Bloomberg:
- Mortgage applications in the U.S. rose last week as lower borrowing costs sparked purchases and refinancing. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan increased 5.6 percent to 527 in the week ended Aug. 14, from 499 in the prior week. The group’s refinancing gauge rose 6.9 percent, while a measure of purchases gained 3.9 percent.
- China’s stocks tumbled, briefly driving the benchmark index into a so-called bear market, on concern economic growth will falter as banks rein in lending. The Shanghai Composite Index lost 4.3 percent to 2,785.58, as Citic Securities Co., the nation’s biggest brokerage, slumped 7.8 percent and China Vanke Co., the largest developer by market value, fell 5.6 percent. The gauge has slumped 19.8 percent since Aug. 4. A plunge in new bank loans in July, disappointing earnings and concern the government will seek to damp property speculation has sapped confidence, driving losses close to the 20 percent threshold for a bear market. “Some mutual funds have been reducing their stock holdings as they are pessimistic about the economic outlook.” The Shanghai index, the world’s best-performing major market from Jan. 1 to Aug. 4, remains 59 percent below its record level on Oct. 16, 2007. Chinese stocks are “extremely frothy” and investors should have an “underweight” position in the country’s shares, said Devan Kaloo, who oversees $11.5 billion as head of global emerging markets at Aberdeen Asset Management Ltd. “I’m worried about a correction in a market that has been driven by cheap money,” said Kaloo, whose Aberdeen Emerging Markets Fund has beaten 98 percent of peers this year. “The current correction is reflecting the tightening in lending,” said Andy Xie, a former Asian chief economist at Morgan Stanley, who correctly predicted in April 2007 that China’s equities would tumble. “We’ve seen the peak of this market cycle.” An estimated 1.16 trillion yuan of loans were invested in stocks in the first five months of this year, China Business News reported on June 29, citing Wei Jianing, a deputy director at the Development and Research Center under the State Council, China’s Cabinet. The market may fall a further 10 percent, Xie said Aug. 17. The Shanghai index is trading at 30.3 times reported earnings, against 17.5 times for shares on the MSCI Emerging Markets Index. Exports last month fell 23 percent from a year earlier, while urban fixed-asset investment and industrial output both expanded less than economist estimates. “The Chinese market is very trend-oriented because there are many individual investors,” said Philippe Zhang, chief investment officer at AXA SPDB Investment Managers in Shanghai, which oversees about $220 million. “It can rally very quickly and go down strongly as well.”
- EnerNOC(ENOC) Returns 260% From Lowering Lights in 2009’s Power Grid. A few investors are cashing in on smart-grid companies that cater to corporations rather than utilities. In 2005, Foundation Capital, a Menlo Park, California-based venture capital firm, funded a startup called EnerNOC Inc. with $21 million. The Boston-based company makes software that helps Marriott International Inc. and other customers reduce power consumption and reap savings by shutting down lighting, air conditioning and even water fountains when they’re not in use or when electricity prices are high. And energy system operators pay EnerNOC to dial back its customers’ usage during heat waves or outages, lessening the need to tap carbon-spewing “peaker plants” for emergency juice.
- Crude oil rose after a government report showed that U.S. inventories declined the most in more than a year as imports tumbled and refineries increased operating rates. Stockpiles dropped 8.4 million barrels last week, the most since the week ended May 23, 2008, the Energy Department report showed. Imports slipped 15 percent to 8.53 million barrels a day, the biggest drop and lowest rate since September when hurricanes struck the Gulf of Mexico coast. “Refiners were probably nervous about rising stockpiles and the outlook for lower gasoline demand in the months ahead, so they reduced purchases,” said Rick Mueller, a director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “You can’t help but pay attention to the massive drop in imports.”
- The worst U.S. recession since the 1930s may already be over, according to Edward McKelvey, a senior economist at Goldman Sachs Group Inc. in New York.
The gain in industrial production in July, the first in nine months, and the likelihood that output will continue to grow because of depleted inventories is “the best” signal that the contraction is over, McKelvey wrote in an e-mail to clients yesterday.
- Demand for Treasuries will be sufficient to absorb the record amount of debt the U.S. is selling amid a $12.8 trillion pledge by policy makers to combat the recession, according to Goldman Sachs Group Inc. Purchases by foreign investors will be augmented by appetite from U.S.-based buyers looking to add to savings or increase the duration of their assets, Michael Vaknin, an analyst for Goldman Sachs in London, wrote in a note today.
