in December from a year earlier and are down 34 percent from a July 2006 peak, according to the S&P/Case-Shiller index of property values in 20 cities.

Toll Brothers, the largest U.S. luxury homebuilder, is buying private golf clubs as an alternative until the residential real estate market improves, according to David Richey, president of Toll Golf, a division of the Horsham, Pennsylvania-based company.

Toll plans to buy three golf properties in cash at “distressed prices” between $3 million and $4 million by the end of this year, Richey said.

The homebuilder rose 49 cents, or 2 percent, to $24.88 as of 4:02 p.m. in New York. It’s gained about 22 percent this year and is at the highest level since October 2008.

Lending Dried Up

Lending to buy the properties has dried up after Textron Inc., GE Capital and Capmark Financial Group Inc., once “the go-to financiers” for golf mortgages, pulled out of the business, according to Don Rhodes, a former manager of Textron’s golf credit business, and now head of investment at Florida- based CNL Lifestyle Company LLC, a property group.

CMBS investors, who buy bonds backed by loans tied to shopping centers, hotels and apartment buildings, are also shunning debt linked to the sport, after suffering losses from deals made before 2007.

Trump Buying Doral

Trump is buying the Doral Golf Resort & Spa out of bankruptcy five years after Morgan Stanley (MS) acquired it as part of the $6.7 billion purchase of CNL Hotels & Resorts Inc.

A $1 billion loan tied to the property was parceled inside a commercial mortgage bond in 2006, according to data compiled by Bloomberg. A lender group including New York-based hedge fund Paulson & Co. and Winthrop Realty Trust (FUR) seized control of the CNL Hotel & Resort properties including the Doral from New York- based Morgan Stanley last year before putting it into Chapter 11 bankruptcy.

Bundling loans on golf courses into CMBS isn’t “likely” to be repeated because too many investors realized “huge losses” and “don’t want to make that bet again,” according to Chuck Elfsten, president and chief executive officer of commercial real estate lender Ocean Pacific Capital.

“Ninety percent of golf CMBS investors will not touch golf courses with a 10 foot pole, maybe even with a 20 foot pole,” Elfsten of Irvine, California-based Ocean Pacific Capital, said in a telephone interview.

Seller Financing

About 80 percent of golf course deals recorded last year were paid for in cash or with private equity, according to Ekovich of Marcus & Millichap. Course purchasing re-emerged in the other 20 percent in special circumstances such as seller financing and localized lending, Ekovich said.

Bobby Silva, vice president of business development at Texas-based Escalante Golf, has acquired eight 18-hole golf courses since 2008 and said he purchased one course through seller financing. If sellers give that option, they usually carry up to 75 percent of loan value with an interest rate between five and seven percent, according to Silva.

“It’s not what you could get from a local institution but it’s still pretty competitive,” Silva said in a telephone interview.

Few lenders take this route because they don’t want to finance their own foreclosed assets, Marcus & Millichap Golf & Resort Properties wrote in a semi-annual report.

‘Taken a Hit’

Wells Fargo & Co. (WFC) has taken back “a dozen or so golf courses since 2008,” according to Ken Kasten, asset manager within a bank unit that oversees some real estate. Some of them have been sold while the others are managed and operated by Wells Fargo, Kasten said. Whatever the case, the San Francisco- based lender doesn’t offer any type of seller financing for golf-course assets, according to Kasten.

“We’ve taken a hit on those properties once so we’re not going to make that risk again,” Kasten said.

Last year, median gross revenue per course increased by 1.4 percent, according to PGA PerformanceTrak, a golf data collection service, in cooperation with National Golf Course Owners Association.

Golf course investment is also expected to increase this year, though it’s predicted to be a “cash heavy,” market until financing returns on a national platform, according to Marcus & Millichap.

Until then Trump, Nanula and other investors are seeking out properties.

“I’m only able to do it because I can write a check,” said Trump, the real-estate investor and reality TV star who last year said he may run for President of the U.S.

“Banks aren’t so generous these days so if you can’t pay with cash you might as well forget about it.”

To contact the reporter on this story: Christine Harvey in New York at Charvey32@bloomberg.net

To contact the editor responsible for this story: Rob Urban at robprag@bloomberg.net

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S&P 500 Tops 1,400 on Better-Than-Estimated Economic Data

By Rita Nazareth - Mar 16, 2012 4:30 AM GMT+0700

U.S. stocks advanced, sending the Standard & Poor’s 500 Index above 1,400 for the first time in almost four years, as data showed manufacturing in the New York region unexpectedly increased and jobless claims declined.

Financial (S5FINL), industrial and commodity shares rose the most among 10 groups in the S&P 500. Bank of America Corp., General Electric Co. and Dow Chemical Co. added at least 1.6 percent. International Business Machines Corp. rallied for a seventh day to an all-time high. Apple Inc. (AAPL) reversed earlier gains after topping $600 for the first time. The Dow Jones Transportation Average, a proxy for economic growth, increased 3.3 percent.

