Yen, Dollar Rise on Rate Outlook, Gold Falls Most in 14 Months

Dec. 7 (Bloomberg) -- The yen strengthened and the dollar rose to its highest level in a month against the euro as investors weighed whether the world economy is recovering fast enough to warrant higher central bank interest rates. Gold headed for the steepest two-day retreat since October 2008.

The yen advanced against all 16 most-traded currencies tracked by Bloomberg at 12:13 p.m. in New York. The dollar gained versus 12. The MSCI Emerging Markets Index dropped for a second straight day as Dubai’s equity index plunged 5.8 percent to a four-month low. Gold fell 1.9 percent in New York, while crude oil dropped a fourth consecutive day. European equities fell, while the Standard & Poor’s 500 Index rallied.

Federal Reserve Chairman Ben Bernanke speaks today for the first time since the Dec. 4 U.S. employment report signaled a surprise drop in the jobless rate, stoking expectations the Fed may raise rates sooner than economists had anticipated. Investors are concerned banks may have to increase writedowns that have reached $1.7 trillion worldwide since the credit crunch began, as Dubai World seeks to delay payment on $26 billion of debt.

“Not only are commodities falling because of strength in the dollar, traders and investors are easing up on their inflation fears and on their hedges on the U.S. dollar,” said Kathy Lien, New York-based director of currency research with online currency trader GFT Forex. “One of the primary reasons why traders or investors have piled into gold is because of the belief that the Federal Reserve is going to be behind the curve on tightening monetary policy.”

Yen, Dollar Gain

The yen rose most against higher-yielding currencies, advancing 1.8 percent versus the New Zealand dollar. The U.S. dollar traded at its highest level since Nov. 4 versus the euro, extending gains made at the end of last week that followed the U.S. employment report.

Treasury two-year notes advanced on speculation Bernanke may try to damp optimism about the strength of the economic recovery in his speech today. The benchmark two-year note yield fell four basis points to 0.80 percent.

The U.S. lost 11,000 jobs in November, less than the 125,000 median forecast of 82 economists in a Bloomberg survey, the Labor Department said Dec. 4. Fed-funds futures contracts on the Chicago Board of Trade showed today a 16 percent probability the central bank will increase its benchmark overnight rate to at least 0.5 percent by March, up from 11 percent a week ago.

Gold futures for February delivery in New York extended their decline since Dec. 3 to 5.8 percent, falling to $1,147.90 an ounce as the Dollar Index’s advance curbed the metal’s appear as an alternative asset.

Four-Day Retreat

Crude oil futures slumped 1.5 percent and have now lost 5.2 percent since Dec. 1. The Reuters/Jefferies CRB Index of commodities declined for a fourth day, the longest losing streak since August.

The Dubai Financial Market General Index sank the most among benchmark equity indexes worldwide. The measure has tumbled 17 percent since Dubai announced on Nov. 25 that state- owned Dubai World would ask creditors for a “standstill” agreement on its debt, including property company Nakheel PJSC’s $3.5 billion bond due for repayment in a week.

Russia’s Micex Index dropped 1.5 percent as oil company OAO Rosneft sank on falling crude prices. South Africa’s FTSE/JSE Africa All Shares Index declined 0.9 percent, after gold producer AngloGold Ashanti Ltd. retreated 3.7 percent.

Europe, U.S. Stocks

The Dow Jones Stoxx 600 Index, the benchmark for European stocks, slumped 0.5 percent. Fresnillo Plc, the world’s largest primary silver producer, led basic-resources producers lower in London, losing 1.89 percent. Siemens AG, Europe’s biggest engineering company, slipped 1.6 percent in Frankfurt after Morgan Stanley cut its recommendation.

The S&P 500 rose 0.1 percent, adding to last week’s 1.3 percent advance. Cigna Corp. added 4.5 percent, leading gains among health-care companies, after Goldman Sachs lifted its industry rating to “attractive,” citing cheap shares and “limited downside risk under likely outcomes for health reform legislation.”

Microsoft: employee stole documents for patent lawsuit

Microsoft is accusing ex-employee Miki Mullor of using his inside access to download internal documents for a patent complaint that his startup company, Ancora Technologies, has since filed against Dell, HP, and Toshiba. The suit alleges that the companies are infringing on Ancora's patent by selling computers with Windows Vista preactivated, which is possible thanks to one of Microsoft's anti-piracy technologies, System Locked Preinstallation (SLP). When Seattle Tech Report covered this story, the publication noted that Ancora's website described the case as follows:

To secure each copy of (Windows), without burdening the honest user, (PC makers) use a technology known as System Locked Pre-Installation (SLP) to protect Windows against piracy. SLP is Ancora's technology and is covered by our pioneer patent, US Patent 6,411,941. This lawsuit is about protecting our patent rights from being infringed by HP, Dell and Toshiba. This is not David vs. Goliath. This is David vs. three Goliaths.

