Microsoft’s Surface tablet has “modest” start: Ballmer
















PARIS (Reuters) – Microsoft Corp‘s new Surface tablet – its challenger to Apple‘s iPad – had a “modest” start to sales because of limited availability, Microsoft Chief Executive Steve Ballmer told French daily Le Parisien.


The world’s largest software company put the Surface tablet center stage at its Windows 8 launch event last month in its fightback against Apple and Google in the exploding mobile computing market.













“We’ve had a modest start because Surface is only available on our online retail sites and a few Microsoft stores in the United States,” Ballmer was quoted as saying.


Meanwhile, 4 million upgrades to Windows 8 were sold in the three days following the system’s launch, Ballmer added. (Reporting by Lionel Laurent; Editing by David Cowell)


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Hathaway says ‘Les Mis’ made her feel deprived
















NEW YORK (AP) — Anne Hathaway credits her new husband Adam Schulman for helping her get through the grueling filming of the screen adaptation of “Les Miserables.”


In “Les Mis,” the 30-year-old actress plays Fantine, a struggling, sickly mother forced into prostitution in 1800s Paris.













Hathaway lost 25 pounds and cut her hair for the role. She tells the December issue of Vogue, the part left her in a “state of deprivation, physical and emotional.” She felt easily overwhelmed and says Shulman was understanding and supportive.


The couple wed in September in Big Sur, Calif. Hathaway wore a custom gown by Valentino whom she collaborated with on the design. Working with the designer is a memory she says she will “treasure forever.”


The December issue of Vogue hits stores Nov. 20.


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Online:


http://www.vogue.com/


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British medical journal slams Roche on Tamiflu
















LONDON (AP) — A leading British medical journal is asking the drug maker Roche to release all its data on Tamiflu, claiming there is no evidence the drug can actually stop the flu.


The drug has been stockpiled by dozens of governments worldwide in case of a global flu outbreak and was widely used during the 2009 swine flu pandemic.













On Monday, one of the researchers linked to the BMJ called for European governments to sue Roche.


“I suggest we boycott Roche’s products until they publish missing Tamiflu data,” wrote Peter Gotzsche, leader of the Nordic Cochrane Centre in Copenhagen. He said governments should take legal action against Roche to get the money back that was “needlessly” spent on stockpiling Tamiflu.


Last year, Tamiflu was included in a list of “essential medicines” by the World Health Organization, which often prompts governments or donor agencies to buy the drug.


WHO spokesman Gregory Hartl said the agency recommended the drug be used to treat unusual influenza viruses like bird flu. “We do have substantive evidence it can stop or hinder progression to severe disease like pneumonia,” he said.


In 2009, the BMJ and researchers at the Nordic Cochrane Centre asked Roche to make all its Tamiflu data available. At the time, Cochrane Centre scientists were commissioned by Britain to evaluate flu drugs. They found no proof that Tamiflu reduced the number of complications in people with influenza.


“Despite a public promise to release (internal company reports) for each (Tamiflu) trial…Roche has stonewalled,” BMJ editor Fiona Godlee wrote in an editorial last month.


In a statement, Roche said it had complied with all legal requirements on publishing data and provided Gotzsche and his colleagues with 3,200 pages of information to answer their questions.


“Roche has made full clinical study data…available to national health authorities according to their various requirements, so they can conduct their own analyses,” the company said.


Roche says it doesn’t usually release patient-level data available due to legal or confidentiality constraints. It said it did not provide the requested data to the scientists because they refused to sign a confidentiality agreement.


Roche is also being investigated by the European Medicines Agency for not properly reporting side effects, including possible deaths, for 19 drugs including Tamiflu that were used in about 80,000 patients in the U.S.


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Online:


www.bmj.com.tamiflu/


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In This Junkyard, It Seems, There Are No Dogs

















It’s kind of Orwellian that anyone would rapaciously buy an ETF with the ticker JNK—branding shorthand for “junk,” Wall Street’s sobriquet for high-yield, the riskiest layer of corporate bonds.


