Evening Headlines
Bloomberg:
- Australia's Bank Bonds Punished on Housing Bubble Concern: Credit Markets. Investors in U.S. dollar-denominated bonds issued by Australian banks are demanding higher relative yields on concern the country’s property market is overheating.
- Oil Supply Climbing to One-Month High in Bloomberg Survey: Energy Markets. U.S. crude oil inventories probably increased to a one-month high last week amid signs that U.S. economic growth is slowing, a Bloomberg News survey showed. Supplies rose 1.55 million barrels, or 0.4 percent, in the seven days ended Aug. 27 from 358.3 million a week earlier, according to the median of 12 analyst estimates before an Energy Department report tomorrow. The gain would leave stockpiles at the highest level since July 23. “These inventory numbers are getting too big to ignore, particularly because this is the case across the board,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “At the very least they will present the market with a strong headwind.” Prices may drop as stockpiles approach the 2010 high of 365 million reached on May 21. Demand is set to decline during the next two months as refineries idle units to perform seasonal maintenance. Inventories of distillate fuel, a category that includes heating oil and diesel, probably climbed 1 million barrels, or 0.6 percent, from 176 million, the survey showed. Stockpiles in the week ended Aug. 20 were the highest since 1983. “We’re looking at the highest inventory levels in a generation,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. “You have to go back at the early years of Ronald Reagan’s administration to find distillate supplies this high.” U.S. stockpiles of oil and fuel climbed 8.9 million barrels to 1.14 billion in the week ended Aug. 20, the highest level since at least 1990, when the Energy Department began to collect weekly data. On a monthly basis, supplies are at the highest level since October 1983. Inventories have climbed for eleven weeks, the longest stretch since July 2007.
- Potash(POT) Says BHP(BHP) Cold-Calling Its Customers as Part of $40 Billion Takeover. Potash Corp. of Saskatchewan Inc. said BHP Billiton Ltd. has been cold-calling some of its customers as part of a $40 billion “hostile takeover effort.”
- IMF Changes, Expands Crisis-Prevention Credit Lines. The International Monetary Fund, which has shored up economies from Romania to Greece over the past 18 months, approved changes to its credit line program to encourage countries to turn to the fund before crises develop. Its flexible credit line, reserved for countries that pre- qualify based on sound fundamentals, will be extended for up to two years and have no set limits. A new credit line with additional policy requirements for economies with “moderate vulnerabilities” also was created, the IMF said in a statement.
- ACLU Sues U.S. Over Targeted Killing of Citizens. The American Civil Liberties Union sued the U.S. government over an alleged policy of killing American citizens who are suspected of terrorism. The lawsuit, filed today in federal court in Washington, argued that such targeted assassinations by the government are unconstitutional. “A program that authorizes killing U.S. citizens, without judicial oversight, due process or disclosed standards is unconstitutional, unlawful and un-American,” ACLU Executive Director Anthony Romero said in a statement announcing the filing of the case against U.S. President Barack Obama, the Defense Department and the Central Intelligence Agency.
- Toyota Prius May Lead Japan Car Sale Collapse as Subsidies End. The Prius hybrid has spearheaded sales growth for Toyota Motor Corp. in Japan for more than a year, helped by government subsidies. The model will likely bear the brunt of plunging demand as the support ends. “A collapse in sales is unavoidable,” said Hiromi Inoue, the new-car sales chief for Tokyo Toyopet Motor Sales Co. “The daily pace of orders for the Prius is already dropping. We are bracing ourselves for the coming crisis.”
- Buy Stocks as Municipal Yields Reach 43-Year Lows: Commentary by Joe Mysak. Don’t worry about too much red ink in state and local budgets and not enough money in public pension plans. Forget about the prospect of inflation. That’s what the municipal market is telling investors. The last time yields were this low, Jacqueline Susann had been on the bestseller list with “Valley of the Dolls” for 62 weeks. The oldest gauge of yields in the market, the Bond Buyer 20-General Obligation Bond Index, fell to 3.88 percent last week, below the recent record low of 3.94 percent it reached in October 2009. Yields were last this low on May 11, 1967.
- Hon Hai, Foxconn International Shares Tumble After Earnings Miss Estimates. Hon Hai Precision Industry Co., the largest contract manufacturer of electronics, and handset unit Foxconn International Holdings Ltd. fell in Asian trading after they reported earnings that missed analysts’ estimates. Hon Hai lost 6.6 percent to NT$113 as of 10:27 a.m. in Taipei, set for its biggest decline since May 2009. Foxconn International, the world’s biggest contract manufacturer of mobile phones, dropped 9 percent to HK$5.06 in Hong Kong, widening its lead as the worst performer on the benchmark Hang Seng Index this year.
