Bloomberg:

• Jobless Claims in U.S. Rose to Highest Since November. Claims for U.S. jobless benefits jumped to the highest level since November and Philadelphia-area manufacturing shrank for the first time in a year, indicating the economy may be slowing faster than forecast. The number of unemployment claims unexpectedly shot up by 12,000 to 500,000 in the week ended Aug. 14, Labor Department figures showed today in Washington. “There’s a red flag being waved right now that says ‘Danger,’” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Growth is going to slow in the second half and we might face something a little more ominous than that.”
  
• U.S. Budget Deficit Forecast Increased by CBO to $1.066 Trillion for 2011. The U.S. Congressional Budget Office predicted the budget deficit for fiscal year 2011 will be $1.066 trillion, revised up from an estimate of $996 billion in March. The nonpartisan agency’s semi-annual budget report is likely to add fuel to the November midterm election debate over reducing the deficit at a time when the nation’s economic recovery may call for more stimulus. Today’s report estimated that the deficit will be 7 percent of the nation’s gross domestic product in 2011. The CBO projected that the cumulative deficit for the next decade will be $6.27 trillion, compared with its March estimate of $5.99 trillion. The CBO said today the deficit for the current fiscal year ending Sept. 30 will be $1.34 trillion. That is 9.1 percent of GDP, or the second largest shortfall in the past 65 years, exceeded only by last year’s 9.9 percent. The agency blamed this year’s shortfall primarily on weak tax revenue and policies enacted in response to the economic decline. Last year’s economic stimulus package accounts for $392 billion of the 2010 deficit, the budget office said. Judd Gregg of New Hampshire, the top Republican on the Senate Budget Committee, decried a “spending spree” sparked in part by the policies of a White House and Congress controlled by Democrats. “Today’s CBO outlook only underscores what we already know -- the current pace of U.S. spending is unaffordable and unsustainable, and without a change in direction, this country is headed for fiscal calamity,” Gregg said in a statement. The CBO report said economic growth has been “anemic” compared with previous recoveries and predicted the economy will only grow by 2 percent from the fourth quarter of 2010 to the fourth quarter of 2011. The CBO anticipated the unemployment rate won’t dip below 8 percent for the rest of Obama’s first term. It said unemployment will drop to 9.0 percent in 2011, 8.1 percent in 2012 and 6.6 percent in 2013. The report also said the government is spending this year almost as much on unemployment benefits as the wars in Iraq and Afghanistan. It said Congress has appropriated $164 billion for the wars this year, while unemployment costs come in at $160 bill. The report forecasts that debt held by the public will reach $10 trillion by the end of next fiscal year, and then climb to 16.07 trillion by 2020.
• Philadelphia Fed Factory Index Drops as Manufacturing-Led Recovery Weakens. Manufacturing in the Philadelphia region unexpectedly shrank in August for the first time in a year as orders and sales slumped, a sign factories are being hurt by the U.S. economic slowdown. The Federal Reserve Bank of Philadelphia’s general economic index fell to minus 7.7 this month, the lowest reading since July 2009, from 5.1 in July. Readings less than zero signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware. Economists forecast the measure would rise to 7, according to the median of 58 projections in a Bloomberg News survey. The Philadelphia Fed bank’s shipments gauge dropped to minus 4.5 from 4 in July. The new orders measure decreased to minus 7.1, the lowest level since June 2009, from minus 4.3. The employment index fell to minus 2.7 from 4. The Philadelphia Fed’s index of prices paid and received all fell, indicating inflation in retreating.
• Intel(INTC) Will Buy McAfee(MFE) for $7.68 Billion. Intel Corp. agreed to buy McAfee Inc. for $7.68 billion, its largest acquisition, adding security software to its chipmaking arsenal. McAfee investors will receive $48 a share in cash, Santa Clara, California-based Intel, the world’s largest chipmaker, said in a statement today. That’s 60 percent more than McAfee’s closing price yesterday. Both boards have unanimously approved the deal, Intel said.
• Asian Computer Shipments Signal Extended Consumer Spending Slump in U.S. At Taipei-based Acer Inc., the world’s second-largest maker of computers, sales plunged 38 percent in July from a year earlier. Micro-Star International Co., a maker of boards that connect computer components, recorded a 15 percent drop. Sales at Asian computer makers, which account for more than 80 percent of computer and parts imports into the U.S. each year, indicate American shoppers aren’t likely to boost the spending that accounts for 70 percent of the world’s largest economy. Already, consumption is growing at the slowest pace of any recovery since 1945.
