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Business Headlines – Sepetember 2, 2009

PFE To Pay Hefty Fine…Company States It is Calculated Into Current Cash Flows

WASHINGTON (Reuters) – Pharmaceutical giant Pfizer Inc will pay a record $2.3 billion to settle civil and criminal charges about how it marketed some of its drugs under a settlement to be unveiled on Wednesday, a source said.

The company, which is acquiring rival Wyeth, had warned in January that it had taken a $2.3 billion charge late last year to resolve investigations involving Bextra and other drugs, but did not provide details at the time.

The agreement will be unveiled later by the U.S. Department of Justice and Health and Human Services Department, the source said. Government spokespeople declined to comment. Pfizer officials could not immediately be reached for a comment.

It would be the largest settlement to date for improper marketing of prescription drugs, topping the $1.42 billion Eli Lilly and Co agreed to pay earlier this year for off-label sales of its Zyprexa schizophrenia drug.

Bextra, an arthritis drug, was withdrawn from the market in 2005 over safety concerns.

Pfizer had pleaded guilty in 2004 to an unrelated criminal charge of improper sales tactics related to its Neurontin seizure drug and its marketing practices have been under federal supervision since then.

In the earlier case, Pfizer’s Warner Lambert subsidiary had been accused of marketing Neurontin for unapproved uses. Pfizer acquired Neurontin through its merger in 2000 with Warner Lambert.

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Attention ETF Holders

As the threat of regulation bears down on certain ETF’s, some have already begun to wind down out of fear.

For example, Deutsche just announced they would shut down their ProShares Crude Oil Double Long ETF (DXO).

Yet as ETF’s such as DXO come to an end, their unwinding could offer profitable opportunities for astute traders.

FT: The WTI positions held by the DXO are in July 2010, therefore they will have to sell about 11’000 July WTI contracts (a third of the July2010 Open Interest). While this will have a flat price impact next Wednesday we think it is too early to already pre-emptily sell in front of it. We would rather buy the WTI spreads to July 2010 as we would imagine that Deutsche will buy the spreads to bring the flat price length closer to the front to find enough liquidity for the liquidation of the Fund.

One would imagine that many winding-down ETF’s might present similar opportunities.

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More on This Morning’s Economic Data

By Timothy R. Homan

Sept. 2 (Bloomberg) — Companies eliminated more jobs than forecast in August, a private survey indicated today, signaling that employers have yet to gain confidence about a recovery from the deepest recession since the 1930s.

The 298,000 drop followed a revised 360,000 decline the prior month that was smaller than previously estimated, according to figures from ADP Employer Services.

Today’s figures underscore the danger that consumer spending, which accounts for 70 percent of the economy, may be slow to gain traction in coming months. The report comes two days before a Labor Department release forecast to show the U.S. unemployment rate rose to 9.5 percent in August.

“Considering the severity of the recession and uncertainty over the strength and sustainability of the recovery, the labor market’s recuperation will be slow and painful,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, which forecast a drop of 290,000.

Stock-index futures dropped and Treasuries erased losses after the ADP report. Contracts on the Standard & Poor’s 500 Index lost 0.4 percent to 992.90 at 8:49 a.m. in New York. Yields on benchmark 10-year notes were little changed at 3.36 percent.

Labor Productivity

Meanwhile, U.S. worker productivity rose in the second quarter at the fastest pace in almost six years as companies squeezed more out of remaining staff to boost profits. Productivity, a measure of employee output per hour, rose at a 6.6 percent annual rate, the most since the third quarter of 2003, revised figures from the Labor Department showed today in Washington. Labor costs fell by the most in nine years.

The Labor Department’s payrolls report, due in two days, may show employers cut another 225,000 jobs in August and unemployment climbed from 9.4 percent in July, according to the median forecast in a Bloomberg News survey.

The economy already has lost 6.7 million jobs since the recession began in December 2007, the most of any economic slump since the Great Depression.

The ADP report was forecast to show a decline of 250,000 jobs, according to the median estimate of 32 economists in a Bloomberg survey. Projections ranged from decreases of 396,000 to 160,000.

Challenger Report

ADP includes only private employment and does not take into account hiring by government agencies. Macroeconomic Advisers LLC in St. Louis produces the report jointly with ADP.

Employers announced 14 percent fewer job cuts in August than the year-earlier month, and 21 percent fewer on a month- to-month basis, according to a report today by Chicago-based placement firm Challenger, Gray & Christmas Inc.

Today’s ADP report showed a decrease of 152,000 workers in goods-producing industries including manufacturers and construction companies. Service providers cut 146,000 workers.

Employment in construction fell by 73,000, while financial firms trimmed jobs by 19,000, ADP said, the 21st consecutive monthly drop for the industry.

Companies employing more than 499 workers shrank their workforce by 60,000 jobs. Medium-sized businesses, with 50 to 499 employees, cut 116,000 jobs and small companies decreased payrolls by 122,000, ADP said.

Announcements of staff reductions continued last week. Whirlpool Corp., the world’s largest appliance maker, said Aug. 28 that it will close its Evansville, Indiana, manufacturing plant, resulting in the elimination of 1,100 jobs, or 1.6 percent of the company’s workforce.

Meanwhile, General Motors Co. last month called back 1,350 union workers, its biggest one-time increase in jobs since 2006, as it boosted second-half production in part because of the government’s “cash for clunkers” trade-in program.

The clunkers program, which ended Aug. 24, offered auto buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles.

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Art Indicator

The end of the Geneva Free Port: a boon for Asia   [ 31 Aug ]

The tightening of Swiss legislation concerning the Geneva Free Ports represents a windfall for the Asian market. And for the French market…?
The company Geneva Free Ports & Warehouses Ltd, which presented itself as a “genuine offshore base at the heart of Europe”, lost its precious status as an extra-territorial zone in May 2009 and become “Swiss regime storage”.

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Art market barometer   [ 25 Aug ]

After five consecutive quarters of contraction, the art market is at last producing some positive signals. Artprice’s index (the Art Price Global Index) progressed 4.97% in the second quarter of 2009 after a fall of more than 30% since the beginning of 2008. Gradual economic recovery during 2009 (very modest economic growth in Germany and France for example) has boosted the morale of art market players and has added 20 points to our AMCI since the end of the first quarter.

