REVIEW & OUTLOOK DECEMBER 31, 2011

The Spenders Won 2011

Republicans fell for Obama's backroom budget trap. Amid this month's payroll tax fracas, few noticed that Congress passed a 1,200page, $1 trillion omnibus spending bill for fiscal 2012. Maybe no one in Washington boasted because it's a victory for spending as usual. Republicans in the House and Senateneed a better strategy. The news is that after accounting for last-minute unemployment insurance extensions, "emergency" spending and higher Medicare physician payments, total federal outlays are estimated to be $3.65 trillion in fiscal 2012, up slightly from $3.6 trillion in 2011. The last year has seen no major reforms in any of the big entitlement programsMedicare, Medicaid or Social Security. Spending on food stamps alone is scheduled to reach $80 billion in 2012, more than double the amount as recently as 2007.

Associated Press

Speaker of the House John Boehner (R., Ohio)

Republicans had promised to roll back discretionary spending to 2008 levels, to save $100 billion. But the August debt deal lowered the savings to $7 billionor a 2012 target for appropriations of $1.043 trillion. Even that target was missed because appropriators tacked on roughly $10 billion in disaster relief hurricanes this summerand so the new total is $1.054 trillion. That's $4 billion more than the 2011 baseline of $1.050 trillion, although savings from troop withdrawals in Iraq may reduce that. What about killing programs? Well, only 28 programs out of the thousands of line-items contained in the omnibus budget were terminated. The list includes mostly minor programs such as $12.5 million spent on something called "adolescent family life," $1.2 million for civic education, and $1.4 million for economics education (not for members of Congress). 1

The one major domestic program of more than $100 million that got the axe was the Energy Department loan guarantee program for the likes of Solyndra. The total domestic savings from program terminations come to less than $0.5 billion.

Meanwhile, scores of programs that have long been GOP targets survived: Amtrak, the Legal Services Corp., National Public Radio, the United Nations population program, mass transit grants, and even funding for the U.N. Climate Panel. Spending increased for many programs, such as the National Institutes of Health, the Consumer Product Safety Commission, Indian Health Service and Bureau of Land Management.

Many readers will look at all this and blame House Republicans, and there's no doubt they failed to meet expectations. Yet believe it or not, a flat overall budget is a vast improvement over the years 2007 to 2011, when overall spending increased 32%, or $868 billion. (See the nearby table.) Voters elected a GOP House to pull the Democratic credit card, and Republicans at least stopped the blowout of the Pelosi-Obama years. The real failure of GOP leaders is that Senate Democrats and the White House foiled Republican attempts to cut spending further. The GOP fiscal high point was the passage of Paul Ryan's budget in the spring, with $4.5 trillion of savings over a decade, numerous program cancellations, the most ambitious entitlement reform since the GOP budget of 1995 (vetoed by Bill Clinton), and an outline for pro-growth tax reform. From that moment on, Democrats went into a prevent defense. Senate Majority Leader Harry Reid refused to pass a comparable budget outline, a Democratic abdication that has now reached more than 900 days. Democrats offered no spending cuts or budget reforms in public. None. Instead, they attacked Mr. Ryan for daring to reform the structure of Medicare to introduce more competition, which takes some nerve after Democrats cut Medicare by $500 billion over a decade to fund ObamaCare. As for the White House, Mr. Obama joined the assault on Mr. Ryan, but he also claimed to favor some fiscal discipline and he invited GOP leaders to work out a compromise behind closed doors. This let him posture as a spending cutter without having to make a decision on any specific budget cuts or reforms. He gulled Speaker John Boehner in particular with promises of sincerity, only to demand $1 trillion in tax increases that House Republicans could never pass without violating their own campaign promises. This was the big GOP mistake. Mr. Boehner and Majority Leader Mitch McConnell both fell for Mr. Obama's backroom political trap. Mr. Boehner privately insisted that Mr. Obama really wanted a deal, while Mr. McConnell, who never liked the House budget, was looking for political cover on Medicare. But whatever their motives, their strategy failed by letting Mr. Obama set the terms of debate. They failed to make Senate Democrats and the White House declare themselves in public where voters would notice.

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There has to be a better way. Tea party expectations of major reforms were always unrealistic with Democrats controlling the Senate and White House. But that's no reason that Republicans in Congress can't use their power to fight for their priorities. 3

They need to draw contrasts with Democrats on taxes, spending, regulation and reform that at least educate the public about what's at stake. Pick some programs and make them budget-cutting showcases. Use the savings to finance tax cuts that promote growth. Or simply vote for tax reform whether or not it is "revenue neutral" under Congress's silly budget rules. Follow votes in the House by bringing pro-growth bills to the Senate and forcing Democrats to vote up or down, as they did with the Keystone XL pipeline. GOP Congressional leaders will be tempted to play it safe and wait for their Presidential nominee. And inevitably the Presidential race will dominate public debate as 2012 unfolds. But before it does, Republicans need to do far more to show their own supporters and independent voters that they are the party of reform and change in Washington. If voters want spending as usual, they'll elect Democrats. ==============================================================

Natural Gas Ends 2011 at 27-Month Low

By DAN STRUMPF And RYAN DEZEMBER

U.S. natural gas prices fell to their lowest point in more than two years, underscoring how the nation's booming energy business is becoming a victim of its own success.

Minneapolis Star Tribune/Zuma Press

Natural gas is burned off at a well in North Dakota. Mild weather and oversupply have pushed the fuel's price below $3.

Prices for the commodity have been under pressure over the last couple of years, as new drilling techniques unlocked vast new stores of natural gas from shale formations and other so-called unconventional reservoirs.

But in the last two months, the steady price decline has turned into a free-fall, as unusually mild temperatures across much of the U.S. have damped demand for gas to heat homes and offices. Natural gas for February delivery settled Friday at $2.989 per million British thermal units, the lowest closing price for the commodity since September 2009. It closed below $3 in the winter for the first time in nearly a decade.

"The sub-$3 levels for gas prices in the winter really point to the incredible amount of nonconventional gas that has come onto the market the last two years," said Gene McGillian, analyst at Tradition Energy in Stamford, Conn. "Our production levels, our mild winter and the gas we have in storage have combined to crush natural gas prices this month." Natural gas traded as high as $13 per million British thermal units in July 2008. But in recent years, domestic production boomed, with horizontal drilling techniques and hydraulic fracturing, or "fracking," helping producers unleash a flood of gas from shale formations in Pennsylvania, Arkansas and elsewhere. Natural gas production in the lower 48 states hit a record 71.3 billion cubic feet a day in October, the U.S. Department of Energy said this week. The bonanza has ushered in lower prices for many consumers and businesses. New Jersey's Public Service Electric and Gas Co., citing lower costs partly due to shale drilling, reduced residential gas rates on Dec. 1 by 4.6%, bringing to 35% the utility's total decrease since January 2009.

Shale drilling has also created jobs and the prospect of greater energy independence, while raising environmental concerns. But the fresh abundance of natural gas has also weighed on its price, undercutting the profitability of the business for energy companies. "American natural gas production growth is essentially useless at this particular point in time since you can't make any profit on North American natural gas," EOG Resources Inc. Chief Executive Mark Papa told an energy conference in late November. EOG plans to direct 90% of spending to oil production in 2012, drilling for gas only where it is necessary to hold on to acreage, he said. The number of rigs in the U.S. targeting gas reservoirs has fallen to 809, down 110 from a year ago, oilfield services company Baker Hughes Inc. said Thursday. Many of those rigs have been steered to more profitable oil basins; the number targeting oil has rocketed to 1,193, up 428 from a year ago, according to Baker Hughes. Still, due in part to the structure of the business, the torrid pace of natural gas production shows few signs of slowing. Producers often have a limited time to begin drilling once they lease property, which leads many to drill wells regardless of commodity prices or risk losing their hold on reserves. Other companies are forced to drill by the terms of joint ventures they signed when the outlook on gas prices was rosier.

Bloomberg News

A crew from Alpha Oil & Gas Services constructs a gas pipeline outside of Watford City, N.D., in October.

Cheap gas hurts energy company profits. Chesapeake Energy Corp., the secondlargest U.S. producer after Exxon Mobil Corp., said recently that to meet its 2012 operating expenses and debt-reduction targets, it would pair $7 billion in planned asset sales and other financial deals with a projected $6 billion operating cash flow. 6

That $6 billion forecast, however, assumes an average natural gas price that translates to $4.38 per million British thermal units, according to a recent investor presentation, a price 50% higher than current levels. A Chesapeake spokesman said if gas prices remain low, the company's drilling expenses are likely to fall as well. Independent explorers, rig owners and other oilfield service companies are likely to be more sensitive to price declines than large international energy companies. With big balance sheets and a long-term investment horizon, they look to factors that could heighten demand for gas. The Environmental Protection Agency, for example, recently ordered power plants to cut emissions of pollutants by 2016. Gas producers envision plants ditching coal for cleanerburning gas. "If the U.S. is going to make a very large move on its greenhouse gas reductions, natural gas will be a big part of that," J. Michael Yeager, who runs BHP Billiton Ltd.'s oil and gas business, told investors in November. BHP in February paid $4.75 billion for Chesapeake's Fayetteville gas fields in Arkansas, the largest-ever deal for a shale asset, and said it will triple production over the next decade. =============================================================

ASIA BUSINESS JANUARY 2, 2012, 10:35 A.M. ET

Asia Manufacturing Picture Clouds

By MICHAEL S. ARNOLD

SINGAPOREManufacturing activity continued to contract in South Korea and Taiwan in December but grew in India, as the euro-zone sovereign debt crisis and the sluggish U.S. recovery hit Asia's export economies harder. Data Monday showed manufacturing contracting for a fifth straight month in South Korea and a seventh month in a row in Taiwan. That followed conflicting readings in recent days from China's two purchasing managers' indexes, with one showing continued contraction and one showing the merest of growth.

