Today's Headlines

Bloomberg:

- The economy’s rebound will be stronger than most forecasters expect, Laszlo Birinyi said, citing the rally that pushed the Standard & Poor’s 500 Index to the highest level since October. “The markets are suggesting that the economy has turned the corner and is going to do a lot better than most people anticipate,” Birinyi, the founder of Westport, Connecticut- based research and money-management firm Birinyi Associates Inc., said today in an interview broadcast on Bloomberg Radio and Television. “I’m still very optimistic.”

- The Baltic Dry Index, a measure of shipping costs for commodities, posted a fifth straight retreat on weaker demand for vessels to haul coal and iron ore. The index tracking transport costs on international trade routes fell 31 points, or 1.3%, to 2,437 points, according to the Baltic Exchange. Hire rates for capsize vessels that haul about 175,000 metric tons of goods shed 2.3%, while smaller panamaxes that compete for coal and iron-ore cargoes and also carry grains dropped 2.2%. Falling Chinese steel prices were highlighted by Nokta in a separate note today. Preices for rebar, used to reinforce concrete, dropped 11% in the country’s south last week, according to Metal Bulletin. That may indicate ebbing demand at a time when China’s stockpiles of iron ore to make steel are at 75 million tons, just .6% below levels last September, when they rose to the highest since at least 2006. That may cut import demand. The cash price for Australian iron ore delivered to China slumped 11% in the week to Aug. 21, Metal Bulletin data showed. The price is based on 63.5% grade iron-ore fines. “The steel market is overheated,” Mark Pervan, senior commodity strategist at Australia & New Zealand Banking Group Ltd., said last week.

- China’s unprecedented appetite for imported coal is about to be sated, jeopardizing a five-month rally in prices by adding to a global surplus of the fuel used in power plants from Perth to Chicago. After importing a record 48 million tons in the first six months, China is opening mines idled by worker deaths this year following safety upgrades in a bid to bolster economic growth. Huadian Power International Corp. expects China’s largest coal- mining province, Shanxi, to boost output by 60 percent in the second half of the year. That would mean an increase of 150 million metric tons, almost twice what Germany burns annually. With little need to buy coal outside the country, prices may tumble, falling as much as 7 percent in Europe alone, Barclays Capital says. China’s purchases will plunge 33 percent between June 30 and Dec. 31, based on the median estimate of four analysts surveyed by Bloomberg.

- Commodity mutual funds lifted their assets by about $7 billion this year, more than triple the year- earlier increase, according to researcher EPFR Global. Assets totaled $85.87 billion as of Aug. 19, after peaking at $89.6 billion on Aug. 6, the Cambridge, Massachusetts-based fund tracker said in an e-mailed reply to questions Aug. 21. Funds investing in raw materials took in $2.05 billion in the comparable period of 2008. Commodity mutual funds exclude energy assets from oil to distillates. Flows into energy mutual funds totaled $2.54 billion, lifting assets under management to $22.87 billion, EFPR Global said.

- Gold declined as the dollar climbed, eroding the metal’s appeal as an alternative investment. “This volatility is mostly dollar driven, with the currency markets undecided between a dollar collapse and a dollar revival. Physical demand remains weak.” Hedge-fund managers and other large speculators reduced their net-long position in New York gold futures by 6.6 percent in the week ended Aug. 18, according to U.S. Commodity Futures Trading Commission data. Speculative long positions, or bets that prices will rise, outnumbered short positions by 177,530 contracts.

- A top U.S. military official said Afghanistan’s security situation is getting worse, as Senator John McCain warned that there aren’t enough troops deployed in the country.

“It is serious and it is deteriorating,” Admiral Michael Mullen, chairman of the Joint Chiefs of Staff, said on CNN’s “State of the Union” program yesterday.

- Charlotte Russe Holding Inc.(CHIC), the U.S. clothing retailer for young women, agreed to be acquired for about $380 million by investment funds managed by Advent International Corp. The chain’s shares surged the most in eight years. Advent, based in Boston, plans to start buying shares around Aug. 31 for 20 days in a tender offer, San Diego-based Charlotte Russe said today in a statement. The offer of $17.50 a share is 27 percent higher than the Aug. 21 closing price on the Nasdaq Stock Market.

- Qualcomm Inc.(QCOM), trying to reignite slowing sales growth, is betting that computers in the future will be more like mobile phones. Smartbooks, which work like phones such as the BlackBerry yet resemble small laptops with full keyboards, will use Qualcomm’s chips and start selling next quarter, Chief Executive Officer Paul Jacobs said in an interview at the company’s headquarters in San Diego. Consumers want computers that will run all day on one battery charge, don’t need to be switched off and are always receiving data, said Jacobs, whose company is the world’s biggest maker of mobile-phone chips.

