Today's Headlines

Bloomberg:

- Mortgage rates for 30-year fixed loans fell this week to the lowest level since May, reducing borrowing costs for hesitant buyers as signs show the recession- plagued U.S. housing market may be bottoming. The average 30-year rate fell to 5.12 percent from 5.29 percent, mortgage buyer Freddie Mac of McLean, Virginia, said today in a statement. The 15-year rate was 4.56 percent. A buyer with a $400,000 mortgage would save about $344 a month under the 30-year fixed rate Freddie Mac announced today compared with the cost a year ago with the rate was 6.47 percent.

- Tech Data Corp. (TECD US) advanced 9.3 percent to $37.27 and gained 11 percent earlier, the most intraday since May 21. The world’s second-biggest distributor of computer products reported second-quarter profit of 70 cents a share, 59 percent more than the average analyst estimate.

- Manufacturing in the Philadelphia region unexpectedly expanded in August for the first time in almost a year, a sign the economy is pulling out of the recession. The Federal Reserve Bank of Philadelphia’s general economic index climbed to 4.2, the highest level since November 2007, from minus 7.5 in July, the bank said today. It was the first positive reading, signaling expansion, since September. Manufacturing may contribute to a recovery in coming months as factories speed assembly lines after cutting inventories at a record pace in the first half of 2009. “As manufacturing firms reduce inventories to more comfortable levels, they will start to look at increasing output and employment in the next several months,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “We’re moving towards growth in the third quarter.” Economists projected the Philadelphia index would improve to minus 2, according to the median of 52 forecasts in a Bloomberg News survey. The index of new orders climbed to 4.2 from minus 2.2 and the shipments index increased to 0.6 from minus 9.5. The inventory measure jumped to 0.3 from minus 15.4. The report showed the employment index improved to minus 12.9, the highest level in 11 months, compared with minus 25.3. Manufacturers were more upbeat about the future, today’s report showed. Expectations for the next six months climbed to 56.8 from 51.9.

- Google Inc.(GOOG), the owner of the most popular Internet search engine, climbed as much as 2.6 percent after Goldman Sachs Group Inc. added it to the “conviction buy” list on expectations for growth in Europe and higher display revenue, as consumers increase their spending. Online travel bookings and e-commerce may improve European search spending, while companies’ back-to-school and Christmas search advertising may rise in September, the analysts led by James Mitchell wrote in a note yesterday. Display revenue, which includes YouTube, could grow 40 percent in 2010 from this year, adding as much as 2 percent to overall sales, they said. The six-month share-price target was also raised to $560 from $510. “Google’s international and U.S. revenue may recover simultaneously, given recent results from other Internet companies showing surprisingly buoyant Europe revenue trends,” the analysts wrote. “We expect structurally more search spending in Europe and increased display share, plus ‘usual suspects’ of seasonality and easing comparisons, to drive revenue re-acceleration.”

- Dennis Gartman, an economist and the editor of the Gartman Letter, said he is creating his first hedge fund to speculate on assets including global equities and commodities. The River Crescent Fund, created Aug. 17, seeks to raise $200 million over the first year, Gartman said today in an interview from Suffolk, Virginia.

- JPMorgan Chase & Co.(JPM) and Goldman Sachs Group Inc.(GS) topped a list of the biggest credit-default swaps dealers in a Fitch Ratings survey. Barclays Plc, the U.K.’s second-largest lender, ranked third. Deutsche Bank AG and Morgan Stanley, both of which had been either first or second in the reports from 2004 through 2006, dropped to fourth and fifth in the survey of 26 banks. The top 10 banks made up an estimated 67 percent of trading among those surveyed by Fitch that are operating in the credit- swaps market, up from 62 percent in the last published survey in 2006.

- The cost of protecting corporate bonds from default fell as a U.S. gauge of leading economic indicators increased for a fourth consecutive month, signaling the recession is almost over. Contracts on the Markit CDX North America Investment-Grade Index, linked to 125 companies in the U.S. and Canada, were off 3 basis points to a mid-price of 121 basis points as of 10:02 a.m. in New York after earlier declining as much as 4.5 basis points, according to broker Phoenix Partners Group.

- Natural gas futures fell below $3 per million British thermal units for the first time in more than seven years after a government report showed rising supplies of the industrial and power-plant fuel. U.S. inventories of the fuel rose 52 billion cubic feet to 3.204 trillion in the week ended Aug. 14, the Energy Department said today in a weekly report. Supplies were 19 percent higher than the five-year average. “We have such a storage overhang staring you in the face,” said Cameron Horwitz, an analyst at SunTrust Robinson Humphrey Inc. in Houston. “If you think storage is going to bump up against physical limitations, then there’s really no place for the price to go but downward,” Horwitz said. Demand from factories, steel mills and chemical plants tumbled 13 percent in the first five months of 2009 because of the recession, department figures show. Industrial users account for about 29 percent of gas demand. U.S. storage capacity is about 3.95 trillion cubic feet, King said. Should weekly storage increases match the five-year average between now and the end of October, inventories would reach about 3.88 trillion cubic feet, according to Energy Department data.

