Greeks reject 'impossible' German plan for budget veto

The greeks only have themselves to blame. 

29 January 2012 Last updated at 08:15 ET
Greeks reject 'impossible' German plan for budget veto

Greece has rejected outright German proposals for the EU to hold power over its budget.

Culture Minister Pavlos Yeroulanos told the BBC it would be "impossible" for Greece to cede control of its tax and spending powers.

There are concerns the measures Greece has taken to cut its budget deficit have not gone far enough.

Meanwhile, Greece and its private creditors are close to a deal to cut dramatically the country's debt levels.

Charles Dallara and Jean Lemierre, representing the creditors, said on Saturday they were "close to the finalisation" of a deal that would see banks and investors write off about 50% of money they are owed.

They said a deal, which is necessary for Greece to receive much-needed further bailout funds, should be agreed this week.'Red line'

Greek officials reacted angrily to the leaked German proposal for an EU budget commissioner with veto powers over Greek taxes and spending.

"It's going to be impossible for the Greek government to accept such a deal - I don't think it would be supported by any of the heads of the parties that are involved in the coalition," said Mr Yeroulanos.

"We have been giving up quite a bit, but I think sovereignty is a red line that no-one would dare cross.

"I would rather resign as a minister than allow anybody to tell us the way we should be spending our money."

Earlier, Greek government spokesman Pantelis Kapsis told the BBC that Greece's budget was "the responsibility of the Greek government and there is no need for such measures".

He said a similar idea had been raised before and should be avoided.

"We have gone a long way in reducing our deficit and are on the right track," he added.

Under the German proposal, a budget commissioner would have veto powers over Greek budgetary measures if they were not in line with targets set by international lenders.

Greece would also legally commit itself to servicing its debt, before spending any money in any other way.Debt deal

Mr Kapsis also said the discussions between Greece and its private creditors had gone well and the two parties were "close to an agreement".

Athens is negotiating with the Institute of International Finance (IIF), which represents Greece's private creditors. The main sticking point in the discussions is the interest rate that Greece will pay on newly-issued bonds that will replace its existing debts.

The IIF said last week it wants no less than 4%, while Athens, backed by eurozone finance ministers, wants the rate to be well below 3.5%.

Agreeing a deal is a precondition of receiving further bailout funds from the European Commission, the European Central Bank and the International Monetary Fund (IMF).

Greece needs these funds to pay back more than 14.5bn ($19.2bn; £12.2bn) euros of debt which needs to repayed in March.

If a deal is not agreed, Greece could decide itself what, if anything, to repay its creditors.

This so-called disorderly default would undermine confidence in the eurozone economy and its banking system.

Some analysts believe it could result in Greece being forced to give up the euro.

European leaders are attending a summit on Monday as part of their continuing attempts to resolve the crisis.

They are looking to forge closer economic ties between member states by agreeing the details of a treaty imposing strict rules on government spending.

They are also trying to agree the details of a permanent eurozone bailout fund, the European Financial Stability Mechanism, to deal with sovereign debt crises in the future.

(BN) Citigroup Said to Cut Bonuses in Investment Bank By About 30%

Gerspach talks like he knows how business is done. its difficult to underperform when you are bean counting.

["Sometimes when you underperformed, it's just because you underperformed," Gerspach said]

["Our 2011 revenues in certain businesses in securities and banking were disappointing and unacceptable," Chief Financial Officer John Gerspach, 58, told analysts this week. "If we do not see meaningful revenue recovery over the course of 2012, we will further restructure securities and banking."]

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Citigroup Said to Cut Bonuses in Investment Bank By About 30%

Jan. 28 (Bloomberg) -- Citigroup Inc., the third-biggest U.S. lender by assets, cut 2011 bonuses in its investment banking division by about 30 percent on average amid slumping revenue, according to a person briefed on the matter.

Some businesses within the securities and banking unit had bonuses reduced by as much as 70 percent compared with the previous year, said the person, who asked to remain anonymous because the decisions aren't public. The unit, led by James "Jamie" Forese, includes bond and stock trading as well as debt and equity underwriting.

Chief Executive Officer Vikram Pandit, 55, is firing workers and shrinking costs in the unit as he grapples with declining revenue. The bank said this month that it will cut about 1,200 workers from the division to save $600 million this year and more reductions may follow. The unit's revenue slipped 21 percent since 2009, while compensation and other operating costs climbed 15 percent.

"Our 2011 revenues in certain businesses in securities and banking were disappointing and unacceptable," Chief Financial Officer John Gerspach, 58, told analysts this week. "If we do not see meaningful revenue recovery over the course of 2012, we will further restructure securities and banking."

Danielle Romero-Apsilos, a spokeswoman for New York-based Citigroup, said she couldn't comment on the firm's pay plans.

Wall Street firms are reining in compensation. New York- based Morgan Stanley, Pandit's former employer, is cutting pay for senior bankers and traders by 20 percent to 30 percent and is capping immediate cash bonuses at $125,000, people briefed on those plans have said.

Credit Suisse

Credit Suisse Group AG, based in Zurich, cut senior-banker pay by 30 percent and may give some bonuses in the form of bonds backed by derivatives, people briefed on the plan said.

Bank of America Corp. plans compensation cuts averaging 25 percent, with cash bonuses capped at $150,000 and base salaries frozen for some bankers at the Charlotte, North Carolina-based firm, people have said. Goldman Sachs Group Inc. reduced discretionary compensation "significantly more" than the New York-based firm's 26 percent drop in revenue, Chief Financial Officer David Viniar said Jan. 19.

Citigroup's fourth-quarter profit fell 11 percent from a year earlier to $1.17 billion. Total revenue fell 7 percent to $17.2 billion, the lowest since the fourth quarter of 2009.

Bank executives have singled out particular units for blame since posting results Jan. 17, including the London-based equities-trading business run by Derek Bandeen. Annual equities- trading revenue plunged by $1.3 billion to $2.4 billion in 2011, Gerspach said on a conference call with reporters that day.

Equity-Derivatives Unit

About half of the decline was tied to the equity- derivatives unit, Gerspach said. This trades in financial instruments whose values are derived from underlying equities, such as shares.

The other half came from the equity principal strategies unit, which traded shareholders' money, a practice that regulators want to restrict. Citigroup is shutting this operation and most of the staff will leave after Feb. 6, the bank said this week.

"Sometimes when you underperformed, it's just because you underperformed," Gerspach said. "The decline year over year in equity derivatives is partly from the markets but it also reflects a certain amount of underperformance on our part."

On the conference call this week, Gerspach said that results at the investment-banking operation were also "disappointing."

Declining Revenue

Revenue at the unit, which comes from underwriting debt and equity sales for clients as well as providing merger and acquisition advice, fell 14 percent to $3.31 billion last year. Raymond McGuire and Tyler Dickson run that department.

Securities and banking head Forese reports to Chief Operating Officer John Havens. Citigroup awarded Havens a stock bonus for 2011 worth about $3.47 million on Jan. 17, based on the closing price of Citigroup shares that day, filings show.

Pandit, a former head of equities at Morgan Stanley, received a stock bonus for 2011 worth about $3.7 million. Last year, when Citigroup shares slid 44 percent, he received a base salary of $1.75 million and a retention plan that could be valued at more than $40 million.

Citigroup advanced 1.6 percent to $30.87 yesterday in New York trading and has gained 17 percent this year.

To contact the reporters on this story: Donal Griffin in New York at dgriffin10@bloomberg.net

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

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CNBC.com Article: George Soros Has Hard Words for European Union

Yup, proclaiming he is a dying breed who supports increasing taxes. This coming out of the mouth of a person who broke the bank of England.  



