Monday Watch

Weekend Headlines
Bloomberg:
- Bank of America Corp.(BAC), JPMorgan Chase(JPM) and Co. and other lenders may tap new customers and begin paring back bad home loans after Congress passed legislation to stem foreclosures and prop up Fannie Mae(FNM) and Freddie Mac(FRE). The bill lets the Federal Housing Administration guarantee new loans for 400,000 homeowners after lenders cut the unpaid balance, and creates a new regulator for Fannie and Freddie, the government-sponsored companies that are the biggest providers of funding for U.S. mortgages. President George W. Bush said he will sign the legislation.
- The average price of regular gasoline at U.S. filling stations fell below $4 for the first time in more than a month after crude-oil prices tumbled 16 percent from a record, an industry survey showed. Gasoline dropped 11.7 cents, or 2.8 percent, to $3.9959 a gallon in the two weeks ended July 25, according to oil-industry analyst Trilby Lundberg's survey of 7,000 stations nationwide. U.S. gasoline demand fell 3.3 percent last week, the 13th consecutive decline, as Americans reacted to record pump prices by driving less, MasterCard Inc. said July 22 in its weekly SpendingPulse report. Demand year to date is down 2.2 percent compared with the same period in 2007.
- The Markit iTraxx Japan index fell 2 basis points to 111 as of 9:21 am in Tokyo, according to Morgan Stanley. Contracts on the senior debt of National Australia Bank Ltd. and Australia & New Zealand Banking Group both declined 5 basis points to 88 as of 9:50 am in Sydney, Citigroup said.
- The US dollar traded near a one-month high against the yen after the U.S. Congress passed legislation to stem foreclosures and prop up Fannie Mae(FNM) and Freddie Mac(FRE).
- Crude oil traded near a seven-week low in New York after falling July 25 on signs the Organization of Petroleum Exporting Countries is bolstering output while fuel use in the U.S. and Asia is dropping. OPEC increased output by 200,000 barrels a day in July, PetroLogistics Ltd. said last week. Oil prices have dropped from a record on speculation that the risk of a conflict between Iran and the U.S. has diminished and because the dollar has appreciated, the group's President Chakib Khelil said July 26.
- European two-year government bonds posted their biggest weekly gain in a month as traders reduced bets the region's central bank will raise interest rates for a second time this year amid slowing economic growth.
- Brazils’s Petrobras(PBR) is opening a biofuels unit next week to oversee $1.5 billion of investments over five years as it seeks to tap growing demand for alternative energy, an executive said.
- Rough rice production in the Philippines, the world's biggest importer, may rise to more than 10 million tons in the second half of the year, as the government increased spending on seed subsidies and repaired irrigation. Output may rise from 9.5 million tons in the same period last year, as irrigation was expanded to cover 1.43 million hectares (3.5 million acres) and farmers were provided with higher-yielding seed varieties, boosting productivity, the Department of Agriculture said.
- Amgen Inc.'s(AMGN) experimental drug for the bone-thinning disorder osteoporosis prevented spinal and hip fractures in a study, boosting a product the company is counting on to replace fading sales of its best-sellers.
- Singapore's visitor arrivals fell 4.1 percent in June, the steepest monthly decline since the SARS outbreak five years ago, as rising hotel charges deter tourists from Indonesia and Malaysia.
- Sirius Satellite Radio Inc.(SIRI) received clearance to buy XM Satellite Radio Holdings Inc.(XMSR) from the U.S. Federal Communications Commission 17 months after the companies said they wanted to combine.
- Asian governments from India to Malaysia, clinging to budget-busting fuel subsidies, may end up paying an even higher price: saddling their economies with an extended period of stagflation. ``Subsidies will come increasingly in the way of future growth,'' says Kalpana Kochhar, a senior adviser for the International Monetary Fund's Asia-Pacific Department in Washington. ``Not passing prices through and keeping artificial price and wage controls never works.''
- U.S. banking regulators closed two lenders in California and Nevada.
- Six months after correctly identifying the Australian dollar as one of the best bets in the foreign exchange market, the biggest investor in the nation’s debt says the rally is coming to an end. Daiwa Asset Management, which holds 4% of the government’s bonds, expects the currency to close the year at $1, compared with 95.62 US cents on July 25, after earlier forecasting a surge to $1.10. “The rally is finished as the best days for the economy may be over,” said Tsutomu Komiya, a money manager in Tokyo at Daiwa, a unit of Japan’s second-largest brokerage. Mizuho Asset Management, State Street Global Advisors and Putnam Investments are also turning into bears as the global economic slowdown curtails the rally in coal, oil and metals that fueled Australia’s expansion. Lehman Brothers(LEH), which recommended the currency in February, now predicts it will depreciate 21% by 2009.
- ``The Dark Knight'' became the first film to surpass $300 million in 10 days as the sequel to ``Batman Begins'' topped the box office for a second weekend in a row.
- KKR & Co., the private-equity firm run by Henry Kravis and George Roberts, plans to go public in a transaction that may value it at as much as $15 billion, according to two people familiar with the matter.