"Downside risks are materializing" in Korea, HSBC economist Ronald Man said in a release Monday. "The sharper drop in manufacturing activity over December confirms that Korea's economy is losing steam, with employment contracting over the month for the first time in almost three years." The South Korean PMI fell to a seasonally adjusted 46.4 in December from November's 47.1, the sharpest drop in nearly three years. A reading below 50 indicates manufacturing is contracting. In Taiwan, HSBC's PMI remained well below 50 in December, though at 47.1 it did beat November's 43.7. Some 70% of Taiwan's gross domestic product comes from exporting electronic components, technology products and petrochemicals, leaving the small island particularly exposed to a global slowdown. Data in recent months have shown Asia's breakneck growth cooling in response to the slowdown in the West, and central banks across the continent are moving to ease monetary policy. A key variable for the region's economies will be China's ability to pick up the slack, as it did during the global financial crisis in 2008. But with Beijing unable to marshal the same kind of fiscal stimulus now, economists are debating whether China's own economic landing will be hard or soft. HSBC's PMI for China, released Friday, showed manufacturing continuing to contract, with a reading of 48.7. The official gauge Sunday from the China Federation of Logistics and Purchasinggenerally sunnier than the private one was at 50.3. Nomura economist Zhiwei Zhang said the improvement in the official China gauge was a surprise, and predicted growth momentum "will continue to wane" in the first quarter. In India, where a huge domestic market helps shield the economy from global tremors, HSBC's PMI rose to 54.2 from 51.0. Indications are rising that the Reserve Bank of India will soon move toward monetary easing as concern shifts from fighting inflation to boosting the economy, but that could be a mistake, said Lief Eskesen, HSBC's chief economist for India. "These numbers suggest it's premature for the RBI to replace inflation with growth as the main concern," Mr. Eskesen said.

Data Monday out of Indonesia showed inflation rising at its slowest pace in 20 months, but economists don't think it will induce the central bank to cut interest rates at its policy meeting next week.
Se Young Lee in Seoul, Aries Poon in Taipei and Anant Vijay Kala in New Delhi contributed to this article.

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ASIA BUSINESS JANUARY 2, 2012, 4:57 A.M. ET

India Raises Iron Ore Export Tax

By RAJESH ROY

NEW DELHI -- India has raised the export tax on iron ore, likely increasing local prices and also deepening a slump in shipments of the steelmaking material from the world's third-largest supplier. The government increased the tax to 30%, effective Dec. 30, 2011, from 20% on both iron-ore fines and lumps, according to an order posted on the Central Board of Excise and Customs website Monday. The tax rise will likely hurt India's export competitiveness. India sells iron ore mainly in the spot market to China, unlike Australia and Brazil, the top two iron-ore producers, which sell the commodity mostly through long-term contracts. Shipments from the South Asian country decreased 28% between April and November to 40 million tons, according to the Federation of Indian Mineral Industries. Volumes have been hit by a mining ban in the southern state of Karnataka, a freeze on sale of old stocks in western Goa state and transport bottlenecks in the eastern state of Orissa. "Indian iron ore will no longer be competitive in the world market," said R.K. Sharma, the federation's secretary general. "This [export tax rise] will push the industry to the verge of dying." With high export tax and railway freight, India's iron-ore exports won't exceed 50 million tons this fiscal year through March, he added. India exported 97.64 million tons iron ore last fiscal year. The increase in export tax could lower the profit margin of Sesa Goa Ltd., India's largest iron-ore exporter by volume, Managing Director P.K. Mukherjee said.

Prior to the export tax change, industry officials had estimated exports in 201112 to be between 60 million and 65 million tons because of mining-related issues. The Supreme Court earlier this year banned mining in the major iron-ore producing districts of Karnataka to prevent illegal mining and environmental damage. In Goa, moves to reduce environmental impact and illegal mining are affecting production. The two states account for around 70% of India's iron-ore exports. The tax move follows lobbying by local steelmakers who wanted the level to be raised in order to preserve the raw material because of rapid expansion in capacity by the steel sector. ==============================================================

BUSINESS JANUARY 2, 2012

India Loosens Rules for Foreign Investors

By ANANT VIJAY KALA

NEW DELHIIndia's federal government on Sunday moved to allow qualified foreign investors to invest directly in local share markets, in yet another move aimed at attracting foreign capital flows amid a shaky global economy. Qualified foreign investors, or QFIs, will now be able to invest individually up to 5% of the capital of the Indian company. Cumulatively, QFIs can invest up to 10% of the capital of the company being invested in, the government said in a statement. The new rule will be effective Jan 15. Previously, only foreign institutional investors and non-resident Indians were allowed to directly invest in local shares. However, with capital inflows drying out due to the global economic uncertainty, the government is finding it harder to fund its gaping current account deficit. Asia's third-largest economy traditionally runs a wide current account gap, but authorities hadn't been too worried as they had relied upon heavy capital inflows to fund the deficit.

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The government has taken a string of measures to revive foreign investor interest in the local economy, which has been managing a moderately fast growth pace despite the global slowdown. In its annual budget, the federal government had allowed QFIs to invest in local mutual funds. With the new rules, they will be able to buy local shares directly. The government has also eased foreign investment rules in local debt, allowing more foreign capital to flow into its sovereign bonds. The government said capital markets regulator Securities and Exchange Board of India and banking regulator Reserve Bank Of India are expected to publish the rules to make them effective on Jan. 15. ==============================================================

UPSIDE DECEMBER 31, 2011

For Bank Stocks, Smaller Is Better in 2012

By JACK HOUGH

For stock investors, banks weren't where the money was in 2011. The KBW Bank Index, which includes 24 U.S. firms, from global giants like Bank of America and JP Morgan Chase to large regional players, plunged 25% in 2011. The broader Standard & Poor's 500-stock index was essentially flat. This is no repeat of the financial crisis, which exposed U.S. banks as dangerously underfunded and sent the KBW index crashing by more than threequarters over two years ended March 2009. This time part of the problem is that, with all of the new safeguards in place to prevent a repeat of 2008, banks can't be as aggressive as they once could. "Banks have much more capital today," says David Rolfe, chief investment officer at Wedgewood Partners, a St. Louis investment adviser overseeing $1.3 billion. "But for the big players, the business simply isn't as profitable." Smaller banks, however, might present an opportunity for bargain hunters.

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In the post-Lehman world, there are basically three sizes of banks: global "systemically important financial institutions," other big banks, and everything else. SIFIs are banks deemed too big to fail. There are 29 worldwide, including eight in the U.S., and membership in the club isn't optional. It is determined by the Financial Stability Board, a global oversight committee created in 2009. These behemoths face the closest scrutiny and strictest capital demands. In the U.S., new regulations impose liquidity and stress-testing requirements on all large banks. Banks with assets of more than $10 billion must run periodic stress tests, and ones with more than $50 billion face outside stress-testing. Strong banks are a good thing for investors in general, of course, but regulators are "erring on the side of caution" with large banks, says David King, an analyst with Newport Beach, Calif., investment bank Roth Capital Partners. That can stifle stock returns two ways, he says. First, extra money held in reserve can't be lent or invested at a profit. Second, large banks will face

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scrutiny as they try to return cash to stockholders through dividends and share repurchases. Big banks face another problem. Customers are depositing plenty of cash into savings accounts and certificates of deposit but demand for loans has been weak. In the past, a big branch network was necessary to attract deposits, says Mr. King. In the current environment, it's a burdensome expense for banks to carry. The idea that big banks enjoy economies of scale is largely a myth, says Frederick Cannon, director of research at Keefe, Bruyette & Woods, an investment bank that specializes in the financial sector (and the creator of the KBW Bank Index). What they have enjoyed is a funding advantage, and that is changing. "For 70 years, regulators viewed large, diversified banks as safer and thus able to make do with lower reserve levels," says Mr. Cannon. "Now they're taking the opposite view." That leaves strong, small banksones with assets below $10 billionin a position to outgrow and outperform the giants. And their shares seem inexpensive, analysts say. Small bank stocks did better than big ones in 2011, but not as well as the broader stock market. The KBW Regional Banking index lost 7%. Mr. Cannon says small banks look inexpensive relative to the book value of their assetsand large banks cheaper still. But the small ones will be better able to turn those assets into profits in coming years. For stock pickers looking for highly profitable banks, the team of bank analysts at Keefe Bruyette & Woods recommends three for 2012: Bank of Marin Bancorp, based in California; Bryn Mawr Bank in Pennsylvania and CVB Financial, out of Ontario. High returns on assets suggest banks like these are in a position to grow, says KBW. For investors who want banks with high levels of excess capital, either for the added safety or the likelihood that future cash flow will be spent on stockholders in the form of dividends or share repurchases, the KBW team likes four banks: Columbia Banking System based in Washington state; Hermitage, Pa.-based community bank F.N.B., People's United Financial in Connecticut; and again, CVB Financial.