CNBC.com Article: George Soros Has Hard Words for European Union
Billionaire investor George Soros on Wednesday minced no words on the financial troubles faced by the Europe Union, as he addressed the future of the EU before an audience in Davos.
Full Story:
http://www.cnbc.com/id/46128877
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Download CNBC Real-Time from the App Store for Free and get Streaming Real-Time quotes, breaking news and the latest videos from CNBC.
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(BN) Singapore Civil Defense, Narcotics Heads Replaced Amid Misconduct Charges

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Singapore's Civil Defense, Narcotics Heads Under Investigation

Jan. 25 (Bloomberg) -- Singapore replaced its Civil Defence and Central Narcotics Bureau heads on allegations of "serious personal misconduct" in the city-state's highest-level probe of public servants in almost two decades.

The commissioner of the Singapore Civil Defence Force, Peter Lim Sin Peng, has been dismissed along with the director of the Central Narcotics Bureau Ng Boon Gay, according to statements from the Home Affairs Ministry yesterday. The city's Corrupt Practices Investigation Bureau began investigations into the activities of the two as early as December, requiring them to go on leave from their duties, according to the announcement.

The probe adds to challenges faced by the Southeast Asian nation since Prime Minister Lee Hsien Loong's People's Action Party won elections in May by the smallest margin since independence. The city, which lost its top spot on Transparency International's corruption index last year, is also grappling with public criticism following the worst disruptions to its subway services and flooding in the biggest shopping district.

"Major bribery scandals dent Singapore's reputation for clean government," said Richard Cassin, author of "Bribery Abroad: Lessons From the Foreign Corrupt Practices Act." "The enormous corporate and personal wealth in Singapore is bound to create more temptation."

Assistant Civil Defence commissioner Eric Yap Wee Teck, 43, and senior assistant commissioner of police Ng Ser Song, 49, will take over from Lim and Ng respectively starting on Feb. 1 to "ensure leadership continuity of both organizations," according to the statement.

Firm, Decisive Action

The ministry said it's unable to comment on the details of the case and that the investigations will shed light on the facts. The officers will be given a fair hearing in accordance with the civil service disciplinary process and the law, it said.

"All public officers, regardless of their position or seniority, are expected to uphold the highest standards of integrity and conduct," said Deputy Prime Minister Teo Chee Hean in a statement. "If officers are found to have abused the trust placed in them, we will not hesitate to take firm and decisive action against them."

Lawmakers in Singapore, ranked as the Asian city with the best quality of life by Mercer and the world's easiest place to do business by the World Bank, have raised concerns about the efficiency of the country's infrastructure system after train breakdowns and flash floods last month. The country also has the highest proportion of millionaires in the world.

Open and Transparent

"You can't always stop bad things from happening," said Hri Kumar, chairman of the Government Parliamentary Committee for Law and Home Affairs. "What defines a proper system is where errors and inappropriate conduct are identified and investigated thoroughly and dealt with in an open and transparent manner."

SMRT Corp. Chief Executive Officer Saw Phaik Hwa stepped down on Jan. 6 as head of the city's biggest train operator after glitches on Dec. 15 and 17 delayed more than 200,000 people, including shoppers in the Orchard Road retail district in the last weekend before the Christmas holiday.

Singapore's parliament backed a motion last week to cut salaries for Lee and top office holders even after some members said the reductions may make it more difficult to attract talent in politics. A government-appointed committee set up by the prime minister recommended this month that his annual income fall 36 percent to S$2.2 million ($1.7 million) and those of new ministers decline to about S$1.1 million from S$1.58 million.

Tougher Penalty Regime

Singapore, where assets under management have risen fivefold since 2001, will consider a "tougher penalty regime" and boost enforcement against money laundering and terrorist financing, the central bank said in October. The city-state will also make laundering of proceeds from tax offenses a crime and tighten laws on tax evasion, it said.

Singapore was rated the fifth-least corrupt country in the world last year by Transparency International, a Berlin-based anti-corruption organization.

The Asian city reviewed its public sector's financial procedures after uncovering a S$12.5 million fraud in September 2010 by two former workers at its land authority. The two men, Koh Seah Wee and Lim Chai Meng, were jailed for 22 years and 15 years respectively for cheating government agencies in the biggest public fraud case since 1995. The incident severely shook public confidence in the internal controls at government agencies, prosecutors said then.

In December, a clerical officer from the Ministry of Home Affairs, which oversees both the civil defense and narcotics bureau, was charged for offenses including forgery and cheating of S$617,087.

Reputation for Leniency

Yeo Seng Teck, who was chief executive officer of the Trade Development Board, was investigated in 1993 for cheating offences dating back to 1988 involving the purchase of S$2 million of Chinese antiques, according to the Corrupt Practices Investigation Bureau's website. He was sentenced to a four-year jail term, it said.

In 1995, Choy Hon Tim, a deputy chief executive at the Public Utilities Board, was jailed for 14 years for taking S$13.9 million in kickbacks in Singapore's largest public sector graft case. Choy was released in 2005 for good behavior.

Glenn Knight, a former director of the Commercial Affairs Department was sentenced to a day's jail in 1998 and suspended from legal practice on corruption charges in 1991. The Straits Times said the latest investigations rank among the highest- level probes of civil servants since Knight's case.

"Singapore doesn't have a reputation for leniency toward white-collar criminals," Cassin said. "What it may need, however, is more oversight in some of the government agencies, more checks and balances and financial accountability. That might slow down the wheels of government a bit, but that's the cost of better financial controls."

To contact the reporter on this story: Andrea Tan in Singapore at atan17@bloomberg.net Kyoungwha Kim in Singapore at 1895 or kkim19@bloomberg.net

To contact the editor responsible for this story: Lars Klemming at lklemming@bloomberg.net

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(BN) Biggs Bets on Stock Gains Citing ‘Strong Rally’ Potential

And Traxis' performance last year was....?

**But that said, I like Biggs. He writes well, but the Hedge Fund Tale was a disappointment

Bloomberg News, sent from my iPod touch.
Biggs Bets on Stock Gains Citing 'Strong Rally' Potential
Jan. 23 (Bloomberg) -- Barton Biggs, who increased bets on U.S. equities before the Standard & Poor's 500 Index rallied last month, said he remains bullish even amid concerns over progress in solving Europe's debt crisis.
"I'm terrified I'm not long enough if we're going to have a strong rally here, which we could," he said during an interview on Bloomberg Television's "In the Loop" with Betty Liu today. Biggs said his net-long position in equities is 65 percent. At the same time, "I'm terrified I'm too long if the apocalypse is coming in Europe," he said.
The founder of Traxis Partners LP said on Dec. 12 that he was investing in U.S. and Asian stocks. Biggs said at the time that equities might rise or fall 20 percent because of concern about budget negotiations and Europe. The S&P 500 has increased 6.4 percent since then through Jan. 20.
His optimism on stocks has fluctuated along with the market. Biggs reduced the net-long position, a gauge of bullish versus bearish investments, in the Traxis Global Equity Macro Fund to about 40 percent at the end of September before increasing it to 65 percent on Oct. 17 and 80 percent on Oct. 31, according to interviews with Bloomberg. On Nov. 21, he said he cut the level to less than 40 percent. On Dec. 2, he said he boosted it to about 60 percent.
U.S. stocks have risen for three weeks, the longest streak since October, as better-than-estimated economic data and company earnings boosted confidence in American growth. The S&P 500 gained 4.6 percent in 2012 through last week, the best start to a year since 1997. The benchmark gauge for U.S. equities rose 0.1 percent to 1,316 at 4 p.m. New York time today.
To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net Deirdre Bolton in New York at dbolton@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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(BN) European Banks May Deepen Their Dependence on Unlimited Central Bank Loans

"This will remove some of the refinancing risk the banks face and the markets are reacting positively after a bit of a delay," Porter said in a telephone interview. "But the more fundamental question is how 'long can you run a banking system like this?'"

