Thursday Watch

Evening Headlines
Bloomberg:

• Farm Exports by U.S. May Surge to Record on Crop-Price Gains, Glauber Says. U.S. farm exports may surpass a 2008 record of $115.3 billion on surging corn, soybean and wheat prices, according to Joe Glauber, the U.S. Department of Agriculture’s chief economist. Exports may exceed the August forecast of $113 billion for the year that began Oct. 1, Glauber said today in a telephone interview. “We very well could exceed the record if prices increase by enough,” Glauber said. Rising prices shouldn’t deter foreign buyers enough to reduce exports significantly because of high demand for U.S. goods, he said. “We’re the only game in town” for wheat, after Russia halted exports following a drought, he said.
  
• Dubai's Worst Office Buildings Will Be Empty Forever, CBRE Says. Some Dubai office buildings are so ill-conceived and poorly located that they will never be occupied, while others may command no more than the cost of maintenance, according to CB Richard Ellis Group Inc. “Some buildings will be permanently vacant and will never be let because they are wrongly located, they are of poor quality or have the wrong legal structure in place,” Nicholas Maclean, Middle East managing director for the U.S. property broker said in an interview. Buyers with no experience in property management flocked to purchase floors in planned office buildings before any work started, resulting in poorly finished office towers in inconvenient locations with multiple owners, Maclean said. Such places have to compete for tenants in a Dubai market with an overall vacancy rate of 40 percent, with newly developed areas on the outskirts hit the hardest. At least 20 million square feet (1.85 million square meters) of space, about 40 percent of Dubai’s existing office supply, will be added in the next four years, CBRE estimates. That will put further pressure on prices that slumped by 60 percent on average since the peak in mid-2008.
• Securitization Flaws May Lead Investors to Fight Mortgage Deals. Potential paperwork errors on some of the $1.34 trillion of securitized home mortgages may give investors an opening to challenge the legality of deals, threatening to unnerve financial markets, according to Joshua Rosner, managing director at Graham Fisher & Co. Some loans to borrowers with poor credit before 2007 may not have been transferred to mortgage trusts in the manner required by their pooling and servicing agreements. That raises questions about the ownership of the loans and may allow investors to force lenders to buy back the securities, Rosner wrote yesterday in a note to clients. The failure to include MBS trust names on documents and to properly assign loans to the trust may encourage MBS holders to challenge the entire securitization, rather than press lenders to take back individual loans that were fraudulently issued, according to Rosner, whose firm advises investors and regulators. That could set off legal fights over almost all subprime MBS sold to investors.
• Santander Funding at Inferior Rate to Inferior Bank Defines Being Spanish. Anyone wondering why the most profitable bank in the euro region pays more to borrow than some of the worst performers can find the answer in Spain, where high unemployment and a sputtering economy pushed up funding costs at Banco Santander SA. Santander sold 1 billion euros ($1.4 billion) of 4.125 percent, seven-year senior bonds last month with a AA rating that yield 156 basis points more than average market rates. Germany’s Commerzbank AG, which required a government rescue in 2008, issued 1 billion euros of 4 percent, 10-year senior debt with an A rating that yields 126 basis points more than the benchmark. Bondholders are penalizing Santander, based in the northern Spanish city of the same name, because the nation’s jobless rate -- at 20.5 percent in August -- was the highest in the euro region and the budget deficit was the third biggest last year as a proportion of gross domestic product. Moody’s Investors Service cut Spain’s debt rating in September because of doubts about the country’s ability to generate enough growth to meet its fiscal targets beyond 2011. “If Santander were a bank in Germany or France, it would be best in class,” said Inigo Lecubarri, who manages about $200 million at Abaco Financials Fund in London. “The problem they have is that their address is Spanish.”
• SEC Withholding Internal Report on Goldman Sachs Suit, House's Issa Says. U.S. Representative Darrell Issa accused the Securities and Exchange Commission of withholding an internal review that evaluates whether politics drove the agency’s April lawsuit against Goldman Sachs Group Inc. Issa, in a letter sent to SEC Chairman Mary Schapiro today, said he directed his staff to work with the agency to obtain an unedited copy of the report “as soon as possible.” The SEC rejected the request, wrote Issa, the top Republican on the House Oversight and Government Reform Committee. “Your refusal to fully cooperate with the committee’s investigation of the commission’s actions is simply unacceptable,” Issa wrote. The California lawmaker demanded that the agency give him an un-redacted copy of the report by the end of the day.
• SEC Investigation Finds No Evidence Goldman Suit Was Timed to Help Obama. The U.S. Securities and Exchange Commission’s internal watchdog said he found no evidence the agency’s lawsuit against Goldman Sachs Group Inc. was timed to help President Barack Obama win support for financial-regulation legislation that was being debated in Congress.
• Foreclosure Fiasco Trail Leads to Washington: Jonathan Weil. What were banking regulators doing while some of the biggest U.S. lenders routinely filed false foreclosure documents in local courthouses around the country? In the case of IndyMac Federal Bank, it turns out the Federal Deposit Insurance Corp. was running the joint. This may help explain why the mortgage-servicing industry got away with such misbehavior for so long. The government, in one form or another, was doing it, too. The facts are there for anyone to see.
• Yahoo(YHOO) Said to Hire Goldman to Handle Takeover Approaches.
  