- As vacancies increase and retail sales throughout the U.S. remain a shadow of the decade’s boom, Apple Inc.’s(AAPL) stores are defying the recession. At Fifth Avenue and Fifty-Ninth Street, the noon-day line on Aug. 11 snaked out the front door. More than a dozen people waited to buy an iPhone, which runs from $99 to $299, plus at least another $70 a month for a service plan. Every computer, seat and station was occupied by a visitor to midtown Manhattan.

- Anyone who expects US stocks to follow tradition by falling next month may wait in vain for a retreat, according to Brian Belski, Oppenheimer’s chief investment strategist. “Seasonal patterns actually favor the market,” Belski said today. Trends have shifted during the past 15 years, in his view, and this year’s gains in June, July and August make it more likely that share prices will rise in September.

- Swine flu may infect half the U.S. population this year, hospitalize 1.8 million patients, and lead to 90,000 deaths, according to a report by White House advisers. Thirty percent to 50 percent of the country’s population will be infected in the fall and winter, according to the “plausible scenario” outlined in today’s report by the President’s Council of Advisers on Science and Technology. As many as 300,000 patients may require treatment in hospital intensive care units, filling 50 percent to 100 percent of all beds available to those facilities, the study said.

Wall Street Journal:

- Sen. Ted Kaufman (D., Del.) is expected on Monday to call for the Securities and Exchange Commission to review all forms of current stock-market structure, signaling the broadest statement yet from a legislator in the continuing debate over the growth in high-frequency trading, a lightning-fast, computer-based trading technique.

- ‘Zombie Credits’ Rise in Europe. The rise of "zombie credits" -- highly leveraged companies left to operate in default by lenders -- is raising concerns among analysts about the risk of another liquidity crisis when those loans come due.

- Proposed federal legislation aimed at curbing global warming would drastically reduce domestic fuel production, according to a new study commissioned by the oil industry as part of its campaign to oppose new restrictions. The report's findings, which are expected to be released Monday, project that by 2030, U.S. refining production could drop 17% from today's levels if the climate bill is passed as currently proposed. The drop would have to be made up by foreign imports, the study says, meaning the U.S. could end up relying on other countries for 19.4% of its refined fuel -- nearly twice the amount it imports today. The American Petroleum Institute, the U.S. oil industry's main trade group, commissioned the study in an effort to hammer home its argument that restrictions on emissions will be a burden on U.S. refiners. The industry sees the climate-change bill sponsored by U.S. Reps. Henry Waxman (D., Calif.) and Ed Markey (D., Mass.) as the harbinger of a grimmer future. Average U.S. refinery output would drop to 12 million barrels a day in 2030 from about 14.5 million barrels a day currently, if nuclear power, technology to reduce carbon emissions and the use of international offsets fail to become widespread. Refinery utilization rates could drop to 63.4%, from about 83% today.

- Off-shore hedge-fund investors could be the next target of the Internal Revenue Service and U.S. lawmakers after last week's landmark agreement between the U.S. and Swiss governments over secret Swiss bank accounts held by U.S. citizens. "We will work with other governments where possible to obtain the information we need," he said. "International tax evasion will continue to be a top priority." One area where the agency may be increasing its focus is hedge funds, or at least, U.S. investors in off-shore hedge funds. "Expect U.S. investors in off-shore hedge funds in places like the Cayman Islands, who failed to properly report earnings to the IRS, to be the next target of U.S. tax authorities," said Shahzad Malik, partner at TroyGould in Los Angeles, who focuses on the hedge fund and private equity industry. "There are indications that the U.S. may be taking steps to target off-shore hedge funds by asking them about their U.S. partners and investigating their earnings." Hedge fund attorneys have scrambled to write client alerts, and investors in alternative investment vehicles have begun taking a closer look to see what the IRS would be doing about U.S. investors in off-shore hedge funds. Alex Raskolnikov, a professor and tax expert at Columbia University Law School, argues that the IRS and Justice Department will identify tax avoiders that invest with hedge funds as part of its larger effort to have big financial institutions provide them with information about Americans with secret bank accounts. "The low-hanging fruit now are foreign financial institutions," Raskolnikov said. "If they are somehow entangled with off-shore hedge funds, you will learn about a couple of hundred hedge funds and what U.S. investors are there." "The U.S. government has no leverage with Cayman Island hedge funds, but they do have leverage against the Cayman Islands," Malik said. Lawmakers are also taking steps that could impose sanctions against off-shore jurisdictions. The Levin bill would allow Treasury to prohibit financial institutions from accepting credit-card transactions involving a certain foreign jurisdiction or a particular financial institution. "This could make it less convenient for investors with off-shore investments in hedge funds," Raskolnikov said. "They would have to physically go to get their capital." Another proposal would create a presumption that money in foreign accounts in "off-shore secrecy jurisdictions" is subject to taxation in the U.S. unless the U.S. taxpayer can prove its not. The provision lists 34 countries, including Cayman Islands, Antigua, Bahamas and Liechtenstein, as these jurisdictions.

