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Wednesday Watch

Late-Night Headlines
Bloomberg:

- The cost of protecting corporate bonds in the U.S. from default fell to levels last seen three months before Lehman Brothers Holdings Inc. filed for the biggest U.S. bankruptcy one year ago. Credit-default swaps on the Markit CDX North America Investment-Grade Index tied to 125 companies in the U.S. and Canada declined 2 basis points to 104 basis points as of 3:34 p.m. in New York, according to broker Phoenix Partners Group. That the lowest level since May 30, 2008, according to CMA DataVision.

- Airline stocks rallied for a ninth day, the longest streak since 1995, following forecasts from JPMorgan Chase & Co. and Delta Air Lines Inc. that the economic rebound will boost travel spending. The AMEX Airline Index jumped 3.8 percent to 28.63 in New York, bringing its climb since Sept. 2 to 26 percent. The measure, which includes companies from Alaska Air Group Inc. to AMR Corp., has soared 125 percent since reaching a low on March 9. JPMorgan analysts upgraded UAL Corp. and US Airways Group Inc. in a Sept. 10 report that said the industry’s revenue in the last two months has beaten estimates. Delta, the world’s largest carrier, increased its profit margin estimate yesterday as customers scooped up lowered fares for summer vacations.

- Ken Griffin started trading convertible bonds 22 years ago from his Harvard University dorm room. Now he’s moving away from the investments that made him a billionaire hedge-fund manager -- and unraveled last year, leaving clients with a 55 percent loss, almost three times the industry average. Citadel Investment Group LLC, Griffin’s $13.5 billion firm, is reducing its two biggest funds’ holdings of convertible bonds and other so-called relative-value trades that try to profit from small price differences in related securities, and amplify the gains with debt. At last year’s peak in May, the firm used borrowings of nine times net assets to hold $145 billion in gross assets. That was triple the average leverage ratio of hedge funds, according to a report from JPMorgan Chase & Co.

- Lawmakers pushed back today against a U.S. presidential panel’s conclusion that NASA can’t afford to return astronauts to the moon by 2020 with a new rocket and spacecraft and should instead consider another plan. “I’m pretty angry,” said Representative Gabrielle Giffords, an Arizona Democrat who chairs a House space subcommittee. “We’ve been given a set of alternatives that almost look like cartoons.”

- U.S. House Republicans are seeking to sell government stakes in companies including Citigroup Inc., American International Group Inc., General Motors Corp. and Chrysler LLC. Legislation being drafted would create an independent trust to sell the U.S. ownership, Representative Spencer Bachus, the top Republican on the House Financial Services Committee, said today at a Washington news conference. The measure covers firms with U.S. ownership that exceeds 15 percent. “We think that we ought to wind down the government ownership of these corporations,” said Bachus of Alabama, identifying the four companies. “That’s not what the American people want.”

- Federal Deposit Insurance Corp. Chairman Sheila Bair and two U.S. Securities and Exchange Commission chairmen will be questioned by lawmakers over their roles in Bank of America Corp.’s takeover of Merrill Lynch & Co. The House Oversight and Government Reform Committee at a Sept. 30 hearing will seek “to better understand the nature and extent of their involvement,” committee Chairman Edolphus Towns said today in a statement. The New York Democrat’s panel also will probe Bank of America’s proposed settlement with the SEC on claims the bank misled investors about Merrill Lynch bonuses.

- Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., increased holdings of government debt last month to the most in five years and cut mortgage securities. Gross boosted the $177.5 billion Total Return Fund’s investment in government-related bonds to 44 percent of assets, the most since August 2004, from 25 percent in July, according to Pimco’s Web site. The fund cut mortgage debt to 38 percent from 47 percent. Officials at Pimco have forecast a “new normal” in the global economy that will include heightened government regulation, lower consumption and slower economic growth.

Wall Street Journal:

- America's top military officer endorsed sending more U.S. troops to Afghanistan, a shift in Pentagon rhetoric that heralds a potential deepening of involvement in the Afghan war despite flagging support from the public and top Democrats in Congress. Addressing a Senate panel, Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, offered no new details about how many American reinforcements will be needed in Afghanistan. But his comments mean that both Adm. Mullen and Defense Secretary Robert Gates, who spoke on the subject last week, now appear willing to order more forces to Afghanistan despite their earlier skepticism about expanding the American military presence there. Their support makes it easier for President Barack Obama to approve the plans of Gen. Stanley McChrystal -- whom the Obama administration installed as the top American commander in Kabul -- when he submits a formal request later this month for as many as 40,000 new troops, in addition to 62,000 now there.

