Weekend Headlines
Bloomberg:
- A U.S. Navy destroyer carrying humanitarian aid arrived in a Georgian port hours after Georgia's government said a fuel train exploded when it struck a mine amid the continuing standoff with Russia.
- President George W. Bush said Congress is dragging its feet and should schedule a vote to permit offshore oil drilling and other measures designed to trim energy costs that are a drag on the U.S. economy.
- Hedge funds reduced their bets in the past year that US stocks would gain as the S&P 500 index declined and credit conditions tightened, Goldman Sachs(GS) said. Such wagers accounted for 32 percent of funds' equity investments as of June 30, compared with 45 percent a year earlier. Hedge funds cut their holdings in financial, consumer and industrial companies, while investments in utilities, telecom services and materials were little changed in the period, Goldman said. Bets that financial stocks would fall accounted for 24 percent of holdings at the end of June; the previous year, 32 percent of funds' portfolios wagered that financials would rise, the bank said.
- Crude oil may tumble to $80 a barrel within 12 months as supplies of alternative energy increase, while grain prices may climb on emerging market demand, said Renee Haugerud, whose commodity hedge fund gained 18% this year. The surge in oil has been ``overdone'' by investors seeking holdings in raw materials through the Standard & Poor's GSCI Index, a commodity gauge weighted toward energy, she said. Industrial metals also rose too high, she said. ``They were the sexy commodities,'' Haugerud, founder of the $2.5 billion commodities hedge-fund firm Galtere Ltd., said in an Aug. 19 interview in her New York office. ``Everyone wanted to get long an asset class via the GSCI, and let's face it, the GSCI is crude.'' Haugerud's flagship fund has surged almost fivefold since starting in 1999. Energy prices account for 74 percent of the S&P GSCI Index, with crude oil making up 38 percent of the gauge.
- Venezuelan inflation may accelerate to 27% in 2008, above the government’s 19.5% target, Finance Minister Ali Rodriguez said.
- Biden’s Son Employed in Profession Obama Disdains: Lobbying.
- China Petroleum & Chemical Corp., Asia's biggest oil refiner, said first-half profit fell 77 percent because government caps on fuel prices prevented the company from passing on higher raw-material costs to consumers.
- The U.S. will station inspectors in three Chinese cities to scrutinize exports to the world's largest economy, responding to concerns over the safety of China-produced food, toys and pharmaceutical ingredients. Up to 15 inspectors will be assigned to Beijing, Shanghai and Guangzhou from October, U.S. Secretary of Health and Human Services Michael Leavitt said in an interview.
- Crude oil fell for a second day in New York as BP Plc restarted flows through a Caspian Sea pipeline.
Wall Street Journal:
- House Speaker Nancy Pelosi and her husband invested between $50,000 and $100,000 in T. Boone Pickens's Clean Energy Fuels Corp., which could benefit from legislation the California Democrat favors to boost U.S. use of natural gas. Drew Hammill, a spokesman for Mrs. Pelosi, said the investment "does not raise any direct conflict-of-interest issues" or violate any ethics rules of the House of Representatives. The Pelosis got in on the ground floor at Clean Energy, purchasing shares in an auction when Mr. Pickens publicly launched the company on May 25, 2007. This year, the speaker has aligned herself with a renewed interest in natural gas, promoted in part by gas industry executives eager to expand markets amid expectations of increased U.S. supplies.
- Hedge fund Ore Hill Partners, which specializes in credit strategies, has barred clients from redeeming their money from its flagship offering just as investors clamored for an exit, the company said Friday. London-based Man Group PLC, the world's largest publicly traded manager of hedge funds, owns 50% of Ore Hill. Fund firms Drake Capital Management, Tisbury Capital Management and Pardus Capital Management put up similar withdrawal restrictions this year. While gates may help fund managers salvage business by allowing them hold onto money during difficult times, hedge-fund industry experts say they are generally a troubling sign that can signal that a fund's end is near.
- Precision Drilling Trust, Canada’s largest oil and gas driller, agreed to buy US drilling company Grey Wolf Inc. for about $2 billion in cash and stock.
- Weaker commodity prices and higher costs are starting to take a toll on the mining industry as the billions of dollars being spent on new projects could take years to recoup.
- China’s Bright Past Belies a Hazy Future. Policies and Trends Fueling Rapid Growth Have Run Their Course.