Wall Street Journal:
- SEC’s Assault on Illegal Short Selling Intensifies. Wall Street executives expect the Securities and Exchange Commission to extend the temporary limits it has placed on short-selling and expand them to cover additional stocks beyond the 19 financial companies it targeted two weeks ago. The limits are set to expire Tuesday, and executives, lobbyists and hedge-fund representatives of the Managed Funds Association, the biggest hedge-fund industry group, have been talking throughout the weekend, trying to come up with possible approaches to asking the SEC to reconsider expanding the rules, according to people familiar with the talks. A call with regulators on Friday gave the funds group "a fair degree of certainty" that the SEC intends to seek an extension of the emergency period, these people said. Regulators said an extension could be for as short as 60 days and could involve insurance, housing-industry and a broader range of financial stocks, according to these people. SEC Chairman Christopher Cox indicated last week the rules might be extended to all stocks. The expansion could require increased capital to finance the borrowed shares during the three days before trades settle, as well as make short selling more cumbersome and labor-intensive. It is expected that the industry will push back forcefully on any attempt to expand rules. The SEC is also working to make short-selling rules permanent.
- In Oil Debacle, Ex-Basketball Star In College Shot a Brick.
- Hermes International SA and other luxury goods makers are reporting strong sales in the Americas even though the US economy is slowing. Sales of luxury products like expensive jewelry and French scarves demonstrate the inroads made by the industry among upper-middle-class consumers.
- NFL, NBC Plan Kickoff of Free Football on Internet.

Barron’s:
- A market bottom may be visible, Leon Cooperman and Steven Einhorn of Omega Advisors said. When investor sentiment t is negative, the market tends to do better, citing Cooperman. Also, the economy’s weakness isn’t accelerating as it usually does in significant recessions, Einhorn said. “Historically, when the S&P 500 dropped 20%, which it did from its October peak to its March low, when the Fed and Congress were stimulating(the economy), when you are in an election year, when stocks are undervalued versus bonds and when stocks are somewhat cheaper versus their own history, you are supposed to buy,” Cooperman said.

MarketWatch.com:
- Russian shares fell nearly 6% on Friday, as Prime Minister Vladimir Putin's call for an investigation of mining company Mechel escalated worries about political risk in the resource-rich emerging market and encouraged investors to sell local equities across sectors.

CNBC.com:
- Of all the talk about a market bottom, one area that may well have found its turning point is the US dollar. After months of tumbling, the US currency is as close to a capitulation as any other sector, as it has posted significant gains against the euro and yen after hitting unprecedented lows. "I think the prospect for improvement in the value for the dollar is getting better everyday," said David Resler, chief economist at Nomura Securities International in New York.

NY Times:
- The militia that was once the biggest defender of poor Shiites in Iraq, the Mahdi Army, has been profoundly weakened in a number of neighborhoods across Baghdad, in an important, if tentative, milestone for stability in Iraq. The Mahdi Army, an Iraqi militia led by anti-American cleric Moktada al-Sadr, has been hurt by a surge in American troops, driving down prices for fuel and positioning the group for defeat in elections this year, citing interviews with Iraqi citizens. The militia has stopped showing up to collect money from some gas stations and is abandoning headquarters around the city, allowing residents to buy fuel at cheaper state prices. Iraqis will have a chance to vote Sadrists, loyal to Moktada al-Sadr, out of power in December provincial elections. The Mahdi Army, which collected money from gas stations and food and clothing stores, took about $13,000 a day from the four main gas stations in the Baghdad suburb of Sadr City at the height of its control a year ago.
- Apple Inc.(AAPL) CEO Steve Jobs hasn’t experienced a recurrence of his pancreatic cancer, and his recent health issues aren’t life-threatening. Nocera wrote that the Apple co-founder telephoned him on July 24.
- LED’s have replaced standard bulbs in many of the nation’s traffic lights. The bright, long-lasting bulbs are starting to show up in some high-profile places too.
- Finding and Fixing a Home’s Power Hogs.

