Today's Headlines

Bloomberg:

- The Baltic Dry Index, a measure of shipping costs for commodities, fell for an eighth consecutive session in London as the supply of ships exceeded demand. The index tracking transport costs on international trade routes fell 83 points, or 3 percent, to 2,689 points, according to the Baltic Exchange. That’s 23 percent lower than before the declines began. Last week’s 17 percent slide was the steepest drop since the end of October. “Charterers out there seem to be well covered for their requirements, and as such we do not expect any turnaround in the short-term,” Rikard Vabo and Lars Erich Nilsen, analysts at Oslo-based Fearnley Fonds ASA, said in a note. “Congestion is also coming down quite significantly.” The number of capesize vessels waiting to offload in China fell to 64 from 81 last week, the analysts said, citing data from Global Ports. All vessel classes slid today, led by a 4.2 percent drop in rates for panamax vessels that carry coal, iron ore and grains.

- Echelon Corporation (NASDAQ:ELON) announced today that it has entered into a long-term agreement with Duke Energy (NYSE:DUK), the nation’s third-largest electric utility, to supply Echelon’s Networked Energy Services (NES) system as a key part of Duke Energy’s smart grid program. Answers to some background questions about what was announced today follow.

- Freddie Mac, the mortgage-finance company under government control being supported by taxpayers, said the collapse of lender Taylor, Bean & Whitaker Mortgage Corp. may cause it “significant” losses. Taylor Bearn, the 12^th-largest US mortgage originator, shuttered its lending business last week after being suspended by US agencies and Freddie Mac. The Federal Housing Administration cited possible financial-statement fraud.

- Gold declined the most in more than a week as falling equities and a rising dollar reduced demand for bullion as a hedge against accelerating consumer prices. Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, slipped 3.97 metric tons to 1,068.9 tons as of Aug. 7, data on the company’s Web site show. The fund reached a record 1,134.03 tons on June 1. “With physical demand very low and ETF investors carrying out further pockets of redemptions, the metal is reliant on further fund/speculative buying to fuel rallies,” James Moore, an analyst at TheBullionDesk.com in London, said in a report. Hedge-fund managers and other large speculators increased their net-long position in New York gold futures by 12 percent in the week ended Aug. 4, according to U.S. Commodity Futures Trading Commission data. Speculative long positions, or bets prices will rise, outnumbered short positions by 193,514 contracts on Comex.

- Crude oil fell for a third day in New York after gasoline futures declined on signs of slowing seasonal demand for auto fuel late in the U.S. summer. “Oil’s looking a little bit vulnerable to some more downside in the first couple of days this week,” said Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney. The dollar’s rally “really undermines a lot of these commodities including oil,” he said. Weak demand through late summer and the “massive overhang of stockpiles” in the U.S. may also limit any price gains from storms and hurricanes in the Gulf of Mexico, he said. Total daily fuel use averaged 18.9 million barrels in the four weeks ended July 31, 3.1 percent less than a year earlier, the Energy Department said last week.

- Pequot Capital Management Inc., once the world’s biggest hedge-fund manager, was cited in at least 44 private reports from exchange watchdogs in the past four years alerting U.S. regulators to potential insider trading, market manipulation or other misconduct, government documents show.

- State Street Corp.(STT) may deplete the $625 million set aside in 2007 to settle legal claims stemming from losses linked to subprime mortgages. The reserve “may not be sufficient to address ongoing litigation” if the U.S. Securities and Exchange Commission sues State Street and seeks monetary penalties, the Boston-based custody bank said in a regulatory filing today.

- Epix, the new premium movie service owned by three Hollywood studios, will be available online for customers of Verizon Communications Inc.’s(VZ) FiOS before the first broadcast on Oct. 1. Verizon’s fiber-optic TV customers will get early online access to 160 movies in high-definition including “Iron Man,” Emil Rensing, New York-based Epix’s chief digital officer, said in an interview.

- Two years after credit markets seized up and caused the worst financial crisis since the Great Depression, companies are hoarding the most cash in at least a decade. Cash and short-term investments accounted for about $1.98 trillion, or 8.2 percent, of assets at the end of the second quarter for companies in the Standard & Poor’s 500 index, up from about $1.6 trillion, or 6.4 percent, a year earlier, Bloomberg data show. Cash reached a record $2 trillion in the first quarter, 8.3 percent of assets.

- McDonald’s Corp.(MCD), the world’s largest restaurant company, said global sales gained 4.3 percent in July, more than some analysts estimated, on demand for McCafe coffees and international sales. The stock rose in U.S. trading. Sales at U.S. restaurants open at least 13 months climbed 2.6 percent, while European orders increased 7.2 percent, Oak Brook, Illinois-based McDonald’s said today in a statement. Sales in Asia, the Middle East and Africa rose 2.1 percent.

- Priceline.com Inc.(PCLN), the online travel agency, rose the most in almost six months in Nasdaq trading after second-quarter earnings topped analysts’ estimates as travelers sought discounts during the recession. Priceline.com climbed $17.34, or 13 percent, to $148.66 at 10:18 a.m. New York time after earlier reaching $149.54, the biggest intraday gain since Feb. 19.

- Consumer bankruptcies show no sign of abating after rising more than a third this year and may hit 1.4 million by Dec. 31 as jobs are lost and loans are harder to get, according to the American Bankruptcy Institute. More than 126,000 consumers filed for bankruptcy in the U.S. last month, 34 percent more than in July 2008, the ABI said in its latest report on Aug. 4.

- Treasury 10-year notes rose for the first time in six days as yields at their highest levels in two months lured buyers before the U.S. sells a record $75 billion of notes and bonds this week.

Wall Street Journal:

- Next year’s census will determine the apportionment of House members and Electoral College votes for each state. To accomplish these vital constitutional purposes, the enumeration should count only citizens and persons who are legal, permanent residents. But it won’t. Instead, the U.S. Census Bureau is set to count all persons physically present in the country—including large numbers who are here illegally. The result will unconstitutionally increase the number of representatives in some states and deprive some other states of their rightful political representation. Citizens of “loser” states should be outraged. Yet few are even aware of what’s going on.

