Tuesday Watch

Late-Night Headlines
Bloomberg:

- Senator Edward Kennedy’s plan to expand health-care coverage would cost about $1 trillion over 10 years and provide coverage to about 16 million more people, according to a preliminary analysis by the Congressional Budget Office. The report today said about 39 million people would be able to buy health coverage through insurance “exchanges,” while the number of people getting coverage from employers and other sources would fall by 23 million. The nonpartisan CBO said its initial analysis of the measure, introduced by Kennedy last week, is not a complete cost estimate because it focused only on the proposal’s major provisions. The analysis also doesn’t include the effects of expanding coverage for low-income Americans, which could be included in the proposal later. In the House, Ways and Means Committee Chairman Charles Rangel, a New York Democrat, said last week that legislation being crafted by Democrats will cost more than $1 trillion over a decade. That cost would include $600 billion in tax increases and $400 billion in cuts to Medicare and Medicaid, said Rangel.

- The cost of protecting U.S. corporate bonds from default rose the most in more than a month as global stock and credit markets slumped. Credit-default swaps on Citigroup Inc. and Bank of America Corp. jumped to a one-month high, signaling a deterioration in the perception of credit quality, according to CMA DataVision in London. Benchmark credit derivative indexes in the U.S. and Europe jumped the most since May. The cost of protecting European banks from default jumped as Moody’s Investors Service cut the ratings of 25 Spanish lenders because of the “speed and depth of the deterioration of the Spanish economy and the impact on banks’ balance sheets.” The cost of protecting European bank bonds from default also rose, with the Markit iTraxx Financial index of 25 European banks and insurers jumping 5.5 basis points to 113.5 basis points and the subordinated index up 13 basis points at 203 basis points, according to CMA.

- Coal exports from Australia’s Newcastle, the world’s biggest export harbor for the fuel, dropped 17% last week and the number of ships waiting outside the port fell. The volume shipped in the week ended 7 am local time yesterday fell to 1.8 million metric tons from 2.17 million tons a week earlier, Newcastle Port Corp. said today on its Web site. A total of 33 ships, waiting to load 3.2 million tons of coal, were lined up outside the port, down from 37 last week. Coal ships waited 11.1 days to load coal, up from 10.7 days a week earlier, Newcastle Port said.

- Cotton prices fell the most allowed on ICE Futures U.S. in New York as a rallying dollar boosted the cost of supplies from the U.S., the world’s largest exporter, and reduced the appeal of commodities as an inflation hedge. Cotton futures for December delivery fell the exchange’s 3- cent limit, or 4.9 percent, to 58.22 cents a pound. The decline was the steepest since Jan. 12. “Commodity traders are caught between a mindset of, ‘Do I play the inflation side or watch demand destruction?’” Egli said. “You have a lack of buyers.”

- The Obama administration’s revamp of U.S. banking and market regulations may be stalled into next year as Congress and the president set health-care reform and climate control as domestic priorities.

- Citigroup Inc. Chief Executive Officer Vikram Pandit said he expects a lower growth rate for the U.S. economy as it goes through an “adjustment” period. “There is a clear trade-off between saving more and stimulating the economy in the short term to achieve stability,” Pandit, 52, said in prepared remarks for a keynote address today at the Detroit Economic Club’s National Summit.

Citigroup, the recipient of $45 billion in government funds, has itself to blame for its financial woes, Pandit said.

- European Central Bank council member Ewald Nowotny warned against raising interest rates and ending emergency policy measures too soon, saying the top priority must be to revive economic growth in the euro region. “I’d warn against a premature exit strategy,” Nowotny, who heads Austria’s central bank, said at a conference in Vienna late yesterday. “We are still in a crisis. The primary goal should be to restore economic growth as fast as possible.”

- The Senate’s energy legislation is likely to stall if it is combined with a pending climate measure, Alaska Republican Lisa Murkowski said. Murkowski said combining the two bills might doom the energy measure, sacrificing the emission cuts that are included in it. The Senate plan would mandate renewable electricity use and establish a so-called green bank that would fund energy projects with low emissions. Mixing the two measures “is not a good thing for our energy bill,” Murkowski said. “If we were not to pass a cap- and-trade bill this year and we were to pass an energy bill we would actually be doing something positive when it comes to what we are emitting.” Senate Majority Leader Harry Reid, a Nevada Democrat, has said he may try to move energy and climate legislation in one bill. Senator Barbara Boxer, the California Democrat who leads the Environment and Public Works Committee, said last week that her panel may consider a climate measure in early August. The House Energy and Commerce Committee approved energy and climate provisions in a single measure on May 21. California Democratic Representative Henry Waxman, the panel’s chairman, said he wants to pass it in the full House this month. Waxman’s panel approved creating a cap-and-trade system to control greenhouse-gas emissions. Murkowski said the worst recession since World War II is the wrong time to consider a climate bill that may increase energy costs for consumers. The Senate Energy and Natural Resources Committee plans to vote on the energy measure by June 17.

