Hundreds honor Ravi Shankar at California memorial

Hundreds of friends and family on Thursday remembered sitar virtuoso Ravi Shankar as an unfailingly generous teacher with a gentle spirit and sense of humor whose music fostered understanding between East and West. Olivia Harrison said Shankar helped her late husband George Harrison achieve a more meaningful life when he was a young Beatle. "They were like father and son as well as brothers," Harrison said on an outdoor stage decorated with garlands of white flowers at the Self Realization Fellowship center in Encinitas, the oceanfront suburb north of San Diego where Shankar lived for the last two decades. Conductor Zubin Mehta said he felt like a "little crumb" listening to Shankar play and credited his close friend with introducing India to the world. Shankar died last week in San Diego at age 92. His wife, Sukanya Rajan, and daughters — singer Norah Jones and Grammy-nominated sitarist Anoushka Shankar — sat in the front row as speakers paid tribute. The audience listened to clips of Shankar's music and recorded voice. "Music is the only language I really know," Shankar said in one clip. Under blue skies on a warm Southern California morning, a family friend read messages from political and cultural luminaries including musicians Phillip Glass and Peter Gabriel, who thanked him for teaching them. The audience heard excerpts from newspaper stories that trumpeted Shankar's enormous influence. Labeled "the godfather of world music" by Harrison, Shankar helped millions of Westerners — classical, jazz and rock lovers — discover the centuries-old traditions of Indian music. From Harrison to John Coltrane, from Yehudi Menuhin to Andre Previn, he bridged the musical gap between East and West. Pirashanna Thevarajah, one of his students, said Shankar was the reason he pursued a music career and that his teacher sometimes believed more in him than he believed in himself. He called Shankar "a very simple soul with a wonderful sense of humor." Thevarajah said Shankar followed his puns with the line, "That's why the call me a pundit." Film director Joe Wright, Shankar's son-in-law, recalled a risky medical operation that Shankar's family was unsure he would survive. Though he made it through, Wright thought he might never again see Shankar alive as he was rolled into the operating room. Wright saw Shankar's fingers moving as he was wheeled away.

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New Miss Universe says win shows confidence is all

The 20-year-old Rhode Islander who brought the Miss Universe crown back to the U.S. for the first time in 15 years is hoping that her quick rise through the beauty contest ranks and an onstage stumble will show women that anything is possible. Perched high above the Las Vegas Strip in the Planet Hollywood winner's suite Thursday, Olivia Culpo told The Associated Press that her yearlong transformation from Boston University sophomore to pageant winner proves that women can accomplish anything to which they set their minds. "My first pageant was a year ago and already I'm Miss Universe. It's kind of incredible," she said. She pointed to the fact that she stumbled on her red velvet evening dress Wednesday night before beating out beauty queens from 88 countries as proof that confidence and poise matter more than perfect performance. "I like the fact that I tripped last night in my evening gown. I think that that's cool," she said. "And you learn from it: Don't step on your dress," she added with a laugh. The former Miss USA spent the first day of her reign surrounded by stylists and handlers, wearing a scarlet mini-dress with cutout cap sleeves and sky-high silver heels. Plates of cupcakes and croissants went untouched as she sipped from a water bottle with a straw. For the past six months, Culpo has shared a New York City apartment with outgoing Miss Universe, Leila Lopes of Angola. The two titleholders traditionally room together. Her coronation ended a long losing spell for the U.S. in the competition. An American had not won the Miss Universe title since Miss Hawaii, Brook Lee, won in 1997. A middle child of five, Culpo was studying theater and communications at Boston University when she decided to enroll in the Miss Rhode Island pageant last year to improve her stage presence. The petite brunette ended up winning that contest in a rented $20 dress with a hole in the back. She claimed the Miss USA crown in the spring, despite losing an earring during the interview portion. Culpo said she studied world events, prepared for interview questions and memorized proper walking and posing techniques using stacks of flashcards. The aspiring actress took a year off from Boston University to fulfill the travel and charity obligations that come along with the Miss USA crown, and now says she will not return to her former college. "I do want to finish my education," she said. "I just don't think that Boston has a big enough market for what I want to do." As Miss Universe, Culpo will advocate for HIV prevention, the official platform of the title holder, but does not intend to speak out on other issues. She did have a word for the "pageant moms" who have caught the nation's attention on reality television shows such as TLC's "Toddlers & Tiaras." "If you think that your child is going to be really sensitive to the fact that they might not win — which they probably won't — you shouldn't do it because it's not healthy if they get the feeling that they're not good enough or they're not worthy," she said. Culpo's mother, a professional viola player, discouraged her from entering the world of beauty competitions last year. "I didn't see the point; I thought it was silly and a waste of time," Susan Culpo said. But she changed her mind when she saw the joy her daughter brought to hometown fans. On Thursday, the mayor of Culpo's home town of Cranston, R.I., called her win an inspiration for the city, state and nation. Asked moments before the Miss Universe show why pageants remain relevant, Donald Trump, who co-owns the competition with NBC, responded that everyone likes beautiful women. His winner had a different take: "It really comes down to being able to inspire others by being comfortable with yourself. You have to show girls that everyone is different, everyone has things they don't like, but they work it and walk the runway," Culpo said. "There is no ideal body. It's just taking what you have and working it.