Nevertheless, JNK, the SPDR Barclays Capital High Yield Bond ETF, and competitor offerings are a hot destination in these yield-famished days. The appeal is irrefutable: You’ll get precious little income from Treasuries and muni bonds. Creditworthy corporations are borrowing at record lows. Why not then pile into riskier, higher-yielding debt, especially if you can do so via one tidy, exchange-traded ticker? (No need to ring Michael Milken.) What’s more, Moody’s sees the global default rate for “speculative-grade” debt ending the year at 2.8 percent, compared with an average of 4.8 percent since 1983. Yields have fallen 1.65 percentage points this year, to 7.05 percent on Nov. 1, according to Bank of America Merrill Lynch data.













What’s not to love?


An overcrowded trade marked by 2007-like issuer complacency—that’s what. More companies are demanding and getting easy terms on their junk issues. The most popular junk ETFs are going deeper into credit risk to scrape for yield. The sluicing of retail money into these ETFs is perpetuating what has historically proved to be a vicious trend. “Signs of over-exuberance are creeping into the corporate credit market,” wrote Michael Lewitt, a hedge fund manager who publishes the Credit Strategist. “In the past, rising issuance of these types of low-quality bonds has been a warning that a market rally is coming to an end … Today’s new issues will be the troubled credits of tomorrow.”


On Nov. 7, Standard & Poor’s warned of the unprecedented dangers of a brave, new junk bond world. Wrote credit analysts Diane Vazza and Evan Gunter:


“The ease with which investors can enter and exit ETF investments creates new and risky dynamics in the speculative-grade market with the potential flow of ‘hot money.’ Speculative-grade companies have a higher default risk than investment-grade companies. Therefore, when the credit cycle turns against investors, losses from defaults can quickly outstrip the additional interest payments that high-yield investors receive. Since we are entering the stage of declining credit quality in the current credit cycle, the credit quality of an issuer or a portfolio has become paramount.”


Vazza and Gunter looked under the hoods of JNK and its rival, HYG, the iShares iBoxx $ High Yield Corporate Bond Fund. They found that both ETFs owned a higher proportion of the riskiest junk debt versus the overall high-yield market. While they estimated that the broad universe of high yield includes 7.9 percent of bonds rated CCC+ and lower, their share in HYG’s portfolio is at 11.0 percent and in JNK just under 10 percent. While higher risk juices returns in a favorable environment like the present one, the analysts explained, they take outsized losses once the credit cycle turns.


Sales of junk debt in the U.S. have come in at $ 294 billion so far this year, the fastest pace on record. It’s in that booming backdrop that private equity-owned companies have paid out $ 34.1 billion in dividends this year, according to Standard & Poor’s Capital IQ Leveraged Commentary & Data. That’s north of 2010’s total of $ 31.5 billion and the $ 23.8 billion paid out in 2007, when the leveraged buyout market peaked. By comparison: Some $ 1.2 billion in dividends were issued in 2008 and $ 440 million in 2009.


This boom has prompted an echo-boom in payment-in-kind transactions, or PIK toggles, which let companies pay interest in debt rather than cash, essentially deferring payments to their investors. That tactic was a hallmark of the private equity bubble of five years ago. According to Moody’s, as of mid-October two of the third quarter’s 14 dividend financings enjoyed PIK toggle structures, including Emergency Medical Services’ $ 450 million of notes to pay a dividend to Clayton, Dubilier & Rice and IDQ Holdings’ $ 45 million deal supporting a payout to Castle Harlan. Last month, Petco also got in on the PIK toggle boom.


Caveat junktor. Moody’s calculates that the default rate for companies that sold PIK-toggle bonds was 13 percent from 2006 to 2010, twice the rate for similarly rated issuers that didn’t use the tactic.


“Low yields are driving more and more investors into really strange territory,” says Lee Pacchia, a Bloomberg Law analyst who follows corporate bankruptcies. “They need to take on risk. While the market forces driving this trend could go on for a while, lowering standards could end badly. It’s called ‘junk’ for a reason.”


