[Articles of Interest] GS Caltex, Hana Lead Korean Race to Beat Government Bond Glut

By Tom Kohn and Bomi Lim

April 1 (Bloomberg) -- Borrowers led by GS Caltex Corp., South Korea’s second-largest oil refiner, and Hana Financial Group Inc. more than doubled bond sales this year as they raced to raise cash before the nation’s $13 billion in stimulus measures increase interest costs.

Companies sold 19 trillion won ($13.8 billion) in local- currency notes in the first quarter, the most in at least a decade and up from 8.3 trillion won in the same period a year earlier, according to data compiled by Bloomberg.

“There seems to be concern among companies that if they wait too long costs may become more expensive” as the government increases borrowing, said Lee Jung Joon, a fixed- income analyst at Kyobo Securities in Seoul.

South Korea added a 17.7 trillion won stimulus package on March 24 to the 51 trillion won in spending pledged over the past year to support an economy heading for its first recession since the Asian financial crisis a decade ago. The government plans to finance 16.9 trillion won of the stimulus by selling debt, pushing this year’s bond sales up 57 percent to a record 81.6 trillion won, the finance ministry said.

The yield on the benchmark 4.75 percent government note due 2014 has risen to 4.69 percent from 3.79 percent at the end of last year on concern sovereign bond auctions will overwhelm investor demand.

Companies across Asia risk being crowded out of “fickle capital markets” as governments increase bond sales to pay for their stimulus measures, according to a Feb. 10 report by the Asian Development Bank, which was formed in 1966 to help countries fight poverty.

Maturing Debt

As of the end of December, South Korea’s banks and highest- rated companies had about $195 billion in debt due to mature this year, compared with national foreign currency reserves of $201 billion, according to central bank data. Moody’s Investors Service said in January that more companies in Asia are facing default risks as the seizure in credit markets makes it harder to refinance maturing debt.

GS Caltex sold 400 billion won of 5.19 percent notes maturing 2012 in February to yield 145 basis points more than similar maturity government debt. The Seoul-based company issued 300 billion won of 6.49 percent three-year notes at a spread of 68 basis points in July, Bloomberg data show. A basis point is 0.01 percentage point.

Seoul-based Hana Financial, which sold 300 billion won in 5.3 percent notes in January, plans to sell the first bonds under a $100 billion guarantee offered by Korea’s government last year. The bank may need to pay a 6.25 percent yield on the three-year notes to get a “decent size” sale done, Hong Kong- based Calyon analyst Brayan Lai said in a March 26 interview.

Dollar Shortage

The finance ministry said on Feb. 26 that it wants to increase investment from overseas to help ease a shortage of foreign currency. The won slumped 5.5 percent against the dollar last quarter, making it the worst performing Asian currency this year. The economy shrank 3.4 percent in the fourth quarter amid a slump in exports of cars, ships and mobile phones.

South Korea sold $59 billion of foreign government and agency bonds to help local banks and companies repay maturing debt as the financial crisis starved the nation of dollars, the Bank of Korea said in a report yesterday.

“Korean corporates seek to benefit from the country’s cheap currency by borrowing in dollars and converting those proceeds into won on an unhedged basis,” said Scott Bennett, a fund manager at Aberdeen Asset Management Ltd. in Singapore, who oversees $800 million of Asian debt.

Overseas Sales

Seoul-based SK Telecom Co., South Korea’s biggest mobile- phone company, sold $333 million in 1.75 percent convertible bonds, while Pohang-based steelmaker Posco issued $700 million of five-year, 8.75 percent notes this month in Korea’s first corporate dollar bond sales of the year, Bloomberg data show.

Korea Railroad Corp., based in Daejeon, hired five banks to help it sell bonds overseas, spokesman Kim Joong Hak said March 17. The rail operator sold $500 million in 5.375 percent bonds maturing 2013 in May that yield 8.4 percent, according to Royal Bank of Scotland Group Plc prices. The notes yielded 10.71 percent Oct. 28 and 8.8 percent Feb. 23.

Seoul-based Samsung Heavy Industries Co., the world’s second-biggest shipyard, will sell 700 billion won in bonds to expand docks and for working capital, it said in a March 16 filing. A week later rival Daewoo Shipbuilding & Marine Engineering Co. said it plans to raise 500 billion won from a bond sale so it has money ready to pay suppliers.

Posco spokeswoman Ko Min Jin and communications officials at GS Caltex and Samsung Heavy declined to comment on their companies’ borrowing plans.

Working Capital

“For companies it’s very important to have plenty of cash on hand,” said Park Se Girl, a fund manager who oversees the equivalent of $1.4 billion at Meritz Asset Management Co. in Seoul. “It’s not that they are running out of cash, but more because they know they have to prepare for a recession.”

Asia’s fourth-largest economy shrank for the first time in 11 years in the final three months of 2008 as exports to the U.S., Europe and China fell. State spending on loans, infrastructure and training announced March 24 will boost economic growth by 1.5 percentage points and help create 552,000 jobs, according to government estimates.

“While the overall market sentiment hasn’t improved, we are seeing some demand for bonds sold by big companies that have good credit ratings,” said Lee at Kyobo. “Because people are looking for higher returns on investment, a lot of them are turning to corporate bonds that have very low risk of default.”

To contact the reporters on this story: Tom Kohn in Hong Kong at tkohn@bloomberg.net;

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The DECB Daily US Market Report

Dow =     7,608.92  86.90 (+) ; δ (last) = 335 ; δ (current) = 201
last week's range [7660, 7925] ; δ = 265 ; (6wks) = [6627, 7776]
last week's change range = [90, 498] ; (6-wks)  = [4, 498]
last week's δ range = [179, 502]
VIX  =    44.14  (-) ; δ (last) = 1.42 ; δ (current) = 3.27
last week's wk-avg =  41.962
last week's range [40, 43] ; δ = 3
last week's δ range = [1.77, 4.62]

{Futures/Commodities}
Oil    =   $49.90 (+) ;  δ (last) = 1.34 ; δ (current) = 1.55
last week's range [52, 54] ; δ = 2
last week's δ range = [0.4, 1.5]
UnleadG    =   $1.37 (-) ;  δ (last) = 0.06 ; δ (current) = 0
last week's range [1.45, 1.55] ; δ = 0.10
last week's δ range = [0, 0.02]
Corn    =   $404.75 (+) ;  δ (last) = 7.25 ; δ (current) = 24
last week's range [386, 396] ; δ = 10
last week's δ range = [3, 10]
Wheat    =   $532.75 (+) ;  δ (last) = 12 ; δ (current) = 25
last week's range [508, 549] ; δ = 41
last week's δ range = [9, 22]
Sugar    =   $21.65 (-) ;  δ (last) = 0.25 ; δ (current) = 0.20
last week's range [21.15, 21.65] ; δ = 0.50
last week's δ range = [0.05, 0.40]

{Other Indicators}
Dollar Index = 85.59 (-)  ; δ (last) = 0.06 ; δ (current) = 0.557
last week's range [83, 85] ; δ = 2
last week's δ range = [0.689, 0.554]
Baltic Dry Index = 1615  31 (-) ;
last week's range [1678, 1773] ; δ = 95
BRK/A - Berkshire Hathaway Inc = 86,700  1,100 (+)
last week's range [86850, 91900] ; δ = 5050
last week's change range = [1500, 5426]

*Red means out of range, below the lower bound
*Bold means out of range, above the upper bound
*Blue means slightly out of range, above the upper bound

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The DECB Daily Asian Market Report

NI225 {Japan} = 8,109.53  126.55 (-) ; δ (last) = 415 ; δ (current) = 295
last week's range [8216, 8636] ; δ = 420
last week's change range = [8, 270]
last week's δ range = [160, 306]

HK:HSI  {Hong Kong} = 13,576.02  119.689 (+) ;  δ (last) = 479 ; δ (current) = 269
last week's range [13447, 14120] ; δ = 673
last week's change range = [11, 614]
last week's δ range = [302, 449]

SENSEX {India} = 9,708.50  140.36 (+) ; δ (last) = 380 ; δ (current) = 279
last week's range [9403, 10049] ; δ = 646
last week's change range = [21, 457]
last week's δ range = [214, 415]

SHCOMP {SHANGHAI} = 2,373.213      15.173 (+) ;  δ (last) = 31 ; δ (current) = 77
last week's range [2292, 2374] ; δ = 82
last week's change range = [13, 70]
last week's δ range = [32, 87]

FSSTI:IND {Singapore STRAITS TIMES} = 1,699.99  26.85 (+) ;  δ (last) = 79 ; δ (current) = 49
last week's range [1664, 1757] ; δ = 93
last week's change range = [13, 67]
last week's δ range = [30, 59]

KOSDAQ  {SKorea} = 421.44  9.43 (+) ;  δ (last) =  15 ; δ (current) = 7
last week's range [409, 427] ; δ = 18
last week's change range = [3, 9]
last week's δ range = [5, 11]

KOSPI  {SKorea} = 1,206.26  8.80 (+) ;  δ (last) = 49 ; δ (current) = 25
last week's range [1200, 1244] ; δ = 44
last week's change range = [6, 30]
last week's δ range = [18, 27]