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Mutual fund investors might consider the PowerShares KBW Regional Banking Portfolio, an exchange-traded fund with exposure to smaller banks. It costs $35 a year per $10,000 invested and has a dividend yield of about 2%, on par with the broad stock market. The average stock market value of its holdings was $1.3 billion at the end of the third quarter. Alternatively, the SPDR S&P Regional Banking ETF holds companies with an average stock market value of $2.7 billion. It also costs $35 a year per $10,000 invested and yields about 1.9%. Finally, there is the FBR Small Cap Financial Investor fund, an actively managed mutual fund. It is costly, with yearly expenses of $151 per $10,000 invested, but over the past decade the fund has returned 6% a year. That's double the S&P 500's return over the period, and a handsome enough performance to rank among the top 1% of financial funds.
Jack Hough is a columnist at SmartMoney.com.

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REVIEW & OUTLOOK ASIA DECEMBER 30, 2011

Beijing's Split and Hong Kong's Autonomy

"One country, two systems" is becoming just "one country." In 1997, when the British colony of Hong Kong reverted to Chinese sovereignty, the most common analogy was the goose that lays the golden eggs. China would leave the territory's capitalism and civil liberties alone as promised, optimists said, and they were largely right. At least until now. Jockeying for power ahead of China's leadership transition next fall is revealing a new debate over how better to control Hong Kong, and as a result Deng Xiaoping's "one country, two systems" formula that guaranteed the territory's status as a free and open city is under threat. This has implications for the way the rest of the world treats Hong Kong, and especially for Taiwan, which China wants to reunify with the mainland under the same formula.

***
A committee of 1,200 of Hong Kong's great and good will choose a new chief executive in March, and since most of the electors are "friends of Beijing," cues from the leadership of the Communist Party will decide the race. That leadership's choice is still not clear, because the two main candidates are effectively proxies for competing factions in Beijing arguing over Hong Kong's future. This is providing a peek into how Beijing thinks about the territory.

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The pro-establishment frontrunner, former Chief Secretary Henry Tang, is close to China's former paramount leader Jiang Zemin by dint of family ties in Jiangsu province going back decades. Mr. Jiang presided over the handover of Hong Kong and the successful implementation, more or less, of its promised autonomy. Since 1997, he entrusted this policy to the director of the Hong Kong and Macao Affairs Office, Liao Hui. But Mr. Jiang's health is failing, and his Shanghai faction seems to be losing influence over Hong Kong policy to the Communist Youth League faction of current supremo Hu Jintao. Mr. Tang's challenger is C.Y. Leung, one of the local leftists who expected to govern Hong Kong after the handover but have been spurned by Beijing in favor of tycoons and British-trained civil servants. After Mr. Liao retired in October 2010, the new Hong Kong affairs Director Wang Guangya, believed to be close to Mr. Hu's faction, made several unusual statements favoring the policy platform of Mr. Leung, including advocating more public housing and reform of land policy. That potentially threatens the interests of the tycoons, many of whom got rich through real estate investments. Mr. Wang also criticized British-trained civil servants for their lack of leadership, clearly meaning the current Chief Executive Donald Tsang, but also hitting his No. 2 and chosen successor, Mr. Tang. Li Keqiang, the incoming premier and another of Mr. Hu's supporters, came bearing economic measures to integrate the city with the mainland when he visited in August, and he also set a harder tone on control of the media, opposition politicians and protesters. To be clear, neither side is enthusiastic about allowing Hong Kong to keep its autonomy. The question is which of Beijing's local friends can engineer firm but popularly accepted government. Political reform legislation passed last year allows for election of the next chief executive in 2017 by universal suffrage, and Beijing is clearly looking ahead with trepidation. The local leftists boast a strong grass-roots organization with which to get out the vote, and some of their proposals will garner mass support. But Beijing has long been wary of unleashing populist passions and introducing more statist policies, lest they drive away investment and leave the central government obligated to support rich Hong Kong's finances, a situation that wouldn't go down well with the mainland public. On the other hand, the tycoons have the resources to finance election campaigns, but they are lightning rods for criticism. The civil service has the expertise to keep the government running smoothly from day to day, but as Mr. Wang said, they lack any understanding of how to practice politics and formulate a governing vision. 15

None of these groups has a good claim to represent local people. Nevertheless, both factions in Beijing seem to agree that Beijing must use these supporters to play a greater role in Hong Kong. Democracy is to be cautiously welcomed if it can make the territory easier to govern. But if it provides an opportunity for the opposition to take power, then it must be curtailed. If necessary, Beijing will renege on past promises, as it did in 2007 when the National People's Congress laid down the law on the pace of political reform, contradicting past assurances that this was up to Hong Kong people to decide. To prevent such an embarrassment, Beijing is putting pressure on Hong Kong to observe a new political correctness. In March, incoming paramount leader Xi Jinping instructed officials to put more emphasis on "one country" ahead of "two systems." Local officials have followed this new line by attacking opposition politicians as traitors for meeting with the U.S. consul-general, and initiating patriotic education in the schools.

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The only approach that Beijing is not considering is abiding by its promises to allow Hong Kong people to govern Hong Kong. Interference in local government is increasing the risk of confrontation and instability, as well as the emergence of a unified opposition. Beijing would be better off if free and fair elections in 2017 produced a more independent-minded chief executive who disagreed with Beijing on some issues but respected the central government's red lines. Unfortunately, none of the mainland's future leaders seem to share the wisdom of their predecessors. Beijing no longer appreciates the dangers of squeezing the golden goose too hard. As Hong Kong struggles to keep its autonomy, there is a danger that China will throttle the freedom that makes the territory successful. ==============================================================

ECONOMY JANUARY 2, 2012, 1:06 P.M. ET

Spain Scrambles to Contain Budget Deficit

DAVID ROMAN And CHRISTOPHER BJORK

MADRIDThe Spanish government said Monday it will introduce more austerity measures this week on top of a swath of spending cuts and tax increases approved last week, as it scrambles to contain a budget deficit that may have surpassed 8% in 2011.

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The new measures are set to be approved at a Cabinet meeting Thursday, Budget Minister Cristobal Montoro said Monday during an official event in Madrid. He didn't specify what measures the government plans to introduce. On Friday, the right-leaning government proposed about 8.9 billion in spending cuts for 2012 that ranged from trimming public-sector employment to curbing subsidies for political parties. It also said it would raise some 6 billion by raising taxes. Also Monday, Finance Minister Luis de Guindos said the budget deficit for 2011 may be above 8% of gross domestic product, overrunning an estimate given just days ago of just below 8%. The previous Socialist government had targeted a budget deficit of 6% of GDP. Spain is the latest of several countries on the euro zone's fiscally frail periphery to miss budget-deficit reduction targets. Portugal, Italy and Greece have all been forced to push through austerity measures in recent months. "It's possible that we surpass 8%. I hope it's not by much," said Mr. de Guindos in an interview with Spanish radio station Cadena SER. He repeated that his government expects a contraction of the economy both in the last quarter of 2011 and the first quarter of this year, meaning Spain is on the path to a double-dip recession. The economy staged a timid rebound in the first half of last year, but the deepening European credit crisis has recently taken a toll on exports, hurt consumption and caused more job losses. With almost five million unemployed workers, some 22.8% of the Spanish work force is currently out of work. "Everyone must make sacrifices," Mr. de Guindos said. "We're in a very difficult situation, very complex, probably the toughest we've seen in decades." Mr. de Guindos said he hopes to keep Spain's value-added tax, one of the lowest in the euro zone and one that wasn't raised Friday, at the current level. Regarding previously mooted plans to launch a government "bad bank" to take in property-related assets now held by commercial banks, Mr. de Guindos said no final decision has been made. He also added that the government will try to minimize the impact of any banking cleanup on the public finances. ==============================================================

ECONOMY JANUARY 2, 2012, 10:35 A.M. ET

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Euro-Zone Manufacturing Activity Falls for Fifth Month

By PAUL HANNON

LONDON -- Manufacturing activity in the euro zone declined for the fifth straight month in December, although less sharply than earlier in the fourth quarter, according to a survey of purchasing managers released Monday. The survey is consistent with other indicators of recent activity, and together the numbers suggest the euro-zone economy contracted during the final three months of the year. Markit Economics said its Purchasing Managers Index for the sector rose to 46.9 from 46.4 in November, in line with expectations and below the 50.0 threshold that distinguishes an expansion from a contraction. Over the fourth quarter, the average PMI for manufacturing was the weakest since the second quarter of 2009. Markit said that while the fall in output slowed in all of the nations covered by its survey, there were wide disparities. Factories in Germany, France, the Netherlands and Austria reported only mild declines in output, while those in Italy, Spain and Greece reported much larger drops. Wherever they are based, all manufacturers are operating in a difficult environment. "Euro-zone manufacturers are now very much on the back foot and finding life extremely challenging as domestic demand is hit by tighter fiscal policy across the region, squeezed consumer purchasing power, and heightened euro-zone sovereign debt tensions leading to tightening credit conditions and financial market turmoil," said Howard Archer, an economist at IHS Global Insight. Beyond problems within the currency area, the survey suggests manufacturers face increasingly anemic demand from other parts of the global economy. German producers, which have been among the currency area's most successful exporters, report "emerging signs of weakness" in Asia. While the rate of decline in output eased, there are few signs that a rebound is imminent, with euro-zone new orders falling for a seventh straight month. "Euro-zone manufacturing is clearly undergoing another recession," said Chris Williamson, an economist at Markit. "Worryingly, new orders are falling at a far faster rate than manufacturers have been cutting output, meaning firms have 18

been reliant on orders placed earlier in the year to sustain current production levels." The threat of a new recession already prompted the European Central Bank to cut its key interest rate in November and December. Its governing council meets next week, and is expected to ease policy again. The euro zone's economic woes continue to have an impact on manufacturers elsewhere that have close ties to the currency area. In Turkey, the manufacturing PMI fell to a three-month low in December, although it still pointed to an expansion of activity. In the Czech Republic, the PMI rose slightly, but indicated that activity declined for the second straight month. And in Poland, the PMI fell, and indicated that activity declined at the sharpest rate since October 2009 ==============================================================