The institutional smart money is increasingly taking the other side of that trade. According to Bloomberg data, the number of bearish options on HYG are at an all-time high: The number of outstanding puts on HYG has almost doubled since Oct. 19, to a record of 118,444 at the end of last month. Hedge funds seeking that bet on both gains and losses in credit attracted $ 12.6 billion of deposits in the three months ended Sept. 30, the most since the last quarter of 2007, according to HFR.


It all makes you wonder how quickly people may have forgotten the lessons of the credit bubble, or what one hedgie has called the era of promiscuous lending. Will today’s junk boom end so differently?


“The history of money is a sad state of affairs,” wrote Prudent Bear’s Doug Noland in his recent post, titled “The Myth of Deleveraging.” “Failing to learn from a litany of previous monetary fiascoes, ‘money’ is these days being abusively over-issued.”



Farzad is a Bloomberg Businessweek contributor.


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Israel kills Gaza rocket crewman in second day of clashes
















GAZA (Reuters) – An Israeli air strike killed a Palestinian militant in the Hamas-governed Gaza Strip on Sunday as a surge in cross-border violence entered its second day, local officials said.


Islamic Jihad, a smaller faction than Hamas which often operates independently, identified the dead man as one of its own, saying he was a member of a rocket crew hit by an Israeli missile in Jabalya, northern Gaza.













The Israeli military confirmed carrying out an air strike in the area. The death brought to six the number of Palestinians killed by Israel since four of its troops were hurt in a missile attack on their jeep along the Gaza boundary fence.


Islamic Jihad said it had fired 70 short-range rockets and mortar bombs across the border since Saturday, salvoes which drove Israeli residents to blast shelters. At least one Israeli, in the town of Sderot, was wounded, ambulance workers said.


Israel described the jeep ambush as part of a Palestinian strategy of trying to curb its countermeasures against possible cross-border infiltration. Israeli forces often mount hunts for tunnels and landmines on the inside of the Gaza boundary, creating a no-go zone for Palestinians.


“Of course we don’t accept their attempt to change the rules,” Defence Minister Ehud Barak told Israel’s Army Radio.


“The essence of the struggle is over the fence. We intend to enable the IDF (Israel Defence Forces) to work not just on our side but on the other side as well.”


Palestinians said four of Saturday’s dead were civilians hit by an Israeli tank shell while paying respects at a crowded mourning tent in Gaza’s Shijaia neighborhood. Israel denies targeting civilians.


The bloodshed puts internal pressure on Hamas, which, though hostile to the Jewish state, has sat out some of the recent rounds of violence as it tried to consolidate its Gaza rule and reach out to neighboring Egypt and other foreign powers.


Israel blames Hamas for any attacks emanating from Gaza, but has shown little appetite for a major sweep of the territory which might strain its own fraught ties to the new Islamist-rooted government in Cairo.


(Writing by Dan Williams; Reporting by Nidal al-Mughrabi; Editing by Todd Eastham)


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China says Hollywood putting pinch on domestic films
















BEIJING (Reuters) – China‘s films are taking a hit from a trade deal that allows for more U.S. movie imports, the country’s broadcast regulator said on Sunday, with their share of the box office take sliding even as the industry’s total revenues outpace those of last year.


The movie pact, which exempted 14 films from China’s annual quota of 20 foreign films per year, was hammered out in February during a trip to the United States by Vice President Xi Jinping, the man expected to take the ruling Communist Party‘s top spot after a congress held this week in Beijing.













After signing the deal, the number of American films in China and their proportion of revenues have increased by a “large margin”, Vice Minister of the State Administration of Radio, Film and Television Tian Jin said.


“The past dominance of domestic films in the Chinese market has been shaken,” Tian told a press briefing on the sidelines of the congress held once every five years.


China’s 2012 box office revenues reached 13.27 billion yuan ($ 2.12 billion) at the end of October, Tian said, already outpacing revenues from all of 2011. But the share of revenues for domestically produced films was only 41.4 percent, constituting “a huge drop”.


Tian said the U.S. film industry is reaping massive profits while domestic producers are under greater pressure, mainly because Chinese movies cannot compete with the Hollywood spectacles.


