Markets Welcome Fiscal Deal

The new year began on an optimistic note after the House of Representatives approved a deal to resolve the fiscal showdown. Major indexes rose in Asia, Australia and Europe in the early hours of trading.

But the rally was not expected to last long, with more concerns looming in the months ahead. The fiscal deal, which was approved by the House late on Tuesday and was expected to be signed quickly by President Obama, does not include a long-term solution for getting past the debt ceiling, the borrowing limit that the government reached at the end of the year, The New York Times notes. Spending cuts of $110 billion to the defense budget and other programs were delayed until March. And the deal itself could reduce economic growth by as much as 1 percent in the first quarter of 2013, market strategists said.

Under the agreement, only the most affluent households will pay more in income tax. But a break on payroll taxes was not extended, meaning that about 77 percent of households will pay a larger share of income to the federal government this year, according to the Tax Policy Center. Income from dividends will be taxed at a flat rate of 20 percent, rather than the same marginal rate as earned income.

In a statement on the deal, President Obama looked ahead to negotiations to come. “The one thing that I think, hopefully, the new year will focus on,” he said, “is seeing if we can put a package like this together with a little bit less drama, a little less brinkmanship, and not scare the heck out of folks quite as much.”

 

AVIS TO BUY ZIPCAR FOR $500 MILLION  |  The Avis Budget Group announced on Wednesday that it had agreed to buy the car-sharing pioneer Zipcar for $500 million in cash. The offer of $12.25 a share represents a premium of 49 percent over Zipcar's closing stock price of $8.24 at t he end of 2012. But it is still below the $18 a share that Zipcar commanded in its I.P.O. in April 2011.

 

HIGHS AND LOWS OF 2012  |  The winners and losers of the past year gathered in spirit for DealBook's annual “Closing Dinner.” Robert H. Benmosche, chief executive of A.I.G., deserves credit for the turnaround of the year, Andrew Ross Sorkin writes. And though Jamie Dimon experienced the biggest failure of his career in 2012, the JPMorgan Chase chief executive was wise to admit his mistake, Mr. Sorkin says. With Marissa Mayer at the helm of Yahoo, “people are talking about the company as if it actually has a future.” Mark Zuckerberg is in need of “friends” on Wall Street, and the board of Hewlett-Packard had a particularly rough year. Mr. Sorkin writes: “We're pleased that Speaker John Boehner also decided to join us this year. We had asked him to invite some other senior members of his caucus, but as you can see from the empty seats at his table, none of them were willing to join him. So we've stuck him next to Vikram Pandit.”

 

WHITE COLLAR CASES TO COME  |  “It is not really of question of whether there will be a major white-collar crime that captures the public's attention in 2013; it's a question of when and how costly it will be,” Peter J. Henning writes in the White Collar Watch column. Several big investigations remain active, including the broad crackdown on interest-rate manipulation. Insider trading is also likely to remain a major focus, and more companies are r unning afoul of the Foreign Corrupt Practices Act, Mr. Henning writes. In addition, “every year seems to bring news of a major trading loss as a result of a breakdown in the internal controls at a major financial institution.”

The United States attorney's office in Manhattan is not focused solely on putting criminals behind bars. It also commands a stream of revenue from asset forfeiture that reached about $3 billion in 2012, including more than $2 billion from a failed Ponzi scheme and about $160 million from an online poker operation, DealBook's Peter Lattman reports. “The aggressive use of forfeiture as a legal mechanism to seize and freeze criminal proceeds has long been a hallmark of Manhattan's federal prosecutors. Securing forfeited assets is a priority of the office in part because many of the largest financial fraud cases are centered in New York.” The proceeds from asset forfeiture amounted to more than 60 times the office's annual budget. “As I like to joke,” said Preet Bharara, the United States attorney in Manhattan, “that's a lot better than the investment return of any hedge fund.”

 

ON THE AGENDA  |  The ISM manufacturing index for December is released at 10 a.m. The Federal Reserve's policy-making committee releases minutes from its previous meeting at 2 p.m. Bill Gross of Pimco is on CNBC at 3 p.m.

 

RISE OF THE CELEBRITY SHORT-SELLER  |  Rock star investors like William A. Ackman and David Einhorn have a huge advant age over ordinary short-sellers, with their ability to move stocks simply by disclosing their bets. But that phenomenon “makes the truth about a company harder to discern,” Steven M. Davidoff writes in the Deal Professor column. The most recent example was Mr. Ackman's bet against Herbalife, which led to a sell-off in the stock last month and created a public relations drama for the company. Herbalife has scheduled an analyst day for Jan. 10 to challenge the hedge fund manager's arguments.

“We have seen this before with Warren E. Buffett, when a new investment by him pushes the stock of the company up instantly. But more often these days, it is the bets of hedge fund managers that a stock will go down that move share prices.” Disclosing these bets, Mr. Davidoff writes, can “create momentum, pushing investors to make decisions ba sed not on the information but on fear.” So, he continues, “perhaps it is time for the Securities and Exchange Commission to require short-sellers with significant positions to disclose them as they are required to do for long positions.”