- Economists don't see much relief for unemployed teenagers in a recession that has trimmed hires and pulled many adults into the scramble for jobs typically held by teens.

Unemployment of people ages 16 to 19 was a seasonally adjusted 23.8% in July after hitting a quarter-century high of 24% in June, the government said last week. That compared with last year's summer peak of 20.5%.

- The Taliban have gained the upper hand in Afghanistan, the top American commander there said, forcing the U.S. to change its strategy in the eight-year-old conflict by increasing the number of troops in heavily populated areas like the volatile southern city of Kandahar, the insurgency's spiritual home. Gen. Stanley McChrystal warned that means U.S. casualties, already running at record levels, will remain high for months to come. In an interview with The Wall Street Journal, the commander offered a preview of the strategic assessment he is to deliver to Washington later this month, saying the troop shifts are designed to better protect Afghan civilians from rising levels of Taliban violence and intimidation.

- A provider of subscription e-textbooks for college students is making its 7,000-plus titles accessible on Apple Inc.'s(AAPL) iPhone and iPod Touch as interest heats up in the digital-textbook arena. The new applications, free for subscribers to CourseSmart LLC, will let students access their full electronic textbooks, read their digital notes and search for specific words and phrases. "Nobody is going to use their iPhone to do their homework, but this does provide real mobile learning," said Frank Lyman, CourseSmart's executive vice president. "If you're in a study group and you have a question, you can immediately access your text."

- Two dump trucks packed with 6,600 pounds of high-grade explosives flattened a large swath of a Shiite village in northern Iraq on Monday, while two more bombs targeting Shiites struck Baghdad. The attacks, which left at least 45 people dead across the country, are part of a wave of violence aimed at rekindling the sectarian bloodshed that swept Iraq from 2006-2007, according to U.S. and Iraqi officials.

CNBC:

- New York Attorney General Andrew Cuomo has issued cease-and-desist orders to nearly 40 auto dealerships in the state for running misleading and deceptive advertisements about the U.S. government's "cash for clunkers" program.

New York Post:

- Victims of Bernie Madoff's massive Ponzi scheme may have to wait until 2024, or longer, before all the money is collected, according to one veteran court-appointed receiver. "We are still sending out checks on a 10-year-old Ponzi scheme case because of the complicated nature of the case," said Robb Evans, whose firm of 25 former bank executives is the receiver in dozens of cases. "I wouldn't be surprised if the Madoff case was not fully settled in 15 years," he said.

NY Times:

- The Internet has taken a lot of the paperwork out of banking, but there is no avoiding paper when someone gives you a check. Now one bank wants to let customers deposit checks immediately — through their phones. USAA, a privately held bank and insurance company, plans to update its iPhone application this week to introduce the check deposit feature, which requires a customer to photograph both sides of the check with the phone’s camera. “We’re essentially taking an image of the check, and once you hit the send button, that image is going into our deposit-taking system as any other check would,” said Wayne Peacock, a USAA executive vice president. Customers will not have to mail the check to the bank later; the deposit will be handled entirely electronically, and the bank suggests voiding the check and filing or discarding it. But to reduce the potential for fraud, only customers who are eligible for credit and have some type of insurance through USAA will be permitted to use the deposit feature. Mr. Peacock said that about 60 percent of the bank’s customers qualify.

- General Motors and eBay(EBAY) are expected to announce Monday that hundreds of G.M.’s California dealers will let consumers haggle over the prices of new cars and trucks through the online marketplace.

MarketWatch:
- Hedge funds have generated strong returns this year, but the $1.4 trillion industry remains in a sticky financial situation because many firms have yet to recoup losses from 2008, leaving them missing out on lucrative fees.

- Most economic forecasters say the recession will end this quarter, but most also believe a U.S. recovery will be subdued, according to the monthly survey of economists published Monday by Blue Chip Economic Indicators. The panel of 51 economists predicts that the economy will contract 2.6% in 2009 and that gross domestic product will grow 2.3% in 2010, according to the median forecast.

- Early warning signs suggest a bubble could be building in China's stock market, although it's too early to know whether this warrants an immediate exit from Chinese equities, analysts said in a recent research report.

Securities Industry News:

- Morgan Stanley(MS) in the last week of July nearly displaced Goldman Sachs(GS) as the program trader most active on the New York Stock Exchange. The global financial services firm’s program trading surged 59 percent, to 737.9 million shares bought and sold between July 27 and July 31, according to weekly statistics released by the exchange. That trailed Goldman Sachs, the perennially most active trader, by 8 percent. Goldman’s buy and sell programs totaled 796 million shares. In the previous week, July 20 to 24, Goldman was nearly twice as active as Morgan. Goldman executed buy and sell programs involving 823.7 million shares; Morgan, 463.7 million. Morgan’s biggest jump came in the daily after-hours crossing session. Its placement and execution of orders there reached 183.6 million shares, more than five times the 32.3 million leaving or coming into its hands the prior week. Also increasing strongly was program trading on its own account, up 39 percent to 184 millions shares.

Wealth Bulletin:

- Less than a fifth of all hedge funds launched this year have been able to charge investors the standard 2% management fee, according to new research that comes as the industry faces up to the prospect of life without the lucrative “two and 20” model. Only 13% of funds set-up this year have asked clients to pay a 2% fixed fee for managing assets, according to a report from Morgan Stanley’s prime brokerage division entitled ‘Out-perform and under-deliver’. This is a large drop on the figure from last year, when about half of all funds launched were able to charge the 2% levy. Between 2005 and 2006, 56% applied the fee. Morgan Stanley said: “New funds are making do with less.”

JLMPacificEpoch:

- An unnamed source says Apple (Nasdaq:AAPL) has selected NetDragon to operate its China application store, reports TechWeb.com.cn. Apple has contacted many local developers to provide applications, the source said.