On January 22, Microsoft filed its own lawsuit in King County Superior Court in Seattle, which claims Mullor wrote in his October 2005 Microsoft employment application that he no longer worked for Ancora because it was out of business. Nor did he disclose when hired that he believed SLP infringed on an Ancora patent. Microsoft, which is intervening in Ancora's patent lawsuit to defend its technology (and the PC makers) against the patent-infringement claims, now becomes Goliath number four.

Mullor, on the other hand, said he informed Microsoft about his patent in his résumé and employment agreement, though he notes that Ancora had ceased business operation before he applied to Microsoft. The documents Mullor downloaded from Microsoft before Ancora filed the lawsuit included information on the SLP and the upcoming Windows 7 operating system, according to Microsoft's complaint. They were downloaded onto Mullor's company-issued laptop, after which Mullor allegedly deleted them, then tried to hide his tracks by using software that overwrites deleted files.

Mullor was still a Microsoft employee when Ancora filed the suit against the PC makers; he was hired as a program manager in the Windows Security Group in November 2005. But in June 2008, four days after allegedly trying to hide his downloading activities, Ancora filed its patent lawsuit. In September 2008, Microsoft intervened as a party-defendant in the case and fired Mullor.

The Ancora patent is dated June 25, 2002, and Mullor claims he approached Microsoft in 2003 to discuss the "benefits Microsoft could realize by using it," but Microsoft wasn't interested. He believes Microsoft developed technology that is the subject of the patent lawsuit after his offer. Mark Cantor, an attorney representing Ancora in the patent litigation, said Mullor denies any wrongdoing, and described the Microsoft complaint as "simply a retaliatory lawsuit by Microsoft to get the patent case transferred to Seattle."

The patent case is scheduled for trial in a Los Angeles federal court on January 26, 2010, but Microsoft is seeking a court order barring Mullor from any involvement in the patent claim, which would bar him from assisting Ancora with prosecuting the suit with or without the documents he downloaded from the software giant. Mullor has given a statement on the situation, which you can read most of at the Seattle Tech Report.

The Best Stock to Own

Do you have a very best stock? A stock that brings you closer to retirement year in and year out? One like Kraft, formerly American Dairy Products, which -- as tracked back by Dr. Jeremy Siegel -- turned $1,000 into more than $2 million over 53 years with dividend reinvestment? In terms of returns, Kraft has quite literally been the very best stock of the past half-century.

I pay special attention to this stuff: My job is to find companies with the same magic that's made Kraft such a dynamite stock.

A repeatable fortune
What's the secret of Kraft's phenomenal digits? Well-branded products that a lot of people use, for starters. While that may be the bulk of it, those products aren't its only source of juju. The rest comes from two magic words: dividend reinvestment.

Don't think these words are powerful? Take a ho-hum stock -- or at least one that appears that way -- paying 5% in dividends yearly and racking up a modest 5% in capital appreciation. Start with $1,000 and reinvest those dividends. After 30 years, you'll have amassed a whopping $18,700!

The other side of the coin is that you could get those returns -- or better -- from a strong growth stock, but the dividend stock above gives you the flexibility to switch from reinvestment to an income strategy. In that example, you'd get almost $900 a year. Besides, which one do you think is the safer bet?

A few ideas for you
Paying dividends to shareholders also forces companies to exercise fiscal discipline. That's great, because being flush with cash tempts managers -- let's face it, they tend to have big egos -- to bungle their loads. And even if they don't slip up, they tend to hoard that cash away from shareholders without putting it to any use. That's why Microsoft's long-anticipated one-time $3-per-share dividend payout meant so much to shareholders, and why cash hoarders like Oracle (Nasdaq: ORCL) are underserving their owners.

In a way, dividends encourage responsibility -- something that strikes a personal nerve with me. As co-advisor of The Motley Fool's dividend stock newsletter, Income Investor, I'm always on the lookout for corporations paying solid dividends, like the stocks I'll share with you now.

Like Kraft, Procter & Gamble (NYSE: PG) has an enormous portfolio of well-branded products that a lot of people use. Its brands include Pringles, Crest, Duracell, and Bounty. At 2.8%, its yield isn't enormous, but its ability to generate free cash flow is quite impressive.

Speaking of companies with strong brands, I'm taking a hard look at Mattel, which manufactures a portfolio of iconic toys, including Barbie, Hot Wheels, Fisher-Price, and Matchbox. The stock has been beaten down hard in the last year, unlike its competitor Hasbro (NYSE: HAS). But I believe brighter days lie ahead as the company continues to work with A-list partners like DreamWorks (NYSE: DWA). The 4.9% dividend yield should make the wait that much easier.

But you needn't limit yourself to the world of consumer staples if you're thirsty for some action. Examine StatoilHydro (NYSE: STO), a big-name in North Sea energy exploration and distribution. The company has been battered by declining energy prices across the world, but remains well-positioned to serve energy consumers in Norway, the U.S. and the rest of Europe. Like ExxonMobil (NYSE: XOM), StatoilHydro should benefit from a long-term increase in fossil-fuel demand. Plus, you'll be collecting a healthy dividend yield along the way.