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The Durand-Ruel Impressionists   [ 17 Aug ]

As the art market slumbers during the summer months, preparations are underway for the major autumn sales, the dates of which have already been announced. The first big events are located in New York during September with sales of Indian, Chinese, Japanese and Korean art on the 16th at Christie’s and the 17th at Sotheby’s, and then Contemporary Art sales on the 23rd at Christie’s and the 24th at Sotheby’s.

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Focus on the photography market   [ 10 Aug ]

The list of this summer’s photography exhibitions has three big names: Diane ARBUS at the National Museum in Cardiff until 31 August, Richard AVEDON with a retrospective at the International Center of Photography in New York until 6 September and Henri CARTIER-BRESSON, (who was born 100 years ago) at the European House of Photography in Paris (Henri Cartier-Bresson à vue d’œil) until 30 August.

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Old Masters: a stable and reliable market   [ 03 Aug ]

Old Masters overtaking Contemporary Art sales? That’s how it looks after Sotheby’s and Christie’s London sales of combined Old Masters & 19th century art on 7 & 8 July. The total revenue from the two houses’ Old Masters works amounted to nearly £39m, i.e. a million more than they both earned from Contemporary Art sales the previous month.

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Marc Newson confirms his star designer status   [ 27 Jul ]

At just 46, Marc NEWSON already has pieces in prestigious public collections such as the Vitra Design Museum, the Museum of Modern Art in New York, the Carnegie Museum of Art in Pittsburg and the Centre Georges Pompidou in Paris. Among the 30 or so awards he has received since the 1980s, he won the famous Compasso d’oro in 2000, and over the last decade his price index has literally exploded making him the most expensive living designer on the international auction circuit.

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AMCI – Art market confidence at the end of the first half of 2009   [ 17 Jul ]

At the start of 2008 Artprice launched a powerful new tool, the Art Market Confidence Index (AMCI) in order to give clients a “real time” appreciation of trends and sentiment on the art market.

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Paris resists crisis   [ 13 Jul ]

Although the global art is in the midst of a crisis, Paris appears to be showing remarkable resistance: the number of auction sales and the volume of lots proposed has remained stable compared with 2008. Moreover, for the first quarter of 2009, the French capital posted a better overall revenue figure than either London or New York on the back of the Pierre Bergé-Yves Saint-Laurent sale at the Grand Palais in February.

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Contemporary Art in convalescence   [ 06 Jul ]

While London’s auctioneers congratulate themselves on the healthy sold rates at their June Contemporary Art sales (92.5% at Sotheby’s, 88% at Christie’s and 75% at Phillips de Pury & Company), bidders are continuing on a path of caution and sobriety.

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No surprise in London   [ 29 Jun ]

The results of the Impressionist & Modern sales in London last week were without surprise (except for the withdrawal of Camille PISSARRO’s, Le Quai Malaquais) and made the era of 8-figure auction results an even more distant memory. Both auction houses generated eight sales above the $1m line. The bought-in rate was not identical however: 15% at Sotheby’s (out of 27 lots presented) and 32% at Christie’s (out of 45 lots offered).

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Asian Markets Fall on Earnings Announcements

By Jonathan Burgos

Sept. 2 (Bloomberg) — Asian stocks fell, giving the MSCI Asia Pacific Index its biggest drop in two weeks, as Seven & I Holdings Co. and Sekisui House Ltd. cut their profit forecasts.

Seven & I, the world’s largest convenience-store owner, and Sekisui House, Japan’s biggest home builder, dropped more than 2 percent in Tokyo. Westpac Banking Corp., Australia’s largest bank by market value, sank 2.3 percent as concern lenders will report more losses dragged U.S. financial shares lower yesterday. Elpida Memory Inc., Japan’s No. 1 memory-chip maker, tumbled 16 percent on plans to sell shares.

The MSCI Asia Pacific Index dropped 1.5 percent to 112.31 as of 7:47 p.m. in Tokyo, the most since Aug. 17. The gauge has risen 59 percent from a more than five-year low on March 9 on speculation the global economy is recovering. That’s taken the average price of stocks on the index to 1.5 times book value, close to an 11-month high.

“We remain cautious on the market,” said Pearlyn Wong, Singapore-based investment analyst at Bank Julius Baer Co., which manages $350 billion. “Much of the recovery story has been priced in. Investors are probably wondering what is going to happen once the stimulus measures end.”

Japan’s Nikkei 225 Stock Average declined 2.4 percent. Hong Kong’s Hang Seng Index lost 1.8 percent. Air China Ltd., which is listed on the city’s stock exchange, slumped 4.6 percent after the Chinese government said it will raise fuel prices.

Australia’s S&P/ASX 200 Index sank 1.7 percent even as a government report showed the country’s economy grew faster in the second quarter. Rio Tinto Group Ltd., the world’s third- largest mining company, fell 2.2 percent in Sydney after oil and copper prices slumped in New York.

Banks Decline…..




European Markets Follow Asia’s Lead

By Adria Cimino

Sept. 2 (Bloomberg) — European stocks fell for a third straight day on speculation a six-month rally has outpaced the prospects for earnings and the economy after valuations for the Dow Jones Stoxx 600 Index climbed to the most expensive level in six years. Asian shares declined.

Alcatel-Lucent SA slid 9.2 percent as the world’s largest supplier of fixed-line phone networks said it plans to sell as much as 1 billion euros ($1.42 billion) of convertible bonds. Old Mutual Plc and Aviva Plc led U.K. insurers lower. Seven & I Holdings Co., Japan’s largest retailer, and Sekisui House Ltd., the country’s biggest homebuilder, dropped more than 2 percent in Tokyo after cutting their profit forecasts.

Europe’s Stoxx 600 fell 1 percent to 229.40 at 11:12 a.m. in London, extending this week’s slump to 3.5 percent. The regional gauge is valued at 48.6 times profit, the highest level since June 2003, according to weekly data compiled by Bloomberg.

“We’re not yet out of the woods,” said Lothar Mentel, chief investment officer at Octopus Investments Ltd. in London, which oversees about $2.3 billion. “With the economy, there’s still a recession out there,” he told Bloomberg Television.

The MSCI Asia Pacific Index lost 1.5 percent today. Futures on the Standard & Poor’s 500 Index retreated 0.1 percent after the benchmark gauge for U.S. equities slid for a third straight day yesterday, the longest streak since June. Financial shares led the drop as concern banks will post more losses overshadowed manufacturing and housing data that topped estimates.