San Francisco Chronicle:
- California’s sales of existing homes rose 18% in June from a year ago, the third straight month of gains, citing the California Association of Realtors.

Washington Post:
- Algeria, Saudi Arabia and the United Arab Emirates are the only Arab nations among 22 that pledged help to send money to support the Palestinian Authority’s annual budget. The nations promised in 2002 to contribute $660 million annually. Oil-rich countries including Libya, Kuwait and Qatar haven’t sent anything and owe more than $700 million in past-due pledges to the Palestinian government. European governments, the World Bank and the US have given more than three times as much money as Arab countries to keep the Palestinian government functioning this year. Unidentified Arab diplomats told the newspaper that officials have little trust in the Palestinian Authority to use the money wisely.
- United behind a renewed push for offshore oil drilling, Republican members of Congress and the party's presumptive presidential nominee, Sen. John McCain, think they have found their best political issue of the 2008 campaign. McCain strategists and GOP leaders on Capitol Hill say the issue, which polls suggest Americans favor by healthy margins, lets Republicans demonstrate their plans to address the anger over high gas prices as well as the broader economic distress that many voters feel. Because most Democrats, including Sen. Barack Obama, are opposed to increased drilling, McCain and the GOP have already begun casting their rivals as unconcerned about gas prices and unwilling to wean the country from foreign oil. "The failure of Senator Obama to understand the need to increase domestic production is just stunning, and that's going to be a real hurdle for him to overcome, because everybody gets it," said Nancy Pfotenhauer, a senior McCain adviser. Republicans say their embrace of more domestic drilling and a dramatic increase in funding for the development of renewable fuels puts them squarely in line with voters, who polls show support both policy initiatives, especially when linked to concern about years of gas at $4 a gallon or more. In a recent CNN poll, 73 percent of those surveyed said they favor increased offshore drilling for oil and natural gas. Democrats reject the idea that Republicans and McCain have made any inroads on the energy issue. Saying they feel no pressure to give in on drilling legislation.

Business Week:
- How Can The New York Times Be Worth So Little?

Houston Chronicle:
- We need to be realistic in our energy aspirations. Here’s my five-point plan:

Pittsburgh Post-Gazette:
- Al Gore’s hypocrisy. He lectures everyone on conservation while wasting energy himself. Former Vice President Al Gore and his entourage arrived at Constitutional Hall in Washington, D.C., July 17 for his speech on global warming in a caravan consisting of two Lincoln Town Cars and a Chevrolet Suburban -- not the most fuel efficient vehicles Detroit ever made. "The driver of the Town Car that eventually whisked away Gore's wife and daughter left the engine idling and the AC cranking for 20 minutes before they finally left," noted Mark Block of Americans for Prosperity.

the hedge fund journal:
- Commodity ETFs, notes and exchange traded certificates, provide an unparalleled ease of access to commodities and have managed to build on the recognition already enjoyed by the original equity-based ETFs. The recent product innovation in the commodity area has allowed a wider range of investors to consider adding this as an asset class to broad portfolio strategies. Turnover in the US commodity space has jumped substantially over the past year, rising from less than US$400 million to a peak of close to US$3 billion in the first quarter of this year. Currently, average daily volume has fallen back to over US$2.5 billion per day with a decline in turnover in precious metals being compensated for by rising interest in energy-related products. Turnover in the US is now dominated by energy ETFs which account for close to 57% of trading activity, whilst precious metals now account for only 37% of trading. The jump in energy-related turnover has been particularly strong in recent months, reflecting both greater interest in the sector and the launch of some successful new ETFs such as the United States Oil Fund (USO).

Forbes:
- Peeking Inside The iPhone. Apple(AAPL) has the entire semiconductor industry wrapped around its little finger.