Answer: As long as it takes.

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EU Banks May Deepen Dependence on Central Bank's Unlimited Loans

Jan. 23 (Bloomberg) -- European banks, shunned by investors and each other, may borrow as much next month from the European Central Bank as they did in a record offering in December as they seek refuge from frozen funding markets.

The ECB last month lent banks an unprecedented 489 billion euros ($630 billion) for three years. Analysts said they expect demand to be just as high at a second auction on Feb. 29 because the stigma associated with using the facility is dissipating and the list of what assets can be used as collateral in exchange for the loans will be extended. ECB President Mario Draghi said last week he expects demand for loans next month to be "still very high," though "probably lower than in December."

"February's second three-year Long Term Refinancing Operation looks set to be extremely large," Credit Suisse Group AG analysts led by William Porter wrote in a report to clients. "The last LTRO has removed any stigma, making managements who do not exploit the value on offer arguably careless at best."

The ECB is flooding the banking system with cheap money in a bid to avert a credit crunch after the market for unsecured bank debt seized up and funding from U.S. money markets dries up. Politicians, including French President Nicolas Sarkozy, are pushing the banks to use the loans, which carry an interest rate of 1 percent, to buy higher-yielding southern European sovereign debt, thereby forcing down borrowing costs in the region.

The ECB is offering banks unlimited cash as lenders try to refinance more than $765 billion of debt that matures this year, just as institutional investors remain reluctant to buy debt from all but the safest banks.

'Flooding the Market'

"People aren't prepared to lend to the banks, so the ECB is just flooding the market with liquidity," said Christopher Wheeler, an analyst at Mediobanca SpA in London. "But it's only a temporary fix. The ECB is only buying time with these loans hoping that things will improve."

Lenders in Italy, Spain and France are using the loans to purchase more of their domestic government debt to profit from the difference between the interest rate on the ECB money and the higher yield on sovereign securities, analysts said.

Demand from more than 500 lenders in December dwarfed the 293 billion-euro estimate of economists surveyed by Bloomberg News. Half of the loans were taken up by Italian and Spanish lenders, Morgan Stanley analyst Huw van Steenis said in a Jan. 18 report to clients.

Italian banks were the main users, with UniCredit SpA, the country's largest lender, taking 12.5 billion euros, Intesa Sanpaolo SpA, the second-biggest, accepting 12 billion euros, and Banca Monte dei Paschi Di Siena SpA 10 billion euros, the Morgan Stanley analyst estimated, citing conversations with 50 banks and policy makers. Spokesmen for the three banks declined to comment.

Spanish Banks

Spain's Banco Popular Espanol SA took 6 billion euros, while Banco Bilbao Vizcaya Argentaria SA used 5 billion euros, according to Morgan Stanley. Bankinter SA used 5 billion euros Chief Executive Officer Maria Dolores Dancausa said in a news conference in Madrid on Jan. 18. A spokesman for Popular wasn't immediately available to comment. BBVA declined to comment.

French banks BNP Paribas SA, Societe Generale SA, Credit Agricole SA and BPCE SA all borrowed from the ECB though declined to say how much, Morgan Stanley said. Spokespeople for the banks declined to comment. Royal Bank of Scotland Group Plc, the U.K.'s largest government-owned lender, took 5 billion pounds ($7.8 billion), according to the analysts. An RBS spokesman declined to comment.

In all, banks may borrow between 150 billion euros and more than 400 billion euros next month, van Steenis said. "It seems even large cap banks have been open-minded to using this given the size and lack of stigma of the first one," he wrote.

Senior Debt

Ronny Rehn, an analyst at Keefe, Bruyette & Woods Inc. in London, Gary Greenwood at Shore Capital in Liverpool, and Neil Smith at WestLB AG in Dusseldorf said they expect demand to be similar to December.

Matthew Czepliewicz, an analyst at Collins Stewart Hawkpoint Plc in London, said demand may fall to 250 billion euros as the market for senior, unsecured debt opens for the strongest lenders.

Since the ECB's first offering of three-year money last month, banks including Rabobank Nederland and Nordea Bank AB have sold more than 19.5 billion euros of benchmark senior unsecured debt. That compares with 14.5 billion euros of bonds sold by banks between July and December last year.

Collateral Rules

Other analysts said the ECB's decision to ease the rules on what bank's can post in collateral in exchange for the loans could push demand higher. Draghi announced the ECB would relax the collateral requirements at a press briefing on Dec. 8. Details on the new rules have not yet been published.

"The ECB is still deciding what will constitute acceptable collateral," Marchel Alexandrovich, an economist at Jefferies International Ltd. in London said. "If criteria are loosened enough, then demand for cheap money will undoubtedly swell up and we may well see a figure in excess of 1 trillion euros" at next month's operation.

Credit Suisse's Porter said he expects banks to borrow slightly more than in December, about 500 billion euros, because lenders won't want to be put at a competitive disadvantage when their peers can borrow cheaply from the ECB.

"This will remove some of the refinancing risk the banks face and the markets are reacting positively after a bit of a delay," Porter said in a telephone interview. "But the more fundamental question is how 'long can you run a banking system like this?'"

To contact the reporters on this story: Liam Vaughan in London at lvaughan6@bloomberg.net Gavin Finch in London at gfinch@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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Who qualifies as a preferred client for French banks?

[At least one Paris-based PE shop was unsurprised. "We are still a good bet and banks are willing to lend where the project is a good one," said a midmarket PE manager. "It takes a bit longer to organize [debt funding] and the ratio is 50/50 (debt to equity) since early 2011, but euro-denominated deals can still get the financing."]

I'm afraid you're not quite right there. you may find banks willing to lend, but it is not a question of being a bit longer to organise. You won't get it at the same margins or tenor as before.

Who qualifies as a preferred client for French banks?

by Paul Whitfield In Paris   |  Published January 20, 2012 at 11:04 AM

The list of French corporate and investment banking clients who can expect to get an immediate call back from their banker is set to get a bit shorter.

That was the gist of an employee memo from BNP Paribas SA, France's biggest lender, in which it said that cuts to funding at its CIB unit would result in a narrower definition of a preferred client. The document, which was leaked to Reuters, said the bank would "redefine its priority lists of preferred clients" based on "the currency of the client's financing, the client's past and future profitability and cross selling opportunities."

The memo provides a glimpse into how BNP plans to meet its broad goal of reducing its CIB asset based by 10% by the end of 2012, a target it announced last September. Since that announcement, details about exactly how it planned to reduce funding for the unit have been as scarce as dollar financing for European lenders. Also on that subject, "The plan's direct impact ... is the sale of existing assets and the cut in lending in currencies other than the euro for the next 15 months," the BNP memo stated.

BNP declined to comment on the memo, though a source confirmed its existence.

BNP isn't the only French bank cutting back or leaking internal memos. In a similar note, also cited by Reuters, Natixis, the CIB unit of Groupe BPCE, said it will cut risk-weighted assets by 5% by the end of the year.

Natixis plans to hit its target by running down some specialist lending operations, such as non-oil shipping, and by reducing its aircraft financing operations. It is also considering offers for its commodities unit.

Specialist financing operations, much of which are denominated in dollars, are likely to be on the block at BNP Paribas, too. BNP has said it will reduce its dollar funding requirements by $20 billion by the end of the year.

