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Posted by: Andy Reinhardt on September 11

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Top Stories of the Week

Posted by: Harry Maurer on September 11

U.S. Consumer Confidence Ticks Up Again

The Reuters/University of Michigan preliminary index of consumer sentiment rose to 70.2 in September from 65.7 in August. Economists had expected a smaller rise, to 67.5. Analysts opined that the bigger jump resulted from job losses slowing down and the economy showing many signs of turning around.

The university’s measure of current conditions, which tracks how Americans size up their financial situation and evaluate whether it’s a good time for big-ticket purchases, also rose substantially, to 71.8 from 66.6. Meanwhile, a government report showed that wholesalers’ inventories fell by 1.4%, more than expected, in July as higher sales helped distributors. And the number of Americans filing first-time claims for unemployment benefits dropped last week to the lowest level since July.

Source: Bloomberg

FedEx More Upbeat

In another harbinger of an economic upswing, Federal Express boosted its profit outlook for its fiscal first and second quarters. FedEx said profit in the just-ended quarter would come in 50% above the midpoint of its previous forecast, thanks partly to better-than-expected deliveries overseas. The company is seen as a key indicator of the economy’s direction. Investors boosted its shares by nearly 6% as of 2:30 p.m.

Source: Reuters

Delta May Buy into Japan Airlines

Delta Air Lines is in preliminary talks to buy a stake in Japan Airlines, according to a person familiar with the negotiations. A deal would boost the carrier’s presence in the Asia/Pacific region and fill a gap in the SkyTeam alliance headed by Delta. JAL is currently a member of a rival grouping, OneWorld. A Delta spokesman denied the report of deal talks.

Source: Wall Street Journal

Morgan Stanley’s CEO Exiting

Morgan Stanley Chief Executive John Mack will step down in a move that ends a four-year tenure marked by controversy over his strategic decisions and a near-death experience during last year's financial crisis. Mack will stay on as chairman when he leaves the chief executive post in January, 2010. He will be replaced by James Gorman, the bank's co-president in charge of global wealth management, investment management, and operations. Mack has overseen Morgan Stanley during one of the toughest periods in the bank's history. It slashed the assets on its balance sheet by almost a third to $677 billion in June in an attempt to cut its reliance on financial leverage. The firm's average value-at-risk -- a measure of how much the company estimates it might lose in a day's trading -- was $154 million in the second quarter compared to $245 million at rival Goldman Sachs.

Source: Financial Times, Bloomberg

Investors Stick with Equities

The last two years have tested people's confidence in the stock markets. But despite most equities still well below their pre-credit crunch highs, investors have stuck with equities. Indeed, participation in 401(k) plans held steady in 2008, even as the average account lost 28% of its value, according to Hewitt Associates, which tracks retirement plans.

Source: New York Times

Chrysler Resumes Auto Leasing

Struggling U.S. automaker Chrysler is planning to resume auto leasing, according to a dealer briefed on the plans. That comes more than a year after the carmaker was forced out of the business -- and three months after it emerged from bankruptcy. Chrysler will make a decision next week on the timing of the return, though new leases may not be offered until later in the month.

Source: Wall Street Journal

Obamacare Still Lacking Specifics

Despite U.S. President Barack Obama's well-received speech on healthcare, administration officials still struggle to explain how he would achieve his goal of extending coverage to tens of millions of uninsured Americans without increasing the deficit. The White House has released few specifics on proposed legislation, including new taxes, changes in malpractice statutes, a new national high-risk insurance pool, and a commission on eliminating Medicare fraud.

Source: Washington Post

Oracle Has Customers Over a Barrel

After spending $30 billion to buy 56 companies, Oracle Chief Executive Lawrence J. Ellison has doubled the software giant's revenues to an estimated $24 billion this fiscal year and sent the company's stock surging. But the Oracle's growing power, coupled with a surge in consolidation by other major players in the technology industry, has frustrated some corporate customers.

Source: BusinessWeek

GM Selling Opel to Magna After All

After mulling over Opel’s fate at length, General Motors confirmed that it will sell 55% of the German carmaker to Canadian car-parts maker Magna International and Russian bank OAO Sperbank. But financing issues remain that won’t be resolved for “the next few weeks.” Under the deal, GM will retain a 35% stake in Opel and sister company Vauxhall, while employees will take a 10% stake. GM, under heavy pressure from the German government to resolve the question before upcoming elections, had pondered other options, including holding on to Opel or selling it to Belgian investment firm RHJ International. The decision was welcomed by Chancellor Angela Merkel. Berlin has provided $2.16 billion in bridge loans to keep Opel going while the deal was being hammered out.