Alcatel, Maersk…..



Oil Trades Around $68pb

By CARLO PIOVANO p {margin:12px 0px 0px 0px;}

LONDON (AP) – Oil prices hovered above $68 a barrel Wednesday after a two-day plunge as a drop in U.S. crude inventories suggested demand may be recovering.

Benchmark crude for October delivery was up 60 cents to $68.29 a barrel by midday European time in electronic trading on the New York Mercantile Exchange. The contract Tuesday lost $1.91 to settle at $68.05.

Oil sank almost $5 a barrel in the first two days of the week as investors worried that a global economic recovery this year would be slow and may not justify the big rallies in stocks and commodities since March.

U.S. stock indexes fell about 2 percent Tuesday.

Investors were cheered somewhat when the American Petroleum Institute said late Tuesday that U.S. inventories plunged 3.2 million barrels last week. Analysts had expected the API numbers to drop 1.9 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

The Energy Department reports mandatory supply figures later on Wednesday, while refiners voluntarily report the API numbers.

There were also signs Tuesday that the U.S. economy – the biggest consumer of oil – is improving.

The Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index rose in August, indicating an expansion for the first time since January 2008. And the National Association of Realtors said pending U.S. home sales rose to the highest level in more than two years.

In other Nymex trading, gasoline for October delivery rose 1.81 cents to $1.80 a gallon and heating oil gained 2.41 cents to $1.78 a gallon. Natural gas jumped 3.6 cents to $2.86 per 1,000 cubic feet.

In London, Brent crude was up 67 cents at $68.40.


Australia’s GDP Grows Unexpectedly

By Jacob Greber

Sept. 2 (Bloomberg) — Australia’s economic growth unexpectedly accelerated in the second quarter, driving the nation’s currency higher on expectations the central bank will raise borrowing costs from a half-century low.

Gross domestic product rose 0.6 percent, the biggest gain in more than a year, from the previous three months when it grew 0.4 percent, the Bureau of Statistics said in Sydney today. The median estimate of 20 economists surveyed by Bloomberg News was for a 0.2 percent expansion.

Today’s report confirms central bank Governor Glenn Stevens’ view that the economy has been “stronger than expected” as A$20 billion ($16.6 billion) of government cash handouts boosted spending at retailers such as Woolworths Ltd. and Harvey Norman Holdings Ltd. Australia joins other developed nations, including France and Germany, that are rebounding from the deepest global recession since the Great Depression.

“Australia clearly is in a sweet spot, one that we expect to extend through to year end,” said Glenn Maguire, chief Asia- Pacific economist at Societe Generale in Hong Kong. The Reserve Bank will raise interest rates by a quarter-percentage point in November, he added.

The Australian dollar rose to 83.04 U.S. cents at 12:38 p.m. in Sydney from 82.73 cents just before the report was released. The two-year government bond yield gained 7 basis points to 4.39 percent. A basis point is 0.01 percentage point. The benchmark S&P/ASX 200 index has climbed 41 percent since March 6.

Government Stimulus…..


Fitch Raises Outllook on South Korea

By Heejin Koo

Sept. 2 (Bloomberg) — South Korea’s credit-rating outlook was raised to “stable” from “negative” by Fitch Ratings, citing the resilience of the nation’s economy and banks.

The country’s investment grade A+ is the same the company applies to Taiwan and China. Fitch lowered the outlook to negative in November on concern South Korea’s foreign-exchange reserves may decline due to its unstable financial system and widening current deficits.

“The term structure of banks’ debt has improved,” Fitch said in an e-mailed statement today. “On the public-finances front, Korea is likely to have avoided large fiscal costs associated with the deleveraging of the banking sector.”

Asia’s fourth-largest economy expanded 2.3 percent last quarter, the fastest pace in almost six years, as exports and household spending jumped. South Korea’s foreign-exchange reserves rose for a sixth month in August and it posted a current-account surplus in July, boosted by exports.

Fitch’s outlook “appears to reflect increased confidence on the Korean economy,” said Kim Seung Hyun, head of research at Taurus Investment Securities Co. in Seoul.

The Bank of Korea will probably report tomorrow the economy grew at a faster pace in the second quarter than initially estimated, Finance Minister Yoon Jeung Hyun said. Yonhap News cited Yoon as saying today second-quarter growth was probably between 2.6 percent and 2.7 percent.

Exports Improve……




BP Announces A Big Discovery Stock Trades up Pre Market

By Eduard Gismatullin

Sept. 2 (Bloomberg) — BP Plc, Europe’s second-largest oil company, reported a “giant” discovery at the Tiber Prospect in the U.S. Gulf of Mexico that may contain more than 3 billion barrels, sending its shares higher.

The well is located in Keathley Canyon block 102, about 250 miles (400 kilometers) south east of Houston, the London-based company said today in a statement. The Tiber well was drilled to a total depth of approximately 35,055 feet (10,685 meters), greater than the height of Mount Everest.

The latest discovery will help BP, already the biggest producer in the Gulf of Mexico, boost output in the region by 50 percent to 600,000 barrels of oil equivalent a day beyond 2020. It will also allay concerns over BP’s reluctance to invest heavily in unconventional projects, such as oil sands in Canada, to replenish reserves as maturing fields age.

“It will take a while to develop, the second half of next decade, but it’s very important,” Jonathan Rigby, an analyst at UBS AG, said in a telephone interview.

BP is developing nine projects in the Gulf of Mexico and in 2007 overtook Royal Dutch Shell Plc’s output in the region.

Kaskida Find

“It will be bigger than the 3 billion barrels” of oil equivalent discovered at the nearby Kaskida field, said Robert Wine, a London-based spokesman at BP. “This is a whole new geological play we’ve got here.”

BP gained as much as 20.4 pence, or 3.9 percent, to 539.9 pence in London after the announcement and traded 17.5 pence higher at 537 pence at 11:41 a.m. local time.

“Tiber represents BP’s second material discovery in the emerging Lower Tertiary play in the Gulf of Mexico, following our earlier Kaskida discovery,” Andy Inglis, chief executive for exploration and production at BP, said in the statement.

BP is operator of the project with a stake of 62 percent, while Petroleo Brasileiro SA, Brazil’s state-controlled oil company, holds 20 percent and ConocoPhillips 18 percent.