- Baghdad was hit by coordinated bombings in the bloodiest attack in Iraq this year. As many as 95 people were killed and 563 wounded, Agence France-Presse reported, citing the Interior Ministry. The mid-morning blasts ripped through diplomatic and civilian areas, state-owned Iraqiya television said. The worst bombing left at least 59 people dead near the Foreign Ministry, the Associated Press said. Another near the Finance Ministry killed 28, AFP reported. The attacks underscore the fragility of Iraq’s security since U.S. combat troops withdrew from urban areas on June 30 and as the country prepares for elections in January.
- The Standard & Poor’s 500 Index may rise as much as 6 percent by year-end as an economic rebound in the second half leads to sales growth for U.S. companies, said Robert Doll, global chief investment officer at BlackRock Inc. “Our guess is starting this quarter, the third quarter into the fourth quarter, we will have positive real and nominal GDP, permitting some revenue growth,” Doll said in a Bloomberg interview broadcast on radio and television.
- Barack Obama’s approval rating declined as a growing number of Americans said the Democratic president and Republican leaders aren’t working together on important issues. In a poll from the Pew Research Center for the People and the Press, 63 percent of Americans said they thought the two sides weren’t working together. While 29 percent of respondents said Republicans are most to blame for the lack of cooperation, 17 percent cited Obama, up from 7 percent in February, Pew said. Obama’s job-approval rating fell 3 percentage points, to 51 percent from 54 percent in July, within the survey’s error margin of plus-or-minus 2.5 percentage points. His rating stood at 61 percent in June. Independents were almost evenly divided, with 45 percent saying they approved of Obama’s performance and 43 percent who disapproved. In June, independents approved of Obama’s job performance by almost a 2-to-1 margin. Approval ratings for the Democratic Party also fell, with 49 percent of Americans saying they viewed the party favorably. That’s down 10 percentage points from April, Washington-based Pew reported.
- Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission, is asking Congress to strengthen the Obama administration’s legislative proposal for regulating the over-the-counter derivatives market. In a letter to House and Senate committee leaders, Gensler requested revising the bill to get rid of exemptions for small derivatives dealers, repeal parts of the Federal Deposit Insurance Corporation Improvement Act, and impose requirements to set aside money to back up trades.
Wall Street Journal:
- The initial public fervor and regulatory rancor surrounding high-frequency trading may have focused on what it means for stock investing, but the debate is just as relevant in other markets. The act of trading in microseconds already makes up a significant part of the foreign exchange and commodities markets, and is an ever-growing part of even the most-nuanced of markets, options. High frequency funds use myriad asset classes in a single strategy, making the markets more connected than they’ve ever been. It’s helped fix inefficiencies in each of these markets because these funds often hunt for subtle disconnects between markets and then trade aggressively to put them back in line. On the other hand, this connection between markets has also extended the reach of any possible manipulation. High-frequency trading, in which firms trade large amounts in fractions of a second, makes up roughly 50% of stock trading volume, according to analysts. Critics say this growth has distorted prices and hurt the most retail of investors.
CNBC:
- A New York dealership group says hundreds of its members have left the Cash for Clunkers program, citing delays in getting reimbursed by the government. The president of the Greater New York Automobile Dealers Association said about half its 425 members have stopped offering rebates from the program because they can no longer afford them. Mark Schienberg says the group's dealers have been repaid for only about 2 percent of the clunkers deals they've made, leaving many short on cash.
Cnet news:
- Despite ongoing problems in the company as a whole, Sony's electronics division is looking on the bright side when it comes to the all-important winter retail season. Looking ahead to the holidays, Sony Electronics' Executive Vice President Mike Fasulo said Tuesday at a small media gathering in San Francisco that the gadget maker is hopeful about better sales this year than last. "I'm cautiously optimistic about (holiday retail sales).
NY Times:
- In an economy where much construction has ground to a halt, charter schools are providing a minor but growing niche for the building and design industries in the New York City area. According to the city, 21 new charter schools will open in September, though only two of them will be in new buildings. The state has 141 charter schools in operation, and about 100 are in the city. “There’s a lot of construction of charter schools going on, especially relative to the slowdown in the market,” said David M. Umansky, the chief executive of Civic Builders, a Manhattan-based developer that specializes in charter schools. Around for more than a decade, charter schools are elementary or secondary schools that receive public operating money, but have been freed from some regulations that apply to public schools in exchange for some type of accountability set forth in each school’s charter. Mr. Umansky said much of the investment is going into historically poor neighborhoods in the South Bronx and central Brooklyn, as well as in Harlem.