• Retail Spaces Lead Drop in U.S. Commercial Property. U.S. commercial real estate prices fell the most in almost a year in June as the economic recovery showed signs of faltering, Moody’s Investors Service said. The Moody’s/REAL Commercial Property Price Index dropped 4 percent from May, the company said today in a report. The decline was the biggest since July 2009, and pushed the gauge down 0.9 percent from the start of the year. High unemployment and concern over slowing economic growth are hampering a price rebound for offices, apartments, industrial and retail properties, Moody’s said. The Moody’s index is down 41 percent from its 2007 peak, having gained 4.2 percent from the seven-year low set in October. The value of malls and shopping centers fell almost 11 percent in the second quarter, the biggest drop of any commercial property type tracked in the Moody’s index. Apartments and offices values both gained about 4 percent, while industrial properties dropped 2.9 percent.
• OPEC will reduce crude shipments by 1% this month as Chinese refining demand slows, according to tanker-tracker Oil Movements.
• Corporate Bond Risk Increases in Europe, Credit-Default Swap Market Shows. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased 4 basis points to 485, according to JPMorgan Chase & Co. at 3:30 p.m. in London. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 1.5 basis points to 108, JPMorgan prices show. The Markit iTraxx Financial Index of 25 banks and insurers climbed 1.5 to 126.25.
• Wheat Gains Most in Two Weeks on Increased Demand for U.S. Stockpiles. Wheat rose the most in two weeks after a government report today showed increased U.S. export sales of both grains. Exporters sold 1.41 million metric tons in the week ended Aug. 12, 4.4 percent more than the week before, the U.S. Department of Agriculture said. Before today, wheat gained 4.1 percent this month as Russia imposed a ban on external shipments. “Export sales were high,” said Larry Glenn, an analyst at Frontier Ag in Quinter, Kansas. The effects of Russia’s ban “showed up today on the sales report. All of the grains were strong. They were above the high end of the range.” Wheat futures for December delivery advanced 28 cents, or 4.1 percent, to $7.1675 a bushel at 11:39 a.m. on the Chicago Board of Trade. A close at that price would be the biggest gain for a most-active contract since Aug. 5. The price has gained 57 percent since the end of May as the worst Russian drought in 50 years damaged crops.
• Oil Falls as Surprise Increase in U.S. Jobless Claims Dims Demand Outlook. Crude oil declined after rising U.S. jobless claims and a contraction in manufacturing in the Philadelphia area bolstered concern that the economic rebound in the world’s biggest oil-consuming country is slowing. Oil declined as much as 1.9 percent after the Labor Department said initial jobless claims rose to the highest level since November. Total U.S. petroleum inventories are at the highest level in at least 20 years, according to the Energy Department. “The negative employment picture, along with collective record petroleum inventories, will continue to put pressure on energy markets,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. A U.S. Energy Department report yesterday showed that total petroleum stockpiles climbed 5.34 million barrels to 1.13 billion in the week ended Aug. 13, the highest level since at least 1990. The department began to compile weekly inventories in 1990, said Jonathan Cogan, an Energy Information Administration spokesman in Washington. Stockpiles of distillate fuel, a category that includes heading oil and diesel, rose 1.07 million barrels to 174.2 million last week, the highest level since 1983, according to yesterday’s report. The increase left supplies 27 percent above the five-year average for the period, the department said.
• Vietnam Dong Slumps to Record Low as Adviser Warns of 'Shock'. Vietnam’s currency dropped for a fourth straight day to a record low after an adviser to the Prime Minister said the country risks a foreign-currency liquidity ‘shock.’ The warning came after the central bank yesterday devalued the currency for a third time in the past year to boost exports and shore up the nation’s trade deficit that has nearly doubled in the seven months through July. The currency has slumped 5.2 percent in 2010, the worst performance among 16 currencies in Asia monitored by Bloomberg.
• Basel Committee Says Bank Bond Investors Should Help Fund Future Bailouts. The Basel Committee on Banking Supervision is proposing that debt counted as bank capital should be converted to stock or written off in a crisis, forcing bond investors to bear some of the cost of future bailouts. All regulatory capital instruments sold by banks should be capable of absorbing losses if the company can’t fund itself, the committee said in a consultative paper today. Before taxpayers’ cash is used to rescue a lender, so-called contingent capital should be converted to equity or written off.