- The index of U.S. leading economic indicators rose in July for a fourth consecutive month, another sign the worst recession in seven decades is almost over. The Conference Board’s gauge of the economic outlook for the next three to six months rose 0.6 percent, less than forecast, after a revised 0.8 percent increase in June, the New York-based group said today. The coincident indicators index, a gauge of current economic activity, was unchanged after falling every month since October. The biggest lift came from a positive spread between long- and short-term interest rates, followed by drops in jobless claims, a longer factory workweek, rising industrial supplier deliveries, stock prices and orders for capital goods. Weaker consumer expectations, declining money supply and falling building permits pulled it down. A gauge of new orders for consumer goods and materials held steady.

- The U.S. Commodities Futures Trading Commission and the U.K. Financial Services Authority said they are boosting cooperation in their supervision of energy markets. Each agency will also be able to conduct on-site visits of exchanges in the other’s jurisdiction as well as coordinate “emergency action” under the terms of the agreement, which covers U.S.-linked energy futures contracts.

Wall Street Journal:

- Second time lucky? Hedge funds have nearly doubled bearish bets on Volkswagen AG since the middle of last month, a repeat of wagers that blew up in the industry's face last year when Porsche Automobil Holding SE disclosed that it had amassed a majority stake in VW. Short sellers appear to be betting that, if the proposed merger between VW and Porsche fails, VW's shares will suffer, said short-selling analysts Dataexplorers.

- Macquarie Group is in serious discussions about a takeover of Fox-Pitt Kelton, a small financial services firm partly owned by private equity firm J.C. Flowers, according to people familiar with the talks. While no deal has been finalized and there are many hurdles that could block a sale, Fox-Pitt could fetch a price in the $150 million range, one of these people said. That would be a price more than double what Mr. Flowers paid for the bank back in 2006, said one person briefed on the deal.

- Sporadic bombs and rocket attacks, rumors of suicide squads and reports of fraud weighed heavily on turnout in Afghanistan's presidential election Thursday, potentially casting a shadow over the government's ability to hold the country together once the votes are tallied.

- Scotland released Thursday the Libyan agent convicted in the 1988 Lockerbie bombing on "compassionate grounds," defying both the U.S. government and the wishes of many victims' families. Scottish Justice Secretary Kenny MacAskill said he had decided to free the convicted bomber, Abdel Baset Ali Mohmet al-Megrahi, on the basis that Mr. al-Megrahi is terminally ill with prostate cancer. Mr. al-Megrahi was sentenced in 2001 to a minimum of 27 years in prison for his involvement in blowing up a New York-bound Pan Am airliner in December 1988 as it flew over the Scottish town of Lockerbie, killing all 259 people on board and 11 people on the ground. On the flight were 189 U.S. citizens, many traveling home for the holidays.

- Between documenting expenses and processing credit cards from just about anywhere in the U.S., smartphone applications have changed the way many small businesses operate. Now, more firms are turning to these apps to enhance the way customers interact with their products and services — and even boost their bottom lines.

CNBC:

- A government-funded “public option” in health insurance “is the minimum” Congress should offer in reforming the system, AFL-CIO Secretary-Treasurer Richard Trumka told CNBC. Trumka warned lawmakers in coming campaigns that their support of a government-funded plan was pivotal to the union. “If you don’t, don’t expect us to support you,” he said.

AppleInsider:

- A new market analysis predicts that an update or overhaul to the Apple TV could arrive soon, perhaps with iTunes TV show subscriptions and DVR capabilities. Gene Munster, senior research analyst with Piper Jaffray, said in a note Thursday that he believes a new Apple TV will arrive in the next several months. Beyond that, he believes the company will launch a "connected television" in 2011. Munster suggests a new Apple TV would bolster iTunes video purchases with a subscription model. He cites the popularity of Hulu and Netflix Watch Instantly as a reason Apple should offer iTunes video subscriptions. "Apple could leverage its deep library of content with many network and cable channel content owners to provide unlimited access to a sub-library of its TV shows for a standard monthly fee ($30 or $40 per month)," Munster writes. "Such a product would effectively replace a consumer's monthly cable bill (~$85/month) and offer access to current and older episodes of select shows on select channels." Munster goes on to say that he believes the timing could be impacted by the negotiations Apple would need to conduct in order to have the rights to offer a subscription model. However, he predicts that when a deal is finalized, Apple would simultaneously release the offering with a new Apple TV, or updated Apple TV software, within the next year. He predicts that Apple will become more aggressive in the living room, citing a number of factors, including:

