North American Investment Grade CDS Index 105.30 bps -1.36%
European Financial Sector CDS Index 109.58 bps -1.93%
Western Europe Sovereign Debt CDS Index 134.33 bps +.07%
Emerging Market CDS Index 224.12 bps -.15%
2-Year Swap Spread 18.0 -1 bp
TED Spread 20.0 unch.
Economic Gauges:
3-Month T-Bill Yield .15% unch.
Yield Curve 214.0 +1 bp
China Import Iron Ore Spot $147.60/Metric Tonne -.54%
Citi US Economic Surprise Index -53.0 +.2 point
10-Year TIPS Spread 1.60% -2 bps
Overseas Futures:
Nikkei Futures: Indicating +15 open in Japan
DAX Futures: Indicating +14 open in Germany
Portfolio:
Higher: On gains in my Tech, Ag, Retail and Medical long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 is trading slightly higher despite euro weakness. On the positive side, Road&Rail, Education, Retail, Homebuilding, Construction, Telecom, Disk Drive, Computer, Semi and Gold stocks are especially strong, rising 1.0%+. (XLF) has outperformed slightly throughout the day. Trading in the tech sector continues to improve. The 10-year yield is flat, but near session highs at 2.63%. Lumber is rising another +1.58%. Oil is trading very poorly given the recent bounce in stocks/euro, hurricane season, deafening Iran rumors and increase in spec long positions. The European Investment Grade CDS Index is falling -2.41% to 100.83 bps, the Japan sovereign cds is falling -3.19% to 67.39 bps and the US Muni CDS Index is declining -2.43% to 220.75 bps. On the negative side, Oil Service, Energy, Coal and Utility shares are lower on the day. Gold continues to trade well and market volume remains anemic. The average stock is performing much better than the major averages today. I still suspect stocks will build further on their recent rally before week's end. (HPQ)'s report after the close tomorrow has taken on added significance given recent negative comments from analysts regarding pc sales. I expect US stocks to trade mixed-to-higher into the close from current levels on less economic fear, short-covering, bargain-hunting, lower energy prices and technical buying.
Deere(DE) Profit Tops Estimates on Farm Equipment Demand. Deere & Co., the world’s largest farm-equipment maker, reported a 47 percent jump in fiscal third-quarter earnings, while tempering investor expectations for the fourth quarter amid weakening demand in Western Europe. Net income climbed to $617 million, or $1.44 a share, in the third quarter ended July 31, amid strength in the U.S. farming industry, the Moline, Illinois-based company said in a statement today. The average of 17 analyst estimates compiled by Bloomberg was for profit excluding some items of $1.22. Deere fell in New York trading after saying fourth-quarter earnings will be $375 million, less than the average estimate from analysts for $389.4 million, excluding items. Deere, led by Chief Executive Officer Sam Allen, said full-year sales will rise 5 to 10 percent in the U.S. and Canada on “solid” commodity prices, while Western Europe sales will fall as much as 20 percent. “While the company’s guidance looks a tad light relative to expectations, this is a conservative management team and is probably trying to set a reasonable bar to exceed,” Joel Levington, managing director of corporate credit at New York- based Brookfield Investment Management Inc., said in an e-mail.
Maersk Raises Forecast as Freight Rates Help First-Half Earnings Recover. A.P. Moeller-Maersk A/S, the owner of the world’s largest container-shipping line, raised its full- year earnings forecast after increases in freight rates and global trade helped the company restore first-half profit. Net income in the first six months of the year was 13.4 billion kroner ($2.31 billion) compared with a 3.67 billion- krone loss a year earlier, the Copenhagen-based company said today in a statement. That beat the 8.22 billion-kroner average estimate of four analysts surveyed by Bloomberg. Sales rose 20 percent to 154 billion kroner.