Wall Street Journal:

- The Obama administration's proposed revamp of financial-sector regulation relies on a high-risk strategy that pins much of the plan's success or failure on the president himself. The exhaustive series of meetings and nitty-gritty debates that forged the comprehensive plan -- to be presented to Congress Wednesday -- contrasts with the way the administration has approached other priorities, such as health care and energy policy. In those cases, the White House has left the many details to be filled in by Congress. The different approaches reflect how some of the administration's most senior officials are personally invested in the finance overhaul, worried that political tinkering by lawmakers could undermine their goals.

- The largest demonstration here since the Iranian Revolution ended in gunfire Monday, after hundreds of thousands of protesters thronged a central square and Iran's ruling cleric ordered an investigation into allegations of fraud in the presidential election. Supreme Leader Ayatollah Ali Khamenei's call hedged his previous strong backing of the result of Friday's vote. It appeared to be in response to two days and nights of violent protests here, and suggested growing unease among the clerics who sit atop Iran's complex power structure. In the past few days, a number of senior clerics have met with Mr. Khamenei or written to him, urging him to intervene, according to a series of public letters from the clerics. One grand ayatollah, one of the highest-ranking clerics, issued a religious order demanding his followers not cooperate with President Mahmoud Ahmadinejad's government.

- Senate Republicans are trying to fire up more debate about the quality of the projects funded by the federal stimulus plan, calling out proposals to spend $16 million on scarcely used rural bridges in Wisconsin and $3.4 million for "eco-passage" wildlife crossings in Florida. These and other uses of federal stimulus money will be targeted in a report to be released Tuesday by the Republican staff of the Senate's Permanent Subcommittee on Investigations.

- Fidelity Investments intends to begin charging financial advisers when the firm refers wealthy, or "high net worth," clients to them.

- Spain may take stakes in some of the country's ailing savings banks as a way of strengthening their capital bases and allow them to survive a deepening economic downturn, Spanish Finance Minister Elena Salgado said Monday. The state would, if necessary, use part of a EUR9 billion aid fund to purchase securities called "cuotas participativas" and would remain as a partial owner of these lenders during a transition period, Salgado said. Salgado, speaking at a conference in Santander, northern Spain, said consolidation and sector restructuring is inevitable, as loan defaults jump on the back of soaring unemployment and an oversized exposure to the troubled local real estate sector. "As the crisis passes, there will be fewer entities," Salgado said. "The reality is that the concentration of risk (in the real estate sector) has been excessive," she added. The Socialist-government is preparing a bank rescue fund that would be used to intervene and clean up insolvent lenders, as well as to boost the solvency of weak but still solvent banks.

- While many Chinese state resources companies are looking abroad for natural resources, China Shenhua Energy Co., the country's biggest coal producer by market value, expects sharp growth at home and isn't feeling pressure to chase deals overseas. Shenhua is focusing on doubling its annual coal output capacity to 400 million metric tons by 2014, getting a tailwind from Beijing's push to consolidate coal reserves in the hands of just a few big miners.

CNBC.com:
- It sure was a ridiculous promise. Especially for a president who, unflinchingly, proposes spending an extra $1.5 trillion on new healthcare efforts and hundreds of billions more on new green initiatives—on top of $787 billion in stimulus that ain't stimulating yet. The president's silly promise forces him to strain to devise massive tax increases that can be called by another name, or alternately to find small, invisible revenue increases in the nooks and crannies of our economy. The One Fell Swoop tax in this scheme would be a new tax on employer health benefits—which could slap new payments on 163 million people covered by employer plans. By some estimates this could raise $2.3 trillion over 10 years, more than enough to cover Obama-care. The problem: half of all people with health coverage at work earn less than $75,000, the Cato Institute says.