FNM & FRE Are Expected to be Overhauled

A mortgage-industry trade group is calling for Congress to transform Fannie Mae and Freddie Mac into several smaller privately held companies that would issue mortgage securities carrying an explicit government guarantee.

The proposed framework, to be released Wednesday by the Mortgage Bankers Association, would give successor entities to Fannie and Freddie the authority to create securities backed by certain types of mortgages. The new companies would guarantee the securities against defaults on the underlying mortgages.

[Courson photo]

John Courson, CEO of the Mortgage Bankers Association, said restoring and maintaining investor confidence requires an explicit guarantee.

The new companies would also pay fees into a federal insurance fund, which would guarantee interest and principal payments to bondholders if the companies were unable to make them.

Such an insurance fund, designed to kick in only if the companies were to suffer catastrophic losses, would provide explicit federal backing. That would replace the current system, in which investors have long assumed that the government would stand behind Fannie and Freddie.

Some foreign investors in China and elsewhere lost confidence in that fuzzy implied guarantee last year and reduced their holdings of the companies’ debt, though the U.S. government has propped up Fannie and Freddie with capital infusions.

“If we’re going to restore and maintain investor confidence and…consistent liquidity, that is going to require an explicit backstop,” said John Courson, chief executive and president of the MBA……



EU Agrees on Extending Financial Stimulus

European Union finance ministers were set to agree on Wednesday that the EU should not be too hasty in withdrawing fiscal stimuli and other extraordinary measures introduced in response to the worst economic crisis in Europe’s post-1945 history.

“The time has not yet come to withdraw from the fiscal stimulus,” said Jean-Claude Juncker, chairman of the 16-member group of eurozone finance ministers. “We have to continue this effort in the course of this year and next year. Then we have to agree on an exit strategy.”…..


WFC Trying to Put Out Fires

What a wild begining to September.Not only was Cerberus forced to come out and make a formal statement denying rumors of an impending default of one of its funds, Wells Fargo also came out to deny rumors that it was preparing a secondary offering to raise money to repay the Tarp.

Wells Fargo’s chief executive, John Stumpf, told Bloomberg Television shortly before yesterday’s market close that the bank planned to pay back $25 billion from the Tarp but it would do so out of organic earnings without an additional stock offering.

“We will pay it back, but we’re going to pay it back in a shareholder-friendly way,” he said. “We are now earning capital so quickly, organically, we don’t want to dilute our existing shareholders.”

If you are keeping score, the rumors yesterday were actually half-right: Wells Fargo is looking to pay back the Tarp. It just isn’t going to do it in the way people were whispering about yesterday. And that repayment will be costly to shareholders, at least in the short term. Any earnings redirected toward the government will deprive shareholders of that money.

Wells has been one of the Gang of Three megabanks–in addition to Citi and Bank of America–that hasn’t yet repaid the Tarp after the stress tests. Wells was one of the companies that arguably failed the stress tests, although officially no banks “failed.” It was just told that it “passed” as long as it could raise $13.7 billion to fill the capital hole in its balance sheet.

Can Wells really spin off enough profit to fill the capital hole and pay back $25 billion out of earnings? And can it really do this “shortly?”

The bank has already raised at least $7.5 billion by selling equity. And it says it generated more than enough revenue to fill that $13.7 billion capital hole. In addition to the $25 billion of Tarp equity, the Tarp warrants held by the government are worth around $1.33 billion according to Linus Wilson. So Wells needs something like $26 billion to meet its capital requirements and pay back the Tarp in full. (These estimates are very rough.)

In April the bank said it earned $3 billion in quarterly profits, its best results in 157 years. Wells also cut its dividend drastically, allowing the bank to conserve cash. In July it said it made $2.75 billion and kept the dividend low. If Wells were to continue that kind of outstanding performance–low dividends plus big earnings, something shareholders will hate–Wells might be able to pay off the Tarp somewhere in the middle of next year. But many analysts are skeptical of those results and predict Wells will stumble in the near future.

At the heart of the debate over earnings at Wells is whether the bank is being reckless by not provisioning for enough losses. If losses outpace the bank’s estimates, it could find that the capital hole is even bigger than expected. One analyst back in April estimated that the bank might actually face a capital hole twice the size of that estimated in the stress tests, meaning Wells would need something like $45 billion to repay the Tarp. That’s more than than three more years of profits with tiny dividends to shareholders.

What’s more, the cheap money from the Federal Reserve and lack of competition in several lending categories that have given the large banks license to mint money may not last. As the economy recovers, the Fed will curtail aid programs and raise interest rates. Competition in lending will return. Those giant earnings from this year may become a thing of the past.

Then again, Wells has surprised critics all through this year. Those betting against its stock since the rally began in March have suffered painfully. (Although the stock is still down year-to-date by around 11%.) So maybe the current quarter is looking like the best one yet. Is this what Stumpf was signalling in his talk with Bloomberg yesterday?

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Editorial: From Barrons- It It Time For Natural Gas Autos ?

Bodes well for CLNE, EP, DNR, CHK

AS “CASH FOR CLUNKERS” DEMONSTRATED, AMERICANS love a deal. And Congress may have yet another for you when it returns from summer recess.

The plan is to offer tax credits worth up to $12,500 on the purchase of new cars and trucks. The catch is that your new vehicle must run on natural gas — compressed natural gas, or CNG, to be precise. A Senate bill, the counterpart to the House’s NAT GAS Act, also would offer up to $64,000 in tax credits on fleet vehicles, and up to $100,000 to anyone opening a CNG filling station.

Washington is beginning to wake up to the value of using this plentiful, homegrown fuel for transportation — and that in turn could open up some intriguing investment opportunities.

Right now, only one CNG car — Honda’s Civic GX — is available to U.S. buyers. But a dozen auto makers sell some two dozen CNG models overseas, and the Web can help you track their development. For an overview of the current cars, go to www.cngnow.com and click CNG Vehicles Around the World.

AOL Autos also is packed with good information (http://autos.aol.com/gallery/hybrid-cars-15k-25k). Likewise, CNG Chat (www.cngchat.com) lets natural-gas vehicle owners share operating tips and parts sources, and the Environmental Protection Agency offers a searchable database of hybrids (www.fueleconomy.gov/feg/byfueltype.htm).