There was a bright spot amid the gloom for French midmarket private equity. Natixis said that it would maintain its leveraged buyout funding.

At least one Paris-based PE shop was unsurprised. "We are still a good bet and banks are willing to lend where the project is a good one," said a midmarket PE manager. "It takes a bit longer to organize [debt funding] and the ratio is 50/50 (debt to equity) since early 2011, but euro-denominated deals can still get the financing."

The iBooks 2, textbook. Reinvented for iPad. NEW

http://www.youtube.com/watch?v=uDNQr52b4oI

Ok, lots of sci-fi and moving images and pretty pics. Now:

So how do I now study for my exams with this piece of hi-tech junk?

(BN) QE3 May Come in April, Credit Suisse’s Jersey Says: Tom Keene

Ice is starting to thaw...this is the time to place your bets for the next boom.

Bloomberg News, sent from my iPad.

QE3 May Come in April, Credit Suisse's Jersey Says: Tom Keene

Jan. 20 (Bloomberg) -- The Federal Reserve may implement a third round of quantitative easing this spring to bolster the economy, according to Credit Suisse Group AG's Ira Jersey.

"We do think the Fed is going to do another round of asset purchases later in the quarter, probably aiming for April," Jersey, director of U.S. rates strategy at Credit Suisse in New York, said today in a radio interview on "Bloomberg Surveillance" with Tom Keene and Ken Prewitt. "We are growing, we just don't feel prosperous. It is a part of the job of the Fed to assure prosperity, one of the ways to do that is to kick- start housing,"

The policy-making Federal Open Market Committee meets Jan. 24-25. The central bank is forecast to keep its target for the federal funds rate at zero to 0.25 percent. The target has been at that level since December 2008 and the Fed has pledge to keep it there until mid-2013.

The central bank has purchased $2.3 trillion of mortgage and government bonds in two rounds of so-called QE. In September, it announced plans to sell $400 billion of short-term debt and use the proceeds to buy an equal amount of longer- maturity securities, in a program as nicknamed Operation Twist after a similar action in 1961 designed to contain borrowing costs for companies and consumers.

Round Three

Jersey said a third stimulus effort may be more focused toward the housing market and buying mortgage-backed securities.

A Bloomberg news survey conducted in November found 16 of the 21 primary dealers of U.S. government securities said Fed Chairman Ben Bernanke and his fellow policy makers would start another purchasing program during the first half of 2012. The dealers' estimated that the Fed may buy about $545 billion in home-loan debt.

"We need to get confidence up, in particular business confidence up," Jersey said. "That would help stimulate jobs, which helps stimulate the residential housing market, and that's what gets you out of the doldrums."

The Fed will wait for more economic data before deciding whether more bond buying is merited, the Wall Street Journal reported today. The central bank is planning to announce a revised communications strategy, including more information about interest-rate projections and objectives for inflation and jobs, the report said.

To contact the reporters on this story: Austen Sherman in New York at asherman18@bloomberg.net Tom Keene in New York at tkeene@bloomberg.net

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

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(BN) Dimon, Blankfein Predict Market Rebound as Rivals Pull Back (1)

Put your bets now, gentlemen. By the time these folks sort out if it is cyclical or secular, it would have been too late.

Bloomberg News, sent from my iPad.

Dimon, Blankfein Predict Market Rebound as Rivals Pull Back

Jan. 19 (Bloomberg) -- JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon and Goldman Sachs Group Inc. CEO Lloyd C. Blankfein predict Wall Street will rebound from 2011's trading- revenue plunge. Rivals and analysts aren't so sure.

Fourth-quarter earnings reported by the six largest U.S. banks show the industry suffered a third straight quarterly drop in combined trading and investment-banking revenue. On conference calls this week, analysts are pressing executives with a similar refrain: Is it a temporary rut or a lasting shift to smaller volumes, profits and pay?

"This is a big debate," said Paul Miller, a former examiner for the Federal Reserve Bank of Philadelphia and an analyst at FBR Capital Markets in Arlington, Virginia. "A lot of bears are saying it is due to regulation and deleveraging, and some are saying it is cyclical. I think it's some of both."

Executives and analysts are focusing on whether stiffer regulations, capital rules and a weak economy may solidify a decline in revenue after the European debt crisis curbed trading volume and corporate dealmaking in last year's second half. Credit Suisse Group AG, UBS AG and Royal Bank of Scotland Group Plc, which are all shrinking their investment banks, have announced plans to eliminate about 8,300 jobs since the start of November.

'Snap Back'

"We'd all hoped that the headwinds to our business, including low levels of client activity, low interest rates, market volatility and political uncertainty around the world would subside," Credit Suisse CEO Brady Dougan told analysts Nov. 1. The bank said that day it would cut about 1,500 jobs, in addition to 2,000 previously announced, and reorganize its securities unit after reporting third-quarter profit that missed analysts' estimates. "It's now clear, however, that these secular trends may persist for an extended period," he said.

Dimon and Blankfein have since sought to reassure investors that markets and earnings from securities units will rebound.

"The world will snap back, and it will be a surprise, and it will be faster than people think," Blankfein, 57, said at a Nov. 15 investor conference. Yesterday, Chief Financial Officer David Viniar echoed the remarks after the firm said trading revenue fell 25 percent from the third quarter to $3.06 billion.

"We are clearly in a cyclical downturn," rather than a secular decline, Viniar said. "There is less activity that is cyclical. That will come back. I have no idea when, but it will come back."

Dimon, 55, said investment banking is a volatile business in which volumes can swing by 50 percent daily.

'Boom Again'

"It's not a mystical thing," he told reporters on a Jan. 13 conference call. "You just have to manage the business carefully and understand it's going to have those kinds of swings. I don't think the lower numbers are permanent. I think when things come back, these numbers will boom again."

Equity issuance across the world fell to $163 billion in the last half of 2011, down 53 percent from the first six months, according to data compiled by Bloomberg. Corporate bond issuance also skidded amid the European crisis and a weaker- than-expected U.S. economy.

Government efforts to prevent banks from trading with their own money also have an impact that may last, said Charles Bobrinskoy, the Chicago-based vice chairman and director of research at Ariel Investments, which has about $5 billion under management and owns shares of New York-based Goldman Sachs, JPMorgan, Citigroup Inc. and Morgan Stanley.

"It's a little of both -- it's a little bit of secular, a little bit of cyclical," he said.

Less Leverage

It doesn't help that lawmakers and regulators are seeking to limit financial maneuvers that boosted or masked leverage in the past, such as off-balance-sheet conduits, variable-interest entities and collateralized debt obligations, said Richard Bove, an analyst at Rochdale Securities LLC in Lutz, Florida.

"There's no more CLOs, CDOs, CDOs squared, CDOs cubed," Bove said, referring to asset-linked securities and financial instruments at the heart of 2008's U.S. financial crisis. "The leverage isn't there and the market isn't there. Banks can't grow at the same rate."

Citigroup reduced employees' 2011 compensation to account for a temporary decline in trading volumes and investor appetite, CEO Vikram Pandit, 55, told analysts Jan. 17. The bank also restructured reserves and sold certain assets where it sees a permanent shift in the market, he said.

"There's no magic answer," Pandit said. "It's very hard to parse out exactly what part of the activity we're seeing is the cause of the cyclical situation versus how much is secular."

BofA, Morgan Stanley

Citigroup, the third-biggest U.S. bank by assets, said Jan. 17 that net income dropped 11 percent as lower revenue from advising companies and trading securities led its investment bank to the first quarterly loss since 2008.