- Interest rates on US 30-year fixed-rate mortgages fell to 5.52 percent late Monday after hovering at 5.67 percent on Friday, according to real estate Web site Zillow.com. That is down sharply from a week earlier when the mortgage rate was around 5.72 percent, according to Zillow Mortgage Marketplace. The lower rates reflect a fall in yields on US government bonds, which are linked to the mortgage market. The rate, however, is sharply higher than the roughly 5.00 percent level seen at the end of May and at the beginning of this year, Zillow said. The move higher in mortgage rates recently collapsed home loan refinancing activity.

NY Times:

- The Obama administration will order the Navy to hail and request permission to inspect North Korean ships at sea suspected of carrying arms or nuclear technology, but would not forcibly seek to board them, senior administration officials said Monday. The new effort to intercept North Korean ships, and track them to their next port if they refuse inspection, is part of what the officials they described as “vigorous enforcement.”

IBD:

- NVE Corp. (NVEC) is a small company with tiny products and big profits. The suburban Minneapolis company makes sensors and couplers that go into pacemakers, hearing aids, factory automation equipment and memory chips.

CNNMoney.com:

- California became the first state to see gas prices top $3 a gallon since October, according to a daily survey of gas prices. The national average price for a gallon of gas rose 0.6 cent Monday to $2.669, according to motorist group AAA. Prices have been steadily climbing higher since April 29 and are up 63% from the start of the year.

Financial Times:

- Hedge funds and managers of other alternative investment funds sold to professional investors will face a heavier compliance burden under proposed European Union rules than the already regulated retail fund sector, institutional investors are warning top officials in Brussels. This regulatory burden could “far outweigh any benefits” and “cannot be right”, UK and Dutch institutional investors have told Charlie McCreevy, EU internal market commissioner, in a letter sent on Monday. The letter, seen by the Financial Times, is significant because it is the first time the views of institutional investors, who are some of the hedge funds’ biggest customers, have been heard in the heated debate over the EU’s controversial proposals for regulating the hedge fund and private equity sectors.

South China Morning Post:
- Billionaire financier George Soros has praised the Hong Kong government for thwarting his attempts to undermine the local currency and stock market in 1998 but maintained he had every right to do so.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (NKE), boosted target to $65.

KeyBanc

- Rated (MAT) Buy, target $20.

Sanford C. Bernstein

- Raised (AMGN) to Outperform.

Night Trading
Asian Indices are -2.0% to -1.0% on average.

Asia Ex-Japan Inv Grd CDS Index -1.28%.
S&P 500 futures unch.
NASDAQ 100 futures -.02%.

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Company/EPS Estimate
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Economic Releases

8:30 am EST

- The Producer Price Index for May is estimated to rise .6% versus a .3% increase in April.

- The PPI Ex Food & Energy for May is estimated to rise .1% versus a .1% gain.

- Housing Starts for May are estimated to rise to 485K versus 458K in April.

- Building Permits for May are estimated to rise to 508K versus 4498K in April.

9:15 am EST

- Industrial Production for May is estimated to fall 1.0% versus a .5% decline in April.

- Capacity Utilization for May is estimated at 68.4% versus 69.1% in April.

Upcoming Splits
- None of note

Other Potential Market Movers
- The Fed’s Warsh speaking, (NVDA) analyst day and the weekly retail sales reports could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by commodity and automaker stocks in the region. I expect US equities to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Finish Sharply Lower, Weighed Down by Commodity, Transportation, REIT and Alt Energy Shares

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In Play

Stocks Lower into Final Hour on Rising Economic Concerns, More Shorting, Profit-Taking