*Red means out of range, below the lower bound
*Bold means out of range, above the upper bound
*Blue means slightly out of range, above the upper bound

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The DECB Daily US Market Report

Dow =     7,522.02  254.16 (-) ; δ (last) = 187 ; δ (current) = 335
last week's range [7660, 7925] ; δ = 265 ; (6wks) = [6627, 7776]
last week's change range = [90, 498] ; (6-wks)  = [4, 498]
last week's δ range = [179, 502]
VIX  =    45.54  (+) ; δ (last) = 1.77 ; δ (current) = 1.42
last week's wk-avg =  41.962
last week's range [40, 43] ; δ = 3
last week's δ range = [1.77, 4.62]

{Futures/Commodities}
Oil    =   $48.41 (-) ;  δ (last) = 0.4 ; δ (current) = 1.34
last week's range [52, 54] ; δ = 2
last week's δ range = [0.4, 1.5]
UnleadG    =   $1.39 (-) ;  δ (last) = 0 ; δ (current) = 0.06
last week's range [1.45, 1.55] ; δ = 0.10
last week's δ range = [0, 0.02]
Corn    =   $386.25 (-) ;  δ (last) = 2.5 ; δ (current) = 7.25
last week's range [386, 396] ; δ = 10
last week's δ range = [3, 10]
Wheat    =   $512.50 (+) ;  δ (last) = 14.5 ; δ (current) = 12
last week's range [508, 549] ; δ = 41
last week's δ range = [9, 22]
Sugar    =   $21.80 (+) ;  δ (last) = 0.32 ; δ (current) = 0.25
last week's range [21, 22] ; δ = 1
last week's δ range = [0.05, 0.40]

{Other Indicators}
Dollar Index = 85.76 (+)  ; δ (last) = 0.554 ; δ (current) = 0.06
last week's range [83, 85] ; δ = 2
last week's δ range = [0.689, 0.554]
Baltic Dry Index = 1646  32 (-) ;
last week's range [1678, 1773] ; δ = 95
BRK/A - Berkshire Hathaway Inc = 85,600  4,000 (-)
last week's range [86850, 91900] ; δ = 5050
last week's change range = [1500, 5426]

*Red means out of range, below the lower bound
*Bold means out of range, above the upper bound

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The DECB Daily Asian Market Report

NI225 {Japan} = 8,236.08  390.89 (-) ; δ (last) = 216 ; δ (current) = 415
last week's range [8216, 8636] ; δ = 420
last week's change range = [8, 270]
last week's δ range = [160, 306]

HK:HSI  {Hong Kong} = 13,456.33  663.17 (-) ;  δ (last) = 302 ; δ (current) = 479
last week's range [13447, 14120] ; δ = 673
last week's change range = [11, 614]
last week's δ range = [302, 449]

SENSEX {India} = 9,568.14  480.351 (-) ; δ (last) = 214 ; δ (current) = 380
last week's range [9403, 10049] ; δ = 646
last week's change range = [21, 457]
last week's δ range = [214, 415]

SHCOMP {SHANGHAI} = 2,358.04  16.398 (-) ;  δ (last) = 32 ; δ (current) = 31
last week's range [2292, 2374] ; δ = 82
last week's change range = [13, 70]
last week's δ range = [32, 87]

FSSTI:IND {Singapore STRAITS TIMES} = 1,673.14  72.52 (-) ;  δ (last) = 50 ; δ (current) = 79
last week's range [1664, 1757] ; δ = 93
last week's change range = [13, 67]
last week's δ range = [30, 59]

KOSDAQ  {SKorea} = 412.01  9.23 (-) ;  δ (last) =  11 ; δ (current) = 15
last week's range [409, 427] ; δ = 18
last week's change range = [3, 9]
last week's δ range = [5, 11]

KOSPI  {SKorea} = 1,197.46  40.05 (-) ;  δ (last) = 23 ; δ (current) = 49
last week's range [1200, 1244] ; δ = 44
last week's change range = [6, 30]
last week's δ range = [18, 27]

*Red means out of range, below the lower bound
*Bold means out of range, above the upper bound

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[Articles of Interest] Geithner Says Some Banks Need ‘Large Amounts’ of Assistance

By Ryan J. Donmoyer

March 30 (Bloomberg) -- U.S. Treasury Secretary Timothy Geithner said some financial institutions will need substantial government aid, while warning against any attempt to tax investors who join a federal program to buy tainted assets from banks.

“Some banks are going to need some large amounts of assistance,” Geithner said yesterday on the ABC News program “This Week.” The terms of a $500 billion public-private program to aid banks “cannot change” for investors or they’ll lose confidence in the plan, he said on NBC’s “Meet the Press.”

The Obama administration is pursuing the most costly rescue of the U.S. financial system in history while facing taxpayer concerns the aid is bailing out Wall Street firms that took excessive risks. After allocating about 80 percent of $700 billion in aid approved by Congress, administration officials want to keep open the option of seeking more.

Geithner said the Treasury has about $135 billion left in a financial-stability fund while declining to say whether he will request additional money.

“If we get to that point, we’ll go to the Congress and make the strongest case possible and help them understand why this will be cheaper over the long run to move aggressively,” he told ABC News.

Geithner announced this month a plan shore up the nation’s banks with a public-private partnership to finance the purchase of illiquid real-estate assets. The program will ensure banks emerge from the crisis “cleaner” and “stronger,” Geithner told ABC News.

Purchasing Bad Debt

The plan is designed to purchase as much as $500 billion of bad debts and securities from banks, allowing the institutions to remove tainted assets, attract private capital and resume active lending, according to Geithner.

“The great risk is that we do too little rather than too much” to revive credit and stem what economists say may be the worst recession in seven decades, he said.

Banks need to show more willingness to take risks and restore lending to businesses in order for the U.S. economy to recover from the recession, Geithner said.

“To get out of this we need banks to take a chance on businesses, to take risks again,” he said.

Increases in housing purchases and small business lending indicate government aid is reviving markets, he said.

“Where we are acting, we are seeing progress and impact,” Geithner said on NBC yesterday.

Geithner defended the public-private partnership by saying it was better than the alternatives of requiring banks to weather the crisis with limited federal backing or having the government buy the financial institutions’ toxic assets.

Money at Risk

“The investors are taking risk, their money is at risk and at stake,” he said. Allowing investors to leverage their money with government contributions and guarantees “is a relatively conservative structure,” similar to when an individual obtains a mortgage to buy a house, he said.

Geithner’s comments are part of an effort by the Obama administration to leverage public anger over the financial crisis to win support for giving the Treasury sweeping new powers.

The public-private partnership plan has been criticized by Nobel Prize-winning economist Paul Krugman and other analysts as eliminating risk for investors.

Arizona Senator John McCain, the Republican nominee for president last year, said that while he hopes the new plan works, the Treasury’s efforts to bolster the economy have suffered from “a great deal of incoherency for a long time. It seemed like every few days there was a target du jour.”

Questionable Support

Most members of Congress probably wouldn’t support a request for new bailout funds because they aren’t clear about how the government used the $700 billion authorized in the first legislation, McCain said.

“We still don’t have the transparency and oversight,” McCain said on “Meet the Press.” He said his biggest concern is that the cost of stemming the financial crisis will worsen annual deficits projected to exceed $1 trillion for many years.

“What I am most worried about is laying the debt on future generations of Americans,” he said.

When asked on “This Week” whether Treasury had enough resources to provide a similar level of aid to struggling U.S. automakers, Geithner said the administration was “prepared as a government to help that process.”

“We want to have a strong automobile industry,” he said. “We want it to emerge from this period of challenge stronger.”

Stronger Industry

“We’re prepared as a government to help that process if we believe it’s going to provide the basis for a stronger industry in the future that’s not going to rely on government support.”

Separately, Geithner called on Latin American and Caribbean countries to help revive global growth by safeguarding free trade and stimulating their economies through “all available tools.”

The U.S. and other nations “need to affirm our commitment to maintain open policies toward international trade and investment and to avoid protectionist measures that could threaten recovery,” Geithner said yesterday at the Inter- American Development Bank meeting in Medellin, Colombia. He called on “international institutions” to quickly provide aid.

Geithner proposed last week bringing large hedge funds, private-equity firms and derivatives markets under federal supervision for the first time. A new systemic risk regulator would have powers to force companies to boost their capital or curtail borrowing, and officials would get the authority to seize them if they run into trouble.

To contact the reporter on this story: Ryan Donmoyer in Washington at rdonmoyer@bloomberg.net

Last Updated: March 30, 2009 00:00 EDT

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[Articles of Interest] Obama's New National Auto Industry

By Jeff Green and Doron Levin

March 30 (Bloomberg) -- General Motors Corp.Rick Wagoner was forced out after President Barack Obama’s task force decided he was unable to craft a plan to save the automaker Chief Executive Officer he ran for more than eight years.

Wagoner, 56, said he agreed to an administration request to leave. Chief Operating Officer Fritz Henderson will become CEO and director Kent Kresa will succeed Wagoner as chairman. GM had been seeking as much as $16.6 billion in new U.S. loans after an initial installment of $13.4 billion.