The Foolish bottom line
These stocks aren't companies that are perfect for everyone; they're ideas to jump-start your research. The best stock for you might not be the best for another reader. The bottom line is that in seeking great stocks for your portfolio, I invite you to give a close look to dividend stocks. They're appropriate for just about everybody. They're closet performers, and they tend to do their jobs more safely than others.

Looking for more stock ideas? Income Investor is beating the market by more than seven percentage points -- and I'm offering a free guest pass. Simply click here to learn more.

More togetherness now for Bill and Melinda Gates

Since Bill Gates left his full-time job at Microsoft Corp., his wife sees much more of him during the day - but not because he's at home. They work in adjoining offices running the world's biggest philanthropic organization, the Bill & Melinda Gates Foundation.

"We have offices that are side-by-side now at the foundation," Melinda French Gates said. "That's really nice because we have a door that passes between them in the back. We can pop into each other's office."

They share ideas about foundation projects for the health and development of the poorest people in the world and to improve education in the United States.

And, put in Bill Gates, they travel - sometimes together and sometimes apart - as they look into the best ways to help the world's poorest people in remote corners of the globe.

They were together for a series of appearances and meetings at the World Economic Forum. Melinda Gates has come from Tanzania, where she was looking into work against malaria, and Ethiopia, where she was seeing what the foundation can do to help make 3,000 new rural health centers more effective.

He's been in Belgium checking on progress toward a malaria vaccine. After Davos, he heads to Nigeria for a couple of days to encourage immunization against polio in one of the world's most affected countries. He visited the other, India, several months ago. He's convinced the world can wipe out the disease with a little more effort.

The couple, sitting next to each other, looked relaxed during an interview Friday with The Associated Press at the World Economic Forum in the Swiss Alpine resort of Davos. They alternate in answering questions, picking up where the other leaves off.

"It's my full-time job," said the co-founder of Microsoft who left his full-time job at the software giant last July amid concerns from friends that he wouldn't find his new role as engaging or rewarding. "Even though I loved my old one a lot, this one's every bit as good."

He said he was "maniacally" devoted to developing software aimed at making computers cheap and available for everyone.

Melinda Gates is heading back home to Seattle to be with the couple's children - Jennifer, 12, Rory, 9, and Phoebe, 6 - the major constraint on their travel.

"We have three young kids, so we're obviously very committed to being in Seattle and being there when they're in school, and then they travel with us quite a bit to," she said. "They're too young to get involved in the foundation. That will be still yet to come."

Obama picks 3 financial regulators

BY ABDON M. PALLASCH Political Reporter

Saying there needs to be “a shift in ethics on Wall Street,” President-elect Barack Obama on Thursday introduced three new appointees he plans to put in charge of financial regulatory agencies.

Citing recent banking scandals, Obama said his appointees will work to correct them — but he conceded better regulators will not necessarily prevent another financial meltdown.

“We can have the best regulators in the world, but everybody from CEOs to shareholders to investors are going to have to be asking themselves, not only is this profitable, not only whether this will boost my bonus but is it right?” Obama said at a news conference at the Drake Hotel in Chicago.

Obama also defended his choice of conservative evangelical leader Rick Warren to speak at his inauguration, even though Warren has angered some of Obama's gay and lesbian supporters.

“It's no secret that I am a fierce advocate for equality for gay and lesbian Americans,” Obama said. “What I've also said is it is important for America to come together even though we have disagreements on certain social issues.”

Obama noted that Warren knew Obama disagreed with him on homosexuality and abortion but invited him to speak at his church anyway.

“And that dialogue, I think, is part of what my campaign's been all about,” Obama said. “During the course of the entire inaugural festivities, there are going to be a wide range of viewpoints that are presented. And that's how it should be, because that's what America is about. That's part of the magic of this country is that we are diverse and noisy and opinionated.”

Obama's nominees introduced Thursday included: Mary Schapiro as chairman of the Securities and Exchange Commission; Gary Gensler as chairman of the Commodity Futures Trading Commission; and Dan Tarullo as a governor on the Federal Reserve Board.

Obama's chief of staff Rahm Emanuel — who the Sun-Times reported Thursday spoke directly to Gov. Blagojevich about naming Obama's friend Valerie Jarrett to the U.S. Senate — watched Obama speak Thursday, but was the first one to leave the room after the news conference, taking no questions.

Obama: Financial bailout program needs overhaul

President-elect Barack Obama urged a revamping of the government's $700 billion financial bailout, saying in an interview broadcast on Sunday it had to increase the flow of credit to families and businesses.

"I, like many, are disappointed with how the whole TARP process has unfolded," Obama said, referring to the Troubled Asset Relief Program.

"There hasn't been enough oversight," Obama said in an interview on ABC's "This Week with George Stephanopoulos." "We found out this week in a report that we are not tracking where this money is going."

Stephanopoulos pressed Obama on whether he wanted U.S. President George W. Bush to request permission from Congress to use the second half of the bailout funds.

Obama, who takes over from Bush on January 20, did not answer directly but said he wanted to see the program changed to do more to help families stave off foreclosures and to increase the flow of credit for small businesses.