- The United States economy is now out of the emergency room and appears to be on a slow path to recovery. But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself. To understand this threat, we need to look at where we stand historically. If we leave aside the war-impacted years of 1942 to 1946, the largest annual deficit the United States has incurred since 1920 was 6 percent of gross domestic product. This fiscal year, though, the deficit will rise to about 13 percent of G.D.P., more than twice the non-wartime record. In dollars, that equates to a staggering $1.8 trillion. Fiscally, we are in uncharted territory. Because of this gigantic deficit, our country’s “net debt” (that is, the amount held publicly) is mushrooming. During this fiscal year, it will increase more than one percentage point per month, climbing to about 56 percent of G.D.P. from 41 percent.
Deal.com:
- Last week, we brought you some of the best-performing hedge funds of 2009. Monday, we offer a peek at some of the worst-performing funds, according to confidential documents obtained by The Deal.
Washington Post:
- Whole Foods(WFMI) aficionados who assumed the company's management was as crunchy as the brand are feeling betrayed. They have stormed Twitter, Facebook and the blogosphere to vent their rage at John Mackey, the chief executive. In an op-ed column in the Wall Street Journal last week, he argued for health-care savings accounts and declared that health care is not an intrinsic right-- ideas with a conservative bent, which made Whole Foods' liberal customer base go ballistic. They are even talking about a boycott. And who knows? Maybe some will have to rethink shopping at Wal-Mart(WMT). Unions once attacked the retailer's labor and benefits policies, but Wal-Mart has become the nation's largest purveyor of organic products and recently espoused a position on health-care reform that is widely considered progressive.
ZDNet:
- Time Warner and YouTube said Wednesday that they have signed an online video distribution deal. Under the pact, YouTube will distribute Time Warner short-form video content, including movie clips, television shows and news. Time Warner(TWX) properties—Warner Bros. and Turner Broadcasting System—will program YouTube videos via an embeddable player. According to a statement, YouTube will get access to CNN news, the Cartoon Network and shows such as Gossip Girl. Time Warner video will appear across Google(GOOG) properties. Time Warner can also create separate channels on YouTube and sell ad time. The two parties will split ad revenue. Time Warner CEO Jeff Bewkes said the YouTube deal was a good way to monetize short-form content. The deal appears to be a win-win.
AppleInsider:
- New reports forecast that Apple will sell 50 million phones in 2011, and more than 80 million in 2012, as worldwide expansion and popularity of the iPhone continues to grow. Apple shipped 13.7 million iPhones in the 2008 calendar year, and the number continues to grow. Last quarter alone, the Cupertino, Calif., company sold 5.2 million iPhones riding the successful launch of the iPhone 3GS. But two new predictions call for the mobile platform to reach astounding new heights worldwide in the next few years.
Politico:
- Video: Barney Frank fights back at town hall.
- Critics of President Obama’s health-care overhaul are zeroing in on his senior adviser David Axelrod, whose former partners at a Chicago-based firm are the beneficiaries of huge ad buys — now at $24 million and counting — by White House allies in the reform fight. The unwelcome scrutiny, largely from Republicans, comes at an inopportune time as Obama seeks to shore up support for health care reform. It revolves around two separate $12 million ad campaigns advocating Obama’s health care plan that were produced and placed partly by AKPD Message and Media, a firm founded by Axelrod that employs his son and still owes Axelrod $2 million. A separate firm, GMMB, is also handling the campaigns. Both AKPD and GMMB did millions of dollars of work on Obama’s presidential campaign, continue to tout their connections to the campaign and still maintain close ties to his inner circle.
USA Today:
- As consumers slowly rediscover shopping, retailers are struggling to strike a balance between slashing prices and going full price. Some high-end stores are settling on lower prices and products that don't have to be discounted to be palatable. That helps maintain their brand images — and profit margins. Luxury retailers have been working for more than six months to develop merchandise that satisfies that goal, says retail strategist Peter Brown.
- In distressed areas, consumers are "increasing their borrowing to make ends meet," says Mark Zandi, chief economist for Moody's Economy.com. The rise in card balances, while not dramatic, is significant amid a 3.3% overall decline in U.S. card debt in the second quarter.
- Johnson & Johnson (JNJ) won a U.S. advisory panel's support on Tuesday for a novel hip replacement designed to provide more durability than current implants. A Food and Drug Administration committee voted 5-0 to recommend approval of J&J's Complete Acetabular Hip System, an experimental implant with a ceramic head and metal liner. The ceramic-on-metal design is meant to reduce wear compared to metal-on-metal implants.