Wall Street Journal:

• Chile's Rescue Formula: '75% Science, 25% Miracle'. One by one, they emerged through a swinging door, out of a pit a half-mile deep, pumping fists and hugging family. A great-grandfather. A 44-year-old who promised a church wedding for his wife. A 19-year-old greeted by his father. And, lastly, the miners' 54-year-old foreman. Less than 24 hours after the extraction of the 33 miners began, Luis Urzua walked out of the Phoenix rescue capsule, approached Chilean President Sebastian Piñera and said, "Just as we previously agreed, I'm now handing over my shift to you." Mr. Piñera, smiling broadly, responded, "Like a good captain would do, you were the last one to abandon your ship." Rescuers cheered and hugged Mr. Urzua, and the president led the crowd in singing the national anthem.
• How to Reform ObamaCare Starting Now. States should steer the mandated health-insurance exchanges in a pro-market direction and dare Washington to stop them. The Republican rallying cry during this election season has been a promise to "repeal and replace" ObamaCare. The problem is that through at least 2012 President Obama would veto any law repealing his signature health-care legislation. What, then, can Republicans do in the next two years? Look to the states.
• Grocery Chains Increase Ad Spending Amid Price War. Supermarket chains—no longer the only place to buy the week's groceries—are pumping more money into advertising to fend off competition from mass discounters, drug stores and even dollar stores. The ad splashes are cutting into profit margins at a time when sales remain weak across the industry. Chains including Safeway Inc. and Great Atlantic & Pacific Tea Co. are touting price cuts on thousands of items, a double whammy to profits: spending to entice customers to come in for lower-priced items.
• Document Mess Hits Fannie, Freddie. Raising questions for the first time about the role of Fannie Mae and Freddie Mac in the unfolding mortgage-foreclosure crisis, the two government-owned giants are reviewing the work of a Florida law firm they recommended to process foreclosures. Until now, Fannie and Freddie have been largely bystanders in the widening foreclosure scandal, because they don't directly service loans, or handle day-to-day management of mortgages. But their use of so-called foreclosure mills, law firms that specialize in quickly processing thousands of foreclosures on behalf of lenders, is dragging the companies into the latest crisis.

CNBC:

• Ten Must-Have iPhone Apps for Business.
• China Can't Lead Knowledge-Based Future: Condi Rice. China may well become the world’s largest economy, but because its policies have exhibited such fear of the Internet, it “can’t lead a knowledge-based revolution,” former Secretary of State Condoleezza Rice told CNBC Wednesday.
• Chinese High Rollers Invest in US Real Estate.
  

Business Insider:

• Sign Of A Bubble #254931542: Mr. T Talks Gold On Bloomberg. (video)
• Chart of the Day: The Link Between Corporate Profits and Investment is Dead.
  

Zero Hedge:

• Mutual Funds See 23rd Sequential Outflow, As Redemptions Accelerate, Hit $80 Billion. (graph)

IBD:

• Discovery Channel's Reality Shows Grab Cable Viewers Worldwide. Discovery Communications (DISCA) is riding high on cable TV. It's enjoying improved ratings and solid gains in market share and ad revenue.