Source: Wall Street Journal

Obama Makes His Case

Declaring that "the time for bickering is over," U.S. President Barack Obama delivered a highly-anticipated address to the U.S. Congress on Sept. 9 laying out his proposals to reform health care and urging lawmakers to move forward on legislation. Over boos and shouts from some Republicans, Obama cast many of his opponents as cynical and called some of the criticisms of reform proposals lies. He pledged to keep reforms from adding to the deficit, and attempted to reassure a worried and confused public with his own determination. In his emotional, sometimes contentious speech, Obama combined tough talk to opponents with olive branches on policy in a bid to break the impasse on revamping the health-care system. The president promised to tackle the problem of medical malpractice insurance and reiterated his backing for a so-called "public option" for healthcare coverage, estimating the cost of the plan at $900 billion over 10 years. Some business groups immediately attacked the proposals.

Sources: Washington Post, BusinessWeek, Wall Street Journal

Brazilian Oil Find Could 'Dwarf' BP's Mexico Strike

The potential for Brazil to become one of the biggest oil producers in the world was highlighted Sept. 9 when BG, the former exploration arm of British Gas, reported a "supergiant" field with up to two billion barrels of recoverable reserves. The Guara discovery builds on a series of other major successes in very deep waters off Brazil and dwarfs rival strikes such as Tiber in the U.S. Gulf, which was announced with great fanfare by BP last week.

Source: Guardian

Kraft Calms Cadbury Bid Speculation

Kraft has played down speculation it will raise its offer for Cadbury after the British chocolate company rejected its $16.7 billion offer. Cadbury shares have climbed 38% on talk the American firm could increase its bid, and that there may be a bidding war with rivals such as Hershey or Nestle.

Source: Reuters

Merger Reshapes British Telco Landscape

France Telecom and Germany's Deutsche Telekom announced plans early Sept. 8 to combine their British Orange and T-Mobile units into a new operator that will take the top spot in Britain's fiercely competitive mobile phone services market, unseating Telefonica's O2 unit and posing a stronger competitive challenge to Vodafone. The companies expect to reap $5.7 billion in savings from the combination.

Sources: Times of London, New York Times, Wall Street Journal

Abu Dhabi Buys Chartered Semiconductor

In a sign of growing consolidation as the chipmaking industry emerges from its worst-ever downturn, Singapore-based contract manufacturer Chartered Semiconductor will be acquired for $1.8 billion by Abu Dhabi-based sovereign wealth fund ATIC.

Source: Reuters

Morgan Stanley's John Mack Steps Down

Posted by: Mark Scott on September 11

Morgan Stanley Chief Executive John Mack will step down in a move that ends a four-year tenure marked by controversy over his strategic decisions and a near-death experience during last year's financial crisis. Mack will stay on as chairman when he leaves the chief executive post in January, 2010. He will be replaced by James Gorman, the bank's co-president in charge of global wealth management, investment management, and operations.

Mack has overseen Morgan Stanley during one of the toughest periods in the bank's history. It slashed the assets on its balance sheet by almost a third to $677 billion in June in an attempt to cut its reliance on financial leverage. The firm's average value-at-risk -- a measure of how much the company estimates it might lose in a day's trading -- was $154 million in the second quarter compared to $245 million at rival Goldman Sachs.

Source: Financial Times, Bloomberg

Investors Stick with Equities

The last two years have tested people's confidence in the stock markets. But despite most equities still well below their pre-credit crunch highs, investors have stuck with equities. Indeed, participation in 401(k) plans held steady in 2008, even as the average account lost 28% of its value, according to Hewitt Associates, which tracks retirement plans.

Source: New York Times

Chrysler Resumes Auto Leasing

Struggling U.S. automaker Chrysler is planning to resume auto leasing, according to a dealer briefed on the plans. That comes more than a year after the carmaker was forced out of the business -- and three months after it emerged from bankruptcy. Chrysler will make a decision next week on the timing of the return, though new leases may not be offered until later in the month.

Source: Wall Street Journal

SEC Must Reform, or Else

The much-maligned U.S. Securities and Exchange Commission must "reform itself from within" or Congress will take over, according to Senator Richard Shelby. Speaking at a Senate Banking Committee hearing about improving the SEC's performance, Shelby questioned whether the agency needs more resources to patch the flaws that allowed Bernard Madoff to embezzle cash for 16 years despite numerous tips and investigations.

