Monti Expects Agreement on Firewall This Month as He Sees Crisis Abating

By David Tweed, Andrew Davis and John Fraher - Mar 1, 2012 6:01 AM GMT+0700

Italian Prime Minister Mario Monti, signaling the worst may be over for the euro region’s most distressed bonds, said he expects leaders to strike a deal by the end of the month on expanding a debt-crisis firewall.

While German Chancellor Angela Merkel has expressed reluctance to discuss increasing the size of Europe’s bailout kitty at a European Union summit in Brussels beginning today, Monti said he’s “confident” a deal will come.

Mario Monti in Milan. Photographer: Camera Press/Gino Begotti/Redux

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Feb. 29 (Bloomberg) -- Italian Prime Minister Mario Monti says it's unlikely that Italian bond spreads will widen. Monti, speaking with Bloomberg Television's David Tweed in Rome, also discusses steps to prevent debt contagion. (Excerpts. Source: Bloomberg)

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Feb. 29 (Bloomberg) -- Italian Prime Minister Mario Monti talks about the European sovereign-debt crisis, Italian bond spreads and the Greek bailout. He speaks with Bloomberg Television's David Tweed in Rome. (Source: Bloomberg)

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Italian Prime Minister Mario Monti. Photographer: Mauro Scrobogna/LaPresse/ZUMAPRESS.com

“Size matters,” said Monti in an interview yesterday at the prime minister’s 16th-century residence in central Rome. “If the approach to firewalls is constructive enough in Europe, I believe we will all be in a better position to face any further contagion effect or any resurgence of the crisis.”

Monti is heading to a meeting of euro-area finance chiefs before the leaders’ summit as 1 trillion euros ($1.3 trillion) of emergency cash from the European Central Bank helps push the yield on Italy’s 10-year bonds -- and their risk premium to German securities -- to the lowest in six months.

“I don’t think it is likely” that spreads will widen again, Monti, 68, said in the interview, sitting in an ante-room of the Chigi Palace adorned by two 17th-century globes, a chandelier and gold colored wallpaper. “The unpredictability of spreads is not negligible. But we see now in the case of Italy a steady, although gradual decline in the last several weeks. I don’t see honestly any reasons why this course should change.”

Germany’s Stance

Asked about Germany’s issues with increasing the firewall, Monti said: “They didn’t say they don’t want to discuss this in March; they prefer not to discuss this on the 1st of March. March has, luckily enough, 31 days.”

Luxembourg Prime Minister Jean-Claude Juncker, who is chairing today’s euro finance ministers gathering, urged governments to expand the crisis firewall as soon as possible or risk losing momentum in the markets.

“It would not be the first time we would be a little bit too late,” he told reporters after an appearance at a European Parliament committee meeting yesterday.

Merkel’s government believes it’s the wrong time for a review of the ceiling of the 500 billion-euro European Stability Mechanism, the permanent bailout fund coming online this year, a German official told reporters in Berlin yesterday, speaking on the condition of anonymity. The official said narrowing bond spreads are reducing the urgency for a decision.

ECB Cash

Europe’s debt crisis has eased since the ECB started pumping unlimited amounts of three-year cash into banks in December. In the second operation, completed yesterday, 800 financial institutions flocked to the ECB to receive 529.5 billion euros in funds. Italian banks borrowed a net 139 billion euros, according to a person familiar with the matter.

The extra yield that investors demand to hold Italian 10- year bonds over German counterparts has narrowed to 337 basis points since hitting a euro-era record of 576 basis points on Nov. 9. The so-called spread on Spanish bonds has also plunged, declining to 318 basis points from a closing high of 469 basis points in November.

Monti, who completed his first 100 days in office last week, also warned against complacency surrounding a potential Greek default after a series of recent summits as both Italian finance minister and prime minister.

“There have been many moments when I thought this would be a possibility,” Monti said.

Looming Default

The risk of a Greek default loomed this month as the country struggled to put together new austerity measures demanded by European leaders for a second bailout. German Finance Minister Wolfgang Schaeuble compounded the angst after saying on Feb. 14 that Europe is better prepared than it was two years ago for a Greek collapse.

“I don’t believe that anybody could be sure of this because it would be a rather unpredictable scenario and sequence of events,” Monti said. “Better not to do the experiment.”

Euro-area finance ministers will probably officially complete the second Greek rescue package tomorrow, an official told reporters on condition of anonymity.

If leaders “had not come to an agreement on the second package, this might have brought a brutal outcome for Greece,” said Monti. That would have led to “contagion effects flowing to Spain, Italy, in spite of the good progress being made by these countries.”

Economy Overhaul

Monti, who leads an unelected government of non- politicians, has drawn plaudits from investors since taking charge on Nov. 16 amid the country’s worst financial crisis in two decades.

The former European competition commissioner initially moved to shore up Italy’s finances by overhauling the pension system and adopting 20 billion euros of austerity measures to balance Italy’s budget next year. His government is moving to crack down on tax evasion and overhaul rigid labor laws to spur competitiveness and growth in an economy that expanded at an annual average of 0.4 percent in the decade through 2010.

Monti said his government is seeking to “kick start” a cultural change to convince Italians that paying taxes, creating a meritocracy, and promoting competition will sustain growth and help cut the euro-region’s second-biggest debt.

“We will not complete a generational change, that is, a change which normally requires a generation, in 12 or 15 months,” said Monti, whose official residence teems with coat- tailed attendants in bow ties. “But it’s important to kick- start it.”

The premier said that even though the overhaul of Italy will take years, he didn’t expect to be asked to seek a second term after the next elections, due in spring next year.

“If I do with my colleagues in government our job very well, I don’t think it is very likely that I will be asked,” he said.

To contact the reporters on this story: David Tweed in Tokyo at dtweed@bloomberg.net; Andrew Davis in Rome at abdavis@bloomberg.net; John Fraher in London at jfraher@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

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U.S. Was Net Oil-Product Exporter in 2011

By Barbara Powell - Mar 1, 2012 5:52 AM GMT+0700

Daniel Acker/Bloomberg

A crude oil well site outside South Heart, North Dakota, on Feb. 10, 2012.

The U.S. exported more gasoline, diesel and other fuels than it imported in 2011 for the first time since 1949, the Energy Department said today.

Shipments abroad of petroleum products exceeded imports by 439,000 barrels a day, the department said in the Petroleum Supply Monthly report. In 2010, daily net imports averaged 269,000 barrels. U.S. refiners exported record amounts of gasoline, heating oil and diesel to meet higher global fuel demand while U.S. fuel consumption sank.

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Feb. 29 (Bloomberg) -- Sergio Marchionne, chief executive officer of Chrysler Group LLC, Nansen Saleri, CEO of Quantum Reservoir Impact LLC, and Edward Morse, head of commodities research at Citigroup Global Markets Inc., offer their views on the rise in oil prices. This report also contains comments from Scott Clemons, chief investment strategist at Brown Brothers Harriman & Co.; Robert Hagstrom, a portfolio manager at Legg Mason Capital Management Inc., and Kevin Book, managing director at ClearView Energy Partners LLC. (Source: Bloomberg)

Oil demand in Latin America will climb 2.5 percent to 6.64 million barrels a day this year, while contracting 2.4 percent in Europe and 0.5 percent in North America, the Paris-based International Energy Agency said Feb. 10. Mexico’s use of U.S.- made gasoline was 44 percent higher last year than in 2010, Energy Department data show.

“There’s stronger global demand for clean fuels and stronger demand for fuel, outpacing production in places like South America,” said Sander Cohan, a global transportation fuels analyst and principal with Energy Security Analysis Inc. in Wakefield, Massachusetts.