"What I've done is asked my team to come together, come up with a set of principles around how we are going to maintain transparency, what are we going to do in terms of housing, how are we going to target small businesses that are under an enormous business crunch?" Obama said.

The White House said on Friday that Bush administration officials were in discussions with the Obama team on the possibility of Bush making a request for the second $350 billion of the bailout funds.

Both the White House and an Obama transition official said no final decision had been made but The Washington Post said a request could come as early as this weekend.

The aim would be to ensure that the funds were in place on January 20, when Obama takes office.

The program, which has used mainly to bail out financial firms, is unpopular on Capitol Hill. Some of the funds also were used to help distressed U.S. automakers.

Obama said his team plans to "lay out very specifically some of the things that we are going to do with the next $350 billion of money."

"And I think that we can gain -- regain the confidence of both Congress and the American people that this is not just money that is being given to banks without any strings attached," Obama said.

Obama Announces Financial Regulators

Over the past few weeks, I've announced key members of my economic team, who are now crafting a 21st Century Economic Recovery Plan that will create 2.5 million jobs. But as I said throughout the campaign, what will be just as important to our long-term economic stability is a 21st century regulatory framework to ensure that a crisis like this can never happen again.

Today, I am pleased to announce two individuals who will be leading that effort - Mary Schapiro as the Chairman of the Securities and Exchange Commission, and Gary Gensler as the Chairman of the Commodity Futures Trading Commission. I'm also pleased to announce that Dan Tarullo will be bringing his years of expertise on regulatory and banking reform to the Federal Reserve Board as one of its new governors.

In the last few days, the alleged scandal at Madoff Investment Securities has reminded us yet again of how badly reform is needed when it comes to the rules and regulations that govern our markets. Charities that invested in Madoff could end up losing savings on which millions depend - a massive fraud that was made possible in part because the regulators who were assigned to oversee Wall Street dropped the ball. And if the financial crisis has taught us anything, it's that this failure of oversight and accountability doesn't just harm the individuals involved, it has the potential to devastate our entire economy. That's a failure we cannot afford.

Financial regulatory reform will be one of the top legislative priorities of my Administration, and as a symbol of how important I view this reform, I'm announcing these appointments months earlier than previous administrations have. These individuals will help put in place new, common-sense rules of the road that will protect investors, consumers, and our entire economy from fraud and manipulation by an irresponsible few. These rules will reward the industriousness and entrepreneurial spirit that's always been the engine of our prosperity, and crack down on the culture of greed and scheming that has led us to this day of reckoning. Instead of allowing interests to put their thumbs on the economic scales and CEOs run off with excessive golden parachutes, we'll ensure openness, accountability, and transparency in our markets so that people can trust the value of the financial product they're buying. And instead of appointing people with disdain for regulation, I will ensure that our regulatory agencies are led by individuals who are ready and willing to enforce the law.

These are precisely the reasons why I chose the outstanding public servants who are with me today. Mary Schapiro currently serves as the Chief Executive Officer of the Financial Industry Regulatory Authority, the largest regulator for all securities firms that do business with the United States. Before that, she served as an SEC commissioner, and as Chairman of the Commodity Futures Trading Commission.

Mary is known as a regulator who's both smart and tough - so much so that she's been criticized by the same industry insiders who we need to get tough on. For years, she's used her position to educate investors about market risks, warn seniors and employers about retirement scams, and call for increased regulation of mortgage brokers long before this housing crisis hit. I know that Mary will provide the new ideas, new reforms, and new spirit of accountability that the SEC desperately needs so that fraud like the Madoff scandal doesn't happen again.

To chair the Commodity Futures Trading Commission, I've chosen Gary Gensler, who brings a wealth of expertise from both the public and private sectors to this position. In addition to serving as Under Secretary of Treasury during the Clinton Administration and a Senior Advisor to the Senate Banking Committee, Gary also gained a deep knowledge of our financial institutions during his decade as a partner at Goldman Sachs. As the new chairman of a commission charged with regulating some of the unsound practices and excessive leverage that helped cause this crisis, I know he will restore sound judgment and strict oversight to our markets. Along with Mary, Treasury Secretary-designee Tim Geithner, and others, Gary will also serve as a key member of the team that will reform our outdated financial regulations.

I am also announcing Dan Tarullo, one of my trusted economic advisors, as a new governor of the Federal Reserve Board. The Federal Reserve's monetary policy function will continue to be critical in navigating us through these trying economic times. But, as many of you know, the Federal Reserve also serves a vital regulatory function. Dan will bring a lifetime of experience to the Fed in economic policy, and financial regulation. A professor of law at Georgetown, Dan previously served as a senior economic advisor in the Clinton Administration, where he coordinated international economic policy and served as President Clinton's personal representative to multiple G-8 summits. His academic and policy work on financial regulation has anticipated some of the problems we have observed, and he has generated important ideas for how we should move forward. I have no doubt that his knowledge, experience, and independence will make him a valuable addition to the Federal Reserve at this critical time.

