German GDP Drops, France Edges Up, and the Periphery is Deep in Gloom

“BERLIN/PARIS (Reuters) – Germany’s economy contracted slightly in the last three months of the year while France eked out an anemic level of growth, suggesting the euro zone may succumb to a mild recession with its high debtors still deep in the mire.

German gross domestic product contracted 0.2 percent in the fourth quarter, a slowdown from upwardly revised 0.6 percent growth in the July-September period, data showed on Wednesday.

France fared better, growing by a stronger-than-expected 0.2 percent in the fourth quarter from the previous three months as corporate investment picked up and domestic consumption remain solid, bringing growth for the year to 1.7 percent in line with the government’s forecast.

Figures for the whole euro zone are due at 1000 GMT and forecast to show its economy slipped by 0.3 percent quarter-on-quarter.

Germany’s figures were a little better than forecast and more forward-looking survey evidence suggests its downturn, at least, will be short-lived.

The ZEW think tank’s monthly poll of economic sentiment jumped for the third month in a row on Tuesday, to its highest level since April 2011, reinforcing signs that Europe’s largest economy is returning to growth.

“We expect the German economy to move roughly sideways in the first half of this year, before gaining momentum from around the middle of the year, when European policymakers should have implemented the final measures to contain the sovereign debt crisis while the global economy picks up,” said Aline Schuiling at ABN AMRO.

France’s economy also beat expectations that it would shrink by 0.1 percent.

“Each of the three main components of the economy – foreign trade, household consumption and investment – had a positive contribution in the last quarter of 2011,” Finance Minister Francois Baroin said in a statement. “This strengthens the government’s forecast for 0.5 percent (growth) this year.”

Late last year, European Central Bank President Mario Draghi forecast a “mild recession” for the currency bloc. His latest assessment, given at a news conference following a monetary policy meeting last week was that there was evidence of “a stabilization of economic activity at a low level.”

Finland posted quarterly growth of 0.7 percent.

PERIPHERAL MISERY”

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Italy saw its economy shrink by 0.7%

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“Global regulators have exposed flaws in banks’ internal controls that may have allowed traders to manipulate interest rates around the world, two people with knowledge of the probe said.

Investigators also have received e-mail evidence of potential collusion between firms setting the London interbank offered rate, said the people, who declined to be identified because they weren’t authorized to speak publicly. Regulators are focusing on a lack of so-called Chinese walls between traders and employees making interest-rate submissions on behalf of their banks, the people said. In some cases, the two groups may have sat close to each other, one person said.

Britain’s Financial Services Authority is probing whether banks’ proprietary-trading desks exploited information they had about the direction of Libor to trade interest-rate derivatives, potentially defrauding their firms’ counterparties, the people said. The investigation may lead to civil fines for the banks and criminal charges for the traders involved, the people said. No penalties are likely from the FSA before year-end, and the case hasn’t moved toward criminal charges, one person said.

“The entire story is very embarrassing for the banks,” said Tom Kirchmaier, a fellow in the financial-markets group at the London School of Economics. “I don’t know how they will eradicate this. The regulators have to rethink the way they set Libor.”

The rate, a benchmark for about $360 trillion of financial products worldwide, is derived from a survey of banks conducted daily on behalf of the British Bankers’ Association in London.

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“China pledged to invest in Europe’s bailout funds and sustain its holdings of euro assets, spurring gains in the currency and Asian stocks on optimism the region’s debt crisis will be overcome.

“China will always adhere to the principle of holding assets of EU sovereign debt,” People’s Bank of China Governor Zhou Xiaochuan said in Beijing today. “We would participate in resolving the euro debt crisis,” he said, echoing comments by Premier Wen Jiabao yesterday.

The remarks offer a carrot to European finance ministers, who are increasing pressure on Greece to deliver budget cuts in exchange for a second bailout. At stake for China is helping to stabilize the economy of its largest export market amid a global slowdown that has curtailed growth in Chinese shipments abroad.

