Bridgewater Takes Grim View Of 2012 (WSJ)
Robert Prince, co-chief investment officer at Bridgewater, and his managers at the world's biggest hedge fund firm are preparing for at least a decade of slow growth and high unemployment for the big developed economies. Mr. Prince describes those economies—the U.S. and Europe, in particular—as "zombies" and says they will remain that way until they work through their mountains of debt. "What you have is a picture of broken economic systems that are operating on life support," Mr. Prince says. "We're in a secular deleveraging that will probably take 15 to 20 years to work through and we're just four years in." In Europe, "the debt crisis is [a] long ways from over," he says. The economic and financial morass will mean interest rates in the U.S. and Europe will essentially be locked at zero for years.
On Wall Street, A Renewed Optimism For Deals (NYT)
“The dialogue has gotten back on track,” said Steven Baronoff, chairman of global mergers and acquisitions at Bank of America Merrill Lynch. “If Europe doesn’t go off the rails, you’ll see a return to long-term positive factors.” According to a recent study by Ernst & Young, 36 percent of companies plan to pursue an acquisition this year. “We’re optimistic that the need and desire for growth will overcome the volatility headwinds, but that’s where the battle will be waged,” said Jim Woolery, J. P. Morgan’s co-head of North America mergers and acquisitions.
New Hurdles Loom In Euro Crisis (WSJ)
"Europe is absolutely my No. 1 concern. It is so far in the lead I can't think of what my No. 2 concern is," says Princeton economist Alan Blinder, a former U.S. Federal Reserve vice chairman. "There's just an almost unending list of things that might go wrong and start us on a bad track again," he says, adding, "This will not be just a problem for Europe. If there gets to be a real financial crisis in the European banking system, it's going to infect America, it's going to infect Asia, it's going to infect South America, everywhere."
Dollar’s Demise Exaggerated as 13% Gain Since 2008 Proves Currency’s Value (Bloomberg)
The U.S. Dollar Index (DXY) has appreciated 13 percent from a record low in March 2008 even as the Fed kept interest rates at about zero and printed cash to buy $2.3 trillion (FARBAST) of Treasury and mortgage-related bonds, and is little changed since 1991. The International Monetary Fund said Dec. 30 that the greenback’s share of global foreign-exchange reserves rose in the third quarter by the most since 2008.
Ready To Try On Mr. Buffett's Shoes (WSJ)
Ted Weschler considers himself one of Warren Buffett's biggest admirers, but until this past summer, he couldn't actually see himself working for the Oracle of Omaha. The spotlight and scrutiny that come with such a job simply wouldn't be worth it. Yet this month, the 50-year-old Mr. Weschler, a hedge-fund manager based in Charlottesville, Va., will join Berkshire Hathaway Inc. to help Mr. Buffett oversee Berkshire's $110 billion in stocks, bonds and other investments. That positions Mr. Weschler, along with 40-year-old Todd Combs, another former hedge-fund manager, as a candidate to take over, some day, a portfolio Mr. Buffett has run with unparalleled success for more than 45 years...As a child, Mr. Weschler traded baseball cards and rare coins. For his 12th birthday, his aunt bought him 12 shares of stock in Litton Industries, a ship-building company that had a presence in Erie, Pa., where he spent time growing up. From that point, he was hooked on markets, thumbing through the financial pages to follow Litton's every move.
Year-End Bets Against Euro Hit Record (FT)
Hedge funds increased their bets against the euro to a record level in the last week of 2011, increasing pressure on the embattled European common currency as it enters the most testing year of its history...The number of short positions in the euro...outweighed long positions by a record 127,900 contracts by December 27, up from 113,700 contracts the previous week. The value of the contracts is not disclosed. “When we see extreme short positions like this it normally means a short-term correction for the euro,” said Carole Laulhere, a strategist at Société Générale. “In the longer term the economic fundamentals are more important, but those are also weakening.”
Jim Rogers: Buy The Euro And The Swiss Franc In 2012 (CNBC)
Rogers, who recommended buying the euro, which has since fallen in value, in an appearance on CNBC in November, said that he was thinking about buying more euros after selling some in recent weeks, as hedge funds unwind their short positions in the currency. “I suspect (German Chancellor Angela Merkel) and that crowd will do something to make us feel better,” he added.