Druckenmiller Calls It Quits After 30 Years as Job Gets Tougher. Stanley Druckenmiller, the hedge- fund icon who boasts one of the best long-term trading records and the distinction of having made $1 billion for George Soros by forcing a devaluation of the British pound in 1992, is closing his firm after 30 years. Druckenmiller, 57, said he was tired of the stress of managing money for others and frustrated by his failure in the past three years to match returns that had averaged 30 percent annually since 1986. His Duquesne Capital Management LLC, which oversees $12 billion and has never had a losing year, is down 5 percent in 2010. “Managing more than $10 billion seems to challenge my long-term standard” for investment performance, Druckenmiller said in a two-hour interview in his New York office on 57th Street overlooking Central Park. “For 30 years I’ve been responsible for managing client money and it’s been a joy, but at some point I need to move on. Thirty years is enough.” “While the joy of winning for clients is immense, for me the disappointment of each interim drawdown over the years has taken a cumulative toll that I cannot continue to sustain,” he wrote to his 100 clients today.
Obama Says He Has 'No Regrets' About Remarks Supporting Ground-Zero Mosque. President Barack Obama said he had “no regrets” about defending the rights of Muslims to build an Islamic center near the World Trade Center site in New York. Obama was responding to a question as he left an event in Columbus, Ohio. His comments about the controversy last week drew criticism from some Republicans and some representatives of families of those killed at the World Trade Center in the Sept. 11 terrorist attacks. Obama spoke about the center for the first time Aug. 13 during an annual White House iftar dinner, marking the Muslim holy month of Ramadan.New York voters oppose the plan by more than two to one, according to a Siena College Research Institute survey. While 64 percent of voters said developers of the mosque have a constitutional right to build, only 27 percent supported putting the project two blocks from the World Trade Center site, with 63 percent opposed, according to the poll. Representative Peter King, a New York Republican, said Obama should have urged leaders to compromise and find a new location for the mosque. The symbolism of having it near Ground Zero is wrong, he said Aug. 15 on CNN.
Crude Oil Falls After Industry Report Shows Higher U.S. Oil, Gasoline Supplies. Crude oil fell to a one-month low after the U.S. Energy Department said total petroleum stockpiles surged to the highest level in at least 20 years. Inventories of crude and fuels climbed 5.34 million barrels to 1.13 billion in the week ended Aug. 13, according to the department. Supplies of distillate fuel, which include heating oil and diesel, rose to the highest level since 1983. “Our inventories are rising at a time of year when they usually decline, so we’re getting a growing surplus,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Demand has improved but supply has risen even faster.” Crude oil for September delivery fell $1.02, or 1.3 percent, to $74.75 a barrel at 12:48 p.m. on the New York Mercantile Exchange. “We got another big build in distillate supplies,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “This is a well- supplied market.” Plans by China to curb oil demand growth by 2020 will have “major implications” for crude prices and refining margins, a consultant said. China may allow oil consumption to peak in 2020 at about 13 million barrels a day, after which growth will slow to about 150,000 barrels a day, or about 1.1 percent a year, Fereidun Fesharaki, chairman of Singapore-based FACTS Global Energy, said in an e-mailed note today.
Vietnam Devalues Its Currency as Equities Approach Bear Market. Vietnam devalued its currency for the third time since November, moving to reverse a slump in exports that helped to drive stocks close to a bear market. The dong dropped 1.1 percent to 19,320 per dollar as of 11:22 a.m. in Hanoi, after touching a record-low 19,425 as the central bank lowered the reference rate by 2 percent. The Ho Chi Minh City Stock Exchange’s VN Index dropped 1.7 percent to 455.49, extending its decline from the May peak to 17 percent, near the 20 percent that would indicate a bear market.
Mexico Imposes Tariffs on U.S. Food Products in Dispute Over Truck Access. Mexico will impose import tariffs on some U.S. pork cuts, ketchup, cheeses, sweetcorn and some fruits because of the U.S. government’s failure to restore a program allowing Mexican trucks to operate north of the border, the nation’s official gazette said. The list includes a tariff of 5 percent on some cuts of pork and as much as 25 percent on fresh white cheese, according to the notice. Onions, apples, pears, oranges, cherries, soy sauce, mineral water and sunglasses are also on the list. Mexico will charge the duties on a rotating list of 99 U.S. products valued at about $2.5 billion, Economy Minister Bruno Ferrari told reporters Aug. 16 in Mexico City.