Source: Financial Times

Obamacare Still Lacking Specifics

Despite U.S. President Barack Obama's well-received speech on healthcare, administration officials still struggle to explain how he would achieve his goal of extending coverage to tens of millions of uninsured Americans without increasing the deficit. The White House has released few specifics on proposed legislation, including new taxes, changes in malpractice statutes, a new national high-risk insurance pool, and a commission on eliminating Medicare fraud.

Source: Washington Post

Oracle Has Customers Over a Barrel

After spending $30 billion to buy 56 companies, Oracle Chief Executive Lawrence J. Ellison has doubled the software giant's revenues to an estimated $24 billion this fiscal year and sent the company's stock surging. But the Oracle's growing power, coupled with a surge in consolidation by other major players in the technology industry, has frustrated some corporate customers.

Source: BusinessWeek

Cadbury Investors Eye Big Pay Day

Many Cadbury investors support the logic of Kraft's $16 billion bid for the British candy maker, but are holding out for an increased offer. The takeover bid has pushed Cadbury's share price through the roof. Now, the British company's price tag may reach $21.3 billion, according to the average estimate of six analysts surveyed by Bloomberg.

Source: Bloomberg

Harvard & Yale Endowments Lose $17.8 Billion

Harvard and Yale may be world-class institutions, but their investment strategies during the recession have been anything but stellar. The universities on Sept. 10 said their endowments -- still higher education's two largest -- each lost 30% of their value in the year ending June 30, 2009. Combined, their investment pools shrank by a staggering $17.8 billion.

Source: Wall Street Journal

China's Recovery Could Led to FX Diversification

Chinese strong industrial output and other bullish economic data in August surprised many analysts, and suggest the emerging giant's recovery is on a solid course. Beijing, though, isn't expected to hit the policy brakes anytime soon. The country's fast-paced recovery also underlines why it makes sense for China to diversify its huge stockpile of foreign exchange reserves, according to David Dollar, the U.S. Treasury's economic and financial emissary to China.

Source: Reuters

GM Will Sell Opel to Magna After All

Posted by: Harry Maurer on September 10

After mulling over Opel’s fate at length, General Motors confirmed that it will sell 55% of the German carmaker to Canadian car-parts maker Magna International and Russian bank OAO Sperbank. But financing issues remain that won’t be resolved for “the next few weeks.” Under the deal, GM will retain a 35% stake in Opel and sister company Vauxhall, while employees will take a 10% stake.

GM, under heavy pressure from the German government to resolve the question before upcoming elections, had pondered other options, including holding on to Opel or selling it to Belgian investment firm RHJ International. The decision was welcomed by Chancellor Angela Merkel. Berlin has provided $2.16 billion in bridge loans to keep Opel going while the deal was being hammered out.

Source: Wall Street Journal

Google Proposes Micropayment System for News

The Internet giant has proposed a system under which online publishers could charge for content, according to a document posted by Harvard University’s Nieman Journalism Lab. The proposal was made in response to a request for information sent to “qualified providers” by the Newspaper Association of America, as part of an increasingly heated discussion between publishers and online outlets that offer their content for free. Google suggested that publishers could “tag” different articles on its site with different levels of pricing, and that Google’s Checkout service could be used to manage micropayments.

Sources: MarketWatch.com

Preventing the Next Madoff

The Securities & Exchange Commission’s internal watchdog, H. David Kotz, may offer as many as 40 measures to help the agency improve oversight and intercept future Ponzi schemesters. In testimony prepared for the Senate Banking Committee, Kotz says he may propose that staff be require to confirm random samples of trading data to make sure money managers are actually trading. He also said the SEC should assign staff with “appropriate skills and expertise” to investigations of financial firms. .

Sources: MarketWatch.com

Obama Makes His Case

Declaring that "the time for bickering is over," U.S. President Barack Obama delivered a highly-anticipated address to the U.S. Congress on Sept. 9 laying out his proposals to reform health care and urging lawmakers to move forward on legislation. Over boos and shouts from some Republicans, Obama cast many of his opponents as cynical and called some of the criticisms of reform proposals lies. He pledged to keep reforms from adding to the deficit, and attempted to reassure a worried and confused public with his own determination. In his emotional, sometimes contentious speech, Obama combined tough talk to opponents with olive branches on policy in a bid to break the impasse on revamping the health-care system. The president promised to tackle the problem of medical malpractice insurance and reiterated his backing for a so-called "public option" for healthcare coverage, estimating the cost of the plan at $900 billion over 10 years. Some business groups immediately attacked the proposals.