“It’s very hard for the government to write a big check without giving some evidence of change,” said John Casesa, managing partner at New York-based consulting firm Casesa Shapiro Group. “This will also give the government moral authority with the other stakeholders to make them sacrifice.”

Wagoner became a symbol of the failing U.S. auto industry in recent months after flying to Washington via corporate jet to ask for aid. Since taking over in 2000, he presided over $82 billion in losses during the past four years and yielded GM’s title as the world’s top-selling carmaker to Toyota Motor Corp.

General Motors fell as much as 57 cents, or 21 percent, to 2.15 euros and was down 15 percent as of 10:18 a.m. in Frankfurt. The stock has plunged 22.6 percent this year in Germany. GM tumbled 87 percent in New York Stock Exchange composite trading last year, the most among the 30 stocks in the Dow Jones Industrial Average.

Unsuccessful Push

His exit caps an unsuccessful five-month push to win U.S. aid without losing his job. Forced to work for $1 a year and cede most of his corporate perks, he had said he wouldn’t resign unless compelled. On March 27, 129 days after Congress’s first hearing on the future of GM, he got that call.

“On Friday I was in Washington for a meeting with administration officials,” Wagoner said in a statement. “In the course of that meeting, they requested that I ‘step aside’ as CEO of GM, and so I have.”

Henderson, 49, was tapped by Wagoner to become COO a year ago after serving as chief financial officer. He previously ran GM’s operations in Asia and Europe.

Obama will outline his ideas for GM at a briefing later today, giving the biggest U.S. automaker 60 days to devise a plan that cuts deeper and makes more changes.

Shedding Jobs

“The bailout loans aren’t hugely popular and that’s creating an issue for Obama,” said Jeremy Anwyl, CEO of Edmunds.com in Santa Monica, California, which tracks vehicle pricing and consumer behavior. “One way to make the loans more palatable is to be able to say the person responsible is no longer with GM.”

GM had said it will shed 47,000 jobs globally in 2009 and plans to close five assembly plants. Executives said the Detroit-based automaker will focus on four U.S. brands, down from eight, and eliminate thousands of dealers.

Wagoner oversaw those plans to meet the terms of the rescue unveiled on Dec. 19 by then-President George W. Bush, after Congress balked at a bailout for GM and Chrysler LLC. CEO Robert Nardelli will stay at Chrysler and must complete a planned alliance with Fiat SpA within 30 days, an Obama administration official said.

Obama’s task force pointed to GM’s failure to win concessions from bondholders, a step needed to cut the automaker’s debt and ensure future viability, as one reason the government needed a new plan.

Tumbling Bonds

GM’s latest debt exchange offer, made March 24, wasn’t likely to win bondholders’ approval because it’s less lucrative than the terms the U.S. required for the company to keep the first $13.4 billion in loans, a person briefed on the talks said. The bondholders didn’t seek Wagoner’s dismissal, the person said.

The government will push for even deeper cuts in debt now, the administration official said.

GM’s 8.375 percent bonds due July 2033 fell 2 cents to 18 cents on the dollar on March 27, yielding 46 percent, according to Trace, the bond-price reporting service of the Financial Industry Regulatory Authority. They traded at 71.7 cents on the dollar a year earlier.

Lampooned on NBC’s “Saturday Night Live” comedy show and lambasted by Congress for his private-jet flight, Wagoner said this month that he hadn’t been asked by the government or GM’s board to quit and that he intended to finish the restructuring.

Feeling Responsible

“It’s important and I feel like I have a responsibility to do it,” Wagoner said in a March 19 interview. “I plan to stay here until we get things well in shape and on track and beyond that, we’ll see.”

He joined GM in 1977, as U.S. automakers were fending off Japanese competitors that recognized a decade earlier that they would need to build fuel-efficient vehicles.

As CEO, he initially bet against gasoline-electric hybrid vehicles, focusing research on hydrogen technology while keeping the current lineup centered on pickups and sport-utility vehicles. GM offered its first full-scale hybrids in 2007, a decade after Toyota’s Prius debuted. He pressed for development of the Volt plug-in electric car when gasoline prices soared.

He used the purchase of South Korea’s Daewoo Motor Co. to expand GM’s overseas sales 51 percent to 5.5 million cars and trucks by 2007. That same year, he wrung concessions from labor unions, including cutting wages in half for new hires and offloading retiree health care to a union-run trust by 2010.

In 2006, Wagoner fended off billionaire Kirk Kerkorian’s push for an alliance with Renault SA and Nissan Motor Co.

“Maybe you can fault him for being too cautious,” Edmunds.com’s Anwyl said. “The real need for the loans is because the economy has fallen so much, which no one anticipated.”

New CEO

Henderson, 49, headed GM’s European operations and was group vice president for the Asia-Pacific region before becoming CFO in January 2006.

As European chief starting mid-2004, he led an effort that included cutting 12,000 jobs and oversaw that region’s first profit in five years. He started at GM in the treasurer’s office in New York in 1984.

Henderson as finance chief led efforts that raised about $21 billion, including selling assets such as the Allison Transmission unit and a 51 percent stake in the GMAC LLC finance unit, to pay for job cuts and develop new models while posting annual losses. He also stepped in to help resolve a labor agreement at Delphi Corp., the bankrupt auto-parts maker that is a former GM unit and is still the automaker’s largest supplier.

“Fritz is the obvious choice,” said Casesa, the consultant. “He’s run every region, he’s been No. 2 and he knows where all the bodies are buried.”

New Chairman

Kresa, 71, a former CEO of Northrop Grumman Corp., joined GM’s board in October 2003. His other directorships include Northrop Grumman, Fluor Corp. and Avery Dennison Corp., where he is chairman. According to Bloomberg data, Kresa holds bachelor’s and master’s degrees from Massachusetts Institute of Technology in Cambridge.

“I knew Kent Kresa from his days as a Chrysler director,” Delphi Chairman Steve Miller said. “He’s bright and insightful about how the auto industry works. He’s a very good choice.”

Steven Rattner, the lead adviser for the U.S. Treasury on Obama’s car task force, said as recently as March 20 that the future of Wagoner and Nardelli hadn’t been decided.

“They’re good guys really trying hard to run those companies and I have nothing bad to say about them,” Rattner said in a Bloomberg Television interview. “The decision about what we do about management will get wrapped up, ultimately, in the configuration of these companies.”

To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net; Doron Levin in Southfield, Michigan, at dlevin5@bloomberg.net.

Last Updated: March 30, 2009 04:22 EDT

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Depression Watch - Week in Review (Mar.23-Mar.27.2009)

{Dow}
(Fri) =        7,776.18   148.38 (-) ; δ (last) = 179 ; δ (current) = 187
(Thurs) =    7,924.56      174.75 (+) ; δ (last) = 314 ; δ (current) = 179
(Wed) =        7,749.81      89.84 (+) ; δ (last) = 150 ; δ (current) = 314
 (Tues) =    7,659.97      115.89 (-) ; δ (last) = 502 ; δ (current) = 150     
(Mon) =        7,775.86      497.48 (+) ; δ (last) = 203 ; δ (current) = 502
last week's range [7217, 7487] ;
last week's change range = [7, 179] ; (6-wks)  = [4, 382]
last week's δ = 270 ; 6wk δ range [190, 677]

{VIX}
(Fri) =           41.04  (+) ; δ (last) = 2.08 ; δ (current) = 1.77
(Thurs) =     40.36  (-) ; δ (last) = 3.39 ; δ (current) = 2.08
(Wed) =     42.25  (-) ; δ (last) = 2.37 ; δ (current) = 3.39
(Tues) =     42.93  (-) ; δ (last) = 4.62 ; δ (current) = 2.37
(Mon)  =     43.23  (-) ; δ (last) = 4.56 ; δ (current) = 4.62
Normal =     30 [3 +/-] {Best Fit Curve: Trig. function}
last week's wk-avg =  44.022
last week's range [40, 50] ; δ = 10

{BRK/A:US - Berkshire Hathaway Inc}
(Fri) =        89,600  2,300 (-)
(Thurs) =     91,900  5,050 (+)
(Wed) =     86,850  1,650 (-)
(Tues) =     88,500    1,500 (-)
(Mon) =     90,000  5,426 (+)
last week's range [81690, 85000] ; δ = 3310

{Futures/Commodities}
{Oil}
(Fri) =           $52.38 (-) ;  δ (last) = 0.75 ; δ (current) = 0.4
(Thurs) =     $54.34 (+) ;  δ (last) = 1.2 ; δ (current) = 0.75 
(Wed) =     $52.77 (-) ;  δ (last) = 1.35 ; δ (current) = 1.2            
(Tues)    =     $53.98 (+) ;  δ (last) = 1.5 ; δ (current) = 1.35
(Mon)    =     $53.80 (+) ;  δ (last) = 1.78 ; δ (current) = 1.5    
last week's range [47, 51] ; δ = 4