Barron’s:
- Presumptive Democratic presidential nominee Barack Obama’s tax plan may be worse for the nation’s economy than Republican John McCain’s proposal, citing a nonpartisan group. Reducing the wealthiest citizens’ incomes would cut the amount they might invest in businesses, stocks, shopping and travel and would “deal another blow to an already-hobbled economy,” the Tax Policy Center said. Obama’s plan would compound the issue with increases in capital-gains and dividend taxes, the group said.
- Raymond James Financial(RJF) topped a list of brokers measured by their analysts’ stock recommendations during the first half of this year and the past year by avoiding recommending financial companies.
MarketWatch.com:
- According to the "official" definition, of course, which defines a bear market to be any decline in excess of 20%, there should be no doubt that many commodities are indeed in a bear market. Before the rally over the last week, for example, crude oil was trading nearly 25% below its all-time high. Gold's decline was slightly less severe, but still in excess of 20%. But to hear many analysts tell the story, commodities have experienced nothing more than a mere correction in an on-going bull market. They go to great lengths trying to dismiss the significance of the decline. If the consensus opinion right now was that commodities were in a bear market, then the contrarians would be drawing bullish conclusions. But with so many arguing instead that commodities suffered nothing more than a mere correction, contrarians are not detecting the sentiment foundation that would support a significant rally.
CNBC.com:
- Americans are driving tens of billions of miles less these days, and experts don't expect that to change even if the recent drop in gasoline prices continues.
NY Times:
- The advent of multitouch screen technology on Apple Inc.’s(AAPL) iPhone may boost the further adoption on other devices such as laptop computers and personal organizers, citing executives.
- A Home Network Where Your TV Talks to Your Fridge.
IBD:
- CyberSource(CYBS): Payment Transactions Firm Profits From Growth Of Online Buying.
MSNBC.com:
- US Tops Medal Count At Beijing Games. What fencer Mariel Zagunis started, Dwyane Wade and the "Redeem Team" finished. In between, Michael Phelps and the rest of the U.S. delegation put on one heck of an Olympics — perhaps their best ever. By reclaiming gold in men's basketball, pulling off an emotional victory in men's volleyball and claiming silver in team handball, the United States wrapped up the Beijing Olympics on Sunday with 110 medals — its most in a non-boycotted Olympics since the 1904 St. Louis Games, which hardly count because of how little the rest of the world was represented.
Southtownstar.com:
- Big Corn takes on Big Oil over ethanol. The opposition isn't hard to understand, said Steve Ruh, an Illinois corn farmer who chairs the ethanol committee for the St. Louis-based National Corn Growers Association. "Oil has a lot to gain by defusing ethanol," he said. "(For) every gallon of ethanol we use, we can leave a barrel of oil in Saudi Arabia," said Ruh, of Sugar Grove. The campaign to educate the public on corn's role in the national economy could be beneficial, he said.
TheStreet.com:
- Apple(AAPL) Stealthily Makes Way for New Stuff. (video)
LA Times:
- California Atty. Gen. Jerry Brown won't investigate complaints by former IndyMac Bank employees that U.S. Sen. Charles E. Schumer violated state law by making comments that allegedly triggered the collapse of the big Pasadena mortgage lender. Thomas Greene, a special assistant to Brown, wrote in a letter released Friday that there was insufficient evidence to investigate Schumer, a New York Democrat, under a California law that bars false statements and rumors about the financial condition of banks. Jen Seely, the leader of the 51 former IndyMac employees who had asked Brown to look into the matter, said in an e-mail that she was disappointed but added, "This isn't over." She suggested that the Senate Ethics Committee might take up the case. "I am not sure who can step up to the plate and demand an investigation behind Sen. Schumer's motives, but it needs to be done," she said.
Business Week:
- A New Front for Defense Contractors. Whatever the outcome of the November Presidential contest, industry players could face some significant changes. Here’s what to expect.
Oil & Gas Journal:
- Reliability of oil supply, demand forecasts challenged. Looking into 2009 and taking into account the removal of fuel subsidies in many parts of the developing world, Lewis sees DOE's 1.4 million b/d oil demand forecast growth as "likely to be too optimistic and even the 0.9 million b/d assumed by the IEA and OPEC may prove too ambitious if recent history is a guide." He said he expects the recent non-OPEC oil production rebound since 2005 set to continue in 2009.
Rocky Mountain News:
- One of every 25 private industry jobs in Colorado is with companies headquartered in other countries. They employ nearly 76,000 Coloradans. They own factories, land and equipment in the state worth about $25 billion, almost double from five years ago. And that's likely an understatement. The most recent data, compiled from U.S. Department of Commerce information collected in 2006, doesn't reflect projects announced in recent months by Danish, Spanish, Australian, German and Canadian companies that will create thousands more jobs.