Goldman Sachs said fourth-quarter net income fell 58 percent, as revenue slid 30 percent. JPMorgan, the biggest U.S. bank, said last week that net income decreased 23 percent as investment bank earnings fell. San Francisco-based Wells Fargo & Co., which relies least on trading among the six banks, said a focus on loans helped soften a 4 percent drop in revenue. Its profit rose 20 percent.

Bank of America Corp. reported a second consecutive quarterly loss today in its global banking and markets division, which includes trading and underwriting operations. The entire company swung to a $1.99 billion profit from a year-earlier loss as mortgage charges eased. Morgan Stanley lost $250 million during the quarter, as trading volumes and mergers and acquisitions fell.

'Difficult Question'

"It's either a slow cyclical recovery or secular, and I don't think it's clear what it is," Morgan Stanley Chief Financial Officer Ruth Porat said today in a telephone interview. "However you look at it, it's a slower growth environment." Morgan Stanley has reduced headcount to account for the slower-than-expected recovery, she said.

The grim outlook for trading was a recurring topic on Goldman Sachs's analyst call.

"Your revenue weakness recently, are you saying none of that is due to secular factors?" Mike Mayo, an analyst at independent research firm CLSA in New York, asked Viniar during the bank's conference call. "It's all cyclical? There's no structural change that's hurting your revenues?"

The market doesn't seem any worse than the fall of 2008 or when the bubble in technology stocks burst years earlier, Viniar said in response to analysts' questions. Still, he would never be so bold as to rule out a lasting change, he said.

"We've all been doing this for a long time and we've seen downturns before," he said. "Every time you're in one it feels like it's never going to end and this world is different now."

"So is it cyclical? Is it secular?" Viniar said. "It's a very difficult question to answer."

To contact the reporters on this story: Dawn Kopecki in New York at dkopecki@bloomberg.net 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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(BN) SocGen, BNP Job Cuts Reflect Wilting Ambitions of Paris Banks

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SocGen, BNP Job Cuts Reflect Wilting Ambitions of Paris Banks

Jan. 20 (Bloomberg) -- Societe Generale SA architects are putting finishing touches on a spanking new, highway-straddling building in La Defense, Paris's financial district, designed to house more than 3,000 markets employees.

The final construction phase of the 250 million-euro ($321 million), 43,000 square-meter, (462,848 square-foot) glass-front structure, called "Basalte," coincides with the bank's talks with unions on the deepest job cuts at its corporate- and investment banking unit.

Conceived in 2008 as a showcase trading-floor facility, the building -- set to be completed this year -- forms a grim backdrop for job cuts by Societe Generale, BNP Paribas SA and Credit Agricole SA, showing how the European debt crisis is eating into once-ambitious plans of French banks. Paris-based lenders, which weathered the 2007 subprime crisis with smaller writedowns than their U.S. rivals and expanded, are now beating a retreat as the regional crisis enters its third year.

"Societe Generale's job cuts are a symbol" of the broader malaise in the French banking world, said Olivier Godechot, a sociologist at the Paris-based National Center for Scientific Research, or CNRS, specializing in finance. "Its job cuts are particularly striking because Societe Generale is the leading and most innovative bank on the Paris marketplace."

France's top three corporate-and-investment banking, or CIB, units, with combined global sales of 25 billion euros in 2010, are cutting 1,800 jobs at home. Although a fraction of the more than 200,000 job losses announced by financial firms globally in 2011, the cuts, about 10 percent of the three bank's total CIB staff in France, are the biggest for the business in the country.

Paris Gloom

The reductions add to the economic gloom in France, where the unemployment rate is just shy of 10 percent. The banks' plans, including scaling back corporate businesses such as aircraft financing, are diminishing any ambition of Paris narrowing the gap with London as a major financial center.

"Paris was the center for project finance as well as aircraft and shipping lending, and that proved very fragile," said Sofiane Aboura, a professor at Paris Dauphine University. "It will be hard for Paris to win back any business leadership it loses because London offers legal and fiscal advantages for corporate and investment banking."

France's top three CIB units employed just over 16,000 people in the country before their job-cutting announcements, said Thierry Iochem, an analyst at eFinancialCareers in Paris. Barclays Capital alone employs about 14,000 people in London, making it probably the City's largest investment-banking employer, estimated Ian Gordon, an analyst at Investec Bank Plc.

Shrinking Operations

French President Nicolas Sarkozy, who faces a two-round election in April and May, has been pushing companies not to cut jobs in France -- something the banks have struggled with as European writedowns eroded profit.

Saphia Gaouaoui, a spokeswoman at Societe Generale in Paris, declined to comment, as did Credit Agricole CIB's spokeswoman Anne Robert and BNP Paribas's Julia Boyce.

Europe's sovereign debt crisis is threatening French banks' revenue from trading and corporate financing. At the end of September, French banks, the most exposed to public and private debt from the euro-zone's periphery, had taken about 5.4 billion euros of losses on Greek sovereign bonds.

Third-quarter net income for BNP Paribas, France's biggest bank, fell 72 percent on Greek write-offs and losses from selling European government bonds. Societe Generale's profit slid 31 percent, hurt by a Greek writedown and lower trading revenue.

Second Round

The two banks in September began a program to trim about 300 billion euros in assets by 2013, cutting dollar-funded activities such as aircraft lending and export finance as Europe's debt woes squeezed funding.

"French banks are giving up businesses where they were leaders worldwide," said Gael de Roquefeuil, founder of Paris- based finance headhunting firm ROCPartners. "If the banking business climate remains depressed, there's a strong risk of a second round of jobs cuts after the presidential elections."

Societe Generale, Paris's biggest CIB employer, began talks with unions in the fall on plans unveiled Jan. 4 to cut 880 of the unit's jobs, or about 14 percent of the business's workforce in France. The cuts may include 189 markets-related positions. France's second-largest bank had about 6,400 CIB employees in the country as of September.

The bank, which is also shedding 700 jobs abroad, held its French CIB workforce stable after the 2007 subprime crisis roiled markets, and even added mergers and acquisitions bankers. In 2008, when it suffered the biggest trading loss in banking history on unauthorized transactions by Jerome Kerviel, Societe Generale boosted its French CIB staff by 7 percent.

Shot in Foot

The CIB unit is Societe Generale's earnings backbone, accounting for about 43 percent of the bank's sales between 2000 and 2011, according to an internal memo obtained by Bloomberg News last week. In August, Societe Generale scrapped its 6 billion-euro profit target for 2012.

"We wonder whether CIB isn't being liquidated in pieces and whether we aren't shooting ourselves in the foot," said Michel Marchet, a CGT union representative at the bank.

To be sure, the bank has left intact its equity derivatives business -- which according to a report this month by JPMorgan Cazenove is the world's second largest by sales behind New York- based Goldman Sachs Group Inc.

For its part, BNP Paribas SA, France's largest bank, in November said it will shrink its CIB staff globally by more than 6 percent, with 373 job cuts at home. The bank increased its CIB unit's global staff with its Fortis acquisition in 2009. BNP Paribas employs about 21,000 people at its CIB unit worldwide, 40 percent more than in 2007, according to its website.

An Adjustment?

Credit Agricole's CIB division is cutting 550 jobs in France and 1,200 abroad as it closes its equity-derivatives and commodity-trading activities. France's third-largest bank by market value is closing operations in 21 countries. The bank is also eliminating 600 consumer-finance positions worldwide.

Paris's CIB jobs, which fell after the 1998 Asian crisis, the 2000 technology bubble and the 2007 subprime crisis, haven't had such a severe reduction since most of the French capital's brokers lost their jobs in the early 90s, CNRS's Godechot said.

"Every time there are strong job reductions, the question remains: is it a durable correction or just an adjustment?" he asked.