Gasoline futures for March delivery on the New York Mercantile Exchange settled at $3.0423 a gallon today, up 11 percent in the past year. Heating oil was up 9 percent during that period to $3.188 a gallon.

Distillate Exports

Distillate shipments rose 30 percent from a year earlier to a record 854,000 barrels a day, and daily exports of finished gasoline and blending components jumped 57 percent to 526,000 barrels in 2011.

Refiners are expanding on the Gulf Coast and in the Midwest, even as unprofitable plants along the East Coast were shut. Operable capacity in the U.S. climbed 0.8 percent to 17.7 million barrels a day in December from a year earlier.

U.S. refineries in the Gulf Coast, where about half of U.S. capacity is located, operated at 88.8 percent last year, up from 88.6 percent in 2010.

“It helps keep refinery utilization rates up in this country,” Bill Day, a spokesman for Valero Energy Corp. (VLO) in San Antonio, said in a telephone interview. “Otherwise we would see what we’re seeing on the East Coast, where refineries are shutting.”

In the fourth quarter, Valero, the largest U.S. independent refiner with 14 North American plants, exported about 5 percent of its gasoline output and 17 percent of its heating oil and diesel production, Day said.

Export Forecast

The U.S. will ship abroad 350,000 barrels a day more petroleum products that it imports in 2012 and 320,000 barrels daily in 2013, according to the department’s Short-Term Energy Outlook report released on Feb. 7.

Gasoline demand in the U.S. sank 2.9 percent to 8.736 million barrels a day last year as pump prices averaged $3.521 a gallon, the highest in records dating back to 1919.

Total U.S. oil product demand fell 9.5 percent to 18.8 million barrels a day last year from 20.8 million in 2005, department data show.

“The reason we can export so much is demand in the U.S. is weak,” Cohan said. Since 2005, the U.S. has lost nearly 2 million barrels a day of total product consumption, he said.

Diesel Demand

Global demand for diesel is rising faster than for gasoline, prompting refiners to increase yields of distillate fuels. A barrel of crude refined in the U.S. yielded 31.2 percent distillate fuel in December, the most ever. Distillate exports reached 1.13 million barrels a day during the month as cold weather in Europe boosted demand. Shipments to the Netherlands doubled, the data show.

“This year was one of the most mild winters on record in the U.S. at a time when the winter weather in Europe was just atrocious,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida.

Total net crude and product imports fell 11 percent from a year earlier to 8.436 million barrels a day, the lowest level since 1995, department data showed. Domestic oil output rose 3.6 percent to 5.673 million barrels a day, an eight-year high.

To contact the reporter on this story: Barbara J Powell in Dallas at bpowell4@bloomberg.net

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

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Cantor Bankers Defect to China in Talent War

By Shai Oster and Debra Mao - Mar 1, 2012 5:00 AM GMT+0700

On May 26 last year, amid the gold lighting and $60 entrees at a restaurant in Hong Kong’s Central entertainment district, Jason Boyer confided to a friend that he was leaving Wall Street.

Instead of moving to a traditional rival, the head of Cantor Fitzgerald LP’s Hong Kong branch told colleague Didier Bensadoun he was joining a boutique bank backed by China. The venture’s government-owned partner in June marked the Communist Party’s 90th anniversary with employees singing “Revolutionists are Young Forever.”

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Victoria Harbour, Hong Kong Island. Photographer: Gregor Lengler/laif/Redux

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Former Cantor Fitzgerald LP employees Jason Boyer, from left, Uwe Parpart, Bradford Ainslie and Brett McGonegal, now of Reorient Group Ltd., stand in front of the High Court in Hong Kong. Photographer: Jerome Favre/Bloomberg

“People were surprised I’d leave Cantor,” Boyer, 42, said in an interview. “This move is evolving with the world, it’s going to the next level.”

After Boyer and three of his colleagues resigned from Cantor on the same day to join what is now called Reorient Financial Markets Ltd., Cantor sued them, accusing them of conspiring to hurt Cantor through a coordinated defection. Hong Kong’s High Court yesterday ruled they hadn’t and rejected Cantor’s claim for damages.

The dispute highlights how Chinese financial firms are becoming more aggressive in their pursuit of talent. They’re raising salaries and hiring headhunters to target veterans from established Wall Street institutions who can bridge Chinese state capitalism and international markets.

Bankers in return are lured to the world’s second-biggest economy as a source of deals, as state-owned assets are broken up and sold off and China’s industrial behemoths step up acquisitions abroad. Overseas direct investment rose 10-fold to $68 billion in 2011 from a decade earlier, according to A Capital, a Beijing-based private equity fund.

‘Story to Tell’

“Chinese banks are going out and they’ve got a story to tell,” said CK Wan, a Hong Kong-based senior partner of headhunter Korn/Ferry International who has hired investment bankers for Chinese banks. “They’ve got access to clients that others don’t and this is appealing to senior bankers.”

Bocom International Holdings Co., the overseas securities unit of China’s fifth largest lender, Bank of Communications Co., boosted pay to attract top talent in Hong Kong, Wang Dong, director of the firm’s executive office said in an e-mail. The 788,000 yuan ($125,129) that Bank of Communications chairman Hu Huaibang in Shanghai earned in 2010 is little more than the $100,000 Boyer says he earned each month at Cantor.

Citic Securities International Co., a subsidiary of Beijing-based Citic Securities Co., has increased international hiring by 5 percent annually over the past few years, according to Elaine Wong, its head of human resources. Recruitment was aided by job cuts at multinational competitors, she said.

Legal Battles

Western companies have hit back through legal action. In 2010 in Singapore, London-based oil company BP Plc sued members of its fuel oil trading team who moved to Shenzhen Brightoil Group, controlled by Chinese billionaire Raymond Sit Kwong Lam. The case was settled out of court in October last year, according to court documents.

The lure of China for the Cantor alumni who were sued -- none of whom reads or writes Chinese -- lies in a pipeline of deals promised by China Chengtong Holdings Group Ltd., a joint venture partner in Reorient Financial’s Hong Kong-based parent Reorient Group Ltd. (376) Chengtong is a conglomerate with more than 100 subsidiaries ranging from logistics to pulp and paper. It wants foreign expertise and capital to streamline its sprawling business, sell off assets and expand overseas.

Boutique Bank

“Our goal is to create a new boutique-style investment and merchant bank that can take the Chinese out through joining assets and acquisition, and bring foreign money in,” Brett McGonegal, who left Cantor along with Boyer and is now Reorient’s chief executive officer, said in an interview. He appeared in court wearing tailored suits matched with embroidered slippers.

Boyer, a wine collector, says he knew his exit would upset his boss, Cantor’s New York-based chairman and chief executive officer Howard Lutnick, 50. Lutnick has a history of legal battles with rivals, including other brokers and the widow of Cantor’s founder, B. Gerald “Bernie” Cantor, from whom he wrested control of the firm.

New York-based Cantor spokesman Robert Hubbell declined to comment on the case or say whether the company would appeal the ruling.

No Gold Watch

“In any other company in the world you’d get a handshake and a party if you left -- maybe even a gold watch for building up such a business,” said Boyer, who says he expanded the brokerage’s Hong Kong unit from four to 75 people in three years after relocating from New York in 2004. “I’d seen enough of Cantor to know I wasn’t going to get a handshake.”

Four days after his dinner with Bensadoun, Boyer quit along with two of the firm’s top traders -- Americans Bradford Ainslie, 34, and McGonegal, 38, from the cash equities desk -- and German-born Uwe Parpart, 70, Cantor’s former chief Asia economist and strategist. Boyer became Reorient’s vice chairman and executive managing director.