LA Times:

- Lawsuits are the latest roadblock for California budget. Litigators go to court to undo cuts made by legislators and the governor. The state is spending billions of dollars fighting the lawsuits and dealing with increasingly unfavorable rulings. Lawyers are being drafted in droves to unravel spending plans passed by the Legislature and signed by the governor. The goal of these litigators is to get back money their clients lost in the budget process. They are having considerable success, winning one lawsuit after another, costing the state billions of dollars and throwing California's budget process into further tumult. In the last few months alone, the courts added more than a billion dollars to the state's deficit by declaring illegal reductions in healthcare services, redevelopment agency funds and transportation spending. Another ruling threatens to deprive California of all its federal stimulus money if the state does not rescind a cut to the salaries of home healthcare workers. Lawyers are scrambling to prepare additional suits related to the budget plan the governor signed last month.

- Iraq has appealed to Iran to free three American hikers after concluding that the trio who apparently strayed across the Iranian border were just lost tourists, Iraqi Foreign Minister Hoshyar Zebari said Sunday. Zebari said he had heard no word from the Iranians since making the request during a meeting with Iran's ambassador to Iraq last week. But he hoped for an answer in the coming days, he said.

Rassmussen:

- Thirty-two percent (32%) of voters nationwide favor a single-payer health care system where the federal government provides coverage for everyone. A Rasmussen Reports national telephone survey finds that 57% are opposed to a single-payer plan. Fifty-two percent (52%) believe such a system would lead to a lower quality of care while 13% believe care would improve.

Politico:

- Under fire from immigration reform supporters who say he’s not moving fast enough, President Barack Obama said Monday he expects to have a draft immigration bill in Congress by year’s end — but that lawmakers wouldn’t begin to seriously debate the issue until next year. He acknowledged that the fight for comprehensive reform would be difficult, saying, “Am I going to be able to snap my fingers and get this done? No. . . . There are going to be demagogues out there who try to suggest that any form of pathway for legalization for those who are already in the United States is unacceptable.” Obama also predicted that Congress would pass his health reform bill later this year when more “sensible and reasoned arguments will emerge” — a clear reference to the increasingly heated attacks being leveled against his overhaul plan by opponents.

AP:

- President Barack Obama says Canada's government-run health care system works for Canada, but wouldn't work for the U.S. Opponents of Obama's plan to reshape health care have contended it would result in a government-run system where people are denied care, as they say happens in Canada.

Reuters:
- Short sellers' portfolios were left in tatters in July after one of the strongest monthly run ups in equities in recent years, preliminary data from Credit Suisse/Tremont showed on Monday. Hedge funds made money overall during the month, with the Credit Suisse/Tremont Hedge Fund Index was up 2.35 percent. However, those returns paled against the MSCI World's 8.4 percent rise. Short sellers got the thin end of the wedge. The dedicated short bias index was down 8.3 percent on the month, bringing year-to-date losses to 18.2 percent. The only other loser aside from short selling was managed futures, a strategy which uses computer programs to exploit trends in certain asset classes. It was down 0.8 percent for the month, and has lost 8.2 percent so far this year.

- Dow Theory, one of the oldest stock market forecasting methods, has shown a new buy signal: the Dow Jones Transportation Average joined the Dow Jones Industrial Average to close above January highs, according to Bank of America Merrill Lynch. However, the bank's analysts said on Monday that a momentum indicator known as breadth thrust, which focuses on the proportion of advancing to declining stocks, shows a pull-back of 15 to 20 percent this fall when combined with the Dow Theory buy signal.

- Car sales in Russia fell 58 percent in July compared to the same period a year ago, a worse showing than the 56 percent slump seen in June, data from the Association of European Businesses showed on Monday. The AEB data showed that the slump in demand for cars has cut sales by 50 percent in the first seven months of this year.

Financial Times:
- Two years after the financial crisis began, Germany is still at risk of a credit crunch as banks face a wave of corporate downgrades, the head of the country’s main banking association has warned. “Will there be a credit crunch? Clearly it is a concern and there is a real danger of this. I do not think it is entirely unrealistic to think there will be one,” Andreas Schmitz, president of the Federal Association of German Banks, said in an interview. “I think we have reached the low point of the financial crisis. But it is obvious that every bank will have more to deal with in the next 18 months, in terms of defaults by clients and non-performing loans, than they have had up to now.” The warning from could undermine fragile confidence that the worst of the recession may be over in Europe’s largest economy. Mr Schmitz said banks were under pressure to reduce the size of their balance sheets and would have to set aside more capital if corporate customers were downgraded by credit rating agencies. “I think there is a substantial migration of ratings that will also come next year,” he said. His comments are one of the clearest statements of the risk of a credit squeeze from a German banker. Banks have been generally dismissive of complaints from other industrial groups that lending is already being reduced.

Frankfurter Rundschau:

- Germany’s metal and electrical industry may see production fall by as much as 20% this year, head of the Gesamtmetall employers’ group, was cited as saying. Kannegiesser said the industry is running at less than 70% of capacity “for the first time,” making further job cuts likely.

Bear Radar

Style Underperformer:
Large-Cap Growth (-.32%)

Sector Underperformers:
Homebuilders (-2.78%), Steel (-2.55%) and REITs (-2.43%)

Stocks Falling on Unusual Volume:
LLY, RTP, RIMM, BBL, VNDA, TNDM, SXCI, PFWD, MBLX, HANS, OCN, NRT and IFN

Stocks With Unusual Put Option Activity:
1) CBS 2) STT 3) VIA/B 4) SOHU 5) HK

Bull Radar

Style Outperformer:
Small-Cap Value (+.25%)

Sector Outperformers:
Disk Drives (+3.34%), Gaming (+1.87%) and Banks (+1.41%)

Stocks Rising on Unusual Volume:
AIG, SGY, DB, CHL, GEOY, ELON, CHDX, SATS, JRJC, PCLN, COHR, VARI, DISH, BAGL, CFSG, CATY, VOCS, RNST, FRED, PWRD, BJRI, LEAP, NUAN, IPCM, HMIN, BKS, MPS, NPO, SWM, WIT, HRL and GBX

Stocks With Unusual Call Option Activity:
1) FRE 2) YRCW 3) PCLN 4) ENER 5) DISH

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Monday Watch

Weekend Headlines
Bloomberg:

- The dollar advanced to a seven-week high against the yen and gained versus the euro for the first week in almost a month as U.S. employers eliminated fewer jobs last month than economists forecast. “The recovery is setting in relatively quickly,” said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt. “It’s positive for the dollar in the long term because when the economy recovers it’ll be clear that the U.S. is coming out of the crisis better.” “This is monumental,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “This would mark a sea change in how speculators trade economic data and the overall view of the U.S.”