Paychecks to Shrink Because of Higher Health Premiums, U.S. Companies Say. Workers will pay more for their health care next year as U.S. companies prepare for provisions of the overhaul signed into law by President Barack Obama, according to a survey released today. About 63 percent of businesses plan to make employees pay a higher percentage of their premium costs in 2011, said the Washington-based National Business Group on Health, which surveyed 72 companies that employ more than 3.7 million people. The survey showed 46 percent plan to raise the maximum level of out-of-pocket costs that workers must bear. The companies surveyed expect their costs of health-care benefits to rise an average of 8.9 percent next year.
Homebuilder Mergers Loom as 'Elephant in Room,' Citigroup Says. Homebuilder takeovers may increase as tumbling demand for new houses and a faltering U.S. economic recovery spur companies to consolidate to gain market share, according to Citigroup Inc.Ryland Group Inc.(RYL), Meritage Homes Corp.(MTH) and Beazer Homes USA Inc.(BZH) are the most likely acquisition targets, Josh Levin, a New York-based analyst, wrote in a note to clients today. D.R. Horton Inc., KB Home, MDC Holdings Inc. and PulteGroup Inc. would be probable buyers, he said. “We view consolidation as the proverbial elephant in the room,” Levin wrote.
BHP's(BHP) Kloppers Goes Hostile in Bid for Potash(POT). BHP Billiton Ltd. Chief Executive Officer Marius Kloppers flew to Chicago to deliver the letter containing his $40 billion offer to Potash Corp. of Saskatchewan Inc. CEO Bill Doyle. The reply was a blunt rejection.
American Eagle(AEO) Call Option Trading Surges on Speculation Retailer For Sale.American Eagle Outfitters Inc. call trading jumped to a nine-month high on speculation that the teen retailer may be acquired. Almost 16,000 calls to buy the stock changed hands, eight times the four-week average and 19 times the number of puts to sell, as the shares increased 4.3 percent to $12.86 as of 1:23 p.m. in New York. The most-active contracts were September $13 calls, which doubled to 75 cents and accounted for a quarter of the bullish volume.
JPMorgan(JPM) Said to Plan $1 Billion CMBS Offering in Biggest Sale of the Year. JPMorgan Chase & Co. plans to sell $1 billion of commercial mortgage-backed bonds, giving control of soured loans to a holder of the riskiest portion after another offering ceded power to investors in the safest pieces. JPMorgan’s sale, the largest this year of the debt, would grant hedge fund H/2 Capital Partners LLC, the buyer of the bottom $50 million slice, primary authority over troubled loans, according to people familiar with the transaction who declined to be identified because negotiations are private.
Wall Street Journal:
Banks Face Fight Over Mortgage-Loan Buybacks. Fannie and Freddie Work to Push Bad Loans to Originators; A Search for Applicants' Lies. While mortgage delinquencies are easing, banks are facing a new round of losses from loans made just before the financial crisis, and the fight to keep them off their balance sheets is intensifying. Leading the charge to make originators repurchase their loans are Fannie Mae and Freddie Mac, the two government-owned finance agencies that guaranteed the mortgages. The firms are sorting through delinquent loans for signs of any violations of the representations and warranties, known as "reps and warranties." In essence, they are looking for lies made by borrowers or lenders in loan applications.
GM May Invest $2.85 Billion in Brazil Production. General Motors Co. is investing 5 billion Brazilian reais ($2.85 billion) to overhaul its portfolio of cars in Brazil, as the firm aims to avoid losing its share of sales in the domestic market, the company's new top executive in Latin America's largest economy said Wednesday.
CNBC:
Where Google(GOOG) Stands Six Years After Going Public. Thursday marks the sixth anniversary of the Google's IPO. Although the company's share price is down about 20 percent this year, it's up an amazing 389 percent since the initial public offering on August 19, 2004.
Nancy Pelosi, House Speaker, Wants Investigation into Ground Zero Mosque Opposition Funding. Nancy Pelosi wants some answers. The house speaker is calling for an investigation into groups protesting the building of the Ground Zero mosque. "There is a concerted effort to make this a political issue by some," she told San Francisco's KCBS radio on Tuesday. Pelosi added that she joins "those who have called for looking into how is this opposition to the mosque being funded." Many Republicans have said they are against the building of the mosque, and have demanded Democratic candidates and incumbents to publicly choose a side. The GOP said it will keep hammering the issue in a drive to take back Congress.