SeekingAlpha:

- Why Do We Listen to Nouriel Roubini? During the height of the most recent economic crisis, the media offered the center-stage spotlight to NYU Economics Professor Nouriel Roubini to comfort us with his soma. At the peak of the crash, Roubini was as ubiquitous as Coca-Cola and cellphones. He was the go-to guy because his PR team branded him as “The Prophet of Doom.” A perfect fit when you need someone to call at an overwhelmingly bullish place like Wall Street. Roubini has disingenuously promoted himself as nailing the crisis, when truthfully he was wrong until other hard working analysts fixed his broken crystal ball. As we can see, in March 2005 Roubini started by predicting a crisis caused by Foreign Central Banks diversifying out of U.S. Dollars. (See: ‘Does Overseas Appetite for Bonds Put the U.S. Economy at Risk?’) In February 2006, Roubini still solely focused on foreigners diversifying out of U.S. Treasury debt and further incorrectly predicted that “our current patterns of spending above our incomes” would cause a crisis by 2013. (See: ‘Taste of the Future‘.) Given that the credit markets (which Roubini never mentions until others show him the light) imploded recently, I think we can conclude that “spending above our incomes” doesn’t have to do the crisis perp walk. During the same month as The Washington Post article, Roubini’s press releases peppered the New Yorker with his message:

- Louis Bacon’s Moore Capital Management bought up equities over the second quarter of 2009, according to the most recent portfolio holdings of the global macro orientated growth investor. Overall, the hedge fund manager’s exposure to US traded equities rose to $1,158 million as of 6/30/2009 from just $510 million as of 3/31/2009. Moore Capital’s portfolio heavily favored financial stocks, which represented over 41% of the firm’s portfolio. The second largest purchase over the quarter was a new $264.7mm / 20,050,000 share position in Bank of America (BAC). The other top financial sector holdings in the hedge fund’s portfolio included:

Boston Globe:

- Vice President Joe Biden today announced that $1.2 billion in grants are available from the economic stimulus package for projects to accelerate the use of electronic health records -- an area where Massachusetts is at the forefront.

PRNewswire:

- New-vehicle retail sales in August are forecasted to cross the 1-million-unit mark for the first time in the past 12 months, according to J.D. Power and Associates. Based on the first 13 selling days of the month, new-vehicle retail sales for the month of August are expected to come in at slightly more than 1 million units, up nearly 2 percent from one year ago. This marks the first increase in retail sales volume since June 2007.

Detroit Free Press:

- Ford Motor Co.(F) is pushing the UAW for additional modifications to its labor contract, but one item that few are expecting is additional job cuts. The Dearborn automaker has aggressively cut hourly and salaried jobs over the past four years, but the pace has slowed dramatically this year and there are no longer any major job reduction programs in the works.

- An eight-month layoff for workers at U.S. Steel Corp.'s Great Lakes Works plant in Ecorse might end soon. Great Lakes Works was temporarily idled in January because of declining demand. Under normal market conditions, it employs about 2,400 workers. Now, efforts to restart the plant have begun. Several hundred workers have been recalled to help prepare the plant to be restarted, said Marc Barragan, president of United Steelworkers Local 1299. "The future looks a lot brighter," Barragan said, "But it's not all the way there yet."

Rassmussen:

- Forty percent (40%) of U.S. voters now say cutting the federal deficit in half by the end of his first term should be President Obama’s number one priority. That’s up three points from a month ago. A new Rasmussen Reports national telephone survey shows that, of the four priorities outlined by the President earlier this year, 21% rate health care reform as the most important. Eighteen percent (18%) say ensuring that every child has access to a complete and competitive education should be the priority, and 15% put the emphasis on development of new sources of energy.

Lloyd’s List:

- US import container volumes set to rise.

Reuters:
- The U.S. Federal Deposit Insurance Corp will meet next week to vote on a proposed policy that would force private equity groups to maintain high capital levels and put a large amount of their own money at stake when investing in failed banks. The FDIC provoked a backlash when it proposed the guidelines in July and is expected to soften the policy when it meets August 26.

- Robert Benmosche, the newly appointed chief executive officer of American International Group Inc, says he expects the bailed-out insurer to be able to repay its federal debts and to boost value for shareholders, according to a report by Bloomberg News. Shares rose strongly after the report, rising as much as 31 percent on the New York Stock Exchange.