BUSINESS JANUARY 2, 2012, 10:09 A.M. ET

ECB Buys 462 Million in Bonds

By MARGIT FEHER

FRANKFURT -- The European Central Bank stepped up its sovereign bond purchases last week but the weekly amount purchased remained significantly lower than the volumes seen in the previous four months. The ECB settled 462 million in government bonds on the secondary market last week, it said Monday, up from 19 million the previous week but less than the 22 billion to 2.2 billion since the ECB restarted the purchases in August to resolve market tensions, having spent 19 weeks on the sidelines. Calls from politicians and analysts on the ECB have been mounting to come to the rescue of the debt-ridden euro-zone governments with increasing its bond purchases considerably and thus move closer to solving the European debt crisis. The ECB, however, has firmly refused the calls. The latest such comment came from ECB governing council member Luc Coene Friday. Mr. Coene, who is also the governor of the National Bank of Belgium, said that Europe shouldn't "count on the ECB" to save the euro zone "through

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large-scale purchases of government bonds." Large-scale ECB government bond purchases would fail to deal with the root of the problem -- fiscal imbalances -and thus they wouldn't restore market confidence, Mr. Coene said in an interview with Belgian weekly Trends. The ECB doesn't break down the debt-purchase figures by country or maturity. The ECB further said it will drain 211.5 billion Tuesday from the market at a variable-rate tender with a maximum bid rate of 1.00%. The tender is aimed at offsetting the potential inflation-boosting impact of the bond purchases. Separately, bank use of the European Central Bank's overnight facilities fell Friday but remained high, while political leaders warned in their New-Year addresses that the euro zone may face an even tougher year in 2012 than in 2011. Banks borrowed 14.823 billion from the ECB Friday, the central bank said Monday, down from an 11-month high of 17.307 billion Thursday. Banks, meanwhile, deposited 413.882 billion with the ECB, down from 445.683 billion Thursday. Banks' use of the ECB's overnight deposit facility hit a 2011 peak last week, at over 452 billion. Most analysts said this was a result of banks hoarding their excess funds at the ECB after tapping its first three-year refinancing operation. Banks are reluctant to lend one another as they fear their counterparties may be exposed to weak European sovereign debt. As a result, they are dealing with the ECB instead. The large amount banks left on their balance sheets Friday, the last trading day of 2011, may also be the result of their obligations to meet balance-sheet requirements at year-end. ==============================================================

BUSINESS JANUARY 2, 2012, 9:27 A.M. ET

For India, a Power Failure Looms

By ERIC YEP

MUMBAIAlmost a decade ago, seeking to overcome one of the biggest challenges facing India's development, the government set an ambitious goal: electric power for all by 2012.

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Instead, as the target date of March nears, the power sector is in a shambles, and its dire state threatens India's economic prospects at a time when growth is already being slowed by high inflation, a burgeoning government budget deficit and ripples from the European financial crisis. India is the world's fifth-largest electricity producer after the U.S., China, Japan and Russia, but its per capita consumption is among the world's lowest, at 778.71 kilowatt hours a year. Almost 300 million people don't have access to electricity. The country needs a huge jump in supply to sustain its rapid economic growth, fight poverty and light the homes of those powerless millions.

The depth of India's power problems became apparent in the autumn of 2010, when blackouts interrupted irrigation and manufacturing across the country and even hit wealthy, urban neighborhoods. What once was an industry full of investment and optimism has plunged into a crisis, driven by a mix of factors some brewing for years, some recent. Government giveaways such as free electricity for farmers have drained cash reserves from the largely state-run electricity-distribution system, leaving it financially crippled and unable to purchase power despite existing demand. A giant new offshore gas field has delivered less fuel than promised. An ambitious nuclear-power program has been stymied by demonstrations at plant sites since

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the Fukushima disaster in Japan last March. And, worst of all, despite abundant reserves of coal, India can't produce enough to feed its power plants. On average, coal-fired plants should maintain stocks to last 22 days, according to the guidelines of the Central Electricity Authoritybut a Dec. 29th report from the regulator showed that of 89 such plants it monitors, 46 didn't have enough coal to last a week, with some holding less than a day's worth or even no coal at all. The plants account for roughly half of total electricity-generating capacity. As more power plants come onlinethe government and private industry are estimated to have spent as much as $100 billion since 2007 to add capacitythe coal shortages are expected to worsen. At the current rate of growth in coal production, the requirements of existing power plants and those under construction will not be met until the year beginning April 2016, Credit Suisse analysts said in a November note. More than half of India's installed electricity generating capacity of 182 gigawatts is coal-based, and a large chunk of future power projects will also run on coal. By comparison, China's installed capacity at the end of 2010 was 962 gigawatts, about 73% of it from coal. India's coal sector is hampered by primitive mining techniques and rife with theft and corruption; the monopoly coal producer, state-controlled Coal India, has consistently missed production targets. Shoddy transport infrastructure, inadequate for moving coal from farflung mines to where it's needed, compounds these problems. To increase output, Coal India needs to mine new depositsbut most lie under protected forests or conflict-ridden tribal lands. Government efforts to create an effective land-acquisition program for such projects, including compensation for displaced people, have been underwhelming. "The federal government has neither set up any national fund for the rehabilitation of the displaced persons of various power projects in the country nor set up any committee to study the issue of setting up of such a fund, " K.C. Venugopal, junior power minister, told Parliament in September. Coal Minister Sriprakash Jaiswal told Dow Jones Newswires, "Domestic coal production cannot keep up with the rising demand, especially from power companies. They have to import to feed their rising needs and bridge the gap." But international coal prices have surged. "The situation is extremely challenging considering the fact that billions of dollars have been invested in building power plants but they can't be used to

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produce power due to nonavailability of coal," said Ravi Sharma, CEO of Adani Power. Adani Power's parent, Adani Group, has invested heavily in coal mines in Australia, but India lags behind other major nations in securing coal assets abroad. It accounted for just 9% of overseas deals in the sector in the financial year ended March 31, trailing the U.S., Japan and China, according to data provider Dealogic. "Progressive governments elsewhere are not just aggressively scouting but are tangibly tying up resources known to be available globally. India needs to also get its act right," said Anil Sardana, managing director at Tata Power Ltd., one of India's largest private power producers. India's efforts to develop other fuels have stumbled. It had hoped to set up gaspowered plants after Reliance Industries Ltd. made the country's biggest gas discoveries in the deep water off the eastern coast, but output has failed to meet the company's projections. Hydroelectric power projects in the mountainous north and northeast are caught in ecological, environmental and rehabilitation controversies. India imports power from Bhutan and expects to import from Nepal, too, but the geographical challenges in the region are immense. Once electricity is generated, it must be supplied where it's needed, with a crucial link being the provincial distribution utilities that buy electricity and resells it to consumers. Operating at huge losses, they're fast running out of money to buy what electricity is available. Not only do they give away huge amounts of electricity to farmers, partly to curry political favor, they lose more to rampant electricity theft and to government departments that don't pay their bills. Inefficient collection is a problem across the country. The result: The amount of electricity categorized as lost in India's states reaches as high as 40%, and even in the best stands at 15%. With fuel costs high and utilities losing money, raising power prices would seem like a solutionbut it's a politically charged and sensitive issue for a government that's being blamed for high inflation levels and widespread corruption. The Finance Commission, an expert body that defines financial relations between the center and the statesappointed every five years, this latest commission was the 13thforecast that in the year ending March 31, state transmission and distribution utilities will lose 803 billion rupees ($15.2

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billion), equal to about 0.8% of the country's gross domestic product. It further forecast that the losses will rise. Blackouts are just one effect. By creating uncertainty about future electricity sales, the losses also lead power companies to shelve projects, and add to pressure on lenders that finance the sector. With its latest five-year plan ending in March, India's government is set to miss the electricity generation target it set out. It has met only 64% of the target so far.
Saurabh Chaturvedi in Delhi and Wayne Ma in Beijing contributed to this article.

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DEALS & DEAL MAKERS DECEMBER 30, 2011

Banks Face Off For Facebook IPO

Goldman Sachs, Morgan Stanley Are Considered Front-Runners for Top Job in Handling 2012's Trophy IPO
By LIZ RAPPAPORT and RANDALL SMITH

WSJ's Shira Ovide has details of Facebook's expected 2012 IPO and how big banks will be battling to be the underwriter. AP Photo/dapd, Joerg Koch

This year has been lackluster for Wall Street bankers. But next year, there's Facebook Inc. Up for grabs is the lead investment-banking role in the social-networking site's initial public offering, and long-time rivals Goldman Sachs Group Inc. and Morgan Stanley are considered front-runners, bankers and venture capitalists say. 24

Associated Press

Facebook CEO Mark Zuckerberg. The firm expects to sell stock in 2012.