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net;

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(BN) Apple Said to Plan Digital-Textbook Push to Bolster IPad Use in Schools

Apple is living in its dream world where kids study with an ipad....lets see if anyone learns anything by poking around a screen. E ink is the most practical but even that cant beat a physcial hard copy dog eared text with highlights and notes scribbled all round. 

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Apple Said to Plan Textbook Push to Bolster IPad Use in Schools

Jan. 18 (Bloomberg) -- Apple Inc. has been selling thousands of iPads to grade schools since its 2010 debut. Now it plans to beef up the educational content available for the tablet so teachers and students find those purchases worthwhile.

At an event in New York tomorrow, Apple will announce a set of tools that make it easier to publish interactive textbooks and other digital educational content, said two people with knowledge of the announcement, who requested anonymity because they weren't authorized to speak publicly.

The plans, to be unveiled by Apple Internet software chief Eddy Cue, are aimed at broadening the educational materials available for the iPad, especially for students in kindergarten to 12th grade, the people said. By setting its sights on the $10 billion-a-year textbook industry, Apple is using the tablet to encourage students to shun costly tomes that weigh down backpacks in favor of less-expensive, interactive digital books that can be updated anywhere via the Web.

"Apple will raise a lot of awareness about digital textbooks and how education is going digital," said Osman Rashid, whose company, Kno Inc., develops e-textbook software.

Apple's new software is designed for a broad range of authors to be able to publish the content in a digital format, similar to what Amazon.com Inc. does with its direct publishing tools, said the people. Large publishers will be able to create digital versions of textbooks, with embedded graphics and video.

Creating Teaching Tools

Apple also wants to empower "self-publishers" to create new kinds of teaching tools, said the people. Teachers could use it to design materials for that week's lesson. Scientists, historians and other authors could publish professional-looking content without a deal with a publisher.

Apple is likely to promote a modified version of the ePub standard, the format used by many e-book publishers, said the people familiar with the company's plans. Natalie Kerris, a spokeswoman for Apple, declined to comment.

Education is one piece of how Apple's iPad became the fastest-selling consumer electronics product in history. As of September, Apple had sold about 40 million iPads, generating $25.3 billion in sales. The device is now Apple's second-best selling product, behind the iPhone and ahead of Mac personal computers and iPod music players.

While the event is expected to aid iPad sales to educators, Gene Munster, an analyst at Piper Jaffray Cos., said the event won't have a material impact on the company's shares. No new hardware products are expected to be unveiled.

Education Sales Force

Apple is building upon a presence in education that was established when its earliest computers won a following among students and schools in the 1980s. A dedicated piece of the company's sales force reaches out to school districts and universities to pitch Apple's products for the classroom.

In a sign of that effort's success, New Jersey's Hasbrouck Heights School District bought 250 tablets last year for use in algebra classes. Nevada's Clark County School District paid $687 per iPad in a trial program so 1,150 Las Vegas middle- and high- school students could use iPads loaded with the same algebra material, made by publisher Houghton Mifflin Harcourt.

The purchases come even as school districts grapple with budget shortfalls, challenging educators to choose where they allocate funds, said Jay Diskey, executive director of the Association of American Publishers' school division.

"It's important to look at the issue of K-12 textbooks through the prism of government procurement," Diskey said. "Many states and school districts are strapped for cash."

Justifying the Price

In some cases, the price of the iPad -- which starts at $499 -- is keeping school districts from making the purchases, said Bethlam Forsa, the head of content and product development for Houghton.

"The price is an issue," she said. "The key area of focus is to ensure there is enough content out there to justify the price." Just after the iPad was introduced, Forsa said the company committed to developing new educational material.

Apple co-founder Steve Jobs had focused on the textbook business before his death in October. He told biographer Walter Isaacson that the industry was ripe for a digital disruption because of the interactive capabilities made possible by the iPad. Jobs had held meetings with publishers, including Pearson Education Inc., about teaming up with Apple, according to Issacson's book, "Steve Jobs," published last year. Jobs wanted to create electronic texts and curriculum material for the iPad.

Jobs had lured John Couch, one of Apple's early employees, back to the company in 2002 to help lead its push in education, one person familiar with Couch's role said. Roger Rosner, a vice president of productivity applications, led the engineering effort, said the person.

Fraction of Market

The electronic-textbook market is still nascent. On college campuses, even as the latest best-sellers have become popular for devices such as Amazon's Kindle, digital textbooks were just 2.8 percent of total textbook sales in 2010, according to the National Association of College Stores.

A March survey of 655 college students by the Oberlin, Ohio-based trade group found that three-quarters of students preferred a printed textbook to an electronic version. That's even though e-textbooks cost as much as 60 percent less than new print copies, which averaged $62 each in the 2009-2010 school year.

"E-textbooks have had a slow go of it," said Charles Schmidt, a spokesman for the college stores group. He attributes the lackluster interest to students not being as technologically adventurous when it comes to education texts, professors sticking to traditional course materials, and publishers not offering compelling interactive content.

Harvard Business School

As more of these features are added and as the iPad and other tablets become more popular, Schmidt said the prevalence of digital texts will increase. He predicts digital college- course materials will account for 10 percent to 15 percent of the market in the next school year.

Among the schools making more materials available in digital formats is Harvard Business School, which is converting a library of 17,000 case studies to tablet-enhanced formats.

Along with Apple, software companies such as Inkling Systems Inc. and Kno have been working with publishers like Pearson's and McGraw-Hill Cos. to make their content more compelling. In Inkling's version of the best-selling textbook "Campbell Biology," students can navigate 3-D pictures of cells, listen to the proper pronunciation of a word or quiz themselves.

Still, the iPad needs more content to be able to become a common tool, said Bill Rieders, executive vice president at Cengage Learning, a publisher of higher-education textbooks that makes its materials available in digital form.

"It is too early to tell if it has improved education," Rieders said. "The jury is still out."

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

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

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(BN) Euro Tumbles on Speculation of ‘Imminent’ Debt Rating Downgrades From S&P

The gods at S&P who told us CDS were investment grade in 07 now presents their latest shocking discovery: we are going into a recession! Get out of stocks now!

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Euro Tumbles on Speculation of 'Imminent' Downgrades From S&P

Jan. 13 (Bloomberg) -- The euro dropped, reaching a 16- month low versus the greenback, amid speculation Standard & Poor's may downgrade the credit ratings of some countries in the 17-nation currency region as soon as today.

The shared currency slid against most of its 16 major counterparts tracked by Bloomberg, erasing weekly gains versus the dollar and yen. Philippa Melaniphy, a spokeswoman at S&P, declined to comment. The Dollar Index climbed to a 16-month high as U.S. stocks fell after JPMorgan Chase & Co. reported profit declined.

"Coming into the weekend, people are going to be concerned that in the absence of the ability to trade, they are going to be stuck with something from Europe," said Thomas Molloy, chief dealer at FX Solutions, an online currency-trading company in Saddle River, New Jersey. "There is market chatter about these headlines from Dow Jones about potential downgrades, but it's sounding more like opinion and chatter than a quote from anyone major."

The euro slid 1.3 percent to $1.2650 at 10:34 a.m. in New York. It touched $1.2624, the lowest level since Aug. 25, 2010, and was headed for a 0.5 percent weekly decline. The shared currency sank 1 percent to 97.39 yen and touched 97.20 yen, the weakest level since December 2000. The Japanese currency declined 0.3 percent to 76.98 per dollar.

France's Rating

France will lose its AAA credit rating from S&P, Agence France-Presse reported, citing an unidentified government official. Germany's credit rating will not be cut, Reuters reported, citing a senior euro-region source. Dow Jones Newswires reported several European nations may face "imminent" downgrade. It cited European Union sources.