For over two centuries, our market has created a prosperity that is the envy of the world, and rewarded the innovators and risk-takers who have made America a beacon of science, technology, and discovery. But the American economy has worked in large part because we have guided the market's invisible hand with a higher principle - that America prospers when all Americans can prosper. That principle is why we put in place common-sense rules of the road to regulate our market, and it's why we need to restore and renew those rules today - so that every American from Wall Street to Main Street can have the chance to prosper once more. I have great faith and confidence in the ability of the team I've announced to make this possible. Thank you.

NEC's loss widens, plans to cut 20,000 workers

Japanese electronics giant NEC Corp. said it will cut 20,000 workers worldwide as it tries to stanch widening losses from semiconductors and other businesses that have been hard hit by competition and the global economic slump.

 

NEC's net loss for October-December swelled to 130 billion yen ($1.46 billion) from 5.2 billion yen a year earlier, it said Friday. Tokyo-based NEC said it would sink into the red for the full year through March as well.

The company hopes the job cuts, which will be split equally between Japan and overseas, will help save 80 billion yen over the next two years.

As Japanese electronics makers struggled to stay afloat in a shrinking market, a Japanese newspaper reported Friday that NEC was in talks with Toshiba Corp. to seek a possible chip alliance.

The Nikkei business daily said the talks focused on the possibility of Toshiba spinning off its system chip operations and incorporating them with NEC Electronics Corp., a semiconductor unit owned by NEC.

NEC declined to confirm the report, saying it was not based on an official company announcement.

NEC said its operations worsened all round, from information technology to mobile and electronic devices, as the company was faced with a deepening global slump and escalating competition in the electronics industry. NEC also blamed the stronger yen for squeezing profits.

Revenue for the fiscal third quarter was down slightly at 948 billion yen from 1.05 trillion yen a year earlier.

By segment, electronic parts and semiconductor operations took the worst beating, with sales falling nearly 30 percent on declining demand for personal computers and display, as well as semiconductors for automobiles. Mobile and networking businesses also suffered because of falling investment by service providers.

NEC now expects a net loss of 290 billion yen for the full fiscal year through March, a steep plunge into the red from the 15 billion yen net profit projected in October. The company also cut its sales estimate to 4.2 trillion yen for the full fiscal year, compared with the previous forecast of 4.6 trillion yen.

NEC shares declined 6.5 percent Friday in Tokyo. The company announced earnings results after trading closed.

Asian markets mixed on weak economy, earnings

BANGKOK, Thailand (AP) -- Asian markets were mixed Friday, with Japanese stocks sinking amid dismal economic numbers and a string of quarterly reports from leading companies like Sony and Honda showing plunging profits.

Hong Kong's key index edged higher on speculation about an interest rate cut in mainland China or other stimulus measures. European markets rose in early trade as Wall Street futures strengthened.

Markets had logged some gains earlier in the week, buoyed by an upbeat earnings outlook from British lender Barclays and a $819 billion stimulus package in the U.S. moving closer to reality, but confidence soured in Asia on bad economic and corporate news, especially out of Japan, Asia's biggest economy.

"Investors are looking for a magic bullet but there isn't one. There isn't one solution that by itself can solve all the complex problems that the world economy faces," said Arjuna Mahendran, head of Asian investment strategy at HSBC Private Bank in Singapore.

"In typical myopic fashion, markets are alternating between despair and hope," he said. "The problem is that there is no real visibility about earnings and the economic situation and there may not be until the second half of this year or very late in the year."

Japan's Nikkei 225 stock average fell 257.19, or 3.1 percent, to 7,994.05 as investors reeled from a mounting pile of bad earnings reports and the latest economic data, which showed industrial production falling at a record pace and unemployment jumping.

Hong Kong's Hang Seng clawed back early losses to rise 0.9 percent to 13,278.21. South Korea's Kospi retreated 0.4 percent while markets in Singapore and the Philippines also lost ground. Australia's main index gained 0.4 percent. Markets in mainland China are closed all week for the Lunar New Year.

As trading got under way in Europe, France's CAC-40 rose 0.3 percent, Germany's DAX gained 0.1 percent and Britain's FTSE 100 rose 0.6 percent.

U.S. stock index futures were moderately stronger. Dow futures were up 38 points, or 0.5 percent, to 8,150, and S&P 500 futures were up 4.9 points, or 0.6 percent, at 847.70.

Industrial output at Japan's manufacturers plunged 9.6 percent from the previous month in December, the largest drop since Tokyo began measuring such data in 1953. The unemployment rate in the world's second-biggest economy jumped to 4.4 percent in December from 3.9 percent the previous month.

Honda Motor Corp. dived 9.2 percent ahead of quarterly results. The automaker's October-December profit, released after the market closed, tumbled 90 percent, hit by rising costs, a stronger yen and falling sales in key markets.

Megabank Mizuho Financial Group Inc., which had a quarterly loss of 50.55 billion yen ($559 million), slid 7.4 percent.

Electronics gaint Sony Corp., which Thursday reported a 95 plunge in October-December profit, sank 6.8 percent.