NATURAL-GAS ENGINES — found in some American buses and fleet vehicles — have clear appeal. Boosters say a “gallon equivalent” of natural gas is about half the price of gasoline or diesel and produces about a third the harmful emissions. And America is swimming in the stuff.

Although a shortage of natural gas was forecast a couple years ago, supply has surged 50% since then — primarily as a result of record gas discoveries in the strategically located Barnett, Haynesville, Marcellus and Bakken shale fields. These so-called unconventional sources are tapped using methods pioneered by outfits like Chesapeake Energy (ticker: CHK) and Denbury Resources (DNR) and can be quickly disseminated through the nearby pipelines of El Paso Corp. (EP) and Kinder Morgan Energy Partners (KMP).

Still, CNG vehicles in America face the same chicken-and-egg dilemma other hybrids do: building a refueling network. Refueling stations are scarce because only about 150,000 of America’s 250 million automobiles are CNG-powered.

So near-term, it will be large commercial shippers like Wal-Mart (WMT) and PepsiCo (PEP) that drive increased use of natural gas on the road, predicts Andrew Littlefair, chief executive of natural-gas filling-station operator Clean Energy Fuels (CLNE).

Operators of America’s long-haul trucks can afford natural-gas pumps in their shipping yards, and utilize Clean Energy’s growing network of 184 North America truck stops. The economic incentives are fairly obvious for these big energy users, less so for consumers paying a premium for CNG vehicles.

ALL THIS ADDS UP TO AN INVESTING outlook that, while cloudy for the moment, seems likely to brighten.

Institutional investors see many good long-term values among the sector’s 40 or so exploration-and-production and field-service companies, says Jon Najarian, co-founder of Chicago-based optionMONSTER (www.optionmonster.com). But depressed commodity prices and potentially punitive regulations directed at energy trades have kept many on the sidelines. Najarian is seeing lower-than-warranted volumes in the U.S. Natural Gas Fund (UNG), the main proxy for the volatile commodity, and other energy ETFs like the levered ProShares Ultra Oil & Gas (DIG) and its inverse, UltraShort Oil & Gas (DUG).

On the other hand, commodity volatility provides plenty of trading opportunities. Najarian recommends a covered-call strategy — going long on a natural-gas stock or fund while selling a call on the same issue, to profit from both up and down price movements. OptionMONSTER’s Covered Call Investor newsletter will walk you through this complicated swing-trading strategy for $149 monthly. At optionmonster.com, click Options Products, then Covered Call Investor.

Auto makers are another possible way to play the trend. But even a marked increase in CNG car sales won’t provide much earnings catalyst for giants like Honda (HMC) and Toyota (TM), which plans to bring some of its CNG-powered vehicles here in the future.

Clean Energy is among potential winners. It just opened the world’s largest natural-gas fueling facility at the Port of Los Angeles, and completed an $8.30-a-share offering that brought in $73 million. Shares recently closed at $12.78, bouncing off a 52-week low of $3.23 last November and a wider-than-expected second-quarter loss in August.

Likewise, Fuel Systems Solutions (FSYS), which supplies electronic gas-flow systems to car makers, picked up the technology for a home-refueling appliance when Honda liquidated its FuelMaker subsidiary in May. FSYS shares recently closed around $30 after the company handily beat second-quarter earnings estimates in a 52-week range of $10-to-$61. With a forward price/earnings ratio of 16, FSYS may appear fully priced, but not in view of a quarterly earnings-growth rate of 56% compared with the prior year.

THE QUESTION FOR ALL CNG-RELATED stock is: Will there be a legislative catalyst? Congress will have a lot on its plate when it returns to Washington — bigger fish to fry, as it were. On the other hand, Senate Majority Leader Harry Reid of Nevada and White House Chief of Staff Rahm Emanuel head the bill’s glittering list of supporters.

Among the politically influential fans cheering the Senate bill at the recent Clean Energy Summit were Bill Clinton, his former chief of staff John Podesta, Al Gore and BP Capital Management Chairman T. Boone Pickens. Populating American roads with CNG cars is Pickens’ Plan B to cut our foreign-oil bill by a third. The renowned energy investor has pulled the plug (temporarily) on Pickens’ Plan A: building the world’s largest wind farm.

Sums up Najarian: “There are all kinds of reasons to be bearish on this sector in the short term — and just as many reasons to be bullish in the long term.”

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Business Headlines September 1, 2009

Attention FSLR Holders

First Solar (FSLR) is overvalued and faces a serious problem in the form of cheap polysilicon. Sound familiar? It should, it’s been the refrain from analysts since May. Today’s shot at First Solar comes from Gordon Johnson of Hapoalim Securities, on Tech Ticker.

Johnson says First Solar is a sell, with a target of $90. His argument trods well worn ground, but in case you missed it, here it is.

First Solar makes its panels out of cadmium telluride. Most of its competitors make panels out of polysilicon. Last summer, thanks to generous subsidies around the world, especially in Spain, the price of polysilicon shot up to $450 per kg. At such a high price, First Solar had an advantage on the competition.

However, the price has crashed to $60 per kg, and might fall even further, thus wiping out First Solar’s advantage. First Solar had told investors not to worry, that it could compete with lowered polysilicon prices. During it’s Q2 conference call, it signaled a slight change in its thinking saying it would give rebates to customers to lower the price of the panels. Another worry from Q2, the odd revenue recognition detailed by Barron’s, and refuted by e4.

Johnson likes Trina Solar (TSL) who are low cost leaders, and have worked through their inventory of overpriced polysilicon, and are now buying the cheap stuff, which ought to boost margins. He’s cautious of Yingli (YGE) because they’ve yet to write down inventory, and Suntech (STP) because it outsources manufacturing of wafers, is locked into higher polysilicon prices, and has accounting practices that are redflags.

In a separate segment, which is included below, Johnson also explains why solar stocks aren’t taking off along with the price of oil. Here’s a hint: Cheap natural gas.

See Link For Video

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U.S. Manufacturing Grows For the First Time in a Year +++

By Courtney Schlisserman

Sept. 1 (Bloomberg) — Factories in the U.S. expanded in August for the first time in 19 months, helping lead the economy out of the worst recession since the 1930s.