Wall Street Journal:

• LG Goes With Nvidia(NVDA) Chip in New Smartphones. LG Electronics on Thursday confirmed that it would be using a dual-core processor manufacturered by Nvidia for its line of Optimus smartphones later this year. That’s a coup for Nvidia, which has been pushing to enter the smartphone market with its Tegra chip and expand beyond its traditional business of providing graphics chips for PCs.
• Value of Independent Advisory Practices Rises Despite Recession. Despite the recession, demand for advisory practices has soared and the average value of independent advisory practices rose 12.1% annually in the five years through June, said FP Transitions, which operates a market for buying and selling financial-services practices.

CNBC:

• Jobs Outlook Isn't Just Bad, It May Be Getting Worse.

MarketWatch:

• Other Duquesne Managers to Start Their Own Firm. Other portfolio managers at Duquesne Capital Management are planning to start their own hedge fund firm, according to a person familiar with the situation.

New York Post:

• Druckenmiller Departs and More Could Follow. Hedge fund giant Stanley Druckenmiller's dramatic decision yesterday to throw in the towel and give up a life of managing money may just be the start of a mass exodus from the field. More hedge fund hotshots could follow, sources say. "I think there's a lot of fatigue in the industry," said a prime broker who's talked to a number of managers thinking of quitting the business. With the markets so volatile, investor money hard to come by and tighter regulatory scrutiny in the offing, Druckenmiller is not alone in feeling the pressure, added one hedge fund executive, who asked not to be named.

Business Insider:

• How Obama's Gift to Unions Will Destroy The Few Remaining Solvent States.
• David Rosenberg Delivers Long, Must-Read Rebuttal of the "Bond Bubble" Talk.
  

Zero Hedge:

• Retail Investors Don't Care if Stocks Are Up or Down, They Just Want Out - Record 15th Weekly Outflow from Domestic Stock Funds. (graph)
• JPMorgan(JPM) Slashes GDP Forecast for Remainder of 2010.
  

New York Times:

• Shrinking 'Quant' Funds Struggle to Revive Boom Times. They were revered as the brightest minds in finance, the “quants” who could outwit Wall Street with their Ph.D.’s and superfast computers. But after blundering through the financial panic, losing big in 2008 and lagging badly in 2009, these so-called quantitative investment managers no longer look like geniuses, and some investors have fallen out of love with them. The combined assets of quantitative funds specializing in United States stocks have plunged to $467 billion, from $1.2 trillion in 2007, a 61 percent decline, according to eVestment Alliance, a research firm. That drop reflects both bad investments and withdrawals by clients.

The Detroit News:

• UAW's Bob King Reiterates Ban on Foreign Cars on Union Property. United Auto Workers President Bob King this month reiterated the union's longstanding policy to ban nonunion vehicles on UAW property, but did so in a more hands-on and publicly forceful fashion that separates him from his predecessors. "Buying a U.S./UAW vehicle makes a difference," King wrote in a two-page rebuttal to a blog post written in July by a Kansas City Business Journal reporter who was recently ousted from the parking lot of UAW Local 249 for driving a Toyota Camry.