Six weeks later Cantor filed its lawsuit, claiming their departures cost the Wall Street firm 29 percent of its average monthly revenue in Hong Kong.

The 5-day trial in January at Hong Kong’s High Court focused in part on Cantor’s corporate culture under Lutnick.

Boyer’s counsel, Adrian Huggins, told the court that his client knew anyone who crossed Lutnick “will be pursued to the end of the world.”

‘Years to Come’

When Bensadoun took the witness stand, Huggins asked whether Lutnick had an aggressive outburst in which he said: “I hope Jason Boyer has saved all the money he made here because he’ll need it for his lawyers for years to come.”

Bensadoun answered: “He made a comment about Jason but I can’t recollect the exact words.”

In his written judgment, High Court Judge A.T. Reyes said Cantor had failed to show it lost more than a “nominal figure” in revenue because of the departures. He also said the defendants had not conspired against Cantor.

“There is not a shred of evidence suggesting that, whether individually or collectively, they had any intention to injure Cantor Hong Kong,” he said.

Over lunch in a private room at the members-only American Club two weeks before the court decision, Boyer said he’d helped Lutnick rebuild Cantor after 658 of its employees were killed in the Sept. 11, 2001, terror attack.

Rebuilding Cantor

“I respected him as a businessman,” said Boyer, who flew back to New York from the firm’s London office after 9/11. “I couldn’t argue with his work ethic or business acumen.”

Motivated by reports of China’s rising incomes, Boyer moved to Hong Kong to open Cantor’s outpost in the city, in an office he outfitted with a pool table. The firm traded blocks of stock for institutional buyers from the U.S. and Europe, and introduced them to Hong Kong-listed companies that had typically only dealt with local retail buyers.

His relationship with Lutnick began to sour in 2009, Boyer said in an interview. The CEO took a more hands-on approach to the business and Boyer was told that instead of a bonus he’d get a loan that might be forgiven, he said.

“I was caught off guard,” Boyer said. “It came out of the blue.”

Into the breach stepped Johnson Chun Shun Ko, a self-made businessman who specializes in buying and selling distressed assets, including the failed brokerage that became Reorient. His publicly disclosed holdings in three companies are worth $133 million, according to data compiled by Bloomberg.

Humble Origins

The two shared humble origins. Raised by a single mother who worked as a part-time teacher in Toronto, Boyer worked odd jobs as a boy and remembers the first pair of white and blue Nike sneakers he bought for $100 when he was 12.

At about the same age, Ko fled the famine of Chairman Mao Zedong’s Great Leap Forward. In 1961, he and his grandmother left Eastern China’s Fujian province, where he recalls a year in which the only food in his village was sweet potatoes. They made their way to the then-British colony of Hong Kong. Ko’s not sure whether his age is 61 or 63 because of conflicting information about his date of birth.

By 2010, Ko was mulling a boutique investment bank backed by the muscle and deal flow of a Chinese state-owned enterprise coupled with the market savvy and access to institutional money of foreign bankers.

“I realized there is room for a local bank, but it would take years to build,” said Ko, Reorient Group’s chairman, wearing a company-branded fleece vest under his suit jacket. “How do we start? We need a state-owned enterprise.”

A friend at the State-owned Assets Supervision and Administration Commission, or SASAC, which oversees China’s biggest government-controlled companies excluding banks, introduced Ko to Chengtong.

German Navy Officer

For overseas expertise, Ko turned to an old associate: Cantor’s Parpart, who says he’s a former German Navy officer and later worked promoting the Strategic Defense Initiative, also known as Star Wars, with the Reagan Administration.

Boyer tried to sell the deal to Lutnick until negotiations broke down in August 2010, according to the court judgment.

Ko kept pursuing the deal.

“He’s like a terrier,” Parpart said. “He’s very persistent.”

Wall Street bankers were sought by Chengtong so it can better understand capital markets, Chen Shengjie, vice president of its asset management company, said in an interview in Hong Kong. Raising money to cover workers’ pensions and minimizing job losses is as important as making a profit when restructuring China’s state enterprises, he said.

Social Stability

“Give us tens of thousands of workers from a bankrupt factory, and we have the tools to solve the issues of social stability,” said Chen, who also sits on the board of Reorient Group. “But when it comes to the assets, we need someone else because we don’t have that experience.”

The pace of restructuring will accelerate as SASAC wants to reduce the number of state-owned firms from about 130 to about 80, according to Chen.

There are no guarantees for Boyer and other bankers tying their futures to China. Reorient Group posted a pretax loss of HK$8.8 million ($1.13 million) for 2011, largely on costs related to building up staff after Ko pulled the company out of liquidation proceedings and re-listed it on the Hong Kong stock exchange.

China’s expansion overseas reminds some of Japan’s struggle to expand, said Paul Schulte, who left Tokyo-based Nomura Holdings Inc. in 2010 to join CCB International Securities Ltd., the overseas investment bank of China Construction Bank Corp. in Beijing.

‘Blow Up?’

“Major funds that wouldn’t take a meeting with me before now have accounts with CCB,” Schulte, a financial strategist, said. “But people still ask: are you going to blow up like the Japanese?”

Nomura is struggling with its 2008 acquisition of Lehman Brothers Holdings Inc. operations after two top bankers who crossed over departed earlier this year. Daiwa Securities Group Inc., also based in Tokyo, cut staff in Hong Kong last month.

Boyer says the risk is not about money, even though he has two ex-wives and three children to support.

“Being backed or endorsed by a state-owned enterprise can’t hurt,” he said. “But it’s really the opportunity to build something and grow it.”

To contact the reporters on this story: Shai Oster in Hong Kong at soster@bloomberg.net Debra Mao in Hong Kong at dmao5@bloomberg.net

To contact the editors responsible for this story: Neil Western at nwestern@bloomberg.net Douglas Wong at dwong19@bloomberg.net

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S&P 500 Snaps Four-Day Advance

By Rita Nazareth - Mar 1, 2012 5:05 AM GMT+0700

U.S. stocks fell, trimming the longest monthly rally in a year for the Standard & Poor’s 500 Index, as Federal Reserve Chairman Ben S. Bernanke gave no indication of further measures to stimulate the economy.

Commodity shares had the biggest decline in the S&P 500 among 10 groups as gold tumbled the most since December. Newmont Mining Corp. (NEM), the largest U.S. gold producer, slumped 4.2 percent. First Solar Inc. (FSLR), the world’s largest maker of thin- film solar panels, retreated 11 percent after reporting an unexpected loss. Apple Inc. (AAPL) topped $500 billion in market capitalization for the first time, rising 1.3 percent.