The Institute for Supply Management’s factory gauge increased to 52.9, higher than forecast, from 48.9 in July, the Tempe, Arizona-based group said today. Fifty is the dividing line between expansion and contraction. Another report showed more Americans than anticipated signed contracts to buy existing homes in July.

The gains indicate Federal Reserve efforts to thaw credit markets together with the Obama administration’s “cash-for- clunkers” program and tax credits for first-time homebuyers are reviving demand. Factories and builders, which have accounted for half of all the jobs lost since the recession began in December 2007, may keep growing in coming months as sales rise.

“All the pieces are falling into place for a recovery to take hold,” Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the report. “The stimulus should exaggerate the pace of recovery in the third quarter and then it’ll settle back down a little bit.”

Economists forecast the index would rise to 50.5, according to the median of 77 projections in a Bloomberg News survey. Estimates ranged from 49 to 53.5. Manufacturing accounts for about 12 percent of the world’s largest economy.

Pending sales of previously owned homes climbed 3.2 percent in July, exceeding the 1.5 percent median forecast of economists surveyed by Bloomberg, a report from the National Association of Realtors also showed. The sixth consecutive increase marked the longest stretch of gains since records began in 2001.

Other reports today showed manufacturing was gaining speed worldwide. China’s factories expanded in August at the fastest pace in 16 months, while European industry shrunk by the least in more than a year.

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Asian Markets Trade Up on Earnings

By Patrick Rial and Jonathan Burgos

Sept. 1 (Bloomberg) — Asian stocks rose, led by technology and mining companies, after Hon Hai Precision Industry Co. earnings beat estimates and China’s manufacturing expanded at the fastest pace in 16 months.

Hon Hai Precision, the world’s No. 1 contract maker of electronics, climbed 6.8 percent in Taipei, as it beat analysts’ profit targets by 29 percent. Rio Tinto Group, the mining company that got 19 percent of its revenue in China last year, added 2.2 percent in Sydney. Industrial & Commercial Bank of China Ltd. rose 2 percent in Shanghai, where the benchmark index gained following its biggest one-day decline since June 2008.

“I don’t see why the stock market should collapse,” said Khiem Do, head of the multi-asset group at Baring Asset Management (Asia) Ltd. in Hong Kong, which holds $7 billion assets. “We are not looking at a reversal of the growth trend in China. Technology is among the sectors benefiting from this global recovery, particularly those in Taiwan and South Korea.”

The MSCI Asia Pacific Index rose 0.4 percent to 113.86 as of 8:21 p.m. in Tokyo. Almost two shares advanced for each one that fell on the gauge. Speculation of a global economic recovery drove the index to the highest in more than 10 months on Aug. 14. The measure has fallen 0.3 percent since then.

China’s Shanghai Composite Index added 0.6 percent amid speculation yesterday’s 6.7 percent decline was excessive. Hong Kong’s Hang Seng Index rose 0.8 percent. China Life Insurance Co. and Ping An Insurance (Group) Co. gained more than 4 percent in Shanghai after UBS AG upgraded their ratings……


European Stocks Trade Down

By Adria Cimino

Sept. 1 (Bloomberg) — European stocks fell for a second day on speculation the rally that drove valuations on the Dow Jones Stoxx 600 Index to the highest in six years has outpaced the prospects for economic growth. U.S. index futures slid.

Eiffage SA retreated the most since February after France’s third-biggest construction company posted a 64 percent drop in first-half profit. Royal Philips Electronics NV sank 4.1 percent as Exane BNP Paribas recommended selling shares of Europe’s biggest-consumer electronics maker and Stoxx Ltd. said the company will be removed from the Dow Jones Stoxx 50 Index.

The Stoxx 600 slipped 1.3 percent at 11:38 a.m. in London. The regional measure erased an earlier gain as an industry report showed European manufacturing contracted in August and a similar gauge in the U.K. dropped unexpectedly. Futures on the Standard & Poor’s 500 Index futures slid 0.7 percent.

Europe’s Stoxx 600 had earlier climbed as much as 0.7 percent as earnings from Vivendi SA and Taiwan’s Hon Hai Precision Industry Co. beat analysts estimates.

The manufacturing numbers show “that things aren’t as solid as expected, there’s a fragility,” said Guillaume Duchesne, a Geneva-based equity strategist at Fortis Private Banking, which oversees about $117 billion. “Economic statistics direct the market. The question is do we believe in a recovery that’s rather smooth or something that isn’t as good.”

A six-month rally has left the Stoxx 600 valued at 48.6 times profit, the highest level since June 2003, according to weekly data compiled by Bloomberg. The gauge gained 48 percent since March 9 as companies from L’Oreal SA to Goldman Sachs Group Inc. reported higher-than-projected profits and the German and French economies unexpectedly expanded.

Manufacturing Reports

An index of euro-area manufacturing rose to 48.2 from 46.3 in July, Markit Economics said. The gauge is based on a survey of purchasing managers and a reading below 50 indicates a contraction. A separate gauge of U.K. manufacturing unexpectedly fell to 49.7 in August from 50.2 in July, a survey by the Chartered Institute for Purchasing and Supply and Markit said.

Stocks had earlier advanced in Asia and Europe as China’s official Purchasing Managers’ Index rose to a seasonally adjusted 54 last month from 53.3 in July. The MSCI Asia Pacific Index gained 0.5 percent.

Eiffage posted the second-biggest decline in the Stoxx 600, losing 8.2 percent to 45.50 euros. First-half earnings slid to 50 million euros ($71.6 million) from 140 million euros a year earlier.

Philips dropped 4.1 percent to 15.12 euros as the company was cut to “underperform” from “neutral” at Exane BNP…..


Oil Trades Flat To Slightly Higher Over $70pb

By GEORGE JAHN p {margin:12px 0px 0px 0px;}

VIENNA (AP) – Oil prices rose slightly to above $70 a barrel Tuesday as a rebound in Asian stocks boosted investor optimism.

Benchmark crude for October delivery was up 38 cents at $70.34 a barrel by late afternoon Singapore time in electronic trading on the New York Mercantile Exchange.

The contract Monday lost $2.78 to settle at $69.96 after a drop in stocks heightened investor concerns that the global economic recovery may be weaker than expected. China’s benchmark stock index fell 6.7 percent Monday while the Dow Jones industrial average fell 0.5 percent.