“The competitiveness of Chinese-made films must be raised,” he said.


Chinese film industry experts have said that Hollywood’s looming shadow means Chinese producers need to focus on quality if they are going to elevate their appeal to a Chinese audience.


February’s deal stemmed from a victory in a 2009 U.S. World Trade Organization case that challenged Beijing’s restrictions on import and distribution of copyright-protected materials.


The U.S. movie industry has long complained about China’s tight restrictions on foreign films, which they say helps fuel demand for pirated DVDs that are widely available in China.


It also argued that it was being boxed out of a booming market, as the fast-growing Chinese middle class spends more money in theatres.


The Chinese film market is seen as one of the largest potential markets for Hollywood, but it has also been tightly controlled by the state-owned China Film Group.


Chinese films frequently compete for international awards, but winners overseas are often not those supported by China’s government, which tend to fan nationalist and patriotic sentiment.


(Reporting by Michael Martina; Editing by Nick Macfie)


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Food labels multiply, some confuse consumers
















FRESNO, Calif. (AP) — Want to avoid pesticides and antibiotics in your produce, meat, and dairy foods? Prefer to pay more to make sure farm animals were treated humanely, farmworkers got their lunch breaks, bees or birds were protected by the farmer and that ranchers didn’t kill predators?


Food labels claim to certify a wide array of sustainable practices. Hundreds of so-called eco-labels have cropped up in recent years, with more introduced every month — and consumers are willing to pay extra for products that feature them.













While eco-labels can play a vital role, experts say their rapid proliferation and lack of oversight or clear standards have confused both consumers and producers.


“Hundreds of eco labels exist on all kinds of products, and there is the potential for companies and producers to make false claims,” said Shana Starobin, a food label expert at Duke University’s Nicholas School of the Environment.


Eco-labels have multiplied in recent years in response to rising consumer demand for more information about products and increased attention to animal and farmworker welfare, personal health, and the effects of conventional farming on the environment.


“Credible labels can be very helpful in helping people get to what they want to get to and pay more for something they really care about,” said Urvashi Rangan, director of consumer safety at Consumer Reports. “The labels are a way to bring the bottom up and force whole industries to improve their practices.”


The problem, Rangan and other said, is that few standards, little oversight and a lot of misinformation exist for the growing array of labels.


Some labels, such as the USDA organic certification, have standards set by the federal government to which third party certifiers must adhere. Some involve non-government standards and third-party certification, and may include site visits from independent auditors who evaluate whether a given farm or company has earned the label.


But other labels have little or no standards, or are certified by unknown organizations or by self-interested industry groups. Many labels lack any oversight.


And the problem is global, because California’s products get sold overseas and fruits and vegetables from Europe or Mexico with their own eco-labels make it onto U.S. plates.


The sheer number of labels and the lack of oversight create a credibility problem and risk rendering all labels meaningless and diluting demand for sustainably produced goods, Rangan said.


Daniel Mourad of Fresno, a young professional who likes to cook and often shops for groceries at Whole Foods, said he tends to be wary of judging products just by the labels — though sustainable practices are important to him.


“Labels have really confused the public. Some have good intentions, but I don’t know if they’re really helpful,” Mourad said. “Organic may come from Chile, but what does it mean if it’s coming from 6,000 miles away? Some local farmers may not be able to afford a label.”


In California, voters this week rejected a ballot measure that would have required labels on foods containing genetically modified ingredients.


Farmers like Gena Nonini in Fresno County say labels distinguish them from the competition. Nonini’s 100-acre Marian Farms, which grows grapes, almonds, citrus and vegetables, is certified biodynamic and organic, and her raisins are certified kosher.


“For me, the certification is one way of educating people,” Nonini said. “It opens a venue to tell a story and to set yourself apart from other farmers out there.”


But other farmers say they are reluctant to spend money on yet another certification process or to clutter their product with too much packaging and information.


“I think if we keep adding all these new labels, it tends to be a pile of confusion,” said Tom Willey of TD Willey Farms in Madera, Calif. His 75-acre farm, which grows more than 40 different vegetable crops, carries USDA organic certification, but no other labels.