The Menlo Park, Calif., company plans to file its offering documents in early 2012, a person familiar with the matter has said, meaning that a decision on bankers could be soon. Some bankers have been waiting by the phone over the holidays for the call that they will be participating in the company's IPO in some way, another person said. As they gear up for the offering, Facebook executives have held a new round of meetings since Thanksgiving with Wall Street firms, according to people familiar with the situation. The deal will be one of the most hotly contested offerings of the decade, with hundreds of millions of dollars in potential fees and bragging rights on the line. Facebook's stock sale could be as big as $10 billion, valuing the company at $100 billion or more. Fees for IPOs of that size have averaged 2.2%, according to Dealogic, which tracks new issues. That would mean a possible total payoff of as much as $220 million, though the company could negotiate lower fees because the Facebook deal is such a trophy. Goldman and Morgan face stiff competition from rival investment banks vying for the prize of becoming the lead manager. Still, both are seen as having a leg up on competitors, even though each has possible knocks against them. Goldman orchestrated a $1.5 billion private offering of Facebook shares in January, indicating a value for the company of $50 billion. Morgan Stanley is the leading bank for Internet IPOs this year, both in the U.S. and world-wide. Goldman was seen initially as a shoo-in for leading the offering. But the New York company has had to prove itself anew to Facebook in the wake of a flub 11 months ago. Goldman had to restructure a private-placement deal that nearly ran afoul of U.S. securities laws that restrict advertising of private placements. 25

Goldman solved the problem by limiting the offering to non-U.S. investors, but executives at the social-networking company became less enamored with the bank, according to people familiar with the matter. Goldman Chairman and Chief Executive Lloyd C. Blankfein went to woo at least one Facebook board member earlier this fall, according to people familiar with the matter. Meanwhile, Morgan Stanley recently held the coveted "lead left" role in the IPO of games site Zynga Inc. The "lead left" bank sees its name in the top left spot on the front page of the IPO prospectus. This "lead of the leads" status imbues the bank with the most authority on a deal, but also subjects that firm to the most criticism if things go awry in an offering.

Zynga shares have mostly traded below their offering price since the IPO, which some bankers have said could hurt Morgan Stanley's chances in winning the Facebook deal. Goldman and Morgan Stanley are running neck-and-neck for the title of No. 1 in underwriting the most U.S.-listed IPOs for 2011, according to Dealogic. Representatives for Goldman, Morgan Stanley and Facebook declined to comment.

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The prize role on Facebook could put the winner ahead of competitors in an area that has proven to be one of Wall Street's bright spots amid relentless pressure on profits. Bankers who advise corporations on mergers and financing have regained some dominance within their Wall Street firms this year as trading businesses suffered. Traders have been hurt by jittery investors and new rules intended to curb risk-taking with a firm's own capital. The Facebook deal could give the winning bankers even more power. At Goldman, fixed-income trading revenue fell 37% in the first nine months of 2011 compared to a year earlier, while investment-banking revenue rose 6%. Morgan Stanley has been trying to expand its nontrading businesses, particularly its wealth-management business. Even if Goldman loses top billing in the Facebook deal, it will still win. The reason: If Facebook is valued at $100 billion, Goldman would double the value of its own stake in the company, giving it an instant $375 million profit. As part of Goldman's fund raising of $1.5 billion for Facebook in January, the securities firm bought what was then slightly less than 1% of the social-network company for $375 million. Goldman has a history of investing its own money alongside that of clients. In addition, Goldman will make nearly another $100 million on fees that clients paid the firm to invest in Facebook through a private fund in January. On about $1 billion invested in the Facebook fund by Goldman's non-U.S. clients, Goldman charged a 0.5% fee on any capital investors committed for expenses, a 4% placement fee plus a 5% fee on any gains in the fund if investors cash out. If Facebook goes public with a stock-market value of $100 billion, that would add up to about $95 million in fees, depending on whether investors cash out after the IPO.
Shayndi Raice contributed to this article

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ASIA BUSINESS JANUARY 2, 2012, 1:06 A.M. ET

India Manufacturing Activity Picks Up

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By ANANT VIJAY KALA

NEW DELHIIndia's manufacturing activity picked up sharply in December, helped by improved demand that drove up new order growth, a survey showed Monday. The seasonally adjusted HSBC Purchasing Managers' Index, prepared by Markit, rose to 54.2 in December from 51.0 in November. A figure above 50 indicates expansion. "Activity in the manufacturing sector rebounded in December led by higher demand from both domestic and foreign clients, suggesting that the momentum in the sector is not quite as weak as official and more dated [industrial production] data would suggest," said Leif Eskesen, chief economist for India and Asean at HSBC. Weak industrial output in recent months has stoked worries of a sharp slowdown in the economy, raising expectations that the Reserve Bank of India may have to ease its tight policy stance to support growth. However, the latest data will calm those worries. "All in all, these numbers suggest it's premature for the RBI to replace inflation with growth as the main concern," Mr. Eskesen said. HSBC said employment in December increased marginally after falling for four consecutive months. However, input prices rose further during December, underscoring persistent price pressures, despite the central bank's aggressive monetary tightening. The RBI has raised its lending rate 13 times since March 2010, but paused at its last policy review on Dec. 16 as growth has been stuttering. ==============================================================

HEARD ON THE STREET DECEMBER 31, 2011

India's Slowing Growth Will Test Banks' Resilience

By HARSH JOSHI

Part of the reason lies in past bad lending decisions. After the peak of the financial crisis in 2009, India's banks opened the floodgates with loans to already over-leveraged companies. Credit Suisse looked at loans to 3,550 non28

financial services companies in India with aggregate borrowing of $385 billion at the end of March and found that nearly 30% had net debt more than six times current earnings before interest, taxes, depreciation and amortization. That's increased by about 50% in the past five years. A weakening economy adds to the pressure. In October, India's industrial output contracted 5.1% from a year earlier. A slump in demand from Europe and a slow recovery in the U.S. don't help. As output and revenue growth decelerate, companies' ability to repay debt suffers. The risk is spread across several sectors. India's private airlines, construction companies, utilities and real estate developers are all notorious for generating non-performing loans. All those sectors will suffer from an economic downturn.

To compound the problem, many companies have borrowed in foreign currency from local banks, taking advantage of lower interest rates overseas. But an 18% fall in the rupee against the dollar since April means they now face significantly higher repayment costs. Struggling borrowers could try to convert foreign debt into rupee-denominated loans or restructuring high risk loans to ease repayment conditions. For lenders, that's better than outright defaults but it will hurt profits. Goldman Sachs estimates banks' gross non-performing loans including restructured debt will rise to as much as 6% of total loans in the next financial year, up from 5% in March. The Reserve Bank of India's stress test report published earlier this month forecasts 5.8% of non-performing assets in the worst-case scenario, double the current level. India's banks aren't doomed. The RBI says the banks' capital to risk-weighted assets ratio fell from 14.5% at the end of March 2010 to 13.5% at the end of the latest fiscal year. That's still quite conservative, but the downward trend is a concern. At the very least, profits will come under pressure. Banks seldom

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perform better than the economy they serve. With India's economy heading into a testing time, its banks will suffer too. ==============================================================

PORTUGUESE JANUARY 2, 2012, 11:24 A.M. ET

Corte manda Venezuela pagar US$ 908 milhes por ativos da Exxon
Por KEJAL VYAS e ANGEL GONZALEZ, de Caracas

Um painel de arbitragem internacional concedeu petrolfera americana Exxon Mobil Corp. cerca de US$ 908 milhes em um veredicto sobre os ativos de petrleo nacionalizados pelo presidente venezuelano, Hugo Chvez, em 2007, informou a empresa.

Associated Press

O pagamento substancialmente menor do que os US$ 7 bilhes que a Exxon estava pedindo em restituio e provavelmente ser bastante favorvel para o governo de esquerda da Venezuela, que nos ltimos anos iniciou uma campanha de nacionalizao generalizada para centralizar o controle de sectores econmicos cruciais. " um timo presente para Chvez e para a Venezuela", disse Russ Dallen, analista e operador de ttulos do banco venezuelano de investimentos Caracas Capital Markets. "O veredicto impe um valor muito menor do que as pessoas provavelmente estavam esperando. Certamente significa que [petrolfera estatal Petrleos de Venezuela SA, ou PDVSA] saiu com poucos arranhes", acrescentou Dallen. O porta-voz da Exxon, Patrick McGinn, disse que a deciso por um tribunal de arbitragem da Cmara Internacional de Comrcio", confirma que a PDVSA tem uma responsabilidade contratual com a Exxon Mobil."

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Um porta-voz da PDVSA se recusou a comentar quando contatado por telefone. Ambas as partes ainda esto aguardando uma deciso sobre a ao impetrada pela subsidiria local da Exxon, a Mobil Cerro Negro Ltd., contra a Venezuela junto ao Centro Internacional para a Arbitragem de Disputas sobre Investimentos do Banco Mundial, ou Ciadi, onde o governo de Chvez enfrenta cerca de 20 casos pendentes. Com o risco de bilhes de dlares em pagamentos iminentes, o nmero de casos tem sido fonte de preocupao constante para os detentores de ttulos soberanos da Venezuela. O veredicto foi dado quatro anos depois que a Exxon, a maior petrolfera de capital aberto do mundo, saiu da Venezuela em meio a uma disputa com o governo do pas, que decretou que o monoplio estatal do petrleo teria participao majoritria na joint-ventures com parceiros estrangeiros. Por lei, a PDVSA passou a deter pelo menos 60% de todos os projetos de petrleo do pas. A Exxon afirmou que investiu cerca de US$750 milhes na Cerro Negro. A empresa reduziu seu pedido dos US$ 12 bilhes originais para US$ 7 bilhes. Apesar da compensao menor do que o esperado para a Exxon, o dinheiro ainda uma soma substancial da mudana para a PDVSA, que registrou um lucro lquido de US$ 4 bilhes durante os seis primeiros meses de 2011. A estatal venezuelana tem enfrentado um declnio na produo de petrleo e problemas de fluxo de caixa nos ltimos anos, medida que Chvez desvia grande parte da receita para projetos sociais, o que, segundo os crticos, resultou em investimentos insuficientes para a manuteno da petrolfera. No incio deste ano, o ministro do Petrleo venezuelano, Rafael Ramirez, disse que seu governo planejava pagar no mais do que um total de US$ 2,5 bilhes nos casos em arbitragem com Exxon e a ConocoPhillips. A Chevron Corp., segunda maior petrolfera dos EUA, decidiu aceitar participao controladora da PDVSA e permaneceu na Venezuela. Em setembro, Ramirez tambm descartou a possibilidade de um acordo com a Exxon fora dos tribunais, pouco depois que o procurador-geral do pas disse a reprteres que um acordo de US$ 6 bilhes estava sendo negociado. O projeto Cerro Negro tinha um valor estimado de cerca de US$ 2 bilhes e est localizado na enorme e em grande parte ainda inexplorada bacia do Orinoco. ==============================================================