- Publicis Groupe SA, owner of the Saatchi & Saatchi ad firm, said it is buying Microsoft Corp.’s Razorfish advertising agency for $530 million in cash and stock to expand in Internet advertising. Razorfish will continue to operate under its own name, and will remain Microsoft’s “agency of record” for online advertising and marketing, the companies said in a joint statement.

- A weak monsoon may shave as much as one percentage point off India’s economic growth this year, an adviser to Prime Minister Manmohan Singh said yesterday. “The monsoon will have an effect, but not as devastating as it would have been in the past,” said Raghuram Rajan, who is also a professor of finance at the University of Chicago.

- Rio Tinto Plc spied on China’s steelmakers for six years, costing them 700 billion yuan ($102 billion) in excessive charges for iron ore, according to a report published yesterday on a Chinese government-run Web site. Government agencies should enhance surveillance of the secret-protection work at key companies they supervise, said the article on http://www.baomi,org, which is affiliated with the National Administration for the Protection of State Secrets

- China will maintain its current macroeconomic policy stance aimed at bolstering domestic spending as the nation continues to experience fallout from the global recession, Premier Wen Jiabao said. The effect of some of China’s stimulus policies will weaken over time, and the economy is still under pressure from declining demand for exports, Wen said in a statement on the central government’s Web site today. “The reason that we are sticking to the proactive fiscal policy and moderately loose monetary policy is because we are facing many difficulties and challenges,” Wen said.

- American International Group Inc.(AIG), the insurer bailed out by the U.S., benefited from hedge funds for the first time in a year as the company returned to profitability in the second quarter. AIG earned $121 million from hedge funds in the period after the holdings cost the New York-based insurer $2 billion in the nine months ended March 31, the company said last week. Hedge fund at MetLife Inc., the biggest U.S. life insurer, also improved, beating the company’s forecast. AIG and MetLife, which invest mostly in fixed income securities, are again benefiting from hedge funds after the assets weighed on results last year.

- Metals prices are looking “frothy” after surging 70% this year and investors in aluminum, nickel and zinc producers should reduce their holdings, according to Goldman Sachs JBWere Pty. Goldman said gains in China’s money supply and the jump in that country’s loans are unsustainable. Increasing aluminum, zinc and nickel stockpiles and declines in global demand outside China threaten the rally, said the brokerage, an affiliate of Goldman Sachs Group(GS). “Base metals prices have run further and faster than we believe to be justifiable either on current fundamentals or on the short-term outlook,” Malcolm Southwood and Ian Preston, Goldman analysts in Melbourne, said. “As the gap widens between prices and fundamentals, we find ourselves getting more nervous about the sustainability of this rally.” Aluminum, nickel and zinc “are of particular concern,” and copper is also “frothy,” Goldman said.

- Japanese machinery orders rose more than economists estimated in June, the first gain in four months and the latest sign that the nation’s worst postwar recession is easing. Bookings, an indicator of capital investment in the next three to six months, rose 9.7 percent from May, the Cabinet Office said today in Tokyo. The median estimate of 22 economists surveyed by Bloomberg was for a 2.6 percent increase.

Wall Street Journal:

- When 10 members of Congress wanted to study climate change, they did more than just dip their toes into the subject: They went diving and snorkeling at the Great Barrier Reef. They also rode a cable car through the Australian rain forest, visited a penguin rookery and flew to the South Pole. The 11-day trip -- with six spouses traveling along as well -- took place over New Year's 2008. Details are only now coming to light as part of a Wall Street Journal analysis piecing together the specifics of the excursion. It's tough to calculate the travel bills racked up by members of Congress, but one thing's for sure: They use a lot of airplanes. In recent days, House of Representatives members allocated $550 million to upgrade the fleet of luxury Air Force jets used for trips like these -- even though the Defense Department says it doesn't need all the planes. The South Pole trip, led by Rep. Brian Baird (D., Wash.), ranks among the priciest. The lawmakers reported a cost to taxpayers of $103,000. That figure, however, doesn't include the actual flying, because the trip used the Air Force planes, not commercial carriers. Flight costs would lift the total tab to more than $500,000, based on Defense Department figures for aircraft per-hour operating costs. Taxpayer-funded travel for Congress is booming. Legislators and aides reported spending about $13 million on overseas trips last year, a Journal analysis has shown, a nearly 10-fold jump since 1995. For Mr. Baird, the trip was one of two such excursions in six months. Last summer, he went to the Galapagos Islands with several lawmakers, also to gain expertise in climate change.

- The rapid pace at which businesses shed jobs during the recession comes with a flip side: Workers will need to be hired back quickly as the economy improves. So deep have companies cut jobs that Friday's employment report, which showed that the U.S. economy lost a quarter-million jobs in July, was seen as a relief. Since the recession began in December 2007, U.S. payrolls have fallen by 6.7 million, according to the Labor Department. That's a 4.8% decline, a level not seen since the late 1940s. "Firms were unusually aggressive in cutting costs and cutting employment," said James O'Sullivan, an economist with UBS. "The flip side of that remains to be seen, but it could mean that companies will be quicker to bring back people because they were more aggressive about getting rid of them."

- Investors eyeing eBay's(EBAY) stock should make like quick-fingered online shoppers and click the "Buy it now" button.

- If ObamaCare is defeated, it will be due to the common sense of the American people, not to the health-care lobbies that have become its political partners.

- Wal-Mart Stores Inc. is experimenting with a new Latino-themed warehouse store as it hunts for U.S. growth, despite a mixed history at ethnic forays by other retailers. The Más Club, which opened in Houston on Thursday, aims to satisfy the yearnings of recent immigrants for the familiar foods of home -- in American-style bulk sizes. The Sam's Club spinoff is part of a broader effort by the retailer to target the nation's fast-growing Latino population with dedicated stores.