“Wen and Zhou are giving the best support China can offer now, which is to send out positive messages such as promising not to cut euro assets and to buy European bonds to help bolster market confidence,” said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. who previously worked at the European Central Bank. “How much and when China will buy will depend on its foreign-exchange investment strategy — when they find the pricing and exchange rate favorable.”

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Really !

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“Stocks climbed and commodities rallied to a six-month high after China said it will get more involved in Europe’s bailout effort. Emerging-market shares gained the most in two weeks, while the dollar weakened.

The MSCI All-Country World Index added 0.7 percent at 7:48 a.m. in New York, following a 0.4 percent drop yesterday. The MSCI Emerging Markets Index climbed 1.3 percent. Standard & Poor’s 500 Index futures gained 0.7 percent. The Dollar Index fell 0.4 percent, and the 10-year U.S. Treasury yield rose one basis point to 1.95 percent. The cost of insuring against default on European government bonds increased for a sixth day. The S&P GSCI gauge of 24 commodities advanced 0.6 percent.

China, which holds the world’s largest currency reserves, can provide help through avenues including the central bank and its sovereign wealth fund, said People’s Bank of China Governor Zhou Xiaochuan. The euro-area economy performed better than analysts anticipated, and earnings for BNP Paribas SA and Heineken NV beat estimates. U.S. industrial output probably had its biggest gain in six months in January, economists said before a Federal Reserve report today.

“China could make Europe’s problems go away,” said Peter Jolly, head of market research at National Australia Bank Ltd. in Sydney. “They have the funds. To the extent that China will participate in the European solution, it takes away some of the flight to quality in Treasuries.”

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“European Central Bank policy makers signaled they may distribute profits from Greek bond holdings to governments to help make up a possible shortfall in aid to the embattled nation.

Governing Council member and Belgian central bank governor Luc Coene said ECB officials have agreed that they “don’t wish to make a profit on Greece.” Executive Board member Joerg Asmussen, echoing remarks by fellow board member Benoit Coeure, told Reuters that the ECB can pass any profits on to national central banks and “then the member states can decide to use this as a contribution to finance the Greek program.”

The comments suggest the ECB may disburse profits on Greek bonds as they mature, giving governments additional cash to help Greece avoid a default. While the ECB has also looked at exchanging its Greek securities for bonds from the government- based rescue fund, the European Financial Stability Facility, Bundesbank President Jens Weidmann suggested politicians don’t favor that plan.

“If governments were prepared to buy the bonds from us, we certainly wouldn’t shy away from that discussion,” he told the Handelsblatt newspaper. “Such willingness is not apparent.”

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Asia

Europe

Futures

Currencies

Commodities

LIBOR, EURIBOR, 10 year yields for Italy, Spain, France, and Germany

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HACKED.

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While we worry about future threats like global warming, and present threats like Iran’s escalating nuclear program, the sun’s propensity for belching out monstrous solar flares (like the Carrington event of 1859) could almost instantly create a world without modern conveniences, or even electricity.  The sun could literally “bomb us back to the stone age”.

Imagine a world without iPhones, and you’d understand why Homeland security rates New York and Seattle the highest for likelihood of major social unrest. Humans don’t do well in the dark. DHS has taken notice.

First some history, from NASA:

At 11:18 AM on the cloudless morning of Thursday, September 1, 1859, 33-year-old Richard Carrington—widely acknowledged to be one of England’s foremost solar astronomers—was in his well-appointed private observatory. Just as usual on every sunny day, his telescope was projecting an 11-inch-wide image of the sun on a screen, and Carrington skillfully drew the sunspots he saw.

On that morning, he was capturing the likeness of an enormous group of sunspots. Suddenly, before his eyes, two brilliant beads of blinding white light appeared over the sunspots, intensified rapidly, and became kidney-shaped. Realizing that he was witnessing something unprecedented and “being somewhat flurried by the surprise,” Carrington later wrote, “I hastily ran to call someone to witness the exhibition with me. On returning within 60 seconds, I was mortified to find that it was already much changed and enfeebled.” He and his witness watched the white spots contract to mere pinpoints and disappear.