- On Monday, the U.S. Senate voted 83-7 to strip Acorn, the premier community organizing group on the left, of more than $1.6 million in federal housing money meant to assist low-income people obtain loans and prepare tax forms. This dramatic step followed last Friday's decision by the U.S. Census Bureau to sever its ties with the organization, one of several community groups it was partnering with to conduct the nation's head count. Both of these actions came after secretly recorded videos involving employees in Acorn's Brooklyn, N.Y., Washington, D.C., Baltimore, Md. and San Bernardino, Calif. offices were televised on Fox News. The videos were recorded by two independent filmmakers who posed as a prostitute and a pimp and said they were planning to import underage women from El Salvador for the sex trade. They asked for and received advice on getting a housing loan and evading federal taxes. In response, Acorn has so far fired four of the employees seen on the videos. But it claimed the videos were "doctored" and accused critics of a smear campaign and "racist coverage" of the incidents. Such rhetoric in the past has deflected scrutiny of Acorn tactics, such as street demonstrations and boycotts against banks to force lower credit standards for home loans, which a congressional report found contributed to the subprime loan mess. But now Acorn may be finally running off the rails.

- Tough times are reshaping some executive M.B.A. programs. Enrollment in many of these programs is slipping, as companies looking to cut costs scale back—and in some cases eliminate—their financial support for employees' executive M.B.A. studies.

- The Securities and Exchange Commission has set up an agencywide task force to examine a financial product in which people collect cash for selling their existing life-insurance contracts. The product, known as a life-insurance settlement, has come under greater scrutiny following the financial crisis. In recent months, Wall Street firms have begun securitizing the products by slicing them up and selling bundled pieces to investors. Regulators are concerned about the securitization of these products and whether those who are selling their life-insurance policies and those buying them know exactly what they are getting, according to people familiar with the matter. Some see echoes of the residential-mortgage market, in which pieces of mortgage-backed assets became widely distributed among financial firms and few people had a good grasp of the value of the underlying mortgages. "There are many questions raised by life settlements -- from sales practices to privacy rights to the role of securitizations," Ms. Schapiro said. "And the answers could help determine where more oversight is needed. This is a growing market and we want to be ahead of it."

- Moving into high gear this year is the issuance of bonds backed by auto loans. That is significant for two reasons: It shows that with lots of help from the Federal Reserve, the securitization markets are slowly reviving, helping to restore the flow of credit to the broader economy. And it also shows that despite all the talk that risk is back, investors remain cautious and are sticking with the tried and tested -- straightforward structures and easy-to-analyze collateral. Notwithstanding the fragile state of the U.S. consumer, auto loans have held up well. Default rates are relatively low.

- Thirty senior bankers from Société Générale's alternative asset management team have left to set up their own hedge fund business amid growing pressures at French banks to curtail the bonuses of top employees. The team - including the head of SocGen's $12.7bn global hedge funds business, Arié Assayag, and several of his most senior colleagues - have left in a move backed by an American private equity firm. The French government has recently clamped down on bankers' compensation in response to public outcry, and hopes to persuade fellow G20 economies to follow suit at the Pittsburgh Summit next week. Both Société Générale and rival BNP Paribas, France's two largest investment banks, have promised to curtail payouts to employees. So-called "golden hellos" - signing on bonuses for new staff - have already been mothballed. Nexar Capital - the name for the new hedge fund venture - will be headed by Mr Assayag, with Eric Attias, the former chief executive of Société Générale's New York Asset Management business, as its chief investment officer. The firm will be based in Paris with an office in New York. Nexar has been backed with seed capital by US private equity firm Aquiline partners - set up by Jeffrey Greenberg, the former chairman of Marsh & McLennan, the American insurance group, and son of Hank Greenberg, the former AIG chief.

