Science has determined that people need to know 7.5 things per day, on average, about the world of business. You can't argue with science. Lucky for you, the Huffington Post has an email newsletter, delivered first thing every weekday morning, boiling down the day's biggest business news into the 7.5 things you absolutely need to know. And we're giving it away free, because we love you, and also science. Here you go:
Thing One: Buffett Hearts Banks: Warren Buffett is the Oracle of Omaha, a national treasure, our Yoda grandpa of investing, so we should probably just take his word for it when he says that the banks in his portfolio are in perfectly fine health and are not going to hurt our economy or anything.
In fact, Buffett, in an interview with Bloomberg discussing his candid views on the stocks he owns, takes a big personal risk in praising these banks. Not only could he possibly have to pay higher capital-gains taxes when their share prices rise, but he also personally guarantees that his banks "will not get this country in trouble." This is exciting, what will Warren Buffett give us if he's wrong? He's a billionaire, so it could be anything. Maybe jobs? Nice, thick cardboard for our shantytowns? The possibilities are endless.
Actually, if the banks do get us into trouble again with another financial crisis, Buffett will probably just buy more shares, which is what has been doing since the last crisis, all the while telling us that everything's just fine now. And we have believed him, to the point where we're starting to go a little squishy on trying to prevent another crisis. Global regulators recently backed down on new Basel III capital and liquidity requirements for banks, for example, buying the classic argument that making banks safer will keep them from lending. Writing in the New York Times, MIT economist Simon Johnson suggests Basel III should be a "floor, not a ceiling" for bank regulation in the U.S. Though I don't have as much to offer as Buffett if I'm wrong, I will personally guarantee you that's not happening, at least not without another crisis.
Other stories today suggest either that not all banks are in quite the fine fettle Buffett says, or at least that a few regulators aren't willing to just take Buffett's word for it. Morgan Stanley announced it was slashing jobs at its trading business, and it may need to shrink even further, raising questions about just what kind of bank it will be, writes Susanne Craig of the New York Times. But Morgan Stanley is not alone; other large investment banks still need to trim down, too, writes Reuters.
The Wall Street Journal, meanwhile, reports that Deutsche Bank turned a neat profit of $654 million betting on the heavily manipulated benchmark lending rate known as Libor in 2008, a time when global markets were at their absolute craziest. The story kinda-sorta hints the bank was manipulating Libor to help its own book, which is something many banks were doing at the time. Deutsche Bank denies it was doing that. But the story is a reminder that, however healthy banks will be, they still need somebody keeping an eye on them.
Speaking of which, the Consumer Financial Protection Bureau will issue new rules today keeping a tight lid on the kind of dicey mortgages banks sold before the financial crisis, in order to help prevent a rerun. The Washington Post points out that these rules could crimp mortgage lending. But that's kind of the point. When banks are as healthy as Warren Buffett says they are, they start reaching for risk. Now's as good a time as any to figure out what the limits of that risk should be.
Thing Two: Rearranging The Cabinet: In another sign that we're losing our appetite for financial reform, President Obama is expected today to tap White House chief of staff Jack Lew to replace Tim Geithner at the Treasury Department. Geithner wasn't exactly a zealous financial regulator, but at least he knew where the bodies were buried. Lew, an expert on the federal budget, has professed to a lack of full understanding of financial markets and has said he didn't think deregulation caused the financial crisis. So, yeah, reform isn't going to be a big priority in a second Obama term, is it?
In other personnel moves, Labor Secretary Hilda Solis said she was stepping down, inspiring Jack Welch to lob one more carefully considered tweet in her direction. Securities and Exchange Commission enforcement chief Robert Khuzami is also leaving.
Thing Three: AIG Comes To Senses: AIG listened patiently yesterday to the ravings of its former CEO, Maurice Greenberg, and then, as expected, declined to make the huge mistake of joining him in suing the government for bailing it out during the crisis. Greenberg is now free to sue the government all by his lonesome for violating his civil rights by making his stock not be worthless, while AIG is free to not be the most hated company on earth. Win-win.
Thing Four: China Suddenly Strong Like Bull: Chinese exports were about three times stronger than economists expected in December, a sign that maybe the world's second-biggest economy isn't quite dead yet. Meanwhile, in Europe, Spanish bond yields have fallen below 5 percent for the first time since March, as suddenly that economy looks to be up and walking around its deathbed, too. Markets are rallying around the world.
Thing Five: Hey, It Could Have Been Five Years: Electronic stock-exchange operator Bats Global Markets admitted to system errors that allowed stock trades to happen at prices that weren't the best prices for customers, for four years, Bloomberg writes. It also admitted that errors allowed short-sellers to violate limits on their negative market bets. Just another reason why nobody trusts the robot-dominated stock market anymore.
Thing Six: Hedge-Fund Fight: Contrary to what you may have heard, rich guys don't always agree on everything. Two very rich hedge-fund-manager guys, Dan Loeb and William Ackman, are battling it out over the goofy, cult-like company called Herbalife. (Quick, without Googling it, what does Herbalife actually sell?) Ackman calls it a pyramid scheme and is betting against it. Loeb is betting heavily on it because why not. The SEC is investigating it. Who will win? Who will care?
Thing Seven: Dreamliner, The Sex Panther Of Airplanes: After a series of recent troubling mishaps with its 787 Dreamliner, Boeing sent its chief engineer forth yesterday to talk up the plane's performance record. He said he was totally confident in the plane, which he says leaves the gate "in the high 90 percent range" without any trouble. Ninety-five percent of the time, it works every time.
Thing Seven And One Half: Hall Of Shame: For the first time since 1996, America's baseball writers declined to elect anybody to the Hall of Fame, in the first year of eligibility for Barry Bonds and Roger Clemens. Bonds and Clemens are arguably the greatest hitter and pitcher, respectively, in baseball history. But they are so tainted by performance-enhancing drugs that baseball writers will need to clutch their pearls for at least another year before they let them into the Hall. Once enshrined, Bonds and Clemens will join such paragons of virtue as Ty Cobb, Tris Speaker and Cap Anson.
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Calendar Du Jour:
Economic Data:
8:30 a.m. ET: Weekly Jobless Claims, week of Jan. 5
Corporate Earnings:
Not much.
Heard On The Tweets:
Guy at work said “I got a good question for ya.” It's like, whoa pal. You've got a question. I'll decide if it's good, my man.
— Daniel Eastman (@danieleastman) January 9, 2013
-- Calendar and tweets rounded up by Alexis Kleinman.
And you can follow us on Twitter, too: Alexis Kleinman and @MarkGongloff
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