Sources: Washington Post, BusinessWeek, Wall Street Journal

Apple's Jobs Returns to Limelight with New Products

Judging by the response of some Apple fans, the company's Sept. 9 digital music event in San Francisco was disappointing. There was no tablet computer, no Beatles catalog on iTunes. Instead, Apple introduced an update to iTunes, a new iPod Nano with a built-in camera, and price cuts on some models. But the clear high point was the return of charismatic CEO Steve Jobs, who spoke publicly about his recent liver transplant and thanked the donor for saving his life.

Sources: BusinessWeek, New York Times

GM Decision on Opel, Vauxhall Expected Thursday

General Motors confirmed early Sept. 10 that it will announce today a decision in its protracted effort to sell off its German Opel unit. The company's board met Tuesday and Wednesday, and will put an end to months of suspense by revealing whether it will hang onto the business or sell it to either of two bidders. Separately, press reports indicated that GM has decided not to spin off its British Vauxhall unit.

Sources: Wall Street Journal, Reuters, Times of London

U.S. Foreclosures Drop Slightly, But Still Near Record

Figures released Sept. 10 by real estate data firm RealtyTrac showed that U.S. mortgage foreclosure filings dipped less than 1% in August from their all-time high in July but were still 18% above their level a year earlier. RealtyTrac predicted that foreclosures will continue to rise for another year, despite broad efforts to keep borrowers in their homes. Most of the problem remains centered in hard-hit states such as Arizona and Nevada, RealtyTrac said.

Source: Reuters, Washington Post

No Big Fix for Global Finance

World leaders have talked bravely about fixing the global financial system. But as they head into a highly anticipated G-20 summit later this month in Pittsburg, their plans appear to be far less ambitious than what some voices were advocating as recently as last spring. Improvements in the global economy and financial markets have sapped momentum from reformers. But industry insiders such as Goldman Sachs chief Lloyd Blankfein also are talking up self-restraint.

Sources: BusinessWeek, Wall Street Journal

Brazilian Oil Find Could 'Dwarf' BP's Mexico Strike

The potential for Brazil to become one of the biggest oil producers in the world was highlighted Sept. 9 when BG, the former exploration arm of British Gas, reported a "supergiant" field with up to two billion barrels of recoverable reserves. The Guara discovery builds on a series of other major successes in very deep waters off Brazil and dwarfs rival strikes such as Tiber in the U.S. Gulf, which was announced with great fanfare by BP last week.

Source: Guardian

Europeans Reconsider Carbon Tax

Economists have long favored a carbon tax because of its simplicity: Polluters pay at a level that is set by decree. But the idea never caught on in the United States or Europe, which opted instead for the market-based cap-and-trade mechanism. Now, amid signs that progress in meeting greenhouse gas reduction targets has been only modest, carbon tax schemes are making something of a comeback among policymakers.

Source: New York Times

Bharti and MTN Agree to Terms of $24 Billion Merger

Bharti Airtel Ltd., India's biggest mobile-phone company, and South Africa's MTN Group Ltd. reached a $24 billion preliminary accord to buy each other's shares, the first step in a planned merger, three people familiar with the matter said. The world's biggest cross-border deal this year would pave the way for the creation of a mobile-phone carrier with annual sales of $20 billion and 200 million wireless subscribers from Johannesburg to Mumbai.

Source: Bloomberg

Can Motorola Save Itself with Android Smartphones?

After floundering for three years in search of a turnaround, the inventor of cellular phone technology and one-time market leader will unveil a new line of smartphones Sept. 10 based on the Android operating system from Google. Will the new models be enough to revive Moto's fortunes—or too little, too late?

Source: MarketWatch

Obama Urges Congress to Act on Health Care Reform

Posted by: Andy Reinhardt on September 10

Declaring that "the time for bickering is over," U.S. President Barack Obama delivered a highly-anticipated address to the U.S. Congress on Sept. 9 laying out his proposals to reform health care and urging lawmakers to move forward on legislation. Over boos and shouts from some Republicans, Obama cast many of his opponents as cynical and called some of the criticisms of reform proposals lies. He pledged to keep reforms from adding to the deficit, and attempted to reassure a worried and confused public with his own determination.

In his emotional, sometimes contentious speech, Obama combined tough talk to opponents with olive branches on policy in a bid to break the impasse on revamping the health-care system. The president promised to tackle the problem of medical malpractice insurance and reiterated his backing for a so-called "public option" for healthcare coverage, estimating the cost of the plan at $900 billion over 10 years. Some business groups immediately attacked the proposals.