“As much as we would like to read into yesterday’s ‘weakness,’ we will not,” commented trader and analyst Stephen Schork, in his Schork Report. “As far as we are concerned, it was end-of-month volatility compounded by yet to be substantiated fears regarding China.”

Most Asian stock indexes rose modestly Tuesday, including China’s. European markets were moderately down.

“Stocks are a leading indicator of the economy, so if we have a slump in stocks, that’s one fewer driver to support high oil prices,” said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.

Oil will likely trade between $65 and $70 during the next few weeks, Shum said.

“I don’t expect a big pullback because we are starting to see more signs of economic life,” he said. “There’s clear evidence that the global economy has reached a bottom.”

In other Nymex trading, gasoline for October delivery rose 0.81 cent to $1.82 a gallon and heating oil gained 0.70 to $1.82 a gallon.

In London, Brent crude was up 57 cents at $70.22.

China’s Manufacturing Expands

By Bloomberg News

Sept. 1 (Bloomberg) — China’s manufacturing expanded at the fastest pace in 16 months in August, driven by record lending in the first half of the year, two surveys showed.

The Purchasing Managers’ Index rose to a seasonally adjusted 54 from 53.3 in July, the Federation of Logistics and Purchasing said in an e-mailed statement today in Beijing. A PMI released by HSBC Holdings Plc also climbed.

Gains in output, orders and jobs added to evidence that Premier Wen Jiabao can meet his 8 percent growth target for the year as a stimulus package counters falling exports. The Shanghai Composite Index plunged into a bear market yesterday on concern that the world’s third-biggest economy will slump as banks rein in credit growth to avert asset bubbles and bad loans.

“China’s equity market has taken a battering in the past few weeks, but the economic data suggests that the recovery remains on track,” said Brian Jackson, a strategist at Royal Bank of Canada in Hong Kong. “Beijing still faces the difficult task of managing liquidity conditions to avoid a bubble or a bust.”

Shanghai’s stock index closed 0.6 percent higher after tumbling 6.7 percent yesterday. Asian stocks rose.

New loans plunged to 355.9 billion yuan ($52 billion) in July, less than a quarter of June’s level, and may slump to 200 billion yuan in August, the Beijing-based business magazine Caijing reported yesterday without citing anyone…..


PetroChina Invests $1.7 bln in Canadian Oil Sands

By John Duce and Gene Laverty

Sept. 1 (Bloomberg) — PetroChina Co. has agreed to pay C$1.9 billion ($1.7 billion) for a stake in a Canadian oil sands project in its biggest North American acquisition, widening the search for energy resources overseas.

China’s largest oil company will buy 60 percent of Athabasca Oil Sands Corp.’s MacKay River and Dover oil-sands projects, the Canadian company said in a statement yesterday.

PetroChina has acquired gas fields in Kazakhstan and a Singapore refinery in deals accounting for about a fifth of China’s $17 billion spending on overseas energy assets since December. Oil sands resources are harder to exploit than conventional fields and the Athabasca transaction underscores China’s determination to snare reserves, said energy analyst Gordon Kwan.

“The easy, lucrative oil projects are gone and what’s left are the more difficult challenging projects for the oil firms to tackle,” said Kwan at Mirae Asset Securities in Hong Kong.

PetroChina shares rose 1.2 percent to HK$8.66 in Hong Kong today while the Hang Seng Index rose 0.8 percent. The company’s market capitalization fell behind Exxon Mobil Corp. yesterday as the U.S. company regained its rank as the world’s most valuable company after shares in China fell.

PetroChina will provide funding for future extractions of the resource under the deal, Athabasca, a closely held company based in Calgary, said yesterday in its statement. PetroChina may deploy methods it has used in northeastern China heavy-oil projects to unlock oil trapped in Alberta sands, according to the statement.

Strategic Deal……


German Recovery Said To Be Far Away

By Kevin Crowley

Sept. 1 (Bloomberg) — Employment levels at British, French and German financial services firms won’t return to last year’s figure before 2013, according to a study by the City of London.

The U.K. will be worst affected by the job cuts and will have 10,000 fewer roles in banking, insurance and fund management in four years’ time than it did in 2008, said the report, commissioned by the municipality running the U.K.’s main financial district. Any resurgence in hiring depends on economic growth, said Stuart Fraser, the City of London’s policy chief.

“We’ll have slow growth for the next few years, and that takes us to 2013 to 2014,” he said in a telephone interview. “Hopefully by then we’ll be in a better balanced position to accelerate growth.”

European banks and financial firms have cut 140,000 jobs since the third quarter of 2007, when financial markets seized up after the U.S. subprime mortgage crisis, according to data compiled by Bloomberg. Firms will eliminate about 84,000 jobs in Europe this year, of which 35,000 will go the U.K., the region’s biggest employer of financiers, the report said.

Economic output from Europe’s financial services industry will shrink 6.2 percent this year, and will continue to contract in 2010 before beginning to expand the following year, the report said. The rebound will proceed at a “much more moderate pace” than the rapid growth between 2000 and 2007, said the report, which was produced by consulting firm London Economics.

‘Growth Efficiency’

“I’m fairly optimistic on the financial sector returning to profitability, but that won’t necessarily feed through to dramatic employment growth,” said Alistair Milne, a senior finance lecturer at London’s Cass Business School.

Financial firms will be focused on “growth efficiency” over the next four years and “earning money out of the staff they’ve got at traditional businesses” such as fixed income, equity trading and derivatives trading, he said.

Banks including Lehman Brothers Holdings Inc., which went bankrupt last September, have cut jobs in London. Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc have eliminated about 15,000 U.K. posts since being rescued by the government…..




U.K. Bond Yields Narrow To Their Tightest Spread In Years

By Esteban Duarte

Sept. 1 (Bloomberg) — Signs the U.K.’s real-estate market is emerging from the worst economic slump in decades are driving yield spreads on mortgage bonds tighter, according to data compiled by JPMorgan Chase & Co.

The yield over benchmark rates that investors demand to hold top-rated U.K. five-year mortgage-backed securities shrank 0.3 percentage points over the last month to 1.65 percentage points, JPMorgan data show. That’s near the narrowest spread, or gap, since July 18, 2008, and is down from as wide as 4.25 percentage points on Jan. 2, according to JPMorgan.