NY Times:

• Ex- Overseer of Aut0 Industry Accepts Ban in S.E.C. Deal. Steven Rattner, the former car czar, has agreed to a settlement with the Securities and Exchange Commission over kickback claims involving the New York State pension fund, a person with knowledge of the negotiation said Wednesday. Mr. Rattner will accept a multiyear ban from the securities industry and pay a fine of more than $5 million, the person said. He is still in negotiations over a similar settlement with the office of the New York attorney general, Andrew M. Cuomo. The settlement, which is expected to be announced on Thursday, caps a multiyear investigation by the government into kickbacks paid to officials with New York’s pension fund. Earlier this month, Alan G. Hevesi, the state’s former comptroller, pleaded guilty to a corruption charge involving the state fund. Since leaving his post with the Obama administration’s auto task force over a year ago, Mr. Rattner has been advising Mayor Michael R. Bloomberg of New York on his personal finances and writing a book about his tenure as car czar.

CNNMoney.com:

• Oil, Gold, Corn... Oh My!. Commodity prices are surging across the board as the U.S. dollar remains under pressure from building speculation that the Federal Reserve is about to take action to aid the stumbling economy. The anticipation of the central bank flooding the economy with more dollars has weakened the U.S. currency and boosted the appeal of commodities as an alternative investment. "Quantitative easing fears are propelling prices higher because the dollar is being devalued," said Flynn. "When there's a weaker dollar, people want to get away from the paper currency and start to want the actual commodity itself." "We might see a little unwinding of positions and prices go down here and there, but the fact that the Fed is coming out and saying it's opening the door to printing more money, you're going to have speculators and funds keep coming out and buying commodities," he added.

Star Tribune:

• Republican Opponent Targets Frank's Flight on a Private Jet Provided by a Hedge Fund Manager. Rep. Barney Frank's Republican opponent says the Massachusetts congressman's private jet ride to the U.S. Virgin Islands, courtesy of a hedge fund manager, shows Frank is too cozy with the financial interests he oversees. Frank, a 15-term Democrat, faces a stronger-than-expected re-election fight against GOP challenger Sean Bielat, who is targeting Frank's role in dealing with the financial crisis.

AppleInsider:

• Apple's(AAPL) Share of U.S. PC Market Cracks the 10% Barrier. Apple's share of the U.S. personal computer market grew more than 13% to reach a modern day high of 10.4% for the third quarter of 2010, leaving it just 17,000 units shy of becoming the nation's third largest PC vendor.

The Daily Beast:

• Who Needs George Soros, Anyway? “I don’t believe in standing in the way of an avalanche,” said the 80-year-old billionaire financier—whose Delphic pronouncements on the economy typically move markets—explaining why he isn’t dispensing his usual largesse this election cycle in support of Democratic causes and candidates.

Politico:

• Ethanol Decision Sees as Corn Belt Pandering. The Obama administration’s decision Wednesday to allow more ethanol in gasoline was met with fury from environmentalists and Big Oil, but it could help Democrats in the nation’s Corn Belt. Less than three weeks before Election Day, the Environmental Protection Agency issued a long-awaited decision to allow 15 percent of the corn-based fuel in gasoline in new cars – a major boost from the current 10 percent. The timing of the announcement seems aimed at shoring up Democratic support in Midwestern states that President Obama carried in 2008, such as Iowa, Illinois and Wisconsin, but where some of his fellow Democrats are now scrambling.
• Obama Admission Inspires GOP. Senate Republicans on Wednesday seized on President Barack Obama’s admission to The New York Times that “there’s no such thing as shovel-ready projects,” an acknowledgement they say suggests the administration’s $814 billion economic stimulus plan is a failure.

USA Today:

• Mine rescue scene: 'Chi! Le! Chile!' and 'God won'. Two shout-outs greet the world watching the spellbinding rescue of 33 trapped miners in Chile. "Chi! Chi! Chi! Le! Le!Le! Chile! Chile!" greets every man emerging from the capsule after riding back to the world from 69 days below the earth. And miner after miner has made his own shout-out -- to God -- in words or images that show their Christian faith sustained them.
• Rising Fuel Costs Mean Higher Heating Bills This Winter. Households will spend more on heating this winter as fuel prices rise and colder weather than last year in the Northeast increases demand, the Energy Department said Wednesday.