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Wall Street dealers lose edge in U.S. Treasury auctions as investor clout grows

NEW YORK (Reuters) - A dramatic increase in the amount of government bonds that investors purchase directly from the U.S. Treasury Department in its regular debt auctions is reducing the advantage large dealers have traditionally held in the sale process. The Treasury will not disclose the names of investors who can purchase directly from the government in its auctions but speculation is rife that the participants include an expanding number of the world's largest governments and asset management firms. BlackRock , the world's largest asset manager, has access to the auctions as a "direct bidder", but does not use it, said Lauren Post, a spokeswoman for the firm in New York. A spokesman for PIMCO, which manages the world's largest bond fund, did not respond to inquiries over whether they have direct bidding access. Qualified investment funds, insurance companies, banks, and foreign governments may all bid directly in U.S. Treasury auctions, but only the 21 authorized "primary dealers" are required to bid to fulfill their role as market makers in the securities. "Direct bidders" are showing an increasing presence in the auctions in the last three years, and this week they bought a record share of seven-year notes and the most five-year debt in the auctions in five years. The shift in the auction procedure is expected to continue, as asset managers increasingly take advantage of the debt sales to buy big positions and leave dealers increasingly in the dark over their purchase plans, while dealers continue to shrink balance sheets weakened by loss making positions taken before the credit crisis of 2007-2009. "It's becoming more consistent that they are doing that now," said Richard Gilhooly, an interest rate strategist at TD Securities in New York. "They are concealing information and they may think that it might help them get the auction cheaper, because the dealers may bid back thinking the demand isn't there." Reuters in May reported that China, the largest holder of U.S. Treasuries with more than $1 trillion, has direct bidder status, and market participants surmise other major central banks may also, although this could not be verified. Japan is close to approaching the size of China's Treasuries holdings, while Switzerland has been dramatically increasing its Treasuries holdings as its central bank accumulates more cash to invest from its foreign exchange intervention against the Swiss franc. In the auction on Tuesday this week, direct bidders bought 30.4 percent, or $10.62 billion, out of $35 billion in five-year notes, while dealers purchased 37.2 percent, or $12.98 billion. On Wednesday the bidders bought 23.1 percent, or $6.69 billion in seven-year notes, a record for a those notes. Dealers took 37 percent, or $10.72 billion of the $29 billion sale. Those recent auctions may have been influenced by year-end demand for low risk assets amid concerns about the impact on U.S. economic growth from the approaching "fiscal cliff" but the results still trail behind a July auction of 10-year notes that stunned dealers. In that month direct bidders bought 45.4 percent of a 10-year note auction, the largest on record for any Treasuries auction, eclipsing dealer purchases of 14 percent. LOSING THE INFORMATION ADVANTAGE The presence of direct bidders in Treasuries auctions has been growing over the past three years, building from a sporadic presence that would involve less than 10 percent of a sale to a consistent attendance that approaches the amount of dealer purchases. For dealers, the increased presence of direct bidders is making it harder for them to gauge demand for bonds ahead of a sale, and therefore hard to know how aggressively to bid for the debt. "If you are a direct bidder you're under no obligation to bid, you just have access to go directly to the Fed, which is a complete advantage for you," said Tom Tucci, head of Treasuries trading at CIBC in New York, which is not a primary dealer. For dealers, "that they are bidding on securities where now they don't see the bids coming, so they are at a disadvantage," he added. By bypassing a dealer, an investor wanting to purchase a large block of bonds may estimate they can obtain a more favorable price. Some primary dealers have argued, however, that the shift might cause long-term harm to the auction process, which they say so far has been stable in large part because of support from the Federal Reserve's massive monthly bond purchases. "The primary dealers are having less information on flows and liquidity. They will take less risk," said Brian Edmonds, head of rates trading at Cantor Fitzgerald, a primary dealer based in New York. "Down the road, you could have sloppy auctions because if the direct bidders step away, primary dealers are not going to fill the void." STRUCTURAL SHIFT For large investors with growing assets under management that need to be invested, government debt auctions are one of the few places they can buy in large amounts with sufficient liquidity, and also without tipping their hand over their positions. "They are trying to get large size because they have much larger portfolios than before," said TD's Gilhooly. While asset managers grow their investments, dealers have pared back assets and shrunk their balance sheets, because they are still hurting from risky loans bought and made before the 2007-2009 financial crisis. Countries which have been active in curbing the appreciation of their currencies in order to help their exporters, may now also have the ability to buy Treasuries in large quantities and direct access may be more appealing, analysts said. According to U.S. Treasury data released earlier this week, Japan's Treasuries holdings were $1.135 trillion in October, up nearly $130 billion from a year earlier, while Switzerland's U.S. bond ownership grew to $194.4 billion from $143.9 billion 12 months earlier. China's Treasuries holdings fell to $1.162 trillion in October from $1.256 trillion a year earlier, but analysts have said China has been storing their Treasuries in overseas accounts which are not counted as a part of its official U.S. bond holdings.