Toshiba Corp. tumbled 17.4 percent in the wake of forecasting a full year loss due to plummeting demand for its flash memory chips, used to store data in consumer gadgets like music players and digital cameras.

China stocks rallied in Hong Kong as speculation of a weekend interest rate cut by the mainland's central bank and other stimulus measures swept the market. Such rumors are frequent and often come to nothing.

"There are hopes for more stimulus measures because the authorities in China have said they are determined to stabilize the economy," said Castor Pang, an analyst at Sun Hung Kai Financial in Hong Kong.

China Telecom added 6.7 percent and insurer Ping An Insurance jumped 6 percent.

On Wall Street Thursday, the Dow Jones industrial index slid 2.7 percent to 8,149.01, while the S&P 500 index dropped 3.3 percent to 845.14.

Oil languished below $42 a barrel in Asia as more dismal U.S. economic numbers offset news that OPEC may further cut production. Light, sweet crude for March delivery rose 40 cents to $41.84 a barrel by midafternoon in Singapore in electronic trading on the New York Mercantile Exchange.

In currencies, the dollar fell to 89.40 yen from 89.92 late Thursday in New York, while the euro declined to $1.2870 from $1.2934.

Citrix, Flextronics, Qualcomm, Sepracor: U.S. Equity Preview

Jan. 28 (Bloomberg) -- Shares of the following companies may
have unusual fluctuations in U.S. trading tomorrow. Stock symbols
are in parentheses and prices are as of 5:54 p.m. in New York.

Standard & Poor’s 500 Index futures expiring in March
lost 0.1 percent to 870.90. Dow Jones Industrial Average
futures fell 0.1 percent to 8,313.

Allstate Corp. (ALL:US) slipped 11 percent to $26.50. The
largest publicly traded U.S. home and auto insurer said it will
cut 1,000 jobs after the falling value of investments caused the
company’s first annual loss as a public firm.

Citrix Systems Inc. (CTXS:US) fell 7.2 percent to $22.46.
The maker of computer-networking software reported revenue of
$415.7 million in the fourth quarter, missing the average analyst
estimate by 3.9 percent, according to Bloomberg data. Citrix said
it will cut 10 percent of its workforce as the recession hurts
demand.

DryShips Inc. (DRYS:US) fell 15 percent to $10.35. The
commodities transporter said it has violated some financial
requirements of its loans and is seeking a waiver from its banks.

Flextronics International Ltd. (FLEX:US) dropped 10 percent
to $2.44. The maker of Microsoft Corp.’s (MSFT:US) Xbox 360 game
console said that, excluding some items, it expects to earn no
more than 7 cents a share in the fiscal fourth quarter. That
trailed the 15-cent average estimate of analysts in a Bloomberg
survey.

Qualcomm Inc. (QCOM:US) fell 4.8 percent to $35.04. The
world’s biggest maker of mobile-phone chips reported a 56 percent
drop in first-quarter profit and cut its annual sales forecast
after the recession curbed growth and hurt its investments.

Sepracor Inc. (SEPR:US) gained 16 percent to $15.75. The
maker of the Lunesta sleeping pill forecast earnings excluding
some items of at least $2.10 a share this year. That beat the
average estimate of $1.41 by analysts in a Bloomberg survey.

Fannie Mae Foreclosure Sale at 50 Cents on $1 Shows Price Reset

Jan. 28 (Bloomberg) -- With a sharp nod, Robert Parkin bids
$500,000 at the auction of a brick colonial house in Upper
Marlboro, Maryland, that the builder once valued at $1.1 million.

Seconds later, a competitor counters at $510,000, and Parkin
must decide whether to raise his limit on the unfinished, 4,878-
square-foot property with a stop-work order taped to the window.

This auction, 19 miles (30.6 kilometers) southeast of
Washington, is one of hundreds a day carried out on front lawns
and in hotel ballrooms nationwide by liquidators such as Williams
& Williams Marketing Services Inc. of Tulsa, Oklahoma. With 2.3
million residences in foreclosure, the sales are pushing down
prices to early 2004 levels in the hunt for new buyers.

“If you’re looking for expediency to get people back in
homes, un-board neighborhoods, clean up the rats, this is it,”
says Pamela McKissick, 62, the president of closely held Williams
& Williams. Banks, brokerages and government-sponsored mortgage
finance companies such as Fannie Mae hire the company to sell
houses one at a time or to liquidate entire portfolios.

Auctions are resetting real estate values at the
neighborhood level, while President Barack Obama tries to find a
way to limit foreclosures and revitalize the worst housing market
since the Great Depression. Bargain hunters such as Parkin, a 50-
year-old aerospace engineer who is shopping for a personal
residence, and mom-and-pop investors on the prowl for rental
properties, aren’t waiting for federal aid.

They are buying foreclosed properties for as little as 10
cents on the dollar. Lenders seized 9,787 houses a day in
December, or almost seven a minute. Even after the 26 percent
drop in residential prices since June 2007, there are enough
unsold homes to last 9.3 months at the current sales rate.