NYPD To Remove Barricade Around Wall Street Bull (NYP)
“We don’t need to destroy the appeal of a world-famous icon and symbol,” said Arthur Piccolo, chairman of the Bowling Green Association, a downtown community-activist group. “I’m happy and relieved. The bull is for the 99 percent; it’s the bull for the people. Anyone who says the bull is for the 1 percent is making a big mistake.” The bronze bull was penned in when the Occupy Wall Street protest began in mid-September — and the barricades have remained in place for more than a month since the NYPD cleared out Zuccotti Park. A community-affairs officer from the 1st Precinct told Piccolo that cops have installed two security cameras facing the sculpture, allowing the NYPD to monitor it 24 hours a day. Tourists and local business owners had been fuming over the barricades. The bull normally draws large crowds of tourists, especially during the busy holiday season, but the number of visitors was drastically down this year, Piccolo said. “I’ve lived here with the bull since the day that it arrived in 1989,” Piccolo said. “Until the September demonstrations, the bull had never been barricaded. It wasn’t barricaded after 9/11.”
World's Biggest Economies Face $7.6 Trillion Debt (Bloomberg)
Governments of the world’s leading economies have more than $7.6 trillion of debt maturing this year, with most facing a rise in borrowing costs. Led by Japan’s $3 trillion and the U.S.’s $2.8 trillion, the amount coming due for the Group of Seven nations and Brazil, Russia, India and China is up from $7.4 trillion at this time last year, according to data compiled by Bloomberg. Ten-year bond yields will be higher by year-end for at least seven of the countries, forecasts show.
Memo To Eddie Lampert: Dump Kmart (Reuters)
If hedge fund manager Eddie Lampert wants to save one of the oldest retail empires in the United States, he should consider shutting down Sears Holdings Corp's Kmart discount chain and focus on revamping its Sears department stores..."Trimming down a hundred stores is like rearranging deck chairs on the Titanic," said Craig Johnson, president of retail strategy and consulting firm Customer Growth Partners, whose clients include J.C. Penney Co Inc and Toys R Us. "This is a company that needs not just cosmetic surgery, not just minor surgery, but radical surgery."
Bank of America severing some small-business credit lines (LA Times)
Bank of America Corp., under pressure to raise capital and cut risks, is severing lines of credit to some small-business owners who have used them to stay afloat. The Charlotte, N.C., bank is demanding that these customers pay off their credit line balances all at once instead of making monthly payments. If they can't pay in full, they are being offered new repayment plans for as long as five years, but with far higher interest rates than their original credit lines had.
Romney: Obama's like the Kardashians (Politico)
"You know, I've been looking at some video clips on YouTube, of president Obama, then candidate Obama, going through Iowa making promises. The gap between his promises and his performance is the largest I've seen since, well, the Kardashian wedding and the promise of 'til death do us part."
Regulators Embrace Zero-Risk Greek Bonds (Bloomberg)
U.S. regulators, required by Congress to remove credit ratings from banking rules, have devised a plan anchored in a Paris-based group’s rankings that assign zero risk to most European government debt. The Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency proposed rules last month to set bank capital levels using classifications made by the Organisation for Economic Co-operation and Development. The intergovernmental group, two-thirds of whose members are European Union countries, considers most EU sovereign bonds risk-free, including those of Greece and Portugal. The proposal undermines the intent of the 2010 Dodd-Frank Act, which sought to eliminate the use of ratings by companies such as Standard & Poor’s and Moody’s Investors Service that are paid by the entities they rate, said Luigi De Ghenghi, a partner at law firm Davis Polk & Wardwell LLP in New York. Regulators are just replacing one set of conflicts with another, he said.
Fragile Banks Remain Afloat (WSJ)
Ninety-two banks failed in 2011, well below the previous two years' totals. The list of what regulators call "problem banks" is shrinking. And the latest two bank failures were the first in nearly a month—the longest failure-free period in almost three years. So is the era of troubled banks over? Don't bet on it. Although the numbers are improving—140 banks failed in 2009 and 157 failed in 2010—an analysis by The Wall Street Journal suggests that failures are down, at least in part, because troubled banks aren't failing as quickly. Weak banks are staying alive for longer periods in undercapitalized condition and they are in weaker shape when they fail than in the past.
Police: TCC teacher told girl, 17, stripping would aid vocal range (TNT)
A former Tacoma Community College music instructor will be in court next month to answer charges that he convinced one of his voice students she could reach lower octaves if she took off her clothes or did sex acts while singing. Kevin Gausepohl, 37, is charged in Tacoma Municipal Court with seven counts of communicating with a minor for immoral purposes and one count of obstructing a law enforcement officer. The charges are misdemeanors. Gausepohl allegedly told a Gig Harbor High School student he was conducting a study on how sexual arousal affects vocal ranges...Other students told investigators Gausepohl approached them about being part of the study, court records show.