PORTUGUESE JANUARY 1, 2012, 4:48 P.M. ET

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Executivos cujo futuro pode ser decidido no novo ano

The Wall Street Journal

Reputao, dinheiro, sobrevivncia. Muito est em jogo para importantes lderes de grandes empresas globais em 2012. H vrios exemplos: Abilio Diniz ter em 2012 seu grande teste para manter seu controle sobre o Po de Acar; Tim Cook tem pela frente a dura tarefa de substituir o carismtico Steve Jobs; na American Airlines, Thomas Horton comea o ano num processo de concordata, com a misso de cortar custos o que deve exigir intensas negociaes com sindicatos. Aqui est um resumo de alguns dos mais intrigantes cenrios para o mundo dos negcios e os principais executivos que vo navegar por eles no prximo ano. Abilio Diniz | Po de Acar Abilio Diniz passou a sua vida construindo a maior rede de supermercados do Brasil, o Po de Acar, enfretando seus concorrentes, sua famlia e seus amigos, durante o percurso. Em um perodo de debilidade financeira na ltima dcada, ele concordou em vender seu imprio para o francs Casino SA., mas a complexa transao s culmina em 2012, quando Diniz, de 74 anos, ter que entregar uma nica e decisiva ao que dar o controle ao Casino. Em 2012, o audaz executivo tentou manter sua empresa, agindo pelas costas do Casino para fechar um acordo com o mais feroz rival da empresa francesa, a Carrefour SA, tambm da Frana. A tentativa fracassou, mas ningum acredita que isso tenha dissuadido Diniz e muitas surpresas so aguardadas antes do prazo limite, no prximo ms de junho. (Rogerio Jelmayer) Akio Toyoda | Toyota Para Akio Toyoda, diretor-presidente da Toyota Motor Corp., 2012 pode ser um ano de vai ou racha. O comandante da maior montadora japonesa se comprometeu a manter a produo domstica em 3 milhes de veculos ao ano, apesar de os rivais japoneses estarem correndo para o exterior. A alta do iene para cotaes

32

recordes em relao ao dlar corroeu as margens de lucro nas exportaes japonesas. Toyoda, de 55 anos, est iniciando o terceiro ano desde que assumiu o leme da empresa de nome to parecido com o seu e que foi fundada por seu av. Ele j prometeu evitar o esvaziamento da base industrial japonesa. Mas com a cotao das aes da Toyota nos menores nveis em 15 anos, o seu comprometimento levanta uma questo que ecoa Charles Erwin Wilson, que presidiu a General Motors no incio do sculo XX: "O que bom para o Japo bom para a Toyota e vice-versa?" (Chester Dawson) Tim Cook | Apple Em seus mais de dez anos na Apple Inc., Tim Cook j provou que um craque na gesto das operaes da gigante de tecnologia. Em 2012, o mundo vai descobrir at que ponto ele est confortvel como o homem frente da empresa. Em agosto, o executivo de 51 anos foi indicado para o cargo de diretorpresidente, substituindo o legendrio cofundador Steve Jobs, que morreu em outubro depois de sofrer com um cncer pancretico. At agora, Cook tem conseguido conquistar pontos com empregados e investidores, que dizem que ele afvel, mas tambm rigoroso, e que mergulha nas operaes e produtos da Apple com a mesma ateno aos detalhes que Jobs tinha. Este novo ano vai trazer uma outra bateria de testes: Cook vai provavelmente ficar em evidncia, acompanhando o lanamento de novas verses para aparelhos antigos, como o iPhone e o iPad e, possivelmente, alguns novos produtos, como a to antecipada TV Apple. (Jessica E. Vascellaro) Tom Staggs | Disney Para os principais executivos da Walt Disney Co.'s, 2012 vai ser o primeiro ano completo na corrida pela coroa de diretor-presidente, e nenhum outro candidato parece ter mais changes de ocupar o posto que Tom Staggs e Jay Rasulo. Servindo o atual diretor-presidente, Robert Iger, que em 2011 anunciou sua inteno de deixar a posio em 2015, os dois executivos veteranos da Disney trocaram de posio a pedido do chefe. Em 2012, cada um deles ter que

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supervisionar planos ambiciosos que vo indicar o potencial para dirigir uma das maiores empresas do mundo. Staggs, presidente do conselho da rea de parques temticos e resorts, vai conduzir o desenvolvimento da Disneylndia de Xangai, parte de um resort de US$ 4,4 bilhes. Rasulo, diretor financeiro, ter que colocar a empresa em condies de apresentar resultados comparveis aos do ltimo trimestre fiscal, em que a Disney apresentou lucro e receita recordes. (Erica Orden) Kenneth C. Frazier | Merck No seu primeiro ano frente da Merck & Co., Keneth Frazier defendeu os pesados gastos da empresa farmacutica com pesquisa de medicamentos, apesar das crticas de Wall Street. Ele prometeu proteger os laboratrios da Merck no Brasil, MSD dos grandes cortes que rivais como a Pfizer Inc. estavam fazendo e, com isso, o conselheiro que virou diretor-presidente se tornou um importante defensor da cincia na indstria farmacutica. Se Frazier tem condies de se sair melhor do que aqueles que dizem que pesquisa e desenvolvimento gastam demais depende da sorte de remdios como o Bridion, criado para reverter os efeitos da anestesia cirrgica e que a Merck pretende submeter aos reguladores americanos para aprovao em 2012. O ex-aluno da Universidade Penn State tambm vai dirigir um comit especial que investiga a resposta da universidade a alegaes de abuso sexual infantil contra um ex-treinador de futebol. (Jonathan D. Rockoff) Ginni Rometty | IBM Desde ontem a International Business Machines Corp. est em uma nova era, com a primeira mulher no comando. Virginia M. Rometty, atualmente em seu 30 ano empresa, conquistou o cargo depois de ter conduzido a expanso da IBM para o segmento de consultoria de alto nvel e para os mercados emergentes.

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No topo da sua lista de prioridades est a continuao dos esforos de crescimento na rea de software para empresas e computao em nuvem, alm do maior foco em mercados emergentes. Rometty, de 54 anos, no pretende fazer mudanas na estratgia, modelo ou mapa financeiro da IBM no curto prazo, disse ela ao The Wall Street Journal em outubro, quando foi nomeada diretora-presidente. Entretanto, a executiva sabe que crucial que a IBM no deixe de se reiventar, um conselho dado por seu atencessor, o diretor-presidente Samuel J. Palmisano, que continua frente do conselho. (Spencer E. Ante) Cyrus Mistry | Tata Group Ele tem capacidade gerencial ou s est l por causa de seu pai? Essa a questo que pesa sobre Cyrus Mistry, o aparente herdeiro do emblemtico conglomerado indiano Tata Group, que tem entre seus ativos a montadora de carros de luxo Jaguar e o hotel Pierre, de Nova York. O currculo de Mistry exibe conquistas como diretor gerente da empresa de construo da famlia, a Shapoorji Pallonji & Co. Mas seu pai, o recluso bilionrio Pallonji Minstry, tambm o maior acionista da Tata Sons, a empresa holding do grupo Tata, com uma participao de 18%. Mistry ter tempo para aprender no emprego antes que as respostas se tornem claras: ele vai passar quase um ano como aprendiz do presidente do conselho, Ratan Tata, que se aposenta em dezembro de 2012. (Paul Beckett) Jack Ma | Alibaba Group Jack Ma, presidente do conselho do maior imprio de comrcio eletrnico da China, a Alibaba Group Holding Ltd., acabou se tornando uma figura-chave no incerto destino da americana Yahoo Inc., que tem uma participao de cerca de 40% em sua empresa. Ma tem o direito de fazer a primeira oferta pela fatia da Yahoo na Alibaba, e o executivo no esconde sua inteno de ficar com pelo menos uma parte dessas aes. Isso lhe d poder de deciso sobre o ativo mais valioso da Yahoo. Este ano, Ma conseguiu contornar seu conselho na deciso de transferir o controle de uma importante subsidiria para uma outra companhia que ele 35

controla. Ma diz que fez a mudana para cumprir as regras relativas ao pagamento de servios pela internet, mas a deciso o colocou no meio do debate sobre governana corporativa na China e intensificou o temor de que o governo possa tentar limitar ainda mais os investimentos estrangeiros no crescente setor de internet no pas. (Loretta Chao) ==============================================================

PORTUGUESE JANUARY 2, 2012, 12:25 P.M. ET

Um colunista econmico espia o futuro

Por DAVID WESSEL

DAVID WESSEL

De vez em quando algum pergunta a um colunista econmico: Quais as surpresas que voc prev para o ano que vem? E o colunista responde, sorrindo para no parecer sarcstico: Se eu conseguisse prev-las, no seriam surpresas. A melhor pergunta : Em que pontos h maior probabilidade de que o consenso esteja errado? O consenso que a economia dos Estados Unidos vai terminar 2011 com um crescimento muito mais forte no quarto trimestre (talvez 3,25%, a uma taxa anualizada) do que no terceiro (1,8%), mas vai crescer muito devagar no ano que vem (talvez 2,25% no primeiro trimestre), um ritmo insuficiente para reduzir o desemprego rapidamente. Embora a taxa de desemprego tenha cado 0,4 ponto percentual, ou quase 600.000 pessoas, em novembro, o consenso que ela vai diminuir muito gradualmente, se diminuir, a partir dos atuais 8,6%, ou 13,3 milhes de desempregados, durante 2012.