- With Cash on Hand and Shares Falling, Companies Look to Spend. With a big drop in the major stock indexes this month, corporations are increasingly looking for opportunities to buy battered shares--both their own and those belonging to other companies. Investors remain skittish, sending the Dow Jones Industrial Average down 3.8% in August and opening the door for U.S. companies sitting on some $2.03 trillion in cash to grab undervalued stocks caught in the selloff. And with another $20 billion or so in proposed deals occurring since Friday's close, the merger-and-acquisition market remains a big area of spending.
- The Surge and Afghanistan by John McCain. Unless he understands the reason for success in Iraq, the president is unlikely to lead a successful strategy against the Taliban. Today President Obama will deliver a major speech to mark the draw down of U.S. forces in Iraq to 50,000 troops. He will likely point out, as his administration has rightly argued, that Iraq still faces major challenges—foremost its inability to form a government—and that neither American sacrifice nor our commitment to Iraq's success is ending today. Yet our troops are returning with honor, which makes this a fitting time to reflect on the causes of their victory and on what lessons from Iraq can help us win the war in Afghanistan.
- House Travel Stipends Probed. Congressional investigators are questioning a half-dozen lawmakers for possibly misspending government funds meant to pay for overseas travel, according to people familiar with the matter. The investigation follows a Wall Street Journal article in March that said lawmakers had used daily cash stipends, meant to cover certain costs of official government travel overseas, to cover expenses that appeared to be unauthorized by House rules. An independent ethics board has referred the matter to the House ethics committee.
- U.S. Wants Report Card for Cars. System Would Rate Fuel Economy, Emissions; Industry Says Government Veers Into Issuing Opinions. The government proposed labeling each new passenger vehicle with a letter grade from A to D based on its fuel efficiency and emissions, part of a broader effort by the Obama administration to promote electric cars and other advanced-technology vehicles. The proposed new rules, released jointly Monday by the Environmental Protection Agency and the Transportation Department, would be the most substantial change in 30 years to the familiar price-and-mileage labels affixed to the windows of new cars at dealerships. The proposed changes —which come as the Obama administration enforces stringent new rules to boost overall fuel economy—were criticized by the car industry, which said the government would be crossing the line between requiring responsible advertising and making value judgments about vehicles. "The proposed letter grade falls short because it is imbued with school-yard memories of passing and failing," said Dave McCurdy, president of the Alliance of Automobile Manufacturers, the industry's largest trade group. A spokeswoman for the alliance added that "grades may inadvertently suggest a government label of approval."
- The Jewelry Prescription. Medical Bracelets Go High-Tech. Style Aside, More People Find They Should Wear Them.
- Social Security Bait and Switch.
- High Altitude, Low Visibility by Andy Xie. Commentary: China's astonishing ascent has concealed many flaws.
- Small-Business Hiring Shows Net Gain, But Pace Slows. Owners of small businesses sour on economy, ease back on hiring, surveys find. Small businesses in the U.S. saw net employment gains in August, but their hiring pace slowed from earlier this year, and small-business owners' outlook for the economy worsened significantly from July to August, according to two surveys released Monday.
NY Times:
- Why Wall St. Is Deserting Obama. Daniel S. Loeb, the hedge fund manager, was one of ’s biggest backers in the 2008 presidential campaign. A registered Democrat, Mr. Loeb has given and raised hundreds of thousands of dollars for Democrats. Less than a year ago, he was considered to be among the Wall Street elite still close enough to the White House to be invited to a speech in Lower Manhattan, where outlined the need for a financial regulatory overhaul. So it came as quite a surprise on Friday, when Mr. Loeb sent a letter to his investors that sounded as if he were preparing to join in Washington over the weekend. “As every student of American history knows, this country’s core founding principles included nonpunitive taxation, constitutionally guaranteed protections against persecution of the minority and an inexorable right of self-determination,” he wrote. “Washington has taken actions over the past months, like the Goldman suit that seem designed to fracture the populace by pulling capital and power from the hands of some and putting it in the hands of others.” Over the weekend, the letter, with quotations from , and President Obama, was forwarded around the circles of the moneyed elite, from the Hamptons to Silicon Valley. Mr. Loeb’s jeremiad illustrates how some of the president’s former friends on Wall Street and in business now feel about Washington. Mr. Loeb isn’t the first Wall Streeter to turn on the president.
- And Now Even The Administration is Talking About a Double Dip. It isn't just Roubini and the other Dr. Dooms out there. Now the call is coming from inside the house!
- Bank of America(BAC) Now Proudly Exporting High Frequency Trading Market Death and Destruction to Asia.
- A Detailed Analysis of Projected Home Prices: A Look at Underlying Supply and Demand Forces.