CNBC.com:
- Not too many people can honestly say they saw the Wall Street crisis coming. Hear from someone who can! Sean Egan president of Egan-Jones Ratings Company was among the first to warn of troubles lurking in subprime mortgage-backed bonds. “The storm has passed,” says Egan. The federal government has taken unprecedented steps to intervene in the market. With the government standing behind the major financial institutions, investors should consider them “downside protected” and instead focus on the upside. "In real estate, the worst has also passed," adds Egan.

- 5 Banks to Own Now, Says Bove.

- The S&P 500 will rise to 1200 or 1250 before there's a meaningful correction, so although stocks aren't as cheap as they were a few months ago, they're still worth buying, said Barton Biggs of Traxis Partners. "Everybody thinks it's gone too far. We're getting all kinds of advice that we ought to cut back and lock in some gains," Biggs told CNBC. "It takes courage to be a pig, and I'm a pig here." Biggs recommended the following sectors and markets to investors:

- What if they planned a stock market correction and nobody came? Although investors were widely expected to return after the Labor Day holiday, volume has remained surprisingly light. The reason: so many people are worried about a big selloff that they're staying out of stocks—at least for now.

- Warren Buffett tells CNBC he has no regrets about any of the decisions he made over the weekend one year ago in September, 2008, when the financial crisis was at its worst.

NY Times:

- Even though the White House has signaled that a so-called public option may not be necessary for a health-care overhaul, some interest groups are trying to pressure Democrats to keep it in play. Health Care for America Now, made up of more than 1,000 labor unions and Democratic groups, is one of them. It started a new advertising campaign on Tuesday in which it advocates for a government-run health insurance plan by demonizing the health insurance industry, which opposes one.

- Anadarko, of the US, with partners Woodside, Repsol, and Tullow, the UK-listed oil company, will reveal as early as Wednesday that they have established a new oil frontier that stretches 1,100km along the coast from Ghana to Sierra Leone. The announcement will be made off the back of discoveries made by the Venus well Anadarko has been drilling off Sierra Leone, people close to the US company said. Peter Hitchens, analyst at Panmure Gordon, the financial services group, said before the official announcement: “If Venus comes in, they are into a grand slam.” That is because Venus-B lies off the shores of Sierra Leone and is at the western edge of a geological system that includes the large discoveries off Ghana’s shores. Anadarko and Tullow have made a bet on the coastline, snapping up rights to explore the area at low prices when their oil reserves were unknown. Woodside and Repsol, which each hold 25 per cent of the Sierra Leone asset, will also benefit. Anadarko owns a 40 per cent share, while Tullow has 10 per cent. The Venus well does not prove that the area is full of oil, but it makes it more likely and will sharpen bigger companies’ interests.

Business Week:
- The Employee Free Choice Act—the embattled bill that would make it easier for unions to organize—may have gotten new life on Sept. 15 when Senator Arlen Specter (D-Pa.) announced that he had reached a compromise with labor representatives on a bill that could pass later this year.

CNNMoney.com:

- Where are the perp walks for the subprime mortgage executives that dragged us into this mess? Three years after the housing bubble popped, federal prosecutors have yet to bring a case against the executives whose firms took part in some of the worst excesses of the subprime mortgage market.

Politico:

- Texas Rep. Lamar Smith, the top Republican on the House Judiciary Committee, on Tuesday called on the Federal Bureau of Investigation and the Department of Justice to open investigations into the embattled Association of Community Organizations for Reform Now, better known by the acronym ACORN. “For years, ACORN has been the subject of allegations of fraud, misconduct and possible criminal activity. In fact, voter registration fraud allegations have led ACORN to be subject to investigation in 15 states,” Smith wrote in a statement attached to letters sent to FBI Director Robert Mueller and Glenn Fine, the Justice Department’s inspector general. “Despite these serious concerns, Congress and the Administration continue to provide federal funding to a corrupt organization,” Smith continued. “Our democracy depends on the integrity of our election process. ACORN’s efforts to swing election results through voter registration fraud undermine the integrity of our elections and shake the American people’s faith in their government.”

Vanity Fair:

- 100 to Blame: Barney Frank, Richard Fuld, and More.