The proliferation of labels, Willey said, is a poor substitute for “people being intimate with the farmers who grow their food.” Instead of seeking out more labels, he said, consumers should visit a farmers’ market or a farm, and talk directly to the grower.


Since that’s still impossible for many urbanites, Consumer Reports has developed a rating system, a database and a web site for evaluating environmental and food labels — one of several such guides that have popped up recently to help consumers.


The guides show that labels such as “natural” and “free range” carry little meaning, because they lack clear standards or a verification system.


Despite this, consumers are willing to pay more for “free range” eggs and poultry, and studies show they value “natural” over “organic,” which is governed by lengthy federal regulations.


But some consumers and watchdog groups are becoming more vigilant.


In October, the Animal Legal Defense Fund filed a lawsuit against Petaluma, Calif., organic egg producer of Judy’s Eggs over “free range” claims. The company’s packaging depicts a hen ranging on green grass, and the inside reads “these hens are raised in wide open spaces in Sonoma Valley…”


Aerial photos of the farm suggest the chickens actually live in factory-style sheds, according to the lawsuit. Judy and Steve Mahrt, owners of Petaluma Farms, said in a statement that the suit is “frivolous, unfair and untrue,” but they did not comment on the specific allegations.


Meanwhile, new labels are popping up rapidly. The Food Justice label, certified via third party audits, guarantees a farm’s commitment to fair living wages and adequate living and working conditions for farmworkers. And Wildlife Friendly, another third-party audited program, certifies farmers and ranchers who peacefully co-exist with wolves, coyotes, foxes and other predators.


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Follow Gosia Wozniacka at http://twitter.com/GosiaWozniacka


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Bernanke’s stamp on Fed could tie hands of successor
















NEW YORK (Reuters) – President Barack Obama‘s next choice to head the U.S. Federal Reserve could have his or her hands tied if Ben Bernanke and company continue to re-write the policymaking rule book at their current clip.


Under Chairman Bernanke, who is expected to step down when his current term expires in January 2014, the U.S. central bank has embraced the goal of making the historically shrouded business of setting monetary policy far more transparent.













It has adopted a string of new rules and guidelines to clarify its policy intentions, including an inflation target and a conditional vow to hold interest rates near zero until at least mid-2015.


The next step is being hotly debated now.


Fed policymakers are striving to agree on a set of economic variables, or thresholds — probably particular levels of unemployment and inflation — that would signal when the time to raise interest rates was finally drawing near.


The trick is making a credible commitment that convinces investors to keep longer-term borrowing costs low, thus stimulating the economy, while at the same time ensuring the Fed can react swiftly to changing economic realities.


The concern is that these rules and guidelines will crimp the central bank’s flexibility in years to come as it deals with the fits and starts of a protracted U.S. economic recovery.


“The more they do it over the next year, the more the next chair will be constrained,” said Vincent Reinhart, chief U.S. economist at Morgan Stanley and a former Fed economist. The “constructive ambiguity” the central bank has famously used over the years to safeguard its policy-setting discretion is slowly disappearing, he said.


PRESERVING POLICY CREDIBILITY


In battling the worst recession in decades, central banks around the world have deployed untested tools, such as large-scale bond purchases. They have also often made commitments about how, and for how long, they plan to use the tools.


Their decisions will matter for years to come.


After eight grueling years battling a severe financial crisis, the deepest recession since the Great Depression and a disappointing recovery, Fed watchers say Bernanke will likely want to step down when his second term as Fed chief expires, even if Obama wants him to stay.


But the economy is unlikely to have fully recovered by then, leaving any rate-hike cycle to his successor. Fed Vice Chair Janet Yellen and Lawrence Summers, a former White House economic adviser, are both considered possible top candidates for the job.


Whomever Obama nominates will be handed a rule book from the Bernanke era that will be difficult, and maybe unwise, to erase.