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Reuters

Ento, o que poderia fazer o ano acabar mostrando melhores resultados? Durante o ltimo ano e meio, os EUA foram pegos em um cabo de guerra. De um lado est a resistncia natural da economia. Do outro, os efeitos de longa durao do estouro da bolha do crdito e um pouco de m sorte o aumento do preo do petrleo causado pela Primavera rabe, a interrupo da cadeia de suprimentos aps o terremoto no Japo. No fim de 2010, a resistncia da economia estava ganhando. Em 2011, ela cedeu terreno. Os dados mais recentes so animadores. Os pedidos iniciais de segurodesemprego, um dos melhores sinais preliminares de alerta, caram para seu menor nvel em trs anos e meio. A populao diz que est um pouco mais fcil encontrar emprego, outro indicador til. A construo e vendas de imveis residenciais esto em alta. Os estoques esto enxutos. E, apesar de um declnio na quarta-feira, o mercado acionrio se recuperou da queda do final de novembro. Este poderia ser o incio de um crculo virtuoso muito esperado. Nele, o mercado de trabalho melhora. Os consumidores tm mais renda. O otimismo aumenta, e o que mais importante, os gastos tambm. Enquanto isso, o enfraquecimento das economias no exterior mantm baixo o preo das commodities e limita a inflao nos EUA. Com juros baixos de hipoteca e melhora nas finanas do consumidor, o preo da moradia finalmente sobe. As empresas, cheias de dinheiro, se expandem e contratam mais, compensando a retrao por parte dos governos. Depois de se queimarem com um otimismo prematuro, analistas e autoridades financeiras esto compreensivelmente cautelosos. O que poderia dar errado? No alto de todas as listas de provveis suspeitos est a Europa. Os acontecimentos mais recentes no continente europeu reduziram, na opinio de autoridades americanas, o risco de uma catstrofe financeira a 37

moratria de algum governo europeu, capaz de arrasar os mercados, ou o colapso de um grande banco, ou uma abrupta desintegrao do euro. Na quartafeira a Itlia conseguiu emprstimos por dois anos com juro de 4,85%, em comparao com 7,81% um ms atrs. Mas os jogos de poder em que nenhuma das duas partes quer ceder seja entre a Alemanha e o sul da Europa, ou entre os lderes polticos e o Banco Central Europeu no esto resolvidos. A Europa est, quase com certeza, em recesso. Quando a maior esperana que os governos europeus iro "conseguir se arrastar" sem cometer outros grandes erros bem, os riscos de algo dar errado ficam desconfortavelmente altos. E se isso acontecer, os mercados financeiros vo transmitir o problema de imediato para o resto do mundo. No se pode dizer que Washington esteja oferecendo um exemplo inspirador de democracia em ao. Os riscos aqui so dois: 1. A incerteza prolongada e maior eroso na confiana no sistema poltico americano vo desencorajar as empresas de contratar ou investir nos EUA, e tambm os consumidores de gastar. 2. A paralisia poltica pode impedir Washington de reagir se a economia precisar de ajuda, seja porque a Europa ou algum Estado dos EUA encontrou problemas financeiros, ou devido a algum acontecimento imprevisto. E h ainda o mercado imobilirio. Os informes oficiais dizem que os preos da habitao esto se "estabilizando", e talvez estejam. Mas ficamos sabendo esta semana que eles caram em outubro em 19 das 20 cidades que compem o ndice Case-Shiller. No ltimo ano esse ndice de 20 cidades caiu 3,4%, alm dos 30% de declnio registrados nos ltimos quatro anos. A cautela dos compradores de imveis, um mercado de hipotecas ainda disfuncional e uma nuvem negra de casas hipotecadas retomadas pelos bancos continuam a pesar sobre a habitao. Se os preos carem mais nesse setor, isso pode atrapalhar qualquer crculo virtuoso. H probabilidade de que as previses do consenso para 2012 estejam erradas. Elas quase sempre esto. O corao de um colunista econmico quer acreditar que a economia vai melhorar; mas sua cabea diz lhe que mais provvel que piore. =============================================================

SPANISH JANUARY 2, 2012, 9:44 A.M. ET

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La economa de Venezuela creci 4% en 2011, dice el banco central

Por KEJAL VYAS

CARACAS (Dow Jones)--La economa de Venezuela finaliz el 2011 con una expansin del 4%, gracias en parte a un elevado gasto gubernamental, pero el pas sudamericano continu afectado por una tasa de inflacin anual del 27,6%, segn el Banco Central de Venezuela. Ambas cifras preliminares, publicadas en el informe de fin de ao del banco central, superaron las proyecciones que entreg el gobierno a comienzos del ao pasado de un crecimiento econmico del 2% y una tasa de inflacin de hasta un 25%. Tras dos aos consecutivos de recesin, la economa venezolana repunt gracias a que los altos precios del petrleo permitieron a la nacin rica en hidrocarburos dirigir recursos hacia proyectos de desarrollo, incluida una iniciativa de vivienda lanzada por el presidente Hugo Chvez, quien se prepara para una campaa de reeleccin en octubre. El banco central seal en su informe que las cifras preliminares muestran que el sector no petrolero de la economa creci un 4,3%, mientras que el sector petrolero se expandi un 0,6%. El petrleo y sus subproductos corresponden al 95% de las exportaciones de Venezuela. ==============================================================

Europe Markets

Jan. 2, 2012, 12:06 p.m. EST

Europe stocks rally on first trading day of 2012

Sunways soars over 20% on Chinese bid
By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) -- Thin trading conditions and a betterthan-expected purchasing-managers index for Germany boosted European stock markets to a higher finish on the first day of trading for the near year.

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The Stoxx Europe 600 index (STX:XX:SXXP) rose 1.1% to close at 247.15 on Monday. The index on Friday closed out 2011 with an 11.3% loss, the first yearly fall in three years and the worst annual performance since 2008. The push higher was led by the German DAX 30 index (ITF:DX:DAX) , which rose 3% to settle at 6,075.52. A wide swath of stocks contributed to that gain, with heavyweight engineering group Siemens AG (FRA:DE:SIE) (NYSE:SI) rising 2% and drug group Bayer AG (FRA:DE:BAYN) gaining 2.9%. Chemicals group BASF SE (FRA:DE:BAS) rose 2.3%, while insurer Allianz SE (FRA:DE:ALV) rose 3.8%. German stocks, in particular, were boosted after the Markit/BME Germany Manufacturing purchasing-managers index rose to 48.4 in December from 47.9 in November. That final number was up from an earlier estimate of 48.1. German PMI were marginally stronger than expected, and anything better-than-expected in current market sentiment will lead risk appetite back in markets, said Christian Tegllund Blaabjerg, chief economist at FIH Erhvervsbank, in emailed comments. And with low liquidity you have a stronger reaction than usual in equity markets. Meanwhile, the Markit euro-zone purchasing-managers index rose in December to 46.9 from a 28-month low of 46.4 in November, confirming a previous estimate. Both readings, however, remained below the 50 level, indicating a further contraction in manufacturing activity. Read more about euro-zone PMI data. Quiet trading The absence of liquidity in markets on Monday was due to markets remaining closed in London and the United States in observance of the New Year holiday. But once markets return in full on Tuesday, Blaabjerg said, there really isnt much pointing to a light at the end of the tunnel for Europe, and European stocks could face renewed pressure. The U.S., however, is a whole different case. I am betting my silver dollar on the U.S. growth outlook in 2012 -- the housing market has bottomed out, and once this happens the U.S. is coming back strongly, he said.

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Bond yields steady European bond yields were largely steady across the board, with the yield on Italys 10-year government bond (ICAPSD:IT:10YR_ITA) up 2 basis points to 6.88%. The Italy FTSE MIB index (MCI:XX:FTSEMIB) rose 2.4% to 15,454.60. The market was led by a 3.7% rise for insurer Assicurazioni Generali SpA (MCI:IT:G) and a 2.8% rise for bank Intesa Sanpaolo SpA (MCI:IT:ISP) . The French CAC 40 index (ENX:FR:PX1) rose 2% to 3,222.30, with BNP Paribas SA (EPA:FR:BNP) up 3.1% and heavyweight energy group Total SA (NYSE:TOT) (EPA:FR:FP) up 1.3%. Spanish and Portugal stocks were also not left out of gains, with the IBEX 35 index (MCE:XX:IBEX) rising 1.8% to 8,723.80 and the Portugal PSI 20 index (ENX:PT:PSI20) jumping 2.1% to 5,611.37. Banks were the main gainers for those indexes. Spanish stocks rose despite Fridays government announcement that the budget deficit will hit around 8% in 2011, far exceeding the prior governments target of 6%. We need to wait until tomorrow to see how the market takes the news of the 8% deficit, said Jos Carlos Dez, chief economist at Intermoney, in emailed comments. The alternative energy sector was active on Monday. Away from the Stoxx 600, shares of German solar-panel maker Sunways AG (FRA:DE:SWW) shares soared 21.3% after the company said that China-based LDK Solar Co. (NYSE:LDK) will buy 33% of the firm and then offer to buy the rest of the shares for 1.90 euros each. Shares of Vestas Wind Systems AS (FRA:DE:VWS) rose 7.3%. On the downside, shares of Storebrand ASA (OSL:NO:STB) fell 3.5%, the top decliner in the Stoxx 600. Storebrand and other Norwegian insurers have reportedly received thousands of claims in the wake of storm Dagmar that swept over Sweden, Finland and Norway with hurricane-strength winds on Dec. 26 and Dec. 27. ==============================================================

Economic Preview

Jan. 1, 2012, 9:00 a.m. EST

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U.S. jobs data likely to confirm momentum

Yet even as 2011 ends on strong note, doubts persist about 2012
By Jeffry Bartash, MarketWatch

WASHINGTON (MarketWatch) The first week of the new year will reveal a lot about U.S. economy in the final month of the old year.