{UnleadG}
(Fri) =        $1.55 (+) ;  δ (last) = 0 ; δ (current) = 0
(Thurs) =     $1.53 (+) ;  δ (last) = 0 ; δ (current) = 0 
(Wed) =     $1.45 (-) ;  δ (last) = 0 ; δ (current) = 0            
(Tues)    =     $1.47 (-) ;  δ (last) = 0.02 ; δ (current) = 0
(Mon)    =     $1.49 (--) ;  δ (last) = --- ; δ (current) = 0.02    
last week's range [--, --] ; δ = --

{Corn}
(Fri) =        $387.00 (-) ;  δ (last) = 4.25 ; δ (current) = 2.5
(Thurs) =     $390.75 (+) ;  δ (last) = 5.75 ; δ (current) = 4.25 
(Wed) =     $386.00 (-) ;  δ (last) = 5.5 ; δ (current) = 5.75            
(Tues)    =    $393.75 (-) ;  δ (last) = 10 ; δ (current) = 5.5
(Mon)    =    $395.50 (--) ;  δ (last) = --- ; δ (current) = 10     
last week's range [--, --] ; δ = --

{Wheat}
(Fri) =        $508.00 (-) ;  δ (last) = 8.5 ; δ (current) = 14.5
(Thurs) =     $514.50 (+) ;  δ (last) = 22 ; δ (current) = 8.5 
(Wed) =     $508.00 (-) ;  δ (last) = 17 ; δ (current) = 22            
(Tues)    =    $535.00 (-) ;  δ (last) = 14 ; δ (current) = 17
(Mon)    =    $549.25 (--) ;  δ (last) = --- ; δ (current) = 14    
last week's range [--, --] ; δ = --

{Sugar}
(Fri) =        $21.65 (+) ;  δ (last) = 0.05 ; δ (current) = 0.32
(Thurs) =     $21.30 (-) ;  δ (last) = 0.3 ; δ (current) = 0.05 
(Wed) =     $21.35 (+) ;  δ (last) = 0.4 ; δ (current) = 0.3            
(Tues)    =    $21.15 (+) ;  δ (last) = 0.4 ; δ (current) = 0.4
(Mon)    =    $--- (--) ;  δ (last) = --- ; δ (current) = --
last week's range [--, --] ; δ = --

{Baltic Dry Index}
(Fri) =        1678  36 (-)
(Thurs) =     1714  26 (-)
(Wed) =        1740  18 (-)
(Tues) =     1758  15 (-)
(Mon) =     1773      9 (-)
last week's range [1782, 2058] ; δ = 276

{Dollar Index}
(Fri) =        85.14 (+)  ; δ (last) = 0.554 ; δ (current) = 0.554
(Thurs) =     83.92 (+)  ; δ (last) = 1.011 ; δ (current) = 0.554
(Wed) =     83.70 (-)  ; δ (last) = 0.689 ; δ (current) = 1.011          
(Tues)    =    84.06 (+)  ; δ (last) = 0 ; δ (current) = 0.689
(Mon)    =    83.40 (-)  ;
last week's range [83, 87] ; δ = 4

{Asia}
{NI225 - Japan}
(Fri) =        8,626.97  9.3604 (-) ; δ (last) = 256 ; δ (current) = 216
(Thurs) =     8,636.33  156.34 (+) ; δ (last) = 160 ; δ (current) = 256
(Wed) =     8,479.99  8.3096 (-) ; δ (last) = 207 ; δ (current) = 160
(Tues) =     8,488.30  272.77 (+) ; δ (last) = 306 ; δ (current) = 207
(Mon) =     8,215.53  269.57 (+) ; δ (last) = 131 ; δ (current) = 306
last week's range [7704, 7972] ; δ = 268
last week's change range = [26, 245]

{HK:HSI - Hong Kong}
(Fri) =        14,119.50  10.52 (+) ;  δ (last) = 313 ; δ (current) = 302
(Thurs) =     14,108.98  486.87 (+) ;  δ (last) = 325 ; δ (current) = 313
(Wed) =     13,622.11  288.229 (-) ;  δ (last) = 415 ; δ (current) = 325
(Tues) =     13,910.34  462.92 (+) ;  δ (last) = 449 ; δ (current) = 415
(Mon) =     13,447.42  613.91 (+) ;  δ (last) = 361 ; δ (current) = 449
last week's range [12834, 13131] ; δ = 297
last week's change range = [13, 451]

{SENSEX:IND - BSE SENSEX 30 INDEX India}
(Fri) =      10,048.49  45.391 (+) ; δ (last) = 226 ; δ (current) = 214
(Thurs) =     9,923.36  255.46 (+) ; δ (last) = 274 ; δ (current) = 226
(Wed) =     9,667.90  196.86 (+) ; δ (last) = 296 ; δ (current) = 274
(Tues) =     9,402.64  21.38 (-) ; δ (last) = 415 ; δ (current) = 296
(Mon) =     9,424.02  457.34 (+) ; δ (last) = 133 ; δ (current) = 415
last week's range [8864, 8996] ; δ = 132
last week's change range = [19, 187]

{SHCOMP:IND SHANGHAI SE COMPOSITE IX}
(Fri) =        2,374.438     12.734 (+) ;  δ (last) = 87 ; δ (current) = 32
(Thurs) =     2,361.704     70.149 (+) ;  δ (last) = 65 ; δ (current) = 87
(Wed) =     2,291.555     46.865 (-) ;  δ (last) = 42 ; δ (current) = 65
(Tues) =     2,338.42      12.94 (+) ;  δ (last) = 52 ; δ (current) = 42
(Mon) =     2,325.48      44.393 (+) ;  δ (last) = 44 ; δ (current) = 52
last week's range [2153, 2281] ; δ = 128
last week's change range = [5, 65]

{FSSTI:IND Singapore STRAITS TIMES INDEX}
(Fri) =        1,745.66  13.13 (-) ;  δ (last) = 59 ; δ (current) = 50
(Thurs) =     1,756.56  64.88 (+) ;  δ (last) = 30 ; δ (current) = 59
(Wed) =     1,691.68  14.66 (-) ;  δ (last) = 42 ; δ (current) = 30
(Tues) =      1,706.34  42.26 (+) ;  δ (last) = 55 ; δ (current) = 42
(Mon) =      1,664.08  67.16 (+) ;  δ (last) = 23 ; δ (current) = 55
last week's range [1559, 1597] ; δ = 38
last week's change range = [9, 28]

{KOSDAQ - SKorea}
(Fri) =        421.24  6.03 (-) ;  δ (last) =  8 ; δ (current) = 11
(Thurs) =     427.27  7.98 (+) ;  δ (last) =  6 ; δ (current) = 8
(Wed) =     419.29  6.90 (+) ;  δ (last) =  6 ; δ (current) = 6
(Tues) =      412.39  3.16 (+) ;  δ (last) = 5 ; δ (current) = 6
(Mon) =      409.23  8.52 (+) ;  δ (last) = 4 ; δ (current) = 5
last week's range [388, 401] ; δ = 13
last week's change range = [9, 28]

{KOSPI - SKorea}
(Fri) =        1,237.51  6.29 (-) ;  δ (last) = 27 ; δ (current) = 23
(Thurs) =     1,243.80  14.78 (+) ;  δ (last) = 18 ; δ (current) = 27
(Wed) =     1,229.02  7.3201 (+) ;  δ (last) = 21 ; δ (current) = 18
(Tues) =     1,221.70  22.20 (+) ;  δ (last) = 22 ; δ (current) = 21
(Mon) =     1,199.50      28.56 (+) ;  δ (last) = 16 ; δ (current) = 22
last week's range [1125, 1171] ; δ = 46
last week's change range = [1, 38]

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[Articles of Interest] Bankers upbeat after DC meet, still want to repay TARP

By MarketWatch

Last update: 4:07 p.m. EDT March 27, 2009

WASHINGTON (MarketWatch) - Top banking CEOs emerged from a Friday meeting at the White House with President Obama saying that they are on board with the administration to do whatever they can to get the economy back on track, but that they remain anxious to pay back government investments in their firm's and end their direct ties with Washington.

Chief Executive Jamie Dimon told CNBC Friday that J.P. Morgan Chase & Co. is looking for guidance from the Treasury Department about when to repay money the bank got last year from the Troubled Asset Relief Program. He also noted that Wall Street compensation practices "went too far" and that banks made a lot of mistakes in this area.

Dimon and chief executives of several other top U.S. banks made the pilgrimage to Washington Friday for a noontime meeting with President Barack Obama to discuss ongoing risks to the financial system and a new regulatory framework.

Obama told the bankers that "getting the economy back on track will require an understanding that each of us must look beyond our own short-term interests to the wider set of obligations we have to each other," the White House said.

The president called the meeting, productive, and the White House reported that he was "very pleased", with the results.

Dimon told CNBC that his firm has already forced many top staffers to take more of their compensation in stock in an effort to align their interests more with other shareholders.

He also said J.P. Morgan doesn't need to raise equity capital, and added that March has been "a little tougher" than January and February. Bank of America's CEO Ken Lewis also told CNBC that his firm's trading book was not as strong in March as it had been in January and February.

