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Top AIG Lawyer Quits Over Pay Restrictions, Gets Millions in Severance; Biggs & Faber: S&P 500 Has Room to Run, Dollar Will Rebound; Consumer Confidence Rises for Second Month in a Row; U.S. Home Prices Unchanged in October; China Audit Finds $35 Billion in Fraud by Officials; GM Holds Fire Sale on Remaining Pontiacs and Saturns; Oil Moves Closer to $79
Outgoing American International Group Inc. (NYSE: AIG) General Counsel Anastasia Kelly will get "several million dollars" in severance after she quit over federal pay curbs, people familiar with the matter told The Wall Street Journal. Kelly was entitled to the money under AIG's severance plan, which says certain executives can resign and collect severance if their pay is significantly reduced, the people said. Kelly's pay stood to take a large hit after the Obama administration "pay czar" Ken Feinberg capped annual salaries at $500,000 for executives at companies that received billions in bailout money. The exact amount of severance was not specified.
Hedge fund manager Barton Biggs and contrarian investor Marc Faber both said in an interview with Bloomberg Television that the dollar and the U.S. equity market may gain up to 10% in the next two years. "History would suggest that after such a severe economic shock like we've just had that the odds are that we're going to have a pretty good burst of growth in 2010, 2011," Biggs said. "I don't see any reason why we can't have a further rally in the dollar and a further rally in stocks. And my guess is that the next move in both could be on the order of 10%." Both Biggs and Faber recommended investors buy U.S. stocks on March 9, 2009 when the Standard & Poor's 500 Index was at its lowest point in 12 years.
Consumer confidence increased to 52.9 in December from 50.6 in November, the second consecutive gain, according to the Conference Board's Consumer Confidence Index. The outlook for the labor market also improved, with 16.2% of consumers expecting more jobs to become available in the months ahead, versus 15.8% in November. Still, sentiment about current conditions fell to their lowest level in 26 years to 18.8 from 21.2 in November.
Gains in home prices throughout the spring and summer have moderated, as the Standard & Poor's/Case-Shiller Home Price Index for October was flat. "The turn-around around in home prices seen in the spring and summer has faded with only seven of the 20 cities seeing month-to-month gains, although all 20 continue to show improvements on a year over-year basis," said David M. Blitzer, chairman of the index committee at S&P. "Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip. Before jumping to conclusions, recognize that the one time that happened at the beginning of the 1980s, Fed policy saw dramatic reversals, which is very different from the stable and consistent Fed policy we have today."
In a glaring indication of how widespread corruption has become among Chinese government agencies in China, the nation's National Audit Office (NAO) found that officials misused or embezzled roughly $35 billion in government money in the first 11 months of the year, The New York Times reported. Officials participated in everything from money laundering and issuing fraudulent loans to cheating the government through the sale or purchase of state land or mining rights. "The huge crackdown reflects the seriousness of corruption in China's government" Zhu Lijia, a professor of public policy at the Chinese Academy of Governance in Beijing told The Times. "Even the National Audit Office should be supervised. In the past few years it was the NAO that decided whether to publish or hide some statistics."
In an attempt to unload its remaining Pontiac and Saturn inventories, General Motors Co. (NYSE: GRM) is offering dealers $7,000 for each vehicle they buy for use in service or daily-rental fleets, Bloomberg News reported. The program started Dec. 23 and will run through Jan. 4, GM spokesman Tom Henderson told Bloomberg in an e-mail. "When GM killed Oldsmobile, it took three years; this is basically killing brands on steroids," said Rebecca Lindland, an analyst at IHS Global Insight Inc. "I don't know why a dealer wouldn't take this deal." GM had 8,700 Pontiacs and 5,800 Saturns in inventory at the start of December, Ward's Auto Infobank data showed.
Benchmark crude oil for February delivery rose 10 cents to settle at $78.87 per barrel in light trading on the New York Mercantile Exchange (NYMEX) yesterday (Tuesday). The gain came even as the U.S. dollar strengthened against the yen, but weakened versus the euro, keeping oil below $79.