- A proposal to tax generous health plans could ensnare a broader swath of employers and workers whose benefits aren't necessarily gold-plated. The idea, first pitched by Democratic Sen. John Kerry late last month, is being given serious consideration by members of the Senate Finance Committee. Senior House leaders and the Obama administration have said they are willing to entertain the idea to help finance a health-care overhaul.

- Bipartisan opposition is emerging in the Senate to a plan by House lawmakers to spend $550 million for additional passenger jets for senior government officials. The resistance to buying eight Gulfstream and Boeing planes comes as members of both chambers of Congress embark on the busiest month of the year for official overseas travel. The plan to upgrade the fleet of government jets, which was included in a broader defense-funding bill, has also sparked criticism from the Pentagon, which has said it doesn't need half of the new jets. Two Missouri senators, Democrat Claire McCaskill and Republican Christopher Bond, said they would oppose funding for the jets when the legislation is taken up by the Senate in September. "The whole thing kind of makes me sick to my stomach," said Mrs. McCaskill in an interview Sunday. "It is evidence that some of the cynicism about Washington is well placed -- that people get out of touch and they spend money likes it's Monopoly money." Sen. John Thune (R., S.D.) says the planned purchase "is a classic example of Congress being out of touch with the realities of deficit spending."

CNBC.com:
- With the economy strengthening but still fragile, Federal Reserve policymakers are expected to hold a key lending rate at a record low this week and will weigh whether to extend some programs that were created to ease the financial crisis.

- Baseball legend and investor Lenny Dykstra is being accused of "dishonest conduct" by the US Trustee's office of federal bankruptcy court. As a result, the trustee is asking the judge to consider converting Dykstra's Chapter 11 reorganization to a Chapter 7 liquidation.

IBD:
- Neal Black stayed the course followed by his predecessor when he took the helm of Jos. A. Bank (JOSB) late last year.

NY Times:

- When the German government developed its pioneering cash-for-clunkers program, it neglected one small detail: making sure the clunkers no longer clunked. Police investigators have concluded that the alluring premise of the program — providing generous incentives to people who replace aging, pollutant-spewing vehicles with environmentally friendly models — is being undermined as cars that were supposed to have been junked are finding their way to markets in Africa and Eastern Europe.

- “We are seeing more people with homes that were on the market for $4 million to $7 million that are not selling and they are calling us,” said Jim Gall, president of Auction Company of America.

- Before he became President George W. Bush’s Treasury secretary in 2006, Henry M. Paulson Jr. agreed to hold himself to a higher ethical standard than his predecessors. He not only sold all his holdings in Goldman Sachs, the investment bank he had run, but also specifically said that he would avoid any substantive interaction with Goldman executives for his entire term unless he first obtained an ethics waiver from the government. Mr. Paulson did not say when he received a waiver, but copies of two waivers he received — from the White House counsel’s office and the Treasury Department — show they were issued on the afternoon of Sept. 17, 2008. That date was in the middle of the most perilous week of the financial crisis and a day after the government agreed to lend $85 billion to the American International Group, which used the money to pay off Goldman and other big banks that were financially threatened by A.I.G.’s potential collapse. While Mr. Paulson spoke to many Wall Street executives during that period, he was in very frequent contact with Lloyd C. Blankfein, Goldman’s chief executive, according to a copy of Mr. Paulson’s calendars acquired by The New York Times through a Freedom of Information Act request. During the week of the A.I.G. bailout alone, Mr. Paulson and Mr. Blankfein spoke two dozen times, the calendars show, far more frequently than Mr. Paulson did with other Wall Street executives. Mr. Paulson was closely involved in decisions to rescue A.I.G., according to two senior government officials who requested anonymity because the negotiations were supposed to be confidential. Government ethics specialists say that the timing of Mr. Paulson’s waivers, and the circumstances surrounding it, are troubling. Mr. Paulson helped decide the fates of a variety of financial companies, including two longtime Goldman rivals, Bear Stearns and Lehman Brothers, before his ethics waivers were granted. Ad hoc actions taken by Mr. Paulson and officials at the Federal Reserve, like letting Lehman fail and compensating A.I.G.’s trading partners, continue to confound some market participants and members of Congress. Adding to questions about Mr. Paulson’s role, critics say, is the fact that Goldman Sachs was among a group of banks that received substantial government assistance during the turmoil. Goldman not only received $13 billion in taxpayer money as a result of the A.I.G. bailout, but also was given permission at the height of the crisis to convert from an investment firm to a national bank, giving it easier access to federal financing in the event it came under greater financial pressure. Goldman also won federal debt guarantees and received $10 billion under the Troubled Asset Relief Program. It benefited further when the Securities and Exchange Commission suddenly changed its rules governing stock trading, barring investors from being able to bet against Goldman’s shares by selling them short. Now that the company’s crisis has passed, Goldman has rebounded more markedly than its rivals. It has paid back the $10 billion in government assistance, with interest, and exited the federal debt guarantee program. It recently reported second-quarter profit of $3.44 billion, putting its employees on track to earn record bonuses this year: about $700,000 each, on average. Mr. Paulson has disavowed any involvement in the decision to use taxpayer funds to make Goldman and A.I.G.’s trading partners whole. In his July testimony to the House, he said: “I want you to know that I had no role whatsoever in any of the Fed’s decision regarding payments to any of A.I.G.’s creditors or counterparties.” Ms. Davis reiterated this, saying that Mr. Paulson’s involvement in the A.I.G. bailout was meant to forestall a collapse of the entire financial system and not to rescue any individual firms exposed to A.I.G., like Goldman. However, she said, federal officials were worried that both Goldman and Morgan Stanley were in danger themselves of failing later in the week and it was in that context that Mr. Paulson received a waiver. “The waiver was in anticipation of a need to rescue Goldman Sachs,” Ms. Davis said, “not to bail out A.I.G.” According to two senior government officials involved in the discussions about an A.I.G. bailout and several other people who attended those meetings and requested anonymity because of confidentiality agreements, the government’s decision to rescue A.I.G was made collectively by Mr. Paulson, officials from the Federal Reserve and other financial regulators in meetings at the New York Fed over the weekend of Sept. 13-14, 2008. These people said Mr. Paulson played a major role in the A.I.G. rescue discussions over that weekend and that it was well known among the participants that a loan to A.I.G. would be used to pay Goldman and the insurer’s other trading partners. On the morning of Sept. 16, 2008, the day the A.I.G. rescue was announced, Mr. Paulson’s calendars show that he took a call from Mr. Blankfein at 9:40 a.m. Mr. Paulson received the ethics waiver regarding contacts with Goldman between 2:30 and 3 the next afternoon. According to his calendar, he called Mr. Blankfein five times that day. At the height of the financial crisis, Mr. Paulson spoke far more often with Mr. Blankfein than any other executive, according to entries in his calendars. “We don’t know what they talked about,” Mr. Hayes said. “Obviously there was an enormous amount at stake for Goldman in whether or not the A.I.G. contracts would be made whole. So I think the burden is now on Mr. Paulson to demonstrate that there was no exchange of information one way or the other that influenced the ultimate decision of the government to essentially provide a blank check for A.I.G.’s contracts.”