Reuters:
Asian electronics makers are forecasting a turnaround in the second half of this year, citing a pick-up in global demand. "I think the weakness in electronic component demand has hit bottom in the second quarter because new orders are now increasing," Anusorn Muttaraid, director of Thailand's Delta Electronics DELT.BK, told Reuters on Wednesday. Hon Hai Precision Co Ltd (2317.TW), the world's largest electronics contract maker, is aiming for revenue to grow by 30 percent this year as increasing numbers of companies cut costs through outsourcing rather than maintaining their own labor-intensive production lines. Other electronics manufacturers offer similarly bullish forecasts. Taiwanese contract laptop PC maker Compal Electronics Inc (2324.TW) is revising up its forecast for total global PC shipments this year. In Japan, industry data released on Wednesday showed orders for Japanese equipment used to make semiconductors outpaced sales for the fourth straight month in July as the chip sector inches out of its worst-ever downturn. In South Korea, shares in Hynix Semiconductor (000660.KS), the world's second-biggest maker of memory chips, jumped nearly 4 percent on Wednesday on rising chip prices. And in Malaysia, Unisem (UNSM.KL), which owns manufacturing plants in Malaysia, Indonesia, China and Europe, said last month it expected sales to grow 10-15 percent in the third quarter from the second as customers replenish inventories. The gains have started to show up in some trade data. On Monday, Singapore reported the smallest drop in electronics exports in four months. Electronics shipments dropped 14.5 percent in July from a year earlier, after falls of 21.6 percent in June, 21.8 percent in May and 25.6 percent in April. There are also anecdotal signs of a pick-up. Delta and other Thai electronics firms such as the local unit of hard-disk drive maker Western Digital (WDC) have started hiring staff again in recent months to meet an increase in orders from clients. Delta, which produces power supply equipment used in telecommunications and computer products, planned to bring its workforce back to normal levels after cutting it to about 9,000 from 11,000, Anusorn said. Its main clients include IBM (IBM) and Nokia NOKIV.HE.
- Switzerland has agreed to hand over details of about 4,450 UBS AG bank accounts to U.S. authorities to settle a tax dispute that challenged Swiss banking secrecy and now threatens to spill over to other banks.
Financial Times:
The price of offices in the US rose in the second quarter for the first time since 2007, offering a glimmer of hope for the stricken commercial property market, according to a report on Wednesday from Moody’s, the ratings agency. In the last 12 months, US commercial property prices across all sectors fell by nearly 27 per cent, the Moody’s/Real commercial property price index showed. From April to June, however, US office prices rose by 4.1 per cent, the first increase since the second quarter of 2007. “I’m comfortable this is a real flattening,” said Neal Elkin, president of Real Estate Analytics. “There’s a lot of money sitting on the sidelines that was held back because nobody wanted to catch a falling knife.” The jump in the second quarter represents a sharp swing from the first, when office prices plunged by 18.6 per cent. Moody’s said overall transactions across all commercial property sectors in June were up by 50 per cent from May and that dollar volume more than doubled in the month. “The Fed’s recent decision to extend Talf for commercial mortgage-backed securities beyond the end of 2009 is highly welcome because the flow of liquidity to commercial real estate will be critical for a sustainable economic recovery,” said Robert Toothaker, chairman of the Realtors Commercial Alliance Committee.
Telegraph:
- World gold demand fell 9% in the second quarter to 719.5 tons as rising prices and the impact of the global recession curbed jewelry consumption, the World Gold Council said on Wednesday.
O Globo:
- Ford Motor’s(F) Brazilian unit expects sales to increase 10% to a record 3.1 million this year from 2008. The estimated sales increase at Ford would be higher than the 6.4% forecast by the country’s automakers association, known as Anfavea.
Haaretz.com:
- The world's nuclear weapons watchdog is hiding data on Iran's drive to obtain nuclear arms, senior Western diplomats and Israeli officials told Haaretz. The officials and diplomats said that the International Atomic Energy Agency under Director General Mohamed ElBaradei was refraining from publishing evidence obtained by its inspectors over the past few months that indicate Iran was pursuing information about weaponization efforts and a military nuclear program. ElBaradei, who will soon vacate his post, has said that the agency does not have any evidence that suggests Iran is developing a nuclear weapon. But the sources told Haaretz that the new evidence was submitted to the IAEA in a classified annex written by its inspectors in the Islamic Republic. The report was said to have been signed by the head of the IAEA team in Iran.
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