Falling Prices

Housing values may decline a further 15.5 percent this year,
based on December 2009 contracts tied to the RPX residential real
estate index. The RPX, developed by New York-based Radar Logic
Inc., measures the average price per square foot of residential
sales in 25 U.S. markets.

After median house prices fell 15 percent in November, the
most on record, home sales rebounded 6.5 percent last month, the
National Association of Realtors said Jan. 26. Distressed sales
accounted for almost half the total.

The California Association of Realtors said yesterday that
the price of a single-family house in the state plunged 41.5
percent last year. The Commerce Department may report tomorrow
that new-home sales fell 2.5 percent last month, based on a
Bloomberg survey of 69 economists.

Barroom Brawler

Auctions are the best way to determine the true value of
real estate, says Dean Williams, 47, the owner of the auction
house that bears his name. Sales through agents promote the
owners’ asking prices, while lenders emphasize the affordability
of monthly payments, he says, during an interview in Tulsa,
surrounded by shelves of books including “Intellectual Freedom
Fighter” and “Radicals for Capitalism.” His lip is scarred
from a bar-room brawl 28 years ago.

“We’re creating values beyond just short-term profit,” he
says. “Those values, we feel, are efficiency, transparency,
competition, stewardship.”

During the last real estate recession in the early 1990s,
brought on by the collapse of the savings and loan industry, a
temporary federal agency, the Resolution Trust Corp., served as a
central clearing house to dispose of foreclosed houses, offices
and stores. No such authority exists now, leaving private buyers
and sellers to work out their own deals.

‘Greedy Speculators’

Forced sales reduce previously recorded property values and
erode the $391 billion in local governments’ property tax rolls.
Auctions exacerbate the crisis, says Ira Rheingold, executive
director of the National Association of Consumer Advocates, a
nonprofit attorneys group in Washington.

“They are just furthering the depressed market, because
what they are doing is selling properties really, really cheap,”
Rheingold says. “I don’t know that it does anything for the
market except make some greedy speculators rich.”

Lawrence Summers, Obama’s director of the National Economic
Council, pledged in a Jan. 15 letter to congressional leaders
that the administration will commit $50 billion to $100 billion
to try to keep people in their homes. While government assistance
may slow the record pace of foreclosures, it won’t stop them.

“I’m anticipating that we’re going to see a frightening
increase in foreclosure activity in the first part of the year,”
says Rick Sharga, a senior vice president at the RealtyTrac real
estate data service in Irvine, California. “Everybody
underestimated just how severe this would be.”

Williams & Williams says it aims to triple its peak sales to
10,000 houses a month this year. In 2008, the company says it
generated $1.1 billion in revenue on 13,872 auctions.

Internet Bidders

About 14 percent of the transactions are won by bidders on
the Internet, and the Williams & Williams switchboard receives
30,000 calls a month, the company says. Its commissions average 6
percent. Auctioneers themselves can earn as much as $1 million a
year.

Williams, who bought the business from his father, Tommy, in
2003, bankrolled the December introduction of an affiliated
broadcast venture, the Auction Network, in 87 million households
and on the Internet. Auction Network sells everything from
antiques to condominiums and is developing a niche marketing the
personal effects of celebrities such as Ozzy Osbourne, the late
comedian Bob Hope and silent film actors Mary Pickford and
Douglas Fairbanks Jr.

While a team of Williams & Williams auctioneers was moving
through Maryland and Virginia on Dec. 16, a competitor, Irvine,
California-based Real Estate Disposition Corp., was wrapping up
an eight-day, 18-city tour at which it sold 2,842 homes for $210
million, according to Chairman Robert Friedman.

Swap-meet Partners

Friedman and Chief Executive Officer Jeffrey Frieden, both
47, met as teenagers when they were working at a swap meet. They
started privately owned REDC in 1990 to help dispose of
properties left by the S&L bust. They auctioned distressed real
estate for seven years before mothballing the practice. Two years
ago, they started again.

In November, the Trident IV private equity fund managed by
Charles Davis, chief executive officer of Stone Point Capital LLC
in Greenwich, Connecticut, bought a 50 percent stake in the
California auction house. Terms weren’t disclosed.

By packing hundreds of bidders into ballrooms at dozens of
auctions a day, REDC says it sold an industry-record 32,799
housing units for $3.4 billion last year.

Bank auctions, foreclosures and loan restructurings have
eliminated “about 60 percent of the bad subprime loans” that
triggered the industry’s collapse, Friedman says in an interview.
The rest will be worked out this year, he says.

New Foreclosure Wave

Now, a new wave of foreclosures is capsizing borrowers with
better credit in higher-cost houses who “got caught up in the
subprime frenzy and maybe overshot the mark,” Friedman says. “I
envision that wave to last probably another 18 to 24 months.”

Foreclosures and liquidations accounted for 34 percent of
the residential market in Los Angeles last year, 30 percent in
Phoenix and 27 percent in Washington, according to Radar Logic.