Sources: Washington Post, BusinessWeek, Wall Street Journal

Apple's Jobs Returns to Limelight with New Products

Judging by the response of some Apple fans, the company's Sept. 9 digital music event in San Francisco was disappointing. There was no tablet computer, no Beatles catalog on iTunes. Instead, Apple introduced an update to iTunes, a new iPod Nano with a built-in camera, and price cuts on some models. But the clear high point was the return of charismatic CEO Steve Jobs, who spoke publicly about his recent liver transplant and thanked the donor for saving his life.

Sources: BusinessWeek, New York Times

GM Decision on Opel, Vauxhall Expected Thursday

General Motors confirmed early Sept. 10 that it will announce today a decision in its protracted effort to sell off its German Opel unit. The company's board met Tuesday and Wednesday, and will put an end to months of suspense by revealing whether it will hang onto the business or sell it to either of two bidders. Separately, press reports indicated that GM has decided not to spin off its British Vauxhall unit.

Sources: Wall Street Journal, Reuters, Times of London

U.S. Foreclosures Drop Slightly, But Still Near Record

Figures released Sept. 10 by real estate data firm RealtyTrac showed that U.S. mortgage foreclosure filings dipped less than 1% in August from their all-time high in July but were still 18% above their level a year earlier. RealtyTrac predicted that foreclosures will continue to rise for another year, despite broad efforts to keep borrowers in their homes. Most of the problem remains centered in hard-hit states such as Arizona and Nevada, RealtyTrac said.

Source: Reuters, Washington Post

No Big Fix for Global Finance

World leaders have talked bravely about fixing the global financial system. But as they head into a highly anticipated G-20 summit later this month in Pittsburg, their plans appear to be far less ambitious than what some voices were advocating as recently as last spring. Improvements in the global economy and financial markets have sapped momentum from reformers. But industry insiders such as Goldman Sachs chief Lloyd Blankfein also are talking up self-restraint.

Sources: BusinessWeek, Wall Street Journal

Suntory in Talks to Buy Orangina from Blackstone, Lion Capital

Japanese beverage conglomerate Suntory, which sells everything from whisky to green tea, is in talks to buy French orange drink maker Orangina from its private equity owners, Blackstone Group and Lion Capital. The firms bought Orangina three years ago from Cadbury for $2.6 billion and are expected to sell it to Osaka-based Suntory for at least $2.7 billion.

Source: Times of London

Brazilian Oil Find Could 'Dwarf' BP's Mexico Strike

The potential for Brazil to become one of the biggest oil producers in the world was highlighted Sept. 9 when BG, the former exploration arm of British Gas, reported a "supergiant" field with up to two billion barrels of recoverable reserves. The Guara discovery builds on a series of other major successes in very deep waters off Brazil and dwarfs rival strikes such as Tiber in the U.S. Gulf, which was announced with great fanfare by BP last week.

Source: Guardian

Europeans Reconsider Carbon Tax

Economists have long favored a carbon tax because of its simplicity: Polluters pay at a level that is set by decree. But the idea never caught on in the United States or Europe, which opted instead for the market-based cap-and-trade mechanism. Now, amid signs that progress in meeting greenhouse gas reduction targets has been only modest, carbon tax schemes are making something of a comeback among policymakers.

Source: New York Times

Bharti and MTN Agree to Terms of $24 Billion Merger

Bharti Airtel Ltd., India's biggest mobile-phone company, and South Africa's MTN Group Ltd. reached a $24 billion preliminary accord to buy each other's shares, the first step in a planned merger, three people familiar with the matter said. The world's biggest cross-border deal this year would pave the way for the creation of a mobile-phone carrier with annual sales of $20 billion and 200 million wireless subscribers from Johannesburg to Mumbai.

Source: Bloomberg

Can Motorola Save Itself with Android Smartphones?

After floundering for three years in search of a turnaround, the inventor of cellular phone technology and one-time market leader will unveil a new line of smartphones Sept. 10 based on the Android operating system from Google. Will the new models be enough to revive Moto's fortunes—or too little, too late?

Source: MarketWatch

Battle of the Comic Books

In the wake of Disney's acquisition of Marvel Entertainment, rival film studio Warner Bros. revealed on Sept. 9 a restructuring of its DC Comics unit that the company hopes will put it under tighter control and boost its competitive positioning in what looks to be a pending race to bring more comic book heroes to the big screen.

Source: Los Angeles Times

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