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Ben S. Bernanke, chairman of the U.S. Federal Reserve, listens during a House Financial Serves Committee hearing in Washington, D.C. on Feb. 29, 2012. Photographer: Andrew Harrer/Bloomber

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Feb. 29 (Bloomberg) -- Bloomberg's Pimm Fox and Deborah Kostroun report on the performance of the U.S. equity market today. U.S. stocks fell, trimming the longest monthly rally in a year for the Standard & Poor’s 500 Index, as Federal Reserve Chairman Ben S. Bernanke gave no indication of further measures to stimulate the economy. (Source: Bloomberg)

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Feb. 29 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke speaks about monetary policy and the U.S. economy. Bernanke, testifying before the House Financial Services Committee in Washington, affirmed that interest rates are likely to stay low at least through late 2014 without any indication that further monetary easing is under consideration. (Excerpts. Source: Bloomberg)

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Feb. 29 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke delivers his semi-annual report on monetary policy to the House Financial Services Committee in Washington. (This report contains opening statements. Source: Bloomberg)

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Feb. 29 (Bloomberg) -- The U.S. economy expanded more than forecast in the fourth quarter as companies rebuilt inventories in anticipation of growing demand. Gross domestic product climbed at a revised 3 percent annual rate, the most since the second quarter of 2010, Commerce Department figures showed today. Betty Liu reports on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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March 1 (Bloomberg) -- Keith Wirtz, chief investment officer for Fifth Third Asset Management in Cincinnati, talks about U.S. stocks and his investment strategy. Wirtz also discusses Federal Reserve monetary policy and his strategy for gold. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

The S&P 500 fell 0.5 percent to 1,365.68 at 4 p.m. New York time, retreating from an almost four-year high. It still rose 4.1 percent in February, capping a third straight month of gains. The Dow Jones Industrial Average (INDU) lost 53.05 points, or 0.4 percent, to 12,952.07. The Nasdaq Composite Index topped 3,000 (CCMP) for the first time since 2000 before falling 0.7 percent to 2,966.89. The Russell 2000 Index slid 1.6 percent to 810.94.

“We have a bit of investor nosebleed,” said Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland. “There are still things to worry about. With the absence of more stimulus, that would lead us to question: what’s there to move us out of some of that? In addition, we’ve had a big run-up in stocks. No trees grow to the sky.”

The S&P 500 has risen 8.6 percent this year on better-than- estimated economic data. Measures of technology and financial shares had the biggest gains among 10 groups in 2012, adding at least 13 percent. The Dow, which yesterday topped 13,000, capped its fifth straight month of gains.

‘Far From Normal’

Stocks fell as Bernanke also said in congressional testimony that the job market remains “far from normal” and rising oil prices may cause inflation to grow temporarily. Earlier today, stocks gained as data showed the U.S. economy expanded more than forecast and business activity accelerated.

“It doesn’t matter if you’re a bull or a bear, you have to acknowledge that the economy is growing,” Ethan Anderson, senior portfolio manager for Rehmann Financial in Grand Rapids, Michigan, said in a telephone interview. His firm manages $1.5 billion. “Yet the market is like a roller-coaster. People want to ride it, but you got to give them a chance to get off. Once that happens, it can continue to move higher.”

Commodity shares in the S&P 500 fell 1.7 percent as a group. Newmont Mining slid 4.2 percent to $59.43. Alcoa Inc. (AA) declined 1.9 percent to $10.17.

Biggest Decline

First Solar tumbled 11 percent, the biggest decline in the S&P 500, to $32.30. The company also reduced its 2012 revenue forecast to $3.5 billion to $3.8 billion, compared with a December forecast of $3.7 billion to $4 billion.

Staples Inc. (SPLS) declined 8.4 percent to $14.66. The world’s largest office products company gave a 2012 forecast that was “lower quality” than analysts expected, Jefferies Group Inc.’s Daniel Binder wrote in a report.

MetroPCS Communications Inc. (PCS) dropped 6.5 percent to $10.30. The Texas-based pay-as-you-go wireless carrier was cut to “neutral” from “buy” at UBS AG.

DreamWorks Animation SKG Inc. (DWA) lost 12 percent, the most since July 2005, to $17.26. The maker of the “Kung Fu Panda” films said fourth-quarter profit tumbled 72 percent as DVD sales declined.

Apple rose 1.3 percent to a record $542.44, gaining for a fifth day. Apple investors are anticipating a sales boost from the company’s latest iPad tablet computer, due on March 7.

Potential Dividend

They’re also banking on a new iPhone coming by the third quarter and the possibility of Apple offering a dividend, its first since 1995, said Howard Ward, a money manager at Gamco Investors Inc. in Rye, New York. Demand for Apple’s products has helped the company increase profit faster than its stock price, making the price-to-earnings ratio more favorable, he said.

“Impressively, its market cap has risen to the $500 billion level as its price-to-earnings multiple has actually contracted,” said Ward, who helps oversee $36 billion in assets. “At 12 times this year’s expectation of earnings, it stands in stark contrast to the experience of Cisco Systems, which sold at over 100 times earnings when it approached the $500 billion level in 2000.”

A measure of homebuilders in S&P indexes climbed 3.6 percent as a weekly survey by International Strategy & Investment Group showed an index of homebuilder activity rose to the highest level since April 2006.

Orders Climb

Toll Brothers Inc. (TOL) jumped 4.6 percent to $23.46. Chief Executive Officer Douglas Yearley Jr. told CNBC yesterday that orders for the spring season have surged 45 percent. PulteGroup Inc. added 6.3 percent to $8.82. Lennar Corp. (LEN) rose 3.9 percent to $23.38.

BlackRock Inc. (BLK)’s Laurence D. Fink said savers need to become more aggressive investors as returns on bank accounts and Treasuries shrink and people grow older. The traditional mix of putting 60 percent of assets in stocks and 40 percent in bonds is inadequate in a “new world” characterized by an aging population, a reduction in borrowing and risk-taking by individuals and governments, and a greater role of emerging economies.

“I’ve personally said I would be 100 percent in equities,” Fink, 59, said in prepared remarks today to the Council on Foreign Relations in New York. “Most investors need a more diversified portfolio, but virtually every investor has to find ways to achieve better returns than they’ll get in cash or government bonds for the foreseeable future.”

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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Gold Falls in ’Manic’ Plunge as Bernanke Damps Stimulus Bets

By Debarati Roy - Mar 1, 2012 5:27 AM GMT+0700

Gold futures fell as much as $100 to below $1,700 an ounce on signs that that the Federal Reserve will refrain from offering more monetary stimulus to bolster the U.S. economy.

In testimony before Congress today, Fed Chairman Ben S. Bernanke gave no signal that the central bank will take new steps to boost liquidity. The dollar rose as much as 0.8 percent against a basket of major currencies, eroding the appeal of the precious metal as an alternative investment. Yesterday, gold reached $1,792.70, a three-month high, even as coin sales by the U.S. mint slumped in February .

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Gold in Atlanta. Photographer: Chris Rank/Bloomberg

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Feb. 29 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke delivers his semi-annual report on monetary policy to the House Financial Services Committee in Washington. (This report contains opening statements. Source: Bloomberg)

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Feb. 29 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke testifies before the House Financial Services Committee in Washington about the central bank's monetary policy. (This is an excerpt from the hearing. Source: Bloomberg)

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Gold bars. Photographer: Michal Cizek/AFP/Getty Images

“People were expecting that the Fed would loosen policies, even if the perception is that the economy is doing well,” James Dailey, who manages $215 million at TEAM Financial Management LLC in Harrisburg, Pennsylvania, said in a telephone interview. “The investor sentiment changed as the Fed committed to nothing. This is the manic nature of the market.”

In electronic trading on the Comex in New York, gold futures for April delivery fell $90.30, or 5 percent, to $1,698.10 at 5:14 p.m., compared with yesterday’s settlement. Earlier, the price tumbled as much as $100, or 5.6 percent, to $1,688.40, the lowest for a most-active contract since Jan. 25.

The settlement at the close of floor trading was $1,711.30, down 4.3 percent, the most since Dec. 14. The price, down 1.7 percent this month, has gained 9.2 percent in 2012.

Bullish Bets

In the week ended Feb. 21, hedge funds and money managers boosted bullish bets on gold futures by 9.9 percent to 179,132 contracts, the highest since Sept. 13, the latest government data showed on Feb. 24.

Holdings in exchange-traded products backed by gold rose to a record 2,403.2 metric tons today, according to data compiled by Bloomberg. Assets increased 0.4 percent, the most since Jan. 27. The total reached an all-time high for the third time in four sessions.