A string of economic reports this week is likely to reveal that manufacturing and service-oriented companies continue to expand and that businesses are adding jobs at a faster clip. The capstone is Fridays monthly report on job creation in December. Yet what the data cannot reveal is whether the recent momentum is sustainable in the early months of 2012. Afterall, the economy entered 2011 with a head of steam only to falter later on. MarketWatch consensus CONSENSU DATE REPORT PREVIOUS S Jan. 3 ISM Jan. 3 Construction spending 53.0% 0.2% 52.7% 0.8% -0.4% 13.6 mln 381,000 52.0% 120,000 8.6% -0.1%

Jan. 4 Factory orders 1.8% Jan. 4 Motor vehicle sales 13.6 mln 375,000 53.5% 155,000

Jan. 5 Jobless claims Jan. 5 ISM services Jan. 6 Jan. 6 Jan. 6 Nonfarm payrolls

Unemployment 8.7% rate Average hourly 0.1% earnings

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The biggest potential drags, economists say, are slower government spending at all levels and the fragile financial health of U.S. households. Stronger growth in the final three months of 2011, economists point out, was largely underpinned by consumers dipping into their savings to pay for holiday-season purchases. Some expect consumers to retrench over the next few months to pay down their debt and rebuild their savings. If that happens, the U.S. economy is likely to slow again and repeat a recent stop-and-go pattern. I think we will see a slower growth in spending, said economist Ryan Sweet of Moodys Analytics. Consumers are going to see that their wages are not going up. They are going to grow a little more cautious. A smaller band of economists, however, are more optimistic. They point to increasing signs that companies are willing to hire and believe the spending of newly employed workers will help sustain recent levels of growth. Which view turns out to be more accurate is not just a matter of great interest to millions of Americans, especially some 16 million who cannot find permanent full-time work. The outcome of the 2012 presidential election is also likely to hinge on whether the economy is surging or slowing down again. Year-end momentum The 2012 economic calendar kicks off with a closely followed survey of U.S. manufacturers, which are expanding again after a latesummer slowdown. The Institute for Supply Managements manufacturing index, released Tuesday, is expected to rise slightly to 53.1% in December, according to economists surveyed by MarketWatch. A similar ISM survey of service-oriented companies, issued Thursday, is expected to climb to 53.4% in December. Both indexes would reach seven-month highs if they met or exceeded expectations. Any reading over 50% indicates businesses are growing.

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They are pushing back up, in the low 50s. Thats an expansionary reading, said Paul Edelstein, an economist at IHS Global Insight. They give you a pretty good reading on the overall economy when you take the two indices together. Along with the ISM surveys, auto sales in December are also expected to show an economy in motion. Annualized sales are expected to remain elevated at 13.6 million the same as in November. On Friday, the government will release the much-anticipated employment report for December. Most economists expect that the latest employment report will build upon gains from September through November, when the U.S. added an average of 143,000 jobs a month. The MarketWatch forecast estimates 150,000 jobs were created last month and some economists are predicting an even larger number. If they are stronger than we expect, it will be confirmation that the jobs market is gaining momentum, Edelstein said. Yet while hiring is on the rise after almost screeching to a halt last June, companies are still not adding workers as fast as they normally do in a strong recovery. The U.S. would have to add at least 250,000 jobs a month for several years to reduce unemployment to precession levels. The sluggish rate of job creation explains why the unemployment rate remains very high 8.6% in November. Economists project it will tick up to 8.7% in December. Unfortunately, the current rate of job creation is not enough to make a dent in the unemployment rate, Sweet said. We need stronger hiring. The key, as is often the case, lies with small businesses that account for the bulk of new U.S. jobs created. Economists at Deutsche Bank note that small businesses have grown more optimistic over the past three months, citing an index produced by the National Federation of Independent business. In particular, the number of small-business owners who said poor sales was their single biggest worry has fallen to 25% as of November from 33% in December 2010.

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If businesses are convinced sales will continue to rise, more hiring is sure to follow and the recovery will quicken. Yet if sales fall off, as Sweet and others expect, the U.S. will stay on its current course of slow and uneven growth. =============================================================

Chuck Jaffe

Jan. 1, 2012, 12:01 p.m. EST

8 fearless fund forecasts for 2012

Commentary: Three-year hype, fee fights, a trendy fund and more
By Chuck Jaffe, MarketWatch

BOSTON The Danish physicist Niels Bohr gets credit for first noting that Prediction is very difficult, especially if its about the future. Presumably he was talking about looking into the future with something simple like physics rather than something complicated like the mutual fund industry. In forecasting the big fund stories for the year ahead which Ive done for more than 15 years now, typically with about a two-out-ofthree success rate its seldom been harder than now to see the industry stories about to make headlines. The only thing thats certain is that there is major news in the fund world every year, no matter the market conditions, political climate or economic cycle. With that in mind, heres my prediction for eight stories that will have fund investors buzzing in 2012: 1. Big hype about three-year returns For mutual fund companies, the best thing about the start of 2012 is that it completely eliminates 2008 from three-year track records for

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stock funds. The Standard & Poors 500 Index (SNC:SPX) lost about 37% in 2008, but it is up roughly 15% annualized since the start of 2009. The first three months of that time period, the market was down 11%. So when the first quarter of 2012 is over even if the market is flat for the next three months you will start hearing fund firms and financial advisers talking about how great the last three years were (thats also when the markets five-year returns will finally be back into positive territory), and how investors may have felt terrible, but did pretty well. For a lot of investors even those with good three-year returns that talk is going to feel hollow, but it will lure others into the market. 2. Low volatility as a big selling point To find the story in mutual funds, look for what sells, and in 2012 the people pushing product know that strategies that protect investors against market shocks or that flatten out much of the markets volatility will open doors. There will be a continued push towards non-correlated assets including commodities, real estate, emerging markets and more, but the bigger idea will be managers who offer market exposure without all of the volatility. 3. A blow-up in a fund designed to protect the downside The low-volatility play is logical because the big fad in fund investing since 2008 has been funds that hedge away risk. Whether it has been absolute-return funds, long-short issues or balanced-risk funds that combine market exposure with some sort of insurance that lets them promise they wont lose money. The problem with these downside-protection funds is that they use derivatives and other complex financial instruments to protect shareholders. At some point, a small fund will find itself upside-down after a market event (maybe a fresh euro-zone scare?) and feel the sudden crush that investors are trying to avoid. Sadly, theres no way to know in advance who the bad guy will be, but its more likely to be from an obscure fund family trying to make a reputation with the new products than a household name. 4. Regulators wage big legal battle over fees and expenses The Securities and Exchange Commissions new Asset Management Unit has been working on a mutual-fund fee initiative since 2010. In

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plain English, a new sheriff is in town itching for a fight, so expect him to pick one.

Moreover, expect this battle to be with a fund family whose name you are familiar with, if only because the hired guns in this battle are aiming to make their reputation from the first draw, and the best way to clean up the town is to pick on one of the well-known bad guys. 5. A big ETF move from Fidelity Fidelity Investments in December filed for a big expansion of their exchange-traded fund business and it appears the Boston-based investment giant will finally jump with both feet into the ETF space. Vanguards success in ETF Land where its Total Bond Market (NAR:BND) is now the biggest fixed-income ETF after starting from scratch in 2007 has shown Fidelity that theres still time to grab market share, but that window is closing. Fidelity is determined to be a big player here, and it wont be shut out. 6. Another wave of money-market fund closings With interest rates near zero and unlikely to go anywhere during an election year, more fund companies will simply give up on money funds. The problem is not really that the funds arent making shareholders any money, its that theyre not making money for the fund sponsors. 7. The SEC finishes 12b-1 reform (sort of) The Securities and Exchange Commission has recognized for years that investors dont understand 12b-1 fees, which technically cover a funds sales and marketing costs. The problem is that regulators have vowed changes and done nothing, and thats whats going to happen again. Oh, they will do something cosmetic to appease politicians in an election year, but mostly they want to finish the job so that they dont have to bother with it again. 8. A trendy new fund literally Industry insiders are whispering that one concept on the drawing board for 2012 is a trending fund. Seriously. Were not talking about a fund that is following market trends or current fashions. This fund invests in stocks that are trending by mention on social networks such as Twitter.

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Apparently, the fund would basically be day-trading the stocks that are being hyped via tweets. Some stock jockey appears on CNBC and talks up shares in XYZ, the Twitter-verse explodes and the fund would go buy the stock to hold it for as long as the talk continues. Its great to talk about even if its a ridiculously horrible investment strategy which is precisely why its apparently on the drawing board. I just hope some fund company is crazy enough to try. ==============================================================

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