The euro retreated 0.6 percent today against nine-developed nation peers tracked by Bloomberg Correlation-Weighted Currency Indexes after Italian borrowing costs declined less at a note sale than when the country auctioned bills yesterday. The dollar gained 0.9 percent, while the Swedish krona was the biggest loser with a decline of 0.6 percent.

Italy sold notes due in November 2014 at an average yield of 4.83 percent, down from 5.62 percent at a prior auction on Dec. 29. Investors bid for 1.2 times the amount allotted, down from a bid-to-cover ratio of 1.36 last month.

The nation's cost of borrowing for one year plunged to 2.735 percent at a bill sale yesterday, from 5.952 percent yield at the prior auction on Dec. 12.

'Room for Disappointment'

"The fact that the bid-to-cover ratio was not especially high, combined with euphoric reactions to the bill auctions yesterday, left room for disappointment," said Shahab Jalinoos, a senior currency strategist at UBS AG in Stamford, Connecticut.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, reached 81.784, the highest level since Sept. 15, 2010, as JPMorgan's profit report bolstered the dollar's refuge appeal. The Standard & Poor's 500 Index slid 1.1 percent.

JPMorgan, the largest U.S. bank by assets, said fourth- quarter profit decreased 23 percent as trading revenue and investment-banking fees declined.

The euro remained lower even after a gauge of consumer confidence in the U.S. rose more than forecast. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment increased to 74 from 69.9 at the end of December. The median estimate in a Bloomberg News survey called for 71.5.

South Korea's won was the biggest winner against the dollar among major currencies. It rose to a one-week high as the central bank kept borrowing costs unchanged for a seventh month to support the economy and global funds boosted holdings of Korean stocks for a fourth day.

The won strengthened the most in more than three weeks, rising 0.9 percent to 1,148.40 per dollar and reached 1,147.68 earlier, the strongest level since Jan. 5.

To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net

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

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(BN) Ex-Goldmanite Nomi Prins Fears Return of 1930s Great Depression: Interview

Another Godman. She who cant trade writes. I expected someone who writes about 1930s to actually experience it, not someone regurgitating the history books and adding some make believe.

Bloomberg News, sent from my iPad.

Ex-Goldmanite Prins Fears Another Great Depression: Interview

Jan. 13 (Bloomberg) -- The conditions that led to the birth of Occupy Wall Street are very similar to those before the Great Depression, says former Goldman Sachs Group Inc. managing director Nomi Prins.

Prins is the author of "Black Tuesday," a novel set in 1929 and '30 in which the heroine accidentally discovers dark secrets at the nation's largest bank. Prins has also written three nonfiction books, including "It Takes a Pillage: Behind the Bailouts, Bonuses and Backroom Deals From Washington to Wall Street" (2009).

In an interview at Bloomberg world headquarters in New York, we discussed the past and future of the financial system and the mistakes policy makers are repeating.

Onaran: Why did you go for fiction this time?

Prins: In nonfiction, you don't have the ability to dig into the emotional impact on people of financial disasters. You can talk about statistics, but that doesn't do it justice. I wanted to explore the emotional side of the story.

Onaran: Why did you use the 1930s as the backdrop to the story rather than the current crisis?

Prins: There are so many parallels between the 1930s and now, they're staggering. Just like the asset bubble that caused the Great Depression, our subprime bubble has led to the 2008 crash from which we're still suffering. So I wanted to say: "We've been here before. Why are we doing this again?"

Rich Versus Poor

Today we have this 1 percent versus 99 percent, the dislocation between the rich and the poor, between the bankers and everybody else. That was very prevalent back then, leading up to the Depression. So the contrast between the poor Lower East Side residents and the Wall Street bankers in the 1930s was very intriguing to me.

Onaran: Are we repeating the same mistakes of the Great Depression?

Prins: The Glass-Steagall Act was created in 1933 to make sure banks couldn't take advantage of their deposit and loan customers to get involved in the creation of new securities. So the risk of investment banking was separated, and the biggest banks were split up. But this time around, we didn't do that -- we didn't break up the banks, we actually consolidated more of their risk. We made them bigger. We lost the opportunity to make the banks less complex and not have the government subsidize zombie banks.

We've done so many things wrong, I'm afraid this will be a prolonged depression on the economy.

Roosevelt's Reforms

Onaran: How could Franklin Delano Roosevelt carry out fundamental reforms -- banks had just as much political clout then, no?

Prins: Banks didn't see that they were losing their power when they were forced to split. The same people stayed on the boards of the new entities formed, so they thought they continued to wield power in the financial system.

Onaran: Are the banks cooking the books now as they were at the time?

Prins: Yes. By not marking to market the complex securities in their books, they're hiding losses. Second, if you have loan properties and if you haven't finished foreclosure, the related assets aren't marked down. So there's massive overvaluing going on across the board.

(Yalman Onaran writes for Bloomberg News. The opinions expressed are his own. This interview was condensed from a longer conversation.)

To contact the writer on the story: Yalman Onaran in New York at yonaran@bloomberg.net or @Yalman_BN on Twitter.

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

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(BN) European Stocks May Slide 10% in Next Three Months, Goldman’s Moser Says

Godman says so, so it must be, even if it comes from Godmans ass.

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European Stocks May Drop 10% in Next Three Months, Goldman Says

Jan. 13 (Bloomberg) -- European stocks may drop as much as 10 percent amid concern the region's sovereign-debt crisis will harm the economy, before recovering in the second half of 2012, according to Goldman Sachs Group Inc.

The Stoxx Europe 600 Index might decline to 225 in the next three months, Gerald Moser, Goldman Sachs's London-based equity strategist, said at the bank's Global Strategy conference in Zurich today. He expects the gauge to recover in the second half of the year to close at 250 to 270, a gain of as much as 20 percent from the trough. The index fell 0.6 percent to 247.97 at 3:09 p.m. in London today.

"It will be a difficult year to navigate," Moser said. "Investors are worried as there is a lot of uncertainty regarding the short-term outcome of the crisis, but we would expect equities to move higher on some resolution and a narrowing of spreads on a sustainable basis."

The Stoxx 600 has advanced 2.5 percent since the beginning of this year as economic reports around the world exceeded forecasts and falling bond yields in the euro area eased concern that the debt crisis is spreading.

"Some resolution, likely driven by an agreement between France and Germany on how to socialize the debt burden, is likely in the next couple of months," Moser said.

Goldman Sachs forecast a 10 percent drop in European profits in 2012, excluding financial companies. Moser said he wouldn't be surprised to see analysts' earnings projections cut by as much as 30 percent.

Valuation Discount

The Stoxx 600 trades at 10 times estimated profits, a discount of 16 percent to its average price-earnings ratio of 11.9 in the past five years, according to data compiled by Bloomberg.

"Equities are an attractive asset class versus bonds," Moser said. "Although the markets are fairly cheap, valuation is not everything. We'll first have to see better clarity and less uncertainty for the market to change direction."

Moser recommended buying shares of European companies that rely on emerging markets for revenue rather than those mainly exposed to the domestic economy, which will "face difficult times in Europe."

"It isn't so much European growth that matters, but overall global growth," he said. "Companies with a global reach are going to be able to generate growth in the next years."

For 2012, Goldman Sachs has an "overweight" rating on the health-care, oil and gas and telecommunications industries, citing strong dividends and cash flows that may provide a "nice cushion if the market falls."

On the other hand, Moser said he is "underweight" in financial shares as well as the food and beverage industry as they have "structural issues and are extremely expensive."