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S&P downgrades Cyprus on default fears

NICOSIA, Cyprus (AP) — The Cyprus government has vowed to do what is needed to finalize a bailout agreement with international lenders after ratings agency Standard & Poor's downgraded Cyprus further into junk status amid concerns that the country could default on its debts. The U.S. agency said Friday that the two-notch downgrade to CCC+ was due to a "considerable and rising" risk that the country, one of the 17 European Union countries that use the euro, may default. It also maintained its negative outlook on the country, meaning that further downgrades are possible. S&P said it went ahead with the downgrade because the Cypriot government is running out of money while uncertainty remains over the terms of a bailout that the country is trying to negotiate with international lenders and its euro partners. The rescue loans will be used to salvage the country's banks, which are heavily exposed to Greece. "With the government's financing options increasingly limited — coupled with what we view as the hesitant attitude of Cyprus' eurozone partners toward sharing the cost of a severe banking crisis — we view the risk of a sovereign debt default as considerable and rising," S&P said. Unable to borrow from international markets for more than a year, the Cypriot government this week had to tap the pension funds of the country's top three state-owned companies to cover salaries and benefits up until March when it's hoped the first batch of bailout cash will arrive. Germany's Foreign Minister Guido Westerwelle said Friday that there are "appropriate aid mechanisms" for Cyprus, but that the country must first make "serious reforms" and achieve "real budget savings." Cyprus government spokesman Stefanos Stefanou played down the S&P downgrade, saying the country is "making every effort" to clinch a bailout accord and attributed any difficulties with doing so to squabbles among its euro partners. Cyprus' Finance Minister Vassos Shiarly said one such difficulty is the International Monetary Fund's insistence on money being pumped directly into troubled banks from the European Union's bailout fund instead of lending it to governments first and pushing up public debt. The EU is balking at that because its single banking supervisor isn't in place yet. S&P said some progress has been made putting together the bailout with the "troika" of international creditors — the European Commission, the European Central Bank and the IMF. It also acknowledged the country's efforts to shore up public finances with this week's approval of the 2013 budget that incorporates troika-mandated spending cuts totaling almost 6 percent of the country's €17.5 billion ($23.2 billion) gross domestic product. Cyprus is the third-smallest economy in the eurozone, ahead of Estonia and Malta. Shiarly said the fact that the country has done "all and more" that the troika has asked it to do even before a bailout accord has been signed — from slashing government workers' salaries and benefits to raising a host of taxes — will stand it in good stead when its eurozone partners decide on the bailout on Jan. 21. But S&P said it doubts whether state-owned companies have much more money to help the government pay its bills if a bailout deal isn't finalized by March, while presidential elections set for February could complicate matters. The agency said it's still unclear how Cypriot banks — whose assets total more than five times the country's economy — will get the money they need to replenish their depleted capital buffers. A draft version of the bailout foresees Cypriot banks needing up to €10 billion ($13.25 billion) to recapitalize, raising questions whether Cyprus can pay off any such loan when its economy is projected to contract by 3.5 percent of its GDP next year. S&P said if the government were to take on the cost of the bank's recapitalization, the Cyprus' debt would rise "well above" 100 percent of GDP. Shiarly said that it's premature to talk about whether the country's debt would be sustainable since an exact figure on the banks' actual needs won't be known before sometime next month when an assessment by investment firm PIMCO and auditors Deloitte will have wrapped up. Cyprus' left-wing President Dimitris Christofias — who won't run for re-election in the February poll — said Friday that he would never accept a writedown of Cyprus' debt in order to make it sustainable, but Germany didn't rule it out. Shiarly said any such haircut would do more harm than good because a large amount of Cypriot government bonds are held by Cypriot banks and the losses they would sustain would push their recapitalization needs even higher.