- The drug industry has authorized its lobbyists to spend as much as $150 million on television commercials supporting President Obama’s health care overhaul, beginning over the August Congressional recess, people briefed on the plans said Saturday. The unusually large scale of the industry’s commitment to the cause helps explain some of a contentious back-and-forth playing out in recent days between the odd-couple allies over a deal that the White House struck with the industry in June to secure its support. The terms of the deal were not fully disclosed. Both sides had announced that the drug industry would contribute $80 billion over 10 years to the cost of the health care overhaul without spelling out the details. With House Democrats moving to extract more than that just as the drug makers finalized their advertising plans, the industry lobbyists pressed the Obama administration for public reassurances that it had agreed to cap the industry’s additional costs at $80 billion. The White House, meanwhile, has struggled to mollify its most pivotal health industry ally without alienating Congressional Democrats who want to demand far more of the drug makers.

Washington Post:
- Expanding preventive medical services may well improve public health, but it is highly unlikely to save the government money, the Congressional Budget Office said Friday. In a letter to leaders of the House Energy and Commerce Committee, CBO director Douglas W. Elmendorf said the evidence suggests that the cost of making services such as cancer screening, cholesterol management, vaccinations and wellness training broadly available would far outweigh any savings ultimately generated. "Although different types of preventive care have different effects on spending, the evidence suggests that, for most preventive services, expanded utilization leads to higher, not lower, medical spending overall," Elmendorf wrote. The director cited a study published last year in the New England Journal of Medicine that found that "slightly fewer than 20 percent of [preventive] services that were examined save money, while the rest add to costs." Another recent study conducted by researchers from the American Diabetes Association, the American Heart Association and the American Cancer Society found that highly recommended preventive measures such as monitoring blood pressure for diabetics and checking cholesterol levels for people at high risk of heart disease "would substantially reduce the projected number of heart attacks and strokes that occurred." However, the tests "would also increase total spending on medical care because the ultimate savings would offset only about 10 percent of the costs of the preventive services, on average," Elmendorf wrote. His letter directly contradicts the assertions of some lawmakers, including House Speaker Nancy Pelosi (D-Calif.), who argued last month that spending money on prevention should lower the overall costs of legislation to overhaul the nation's health-care system.

CNNMoney.com:

- You've heard of speed dating? It's got nothin' on foreclosure buying these days. In many places, anyone who wants to buy a foreclosure better act fast, or they're going to come away with bupkus. REOs, the industry term for homes repossessed by lenders and put back on the market, are often selling in a day -- sometimes in less.

- President Obama's fall agenda has grown larger as some of the biggest decisions -- and fights -- over health care reform have been punted to September ... at the earliest. But health reform is not the only major initiative he wants to get done. Far from it. There's climate change. There's reforming Wall Street. And, of course, there's passing a budget for 2010 at a time of huge deficits. Running in the background to all of this will be one of the biggest issues the Obama administration must address: taxes. "As soon as they can clear health care off the plate, it will be taxes, taxes, taxes," said Anne Mathias, director of research at Concept Capital's Washington Research Group.

Business Week:
- The SEC Speeds Up Its Enforcement Arm.

LA Times:

- The abrupt shutdown of two aging nuclear reactors that produce a radioisotope widely used in medical imaging has forced physicians in the U.S. and abroad into a crisis, requiring them to postpone or cancel necessary scans for heart disease and cancer, or turn to alternative tests that are not as accurate, take longer and expose patients to higher doses of radiation. Because of limits on testing produced by the shortage, some patients will undergo heart or cancer surgeries that could have been prevented by imaging, and others will miss needed surgeries because of the lack of testing, said Dr. Michael Graham of the University of Iowa, president of SNM, formerly the Society of Nuclear Medicine. "It's possible that some deaths could occur," he said. Every day of the year, nearly 55,000 Americans and tens of thousands of patients in other countries undergo nuclear medicine tests -- such as checking for the spread of cancer to the bones or monitoring the flow of blood through the heart -- most of them using technetium-99m. The radioisotope is attached to chemicals that allow it to bind to specific sites in the body, where it emits gamma rays that can be used to produce an image of the area. The shortage is also straining hospital finances. When a shipment does come in, some hospitals are scheduling tests far into the evening and on weekends to use up the technetium before it disintegrates -- frazzling the nerves of some technicians and boosting overtime costs. The cost of the radioisotope itself has also gone up, by at least 20% to 30%, according to Dr. Marcelo F. Di Carli, chief of nuclear medicine at Brigham and Women's Hospital in Boston. "That's overhead we are absorbing because reimbursement is fixed." Perhaps the best short-term hope is the University of Missouri Research Reactor in Columbia, which could be modified to produce molybdenum-99 in two to three years at a cost of perhaps $50 million. "That is a perfect example of what we should be spending stimulus money on," radiologist Atcher said. "It's shovel-ready and would create jobs in the short term, as well as staffing in the long term." For the longer term, reactor builder Babcock & Wilcox Co. is planning to construct a reactor to produce medical isotopes, but it has not yet chosen a site and plans have not been approved by the government. Construction would probably take five to six years.