Rasmussen Reports:
- 39% Say Biden the Right Choice for VP, Women Less Enthusiastic.
USA Today:
- There was no word Sunday from the International Gymnastics Federation (FIG) as officials tried to determine whether five Chinese women's gymnasts met the sport's minimum age requirement of 16 to compete in these Olympics.
- For patients with paralysis, tongue could run controls. The tireless tongue already controls taste and speech. Now scientists hope to turn it into a computer control pad.
Portfolio.com:
- Google(GOOG) Wins Verizon Wireless Sweepstakes.
CNNMoney.com:
- Gas prices down for the 38th day in a row. The price of gas dipped below $3.70, after crude oil futures posted a record drop on Friday.
E-Commerce Times:
- What Should Apple(AAPL) Do With Its $20 Billion Piggy Bank? In order to realistically examine what Apple might do with its US$20 billion, one has to look at Steve Jobs' stated goals from the past plus the biggest threats to Apple in the future. Those two elements are good candidates for assessing how Apple might spend some of that money in the grandest sense.
CourierPostOnline.com:
- A New Jersey state appeals court has allowed New Jersey to move ahead with a plan to invest some state pension money into hedge funds. The court ruled Friday, rejecting a challenge by the Communications Workers of America and the New Jersey Education Association, two of the largest and most powerful unions of public employees in the state. The unions said hedge funds and other "alternative investments" were too risky and were ripe for political abuses.
Reuters:
- Democratic U.S. House of Representatives Speaker Nancy Pelosi said on Sunday that expanded oil drilling in federal waters could be included in a broader energy bill if advocates can prove its viability as a solution to America's energy problems. Pelosi, a California Democrat who reversed her outright opposition to expanded offshore drilling earlier this month, said the oil industry and its allies in Congress must also agree to royalties on oil profits to fund the development of renewable energy resources. She criticized President George W. Bush and other Republicans for presenting offshore drilling as an answer to the recent rise in U.S. gasoline prices, saying expanded drilling would not affect prices for a decade and then only by a small degree. "I don't think that's a good alternative. But if they can prove that it is, and they want to pay royalties to the taxpayer ... then we have something to talk about," the top congressional Democrat told NBC's "Meet the Press" program. Bush, in his latest weekly radio address, said Democrats were simply trying to block expanded offshore drilling by "bringing up a bill that is designed to fail.” Rep. James Clyburn of South Carolina, the House majority whip, told CNN on Sunday that a separate up-or-down vote on expanded offshore drilling is unlikely when Congress returns next month.
AP:
- Biden’s career provides grist for McCain’s mill. In August 2007, three men who later became entangled in a Mississippi bribery scheme raised money for Sen. Joe Biden's run for president. A month later, two of the three were overheard in a phone call recorded by the FBI discussing federal legislation and a prospective meeting with Biden's brother, Jim.
Financial Times:
- A successful presidential convention can give the nominee a five- to 10- percentage point bounce in opinion polls. But as Barack Obama and running mate Joe Biden chart their course across the swing states of the mid-west towards Denver on Wednesday, a large chunk of media attention will be eaten up by Hillary and Bill Clinton. Many supporters of Mr Obama express private anguish over the prominent role he has conceded to the former president and first lady on three out of the four days of the convention this week. The democratic nominee starts off the convention with an insignificant 1- to 2- percentage-point lead over republican rival John McCain.
Telegraph:
- China's central bank has acquired a secret stake in Prudential, Britain's second-largest insurer, as part of Beijing's increasingly active plans to deploy its vast pool of foreign currency reserves in overseas markets, The Sunday Telegraph has learned.
Observer:
- Savills Plc, the UK’s largest publicly traded property consultant, will announce this week it is cutting “scores of jobs.” Savills will also say homes selling for $1.7 million or more in London are “simply not moving.” CEO Jeremy Helsby is understood to have told colleagues that he expects housing prices to fall by 25% by the end of next year.
- Lehman Brothers Holdings(LEH) CEO Richard Fuld is expected to relinquish his position before the end of the year, citing bank “insiders.”
- A British-built spy plane has set an unofficial world record for the longest continuous unmanned flight. The aircraft, a Zephyr, stayed aloft for 82 hours and 37 minutes powered by solar panels and a rechargeable battery at night.
International Herald Tribune:
- Oil and natural gas companies are stepping up exploration efforts off Ireland's coast, lured by an attractive tax regime and higher energy prices. A study commissioned by the Irish government said early data showed potential reserves of 10 billion barrels of oil off Ireland's Atlantic coast.