British house prices rose for the first time in two years in August, buoyed by a lack of homes for sale, London-based property research company Hometrack Ltd. said in a report yesterday. The data backed up reports from the government and mortgage lender Nationwide Building Society last month that showed property prices are rebounding from the deepest recession since World War II.

“The increase of home prices and the stabilization of arrears are giving some fundamental base to the recovery” in mortgage bonds, said Markus Ernst, a credit analyst at UniCredit SpA in Munich. “The overall credit market also became less risk averse,” he said.

The average cost of a home in England and Wales rose 0.1 percent from July to 155,800 pounds ($253,000), Hometrack said. The increase, the first since July 2007, left house prices 6.7 percent lower than a year earlier, the smallest annual decline in a year. Home values have fallen 12 percent since their peak in September 2007, the London-based firm said.

Fourth Straight Gain…..


U.S. Manufacturing Expected To Rise

NEW YORK (Reuters) – A key gauge of U.S. manufacturing activity likely rose in August, which would bring the index into positive territory for the first time since just after the recession began, according to a Reuters’ poll of economists.

The Institute for Supply Management’s manufacturing index is expected to have risen to 50.5 in August from 48.9 in July, according to a median forecast from a recent Reuters poll.

Estimates from the 78 economists polled ranged from a low of 48.9 to a high of 53.5.

A reading above 50 indicates the sector is expanding.

An expansionary reading on the nationwide ISM manufacturing index would come a day after the Institute for Supply Management-Chicago reported that its midwest business barometer rose to 50.0 in August.

The national Institute for Supply Management will release its August non-manufacturing index at 10 a.m. (1400 GMT) on Tuesday.


Ebay Said To Sell Skype To Private Equity

(Reuters) – Internet auction and services company EBay Inc has reached a deal to sell its online telephony unit Skype to a group of private investors, the New York Times said, citing two people briefed on its plans.

Andreessen Horowitz, a new venture capital firm headed by the Netscape co-founder Marc Andreessen, is likely to be among the investors in the group, the paper cited the people as saying.

London-based Index Ventures and Silver Lake Partners may also be involved in the deal, one of the people told the paper.

The paper added that the value of the deal, which is likely to be announced later on Tuesday, had not been disclosed.

EBay spokesman Alan Marks declined to comment on the report.

In May, EBay Chief Executive John Donahoe said a valuation of $2 billion would be low for Skype.

(Reporting by Ajay Kamalakaran in Bangalore, editing by Will Waterman)

SAN FRANCISCO (Reuters) – Yahoo Inc (YHOO.O) board member Carl Icahn has cut back his stake in Yahoo, selling nearly 13 million shares since last Thursday, according to a regulatory filing on Monday.

Icahn Capital reported that the overall Yahoo stake held by various Icahn-related funds was 4.48 percent, down from 5.38 percent as of June 30, according to Reuters data.

Icahn’s stock sales come one month after Yahoo struck a deal to outsource its search technology to Microsoft Corp (MSFT.O), a partnership Icahn advocated.

Since the deal was announced, Yahoo’s stock price has declined nearly 16 percent, closing Monday at $14.49.

According to Monday’s filing, Icahn remained optimistic about Yahoo’s long-term prospects.

Icahn sold his Yahoo shares to better “balance” his portfolio of tech stocks and because the window for Yahoo directors and offices to sell stock would be closing after August 31, according to the filing.

“The reporting persons continue to believe in the wisdom of the Microsoft-Yahoo search transaction and fully support the performance of the Issuer’s CEO Carol Bartz,” Icahn Capital said in its filing.

According to the filing, Icahn sold his Yahoo shares between August 27 and August 31 at prices ranging from $14.75 to $14.92.

Icahn amassed the bulk of his stake in May of 2008, according to media reports at the time, when shares of the company were trading in the low- to mid-$20 range.

(Reporting by Alexei Oreskovic; editing by Carol Bishopric)


Insider Selling Continues Its Record Pace

The insider selling statistics continue to represent an almost unbelievably low level of confidence by insiders in their own companies.  The latest data out of Finviz showed an incredible $837MM in insider selling compared to just $13MM in insider buying. While we try not to read too much into the extreme amount of insider selling (insiders sell for many reasons that don’t always represent a lack of confidence in future prices) the drop-off in insider buying is quite alarming.  Insiders only buy their own stocks for one reason: they believe the stock is going to rise.  The total lack of insider buying can only be seen as a widespread vote of no confidence in the future prices of U.S. stocks.   Although the selling data should be largely ignored, the incredible amount of sales has to make one wonder how much of the selling is due to insiders who simply want to cash out of stocks before they decline again….

The following chart from insidercow.com shows the sharp drop in the insider buying:

dailyBuy1 INSIDER SELLING SPIKES TO NEW HIGHS, BUYING STILL NON EXISTENT

 INSIDER SELLING SPIKES TO NEW HIGHS, BUYING STILL NON EXISTENT

Click for larger image

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Editorial: Should We Have a Single Payer System ?

Taibbi From Rolling Stone Magazine Takes a look @ Healthcare:

Health Care Reform: Sick and Wrong

America’s disastrous health care system is responsible for incalculable amounts of illness, death, lost productivity and federal deficit — not to mention anxiety, anger and disgrace. And it’s not going to get fixed, writes Matt Taibbi in the new issue of Rolling Stone, because it’s encased in another failed system: the U.S. government. Rather than attempt to remedy the problem this summer, our government sat down and demonstrated its dizzying ineptitude. “We might look back on this summer someday and think of it as the moment when our government lost us for good,” writes Taibbi. “It was that bad.”

Taibbi breaks down the five steps Congress took to be sure no bill would pass — aiming low, gutting the public option, packing it with loopholes, providing no leadership and blowing the math — in his story, which is available on stands now. In a series of video interviews for RollingStone.com, Taibbi explores one of our system’s most severe flaws, explains how the government wedged itself into an awkwardly damning position, and looks at how the proposed bill would change the ordinary American’s life.

Perhaps the biggest flaw in the American health care system is that 31 percent of costs are associated with administration and paperwork. Here Taibbi examines the easiest way to eliminate the red tape:

Video 1:

Taibbi on how the Democrats wound up on the defensive — and theories that the government struck a sideline deal with the pharmaceutical industry:

Video 2:

Inside the “individual mandate” that would require people to buy insurance and how the bill might make conditions worse than before:

Video 3:

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