LA Times:
California Pension Reform Effort Loses Support. The bill's sponsor, state Controller John Chiang, and others say it has become so watered down that it would do little to prevent public employees from spiking their end-of-career paycheck.
What's Intel's(INTC) Next Move? (NYSE: Intel Corp. (Nasdaq: INTC) is adding one more piece to the do-it-all cable video gateway puzzle by purchasing Texas Instruments Inc.TXN)'s cable modem business, but the chip giant may have to do more shopping if it's to match up with Broadcom Corp. (Nasdaq: BRCM)'s ability to develop super-integrated system–on-chips (SoCs) for advanced set-tops, TVs, and other broadband-connected devices. (See Intel Snares TI's Cable Modem Business .) Companies that could top that list include Entropic Communications Inc. (Nasdaq: ENTR), the leading maker of Multimedia over Coax Alliance (MoCA) chipsets, and MaxLinear Corp. and Microtune Inc. (Nasdaq: TUNE), which make silicon tuners.
Boston Globe:
Grow Jobs and Shrink Government by Mitt Romney. IT’S NOT happening the way President Obama had planned. Unemployment blew past his 8 percent ceiling and hasn’t looked back. Private sector investment in new jobs and capital has languished. Even the head of the president’s Council of Economic Advisers, Christina Romer, has resigned. Almost every action the president has taken has deepened and lengthened the downturn. The private sector has retreated, frightened by his agenda and paralyzed by the uncertainty, lack of predictability, and outright hostility he has engendered. His policies are anti-investment, anti-jobs, and anti-growth. Raising taxes — with a 15 percent hike on certain small business corporations, new taxes to pay for ObamaCare, and an increase on the dividend tax from 15 percent to nearly 40 percent — depresses new investment throughout the economy. Promoting an open-ended cap-and-trade tax dissuades expansion by employers in the energy sector. Bowing to the demands of unions to tilt the table in their favor — with proposals for card check and mandatory arbitration as well as the installation of a labor stooge at the National Labor Relations Board — chills new hiring.
The Post and Courier:
Charleston Port Volume Soars for July, But Caution is Urged. July's container volume at the Port of Charleston rebounded to a level not seen since the financial market meltdown two years ago, but the head of the State Ports Authority cautioned that the uptick might be short-lived. The SPA handled nearly 74,000 containers in July, a 26 percent increase over a year earlier and the port's best month since October 2008.
AP:
AP Poll: Obama at New Low for Handling Economy. A new Associated Press-GfK poll is giving President Barack Obama his lowest marks ever on how he's handling the economy. The same poll finds that an overwhelming majority of Americans now describe the nation's financial outlook as poor. If this sour outlook lasts until the November elections, frustrated voters could take it out on the party in power, which means Obama's Democrats. Just 41 percent of those surveyed approve of the president's performance on the economy — down from 44 percent in April — while 56 percent disapprove. And 61 percent now say the economy has gotten worse or stayed the same on Obama's watch.
Reuters:
Chico's(CHS) Beats With Trendier Clothese, Sees Sales Gains. Women's apparel retailer Chico's FAS Inc reported higher-than-expected quarterly profit as trendier fashions attracted shoppers and margins were boosted by exclusives at its outlet stores. Chico's shares rose 7.5 percent to $9.04 on Wednesday as the company also forecast further sales gains through the end of the year.
Frankfurter Allgemeine Zeitung:
The European Commission may introduce a tax on raw materials including wood, metal, water and fossil fuels, citing an internal commission document.
National Post:
A Brave Canadian Confronts Ground Zero Mosque.Unlike U.S. President Barack Obama who insists putting a mosque near the site of 9/11 is “legal” and not his concern, a leading Canadian Muslim has publicly attacked the proposal as inappropriate, insensitive and wrong. Farzana Hassan lives in Toronto and is an astonishingly brave woman who has written three books since 9/11, putting Islam into perspective. She, along with Tarek Fatah, founder of the Canadian Muslim Congress (MCC), are among the few Muslims who speak out loudly and clearly against extremism. Both have had death threats, both soldier on fearlessly and honestly.