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March 15 (Bloomberg) -- Bloomberg's Pimm Fox and Deborah Kostroun report on the performance of the U.S. equity market today. U.S. stocks advanced, sending the Standard & Poor’s 500 Index above 1,400 for the first time in almost four years, as data showed manufacturing in the New York region unexpectedly increased and jobless claims declined. (Source: Bloomberg)

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March 15 (Bloomberg) -- William Cohan, author of "Money and Power: How Goldman Sachs Came to Rule the World" and a Bloomberg View columnist, and Bloomberg's Christine Harper talk about Goldman Sachs Group Inc.'s corporate culture and departing executive Greg Smith's op-ed piece attacking the firm. They speak with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "InsideTrack." (Cohan is a Bloomberg View columnist. The opinions expressed are his own. Source: Bloomberg)

The S&P 500 advanced 0.6 percent to 1,402.60 at 4 p.m. New York time, exceeding the median 2012 projection of strategists surveyed by Bloomberg of 1,400. The Dow Jones Industrial Average increased 58.66 points, or 0.4 percent, to 13,252.76, gaining for a seventh straight day, the longest winning streak in 13 months. About 7.1 billion shares changed hands on U.S. exchanges, or 7.5 percent above the three-month average.

“It’s been a smooth ride,” said Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc. His firm oversees $3.51 trillion as the world’s largest asset manager. “The economy is doing better than people thought. The buying is justified.”

The S&P 500 closed at its highest level since June 5, 2008. (SPX) On that date, the index climbed 2 percent to 1,404.05, led by a 7.8 percent rally in Lehman Brothers Holdings Inc. The securities firm had lost a third of its value in the previous month and filed for bankruptcy in September 2008. The S&P 500 went on to plunge 52 percent before bottoming in March 2009.

Best Since 1998

The benchmark gauge is on pace for the best first quarter since 1998, after rallying 12 percent, amid better-than- estimated economic and corporate reports. It trades at 14.5 times reported earnings, the highest valuation level since July while still below the average since 1954 of 16.4 times earnings.

Equities rose today as manufacturing in the New York region expanded in March at the fastest pace since June 2010. Claims for jobless benefits fell last week, matching the lowest level in four years, more evidence the labor market is improving. Separate data showed that the Federal Reserve Bank of Philadelphia’s general economic index increased to 12.5 in March from 10.2 last month, beating economists’ estimates.

“The U.S. economic numbers are quite encouraging,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in a telephone interview. “People who haven’t gotten into the market might be drawn in because the economy is improving and there are some relative good values out there.”

GE, Dow Chemical

More than two stocks gained for each falling on U.S. exchanges today. The Morgan Stanley (MS) Cyclical Index of companies most-dependent on economic growth advanced 1.6 percent. GE added 1.9 percent to $20.16. Dow Chemical rose 1.6 percent to $35.

Bank of America rallied the most in the Dow, surging 4.5 percent to $9.24. The KBW Bank Index (BKX) jumped 2.7 percent as all of its 24 stocks advanced. The gauge has climbed 8.8 percent in three days following dividend increases this week by banks including JPMorgan Chase & Co. (JPM) Shares of the New York-based bank added 2.6 percent to $44.70.

S&P 500 companies have never paid more dividends, according to Howard Silverblatt, S&P’s senior index analyst. Announced payouts imply an annual dividend rate of $29.02 per index share, he said. The prior record was $28.96 in June 2008 before the figure slid 26 percent to $21.44 in August 2009. It has since risen 35 percent. S&P 500 companies are paying out 30 percent of profits, less than the average of 52 percent, S&P data show.

‘Back in Fashion’

“Companies have the money, they have the ability, and dividends are back in fashion,” he said in a telephone interview today. “We would expect to see more banks.”

Technology shares, which comprise more than 20 percent of the S&P 500, rose 0.3 percent. IBM (IBM) advanced to a record, adding 0.6 percent to $206. Apple Inc. fell 0.7 percent to $585.56, snapping a six-day rally. The company will start selling a new iPad tablet tomorrow and cut the price of the previous version, helping widen its lead over competitors.

Advanced Micro Devices Inc. (AMD) gained 6.3 percent to $8.25. The second-largest maker of processors for personal computers was moved to buy from hold at Jefferies, which increased the 12- month price estimate to $10.50 from $7.

Cisco Systems Inc. (CSCO) dropped 1.4 percent, the most in the Dow, to $19.91. The maker of equipment for computer networks agreed to buy NDS Group Ltd. in a deal valued at about $5 billion to add software used in next-generation video services.

Transportation Stocks

A measure of transportation shares in the S&P 500 had the biggest gain among 24 industries, adding 3.2 percent. The Bloomberg U.S. Airlines Index jumped 3.8 percent. FedEx Corp. (FDX) increased 2.6 percent to $94.61.

CSX Corp. (CSX) rose 8.5 percent, the most in the S&P 500, to $21.92. The biggest eastern-U.S. railroad expects record first- quarter earnings even with a drop of as much as 30 percent in domestic utility coal shipments.

Scholastic Corp. (SCHL) surged 13 percent to $36.36, the highest level since February 2008. The children’s book publisher boosted its full-year forecast, saying it now expects to earn at least $2.60 a share from continuing operations. The company had projected $2.10 at most.

Nucor Corp. (NUE) fell 1.1 percent to $43.45. The largest U.S. steelmaker by market value forecast first-quarter profit that missed analysts’ estimates after an increase in imports and domestic production.

EBay Inc. (EBAY) slumped 2.1 percent to $36.83. The largest Internet marketplace was downgraded to neutral from outperform at Credit Suisse Group AG.

Guess? Inc. (GES) tumbled 10 percent, the most in the Russell 1000 Index, to $32.97. The clothing retailer forecast fiscal 2013 earnings of no more than $2.65 a share, below the average analyst estimate of $3.16 a share, according to a Bloomberg survey.

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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