CNNMoney.com:
- 10 house-selling secrets.

Ventura County Star:
- Local market shows signs of life. Realtors seeing multiple offers – but say we’re not home free. The market is turning, said Kay Wilson-Bolton, owner- broker of Century 21 Buena Vista in Santa Paula. She's seen 29 offers in five days for a three-bedroom, two-bath house on Leeward Way in Oxnard priced at $287,100, and she can cite several other listings that have fetched similar results, mostly on bank-owned properties. "It's really changed," she said. "Prices have gotten so low that people can afford to buy with sensible loans, and it's just been multiple offers everywhere." In contrast, she described the market as painful and stagnant just months ago. Sales activity has risen sharply, and the spread between asking price and selling price is shrinking — all signs of a recovery, Wilson-Bolton said. "A year ago, there was no hope in sight — we didn't know what it would take to recover," Wilson-Bolton said. Now, "I don't see anybody depressed. Realtors are able to exercise their craft again."

Reuters:
- Traders flocked on Friday to put options in an exchange-traded fund tracking the performance of the financial sector on renewed fears that credit problems could create further fallout in the battered sector. The increased number of bearish bets in the Financial Select Sector SPDR fund XLF.A may also be the result of U.S. regulators' crackdown on short selling, affecting the shares of 19 major financial firms. Roughly one million options traded in the XLF, with puts outnumbering calls by a factor of 1.71, topping its normal level of 840,000 lots, according to Trade Alert.
- China furniture makers feel global slowdown pain.

Financial Times:
- Hedge funds had their worst month in eight years as bets against banks and support for rising commodity prices go awry, citing Hedge Fund Research’s daily index. The Chicago-based Hedge Fund Research Index said funds fell 2.77% for the month to July 23 versus a .28% gain for the S&P 500. New York-based Harbinger, which manages $26 billion, lost 12 per cent in the first 2½ weeks of July, while San Francisco's Clarium plunged 10 per cent in a week to leave it down 4.3 per cent for the month to the 18^th. London-based RAB Capital's hedge funds: RAB Energy had plummeted 16.1 per cent by the middle of the month to leave it down 25.2 per cent this year, while the company's $2bn flagship Special Situations fund was down 11.4 per cent to leave it down 31.8 per cent for the year. Many hedge funds have been betting that bank stocks would fall further as the credit crunch continued to bite, and that oil and other commodity prices would keep rising - a trade that generated big profits this year, helping offset losses in other areas. But over the past fortnight the trade has been hit by a double whammy: one of the most vicious falls in commodity prices on record and a leap in financial stocks. “One of the things that's obvious with the financials/resources trade is that everybody had it on," said Paul Meader, director of Guernsey-based hedge fund investor Corazon Capital.
- Unsolicited bids are running at their highest in almost a decade as companies use their cash-rich balance sheets to swallow weaker counterparts. Since the beginning of the year, unsolicited bids have accounted for 19 per cent of global mergers and acquisitions, according to data from Dealogic - the highest proportion since 1999.
- Chinese Muslims linked to Games bombings. A group opposed to Chinese rule in the mainly Muslim region of Xinjiang has claimed responsibility for bombings around the country, saying they were part of a campaign against next month's Beijing Olympics.

TimesOnline:
- European energy firms ‘conspire to raise prices’ A report claims that the six biggest energy companies conspire to keep charges artificially high and gives a warning of widespread hardship this winter unless the Government acts. It also accuses the industry regulator of failing to protect the interests of customers and calls for an immediate overhaul of the way gas is traded, amid concern that speculators are making huge profits at the expense of hard-up consumers.
- Pessimists are basing their gloom on old news. A theme of this column for almost a year has been the contrast between apocalyptic views in the financial markets about the earth-shattering consequences of the credit crunch and the rather more mundane evidence from the real economy of a mild recession, at worst. My view has been - and remains - that this episode is likely to be remembered as one of those extremes of panic or euphoria in financial markets, which tend to reoccur once or twice every decade, when market prices - of bank shares, of oil, of the dollar and of several other assets - turn out to be simply wrong.
- The UK economy is heading into recession and may face a slump on the scale of the early 1990s, according to Deloitte, one of Britain’s leading accountants. About half of senior UK executives interviewed by consultant KPMG said they would probably dismiss staff in the coming months, citing the study. Sixty percent of the more than 200 executives surveyed at major UK companies said they were drawing up cost-cutting plans and 53 percent said they were likely to reduce headcount.