Reuters:

- Chipmaker Silicon Laboratories Inc (SLAB) raised its outlook for the third quarter, citing better-than-expected demand for its chips used in FM radio tuners. The strength in the radio business was a result of better-than-seasonal demand in handsets at the company's largest customer, which is expected to moderate in the fourth quarter, Silicon Laboratories said. "Audio broadcast, that is FM tuners, is seeing strength at their largest handset customer, Samsung, we believe," Ian Ing, an analyst with Broadpoint Amtech, said. The company said a faster-than-expected roll-out at a new consumer audio customer also helped the business. The analyst said the new customer could be Apple Inc (AAPL), which recently launched iPods with FM radio tuners.

- Rambus Inc (RMBS) shares rose 3.6 percent in after-hours trading on Tuesday after the company announced current quarter revenue will be better than expected because of brisk computer sales. The company, which licenses patents for use by chip makers, said revenues for the quarter ending September 30 will be between $27 million and $28 million, up from its earlier prediction of $22 million to $25 million. The stock rose to $18.69 in after-hours trading, up from its close of $18.03. "Semiconductor shipments rose to meet current OEM (computer maker) demand, after an overcorrection earlier this year, driving an increase in our variable royalty payments and consequently higher expected revenue for the quarter," Chief Executive Harold Hughes said in a statement.

- Adobe Systems Inc (ADBE) plans to pay $1.8 billion for fast-growing business software maker Omniture Inc (OMTR) as the maker of Photoshop and Acrobat looks to turn around declining sales. Omniture shares soared 25 percent to $21.74 in after-hours trading, while Adobe shares slid 4.5 percent to $34.06.

- Chinese electric car maker Tianjin Qingyuan Electric Vehicle Co is in talks with Daimler AG to develop an electric version of a van made at the German automaker's joint venture in southeast China, a source said on Tuesday.

- Citigroup Inc(C) is slowly regaining favor among institutional investors, a development that could help the U.S. government unload its 34 percent stake in the still-troubled bank.

- U.S. crude oil futures pared gains in post-settlement trading on Tuesday after industry data showed a surprise increase in domestic crude stocks last week. Heating oil and gasoline futures trimmed gains as the data showed distillate and gasoline stocks rose more than expected. The American Petroleum Institute, in a weekly inventory report, said that crude stocks rose 631,000 barrels in the week

to Sept. 11, against the forecast in a Reuters poll of analysts for a 2.4-million-barrel drawdown. The industry group said gasoline stocks rose 1.3 million barrels, more than twice the forecast for a 600,000 barrel build in the poll. Most stunning for analysts, distillate stocks, which include heating oil and diesel fuel, jumped 5.2 million barrels, against the forecast for a 1.3 million barrel rise. "What strikes me the most in the API report is the incredible build in distillates, even with our current surplus in supplies already above the five-year average," said Phil

Flynn, analyst at PFGBest Research in Chicago. "This is very bearish and tells you that we still have demand issues that probably reflect some of the problems we

still have in the economy. Of course, we'll have to wait for tomorrow's EIA data to see if these industry numbers will stick," he added.

Financial Times:

- The US government should help revive the moribund market for big mortgages by getting Fannie Mae and Freddie Mac to buy large home loans from banks, the chief executive of the lender Wells Fargo urged on Tuesday. In an interview with the Financial Times, John Stumpf, whose bank originates a quarter of all US mortgages, called for an increase in the size of loans purchased by Fannie and Freddie, the troubled finance groups controlled by the authorities. Mr Stumpf said such a move would help reduce the interest rates charged by banks on so-called “jumbo” mortgages and revive a market for higher-end housing that has been devastated by the credit crunch. Fannie and Freddie can currently buy or guarantee mortgages worth up to $417,000. The stimulus plan approved last year set the companies higher limits of up to $729,750 in certain high-cost areas such as California until the end of 2009. Congress has to approve any extension of those higher limits. “I would like to see Fannie and Freddie increase the size of mortgages [they buy],” Mr Stumpf said. “It would be good for housing and good for the economy”.

ORF:

- European Central Bank council member Ewald Nowotny sees the economy stabilizing at a “low level” in 2010. “The clear decline has been stopped,” Nowotny said. This means growth rates next year will be positive, but will be too low to – for instance – stop an increase in unemployment.”

Late Buy/Sell Recommendations
Citigroup:

- Upgraded (WMG) to Buy, target $6.

- Downgraded (MIR) to Sell, target $13.