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Wall St clings to hopes for budget deal, but market risks rising

NEW YORK (Reuters) - If the United States sails over the fiscal cliff in less than two weeks, it probably will not mean disaster for the stock market, investors said on Friday, but the margin for error is getting dangerously thin. At heart are fears over how long the U.S. economy, the world's largest, can hold up under the brunt of higher taxes and big spending cuts that would be triggered by the fiscal cliff. If Washington's inability to reach a deficit-reduction deal persists into late January or provokes a second credit ratings agency to strip the United States of its top triple-A rating, all bets may be off. "Clearly, if this thing drags on with no deal, eventually markets are going to start to take it on the chin," said Sandy Lincoln, chief market strategist at BMO Asset Management in Chicago, which oversees $38 billion. Stock markets fell on Friday after a Republican proposal that would have prevented tax increases on all but those earning more than $1 million unraveled amid a conservative backlash. Though President Barack Obama had vowed to veto the bill, opposition from Republicans stoked doubt about the ability of House of Representatives Speaker John Boehner to win support within his party. That suggested the two sides were too far apart to reach a deal to forestall the $600 billion in automatic tax hikes and spending cuts before they are set to begin to take effect in January. "The fact they couldn't even get the Republicans in Congress to sign on for that is disturbing. If we get into late January, early February and we are still in the soup, then the odds of going into a recession go up, and I just can't believe anybody wants that," said Jeffrey Saut, chief investment strategist at Raymond Jones Financial. HEATING UP If the new year dawns without a deal, Jack Ablin, chief investment officer at BMO Private Bank, said he would view "any incremental market sell-off as a buying opportunity." But if things remain in limbo in February, "that is going to leave a mark on the economy," he said. "The way I'd characterize it is that we're sitting in this pot of water and on January 1, Congress turns on the flame underneath. It's comfortable at first, but eventually it's going to start to hurt." Americans would start to feel the effects in their wallets. As of 2013, payroll taxes would revert to 6.2 percent of Americans' paychecks, up from the 4.2 percent level put in place during the economic downturn. Higher income tax rates would also start to hit, though that could be delayed by officials in Washington. Still, Americans would start to feel a pinch on their paychecks, which could hurt spending next year. Some investors believe holiday sales are already being affected. Another risk, said BNY Mellon currency strategist Michael Woolfolk, would be if a second ratings agency cuts the United States' AAA rating, a move that Standard & Poor's made after a similar budget standoff in 2011. Fitch Ratings said this week it would be more likely to downgrade the United States if the economy goes over the cliff. "Markets would take that very badly," Woolfolk said. "Stocks sold off by 10 percent after the S&P downgrade in 2011, and I'd expect something at least as severe" if Fitch were to act. LAST-MINUTE DEAL STILL POSSIBLE Of course, lawmakers still have 10 days left in 2012 to strike a deal, and some are confident they will return to Capitol Hill after Christmas and do just that. "So far, the market has been handling setbacks in talks very well, and with a bit of time left on the clock, this time will be no different," said Jim Barnes, senior fixed income manager at National Penn Investors Trust Co. For some, the political disarray among Congressional Republicans that sent Boehner's "Plan B" to defeat late on Thursday only increased those hopes. "Given that Reid called Plan B 'dead on arrival' and Obama said he would veto it, the non-passage of this bill due to lack of Republican support makes it more likely, not less likely, that compromise will be reached," said Jeffrey Gundlach, chief executive officer and chief investment officer of DoubleLine Capital, which oversees more than $50 billion. Harry Reid is the Democratic Senate leader. The "continued positioning and posturing" isn't a huge concern to investors, Woolfolk said. "Neither side has incentive to compromise too much, too soon. They can extract concessions by delaying. So I would not be surprised if it takes until minutes before midnight on December 31." All the back-and-forth, however, may keep the stock market a bit more volatile than it would normally be so late in the year. The benchmark S&P 500 <.spx> has gained or lost more than 1 percent in three of the past five trading sessions, while the CBOE Volatility Index <.vix> has climbed more than 20 percent over the past three days. In a sign of the type of volatility investors may be confronted with, S&P 500 E-Mini futures fell as much as 3.6 percent in after-hours trading Thursday evening, with a 15-point drop in less than one second that resulted in a brief halt in futures trading. "While last night's mini-crash is a rare event, I do expect bigger moves than we've seen in the past year," said Enis Taner, global macro editor at RiskReversal.com, an options trading firm based in New York.