- The U.S. commercial paper market expanded in the latest week, suggesting the economy may be growing again after the longest recession in decades as the two-year-old global credit crisis slowly eases, analysts said. It was only the second time since April that the overall size of the market had expanded on a weekly basis; the first time being earlier this month. For the week ended Aug. 19, the size of the U.S. commercial paper market, a vital source of short-term funding for routine operations at many companies, rose by $35.8 billion, the biggest jump in at least four months, to $1.111 trillion outstanding, from $1.075 trillion the previous week, Federal Reserve data showed on Thursday. In two years of credit market turmoil, the market's size has halved, from about $2.2 trillion outstanding in August 2007 when the crisis first erupted. Now, however, "it appears that the freefall we saw in commercial paper may be ending," said Ray Stone, an economist with Stone & McCarthy Research Associates in Princeton, New Jersey. Because companies use commercial paper to fund activities such as restocking shelves and meeting payroll costs, higher issuance typically signals companies are responding to an upturn in demand as the economy gains momentum. "It appears from the commercial paper data that the inventory liquidation cycle is bottoming and with that the inventory drag on gross domestic product will be diminished in the third quarter, probably leading to a smartly positive number of about three percent growth," Stone said.

TimesOnline:

- OPEC’s greed will herald the end of the oil age. If producers keep prices high even when demand is slack, the world will be surprisingly quick to wean itself off fossil fuels. Given how bleak the world looked as this year began, it feels remarkable to be seeing growth again so soon. But it is even more remarkable that the world is emerging from such a severe financial shock and slump with its most basic fuel, crude oil, priced at close to $70 a barrel, seven times its price of a little over a decade ago and double the level it was as recently as March. So this must mean the rebound is even stronger than we think, with demand for oil soaring again? Not at all. Admittedly, this is a pretty opaque market, with many countries treating oil stocks as an official secret. Still, analysts at Banc of America Securities-Merrill Lynch reckon that global oil demand has been three million barrels a day lower in the second quarter of this year than in early 2008. They don’t expect it to get back above that until 2011 at the earliest. No, the explanation for this potentially recovery-sapping (and certainly wallet-threatening) resurgence in the price of oil, and thus petrol at the pump, lies on the supply side. This point in the analysis is where the planetary gloomsters start citing a concept called “peak oil” (or, to the real oil nerds, “Hubbert’s peak”). This is the idea that the planet’s oil reserves are nearing (or, in some eyes, are past) a time at which the output from oilfields starts to decline. Don’t pay them any attention. The world is not running out of oil. The oil producers’ cartel has deliberately cut production by nearly five million barrels a day, which is more than the drop in global demand, to keep prices high. Opec members account for only about 35 per cent of world supply, but Russia, a non-member, accounts for a further 11.5 per cent and is co-operating with their efforts. In the early years of this decade the kingpins of Opec, Saudi Arabia, used to say that their ideal price range for crude oil was $20-25 a barrel. Now, they say that it is $70-75. Crucially, the nationalists in Opec and the extortionists in Russia have blocked the big Western oil companies from investing as much in developing their oil reserves as they would have liked, driving them into higher-cost fields elsewhere. That will change over the next decade or so, if prices stay high. Brazil has discovered a huge new offshore oilfield and Angola has shown just how quickly development can occur. In seven years it has trebled its oil output, joined Opec and is now challenging Nigeria for its status as sub-Saharan Africa’s biggest oil producer — and hence as the leading oil-rich basket case. Yet by the time non-Opec oil supply has been boosted, something even more important will have occurred, if Opec continues to overplay its hand and support painfully high prices. In the 1970s, the rather quotable Saudi Oil Minister, Sheikh Zaki Yamani, had a nice saying: “The Stone Age did not end because the world ran out of stones. Nor will the oil age end because we have run out of oil.” It will end when oil consumers run out of patience with greedy oil producers, and develop substitutes instead. They should remember this. When the 1970s oil shocks gave Japan a second whammy after a sharp revaluation of the yen had given it a first, its Government and industry set about transforming themselves from cheap clunker-producers into the world’s leading makers of semiconductors, consumer electronics and fuel-efficient cars — all within ten years. This time around, there are scientists and engineers all over the globe dying to bring about just that sort of transformation — but nowhere more so than in China, the world’s second-biggest oil consumer, whose policymakers fully expect their currency to have to be revalued, hitting cheap energy-guzzling producers, and where the need to clean up the environment is urgent. The usual forecasts, based on extrapolation of past trends, do not see electric cars or non-fossil fuel power plants having a really big impact for another 20-30 years. Imagine, though, the effect on innovation of oil at $100-200 a barrel, of hundreds of thousands of Chinese (and Japanese, European and America) engineers trying to do for solar power and for car batteries what has been done in the past decade for mobile phones and computers. Then, the usual forecasts will turn out to be wrong — as usual. The oil age, which began in earnest a century ago in America, will be at an end.