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Financial longs, Technology longs and Medical longs. I added (IWM)/(QQQQ) hedges and added (EEM) short this morning, thus leaving the Portfolio 75% net long. The tone of the market is very negative as the advance/decline line is substantially lower, every sector is declining and volume is about average. Investor anxiety is high. Today’s overall market action is very bearish. The VIX is rising 9.91% and is very high at 30.93. The ISE Sentiment Index is below average at 117.0 and the total put/call is slightly below average at .77. Finally, the NYSE Arms has been running very high most of the day, hitting 3.68 at its intraday peak, and is currently 2.44. The Euro Financial Sector Credit Default Swap Index is rising 6.22% today to 109.67 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising 3.89% to 129.33 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising .47% to 46 basis points. The TED spread is now down 417 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling 6.90% to 39.63 basis points. The Libor-OIS spread is falling 1.83% to 40 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 5 basis points to 1.88%, which is down 76 basis points since July 7th. The 3-month T-Bill is yielding .15%, which is down 2 basis points today. The most economically sensitive stocks are underperforming today on rising worries over credit availability throughout Europe, potential currency devaluations in Eastern Europe and some weaker-than-expected US economic data. The recent rise in energy prices and mortgage rates are likely to continue to negatively impact US economic data over the coming weeks. I continue to believe the crowded "reflation" trade will underperform over the intermediate-term. It is also a negative to see such a big jump in the euro financial sector credit default swap index. On the positive side, volume is relatively light and the NYSE Arms is soaring today. Moreover, the ISE Sentiment Index hit an extraordinarily depressed reading of 38.0 this morning, which is a positive. Nikkei futures indicate a -139 open in Japan and DAX futures indicate an +2 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, profit-taking, rising economic worries and greater financial sector pessimism.

Today's Headlines

Bloomberg:

- Yields on Fannie Mae and Freddie Mac mortgage securities fell for a third day from the highest level since the Federal Reserve said it would buy home-loan bonds, suggesting a further decline in home-loan interest rates. Yields on Washington-based Fannie Mae’s current-coupon 30- year fixed-rate mortgage bonds dropped 0.17 percentage point to 4.75 percent as of 11:35 a.m. in New York, the low since June 3, data compiled by Bloomberg show. While that’s down from a six- month high of 5.07 percent on June 10, it’s still up from 3.94 percent on May 20.

- Commercial banks in the 16-nation euro region may lose a further $283 billion by the end of next year as the financial crisis forces them to write off bad loans, the European Central Bank said. “Hard-to-value assets have remained on bank balance sheets and the marked deterioration in the economic outlook has created concerns about the potential for sizeable loan losses,” the Frankfurt-based ECB said in its June Financial Stability Report today.

- North Korea’s May 25 nuclear explosion resulted in a blast of a “few kilotons,” the Office of the Director of National Intelligence said.

- The US dollar rose to a three-week high against the euro as Russia’s Finance Minister Alexei Kudrin said his nation has full confidence in the U.S. currency. The greenback advanced versus all of its 16 major counterparts except the yen after Kudrin said in an interview following the Group of Eight meeting that it was too early to speak of an alternative to the world’s main reserve currency. The euro fell versus the dollar after the European Central Bank said commercial banks in the 16-nation euro region may lose a further $283 billion by the end of next year. “The dollar is still the global reserve currency and most likely to remain the reserve currency for the foreseeable future,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “Certainly there’s no basis for seeing a major shift away from the dollar by global central banks.”

- Confidence among U.S. homebuilders fell unexpectedly in June, indicating that a recovery from the housing slump will be slow to develop. The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 15 this month from 16 in May, the Washington-based NAHB said today.

- UBS AG’s long-term debt and deposit ratings were put on review for possible downgrade by Moody’s Investors Service because of potential losses in its investment banking unit and declining customer confidence in its wealth management unit.

- Hundreds of thousands of people defied an Iranian government ban on a rally in Tehran to protest President Mahmoud Ahmadinejad’s re-election, as the supreme leader said allegations of vote-rigging should be investigated. A pro-government militia fired at opposition protesters, killing at least one person, the Associated Press reported, citing one of its photographers.

- International purchases of American financial assets grew more slowly in April as China, Japan and Russia pared demand for Treasuries, underscoring the danger of U.S. reliance on foreigners to finance its fiscal deficit.

- Companies may be encouraged to seek protection from creditors as the stigma of bankruptcy diminishes and some bond investors are comforted by holdings of credit-default swaps, according to BNP Paribas SA. Creditors that are hedged in the default swap market may make more money from a so-called credit event triggered by bankruptcy than from a debt restructuring, said Andrea Cicione, a credit strategist at BNP.

- Gold fell to a three-week low in New York and London as a stronger dollar eroded demand for the metal as an alternative investment. The U.S. Dollar Index, a six-currency gauge of the greenback’s value, gained after Russian Finance Minister Alexei Kudrin said the nation had full confidence in the U.S. currency. Gold, which typically moves inversely to the dollar, has slipped 4.5 percent this month as the dollar index added 2.1 percent. “Stronger dollar sentiment has put gold under further pressure,” James Moore, an analyst at TheBullionDesk.com in London, said today in a note. “The metal could extend lower as a result.” “We would not be surprised to see further short-term declines especially in the absence of any material jewelry, physical investment or ETF demand,” John Reade, UBS AG’s head metals strategist in London, said today in a report.