“Bernanke’s comments seem to have eliminated hopes of U.S. quantitative easing coming anytime soon,” William O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview after the Comex settlement. “There were excessive net longs on hopes of more credit easing, so the market was vulnerable to these kind of statements, and it almost seemed as if Bernanke was trying to take the steam out of the commodity market.”

Sales of gold coins by the U.S. mint tumbled 83 percent in February to an estimated 21,000 ounces from January, data on the Mint’s website showed today.

Inflation ‘Subdued’

The Fed chairman said today that the inflation outlook is “subdued.” Gold had climbed this month as gasoline costs jumped, spurring demand for the metal as a hedge against increasing consumer prices.

Keeping monetary stimulus is warranted even as the unemployment rate falls and rising crude-oil prices may cause inflation to accelerate temporarily, Bernanke said.

The Fed said today in its Beige Book business survey that the U.S. economy expanded at a “modest to moderate pace” in January and early February, bolstered by manufacturing.

Total Comex volume was an estimated 342,701 contracts, the highest since Jan. 27.

To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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Wall Street Bonus Withdrawal Means Trading Aspen for Coupons

By Max Abelson - Mar 1, 2012 2:42 AM GMT+0700

Andrew Schiff was sitting in a traffic jam in California this month after giving a speech at an investment conference about gold. He turned off the satellite radio, got out of the car and screamed a profanity.

“I’m not Zen at all, and when I’m freaking out about the situation, where I’m stuck like a rat in a trap on a highway with no way to get out, it’s very hard,” Schiff, director of marketing for broker-dealer Euro Pacific Capital Inc., said in an interview.

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Photographer: Raul Belinchon/Gallerystock.com

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On the floor of the New York Stock Exchange. Photographer: Scott Eells/Bloomberg

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Andrew Schiff, director of communications and marketing at Euro Pacific Capital Inc. Source: Euro Pacific Capital Inc. via Bloomberg

Schiff, 46, is facing another kind of jam this year: Paid a lower bonus, he said the $350,000 he earns, enough to put him in the country’s top 1 percent by income, doesn’t cover his family’s private-school tuition, a Kent, Connecticut, summer rental and the upgrade they would like from their 1,200-square- foot Brooklyn duplex.

“I feel stuck,” Schiff said. “The New York that I wanted to have is still just beyond my reach.”

The smaller bonus checks that hit accounts across the financial-services industry this month are making it difficult to maintain the lifestyles that Wall Street workers expect, according to interviews with bankers and their accountants, therapists, advisers and headhunters.

“People who don’t have money don’t understand the stress,” said Alan Dlugash, a partner at accounting firm Marks Paneth & Shron LLP in New York who specializes in financial planning for the wealthy. “Could you imagine what it’s like to say I got three kids in private school, I have to think about pulling them out? How do you do that?”

Bonus Caps

Facing a slump in revenue from investment banking and trading, Wall Street firms have trimmed 2011 discretionary pay. At Goldman Sachs Group Inc. (GS) and Barclays Capital, the cuts were at least 25 percent. Morgan Stanley (MS) capped cash bonuses at $125,000, and Deutsche Bank AG (DBK) increased the percentage of deferred pay.

Wall Street’s cash bonus pool fell by 14 percent last year to $19.7 billion, the lowest since 2008, according to projections by New York state Comptroller Thomas DiNapoli.

“It’s a disaster,” said Ilana Weinstein, chief executive officer of New York-based search firm IDW Group LLC. “The entire construct of compensation has changed.”

Most people can only dream of Wall Street’s shrinking paychecks. Median household income in 2010 was $49,445, according to the U.S. Census Bureau, lower than the previous year and less than 1 percent of Goldman Sachs CEO Lloyd Blankfein’s $7 million restricted-stock bonus for 2011. The percentage of Americans living in poverty climbed to 15.1 percent, the highest in almost two decades.

House of Mirth

Comfortable New Yorkers assessing their discomforts is at least as old as Edith Wharton’s 1905 novel “The House of Mirth,” whose heroine Lily Bart said “the only way not to think about money is to have a great deal of it.”

Wall Street headhunter Daniel Arbeeny said his “income has gone down tremendously.” On a recent Sunday, he drove to Fairway Market in the Red Hook section of Brooklyn to buy discounted salmon for $5.99 a pound.

“They have a circular that they leave in front of the buildings in our neighborhood,” said Arbeeny, 49, who lives in nearby Cobble Hill, namesake for a line of pebbled-leather Kate Spade handbags. “We sit there, and I look through all of them to find out where it’s worth going.”

$17,000 on Dogs

Executive-search veterans who work with hedge funds and banks make about $500,000 in good years, said Arbeeny, managing principal at New York-based CMF Partners LLC, declining to discuss specifics about his own income. He said he no longer goes on annual ski trips to Whistler (WB), Tahoe or Aspen.

He reads other supermarket circulars to find good prices for his favorite cereal, Wheat Chex.

“Wow, did I waste a lot of money,” Arbeeny said.

Richard Scheiner, 58, a real-estate investor and hedge-fund manager, said most people on Wall Street don’t save.

“When their means are cut, they’re stuck,” said Scheiner, whose New York-based hedge fund, Lane Gate Partners LLC, was down about 15 percent last year. “Not so much an issue for me and my wife because we’ve always saved.”

Scheiner said he spends about $500 a month to park one of his two Audis in a garage and at least $7,500 a year each for memberships at the Trump National Golf Club in Westchester and a gun club in upstate New York. A labradoodle named Zelda and a rescued bichon frise, Duke, cost $17,000 a year, including food, health care, boarding and a daily dog-walker who charges $17 each per outing, he said.

‘Crushing Setback’

Still, he sold two motorcycles he didn’t use and called his Porsche 911 Carrera 4S Cabriolet “the Volkswagen of supercars.” He and his wife have given more than $100,000 to a nonprofit she founded that promotes employment for people with Asperger syndrome, he said.

Scheiner pays $30,000 a year to be part of a New York-based peer-learning group for investors called Tiger 21. Founder Michael Sonnenfeldt said members, most with a net worth of at least $10 million, have been forced to “re-examine lots of assumptions about how grand their life would be.”

While they aren’t asking for sympathy, “at their level, in a different way but in the same way, the rug got pulled out,” said Sonnenfeldt, 56. “For many people of wealth, they’ve had a crushing setback as well.”

He described a feeling of “malaise” and a “paralysis that does not allow one to believe that generally things are going to get better,” listing geopolitical hot spots such as Iran and low interest rates that have been “artificially manipulated” by the Federal Reserve.

Poly Prep

The malaise is shared by Schiff, the New York-based marketing director for Euro Pacific Capital, where his brother is CEO. His family rents the lower duplex of a brownstone in Cobble Hill, where his two children share a room. His 10-year- old daughter is a student at $32,000-a-year Poly Prep Country Day School in Brooklyn. His son, 7, will apply in a few years.

“I can’t imagine what I’m going to do,” Schiff said. “I’m crammed into 1,200 square feet. I don’t have a dishwasher. We do all our dishes by hand.”

He wants 1,800 square feet -- “a room for each kid, three bedrooms, maybe four,” he said. “Imagine four bedrooms. You have the luxury of a guest room, how crazy is that?”

Vegas, Ibiza

The family rents a three-bedroom summer house in Connecticut and will go there again this year for one month instead of four. Schiff said he brings home less than $200,000 after taxes, health-insurance and 401(k) contributions. The closing costs, renovation and down payment on one of the $1.5 million 17-foot-wide row houses nearby, what he called “the low rung on the brownstone ladder,” would consume “every dime” of the family’s savings, he said.