Beijing News:
China's western Qinghai province will raise minimum wages by an average of 29% from Sept. 1, the 27th of the nation's 31 regions to increase pay rates this year, citing the local government. The remaining four - Guangxi, Gansu, Guizhou and Chongqing - also plan increases.
RBS Leads Bank Offerings With Yields Lowest in Five Years: Credit Markets. Royal Bank of Scotland Group Plc, issuer of the second best-performing financial bonds this month, led lenders selling $7.5 billion of debt today after bank borrowing costs fell to the lowest in more than five years. RBS’s $3.6 billion bond offering came after average bank yields fell yesterday to 3.815 percent, the lowest since June 2005, Bank of America Merrill Lynch index data show. HSBC Holdings Plc, ING Groep NV, Westpac Banking Corp. and Bank of America Corp. also sold debt in the busiest day for bank issuance in dollars since July 21, according to data compiled by Bloomberg. The Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, dropped 3.4 basis points to a mid-price of 107.2 basis points as of 7 p.m. in New York, according to Markit Group Ltd. In London, the Markit iTraxx Europe Index of credit-default swaps linked to 125 companies with investment-grade ratings, fell 4.02 to 110.94, Markit prices show.
California City With $800,000 Manager Has Ratings Lowered to Junk by Fitch. Bell, the Los Angeles suburb that paid its city manager almost $800,000 a year, had its credit cut to junk grade by Fitch Ratings on concern the city may default on debt and had improperly raises taxes to pay off bonds. Fitch said it lowered the rating on $50 million of general obligation bonds seven steps to BB, or junk, from A+, and to BB- from A+ on $7.5 million of pension bonds sold in 2005. Standard & Poor’s took similar actions Aug. 10. The actions follow Los Angeles Times reports that Robert Rizzo, Bell’s manager, got almost $800,000 a year and that part- time city councilors took home almost $100,000 annually, mostly by serving on municipal boards and commissions.
Investors are paying the most in 22 months to borrow aluminum for a day in London and the highest fees in more than six months for tin, adding to signs of scarce supply for both metals. Aluminum's so-called tom-next spread rose today as high as $8 daily for each metric ton, the highest level since Oct. 15, 2008, London Metal Exchange figures show. The equivalent fee for tin touched $10, the highest level since Feb. 5.
Ukraine to Limit Exports of Wheat, Barley Through Dec. 31; Corn is Exempt. Ukraine, the world’s biggest barley exporter, plans to limit overseas sales of the grain and wheat through the end of the year to shore up domestic food supply, Agriculture Minister Mykola Prysyazhnyuk said. Export quotas will be probably 1 million metric tons for barley and 1.5 million tons for wheat from Sept. 1 through Dec. 31, the minister said today. Corn is likely to be exempt from the curbs, and 1 million tons of grain already at ports for export will be allowed to go before the quotas start, Prysyazhnyuk said.
BHP(BHP) Said to Weigh Hostile Bid for Potash(POT) After Offer Rejected. BHP Billiton Ltd. may go directly to shareholders as early as this week with its $39 billion unsolicited takeover offer for Potash Corp. of Saskatchewan Inc., said two people with direct knowledge of the matter. BHP, the world’s largest mining company, is unlikely to raise the bid before talks with investors, though a final decision hasn’t been made, said the people, who declined to be identified because the plan isn’t public. Potash Corp., the world’s largest fertilizer producer, rejected BHP’s $130-a-share offer yesterday, calling it “grossly inadequate,” and adopted a shareholder rights plan as a defense. “Potash is in play now,” said Prasad Patkar, who helps manage about $1.6 billion at Platypus Asset Management Pty in Sydney, including BHP shares. “Price action overnight on Potash tells you that a higher bid is coming. You can’t rule out BHP going hostile.”
Frank Seeks Meeting With Obama to Push Warren as Chief of Consumer Agency. U.S. Representative Barney Frank, who helped write the law that creates the Bureau of Consumer Financial Protection, requested a meeting with President Barack Obama as part of his push to have Harvard law professor Elizabeth Warrennamed head of the new agency. Frank, the Massachusetts Democrat who leads the House Financial Services Committee, joined 41 other lawmakers in urging “no further delay” on nominating Warren, 61, as the bureau’s first leader in a letter to Obama dated yesterday.