- More Observations on High Frequency Trading's Tyranny of Stock Markets. Anywhere one turns these days, bashing HFT is the new market normal. Having written 150 articles on the topic, beginning in April 2009, we are happy to have brought the world's attention to this most dangerous of market aberrations. Yet until the SEC finally bans the practices of micro churning, quote stuffing, positive feedback loop chasing, flash trading, subpennying, DMA accessing, and all other aspects conceived merely to provide some market participants with an unfair advantage over everyone else, the fight against HFT must continue.
- State Default Risk. Below is a chart highlighting default risk for sixteen states that we have credit default swap (CDS) pricing for.
- Tidal Wave? 10-Point Poll Edge for GOP. Democrats thought things couldn't get much worse on the electoral front — and then they went home to campaign. A new Gallup poll released Monday shows Republicans with a record 10-point edge over Democrats on the "generic ballot" test — the question of whether voters prefer a Democratic or Republican congressional candidate. It’s the largest GOP polling edge at this stage in the 68 years of the generic ballot poll. The Gallup poll, coming at the end of a brutal August for Democrats and President Barack Obama, reinforces the rapidly forming prevailing view that the horizon is as bleak for Democrats as it ever has been.
- Homebuyer's Tax Break Isn't 'High' on President's List. President Obama will be exploring a number of new options to jump-start the flagging economy – but reinstating the first-time homebuyer’s tax credit to prop up housing sales isn’t likely to be one of them, White House press secretary Robert Gibbs says.
- Survey: Mortgage Closing Costs 37% Higher. A recent survey by Bankrate.com found that, on average, origination and third-party fees on a $200,000 purchase mortgage added up to $3,741 — a 37% jump over last year's average of $2,739. The fees can include appraisals, credit reports, a closing or settlement attorney and surveys. Some housing experts say costs are rising because lenders have had to hire more staff to comply with the requirements of the Jan. 1 rule. That includes auditors, inspection experts and others who make sure estimates are accurate. "Lenders have had to hire compliance people," David Leoncavallo, president of GFEazy, a Salt Lake City provider of compliance and other data for lenders. "To go up from $2,700 to $3,700 overnight is insane. Consumers should be upset."
- Iran to Make Medical Reactor Fuel in Year - Report. Iran said it would produce in a year the nuclear fuel needed for a medical reactor in Tehran, a news agency reported on Monday, days after the Islamic state began loading fuel into its first atomic power plant. Iran's nuclear chief Ali Akbar Salehi said Tehran so far had produced 25 kg (55 lb) of uranium to a level of 20 percent purity for the Tehran reactor, the official Irna news agency quoted Salehi as saying in an interview with the country's Arabic-language TV station, Al-Alam.
- Japan August Manufacturing PMI Lowest in 14 Months.
- Hedge Fund Managers More Bearish on US Stocks - Report. Almost half of all hedge fund managers are bearish about the U.S. stock market, up from 33 percent a month earlier, according to a new report released on Monday. Forty-seven percent of 104 hedge fund managers polled by TrimTabs and BarclayHedge in the last week said they were bearish on the Standard & Poor's 500 index, the research groups said. Only about 17 percent respondents said they were bullish on the S&P 500, down from 34 percent a month ago, they noted.
- US Housing Woes Compound Labor Concerns. Concerns that the depressed US housing sector will remain a drag on the US labor market have mounted following the loss of nearly 120,000 jobs in construction and related businesses in the last three months for which statistics were available. According to Financial Times analysis, the decline in housing-related employment was the biggest weight on private sector job creation as it slowed to an average of 51,000 jobs a month during the May-July period from 153,000 a month in February-April. US Labor Department data show that some 61,000 construction jobs were lost between May and July, with another 56,000 positions shed in ancillary areas, such as furniture, building products and financial services related to property.
- China and Iran will sign a $2 billion contract to build railway networks in western Iran on Sept. 12, citing Iran's Roads and Transportation Minister Hamid Behbahani.
- None of note
- Asian equity indices are -2.0% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 133.50 +3.0 basis points.
- Asia Pacific Sovereign CDS Index 121.25 -4.25 basis points.
- S&P 500 futures +.04%.
- NASDAQ 100 futures +.02%.
Earnings of Note
Company/Estimate
- (DG)/.38
- (DSW)/.45
- (ABM)/.41
9:00 am EST
- S&P/CaseShiller 20 City Home Price Index for June is estimated to rise +.2% versus a +.47% gain in May.
- The Chicago Purchasing Manager for August is estimated to fall to 57.0 versus a reading of 62.3 in July.
- Consumer Confidence for August is estimated to rise to 50.7 versus a reading of 50.4 in July.
- FOMC Minutes
- (TSCO) 2-for-1
- The NAPM-Milwaukee for August, Bloomberg FCI for August, weekly ABC Consumer Confidence reading, weekly retail sales reports, Morgan Stanley Global Industrials Conference and the (GES) analyst meeting could also impact trading today.
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