“I wouldn’t want to whine,” Schiff said. “All I want is the stuff that I always thought, growing up, that successful parents had.”

Hans Kullberg, 27, a trader at Wyckoff, New Jersey-based hedge fund Falcon Management Corp. who said he earns about $150,000 a year, is adjusting his sights, too.

After graduating from the Wharton School of the University of Pennsylvania in 2006, he spent a $10,000 signing bonus from Citigroup Inc. (C) on a six-week trip to South America. He worked on an emerging-markets team at the bank that traded and marketed synthetic collateralized debt obligations.

Wet T-Shirt

His tastes for travel got “a little bit more lavish,” he said. Kullberg, a triathlete, went to a bachelor party in Las Vegas in January after renting a four-bedroom ski cabin at Bear Mountain in California as a Christmas gift to his parents. He went to Ibiza for another bachelor party in August, spending $3,000 on a three-day trip, including a 15-minute ride from the airport that cost $100. In May he spent 10 days in India.

Earlier this month, a friend invited him on a trip to Mardi Gras in New Orleans. The friend was going to be a judge in a wet T-shirt contest, Kullberg said. He turned down the offer.

It wouldn’t have been “the most financially prudent thing to do,” he said. “I’m not totally sure about what I’m going to get paid this year, how I’m going to be doing.”

He thinks more about the long term, he said, and plans to buy a foreclosed two-bedroom house in Charlotte, North Carolina, for $50,000 next month.

M. Todd Henderson, a University of Chicago law professor who’s teaching a seminar on executive compensation, said the suffering is relative and real. He wrote two years ago that his family was “just getting by” on more than $250,000 a year, setting off what he called a firestorm of criticism.

“Yes, terminal diseases are worse than getting the flu,” he said. “But you suffer when you get the flu.”

‘Have to Cut’

Dlugash, the accountant, said he’s spending more time talking with Wall Street clients about their expenses.

“You don’t necessarily have to cut that -- but if you don’t cut that, then you’ve got to cut this,” he said. “They say, ‘But I can’t.’ And I say, ‘But you must.’”

One banker who owes Dlugash $20,000 gained the accountant’s sympathy despite his six-figure pay.

“If you’re making $50,000 and your salary gets down to $40,000 and you have to cut, it’s very severe to you,” Dlugash said. “But it’s no less severe to these other people with these big numbers.”

A Wall Street executive who made 10 times that amount and now has declining income along with a divorce, private school tuitions and elderly parents also suffers, he said.

“These people never dreamed they’d be making $500,000 a year,” he said, “and dreamed even less that they’d be broke.”

To contact the reporter on this story: Max Abelson in New York at mabelson@bloomberg.net.

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

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U.S. Consumer Sentiment Climbs Toward ’08 Levels

By Timothy R. Homan - Feb 29, 2012 4:28 AM GMT+0700

Consumer-confidence measures are climbing out of the depths reached during the last recession as employers step up hiring and stocks rally, signaling Americans may be poised to increase spending.

The Conference Board’s gauge in February increased to the highest level in a year, figures from the New York-based research group showed today. The Bloomberg Consumer Comfort Index rose to an almost four-year high in the week through Feb. 19, and the Thomson Reuters/University of Michigan measure of consumer sentiment increased to 75.3 in February, the sixth straight monthly gain and the longest advance since 1997.

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Employers have added 1 million workers to payrolls since July, according to Labor Department data. Photographer: Scott Eells/Bloomberg

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Feb. 28 (Bloomberg) -- Robert Shiller and Karl Case, co-creators of the S&P/Case-Shiller index of property values in 20 U.S. cities, talks about the housing market and home prices. The S&P/Case-Shiller index fell 4 percent in December, more than forecast, to the lowest level since the housing crisis began in mid-2006. Shiller and Case speak with Tom Keene on Bloomberg Radio's "Surveillance." (Source: Bloomberg)

Audio Download: Maki Pushes Back Against ECRI Recession Call

The last time the University of Michigan index stayed above 75 for more than two months was in the period through January 2008, a month after the end of the previous expansion. Consumers are likely to grow more optimistic as the two-year recovery boosts employment and incomes further, said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York.

“The major driver of the improvement in confidence has been the labor market,” Maki said. “We would expect consumer confidence to continue trending higher if the labor market continues to improve as we expect.”

Employers have added 1 million workers to payrolls since July, according to Labor Department data. During that same period, the unemployment rate dropped by 0.8 percentage point, the biggest decline since 1984. The rate was 8.3 percent in January, the lowest in almost three years.

Job Growth

The pace of job growth is picking up. Payrolls rose by 243,000 in January, the biggest gain since April.

The world’s largest economy grew at a 2.8 percent annual pace in the fourth quarter of 2011, the fastest since the second quarter of 2010. The index of U.S. leading indicators rose in January for a fourth month, signaling the economy will maintain its expansion.

Growth is helping to power stock-market gains. The Standard & Poor’s 500 Index is up 9.1 percent in 2012, the best start to a year since 1991. The S&P 500 rose 0.3 percent in New York today to 1,372.18. The Dow Jones Industrial Average (INDU) added 23.61 points, or 0.2 percent, to 13,005.12 for its first close above 13,000 since 2008.

Gains in stocks, in turn, are contributing to household wealth, helping to make up for some of the damage wrought by the 18-month recession.

Unemployment Claims Decline

A decline in claims for unemployment benefits is adding to evidence of a labor-market recovery.

Applications for jobless benefits held at 351,000, the lowest level since March 2008, for the week ended Feb. 18, according to Labor Department data. The four-week average, a less-volatile measure, declined to 359,000, also the lowest since March 2008.

The Bloomberg Consumer Comfort Index rose to minus 38.4 in the period to Feb. 19, the highest since April 2008, from minus 39.8 the previous week. It marked the second straight week above minus 40, which is the level associated with recessions and their aftermath.

The Conference Board’s gauge this month increased more than forecast to 70.8 from a revised 61.5 in January, today’s report showed. Economists predicted the index would climb to 63, according to the median estimate in a Bloomberg News survey.

A sustained rise in gasoline costs poses a threat to confidence. A gallon of regular unleaded gasoline climbed to $3.72 as of Feb. 27, the highest level since June, according to AAA, the nation’s largest automobile association.

Gasoline Prices

“Gasoline prices have been a pretty important contributor to consumer confidence over the last decade or so,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “When gasoline prices spike, consumer confidence goes down.”

Still, rising incomes may help spur a recovery in housing, which was at the principal driver of the last recession, he said.

“People are only going to buy a house if they feel confident they’re going to have a job and be able to make the mortgage payments,” Stanley said.

Homebuilders such as Miami-based Lennar Corp. (LEN) are optimistic.

“Consumers are beginning to realize that housing represents an undeniable value proposition, and accordingly demand is growing,” Stuart Miller, chief executive officer at Lennar, the third-largest U.S. homebuilder by revenue, said on a Jan. 11 conference call.

Home Sales

Sales of previously owned homes, which account for about 94 percent of the market, rose in January to the highest level since May 2010, the National Association of Realtors said on Feb. 22.

Purchases of cars and light trucks in the U.S. climbed to an annualized rate of 14.1 million last month, the highest since the so-called cash-for-clunkers program in August 2009, according to industry data.

Companies such as Houston-based Sysco Corp. (SYY), the biggest North American distributor of food to restaurants, are counting on further gains in consumer confidence and spending.