- Downgraded (PPS) to Sell, target $15.

Night Trading
Asian Indices are -.25% to +1.75% on average.

Asia Ex-Japan Inv Grade CDS Index 118.50 -5.0 basis points.
S&P 500 futures +.17%.
NASDAQ 100 futures +.19%.

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Company/EPS Estimate
- (DBRN)/.36

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Economic Releases

8:30 am EST

- The Consumer Price Index for August is estimated to rise .3% versus unch. in July.

- The CPI Ex Food & Energy for August is estimated to rise .1% versus a .1% gain in July.

- The 2Q Current Account Deficit is estimated to widen to -$92.0B versus -$101.5B in 1Q.

9:00 am EST

-.Net Long-term TIC Flows for July are estimated at $60.0B versus $90.7B in June.

9:15 am EST

- Industrial Production for August is estimated to rise .6% versus a .5% gain in July.

- Capacity Utilization for August is estimated to rise to 69.0% versus 68.5% in July.

9:30 am EST

- The NAHB Housing Market Index for September is estimated to rise to 19.0 versus 18.0 in August.

Upcoming Splits
- None of note

Other Potential Market Movers
- The weekly EIA energy inventory data, weekly MBA mortgage applications report, the Bloomberg Global Confidence Index, RBC Consumer Conference, Deutsche Bank Tech Conference, Barclays Financial Services Conference, UBS Paper Conference, Goldman Sachs Communacopia Conference, Roth Capital Partners Media/Software Event, CSFB Chemical Conference, Keybanc Basic Materials Conference, ThinkEquity Growth Conference, (SLE) analyst day, (MXM) analyst meeting, (CFL) analyst day, (MT) investor day, (BAX) investor conference, (DBD) investment conference and the (BHP) analyst meeting could also impact trading today.

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

Stocks Finish Near Session Highs, Boosted by Airline, Steel, Alt Energy, Coal, Gaming and Homebuilding Shares

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Stocks Higher into Final Hour on Less Economic Fear, Short-Covering, Technical Buying, Declining Financial Sector Pessimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Financial longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is about average. Investor anxiety is high. Today’s overall market action is bullish. The VIX is falling 1.93% and is high at 23.40. The ISE Sentiment Index is around average at 146.0 and the total put/call is slightly below average at .74. Finally, the NYSE Arms has been running very high most of the day, hitting 1.69 at its intraday peak, and is currently 1.56. The Euro Financial Sector Credit Default Swap Index is falling 1.79% today to 74.33 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 falling 3.37% to 106.71 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising 4.55% to 17 basis points. The TED spread is now down 446 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 5.88% to 34.94 basis points. The Libor-OIS spread is dropping 8.63% to 11 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 6 basis points to 1.84%, which is down 83 basis points since July 7th. The 3-month T-Bill is yielding .12%, which is down 1 basis point today. The MS Cyclical Index is outperforming substantially again today, rising 1.7%. Airline, Gaming, Homebuilding, Bank, Steel and Coal shares are especially strong, rising 2.25%+. Retail shares are underperforming today on BBY’s report and a “sell the news” reaction to today’s better-than-expected August Retail Sales report. These shares have had a big run and I suspect this is just another pause before another surge higher commences. Redbook weekly retail sales fell -2.1% this week versus a -2.4% decline the prior week and a -5.7% decline during the week of July 21. This meaningful improvement should continue through year-end on pent-up demand and better sentiment. Airlines, arguably the most hated group in the market, are on a tear. The XAL has risen 21% in 9 days, which is even more impressive considering oil at $71/bbl. and rising H1N1 fears. (XLF) is reversing higher again today and (IYR) continues to trade very well, breaking higher from its recent range. I expect (XLF) to follow over the coming days. I expect to see overseas shares rise again tonight/tomorrow morning. Nikkei futures indicate an +113 open in Japan and DAX futures indicate an +12 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on diminishing economic fear, short-covering, less financial sector pessimism, technical buying and investment manager performance anxiety.