- Natural gas futures gained the most in two weeks on speculation the price for the industrial and power-plant fuel is set to advance after trading near six-year lows in recent weeks. Gas has fallen 70 percent since July as declining demand and bulging stockpiles weighed on futures prices. The fuel has lagged behind a rebound in other energy commodities, including crude oil, which has risen 59 percent this year. The move in crude widened the ratio between the two fuels to about double the five-year average of the price relationship. “On a relative value to crude oil, we’ve been at ratios we’ve never seen,” said Chris Jarvis, president of Caprock Risk Management LLC in Hampton Falls, New Hampshire. “The worst has already been baked in the cake for gas. The divergence between oil and gas will create switching demand from the industrial and utility side.”

- Singapore’s retail sales fell the most in more than ten years in April as rising unemployment and the nation’s deepest economic slump in more than four decades led consumers to buy fewer cars and household equipment. The retail sales index dropped 11.7 percent from a year earlier, after sliding a revised 7.2 percent in March, the Statistics Department said today. The median estimate of 11 economists surveyed by Bloomberg News was for an 8.1 percent decline.

- A Latvian currency devaluation would lead to a “swift contagion” in the neighboring Baltic states of Lithuania and Estonia, Fitch Ratings said. Nordic banks, with Swedish lenders dominating in the Baltic region, would see loan losses “crystallize much quicker,” if Latvia abandons its euro peg, Fitch credit analyst Alexandre Birry said today at a seminar in Copenhagen.

- The International Monetary Fund, which has rescued economies from Pakistan to Iceland in the past year, raised its outlook for the U.S. and called for steps to reduce concern about rising public debt and inflation.

Wall Street Journal:

- The euro zone's financial sector is likely to face a new round of tests as more corporate defaults, deteriorating credit conditions and falling asset prices add stress, the European Central Bank said in its biannual stability review Monday. Market participants and policy makers should be "especially alert in the period ahead," the ECB said, and mustn't be lulled by massive state interventions to rescue banks and insurers, or by lower central bank interest rates. "There is no room for complacency because the risks for financial stability remain high, especially since the credit cycle has not yet reached a trough," the ECB said. The profitability of large banks in the euro zone has been eroded further since the beginning of the year and the prospects for an imminent turnaround are bleak, the report said. Further pressure could soon materialize, the ECB said. It called corporate defaults a "likely" source of more stress, adding to ongoing asset write-downs and deleveraging of balance sheets.

- Research In Motion Ltd.(RIMM) doesn't normally comment on the competition, but the BlackBerry maker may hint this week at strategy changes to meet the dual challenges of a $99 iPhone from Apple Inc.(AAPL) and Palm Inc.'s Pre(PALM). RIM reports results Thursday for its fiscal first quarter, which ended May 30, before the competition unveiled its new offerings.

- The Russell Global Index will have an increased U.S. presence when it is reconstituted in two weeks, with the country set to have a net 121 additions in the index of more than 10,000 stocks. Meanwhile, emerging markets will also add to their lots as other developed countries - led by the U.K. - will have a smaller presence in the global index, said Russell Investments.

- Gunmen fired on opposition protesters at a massive march over alleged election fraud. An Associated Press photographer saw one person who appeared to have been shot dead and several others who appeared seriously wounded in Tehran's Azadi Square. The shooting came from a compound for volunteer militia linked to Iran's powerful Revolutionary Guard. The gunfire Monday came after more than 100,000 opponents of President Mahmoud Ahmadinejad streamed through Tehran. They were largely not challenged by security forces despite an earlier ban on rallies for reformist leader Mir Hossein Mousavi.

- Even sham elections can sometimes produce real results. That was the lesson of the Philippines in 1986 and of Ukraine in 2004. And though Friday's election in Iran is unlikely to yield a similar democratic outcome anytime soon, the poll matters for having again revealed the nature of mullah rule -- to the Iranians who cast ballots expecting they'd be counted, and to a world that finds its illusions about Iranian democracy shattered. The election was a sham thrice over. Though elected by popular vote, Iran's president is subservient to an unelected Supreme Leader, Ayatollah Ali Khamenei. The four candidates whose names made it on the presidential ballot this year were pre-screened by an unelected Guardian Council composed mostly of Islamic clerics, which also disqualified more than 400 others.