“To a large extent, our performance in the second half of the year will be heavily influenced by how much the recent uptick in consumer confidence translates into increased consumer spending on meals away from home,” Chief Executive Officer Bill DeLaney said on a Feb. 6 conference call with analysts.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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

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IBM Fired More Than 1,000 in North America This Week, Advocacy Group Says

By Beth Jinks - Feb 29, 2012 4:09 AM GMT+0700

International Business Machines Corp. (IBM), the world’s largest computer-services provider, fired more than 1,000 workers in North America this week, according to an employee advocacy group.

The job reductions are mostly in the U.S., with some in Canada, said Lee Conrad, national coordinator of Alliance@IBM, which has been trying to organize IBM employees. The group is continuing to update the number as it receives severance documents from workers notified with what IBM calls “resource actions,” Conrad said. Redundant employees may apply for other positions within IBM, the documents show.

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The International Business Machines Corp. in New York. Photographer: Jin Lee/Bloomberg

Doug Shelton, a spokesman for Armonk, New York-based IBM, declined to provide a number, citing company policy and the “competitive nature of our business.”

The cuts would represent about 0.2 percent of IBM’s global workforce, which totaled 433,362 at the end of 2011, according to the annual report filed today with the U.S. Securities and Exchange Commission. The company stopped providing a geographic breakdown of its employees in 2009. At the end of 2008, U.S. staff accounted for 115,000 of its 398,455 employees, according to its annual report that year.

“IBM is constantly rebalancing its workforce,” Shelton said today. “That means reducing in some areas and hiring in others -- based on shifts in technology and client demand. This allows IBM to remain competitive and relevant in an industry that is constantly changing.”

IBM rose less than 1 percent to $197.98 at the close in New York. The shares have gained 7.7 percent this year.

Alliance@IBM is affiliated with the Communications Workers of America and is seeking union recognition at IBM.

Information Week reported yesterday that more than 250 jobs had been cut at IBM.

To contact the reporter on this story: Beth Jinks in New York at bjinks1@bloomberg.net

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

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Dow Closes Above 13,000 for First Time Since ’08

By Rita Nazareth - Feb 29, 2012 5:14 AM GMT+0700

U.S. stocks rose, sending the Dow Jones Industrial Average (INDU) to its first close above 13,000 since 2008, as better-than-estimated consumer confidence data and a drop in oil bolstered optimism in the world’s largest economy.

Apple Inc. (AAPL) added 1.8 percent and its market capitalization approached $500 billion as it is said to unveil a new iPad next month. Micron Technology Inc. (MU) jumped 3.7 percent after buying Intel (INTC) Corp.’s stake in two wafer factories as the companies expand their venture. Intel advanced 1.3 percent. Priceline.com Inc. surged 7 percent to the highest level since 1999 (PCLN) as profit beat estimates. The Bloomberg U.S. Airlines Index rallied 1.7 percent as oil fell the most in more than five weeks.

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The Dow closed above 13,000 for the first time since May of 2008. Photographer: John Angelillo/UPI/Landov

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Feb. 28 (Bloomberg) -- Craig Johnson, a technical market strategist with Piper Jaffray Cos., talks about the performance of U.S. stocks and his technical analysis of the S&P 500 Index. He speaks with Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)

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Feb. 29 (Bloomberg) -- Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, talks about U.S. and emerging-market stocks. U.S. stocks climbed yesterday, sending the Dow Jones Industrial Average to its first close above 13,000 since 2008, as confidence jumped to a one-year high and oil retreated for a second day. Gayle also discusses Europe's sovereign debt crisis. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

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Feb. 28 (Bloomberg) -- Jason Pride, director of investment strategy at Glenmede, talks about the U.S. economy and investment strategy. He speaks on Bloomberg Television's "InBusiness With Margaret Brennan." (Source: Bloomberg)

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Feb. 28 (Bloomberg) -- Mary Ann Bartels, head of technical and market analysis at Bank of America Merrill Lynch, discusses the outlook oil prices and the U.S. stock market. Bartels speaks with Sara Eisen on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

The Standard & Poor’s 500 Index increased 0.3 percent to 1,372.18 at 4 p.m. New York time, gaining for a fourth day, the longest streak since Jan. 23. The Dow advanced 23.61 points, or 0.2 percent, to 13,005.12. The 30-stock gauge closed above 13,000 after three unsuccessful attempts over the past week.

“13,000 is just a number,” Malcolm Polley, who oversees about $1.1 billion as chief investment officer at Stewart Capital in Indiana, Pennsylvania, said in a telephone interview. “The U.S. economy is in decent shape. The market is not expensive.”

Today’s gain put the Dow on pace for a fifth straight month of gains, the longest rally since April, amid better-than- estimated economic data. Still, the index is 8.9 percent below its all-time high of 14,164.53 in October 2007. (SPX) The S&P 500 has rallied 4.6 percent in February, poised for a third monthly gain, the longest stretch in a year. The index trades at about 14.1 times reported earnings, compared with the average since 1954 of 16.4 times, according to data compiled by Bloomberg.

Economic Data

Stocks rose as the Conference Board’s index increased to the highest level in a year. The euro strengthened versus the dollar before the European Central Bank provides funds tomorrow to support banks. Earlier today, stocks dropped as orders for U.S. durable goods fell in January by the most in three years. Separate data showed that home prices in 20 U.S. cities declined more than forecast in December.

“I don’t have rose-colored glasses on, but I think the path of least resistance is up,” Richard Weeks, the Vienna, Virginia-based managing director and partner at HighTower’s VWG Wealth Management, said in a telephone interview. His firm oversees more than $20 billion. “The news is generally good. Short-term, all signs say that risks have been reduced.”

Seven out of 10 groups in the S&P 500 advanced. Technology shares, which comprise 20 percent of the index, added 0.9 percent as a group.

Apple Rallies

Apple, the world’s largest technology company, gained 1.8 percent to $535.41. The shares advanced for a fourth straight day to a record. The company will hold a product event on March 7 in San Francisco, where it’s said to be releasing the third generation of its best-selling iPad tablet computer.

“We have something you really have to see. And touch,” Apple said today in an invitation, which features a picture of an iPad screen. The new device will sport a high-definition display, run a faster processor and work with speedier wireless networks, people familiar with the product said last month.

The Philadelphia Semiconductor Index (SOX) climbed 1.6 percent as 23 of its 30 stocks increased.

Micron surged 3.7 percent to $8.88. The stock has gained 14 percent over three days. The company will supply Intel products based on a technology called Nand flash memory. The chipmakers will also extend their Nand flash development program, expanding it to include emerging technologies. Intel, the world’s largest chipmaker, added 1.3 percent to $27.24.

Priceline’s Results

Priceline gained 7 percent, the most in the S&P 500, to $632.76. The company has weathered the European debt crisis better than Expedia Inc. (EXPE) and Orbitz Worldwide Inc., and it’s expanding into emerging markets and new businesses.

Ten out of 14 stocks in the Bloomberg U.S. Airlines Index (BUSAIRL) advanced. Crude oil for April delivery fell $2.01 to settle at $106.55 a barrel on the New York Mercantile Exchange. It was the biggest decline since Jan. 20. US Airways Group Inc. increased 5.9 percent to $7.41. United Continental Holdings Inc. added 2.5 percent to $20.58. Energy (S5ENERS) shares in the S&P 500 lost 0.2 percent as a group.

Office Depot Inc. (ODP) increased 19 percent, the most since May 2009, to $3.59. The second-largest U.S. office-supply chain posted earnings excluding some items of 3 cents a share in the fourth quarter. Analysts, on average, expected the company to break even, according to a Bloomberg survey.

Domino’s Pizza Inc. (DPZ) soared 16 percent to $38.82. The pizza- delivery chain announced a debt refinancing that may result in a special dividend.