Goldman Sachs CEO Lloyd Blankfein and Morgan Stanley CEO John Mack also said they would like to repay the Troubled Asset Relief Program investments when it's prudent.

Goldman's Blankfein also said the firm is "anxious" to get the results of the government's so-called stress test, which is scheduled to be completed by the end of April. He said the firm is already confident about its financial strength, but needs to hear what regulators think. After that, Goldman may be in a position to repay money it got last year from the government's TARP program.

Blankfein noted that repaying TARP money is in taxpayers' interests.

Treasury pushing for more and more control

The closed-door meeting with the 15 men followed on the heels of Treasury Secretary Timothy Geithner's unveiling of a plan for sweeping new "rules of the game" that seek to expand federal regulatory powers over a broader swath of the financial industry. See full story on Geithner's plans.

Among other things, Geithner pushed Congress to give federal regulators new powers over hedge funds and their advisers and to apply oversight to such exotic securities as credit default swaps and over-the-counter derivatives. See related story.

Money-market mutual funds also need tougher rules to eliminate the risk of sudden withdrawals. Other ideas that have already been touted include a single systemic regulator, higher capital standards and government power to shut down large financial firms in an orderly manner.

Citigroup Inc.'s  Vikram Pandit, Goldman Sachs Group's  Lloyd Blankfein and J.P. Morgan Chase & Co.'s  Jamie Dimon were among the CEOs attending the meeting.

Others attending include Bank of America's  Ken Lewis, Freddie Mac's  John Koskinen, American Express'  Ken Chenault, Robert Kelly of Bank of New York-Mellon  , Ronald Logue of State Street  . Rick Waddell of Northern Trust  , James Rohr of PNC  , Jack Mack of Morgan Stanley  , John Stumpf of Wells Fargo  , and Richard Davis of US Bancorp  .

Two banking industry leaders were also in the room: Cam Fine of the Independent Community Bankers and Edward Yingling of the American Bankers Association.

Tension between the financial-services sector and the administration has increased in recent weeks amid a national furor over bonuses paid out by American International Group Inc.  and by proposed legislation that could tax bonuses heavily.

The government's planned "stress test" of banks, due to be finished at the end of April, has also had the effect of putting intense pressure on bank shares in recent months.

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The DECB Daily Asian Market Report

NI225 {Japan} = 8,626.97  9.3604 (-) ; δ (last) = 256 ; δ (current) = 216
last week's range [7704, 7972] ; δ = 268
last week's change range = [26, 245]

HK:HSI  {Hong Kong} = 14,119.50  10.52 (+) ;  δ (last) = 313 ; δ (current) = 302
last week's range [12834, 13131] ; δ = 297
last week's change range = [13, 451]

SENSEX {India} = 10,048.49  45.391 (+) ; δ (last) = 226 ; δ (current) = 214
last week's range [8864, 8996] ; δ = 132
last week's change range = [19, 187]

SHCOMP {SHANGHAI} = 2,374.438      12.734 (+) ;  δ (last) = 87 ; δ (current) = 32
last week's range [2153, 2281] ; δ = 128
last week's change range = [5, 65]

FSSTI:IND {Singapore STRAITS TIMES} = 1,745.66  13.13 (-) ;  δ (last) = 59 ; δ (current) = 50
last week's range [1559, 1597] ; δ = 38
last week's change range = [9, 28]

KOSDAQ  {SKorea} = 421.24  6.03 (-) ;  δ (last) =  8 ; δ (current) = 11
last week's range [388, 401] ; δ = 13
last week's change range = [9, 28]

KOSPI  {SKorea} = 1,237.51  6.29 (-) ;  δ (last) = 27 ; δ (current) = 23
last week's range [1125, 1171] ; δ = 46
last week's change range = [1, 38]

*Red means out of range, below the lower bound
*Bold means out of range, above the upper bound

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[Articles of Interest] Geithner sends dollar on roller-coaster ride

By Nick Godt, MarketWatch

Last update: 6:00 p.m. EDT March 25, 2009

NEW YORK (MarketWatch) -- Treasury Secretary Timothy Geithner shook markets Wednesday when some of his comments over China's call for a new global reserve currency led to confusion over U.S. policy and triggered a brief plunge in the dollar.

Speaking at a conference in New York, Geithner was asked his thoughts about comments from People's Bank of China Gov. Zhou Xiaochuan, who has called for a new international reserve currency to replace the dollar.

Earlier this week, Zhou suggested that the International Monetary Fund's Special Drawing Right should be given a greater role. The SDR is an international reserve asset, created by the IMF in 1969 to support the Bretton Woods fixed exchange-rate system. Its value is based on a basket of key international currencies. Read more on China's call for a new reserve currency.

"I haven't read the entire proposal," Geithner said. "But the governor is a sensible man [and] anything he says deserves consideration." As for "increasing the IMF drawing reserves, we are favorable to that."

The dollar index , which measures the U.S. unit against a trade-weighted basket of six major currencies, plunged about 1% in the minutes following Geithner's remarks.

The sharp market reaction forced Geithner to clarify his statements during his press conference.

The dollar remains the main global reserve currency, Geithner said, adding he does not see a change in that status in the foreseeable future. Speaking later on CNBC, he further clarified official U.S. policy by reiterating the Treasury's long-held stance that a strong dollar is in America's interest.

The dollar regained some lost ground after the clarification. See Currencies.

"But the damage was done," said Michael Gregory, senior economist at BMO Capital Markets.

"There are theoretical merits to a non-country specific reserve currency such as the SDR," Gregory said. "But two wrongs don't make a right, and this is not a university lecture."

"Perhaps Geithner was attempting to give the Chinese an olive branch after his early-in-term politically-incorrect comment that China is manipulating the yuan," Gregory said, referring to comments Geithner made in January.

U.S.-China policy

Zhou's suggestions and Geithner's comments came ahead of a key meeting between leading nations next week.

Finance ministers and central bankers from the G20, which includes 19 of the world's largest economies and the European Union, are due to meet April 2, to address ways to tackle the global financial and economic crisis.

While currency policy is not on the official agenda, underlying tensions may come to the fore.

Tensions over currency and trade were a fixture of U.S.-Chinese relations over the past few years. The U.S., along with other countries, has accused Beijing of keeping the yuan artificially low in order to boost its exports.

The global financial and economic meltdown has partly changed the game. China is the largest holder of U.S. Treasury debt, and as it continues to buy more government bonds each month, Beijing helps keep interest rates low in the U.S. Yields on government bonds, which move inversely to their price, are used to benchmark mortgage rates and other consumer loans.

But with the U.S. now planning to spend $1 trillion to rescue its ailing banks, Chinese Premier Wen Jiabo indicated earlier this month that China worried about the safety of its U.S. investments in Treasurys.

Although the dollar has been stronger in recent months, as global investors turned to it as a safe haven asset, some worry that the U.S. currency could resume its multi-year decline as the government floods the system with dollars to boost the economy.

Last week, the Federal Reserve led the dollar to plunge as it announced a plan to buy up to $300 billion of Treasurys to bring borrowing costs down.

And on Wednesday, a Treasury auction of $34 billion worth of five-year notes drew less-than-expected demand. Indirect bidders, a closely watched metric because it includes buying by foreign central banks, bought 30% of the monthly auction, the lowest since December. See Bond Report.

Still, the U.S. might be unofficially open to expanding the IMF's SDR system, which would result in a marginally weaker dollar, according to some analysts.

"A weaker dollar is stimulative for the U.S. economy and would relieve the U.S. of worrying about implementing effective monetary policy while weighing the international demand for a reserve currency," said Kathy Lien, director of currency research at Global Forex Trading.

Still, speaking on CNBC, Geithner said that a strong dollar was in America's interest. The Obama administration will do "everything" to improve America's economy and to keep the U.S. debt burden "at a low and stable level", he said.

The U.S., he said, is working "very closely" with China, and China "has a lot of confidence in U.S. policy."

Nick Godt is a MarketWatch reporter based in New York.

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The DECB Daily Market Report

Dow =     7,924.56      174.75 (+) ; δ (last) = 314 ; δ (current) = 179
last week's range [7217, 7487]
last week's change range = [7, 179] ; (6-wks)  = [4, 382]
last week's δ = 270 ; 6wk δ range [190, 677]
VIX  =    40.36  (-) ; δ (last) = 3.39 ; δ (current) = 2.08
last week's wk-avg =  44.022
last week's range [40, 50] ; δ = 10
Oil    =   $54.34 (+) ;  δ (last) = 1.2 ; δ (current) = 0.75
last week's range [47, 51] ; δ = 4
UnleadG    =   $1.53 (+) ;  δ (last) = 0 ; δ (current) = 0
last week's range [--, --] ; δ = --
Corn    =   $390.75 (+) ;  δ (last) = 5.75 ; δ (current) = 4.25
last week's range [--, --] ; δ = --
Wheat    =   $514.50 (+) ;  δ (last) = 22 ; δ (current) = 8.5
last week's range [--, --] ; δ = --
Sugar    =   $21.30 (-) ;  δ (last) = 0.3 ; δ (current) = 0.05
last week's range [--, --7] ; δ = --
Dollar Index = 83.92 (+)  ; δ (last) = 1.011 ; δ (current) = 0.554
last week's range [83, 87] ; δ = 4
Baltic Dry Index = 1,714      26 (-) ;
last week's range [1782, 2058] ; δ = 276
BRK/A - Berkshire Hathaway Inc = 91,900  5,050.00 (+)
last week's range [81690, 85000] ; δ = 3310

*Red means out of range, below the lower bound
*Bold means out of range, above the upper bound

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[Articles of Interest] Obama Administration Revives Tax Battle With Oil Industry

By STEPHEN POWER and SIOBHAN HUGHES

The Obama administration's push to raise taxes on the oil industry is reigniting a battle the industry fought and won last year.