Reuters:

• Fed's Lacker Says Would Not Support More Easing. Richmond Federal Reserve Bank President Jeffrey Lacker said on Wednesday he would not support further monetary easing, saying he is not very worried about subdued U.S. inflation readings. With additional Treasury bond purchases aimed at supporting the economy looking increasingly likely at the Fed's November meeting, Lacker appeared to be cementing his role as a hawk at the U.S. central bank and digging in his heels in opposition. "I am not yet convinced that inflation is likely to remain undesirably low," he told a conference sponsored by the Richmond Fed. That was a direct reference to a benchmark set by the Federal Open Market Committee, the Fed's policy-setting body, for another round of bond buying in the Fed's last policy statement in September. "I said several weeks ago that I thought if the economic growth and inflation numbers came in the way I was expecting them to, I'd probably not support more easing," Lacker told reporters after a speech. "I'm kind of in the same place."
• IDC Says Q3 PC Growth Weaker Than Expected. Worldwide sales of personal computers rose a less-than-expected 10.5 percent in the third-quarter, industry tracker IDC said on Wednesday, hampered by weak consumer spending in the United States. Global PC shipments totaled 89.3 million units in the July-September period, with the U.S. experiencing 3.8 percent growth versus IDC's expectation of near 11 percent. "Despite a sluggish start, the quarter ended with a good rally in September which could be a good prelude for what is ahead," said IDC analyst Jay Chou in a statement.
• U.S. Senate Poised to Act on China Yuan - Lawmaker. The U.S. Senate is poised to pass legislation aimed at pressuring China to raise the value of its currency, unless Beijing works with the United States to address its concerns, a U.S. senator said on Wednesday.
• Apollo(APOL) Withdraws Outlook, Warns on Enrollment Growth. Apollo Group Inc, the biggest for-profit U.S. education company, blamed an uncertain regulatory environment for withdrawing its 2011 outlook and warned of a significant drop in new enrollments, setting a dismal tone for an industry facing intense government scrutiny. Apollo stock fell 15 percent after the bell, and dragged down other education stocks which have been volatile for most of the year on fears that new regulations will chop off the rapid growth witnessed by the industry even last year.

Securities Times:

• Reducing holdings of Treasuries is China's most-effective tool for dealing with the U.S., Zhang Monan, a researcher with the State Information Center, wrote in a commentary published today. China should ponder how to use its rolse as the U.S.'s biggest creditor when yuan appreciation is expected to cause the value of its foreign exchange reserves to shrink, Zhang wrote. This role should be used to counter outside pressure, he wrote. Cutting its holdings of Treasuries is also in China's long-term interests, Zhang wrote. The State Information Center is a research unit under the National Development and Reform Commission, China's top economic planning agency.

China Securities Journal:

• China has "basically completed" an investigation into loans taken by the financing vehicles of local governments and discovered "problems" with about 2 trillion yuan of the loans. There was 7.66 trillion yuan of outstanding loans taken by these financing vehicles as of the end of June. There is "serious risk" for the repayment of about 26% of that debt, according to the report.

Evening Recommendations
Citigroup:

• Reiterated Buy on (ADTN), target $41.
• Reiterated Buy on (AAPL), target $350.

Night Trading

• Asian equity indices are +.25% to +1.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 96.5 -5.5 basis points.
  
• Asia Pacific Sovereign CDS Index 93.5 -3.5 basis points.
  
• S&P 500 futures +.20%.
  
• NASDAQ 100 futures +.21%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FCS)/.39
• (LSTR)/.49
• (GWW)/1.82
• (GOOG)/6.68
• (AMD)/.06
• (PGR)/.37
• (SWY)/.31
• (VMI)/1.09
  

Economic Releases
8:30 am EST

• The Trade Deficit for August is estimated to widen to -$44.0 Billion versus -$42.8 Billion in July.
• The Producer Price Index for September is estimated to rise +.1% versus a +.4% gain in August.
• The PPI Ex Food & Energy for September is estimated to rise +.1% versus a +.1% gain in August.
  
• Initial Jobless Claims for last week are estimated at 445K versus 445K the prior week.
• Continuing Claims are estimated to fall to 4450K versus 4462K prior.

11:00 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,450,000 barrels versus a +3,088,000 barrel gain the prior week. Gasoline supplies are estimated to fall to -1,500,000 barrels versus a -2,646,000 barrel decline the prior week. Distillate supplies are expected to fall by -1,150,000 barrels versus a -1,124,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise +.43% versus a -2.7% decline the prior week.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Kocherlakota speaking, $13 Billion 30-Year Treasury Bonds Auction, weekly EIA natural gas inventory report, (TS) investor presentation and the (GPS) analyst meeting could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.