CNBC:

- Gold and other commodities may have seen their highs as interest in the dollar is unlikely to wane significantly, two experts said on CNBC.

- Risk aversion has eased, while inventory rebuilding and new business spending bode well for an economic recovery that could provide a dramatic surge in corporate profits by year end, Goldman Sachs senior investment strategist Abby Joseph Cohen said Monday.

NY Times:

- The Managed Funds Association, a major trade group for the hedge fund industry, has hired the powerhouse K Street lobbying firm Brownstein Hyatt Farber Schreck to press its interests on Capitol Hill, according to a document filed this week with the Senate Office of Public Records. It is no surprise that the association wants a louder voice in Washington: The financial crisis has created a movement to regulate the financial industry more tightly, and hedge funds want to make sure they do not get bound up in new rules. The group’s new lobbying team has some notable members, including Carmencita Whonder, who as recently as 2007 was a banking adviser to Senator Charles E. Schumer, the New York Democrat who sits on the Senate banking and finance committees. Brownstein Hyatt will also be lobbying on the Prevent Excessive Speculation Act, the document said. Sponsored in February by Mr. Levin, the bill is aimed at curbing abuses in the energy trading arena that helped inflate the oil bubble last year and may be contributing to the recent spike in oil prices, which have about doubled since February. The group also plans to lobby on bills in the House, including the Derivatives Markets Transparency and Accountability Act of 2009, which would increase the power of the Commodities Future Trading Commission in regulating futures and the opaque over-the-counter trading market; the Hedge Fund Adviser Registration Act of 2009, which would require hedge funds to register with the S.E.C., and a bill that would aim to tax partnerships at normal income tax rates instead of reduced capital gains rates — also known as carried interest. All of the bills are in the beginning stages of the legislative process and have yet to move from the committee and on to the floor for a vote. But Brownstein Hyatt, along with its former legislative insider, Ms. Whonder, will be working very hard to make sure the hedge fund industry has considerable say on those bills.

Washington Post:

- With the leveraged-buyout business on life support, major private-equity firms such as the Carlyle Group are taking a closer look at the battered banking sector as a way to make money for their clients.

NY Post:

- Broadcast television appears to like the financial buzz it is starting to get from liquor advertising. This year, with network advertising revenue off about $250 million, or 4.2 percent, in the first quarter compared to last year, local affiliates are not only accepting hard liquor ads -- they are actively courting the $451 million distilled-spirits advertising business. "With the economy and what's happening to corporations, more and more people are accepting liquor advertising," said Matt Carroll, the chief marketing officer at Patron, a maker of tequila and rum.

- A former official in the George H.W. Bush White House estimates that the bloated public and private debt in the US works out to $250,000 for every man, woman and child in the country. David Walker, the former US Comptroller General, says that the federal debt level is approaching $55 trillion and if you add in the what is owed on the state and local levels -- plus personal household debt -- it adds up to $75 trillion in obligations. Walker, who now heads the Peter G. Peterson Foundation, named for the co-founder of the Blackstone Group, warned that without fiscal restraint, Uncle Sam may be guaranteeing that our future is not as prosperous as our past. At the $75 trillion deficit level a family of four owes $1 million, he said. Earlier this year Walker wrote on Politico.com: "Social Security and Medicare alone are already underfunded by about $44 trillion, or $146,000 per American, in today's dollars, and this number is growing on auto pilot every year by about $2 trillion, or $6,600 per American."

Pensions&Investments:

- Assets under management by the most institutional of hedge fund-of-funds managers dropped 37% — a whopping $172 billion — in the nine months ended March 31. All but two of the 25 largest managers of hedge funds of funds for institutional investors saw double-digit drops in assets under management as of March 31 or their most recent date available —compared with June 30, 2008. In fact, 16 managers experienced asset declines of more than 25%.

Politico:

- Sen. John McCain (R-Ariz.) on Monday called the recent reelection of Iranian President Mahmoud Ahmadinejad a “sham” and criticized President Barack Obama’s administration for not voicing strong opposition to the election’s result.