It was 11:23 AM. Only five minutes had passed.

Just before dawn the next day, skies all over planet Earth erupted in red, green, and purple auroras so brilliant that newspapers could be read as easily as in daylight. Indeed, stunning auroras pulsated even at near tropical latitudes over Cuba, the Bahamas, Jamaica, El Salvador, and Hawaii.

Even more disconcerting, telegraph systems worldwide went haywire. Spark discharges shocked telegraph operators and set the telegraph paper on fire. Even when telegraphers disconnected the batteries powering the lines, aurora-induced electric currents in the wires still allowed messages to be transmitted.

“What Carrington saw was a white-light solar flare—a magnetic explosion on the sun,” explains David Hathaway, solar physics team lead at NASA’s Marshall Space Flight Center in Huntsville, Alabama.

Read the rest, including the Department of Homeland Security Report, here.

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By WSJ Staff

By Erik Holm

Warren Buffett’s Berkshire Hathaway Inc. (BRKA, BRKB) revealed new investments in DaVita and Liberty Media, though both holdings were small enough to suggest they may not have been made by the company’s famed leader.

Berkshire held 2.68 million shares of DaVita, one of the largest U.S. providers of dialysis services, as of Dec. 31, according to a regulatory filing released Tuesday. The stake was worth $203 million.

The 1.7 million Liberty Media shares were valued at $132 million at the end of the year. The company is a media conglomerate controlled by John Malone.

In addition, Omaha, Neb.-based Berkshire more than quadrupled its stake in DirecTV, holding shares valued at $870 million at yearend.

All three companies have been favorites of new Berkshire investment manager Ted Weschler. His hedge fund, Peninsula Capital Advisors LLC, owned the stocks last year before he began winding down the fund to join Buffett’s conglomerate.

Buffett had said Weschler would join Berkshire in early 2012, but some of his stock picks appear to have arrived in Berkshire’s portfolio before he did.

Read the rest here.

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Billionaire John Paulson sold his entire stakes in Bank of America Corp. and Citigroup Inc. (C) in the fourth quarter before the bank’s shares rallied.

Paulson & Co. sold 25.1 million shares of Citigroup valued at $643 million as of Dec. 31, according to a filing today with the U.S. Securities and Exchange Commission. The hedge fund sold about 64.3 million shares of Bank of America worth $394 million.

Source

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A recent survey of U.S. bankruptcy attorneys found a major jump in student loan debtors seeking their help, pointing the way to a possible mortgage-style debt crisis.

Now that state attorneys general across the country have reached a $25 billion deal with the major banks on their investigation into “robo-signing” and other foreclosure abuses, the next financial crisis may be on the horizon, one group is warning.

A survey and report released Tuesday by the National Association of Consumer Bankruptcy Attorneys found that 81 percent of the bankruptcy attorneys polled said that potential clients with student loan debt have increased “significantly” or “somewhat” in the past three to four years. Overall, 48 percent of the bankruptcy attorneys in the survey reported significant increases in such potential clients.

Read the rest here.

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abnormalreturns February 14th, 2012

This is not a novel theme for us.  Indeed one thing we note in our forthcoming book, Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere, is that investing has never been “cheaper or easier.”  Some of this has to do with the rise exchange traded funds.  In other respects it has to do with the blossoming of the options markets.  In large part, it has to do with technology.  In short, never before have investors had access to data, analysis, opinion and social tools that are commonplace today. Let’s take these points one by one.

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Knicks: 90

Raptors: 87

#Linsanity

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via Buzzfeed.com 

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RAX is @ $56 up $6.77

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The S&P goes up 14.3% when an American is featured on Sports Illustrated Swim Suit issue….

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