Lloyd’s List:

- CAPESIZE owners with early tonnage are heading for another rough week as too many ships chase too few cargoes. Brokers said the situation has caused a price differential to open up, with owners of ships available for August loading being offered a lower rate to charterers than owners with vessels free in September.

USA Today:

- The U.S. price of gasoline jumped nearly 16 cents a gallon during the past two weeks to $2.64. That's according to the national Lundberg Survey of fuel prices released Sunday. Analyst Trilby Lundberg says it appears the rate of increase is slowing. The latest average price of regular gasoline is $1.20 below the price at the same time last year. The average price for a gallon of mid-grade was $2.77. Premium was at $2.88. Charleston, S.C., had the lowest price, $2.38 for a gallon for regular. Honolulu was the highest at $3.07.

Politico:

- National Security Adviser James Jones said Sunday on NBC’s "Meet the Press" that Iran has finally acknowledged it is holding three American hikers who strayed into the country. “The government has officially acknowledged that they have them in their custody," Jones said. "That is as of this morning, we do have that confirmation. ... We have sent strong messages that we would like these three young people released as soon as possible and also others that they have in their custody, as well. These are innocent people.”

- Former Democratic National Committee Chairman Howard Dean said as Congress continues to hammer out health care reform legislation, lawmakers will need to be cautious that the policy doesn’t allow care to be denied to key patients. “I don’t want somebody in between the doctor and the patient,” Dean said Sunday on ABC’s “This Week.” “I don’t want the possibility…of people setting standards of denying care.” A post on former Alaska Gov. Sarah Palin’s Facebook page this weekend warned that the Obama health care plan could easily refuse to pay medical bills for the elderly and would promote ‘death panels’ encouraging euthanasia. “The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama’s “death panel” so his bureaucrats can decide, based on a subjective judgment of their ‘level of productivity in society’ whether they are worthy of health care,” Palin wrote. “Such a system is downright evil.” Former House Speaker Newt Gingrich defended Palin's take. “Communal standards historically is a very dangerous concept,” the Georgia Republican said. “You are asking us to trust turning power over to the government, when there are clearly people in American who believe in establishing euthanasia, including selective standards."

Rasmussen Reports:

- The Rasmussen Consumer Index, which measures the economic confidence of consumers on a daily basis, climbed five points on Sunday, reaching its highest level since the Lehman Brothers collapse in September 2008. At 78.8, the Index is up five points over the past week, up 18 points over the past month and up 19 points from the beginning of this year.

Reuters:

- U.S. Treasury Secretary Timothy Geithner formally requested that Congress raise the $12.1 trillion statutory debt limit on Friday, saying that it could be breached as early as mid-October. "It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations," Geithner said in a letter to Senate Majority Leader Harry Reid that was obtained by Reuters. Treasury officials earlier this week said that the debt limit, last raised in February when the $787 billion economic stimulus legislation was passed, would be hit sometime in the October-December quarter. Geithner's letter said the breach could be two weeks into that period, just as the 2010 fiscal year is getting underway. The latest request comes as the Treasury is ramping up borrowing to unprecedented levels to fund stimulus and financial bailout programs and cope with a deep recession that has devastated tax revenues. It is expected to issue net new debt of as much as $2 trillion in the 2009 fiscal year ended September 30 and up to $1.6 trillion in the 2010 fiscal year, according to bond dealer forecasts. The request to increase the debt limit will likely raise the ire of Republicans who have accused President Barack Obama of runaway spending.

- U.S.-Swiss talks to settle a tax evasion row against UBS have stalled as the two states have yet to agree legal details on how to allow the transfer of some bank client data to Washington, a Swiss paper said on Sunday.

- Oil fell toward $70 a barrel on Monday, extending the previous session's decline, as strength in the U.S. dollar encouraged investors to take profit from a recent rally. "Despite a more positive outlook for product margins, we continue to see sizeable risks to the downside for crude in the near-term as weaker demand for crude will add to already weak fundamentals for the complex," JP Morgan's Lawrence Eagles said in a research note on Friday.

Financial Times:

- The aluminum market appears to be contravening some of the most basic principles of economics. Prices have risen 30 per cent this year, a gravity-defying recovery in the face of falling demand and a growing supply surplus. Klaus Kleinfeld, chief executive of Alcoa, the US aluminum producer, recently warned that global consumption would decline 7 per cent this year. “Aluminum cannot escape the inventory overhang,” says Michael Jansen, analyst at JP Morgan, who believes that prices are likely to remain choppy as metal flows in and out of the warehouses. Another factor which could buffet the market is that a swathe of production capacity has been left idle following last year’s collapse in prices. As prices recover, output is expected to increase, particularly in China, some traders say.

- More than 80 per cent of the largest US advertisers are using Facebook to promote themselves, suggesting that corporate America has embraced the social networking site as a mainstream promotional platform. This marks a striking shift. Companies were initially hesitant to advertise on social networks because users appeared resistant to advertising and there were fears that corporate logos might appear alongside offensive content. However, Facebook, which has 340m unique monthly visitors, says 83 of the top 100 advertising spenders in the US, as ranked by the research group AdAge, use its site. This group includes Johnson & Johnson, Nike and AT&T. “Every client wants to talk about Facebook,” said Ed Montes, US managing director of Havas Digital, whose clients include Sears, Expedia and Air France. “I haven’t seen this kind of consistent fervour for a company since Google.”

TimesOnline:
- Electricity production – supposedly a rare “honest” gauge of Chinese industrial activity and economic growth – may be misleading investors on the true state of the nation, analysts warn. A recent surge in power generation may have more to do with the demise of a commodity arbitrage play than a revival of activity in China’s “workshop of the world” factory heartlands. It could also mean that the world’s third biggest economy may not find a base for broad recovery next year. One strong note of caution on electricity consumption, issued this week by the chief China economist at Royal Bank of Scotland, said that changes in aluminum production – a notoriously power-hungry industry – were distorting the numbers and may be significantly exaggerating the true level of industrial improvement. The warning comes amid mounting concern that official readings of the Chinese economy are being manipulated more than usual in Beijing’s haste to declare the country the first leading economy to emerge from the global crisis. Doubts are also now being voiced domestically. Particularly strange is the deepening division between the sum of the GDP growth rates in the individual regions and the official figure for the country produced by the statisticians in Beijing, say observers.