Apollo Tumbles

Apollo Group Inc. (APOL) fell 16 percent, the most in the S&P 500, to $43.04. The for-profit educator cut its operating profit forecast for 2012 to no more than $725 million, below the previous estimate of as much as $750 million.

Other education shares declined. ITT Educational Services Inc. (ESI) retreated 5.4 percent to $68.29. DeVry Inc. (DV) fell 3.8 percent to $35.41.

The Russell 2000 Index (RTY) of small companies slid 0.4 percent to 823.80. Sykes Enterprises Inc. dropped 17 percent to $14.28. The operator of call centers forecast full-year earnings of $1.20 a share at most, below the average analyst estimate of $1.46.

Warren Buffett’s pursuit of bigger acquisitions makes companies from Stanley Black & Decker Inc. (SWK) to Parker Hannifin (PH) Corp. the most attractive takeover targets, according to data compiled by Bloomberg.

‘On The Prowl’

Berkshire Hathaway Inc. (BRK/A)’s 81-year-old chairman and chief executive officer said in his annual letter to shareholders on Feb. 25 that he was “on the prowl” for large deals after spending more than $35 billion on companies including Lubrizol Corp. and Burlington Northern Santa Fe in the past two years.

With Berkshire generating $1 billion a month in free cash flow, the world’s most successful investor is eyeing takeovers as near-zero percent interest rates limit returns in fixed- income markets and the Omaha, Nebraska-based company’s cash hoard increased to $37.3 billion.

Stanley Black & Decker, the world’s biggest maker of hand tools, and Parker Hannifin, which controls more than half the market for fluid-powered valves, are among 21 U.S. companies that meet the acquisition criteria in Berkshire’s annual report, data compiled by Bloomberg show.

Stanley Black & Decker and Parker Hannifin “seem very plausible acquisition candidates for Buffett,” said Timothy Ghriskey, who oversees $2 billion as chief investment officer of Solaris Group in Bedford Hills, New York. “We would expect him to make a larger deal. He’s a man of his word.”

List of U.S. Companies:
Ranked in Highest 500 by Revenue
Market Capitalization from $5 Billion to $25 Billion
10-Year Return on Invested Capital > S&P 500 Median Value
Capital Expenditures / Net Fixed Assets > 10%
5-Year Net Income Growth in Highest 50%
5-Year P/E Ratio < S&P 500 Median Company Value *Excludes Banks,
Technology and Biotechnology Companies 

Advance Auto Parts Inc.
AutoZone Inc.
Cooper Industries Plc
Cummins Inc.
DaVita Inc.
Discover Financial Services
Dish Network Corp.
Eastman Chemical Co.
Family Dollar Stores Inc.
Flowserve Corp.
Forest Laboratories Inc.
Goodrich Corp.
Hormel Foods Corp.
Humana Inc.
KBR Inc.
Parker Hannifin Corp.
PPG Industries Inc.
Ross Stores Inc.
Sara Lee Corp.
Stanley Black & Decker Inc.
VF Corp.

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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JPMorgan Clients With Under $100K Unprofitable

By Laura Marcinek - Feb 29, 2012 5:58 AM GMT+0700

JPMorgan Chase & Co. (JPM), the largest U.S. bank by assets, said about 70 percent of customers with less than $100,000 in deposits and investments will be unprofitable following regulations that cap lenders’ fees.

“I’m trying to give you a proxy for what the banking industry has to look forward to if you don’t take into account business bank clients and getting more of the affluent wealth wallet,” Todd Maclin, chief executive officer of consumer and business banking at the New York-based company, said today at an investor presentation.

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JPMorgan Chase & Co. signage is displayed at a bank branch in New York. Photographer: Robert Caplin/Bloomberg

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Jamie Dimon, chief executive officer of JPMorgan Chase & Co., center, at the World Economic Forum (WEF) in Davos, Switzerland, on Jan. 26, 2012. Photographer: Scott Eells/Bloomberg

The biggest U.S. banks are grappling with lost revenue from regulations that cap debit interchange fees and overdraft charges, making customers with low deposits more expensive for lenders to manage. JPMorgan, run by CEO Jamie Dimon, sees its greatest opportunity with affluent customers that have more relationships with the company, Maclin said.

“Lost revenue has to be replaced with higher share of wallet and customer penetration,” Maclin said. “You have to get your costs and where you spend your time, to the fullest extent possible, more in line with where the opportunity is.”

JPMorgan said there is a “significant opportunity to deepen affluent relationships” and a “limited opportunity to deepen relationships” with customers who have less than $100,000 in deposits and investments, according to slides at the presentation.

‘Better Customers’

“We will see banks pulling out of certain markets, looking closely at where they have market share,” said Bert Ely, an independent bank consultant based in Alexandria, Virginia. “If you shrink the customer base too much, it will kill the bottom line. You have to avoid the downward spiral where you try to drive away customers and trim customers, and you lose your better customers because they aren’t happy with what you’ve done.”

The Federal Reserve has held interest rates at record lows, putting pressure on profit margins as banks make less money from deposits. The Fed has decided to keep the rates near zero through at least late 2014.

“When you are in this interest-rate environment, retail customers aren’t generating the interest income they used to,” Ely said. “The low interest rates would have a negative impact no matter what happens with regulations.”

Bank of America

CEO Brian T. Moynihan of Bank of America Corp., the second- biggest U.S. lender by assets, has said his strategy is to broaden relationships with the lender’s 8 million so-called preferred clients that are 1.5 times as profitable as the retail group. The Charlotte, North Carolina-based company gives these customers incentives such as removing monthly service fees on checking accounts for using a Bank of America credit card, mortgage or Merrill Lynch brokerage account.

Bank of America abandoned a plan to charge some debit-card users $5 a month for the service after JPMorgan and San Francisco-based Wells Fargo & Co. (WFC) decided against imposing similar fees. Citigroup Inc. (C) and U.S. Bancorp (USB) had already rejected the idea. Maclin said JPMorgan will implement “follow- on pricing” for fees in the future.

“When the world lets us charge something more akin to your gym membership or your card, we’ll be right there with them,” he said. “In this environment, we’re just not going to rock that boat, and we have a brand and a franchise where we can make it up other ways over time.”

Regions Financial

Regions Financial Corp. (RF), the 10th-largest U.S. bank by deposits, launched a fee-based service last year that provides customers with money transfers, bill pay services, check cashing and reloadable prepaid cards. Since the program started in July, half of the customers who have started the service were existing Regions clients and half were new, said John Owen, head of consumer services group at the Birmingham, Alabama-based lender.

“If I can start off by cashing their check or loading a prepaid card, and then move them into traditional banking, which means moving them into a savings account or checking account, that’s what I want to do,” Owen said today in a phone interview. “We’re trying to get more people into the banking system.”

Regions “would love to” take on clients shunned by larger banks, Owen said. “We’ll take all we can get in our 16-state footprint,” he said.

Maclin said it’s possible that fees for checking accounts could reach $20 one day, which he said the bank would “celebrate.”

‘Invaluable’ Branches

JPMorgan’s branches are “invaluable” to its so-called affluent customers, according to the presentation slides. The company said it may open 900 “potential” new branch buildings in 2012, especially in California, Florida and Atlanta.

“Branches are not that expensive relative to all the opportunity and the other expenses that we have in running this place, given our scale,” Maclin said. “We would acknowledge with everybody else out there that it is entirely possible that they could go away one day. If they do, we will make a lot more money than we’re making right now. Until they do, we’re going to make sure we’ve got them so no one else can take our location.”

To contact the reporter on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net

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

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