“Money is made, unfortunately, by the M&Ms of life:
Mistakes and misfortunes of others,” says Monte Lowderman, 41, a
Williams & Williams auctioneer from Macomb, Illinois.

The Upper Marlboro property was the third of 14 that
Lowderman’s three-man crew sold for $2.4 million that day. They
traveled in a rented Toyota sport-utility vehicle on a six-day
swing from Virginia to Massachusetts.

The house once belonged to Jeffrey Whitner, a 43-year-old
independent contractor who ran out of time and money to complete
the job. He planned to use it to showcase his building abilities,
he says. Whitner discovered the empty hilltop lot by driving
around the neighborhood in February 2004. He paid $86,000 to buy
it from an 80-year-old widow, public records show.

$1.1 Million Appraisal

The builder obtained a $651,300 interest-only construction
loan from SunTrust Mortgage Inc., a unit of Atlanta-based
SunTrust Banks Inc., property records show. That gave him enough
to complete 95 percent of the construction, he says.

Whitner says he obtained a $1.1 million appraisal on the
project and in September 2007 was closing in on new funding to
finish. Then the real estate market collapsed, and his bank
credit line vanished, he says.

Between starting and losing the project, Whitner fell a year
behind on child support for his 12-year-old son, owing as much as
$3,600, and ran up $11,034 on an unpaid credit card and personal
loan, according to a Prince George’s County, Maryland, judgment.

“Maybe I put too much pride in the home and wanted to make
it perfect for the owners,” Whitner says.

SunTrust foreclosed on Oct. 26, 2007, court records show.
Ten days later, Whitner defaulted on the mortgage for the
$228,000 condominium where he lived in Bowie, Maryland.

“I got really depressed,” he says.

Burning Building

Lowderman, who is about to auction the Upper Marlboro house,
spits chewing tobacco into a paper cup.

“What we’re seeing today, in my lifetime, it’s happened
once already,” he says.

His father, Jack, worked with Tommy Williams in an Illinois
farm-and-livestock auction firm until the 1980s agricultural
crisis doomed the partnership.

Tommy Williams resettled in Tulsa, where his sales exploits
are family legend. He says he once auctioned a burning building.

When son Dean graduated from Georgetown University law
school in Washington in 1989, he began flipping properties for
profit, buying houses and having his father auction them.
Williams & Williams was born.

Dean Williams says he honed his economic views reading the
Libertarian author Ayn Rand, and named his 8-year-old son for the
self-made businessman Hank Rearden in Rand’s 1957 novel “Atlas
Shrugged.”

“Our focus,” says Williams, “is much longer than prices
going up or down, even in a crisis of this magnitude.”

Unlit Townhouse

At an unheated, unlit townhouse in Capital Heights,
Maryland, Lowderman’s auction team has already disposed of a
residence that stood empty for eight months. The sale took seven
minutes and elicited a winning bid of $139,000. That was less
than half the $305,000 it sold for in December 2006 and 9 percent
below the price a previous owner paid in 2003.

The winning bidder in this and all auction sales must make
an immediate 5 percent down payment and arrange financing within
a month. The transaction is subject to the seller’s approval.

If Fannie Mae, the seller of the Capital Heights property,
accepts the offer, it will record a loss equal to half the loan’s
balance, according to public records. The Washington-based
government mortgage finance company, which hired Williams &
Williams, has absorbed a $56 billion beating on mortgage-related
losses, Bloomberg data show. The mistakes pushed it into
conservatorship last year. Fannie Mae couldn’t be reached for
comment yesterday.

The original lender, HSBC Mortgage Corp., a unit of HSBC
Holdings Plc, has recorded $33.1 billion in subprime losses.

‘Cash is King’

“There’s people who’ve lost a bunch of money,” says Juston
Stelzer, 29, who works with Lowderman as a “ring man,”
recognizing each bid at auction by belting out “Hey!” and
“Yes!”

“But cash is king right now. And there’s going to be some
people get filthy, filthy wealthy,” he says.

It’s decision time for Parkin, standing on an unfinished
floor in the unheated front room of the Upper Marlboro house.

As he peers into the muddy, unplanted yard, the winter sun
frames him in a spotlight.

Parkin says he’s stepped into $1 million tract houses that
don’t feel as hospitable as this one, with its granite counters,
stone fireplace and floor-to-ceiling windows.

Lexus and Ford

“Maybe it’s the analogy of closing the door of a Lexus and
closing the door of a Ford,” he says.

Mechele Silva, 39, a physician who lives nearby, says she
used to peek in the windows to glimpse the builder’s progress.

“It was so much nicer than the old houses that we lived
in,” says Louise Pearson, 84, another neighbor.

While the first minute at auction raised the offering price
more than fivefold, the next 60 seconds tick by without a bid.

“I had never done an auction in my life,” Parkin says. “I
didn’t want to get myself in a position I couldn’t handle.

Then he offers $520,000 and reclaims the lead. The
competitor’s face falls. The auction ends.

Lowderman asks for applause.

“When I won, I had this rush: What did I do?” Parkin said
later. “It was this blend of excitement. And terror.”