Telegraph:

- Bank of England Governor Mervyn King will this week warn that deflation remains a very clear and present risk for the British economy, despite signs of recovery. Mr King will use the Bank's quarterly Inflation Report, due on Wednesday, to indicate that unless the Bank continues with its Quantitative Easing (QE) scheme, the UK could lapse into a Japan-style decade of stagnation. The report is likely to advise that although inflation will remain in positive territory over the next year, there remains a high chance that it will be below target in two years time.

- The Baltic Dry Index, which tracks shipping costs and is viewed as leading indicator for commodity prices, has had its worst week since the peak of the financial crisis last October, as Chinese demand slowed.

SonntagsZeitung:
- Peter Bofinger, a member of German Chancellor Angela Merkel’s council of economic advisers, said while the economic slump has bottomed out there are no signs of recovery yet, citing an interview. “A turnaround hasn’t emerged yet,” Bofinger was quoted as saying. There are no “hard facts” suggesting an upswing, especially in export-oriented counties like Germany and Switzerland, he said.

Euro am Sonntag:

- Germany’s SAP AG(SAP) is in talks to buy US software company Tibco Software(TIBX), citing SAP officials. While the talks are “well advanced,” the outcome remains open. SAP is also interested in US software company Teradata Corp.(TDC)

arabianBusiness.com:

- Dubai apartment prices fell 17 percent in the second quarter, while villa prices plunged 24 percent, Landmark Advisory said on Sunday. Demand was considerably stronger for villas, which accounted for 73 percent of all residential sales. Since peaking in the fourth quarter, Dubai villa and apartment prices have declined by 44 percent and 36 percent, respectively, according to the data. Average apartment rents in Dubai fell 23 percent in the period while villa rents declined 19 percent.

Weekend Recommendations
Barron's:
- Made positive comments on (AAPL), (DRIV), (GOLD), (FRED), (C), (GRS) and (GSIC).

- Made negative comments on (PCL), (PCH), (ALGT) and (WY).

Night Trading
Asian indices are +.25% to +1.50% on avg.

Asia Ex-Japan Inv Grade CDS Index -2.3%.
S&P 500 futures -.03%.
NASDAQ 100 futures -.12%.

Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Global Commentary
WSJ Intl Markets Performance
Commodity Futures
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Earnings Calendar

Conference Calendar

Who’s Speaking?
Upgrades/Downgrades
Rasmussen Business/Economy Polling

Earnings of Note
Company/Estimate
- (KWK)/.19

- (DISH)/.65

- (SYY)/.49

- (PCLN)/1.79

- (DYN)/-.04

- (NUAN)/.25

- (FLR)/.91

- (MDR)/.37

Upcoming Splits

- None of note

Economic Releases

- None of note

Other Potential Market Movers
- The Pacific Crest Tech Forum could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and financial stocks in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the week.

Weekly Outlook

Click here for Wall St. Week Ahead by Reuters.

Click here for Stocks to Watch Monday by MarketWatch.

There are several economic reports of note and some significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – None of note

Tues. – Weekly retail sales reports, Preliminary 2Q Non-farm Productivity, Preliminary 2Q Unit Labor Costs, Wholesale Inventories, IDB/TIPP Economic Optimism, ABC Consumer Confidence

Wed. – Bloomberg Global Confidence Index, Weekly MBA Mortgage Applications report, Weekly EIA energy inventory report, Trade Deficit, Monthly Budget Statement, FOMC rate decision

Thur. – Import Price Index, Advance Retail Sales, Initial Jobless Claims, Business Inventories

Fri. – Consumer Price Index, Industrial Production, Capacity Utilization, Univ. of Mich. Consumer Confidence

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. – Dish Network(DISH), Sysco Corp.(SYY), priceline.com(PCLN), Dynegy(DYN), Flour Corp.(FLR), McDermott(MDR)

Tues. – Bob Evans(BOBE), Warnaco Group(WRC), Fossil(FOSL), Dendreon(DNDN), Applied Materials(AMAT)

Wed. – Liz Claiborne(LIZ), Advance Auto Parts(AAP), Macy’s(M), Sara Lee(SLE), Ethan Allen(ETH)

Thur. – Royal Gold(RGLD), Urban Outfitters(URBN), Dr Pepper Snapple(DPS), Wal-Mart(WMT), Kohl’s(KSS), Nordstrom(JWN), Estee Lauder(EL), DeVry(DV), Autodesk(ADSK)

Fri. – Abercrombie & Fitch(ANF), JCPenney(JCP)

Other events that have market-moving potential this week include:

Mon. – Pacific Crest Tech Forum

Tue. – Pacific Crest Tech Forum, CanaccordAdams Growth Conference, Oppenheimer Communications/Tech/Internet Conference, Morgan Keegan Security/Safety/Defense Conference, Morgan Keegan Tech Conference, Jeffries Industrial Summit

Wed. – CanaccordAdams Growth Conference, Oppenheimer Communications/Tech/Internet Conference, Jeffries Industrial Summit

Thur. – (ERIC) investor relations forum, (ATV) general meeting, CanaccordAdams Growth Conference, UBS Engineering & Construction Conference, (MF) shareholders meeting, (MDCI) shareholders meeting, (RHT) shareholders meeting, (QSII) shareholders meeting

Fri. – None of note

BOTTOM LINE: I expect US stocks to finish the week mixed as less financial sector pessimism, diminishing economic fear, declining commercial real estate worries, investment manager performance anxiety and mostly positive earnings reports offset more shorting, Chinese asset bubble concerns, healthcare reform worries, profit-taking and higher long-term rates. My trading indicators are giving bullish signals and the Portfolio is 100% net long heading into the week.