Under pressure to narrow projected deficits, President Barack Obama's 2010 budget proposal calls for raising more than $31 billion over the next decade by eliminating the oil and gas industry's eligibility for various tax breaks.

Associated Press

Interior Secretary Ken Salazar, center. Mr. Salazar signaled that the administration might reconsider some proposed tax increases on small, independent producers.

The plan would slap companies with a new excise tax on production in the Gulf of Mexico worth $5.3 billion between 2010 and 2019, and repeal the industry's eligibility for a manufacturing tax credit worth $13.3 billion in that period. The industry says the final cost of Mr. Obama's proposals on petroleum production could top $400 billion, once his plan to put a price on greenhouse-gas emissions is factored in.

The Obama administration has generally justified its proposals by arguing that taxpayers deserve a better deal. Speaking to the American Petroleum Institute this month, Interior Secretary Ken Salazar cited a recent report by the Government Accountability Office that said the U.S. receives a low share of revenue for oil and gas resources compared with other countries.

In an interview Wednesday, Mr. Salazar signaled that the administration might reconsider some proposed tax increases on small, independent producers.

"If it is going to have a disproportionate impact on a mom-and-pop kind of operation, I do think that's something that should be taken into consideration," Mr. Salazar said. In general, he added, "the oil and gas companies have all the incentives they need" for exploration and output.

At other times, the administration has tied its proposals to its environmental agenda. Testifying before Congress this month, Treasury Secretary Timothy Geithner said, "We don't believe it makes sense to significantly subsidize the production and use of sources of energy that are dramatically going to add to our climate change."

The oil industry, which in its campaign donations has long favored Republicans, is taking its case to voters. A new ad campaign by the American Petroleum Institute in about a dozen states says new taxes would "hobble our ailing economy" and "cost thousands of American jobs."

"I think we should pay our fair share of taxes, but I don't think we should look at this industry as the source of all money to pay for the renewable energy industry," said Peter Robertson, vice chairman of Chevron Corp. Mr. Robertson said Mr. Obama's tax proposals will discourage domestic oil and natural-gas production and undermine his goal of reducing U.S. dependence on foreign oil.

On Wednesday, a White House spokesman said the administration's budget seeks to "transition our nation to a clean-energy economy fueled by domestic sources."

The fight over how much oil companies should pay the federal government is a Washington perennial.

In recent years, surging crude prices have led to record profits for the major oil companies. A report by the Congressional Research Service last year said the top five major integrated companies -- Exxon Mobil Corp., Royal Dutch Shell PLC, BP PLC, Chevron and ConocoPhillips -- generated more than $100 billion in profits on nearly $1.5 trillion of revenue in 2007.

Last summer, when oil prices were near record highs, Democrats in Congress proposed slapping a windfall-profits tax on oil producers, rescinding various tax breaks for the industry and using the money raised to fund alternatives such as wind and solar power. The oil industry said the proposals would do nothing to bring down $4-a-gallon gas prices. The legislation died.

Now, oil prices are down 63% from their highs. Many companies are cutting back on investment in exploration and production. That is raising fears that the industry won't be able to respond quickly once the economy recovers and demand for oil returns.

Instead of raising their taxes, oil producers say the government should open up more offshore and onshore territory for exploration, a step the industry says would lead to billions of dollars in additional royalties for the government. But some Democrats note recent government audits have questioned how effectively the U.S. tracks domestic oil production, and have found cozy relations between industry officials and government royalty collectors.

"That's our No. 1 goal -- to make sure the mechanisms are in place to collect [royalties]," said Rep. Nick Rahall (D., W.Va.), chairman of the House Natural Resources Committee.

Write to Stephen Power at stephen.power@wsj.com and Siobhan Hughes at siobhan.hughes@dowjones.com

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[Articles of Interest] Roubini Says Geithner Plan Won’t Prevent Bank Nationalizations

By Simon Kennedy and Maithreyi Seetharama

March 26 (Bloomberg) -- U.S. Treasury Secretary Timothy Geithner’s new plan to remove toxic assets from the books of the nation’s banks won’t stop some financial companies from having to be nationalized, said Nouriel Roubini, the New York University professor who predicted the financial crisis.

Geithner’s plan, unveiled three days ago, is aimed at financing as much as $1 trillion in purchases of illiquid real- estate assets, using $75 billion to $100 billion of the Treasury’s remaining bank-rescue funds.

Roubini echoed criticism from Nobel laureate Paul Krugman that the proposal will not be enough for those banks that are insolvent and predicted that ultimately the government will have to take over more of them. He didn’t name which companies he thought would need to be rescued.

“Some banks are going to have to be nationalized and for them the plan doesn’t apply,” Roubini said in an interview with Bloomberg Television in London today.

While the Standard & Poor’s 500 Index is recording its best monthly rally in 17 years, Roubini predicted it will not be sustained as the U.S. economy will continue to contract through this year and investors will start “discriminating” between solvent and insolvent financial companies.

“People are going to be surprised to the downside,” Roubini said.

The government is conducting stress tests of banks to determine how much more capital each will need. Roubini said once those were completed it will be evident that some banks will need to be taken over and have their good and bad assets separated before being returned to the private sector.

Geithner’s Plan

Critics of Geithner’s plan including Krugman, a professor at Princeton University, say the government should take over banks loaded with devalued assets, remove their top management, and dispose of the toxic securities. Sweden adopted the temporary nationalization approach in the 1990s.

Roubini, who also runs his own economics consultancy, estimates a total of $3.6 trillion of loan and securities losses in the U.S., including writedowns on $10.84 trillion of securities and losses on a total of $12.37 trillion of unsecuritized loans.

With “deflationary forces” lingering for as long as three years, Roubini said U.S. government bond yields were going to remain relatively low and that American house prices would fall as much as 20 percent more in the next 18 months. While the dollar will benefit as investors seek safe havens, it will ultimately decline as the U.S. trade deficit has to shrink, he said.

The need for governments to issue more public debt to fund stimulus and bank-rescue packages risked more downgrades to sovereign debt and the failure of more government auctions as happened in the U.K. yesterday, Roubini said.

To contact the reporter on this story: Simon Kennedy in Paris at skennedy4@bloomberg.net

Last Updated: March 26, 2009 04:33 EDT

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[Articles of Interest] Geithner to Seek Power Over Large U.S. Hedge Funds, Derivatives

By Robert Schmidt

March 26 (Bloomberg) -- Treasury Secretary Timothy Geithner will ask Congress to bring large hedge funds, private- equity firms and derivatives markets under federal supervision for the first time as part of a revamp of U.S. financial rules.

The Treasury chief will present his proposed framework at a House Financial Services Committee hearing in Washington today. Under the new so-called rules of the road, the government would get powers to seize and wind down any financial company big enough to destabilize the banking system.

The Obama administration is counting on public anger over the taxpayer-financed rescues of American International Group Inc., Bear Stearns Cos. and other firms to help it win approval for the changes, which could be the most sweeping since the 1930s. Policy makers want to improve the oversight of the financial system now rather than wait until the crisis is over, administration officials said on condition of anonymity.

“We have a moment now where there is broad-based will to change things that people did not want to change in the past,” Geithner said yesterday in a speech in New York. “We want to begin the process now of trying to build consensus while people recognize and are feeling so acutely the damage caused by those basic failures in regulation.”

Geithner plans to work with Congress to hammer out more details and legislation, the officials said. It’s unclear how quickly any bills could move through Congress because lawmakers are likely to have their own proposals.

Unchecked Risk-Taking

“Thoughtful and effective measures to prevent a repeat of the type of unchecked risk-taking that has currently put the system at risk are absolutely essential, and must be coordinated globally,” said Kirby Daley, senior strategist and head of capital introductions at Newedge Group in Hong Kong.

The Treasury secretary will also call for stronger protections against financial fraud for consumers and investors, an elimination of the gaps in oversight among regulatory agencies and stepped-up coordination with international counterparts. Details on those plans will be unveiled in coming weeks, the officials said.

The people also said Geithner will offer broad outlines and purposefully won’t get down to specifics, such as which agency should police credit default swaps. The swaps are a type of derivative that allows traders to bet on a company’s creditworthiness.

Wrong-Way Bets

AIG sold billions of dollars of the contracts with little money held in reserve in case the bets went wrong, helping seal the insurer’s downfall, Federal Reserve Chairman Ben S. Bernanke told lawmakers earlier this week. New York-based AIG also exposed the lack of federal powers to take over a non-bank financial firm and allow an orderly process for liquidating it.

