Archives for December 2009

December 2009 - Page 9 of 10 - Money Morning - Only the News You Can Profit From

Bank of America Hopes to Lure Top Shelf Talent by Paying Back TARP Loans

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Bank of America Corp. (NYSE: BAC), the nation's biggest lender, reached an agreement to repay $45 billion of Troubled Asset Relief Program (TARP) bailout funds, removing government imposed restrictions on executive pay that have hindered its search for a new CEO.

The Charlotte, N.C., bank will become the first bank to return a large, or "exceptional," taxpayer-funded bailout. Bank of America initially received $25 billion of TARP funding in October 2008 as government officials raced to stabilize the U.S. financial system. The government injected the bank with an additional $20 billion in January to mitigate losses associated with its takeover of securities firm Merrill Lynch & Co. (NYSE: MER).

The bank will use $26.2 billion of “excess liquidity” and $18.8 billion from the sale of securities to repay the TARP funds according to a statement issued late Wednesday.

The repayment will clear the way for the bank to intensify its efforts to replace Chief Executive Officer Kenneth D. Lewis, who announced in September he would retire at the end of this year.

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The Five Things You Need to Know About China

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Legendary investor, Bill "The Bond King" Gross made headlines recently when he said that China will one day have to contend with a bubble of its own making. Gross runs the world's biggest bond fund at Pacific Investment Management Co. LLC (PIMCO). Millions of investors reacted just as you would expect when someone of his prominence makes such a pronouncement – they panicked.

While I can see how Gross would arrive at such a conclusion, his comment about China is akin to the economist who tells us that "the U.S. economy will recover."

In either case, just when and how isn't clear.

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China Will Continue to Drive the Global Economic Recovery in 2010

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China isn't just leading the global economic recovery – it's lapping the field.

China's gross domestic product (GDP) expanded at an 8.9% annual rate in the third quarter – the fastest pace in a year and up from 7.9% in the second quarter And the median projection of economists surveyed by Bloomberg News is for China's GDP to jump more than 10% in the final three months of 2009, setting the stage for double digit growth in 2010.

China has been the muscle behind the worldwide economic recovery for much of 2009. That role will continue in the New Year as the Red Dragon maintains its catalyst role.

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GM's Search for CEO Won't Likely Be Part of the "Old Guard"

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The circumstances surrounding the resignation of General Motors (NYSE: GRM) Chief Executive Officer Fritz Henderson are still unclear. But it's likely that whoever succeeds Henderson will no doubt have a turnaround plan more compatible with that of the company's board, and will likely come from outside of GM's ranks.

Henderson, who resigned Tuesday, was a longtime GM veteran who joined the company's treasurer's office in 1984. The Detroit-born Henderson is the son of a former GM executive. He became CEO in March after the Obama administration ousted then-CEO Rick Wagoner.

And therein was the problem: Henderson was so firmly entrenched in GM and its old culture that it was trying to shake, the board lost confidence in his ability to transform the company that would one day emerge from years of declining market share, a tainted consumer perception, and ultimately, bankruptcy.

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Unemployment Struggling to Turn a Corner as Job Losses Mount in November

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U.S. job losses in the private sector slowed in November but still exceeded economists' projections, a report by payroll-processing firm Automatic Data Processing (Nasdaq: ADP) indicated yesterday (Wednesday).

The report showed U.S. companies cut an estimated 169,000 jobs in November, whereas economists had been expecting a loss of 150,000 jobs, according to a survey by Bloomberg News.

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Investment News Briefs

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With our investment news briefs, Money Morning provides investors with a quick overview of the most important investing news stories from all around the world.

Gold Stretches Record Run; GM CEO Henderson Out; Philly Fed Calls For Interest Rate Hike; U.S. Auto Sales Edge Up in November; Chinese Manufacturing Continues to Expand; U.S. ISM Index Shows Slower Growth; Late Auto Payments in the U.S. Rise; The Clock is Ticking for Saab; Staples' Profit, Revenue Beat the Street

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How to Profit From the "Next" Dubai

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The Dubai World default is a matter of only $60 billion – mere peanuts when compared to other elements of the global financial crisis. It's thus of concern only to those silly enough to invest in real estate there (and the European banks foolish enough to finance it.) For the rest of us, it is a useful reminder that sudden collapses don't really come out of nowhere – they can be foreseen, and smart investors can plan for them.

You see, I did foresee this one, for Money Morning readers – 16 months ago, before the global banking crash. Back in July 2008, I wrote that Dubai's economy was "more bubble than boom," that it had "a construction bubble worse than the Florida market and a monetary policy looser than Ben Bernanke's" and that "its return to earth will be painful and probably not long delayed."

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Does the Bank of Japan Have Enough Juice to Overcome Nagging Deflation?

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The Bank of Japan (BOJ) yesterday (Tuesday) took steps to preserve a fragile economic recovery by pumping more short-term funds into the nation's banking system. However, many analysts are worried that the central bank didn't do enough to put a ceiling on the yen, and prop up its ailing corporate sector.

Japan's central bank said it would make available $115 billion (10 trillion yen) in three-year loans at 0.1% interest. The announcement was made after the BOJ held an extraordinary monetary policy meeting, which was called to "discuss monetary control matters based on recent economic and financial developments," namely the rise of the yen and growing deflation that poses a threat to its nascent economic recovery.

Japan's third-quarter gross domestic product (GDP) rose at a 4.8% annual rate, after revised growth of 2.7% in the second quarter. But the nation's currency, which last week hit a 14-year high against the dollar, is jeopardizing the recovery by making Japanese exports more expensive for other countries.

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Will Cyber Monday Success Set the Tone for the Holiday Season?

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E-commerce sales on "Cyber Monday" – the first Monday following the Thanksgiving holiday – climbed to record levels this year, but that success doesn't necessarily mean the holidays will bring more cheer to retailers.

Virtually every retailer with an online presence dressed up its website with special offerings, and many of the bigger ones – RadioShack Corp. (NYSE: RSH), Best Buy Co. (NYSE: BBY) and Target Corp. (NYSE: TGT) – sent out targeted e-mails offering their best customers discounts of up to 40% on Internet purchases. The tactics worked, as an estimated 96.5 million Americans went online Monday to buy everything from toys, books and music CDs to high-end fashions, jewelry and flat-screen TVs.

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GE Sets Up Comcast Venture With Buy of Vivendi's NBC Universal Stake

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General Electric Co. (NYSE: GE) cleared the way for Comcast Corp. (Nasdaq: CMCSA) to take control of its NBC Universal unit yesterday (Tuesday) when it reached agreement with Vivendi SA to buy the French company's 20% stake for $5.8 billion.

GE Chief Executive Officer Jeffrey Immelt and Vivendi Chief Jean-Bernard Levy agreed on a price after they met in France last week, according to multiple sources cited by Reuters and Bloomberg News.

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