Copper Gains as Stockpiles Plunge to 9-Month Low, Boosting Demand Outlook. Copper climbed to the highest in more than a week as inventories slumped a nine-month low, raising speculation that demand is improving. Stockpiles tallied by the London Metal Exchange dropped for a third day to 405,025 tons yesterday, the lowest level since Nov. 13. Canceled warrants, or inventories earmarked for withdrawal, rose for a second day, by 11.5 percent.
Wall Street Journal:
Blagojevich Guilty of Lying to Federal Agents; No Verdict on Other Counts. A federal jury found former Illinois Gov. Rod Blagojevich guilty Tuesday of one count of making false statements to the Federal Bureau of Investigation but failed to reach a verdict on 23 other corruption counts. Prosecutors said they would seek a retrial on the remaining counts, but Mr. Blagojevich claimed a victory moments after the verdict was read. "This jury shows you that the government threw everything but the kitchen sink at me," Mr. Blagojevich said. "They could not prove I did anything wrong—except for one nebulous charge from five years ago." A juror speaking Tuesday evening to the Associated Press said the jury was split 11-1 in favor of convicting Mr. Blagojevich on the charge of selling the Senate seat vacated by President Barack Obama. Juror Erik Sarnello, 21 years old, of Itasca, Ill., said a female holdout "just didn't see what we all saw." Mr. Sarnello said the counts involving the Senate seat were "the most obvious." Mr. Blagojevich is the fourth Illinois governor in recent years to be tried for corruption. The political implications of the trial have taken center stage as campaigning for November's midterm elections has heated up this summer. The case was expected to stretch into the autumn and include a slate of high-profile Democrats. But the government rested its case earlier than expected and Mr. Blagojevich did not present a defense. The prospect of a retrial after 14 days of deliberation raised the possibility that many boldfaced names in political circles could still be called to testify, including Democratic U.S. Rep Jesse Jackson Jr. and White House Chief of Staff Rahm Emanuel.
Chicago Could Have to Pay Up in Order to Sell $160 Million Muni Deal. The city of Chicago could have to pay up to find a home for nearly $160 million in debt it's looking to sell in the municipal bond market this week, offering higher yields to entice investors following two recent ratings downgrades.
Brokers, Critics Spar Over 'Fiduciary' Rule. Every day, brokers call their customers with stock tips, and the brokers can say pretty much what they like so long as the investment they're pitching is "suitable" for the customer. Now the rules underlying those conversations are due for a big change. The new financial law allows the Securities and Exchange Commission to set a tougher standard for brokers' advice, and a battle is already flaring over how strict the SEC should be. The Dodd-Frank law, which took effect last month, says the SEC can hold brokers to a higher "fiduciary duty" standard, compelling them to put the interests of clients before their own. Investment advisers are already held to that standard. That could mean brokers would have to disclose more conflicts of interest to clients, such as the commissions they get for selling certain high-fee mutual funds. Otherwise they could be accused of failing to put the customer first. All that depends, though, on how the SEC makes the rules. The agency is set to complete a study by January, with proposed rules to follow shortly after. Some in the industry paint a picture of brokers paralyzed by red tape, unable to say anything about a stock or mutual fund without risking punishment for failing to uphold fiduciary duty—particularly if the stock tanks later. As a result, they say, average investors might end up online, where they can't get any help at all.
France Prepares to Deport Foreign Gypsies. France is preparing to deport hundreds of foreign Gypsies as part of a drive to clamp down on lawbreaking by Roma, Interior Minister Brice Hortefeux said Tuesday. The deportations, scheduled to start Thursday, follow the dismantling of 51 illegal camps—set up by Roma of eastern origin and by other Gypsies, including French citizens—over the past three weeks. Around 700 of the people expelled from their camps who were staying in France illegally will be flown home to Central and Eastern Europe, he said.
The Avastin Mugging. The FDA rigs the verdict against a good cancer drug. If there's an American precedent for the medical central planning of ObamaCare, it's the Food and Drug Administration. Witness a looming FDA ruling that may deplete the drug arsenal for terminally ill cancer patients. Last month, an FDA advisory board recommended withdrawing government approval of Avastin as a treatment for advanced breast cancer. The decision betrays a bias that puts costs above treatment, and unless the FDA leadership overrules its own experts, the 40,000 women killed by breast cancer each year will be denied an important clinical option.