Geithner’s framework would set up an independent overseer for systemically vital firms. While the Bush administration had proposed that the Federal Reserve take on that authority, Geithner won’t specify which agency should have the job. Bernanke has also called for a systemic-risk regulator, and said the central bank should have some role.

President Barack Obama will discuss the need for stronger global financial regulation at the summit of Group of 20 leaders in London on April 2.

The administration’s framework would make it mandatory for large hedge funds, private-equity firms and venture-capital funds to register with the Securities and Exchange Commission, subjecting them to new disclosure requirements and inspections by the agency’s staff.

Informing SEC

Once registered, the investment firms would also have to reveal to the SEC -- but not to the public -- information about their trades and counterparties. The SEC would share the data with the systemic-risk regulator, which could restrict the funds’ reliance on short-term financing and limit how much money they can borrow to maximize trading profits.

The investment firms would only fall under the increased scrutiny if they were deemed to pose systemic risks to the economy, the administration officials said.

Geithner plans to tell lawmakers today that the decision on which firms should be labeled systemically important should be based on characteristics that include a company’s size, its interdependence with the financial system, its leverage and how much it relies on short-term funding.

Capital Requirements

Other criteria would be whether the firm is a critical source of credit for households, businesses and governments or whether it’s a source of liquidity for the financial system, the officials said. Capital requirements for these companies would need to be high enough to withstand a range of deeply adverse economic scenarios, the officials said.

Geithner’s framework would also regulate derivatives by mandating that they be traded through so-called central counterparties.

The Fed, Commodity Futures Trading Commission and SEC have been working to set up “clearinghouses” for swaps trades to act as a buyer to every seller and a seller to every buyer, reducing the risk that one firm’s collapse could cause failed trades to reverberate throughout the market.

Regulators have said the lack of a clearinghouse to absorb losses contributed to the government’s $182.5 billion rescue of AIG. The bankruptcy in September of Lehman Brothers Holdings Inc. also exposed the market’s weaknesses.

Under Geithner’s proposal, clearinghouses would publicly disclose data on trading volumes. Regulators would have access to individual traders’ bets and counterparties.

Money-Market Runs

Geithner will also suggest that the SEC strengthen rules for money-market mutual funds to make them less susceptible to industrywide runs, such as when the flagship fund of Reserve Management Co. buckled last year.

The Treasury yesterday sent Congress its outline for so- called resolution authority, allowing federal regulators to seize and wind down non-bank financial institutions. The Federal Deposit Insurance Corp. already has that power for banks.

The Treasury and FDIC would be the main agencies that handle the resolution of the systemically important financial companies that aren’t banks. The plan uses procedures similar to the way the FDIC handles bank failures, without tapping the Deposit Insurance Fund used to safeguard bank deposits. A new funding mechanism would be used, the Treasury said.

To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net.

Last Updated: March 26, 2009 00:01 EDT

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The DECB Daily Asian Market Report

NI225 {Japan} = 8,636.33  156.34 (+) ; δ (last) = 160 ; δ (current) = 256
last week's range [7704, 7972] ; δ = 268
last week's change range = [26, 245]

HK:HSI  {Hong Kong} = 14,108.98      486.87 (+) ;  δ (last) = 325 ; δ (current) = 313
last week's range [12834, 13131] ; δ = 297
last week's change range = [13, 451]

SENSEX {India} = 9,923.36  255.46 (+) ; δ (last) = 274 ; δ (current) = 226
last week's range [8864, 8996] ; δ = 132
last week's change range = [19, 187]

SHCOMP {SHANGHAI} = 2,361.704      70.149 (+) ;  δ (last) = 65 ; δ (current) = 87
last week's range [2153, 2281] ; δ = 128
last week's change range = [5, 65]

FSSTI:IND {Singapore STRAITS TIMES} = 1,756.56  64.88 (+) ;  δ (last) = 30 ; δ (current) = 59
last week's range [1559, 1597] ; δ = 38
last week's change range = [9, 28]

KOSDAQ  {SKorea} = 427.27  7.98 (+) ;  δ (last) =  6 ; δ (current) = 8
last week's range [388, 401] ; δ = 13
last week's change range = [9, 28]

KOSPI  {SKorea} = 1,243.80  14.78 (+) ;  δ (last) = 18 ; δ (current) = 27
last week's range [1125, 1171] ; δ = 46
last week's change range = [1, 38]

*Red means out of range, below the lower bound
*Bold means out of range, above the upper bound

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The DECB Daily Market Report

Dow =     7,749.81      89.84 (+) ; δ (last) = 150 ; δ (current) = 314
last week's range [7217, 7487]
last week's change range = [7, 179] ; (6-wks)  = [4, 382]
last week's δ = 270 ; 6wk δ range [190, 677]
VIX  =    42.25  (-) ; δ (last) = 2.37 ; δ (current) = 3.39
last week's wk-avg =  44.022
last week's range [40, 50] ; δ = 10
Oil    =   $52.77 (-) ;  δ (last) = 1.35 ; δ (current) = 1.2
last week's range [47, 51] ; δ = 4
UnleadG    =   $1.45 (-) ;  δ (last) = 0 ; δ (current) = 0
last week's range [--, --] ; δ = --
Corn    =   $386.00 (-) ;  δ (last) = 5.5 ; δ (current) = 5.75
last week's range [--, --] ; δ = --
Wheat    =   $508.00 (-) ;  δ (last) = 17 ; δ (current) = 22
last week's range [--, --] ; δ = --
Sugar    =   $21.35 (+) ;  δ (last) = 0.4 ; δ (current) = 0.3
last week's range [--, --7] ; δ = --
Dollar Index = 83.70 (-)  ; δ (last) = 0.689 ; δ (current) = 1.011
last week's range [83, 87] ; δ = 4
Baltic Dry Index = 1740      18 (-) ;
last week's range [1782, 2058] ; δ = 276
BRK/A - Berkshire Hathaway Inc = 86,850  1,650 (-)
last week's range [81690, 85000] ; δ = 3310

*Red means out of range, below the lower bound
*Bold means out of range, above the upper bound

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The DECB Daily Asian Market Report

NI225 {Japan} = 8,479.99  8.3096 (-) ; δ (last) = 207 ; δ (current) = 160
last week's range [7704, 7972] ; δ = 268
last week's change range = [26, 245]

HK:HSI  {Hong Kong} = 13,622.11  288.229 (-) ;  δ (last) = 415 ; δ (current) = 325
last week's range [12834, 13131] ; δ = 297
last week's change range = [13, 451]

SENSEX {India} = 9,667.90  196.86 (+) ; δ (last) = 296 ; δ (current) = 274
last week's range [8864, 8996] ; δ = 132
last week's change range = [19, 187]

SHCOMP {SHANGHAI} = 2,291.555  46.865 (-) ;  δ (last) = 42 ; δ (current) = 65
last week's range [2153, 2281] ; δ = 128
last week's change range = [5, 65]

FSSTI:IND {Singapore STRAITS TIMES} = 1,691.68  14.66 (-) ;  δ (last) = 42 ; δ (current) = 30
last week's range [1559, 1597] ; δ = 38
last week's change range = [9, 28]

KOSDAQ  {SKorea} = 419.29  6.90 (+) ;  δ (last) =  6 ; δ (current) = 6
last week's range [388, 401] ; δ = 13
last week's change range = [9, 28]

KOSPI  {SKorea} = 1,229.02  7.3201 (+) ;  δ (last) = 21 ; δ (current) = 18
last week's range [1125, 1171] ; δ = 46
last week's change range = [1, 38]

*Red means out of range, below the lower bound
*Bold means out of range, above the upper bound

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The DECB Daily Market Report

Dow =     7,659.97      115.89 (-) ; δ (last) = 502 ; δ (current) = 150
last week's range [7217, 7487]
last week's change range = [7, 179] ; (6-wks)  = [4, 382]
last week's δ = 270 ; 6wk δ range [190, 677]
VIX  =    42.93  (-) ; δ (last) = 4.62 ; δ (current) = 2.37
last week's wk-avg =  44.022
last week's range [40, 50] ; δ = 10
Oil    =   $53.98 (+) ;  δ (last) = 1.5 ; δ (current) = 1.35
last week's range [47, 51] ; δ = 4
UnleadG    =   $1.47 (-) ;  δ (last) = 0.02 ; δ (current) = 0
last week's range [--, --] ; δ = --
Corn    =   $393.75 (-) ;  δ (last) = 10 ; δ (current) = 5.5
last week's range [--, --] ; δ = --
Wheat    =   $535.00 (-) ;  δ (last) = 14 ; δ (current) = 17
last week's range [--, --] ; δ = --
Sugar    =   $21.15 (+) ;  δ (last) = 0.4 ; δ (current) = 0.4
last week's range [--, --7] ; δ = --
Dollar Index = 84.06 (+)  ; δ (last) = 0 ; δ (current) = 0.689
last week's range [83, 87] ; δ = 4
Baltic Dry Index = 1,758    15 (-) ;
last week's range [1782, 2058] ; δ = 276
BRK/A - Berkshire Hathaway Inc = 88,500    1,500 (-)
last week's range [81690, 85000] ; δ = 3310

BLS - Unemployment = 8.1%

*Red means out of range, below the lower bound
*Bold means out of range, above the upper bound

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[Articles of Interest] Eat-What-You-Kill Bond Traders Rise From Wall Street Wreckage

By Caroline Salas and Pierre Paulden

March 24 (Bloomberg) -- Wall Street bond trading is heading back to the 1980s, when private partnerships and independent firms dominated the market.