- As President Barack Obama tried to sell the American Medical Association today on his health care overhaul, the top Senate Republicans launched a familiar line of attack. They warned of rationed medical care, lack of patient control and government bureaucracy. “The American people will not stand for rationed health care,” Senate Minority Whip Jon Kyl said Monday. “We believe that a one size fits all approach is the wrong approach. "Senate Majority Leader Mitch McConnell, in a floor speech scheduled for this afternoon warned that what Americans "don’t want is a Washington takeover of health care along the lines of what we’ve already seen with banks, insurance companies, and the auto industry. Americans don’t want a government-run system that puts bureaucrats between bureaucrats between patients and doctors."

Investment International:

- Patric de Gentile-Williams, COO at FRM Capital Advisors (FCA), stated on 8 June that the environment for hedge fund seeders has changed dramatically over the last 12 months. “There are now fewer seeders in the market, and even established funds are looking for seed capital after redemptions have hit their funds. “Some start ups have suffered as their original seeders have withdrawn from the market. Investors are more stringent than ever before on issues such as corporate governance, use of third party administrators and transparency.”

Reuters:
- Hedge funds face redemption risks from investors who have not yet unwound their investments while the industry's leverage level is set to increase as markets recover, the European Central Bank said on Monday. In its half-yearly Financial Stability Review, the ECB said investor redemptions reached record levels in the last quarter of 2008 and bleak investment returns in the first quarter of 2009 were not supportive in halting them. The ECB cited estimates that the amount of investor capital managed by single manager hedge funds might halve close to $1 trillion by mid-2009 from the mid-2008 peak of nearly $2 trillion, although the pace of withdrawals seemed to be slowing down in the first three months of this year. "It is noteworthy that default time-weighted returns do not take into account the timing of investors' flows and, in relation to money-weighted returns, may underestimate looming redemption risk stemming from investors who invested at the wrong point in time," the ECB said. "All in all, the average level of leverage in the hedge fund sector seems to have bottomed out. It could start increasing as soon as financial markets recover," it said.

- Ford Motor Co (F) has found advantages in going without the federal emergency aid that supports its domestic rivals, although the long-term implications of the government intervention are unclear, Ford Chairman Bill Ford said on Monday. "We don't know what the implications are going to be, but one thing is for sure, I like our position," Ford told reporters on the sidelines of the National Summit in Detroit.

Spiegel:

- German companies are increasingly hurt by tightening credit conditions, citing a survey conducted by the DIHK Association for Industry and Commerce. The share of companies with over 1,000 employees facing worsening credit conditions rose 10 percentage points to 36% from the beginning of this year, citing a DIHK survey among more than 20,000 companies. 23% of all companies surveyed reported worsening credit conditions, up 3 percentage points.

Die Welt:

- European companies are increasingly hurt by tight credit conditions and the worst of the crisis isn’t over yet, European Union Industry Commissioner Guenter Verheugen said. “The credit crunch is still a problem and the longer it lasts, the more difficult it becomes for companies,” Verheugen, who is also vice president of the European Commission, said. “That’s a threat.” “I don’t see any light at the end of the tunnel yet,” he said. Verheugen also called on European leaders to find a joint solution on banks’ toxic assets. “Without a solution on high-risk assets, we won’t overcome the deep economic crisis,” he said.

Les Echos:

- France will next week increase its 2009 budget deficit forecast for a third time after a collapse in company taxation receipts. Cash garnered from company taxation tumbled 91% in the first four months of the year.

Bear Radar

Style Underperformer:
Small-cap Value (-3.59%)

Sector Underperformers:
Steel (-6.17%), Alt Energy (-5.75%) and Road & Rail (-5.56%)

Stocks Falling on Unusual Volume:
CMC, IPCS, CHDX, COLB, SNDA, HOGS, GENZ, VECO, WSBC, TNDM, PTNR, FUQI, HRBN, KNDL, VRSN, ZEUS, CETV, BOOM, ODC, MXI, DEP, MFW, IXC, CXG, CUK, SLV and AMN

Stocks With Unusual Put Option Activity:
1) GENZ 2) ATHR 3) HNT 4) HBAN 5) ADS

Bull Radar

Style Outperformer:
Large-cap Value (-2.08%)

Sector Outperformers:
Computer Services (-1.14%), Telecom (-1.34%) and Banks (-1.84%)

Stocks Rising on Unusual Volume:
CALM, SHLM, NTT, RMBS, MAPP, NTGR, ACOR, SLXP, TKG and KUB

Stocks With Unusual Call Option Activity:
1) HBAN 2) WYN 3) GENZ 4) AMP 5) S