Gulf States Endorse "Military Option" Against Iran. The latest development in the neverending saga of Iran, comes via the Middle East Media Research Institute (MEMRI) which states that according to the Gulf states, the military option may be the best option to deal with the Iranian nuclear program, as the contra-Iran (no pun intended) axis is now complete. The article also reflected "the Gulf states' growing tension and concern regarding Iran's nuclear program, and mentioned their proximity to the Bushehr reactor." What is scary is that the straw man of military intervention is pretty much presented as a fait accompli, and alternatives to military intervention are not even considered as an option.
Execs S0und Off on Sourcing Woes at Footwear News Platform. Top footwear executives said this morning that sourcing challenges in China are likely to get even worse over the next year, translating into sizeable price increases across the supply chain.
The Huffington Post:
Will Anyone Be Punished For Citibank's(C) $40 Billion Subprime Lie? Finally, some good news on Wall Street accountability. A federal judge is holding up the SEC's effort to let Citigroup's top executives off the hook for misleading their own shareholders about $40 billion in subprime debt.
UNHCR Says Vast Scale of Emergency in Pakistan Still Not Being Grasped. Pakistan's emergency continues to worsen as bloated rivers head southwards, flooding new areas and triggering massive further displacement. Urgent needs continue to overwhelm the capacity of agencies and authorities to respond. Overall, we see a risk that the full scale of the emergency is still not being grasped by the world community.
Rasmussen Reports:
Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 26% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-five percent (45%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -19 (see trends).
Reuters:
Analog Devices(ADI) Q3 Profit Beats Street, Outlook Strong. Microchip maker Analog Devices Inc. posted a third-quarter profit that topped market estimates, helped by strong growth at its industrial segment, and gave a better-than-expected fourth-quarter outlook. The company, which makes chips for cars, video game consoles and defense equipment, said revenue from its key industrial segment rose 69 percent. Third-quarter net income rose to $199.5 million, or 65 cents a share, from $65.5 million, or 22 cents a share, a year ago. Revenue rose 46 percent to $720.3 million. Analysts were expecting earnings of 60 cents per share, on revenue of $706.5 million, according to Thomson Reuters I/B/E/S. For the fourth quarter, the company forecast earnings of $0.68-$0.72 per share, on revenue of $740-$770 million. Analysts are projecting earnings of 61 cents per share, on revenue of $715.5 million. The Norwood, Massachusetts-based company's shares, which have gained 4 percent in the last 52 weeks, were up 2 percent at $29.27 after the bell.
Connecticut May Have Just a Week's Worth of Cash. Connecticut this autumn probably would have just a little more cash than it needs to pay a week's expenses unless it issues $520 million of debt, according to the state comptroller.
Democrat Says Abolish Freddie, Fannie. Fannie Mae and Freddie Mac should be abolished rather than reformed as part of the Obama administration's planned overhaul of the government's role in housing finance, Rep. Barney Frank, chairman of the House Financial Services committee, said on Tuesday. "They should be abolished," Frank said in an interview on Fox Business, when asked whether the mortgage giants should be elements in housing market reform. "They only question is what do you put in their place," Frank said.
US Says Bankruptcies Reach 5-Year High. U.S. bankruptcy filings have reached the highest level since 2005, government data released on Tuesday show, as the economy slows and the unemployment rate hovers just below double digits. There were 422,061 bankruptcy filings between April and June, according to the Administrative Office of the U.S. Courts, up 9 percent from 388,148 in the prior three-month period, and up 11 percent from 381,073 a year earlier. For the year ended June 30, there were 1.57 million bankruptcies, up 20 percent from 1.31 million a year earlier. Consumer bankruptcies rose 21 percent to 1.51 million, and business bankruptcies rose 9 percent to 59,608.
Financial Times:
$60 Billion Saudi Arms Deal Poised for Smooth US Passage. One of the largest arms deals in US history, involving the sale of weaponry worth some $60bn to Saudi Arabia, is likely to go through Congress without significant objections, according to people on Capitol Hill. The deal would include 84 Boeing F-15 fighter aircraft along with Blackhawk and Apache helicopters.