LA Times:

• CALPERS Investment Staff Received Luxury Travel, Gifts From Financial Firms. California's public pension system allowed senior portfolio managers to take private jet trips around the world, paid for by firms seeking business with the agency. The state's embattled public pension fund for years allowed its top investment staff to accept private jet trips around the world and other luxury travel from financial firms with whom they were doing business — without disclosing any of the trips publicly, according to the court testimony of a senior portfolio manager. Mark testified that he had taken 10 or 12 private jet trips paid for by firms doing business with CalPERS to locations including Shanghai, Mumbai and New York. Financial firms paid for dozens more such trips for him on commercial airlines, he said, often in first or business class. Mark reported none of the travel on disclosure forms that government officials must file with the state when they accept gifts valued over $50. CalPERS spokeswoman Pat Macht said Mark and other CalPERS officials did not have to disclose the payments because the luxury travel was part of CalPERS' contracts with the investment firms. CalPERS has never allowed those contracts to be made public, arguing that they contain trade secrets.
  

Houston Chronicle:

• Drillers Fear Sinking in Shallow Waters. They say federal delays in permit process threaten their companies' existence. A post-oil-spill delay in issuing new federal drilling permits in the shallow waters of the Gulf of Mexico, at first an inconvenience, has suddenly emerged as a real threat to the future of companies in the business, industry executives said Wednesday. While no one is talking about bankruptcy filings, shallow-water drilling contractors say the holdup in permitting is cutting into the bottom line a bit more each day they have rigs sidelined and idled workers on payroll. "At some point," said Randy Stilley, CEO of Houston's Seahawk Drilling, "it becomes a viability issue." So far, permitting delays have idled 14 of the 46 available jackups in the Gulf and forced offshore companies to cut several hundred jobs. Each rig employs about 100 workers and supports many additional indirect jobs at supply boat companies, oil field services companies and other businesses. If the situation doesn't change, 25 rigs will be idle by the end of August and 30 by the end of September as existing permits expire, according to figures provided by the Shallow Water Energy Security Coalition, an industry group formed in May to call attention to the issue. Small independent oil and gas companies that hire the rigs and are the backbone of the business may also be forced to abandon the Gulf, taking with them millions in spending in the region, said John Rynd, CEO of Houston-based Hercules Offshore. "You kill this industry, you kill a lot of dollars," he said. Shallow-water drilling operations, because they rely on rigs whose legs reach the sea floor and have blowout preventers on the rig deck, are not affected by the moratorium. But industry officials say the Interior Department has essentially created a de facto moratorium on shallow-water drilling with new rules issued in June that call for new rig safety measures and additional plans for responding to spills. Since then, the department's Bureau of Ocean Energy Management has approved just two new shallow-water drilling permits, compared with the 10 to 15 per week approved by its predecessor, the Minerals Management Service, prior to the BP accident.

Reuters:

• Apple(AAPL) iPhone 4 May Go On Sale in China by September. China Unicom, China's second-largest telecommunications operator, may start selling Apple Inc's iPhone 4 in the mainland market in September, state television reported on Thursday. "China Unicom has reached an agreement with Apple, and the iPhone 4 may enter the mainland market by as early as next month," the report said, citing a company statement released to the ongoing China Internet Conference in Beijing.
• U.S. Homeowner Confidence Fell in 2nd Quarter. U.S. homeowners were less confident about the value of their homes in the second quarter, with one-third believing home prices had not yet reached a bottom, real estate website Zillow.com said on Thursday. Nevertheless, a significant number of homeowners said they planned to put their home up for sale in the next six months if they saw signs of a real estate market turnaround. Homeowners were more pessimistic about the short-term future of home values in their local market than they had been in the previous three quarters, according to the Zillow Second Quarter Homeowner Confidence Survey. 5 percent of U.S. homeowners said they were very likely to put their home on the market in the next six months if they saw signs of a real estate market turnaround. Zillow said this translated into 3.8 million homes with the potential to come into the market. By comparison, 5.2 million existing homes were sold in all of 2009.

Nikkei English News:

• Sharp Corp. will reduce LCD panel production this month for components that serve other companies, such as Sony Corp., because of higher TV inventories in the U.S. and China.