International Herald Tribune:
- Emerging market credit ratings under scrutiny. Improving local finances and domestic growth helped lead to a string of upgrades in emerging markets in recent years. But from here on, ratings agencies say, the outlook is likely to be more gloomy. Deutsche Bank research based on data from the three major ratings agencies - Moody's, Standard & Poor's and Fitch - shows that in the past three months there were more downgrades of emerging sovereign debt than upgrades for the first time in five years.

AFP:
- General Motors Corp.(GM) will start constructing Saab vehicles in the US, citing GM Chairman and CEO Rick Wagoner. The US carmaker plans the expansion rather than selling its Swedish unit, Wagoner said. Production of one of the Saab vehicles in the US may start next year.

Handelsblatt:
- Volkswagen AG is sticking to its plan to build a factory in Tennessee, citing an interview with CFO Hans Dieter Poetsch. Volkswagen can profit from the growing demand for cars with lower emissions, he said.

Rzeczpospolita:
- PKN Orlen SA, Poland’s largest oil company, may sign a five-year contract worth more than $490 million with rapeseed oil producer Komagra Sp. z o.o. to supply it with biofuel.

Sonntag:
- Swatch Group AG’s revenue from the US increased about 20% in dollar terms in June, citing an interview with CEO Nicolas Hayek Jr. “We don’t feel anything from the cooling economy,” Hayek said.

Vesti:
- Russian space rocket Soyuz-2 put a satellite that has a “military purpose” into orbit. The satellite will stay in orbit for 7 years.

The Financial Express:
- Indian Finance Minister P Chidambaram on Friday said if policy rates were to be adjusted to tackle the country’s high inflation, it would have a bearing on growth.

South China Morning Post:
- Microsoft(MSFT) plans gaming and mobile push in China. Software giant bets on growing network of mainland partners and R&D investments.
- China National Petroleum Corp., the country’s biggest oil producer, is considering a bid for minority stakes in shale-gas assets owned by Chesapeake Energy Corp.(CHK). Each of the two shale gas assets owned by the US company in Arkansas and Pennsylvania is valued at about $15 billion. Chesapeake Energy is the second-biggest US independent natural-gas producer.

China Daily:
- Investment and consumption, the two pillars of economic growth in Beijing, faces challenges in the post-Olympic period as a report predicts the growth of fixed-asset investment may shrink to 10 percent in the third quarter, down 14.8 percent from the first quarter.

Lao Dong:
- The number of Vietnamese using buses has risen, citing public authorities. The number of bus passengers in Ho Chi Minh City has risen by as much as 30%, citing Pham Dinh Duc, head of the city’s center for public transportation management. The government on July 21 raised the retail price of the most commonly used grade of gasoline in the country by 31% and kerosene by 44%.

Press TV:
- Iran has fixed interest rates at 12% until the end of the Iranian year in March 2009, even after the International Monetary Fund recommended tightening monetary policy to help slow inflation. The IMF recommended July 19 that Iran tighten monetary policy and cut spending if the Persian Gulf country is to slow inflation to below 25% next year.

Weekend Recommendations
Barron's:
- Made positive comments on (GLW), (UNH), (AET), (WLP), (RIG), (MXIM) and (SLM).
- Made negative comments on (NOG) and (ISRG).

Citigroup:
- Reiterated Buy on (ROP), target $70.

Night Trading
Asian indices are unch. to +.75% on avg.
S&P 500 futures +.02%.
NASDAQ 100 futures +.18%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Upgrades/Downgrades
Rasmussen Business/Economy Polling

Earnings of Note
Company/Estimate
- (CNA)/.92
- (K)/.81
- (TSN)/.12
- (KFT)/.50
- (VZ)/.65
- (ATHR)/.29
- (PCL)/.16
- (MOS)/1.64
- (AMGN)/1.04
- (EDS)/.26
- (SLG)/1.71

Upcoming Splits
- (ARTW) 2-for-1

Economic Releases
- None of note

Other Potential Market Movers
- The Fed’s Mishkin speaking and (CPHD) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and automaker shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.