US Law to Squeeze 'Conflict Minerals'. The links between electronic devices such as smartphones and the bloody conflict in the Congo may to date have been largely invisible to most consumers. But a combination of increasing public pressure and a far-reaching new regulation in the US could well change this. A fresh law, buried in section 1,502 of the Wall Street reforms passed last month, will force many manufacturers to overhaul checks on their supply chain in an attempt to identify any “conflict minerals” that can be traced back to the Democratic Republic of the Congo or adjoining countries. Thousands of companies will be affected by the law. The Congo region is a widely used source of important industrial metals and minerals such as tantalum, copper, germanium, gold, manganese and cobalt. Tantalum, for example, is used in very small amounts in crucial electronic components such as capacitors, which find their way into everything from cars, to personal computers and mobile phones. The existing practice of many manufacturers on relying on undertakings from their supply chain is unlikely to satisfy the law, due to be codified by the regulator, the Securities and Exchange Commission, before April. “It’s not good enough for companies to just say their suppliers have told them that they don’t use conflict minerals,” Darren Fenwick, senior manager of government affairs at anti-genocide campaign group the Enough Project, said. “They need to undertake proper due diligence.” That task of due diligence is not an easy one, given that the minerals pass through several stages – including a smelter process – between the mines and the assembly plant. Industry groups warn that too onerous an audit requirement could deter companies from using the Democratic Republic of the Congo entirely, cutting off a financial lifeline to the region. The American action is also likely to have a wider international effect. The disclosure requirement will affect companies listed in the US, even if their headquarters are elsewhere, drawing a number of Chinese, European and Latin American manufacturers within its scope.
Accounting Change Set to Burden Companies. Retailers, airlines and ship operators can expect to assume billions of dollars more liabilities on their balance sheets as the result of a radical overhaul of lease accounting proposed by US and international standard setters. The new rules have been drawn up in spite of fierce opposition from multinationals, which worry that the shake-up will make their corporate accounts more volatile and vastly increase their liabilities. Some companies fear they may breach bank loan covenants as a result. Under the rules, the liabilities of many companies would increase as they are forced to move rented assets such as aircraft, ships, shops and even photocopiers on to their balance sheets. On average, the changes will increase a company’s reported debt load by 58 per cent, according to PwC and Erasmus University. Senior accountants say few companies and investors are prepared for the volatility the new rules will bring to corporate reporting. The rare joint proposals from the International Accounting Standards Board and the US Financial Accounting Standards Board have also been criticised for failing to reduce complexity. Veronica Poole, a senior partner at Deloitte, the accountancy firm, believes the financial impact of the proposed standard could go so far as to cause some companies to breach loan covenants. “A lot of companies, particularly in the current turbulent times, are very much on the edge of their covenant compliance,” she said.
International Finance News:
China's National Development and Reform Commission recommended stabilizing the country's real estate prices after new property prices rose recently in some second and third tier cities, citing the economic planner.
Financial News:
Chinese central bank adviser Xia Bin said China shouldn't make any short-term changes to its property market measures. The nation shouldn't rush when dealing with the property market and should take two years to "solve" real estate issues.
Beijing Evening News:
Beijing may prohibit real estate developers from directly taking advance payments from purchases of houses and condominiums, citing developers. Homebuyers must make payments to a designated account at a bank under new rules that may be implemented this year.
Evening Recommendations Citigroup:
Reiterated Buy on (HD), target $38.
Night Trading
Asian equity indices are -.25% to +.75% on average.
Asia Ex-Japan Investment Grade CDS Index 118.0 -8.0 basis points.
Asia Pacific Sovereign CDS Index 116.0 -4.0 basis points.
Bloomberg consensus estimates call for a weekly crude oil inventory drawdown of -1,000,000 barrels versus a -2,988,000 barrel decline the prior week. Gasoline supplies are expected to fall by -375,000 barrels versus a +409,000 barrel increase the prior week. Distillate inventories are estimated to rise by +1,500,000 barrels versus a +3,456,000 barrel gain the prior week. Finally, Refinery Utilization is expected to fall by -.63% versus a -3.1% decline the prior week.
Upcoming Splits
None of note
Other Potential Market Movers
The weekly MBA mortgage applications report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and automaker shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