 

 

 

Mergers & Acquisitions '

ArcelorMittal to Sell Stake in Iron Ore Unit for $1.1 Billion  |  The giant steel maker has agreed to sell a 15 percent stake in a Canadian iron ore unit to a consortium of Asian investors that includes Posco of South Korea. DealBook '

 

Duff & Phelps to Be Sold for $665.5 Million  |  Duff & Phelps said on Sunday that it had reached a $665.5 million deal to be acquired by a consortium including the Carlyle Group, Stone Point Capital and the Edmond de Rothschild Group. DealBook '

 

Middleby Acquires Viking Range for $380 Million  | 
WALL STREET JOURNAL

 

INVESTMENT BANKING '

Investors Opted for Bonds in 20 12, But the Craze May Fade  |  The New York Times writes: “Entering the new year, a growing number of professional investors are betting that the craze for bonds has gone too far, perhaps dangerously so, as has been evident in the headlines from the year-end reports from large investment firms.” NEW YORK TIMES

 

Markets Came Out Ahead, Despite Turmoil  |  The New York Times columnist Floyd Norris writes: “It may have been typical of 2012 that it was politicians and central bankers - not economic news or corporate developments - that dominated investor attention. As the year ended, the difference was that it was Washington, not Europe, where the squabbles were taking place.” NEW YORK TIMES

 

Big Investors Flock to a Mall Boom in Russia  |  Morgan Stanley, which paid $1.1 billion a year ago for a single mall in St. Petersburg, is among big investors buying into Russian malls, The New York Times writes. NEW YORK TIMES

 

Big Depositors Seek a New Safety Net  |  On the first day of the New Year, $1.5 trillion of bank deposits lost an unlimited government guarantee granted during the financial crisis, and a scramble is under way to make sure cust omers do not withdraw large sums out of banks. DealBook '

 

Should Buffett and Bank of America Part Ways?  |  “Bringing Warren Buffett on board as an investor during a crisis is meant to instill confidence in a company. The real show of strength, though, is seeing him off,” The Wall Street Journal's Heard on the Street column says. WALL STREET JOURNAL

 

TD Bank Tries to Appear More Human  |  In a new advertising campaign called “Bank Human Again,” TD Bank is looking to “portray the custome r experience at other banks as cold and impersonal,” The New York Times writes. NEW YORK TIMES

 

PRIVATE EQUITY '

Buyout Firms Raise Less Money From I.P.O.'s  |  Companies backed by private equity raised $20.5 billion through 103 I.P.O.'s worldwide between January and November last year, according to Ernst & Young, compared with $38.6 billion raised in 2011, The Financial Times reports. FINANCIAL TIMES

 

2 Directors Leav e Best Buy's Board  |  Two directors of Best Buy, including G. Mike Mikan, who was interim chief executive last year, have resigned, leaving the retailer with four vacancies on its board, Reuters reports. REUTERS

 

Warburg Pincus Acquires Control of Drug Company for $195 Million  |  Warburg Pincus bought a majority stake in JHP Pharmaceuticals from Morgan Stanley Principal Investments, Bloomberg News reports. BLOOMBERG NEWS

 

 

HEDGE FUNDS '

Once Again, Most Hedge Funds Trail S.&P. 500  |  The Wall Street Journal reports: “Despite a few outsize performers, hedge funds lagged behind broader markets for the fourth year in a row, the longest period of underperformance since 1998, according to industry tracker HFR.” WALL STREET JOURNAL

 

I.P.O./OFFERINGS '

India Considers a Plan to Refund I.P.O. Investors  |  The Wall Street Journal reports: “India's capital-markets regulator is taking steps to tame what has been one of the world's wildest I.P.O. markets, with plans including forcing companies' founders to reimburse small investors for some losses.” WALL STREET JOURNAL

 

A Global Slump in I.P.O.'s  |  The Wall Street Journal reports: “In 2012, only 751 companies made initial offerings, raising $113.1 billion,” a 29 percent decline in the amount of funds raised. WALL STREET JOURNAL

 

VENTURE CAPITAL '

Silicon Valley Prepares for More Scrutiny  |  The tech industry is likely to step up its lobbying effort this year, as the government takes a harder look at privacy and tracking issues, The New York Times writes. NEW YORK TIMES

 

Start-Ups Try New Approaches to Computer Security  | 
NEW YORK TIMES

 

LEGAL/REGULATORY '

Banks Approach Settlement on Past Abuses in Home Loans  |  The New York Times reports: “Banking regulators are close to a $10 billion settlement with 14 banks that would end the government's efforts to hold lenders responsible for foreclosure abuses like faulty paperwork and excessive fees that may have led to evictions, according to people with knowledge of the discussions.” NEW YORK TIMES

 

Tribune Company Emerges From Chapter 11  |  After four years, the Tribune Company has emerged from bankruptcy protection, Christine Haughney reports on the Media Decoder blog of The New York Times. DealBook '

 

< span class="title">William Baer Confirmed as Justice Department Antitrust Chief  |  William J. Baer is expected to continue what has been widely seen as the agency's reinvigorated enforcement of antitrust laws after a period of lax oversight during the Bush administration. DealBook '

 

Family of Chinese Regulator Profited From Rise of Ping An Insurance  |  The New York Times reports: “Relatives of a top Chinese regulator profited enormously from the purchase of shares in a once-struggling insurance company that is now one of China's biggest financial powerhouses, according to interviews and a review of regulatory filings.” NEW YORK TIMES