Jon Bass, who traded debt five seats from Salomon Brothers Inc. Chairman John Gutfreund and later helped run fixed income at UBS AG, joined equity broker BTIG LLC to help start its credit operation last month. BTIG, with a pool table and gym adjoining its seventh-floor midtown Manhattan trading room, is one of more than 50 credit dealers seeking to take advantage of the widening gap at which securities are bought and sold.

Smaller firms are emerging from the wreckage of the world’s largest financial companies, which are conserving capital following more than $1.2 trillion of writedowns and credit losses since the start of 2007. They’re luring traders with a shot at $500,000 commissions for two days’ work as banks that accepted federal bailouts retrench and slash bonuses.

“I don’t mean to dance on anybody’s graves here, but it’s just this incredible opportunity to reassemble a securities firm that does business the right way,” said Lee Fensterstock, chief executive officer of one of the firms, Broadpoint Securities Group Inc. in New York. “That business is going to lead with brain as opposed to capital. We’re not planning to run big balance sheets or big leveraged positions.”

Bear Stearns, Lehman

Broadpoint, whose shares have outperformed Citigroup Inc.’s by almost 51 percentage points this year, has added more than 240 people since September 2007. They include traders from Bear Stearns Cos., Lehman Brothers Holdings Inc. and Merrill Lynch & Co., which either collapsed or were absorbed by bigger banks amid the worst financial crisis since the Great Depression. Cantor Fitzgerald LP, the closely held securities firm, has hired 100 people in the past six months from banks, including UBS and Bear Stearns.

Just as when Gutfreund, 79, walked the aisles of Salomon’s trading floor, BTIG’s principals aren’t secluded in their offices during the day, said Bass, 46, who most recently headed fixed-income client management at UBS.

“Back then it was motivating to see the person running the firm in the trenches,” Bass said. “It’s getting back to basics.”

Partnerships including Bear Stearns and Morgan Stanley went public in the 1980s, and many closely held firms disappeared into larger banking institutions by the end of the next decade. The trend accelerated after Sanford “Sandy” Weill’s creation of New York-based Citigroup and the 1999 repeal of the Depression-era Glass-Steagall Act, which had separated commercial and investment banks.

After Federal Reserve Chairman Alan Greenspan reduced interest rates at the start of the decade, banks borrowed inexpensively to buy long-term assets including subprime mortgage securities, said Michael Aronstein, Oscar Gruss & Son Inc.’s chief investment strategist.

‘Free’ Liquidity

“When liquidity became free, five or seven years ago, that changed the Street: You could trade $500 million of anything in a second,” said Shawn Matthews, chief executive officer of Cantor Fitzgerald & Co. in New York, a unit of Cantor Fitzgerald LP.

“It has to go back to a time where it looked and felt like it was in the ‘80s,’’ Matthews said. ‘‘How many 28-year olds can you put in positions to trade $2 billion?’’

Morgan Stanley’s trading profits rose to records in 2006 and early 2007 when its leverage, the ratio of assets to shareholder equity, rose to 33 times. The New York-based firm reported a record $2.9 billion of revenue from fixed income for the second quarter of 2007.

Banks traded their own investments alongside client orders, ‘‘combining hedge funds, which is what these places turned into, with customer-oriented businesses’’ and creating conflict-of- interest concerns, Aronstein, 55, said. ‘‘The fact is it ended in tears.’’

Subprime Losses

Losses in June 2007 at two Bear Stearns hedge funds that invested in subprime mortgage securities led to the firm’s government-arranged takeover by JPMorgan Chase & Co. of New York in March 2008. Six months later, Lehman Brothers filed for bankruptcy, and Charlotte, North Carolina-based Bank of America Corp. acquired Merrill Lynch as the world’s largest brokerage suffered almost $19 billion in net losses tied to mortgages.

New York-based Goldman Sachs Group Inc., which was the world’s biggest and most-profitable securities firm, and Morgan Stanley, converted to bank holding companies. Each received $10 billion from the U.S. government. UBS and Citigroup lost more than $138 billion and governments globally have intervened to protect the financial system from collapse.

‘Partnership Mentality’

‘‘If Wall Street had kept the partnership mentality we wouldn’t be in this mess,” said Matthews, 42, of Cantor Fitzgerald. “The universal bank model is wounded, if not destroyed.”

After financial institutions eliminated more than 284,000 jobs and slashed pay, smaller firms are hiring salesmen and traders who wouldn’t have considered boutiques during the boom, Fensterstock, 61, said.

Banks were paying “huge amounts of restricted stock,” to keep employees, he said. “Because of the decimation firms are either out of business or with the stock performance of a Bank of America or a Citigroup, that’s no longer a factor. You have this perfect storm,” he said.

Citigroup shares have tumbled 94 percent to $3.13 from its peak of $56.41 in December 2006. Bank of America has fallen 86 percent to $7.80 from $54.90 in November 2006.

Fensterstock, who ran PaineWebber’s worldwide sales and trading in the early 1990s, said commission-based compensation, known as eat what you kill, is an “extremely important” aspect of the boutique model.

Broadpoint wants to put about half of its trading revenue into employees’ pockets, with 30 percent to 40 percent for salesmen and 10 percent to 20 percent for traders, he said.

Banks Lower Pay

Some salesmen at the largest firms, which are reducing compensation as business slows under the glare of government oversight, saw their compensation fall from $2 million in 2007 to just their base salary of $150,000 in 2008, with no bonus, according to Michael Maloney, president of Wall Street recruiting firm Maloney Inc.

“All the A-level and B-level salesmen will make more money on commission,” Maloney said. “I know one salesman who made half a million dollars in his pocket in 48 hours. He could gross $500 million at Citibank and he’s not going to get paid a dime.”

For all the opportunity, many of the 50 start-up boutique dealers in New York won’t succeed, he said.

“They just don’t have enough critical mass,” Maloney said. “A lot of people are just setting up firms where they have a Bloomberg and five or six people they used to work with.”

Walking the Aisles

BTIG, which had five employees in 2002, plans to add at least 26 more salesmen and traders for investment-grade bonds, high-yield and distressed debt, said John Purcell, 50. With Bass, Purcell is co-head of global fixed income at the 270- person firm and ran global fixed-income syndicate at Citigroup.

ICP Capital, a boutique investment bank set up in 2004, has almost doubled its staff since last year’s second quarter to 74 people, including Patrick Russell, 40, the former co-head of residential mortgage trading at Morgan Stanley, said Carlos Mendez, a senior managing director at ICP.

John Costas, the former head of UBS’ investment bank, and Michael Hutchins, who previously headed the debt unit of UBS, are starting a financial services firm preliminarily named VinsonForbes.

Bid-Ask Spread

A shortage of trading capital at the biggest banks has increased the gap between how much they pay to buy or sell fixed-income securities. The so-called bid-ask spread has almost doubled to 19 basis points in the past six months, according to data compiled by Bloomberg.

Those spreads will narrow in the next couple of years, and banks will attempt to win back business through financing, said Adam Yarnold, 33, who trades residential mortgage securities and distressed bonds backed by consumer loans at Braver Stern & Co. in New York. The firm has 15 traders and salesmen.

“The next 12 to 24 months will be make or break for the smaller shops,” said Yarnold, a former army ranger who helped run Deutsche Bank AG’s residential mortgage-backed securities desk in New York until July. “There will be a high mortality rate but the boutiques that make it will win big.”

Gutfreund, the former chairman of Salomon Brothers, said the resurgence of smaller firms has only to do with greed and necessity.

‘Always Money’

“The motivation is always money,” said Gutfreund, the president of Gutfreund & Co. in New York. “The reason people are leaving is because they need the money and a job.”

U.S. Senator Christopher Dodd last month proposed restrictions on executive compensation at companies that received money from the government’s financial rescue fund. U.S. House Democratic leaders voted March 19 on a 90 percent tax on executive bonus payments by companies receiving more than $5 billion in federal bailout funds. New York Attorney General Andrew Cuomo has also criticized Merrill Lynch for paying $3.6 billion in bonuses for 2008.

“The talent is streaming out of the doors of the big firms,” Bruce Foerster, a former Lehman Brothers managing director and now president of South Beach Capital Markets in Miami said. “As the best and the brightest leave, they will tip their hat to Senator Christopher Dodd. Bright people won’t want to be at places where the government is.”

To contact the reporters on this story: Caroline Salas in New York at csalas1@bloomberg.net; Pierre Paulden in New York at ppaulden@bloomberg.net

Last Updated: March 24, 2009 00:00 EDT

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