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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(BN) Scientists, Share Secrets or Lose Funding: Stodden and Arbesman

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Scientists, Share Secrets or Lose Funding: Stodden and Arbesman

Jan. 10 (Bloomberg) -- The Journal of Irreproducible Results, a science-humor magazine, is, sadly, no longer the only publication that can lay claim to its title. More and more published scientific studies are difficult or impossible to repeat.

It's not that the experiments themselves are so flawed they can't be redone to the same effect -- though this happens more than scientists would like. It's that the data upon which the work is based, as well as the methods employed, are too often not published, leaving the science hidden.

Many people assume that scientists the world over freely exchange not only the results of their experiments but also the detailed data, statistical tools and computer instructions they employed to arrive at those results. This is the kind of information that other scientists need in order to replicate the studies. The truth is, open exchange of such information is not common, making verification of published findings all but impossible and creating a credibility crisis in computational science.

Federal agencies that fund scientific research are in a position to help fix this problem. They should require that all scientists whose studies they finance share the files that generated their published findings, the raw data and the computer instructions that carried out their analysis.

The ability to reproduce experiments is important not only for the advancement of pure science but also to address many science-based issues in the public sphere, from climate change to biotechnology.

Too Little Transparency

Consider, for example, a recent notorious incident in biomedical science. In 2006, researchers at Duke University seemed to have discovered relationships between lung cancer patients' personal genetic signatures and their responsiveness to certain drugs. The scientists published their results in respected journals (the New England Journal of Medicine and Nature Medicine), but only part of the genetic signature data used in the studies was publicly available, and the computer codes used to generate the findings were never revealed. This is unfortunately typical for scientific publications.

The Duke research was considered such a breakthrough that other scientists quickly became interested in replicating it, but because so much information was unavailable, it took three years for them to uncover and publicize a number of very serious errors in the published reports. Eventually, those reports were retracted, and clinical trials based on the flawed results were canceled.

In response to this incident, the Institute of Medicine convened a committee to review what data should appropriately be revealed from genomics research that leads to clinical trials. This committee is due to release its report early this year.

Unfortunately, the research community rarely addresses the problem of reproducibility so directly. Inadequate sharing is common to all scientific domains that use computers in their research today (most of science), and it hampers transparency.

By making the underlying data and computer code conveniently available, scientists could open a new era of innovation and growth. In October, the White House released a memorandum titled "Accelerating Technology Transfer and Commercialization of Federal Research in Support of High-Growth Businesses," which outlines ways for federal funding agencies to improve the rate of technology transfer from government-financed laboratories to the private business sector.

Technology Transfer

In this memo, President Barack Obama called on federal agencies to measure the rate of technology transfer. To this end, agencies such as the National Institutes of Health and the National Science Foundation should require that scientists who receive federal funds publish full results, including the data they are based on and all the computer steps taken to reach them. This could include providing links to Internet sites containing the data and codes required to replicate the published results.

Exceptions could be made when necessary -- some information might need to be kept confidential for national-security reasons, for example. But standard practice for scientific publication should be full transparency.

Leaving this up to the scientific community isn't sufficient. Nor is relying on current federal rules. Grant guidelines from the NIH and the NSF instruct researchers to share with other investigators the data generated in the course of their work, but this isn't enforced. The NIH demands that articles resulting from research it finances be made freely available within a year of publication. But even if this policy were extended to all government-financed studies, the data and computer codes needed to verify the findings would still remain inaccessible.

As Jon Claerbout, a professor emeritus of geophysics at Stanford University, has noted, scientific publication isn't scholarship itself, but only the advertising of scholarship. The actual work -- the steps needed to reproduce the scientific finding -- must be shared.

Stricter requirements for transparency in publication would allow scientific findings to more quickly become fuel for innovation and help ensure that public policy is based on sound science.

(Victoria Stodden is an assistant professor of statistics at Columbia University. Samuel Arbesman is a senior scholar at the Ewing Marion Kauffman Foundation. The opinions expressed are their own.)

Read more opinion online from Bloomberg View.

To contact the writers of this article: Victoria Stodden at victoria@stodden.net Samuel Arbesman at sarbesman@kauffman.org .

To contact the editor responsible for this article: Mary Duenwald at mduenwald@bloomberg.net .

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(BN) John Paulson’s Advantage Plus Hedge Fund Drops 51% in ‘Aberrational Year’

Ups and downs...great to trigger a heart attack

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Paulson's Advantage Plus Fund Drops 51% in 'Aberrational Year'

Jan. 6 (Bloomberg) -- John Paulson, the billionaire money manager mired in the worst slump of his career, lost 51 percent in one of his largest funds last year amid a failed bet on an economic rebound.

Paulson's Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, declined 8.6 percent last month, according to an investor update, a copy of which was obtained by Bloomberg News. The fund's gold share class dropped 10 percent in December and 36 percent last year.

"Clearly, this has been an aberrational year for us," Paulson wrote yesterday in a signed letter to investors that was released with the update. "Going forward, we remain committed to restoring all of our funds to profitability."

Paulson, 56, has scaled back bullish bets across his funds after suffering losses from holdings ranging from Citigroup Inc. to Sino-Forest Corp., the Chinese forestry company accused by short-seller Carson Block of overstating timberland holdings. One bet that worked for Paulson in the first part of the year was gold, which slumped 14 percent in the final four months of 2011, leaving his Gold Fund, which can buy derivatives and other gold-related securities, with an 11 percent loss last year. The fund declined 20 percent in December.

Armel Leslie, a spokesman for New York-based Paulson & Co., declined to comment on the firm's returns.

Advantage Funds

Paulson's biggest funds, Advantage Plus and Advantage, employ similar strategies and have $11 billion in combined assets, which are mostly invested in shares of banks, insurance companies and other financial services firms. The dollar- denominated Advantage Fund fell 6.2 percent in December and 36 percent last year. Its gold share class slumped 11 percent last month and 22 percent in 2011. Paulson investors can choose between dollar-and gold-denominated versions for most of the firm's funds.

Last year was the first time in the firm's history that Paulson's Partners Enhanced, Advantage Plus, Advantage and Credit Opportunities funds posted negative annual returns, and the second time his Partners fund lost money during a year, he said in the letter.

Paulson has been betting on a U.S. economic recovery by the end of this year, which led to losses as the European sovereign- debt crisis roiled stock markets and spurred sharp price swings in equities. His bullishness on the economy drove bets in favor of U.S. financial companies, the biggest and worst performing component of the Advantage funds, according to a letter sent to investors in October.

'Overly Optimistic'

"At the beginning of the year, we positioned our portfolios with net equity exposure appropriate for growth in the U.S. and an orderly resumption of Europe's sovereign credit issues," the firm wrote in the letter. "However, as the year progressed, our assumptions proved overly optimistic."

The Recovery Fund, which invests in assets Paulson believes will benefit from a long-term economic upturn, including hotels, financial services and real estate companies, rose less than 0.1 percent in December and fell 28 percent last year. The gold share class declined 6.4 percent last month and 18 percent in 2011.

The Paulson Partners Enhanced Fund, which invests in the shares of merging companies, decreased 2 percent last month and 19 percent last year. Its gold share class declined 8.7 percent in December and 9.5 percent in 2011.

Credit Opportunities Fund

Paulson's Credit Opportunities Fund slumped 0.2 percent last month and 18 percent last year. Its gold shares dropped 6.2 percent in December and 5.8 percent in 2011.

Hedge funds fell 4.9 percent last year, according to data compiled by Bloomberg, as global stock markets slumped and the European debt crisis spread and managers struggled with increased market volatility. Hedge funds, which are investment pools that can wager on or against any asset, hold $1.97 trillion, according to Chicago-based Hedge Fund Research Inc.

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

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

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