Today's Headlines

Bloomberg:
- General Electric Co.(GE) fell as much as 2.2% after JPMorgan Chase(JPM) downgraded the stock to “neutral” from “overweight,” saying slower economic growth may reduce profit.
- Crude oil fell from a record on signs that Saudi Arabia will increase production to stabilize prices. ``When you put in a new record and fail to see any follow- through, it suggests that there is some underlying weakness in the market,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York.
- Goldman, Morgan Stanley Profits Conceal Reliance on Commodities. On Wall Street ,where just about everyone has lost confidence in financial assets, Goldman Sachs(GS) and Morgan Stanley(MS) are making money the old-fashioned way: Buying and selling commodities. The two NY-based companies accounted for about half of the $15 billion of revenue that the world’s 10 largest investment banks generated from commodities last year. Goldman and Morgan Stanley, the two largest U.S. securities firms by market value, don't report commodity revenue separately, lumping it instead into the same line as fixed-income and currency trading. That makes it difficult to assess just how much commodity revenue has cushioned earnings. ``There's just a lot of money chasing these markets,'' said Peter Fusaro, chairman of New York-based Global Change Associates, which advises hedge funds on energy investments. The number of energy-related hedge funds his company lists has more than tripled to 634 in less than four years. Global trading in commodity derivatives on exchanges rose 52 percent to 489 million contracts in the first quarter from a year earlier, according to data compiled by the Bank for International Settlements. Energy and agricultural products led the climb. In the over-the-counter market, the value of outstanding commodity- derivative contracts jumped 26 percent to $9 trillion in December 2007 from a year earlier, the most recent BIS data show. The dominance of Goldman and Morgan Stanley in commodity trading comes as a 60 percent increase in food prices over the past 18 months has sparked riots in 30 countries and as record oil prices have led to hearings in Congress on energy markets. Goldman's value-at-risk in commodity prices, a statistical measure of how much it estimates it could lose in a day of trading, rose to $38 million in the first quarter from $26 million in the prior quarter, the firm reported in March. At the same time, it lowered risk in equities and kept it unchanged in interest rates. Morgan Stanley lifted trading VaR in commodities to $40 million from $34 million, while reducing the risk in equities and currencies, the firm reported.
- Dazzling Dandelions Foment New Commodities Craze.
- Lehman Brothers(LEH) CEO Richard Fuld declared his “confidence” in the valuation of the firm’s mortgage assets.
- Richmond Federal Reserve Bank President Lacker said downside risks to growth have “diminished” and reversing previous interest rate cuts makes “eminent sense” as the economy recovers.

Wall Street Journal:
- Federal prosecutors are preparing to file criminal charges against managers of two Bear Stearns Cos. hedge funds whose collapse helped mark the start of the credit crisis.
- The staff of the FCC has proposed that the agency approve the merger of XM Satellite Radio(XMSR) and Sirius Satellite Radio(SIRI), setting the stage for a final vote on they multibillion-dollar deal in as little as three weeks if the companies meet several conditions.
- Moody’s Investors Service has started including online sales of major retailers as an important factor in its credit ratings.
- Wall Street’s specialty is chasing returns. And these days it’s chasing returns in places like Nigeria and Oman. While frontier markets offer high-return potential, they can also implode.

Washington Post:
- All Biofuels Are Not The Same. Last month the Wall Street Journal accused me of advocating subsidies for food-based ethanol. I ought to "take a vow of embarrassed silence," it said, for claiming that ethanol's contribution to the food crisis is "overblown." The Journal's claims would be laughable if the stakes were not so high. Cellulosic biofuels offer a chance to have an environmentally meaningful impact on petroleum use while benefiting farmers, entrepreneurs and consumers. We face an energy crisis, an environmental crisis and a terrorism crisis all related to oil.

FINalternatives:
- Rough Seas? Prime Brokerages Change Tack To Navigate Choppy Markets.

Reuters:
- Billionaire financier Carl Icahn, who launched a proxy battle in May to replace the board of Yahoo(YHOO) said on Sunday the subsequent deal Yahoo forged with Google(GOOG) “might have some merit.”

Financial Times:
- Almost $20 billion of real estate funds are to be launched this week as equity raising for property investment shows no sign of slowing, despite apparent difficulties in global property markets.

European Central Bank:
- ECB’s Papademos Says Downside Growth Risks Prevail.