Though the guidelines adopted under Bernanke are not iron-clad law, “the credibility of policy actions would be at stake if they were easily overturned,” said Peter Hooper, chief U.S. economist at Deutsche Bank Securities.


AGE OF IMPROV


If Fed officials can reach agreement, economic thresholds would replace their stated expectation that interest rates would remain near zero through at least mid-2015.


It would be the latest refinement to the Fed’s communications toolkit. In the last 16 months alone, it moved to tie low interest rates to calendar dates, adopted a formal inflation target of 2 percent, and published the policy expectations of each of its 19 policymakers. It built on that list in September when it said it expected to buy bonds until the labor market outlook improved “substantially.”


Within the Fed’s policy-making committee, however, consensus on which unemployment or inflation levels to use has proven elusive. Four top Fed officials have gone public with their own proposals, whether simply to provide a window into their tough internal debate or to sway their colleagues.


“It would be nice if we could communicate more clearly what those parameters are,” William Dudley, the influential president of the Federal Reserve Bank of New York, said last month.


“The problem of course is that it’s very hard to summarize the economy, and how you’re going to feel about the economy, through just one or two parameters,” said Dudley, who has not pitched a plan.


Yellen — who as chair would likely smooth the transition from Bernanke — could shed more light on the issue on Tuesday when she gives a speech on central bank communications.


To be sure, Bernanke’s Fed has been careful to leave itself some breathing space. The current round of bond purchases is “open-ended,” meaning there is no dollar value or timeline constraining it.


Still, the drum beat of rule changes continues.


The Fed is also considering adopting a “consensus forecast” to give investors a better sense of how policy is likely to evolve. That would build on a January decision to publish for the first time individual policymakers’ rates forecasts.


As Bernanke’s term draws to a close, the jury is still out on the effectiveness of the new transparency steps.


“It is the improvisation stage,” Reinhart said, “and it does feel unsatisfying.”


(Reporting by Jonathan Spicer; Editing by Tim Ahmann and Leslie Adler)


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Twin explosions strike southern Syrian city
















BEIRUT (AP) — Syria‘s state-run news agency says two large explosions have struck the southern city of Daraa, causing multiple casualties and heavy material damage.


SANA did not immediately give further information or say what the target of Saturday’s explosions was.













The Britain-based Syrian Observatory for Human Rights says the blasts went off near a branch of the country’s Military Intelligence in Daraa.


The Observatory, which relies on a network of activists on the ground, says the explosions were followed by clashes between regime forces and rebels fighting to topple President Bashar Assad.


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Chen Guang-who? Chinese official claims ignorance of blind activist
















BEIJING (Reuters) – Despite causing a huge diplomatic incident between the world’s two largest economies earlier this year, the Chinese official in charge of the hometown of blind legal activist Chen Guangcheng said on Friday that he has no idea who he was.


Chen, one of China’s most prominent human rights advocates, slipped away from under the noses of guards and eyes and ears of surveillance equipment around his village home near Linyi in eastern Shandong province in late April.













He then sought refuge at the U.S. embassy in Beijing for six days, embarrassing China and creating an awkward backdrop for U.S. Secretary of State Hillary Clinton’s visit which happened to fall at the same time.


But asked on the sidelines of a party congress in Beijing about Chen, Linyi’s Communist Party boss Zhang Shaojun deadpanned.


“I’ve never heard (of him),” Zhang told Reuters, before hurrying away into a closed-door meeting.


In May, Chen told Reuters that an unnamed central government official had promised to investigate accusations that local officials engineered his jailing on false charges and subsequent 19 months of extra-judicial house arrest and abuse.


But Zhang, a portly man with thinning hair, said he knew of no such investigation.


“I’ve never heard of this matter,” he said.


Robbed of his sight as a child, the rural-born Chen taught himself law and drew international attention in 2005 after accusing officials of enforcing late-term abortions and sterilizations.


Following intense negotiations between Chinese and U.S. officials, Chen left the embassy and was allowed to apply for a visa to study abroad. He is currently a visiting fellow at the New York University School of Law.


(Reporting by Gabriel Wildau; Editing by Ben Blanchard)


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