Spiegel:
- The German economy may contract again in the third quarter, pushing Europe’s largest economy into a recession, citing an interview with the head of the Kiel-based Institute for World Economics, Dennis Snower.
Frankfurter Rundschau:
- The European Central Bank should cut interest rates as the current level hurts the economy and job creation, the head of Germany’s IG Metall Union Berthold Huber said. The ECB should follow the example of the US Federal Reserve, the head of Germany’s biggest labor union said. Borrowing costs in the euro area “have been too high for at least two years,” Huber said. IG Metall will lodge a pay-raise claim exceeding its 2007 demand of 6.5% of Sept. 8. IG Metall wage accords affect 3.2 million workers across Germany.
Cinco Dias:
- Spanish construction activity will decline next year and in 2010 after the end of a building boom, citing research network Hispalink. Building work will fall by .2% in 2008, extending to a 1.8% drop in each of the following two years, the group said.
Wirtschaftswoche:
- Dell Inc.(DELL) may post faster sales growth than the personal-computer market this year, citing an interview with CEO Michael Dell. Dell said the company will match strong first-half growth in the final six months of the year, driven by demand from US companies expanding abroad. The financial services industry still needs to expand its information its information technology capacity. The company also sees “huge potential” in the consumer market, as the company increased shipments in that sector by 48% in the last quarter.
Focus:
- Deutsche Telekom AG’s T-Mobile International AG wireless unit has sold 120,000 new iPhones since they were introduced a month ago, citing an interview with CEO Hamid Akhavan. The mobile-phone operator has sold 75,000 iPhones in Germany alone. T-Mobile may also be interested in expanding its broadband network in rural areas by utilizing unused broadcasting frequencies.
Globe and Mail:
- Breaking even becomes hedge funds’ mantra. In the first three months of this year alone, 170 funds in the United States went out of business, and that was before things got really bad. Globally, hedge funds ended the first half with their most dismal performance in a decade. And then came the selloff in resource stocks, which brought misery to commodity funds, one of the few bright spots earlier in the year. July ended up being the worst month for futures in more than five years. Scotia Capital's Canadian hedge fund index, a useful measure of performance, was off 8.6 per cent on an asset-weighted basis last month, bested by both the gloom-laden TSX composite and S&P 500 indexes.
The Economic Times:
- Caught in an atmosphere of uncertain growth and rising costs of essential services, India’s largest private sector bank is cutting costs aggressively. ICICI Bank is shifting thousands of jobs from Mumbai to Hyderabad. The bank is also cutting down on banking hours in several branches and curbing staff reimbursements such as phone and conveyance bills.
Seoul Economic Daily:
- South Korea’s consumer-price inflation may exceed 7% in August, citing a government official. Consumer prices are likely to accelerate further in September. Consumer prices climbed 5.9% in July from a year earlier, the faster pace in 10 years.
Vietnam.net:
- Steel prices are forecast to fall for the rest of the year as demand slackens in the domestic market, according to the Viet Nam Steel Association (VSA). The association said July steel output was at a record low 250,000 tons this year, adding that August steel consumption was even lower at an estimated 200,000 tons.
Shana:
- Iranian oil officials will travel to China next week to discuss energy cooperation with Chinese companies, the oil ministry news agency Shana reported. The delegation, including National Iranian Oil Co. Managing Director Seifollah Jashnsaz and Vice President for Investment Affairs Hojattollah Ghanimifard, will discuss Chinese investment in Iran’s South Pars gas field, the world’s second-largest deposit of gas reserves, and the sale of liquefied natural gas to China.
Al-Gomhuria:
- Wholesale cement prices in Egypt dropped $1.90 a ton as construction spending plunged 50% before the month of Ramadan.
Emarat Alyoum:
- The United Arab Emirates’ inflation rate is expected to reach 13% next year, citing the head of the finance committee at the Federal National Council.
Weekend Recommendations
Barron's:
- Made positive comments on (FCX), (FE), (ICE) and (AAPL).
- Made negative comments on (GRMN) and (RSH).
Citigroup:
- Reiterated Buy on (MENT), target $19.
- Reiterated Buy on (AOC), target $55.
- Downgraded (CVC) to Sell, target $29.
Night Trading
Asian indices are +.25% to +1.75% on avg.
S&P 500 futures -.22%.
NASDAQ 100 futures -.16%.
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Economic Releases
8:30 am EST
- Existing Home Sales for July are estimated to rise to 4.91M versus 4.86M in June.
Other Potential Market Movers
- None of note
BOTTOM LINE: Asian indices are higher, boosted by financial 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.
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