- Sen. Charles Grassley, a key player in the debate over health-care reform, reiterated his opposition to a public insurance option Monday and questioned the notion that government-sponsored coverage for all Americans is a moral obligation. The senior Republican member of the Senate Finance Committee is central to the national debate as the bipartisan leadership of that committee–the so-called Gang of Six–struggles to forge a compromise plan. But speaking in front of a mostly friendly audience of about 250 people, the Iowa lawmaker stressed the distance between the two parties and listed what he thinks would not work. "Government is not a competitor, it's a predator," he said of the public option that has been embraced by key congressional Democrats. "We'd have 120 million people opt out [of private insurance], then pretty soon everyone is in health care under the government and there's no competitor."

NY Times:

- At 9:20 p.m. on July 3, Mr. McSwain arrested Mr. Aleynikov, 39, at Newark Liberty Airport, accusing him of stealing software code from Goldman Sachs(GS), his old employer. At a bail hearing three days later, a federal prosecutor asked that Mr. Aleynikov be held without bond because the code could be used to “unfairly manipulate” stock prices. This case is still in its earliest stages, and some lawyers question whether Mr. Aleynikov should be prosecuted criminally, or whether a civil suit may be more appropriate. But the charges, along with civil cases in Chicago and New York involving other Wall Street firms, offer a glimpse into the turbulent world of ultrafast computerized stock trading. no one disputes that high-frequency trading is highly profitable. The Tabb Group, a financial markets research firm, estimates that the programs will make $8 billion this year for Wall Street firms. Bernard S. Donefer, a distinguished lecturer at Baruch College and the former head of markets systems at Fidelity Investments, says profits are even higher. The profits have led to a gold rush, with hedge funds and investment banks dangling million-dollar salaries at software engineers. In one lawsuit, the Citadel Investment Group, a $12 billion hedge fund, revealed that it had paid tens of millions to two top programmers in the last seven years.

- The Justice Department’s ethics office has recommended reversing the Bush administration and reopening nearly a dozen prisoner-abuse cases, potentially exposing Central Intelligence Agency employees and contractors to prosecution for brutal treatment of terrorism suspects, according to a person officially briefed on the matter.

Washington Post:

- Protecting Out Seniors by Michael S. Steele. Americans are engaged in a critical debate over reforming our health-care system. While Republicans believe that reforms are necessary, President Obama's plan for a government-run health-care system is the wrong prescription. The Democrats' plan will hurt American families, small businesses and health-care providers by raising care costs, increasing the deficit, and not allowing patients to keep a doctor or insurance plan of their choice. Furthermore, under the Democrats' plan, senior citizens will pay a steeper price and will have their treatment options reduced or rationed. Republicans want reform that should, first, do no harm, especially to our seniors. That is why Republicans support a Seniors' Health Care Bill of Rights, which we are introducing today, to ensure that our greatest generation will receive access to quality health care. We also believe that any health-care reform should be fully paid for, but not funded on the backs of our nation's senior citizens.

- President Obama has approved the creation of an elite team of interrogators to question key terrorism suspects, part of a broader effort to revamp U.S. policy on detention and interrogation, senior administration officials said Sunday. Obama signed off late last week on the unit, named the High-Value Detainee Interrogation Group, or HIG. Made up of experts from several intelligence and law enforcement agencies, the interrogation unit will be housed at the FBI but will be overseen by the National Security Council -- shifting the center of gravity away from the CIA and giving the White House direct oversight. Under the new guidelines, interrogators must stay within the parameters of the Army Field Manual when questioning suspects. The task force concluded -- unanimously, officials said -- that "the Army Field Manual provides appropriate guidance on interrogation for military interrogators and that no additional or different guidance was necessary for other agencies," according to a three-page summary of the findings. The officials spoke on the condition of anonymity to discuss intelligence matters freely. Using the Army Field Manual means certain techniques in the gray zone between torture and legal questioning -- such as playing loud music or depriving prisoners of sleep -- will not be allowed.