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How the Dow Jones industrial average fared

Investors sent Washington a reminder Friday that Wall Street is a power player in talks to avoid the "fiscal cliff." Stocks fell sharply after House Republicans called off a vote on tax rates and left federal budget talks in disarray 10 days before sweeping tax increases and government spending cuts take effect. The Dow Jones industrial average was down as much as 189 points before recouping some of its losses. The Dow Jones industrial average lost 120.88 points, or 0.9 percent, to close at 13,190.84. The Standard & Poor's 500 index fell 13.54 points, or 0.9 percent, to 1,430.15. The Nasdaq composite index fell 29.38, or 1 percent, to 3,021.01. For the week: The Dow is up 55.83, or 0.4 percent. The S&P is up 16.57, or 1.2 percent. The Nasdaq is up 49.68, or 1.7 percent. For the year: The Dow is up 973.28, or 8 percent. The S&P is up 172.55, or 13.7 percent. The Nasdaq is up 415.86, or 16 percent.

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Wall Street falls on fiscal cliff setback

NEW YORK (Reuters) - U.S. stocks finished lower on Friday after a Republican plan to avoid the "fiscal cliff" failed to gain sufficient support on Thursday night, draining hopes that a deal would be reached before 2013. Still, stocks managed to rebound from the day's lows near the end of the session, and for the week, major averages still ended higher, with the S&P 500 gaining 1.2 percent. Trading was volatile as confidence eroded in the prospect of a deal out of Washington, and in part due to quarterly expiration of options and futures contracts. The CBOE Volatility Index or VIX, the market's favored anxiety measure, finished below its high of the day. Republican House Speaker John Boehner failed to garner enough votes from even his own party to pass his "Plan B" tax bill late on Thursday. It was the latest setback in negotiations to avoid $600 billion in tax hikes and spending cuts that some say could tip the U.S. economy into recession. "The failure with Plan B was disappointing, if not terribly surprising, but now there's a real lack of clarity about what will happen, and markets hate that," said Mike Hennessy, managing director of investments for Morgan Creek in Chapel Hill, North Carolina. Herbalife dropped for an eighth straight session. Investor Bill Ackman recently ramped up his campaign against the company. The company skidded 19 percent to $27.27 and has lost more than 35 percent this week. Plan B, which called for tax increases on those who earn $1 million or more a year, was not going to pass the Democratic-led Senate or win acceptance from the White House anyway. But it exposed the reality that it will be difficult to get Republican support for the more expansive tax increases that President Barack Obama has urged. Still, the declines of less than 1 percent in the three major U.S. stock indexes suggest that investors do not believe the economy will be unduly damaged by the absence of a deal, said Mark Lehmann, president of JMP Securities, in San Francisco. "You could have easily woken up today and seen the market down 300 or 400 points, and everyone would have said, 'That's telling you this is really dire,'" Lehmann said. "I think if you get into mid-January and (the talks) keep going like this, you get worried, but I don't think we're going to get there." Banking shares, which outperform during economic expansion and have led the market on signs of progress on resolving the fiscal impasse, led declines. Citigroup Inc fell 1.6 percent to $39.49, while Bank of America slid 1.9 percent to $11.29. The KBW Banks index lost 1.19 percent. Volatility on Friday was exacerbated in part by "quadruple witching," the quarterly expiration of stock index futures and options, stock options and single stock futures contracts. About 8.59 billion shares changed hands on major U.S. exchanges, more than the daily average of 6.47 billion daily in 2012, in part due to expiration. The Dow Jones industrial average dropped 120.72 points, or 0.91 percent, to 13,191.00. The Standard & Poor's 500 Index fell 13.52 points, or 0.94 percent, to 1,430.17. The Nasdaq Composite Index lost 29.38 points, or 0.96 percent, to 3,021.01. "Amazingly, this sharp decline today may not actually change the technical picture much - unless the decline gets worse," said Larry McMillan, president of options research firm McMillan Analysis Corp, in a research note. The day's round of data indicated the economy was surprisingly resilient in November; consumer spending rose by the most in three years and a gauge of business investment jumped. But separate data showed consumer sentiment slumped in December. The S&P Retail Index fell 1.2 percent. U.S.-listed shares of Research in Motion sank 22.7 percent to $10.91 after the Canadian company, known as the BlackBerry maker, reported its first-ever decline in its subscriber numbers on Thursday alongside a new fee structure for its high-margin services segment.

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