NY Post:

- Wall Street may have discovered a way out from under the bad debt and risky mortgages that have clogged the financial markets. The would-be solution probably sounds familiar: It's a lot like what got banks in trouble in the first place. In recent months investment banks have been repackaging old mortgage securities and offering to sell them as new products, a plan that's nearly identical to the complicated investment packages at the heart of the market's collapse. "There is a little bit of deja vu in this," said Arizona State University economics professor Herbert Kaufman. But Kaufman said the strategy could help solve one of the lingering problems of the financial meltdown: What to do about hundreds of billions of dollars in mortgages that are still choking the system and making bankers reluctant to make new loans. In recent months, banks have been tiptoeing toward a possible solution, one in which the really good bonds get bundled with some not-quite-so-good bonds. Banks sweeten the deal for investors and, voila, the newly repackaged bonds receive AAA ratings, a stamp of approval that means they're the safest investment you can buy. "You've now taken what was an A-rated security and made it eligible for AAA treatment," said Richard Reilly, a partner with White & Case in New York. As for the bottom-of-the-barrel bonds that are left over, those are getting sold off for pennies on the dollar to investors and hedge funds willing to take big risk for the chance of a big reward. Kaufman said he's optimistic about the recent string of deals because, unlike during the real estate boom, investors in these new bonds know what they're buying.

- TODD Stottlemyre, the former major league pitcher and the son of Yankees standout Mel Stottlemyre, is hoping to hit a home run moving from the diamond to the hedge-fund world. The 44-year old former member of the Toronto Blue Jays, Oakland Athletics, St. Louis Cardinals, Texas Rangers and Arizona Diamonbacks, just started Desert Shores Capital, which, according to one published report, could be a hedge fund built around fast-paced momentum trading in stocks. We certainly wish him and his partner, Joe "Upside Trader" Donohue, all the best. But it may not be the best time for ex-jocks to try and make a go of it managing other people's money. After all, news of Lenny Dykstra's fantastic blow-up are still reverberating in videos all around the Web. Dykstra, a former All-Star, recently filed personal bankruptcy while trying to build a financial-advice empire.

Detroit Free Press:

- Anti-labor forces say it's welfare for the UAW and Democrats' union allies. Labor supporters say it falls short of what's needed as tens of thousands of union members are pushed into early retirement as employers cut back health care coverage. They're both talking about a $10-billion provision tucked deep inside thousands of pages of health care overhaul bills that could help the UAW's retiree health-care plan and other union-backed plans. Greg Mourad of the National Right to Work Committee called it "a shameless case of political payback," saying Democrats and President Barack Obama are trying "to force the rest of us to pay billions to cover those unions' health care." Labor advocates say even more funding may be needed. "It is not enough money," said former U.S. Rep. David Bonior, a Mt. Clemens Democrat who chairs the board at Washington, D.C.-based American Rights at Work, a labor advocacy group. "That will have to be supplemented to fill the gap."

Rassmussen:

- Eighty-two percent (82%) of Americans disagree with the decision to release the terminally ill terrorist convicted of blowing up a Pan Am jet over Lockerbie, Scotland so he could return home to die in his native Libya. A new Rasmussen Reports national telephone survey finds that just 10% agree with Scotland’s decision to release Abdel Basset Ali al-Megrahi, the only person convicted in the incident in which 270 people were killed.

Reuters:
- Animal welfare group People for the Ethical Treatment of Animals (PETA) said on Monday it bought stock in retailer Talbots Inc (TLB) and will take its case against what it calls cruel Australian wool farming directly to shareholders. PETA bought 675 shares of women's apparel chain Talbots at $5.81 in early August and plans to speak at the annual meeting of the Hingham, Massachusetts-based company next year.

- Wall Street salaries have become everybody's business lately, but the Obama administration's pay czar may try to keep under wraps a large portion of the compensation plans he is reviewing. Kenneth Feinberg has said he is uncertain how much information will be made public. Privacy laws and fears that highly compensated executives will become targets for populist anger argue for limiting such disclosure.

Dagbladet Borsen:

- A.P. Moeller-Maersk A/S is ready to lower prices to retain market share in its container line, the world’s biggest, citing CEO Nils Smedegaard Andersen. “We will not allow anyone to take market share from us by systematically undercutting our prices. If it comes down to that we’re ready to fight it out on prices,” Andersen said.

Hindustan Times:

- New Delhi: India is all set to build new strategic ties with gas-rich Iran. Even as the fate of the $8 billion pipeline project to import gas from Iran to India via Pakistan has been hanging fire since 1989, the ministry of power along with state-owned NTPC and Powergrid Corp. of India Ltd is working out the contours of another $10 billion similar deal from Iran.

ArabianBusiness.com:
- Iran's oil minister Gholamhossein Nozari said over 8.8 billion barrels of crude oil has been discovered in four new layers at the Sousangerd oilfield, the largest in five years, the IRNA news agency reported on Monday. "Drilling all layers of this field was successfully finished in the depth of 5,026 metres and as expected the amount of in-place oil reserve is about 8.83 billions of barrel," Nozari was quoted as saying.