Today's Headlines

Bloomberg:

- U.S. stocks are in a bull market after rallying as much as 55 percent from a 12-year low on March 9 and have “a lot of room to run,” investor Laszlo Birinyi said. The advance in U.S. equities shows that the longest recession since the 1930s is over, and investors who wait to buy stocks until the National Bureau of Economic Research declares the contraction finished will miss out on gains, Birinyi said. Birinyi recommended buying financial stocks that are “strongly outperforming,” citing Wells Fargo & Co., JPMorgan Chase & Co., and American Express Co., which topped analysts’ estimates for adjusted second-quarter profit. Financial stocks in the S&P 500 have climbed 135 percent since March 9, the best performance among 10 industries and 60 percentage points more than industrial shares, the next best-performing industry. Birinyi said on May 20 that the S&P 500 would climb to a record 1,700 in the next two or three years, an 88 percent gain from its close that day.

- Sales at U.S. retailers surged in August by the most in three years, showing unexpected strength in consumer demand that extended beyond auto purchases spurred by the government’s “cash-for-clunkers” program. The 2.7 percent increase exceeded economists’ forecasts and followed a 0.2 percent drop in July, Commerce Department figures showed today in Washington. Purchases excluding automobiles climbed 1.1 percent, topping the highest forecast.

- Ford Motor Co.(F), the U.S. automaker that lost $30 billion in the past three years, is on target with its plans to slow cash losses in this year’s second half, Chief Financial Officer Lewis Booth said. “I’m comfortable with our guidance that we will do better in the second half,” Booth said today in an interview at the Frankfurt Motor Show.

- The first vaccines for swine flu have been approved by the U.S. Food and Drug Administration, a top health official said. The FDA today cleared sales of four vaccines to combat the spread of H1N1 influenza, Health and Human Services Secretary Kathleen Sebelius told the House Energy and Commerce Committee in Washington. The vaccines are made by Australian drugmaker CSL Ltd., Novartis AG, based in Basil, Switzerland, Paris-based Sanofi Aventis SA and London-based AstraZeneca Plc, Peper Long, an FDA spokeswoman, said in an e-mail. A small number of vaccines are expected to be available at the start of October with mid-October being the “target” release date for most doses, Sebelius told lawmakers on the panel.

- The U.S. should begin preparing crippling sanctions on Iran and publicly make clear that a military strike is possible should the Iranian government press ahead with its nuclear effort, a bipartisan policy group said. “If biting sanctions do not persuade the Islamic Republic to demonstrate sincerity in negotiations and give up its enrichment activities, the White House will have to begin serious consideration of the option of a U.S.-led military strike against Iranian nuclear facilities,” said the study from the Bipartisan Policy Center in Washington. The report was written by Charles Robb, a former Democratic senator from Virginia; Daniel Coats, a former Republican senator from Indiana who also served as ambassador to Germany, and retired General Charles Wald, the former deputy commander of U.S. European command.

- Chipmakers such as Intel Corp.(INTC) and Samsung Electronics will boost production this year as demand for electronics rebounds, according to research firm Gartner Inc. Capital expenditures by semi makers will bottom out at $22.9 billion in 2009, a drop of 48% from last year. The market will then grow until 2012, according to Gartner’s forecasts.

- The Libor-OIS spread fell to the average level in the five years before the credit crisis began after central banks and governments acted to limit the damage sparked by the failure of Lehman Brothers Holdings Inc. The spread, a gauge of bank reluctance to lend, narrowed 1 basis point to 11 basis points today, the average in the period leading to August 2007, when credit markets began to seize up. “The money markets are healing rather rapidly,” said David Keeble, head of fixed-income strategy in London at Calyon, the investment-banking unit of Credit Agricole SA. “All the money that has been thrown at us from the central banks is having a profound effect. There is just a wall of money out there willing to be lent out.”

- Simon Property Group Inc.(SPG), the largest mall owner in the U.S., may use some of its cash for acquisitions and is monitoring the availability of properties owned by bankrupt rival General Growth Properties Inc.(GGP), Simon Property chairman and chief executive officer said.

- The U.S. Treasury Department adopted rules letting lenders revise commercial real estate loans without triggering tax penalties in an effort to stem a rise in defaults. The guidance would ease requirements for collateral and other guarantees in many cases. Borrowers in investor pools known as Real Estate Mortgage Investment Conduits would be allowed to refinance some loans without paying tax penalties. The rules were urged by trade associations such as the Real Estate Roundtable and opposed by the Commercial Mortgage Securities Association.

- The Afghan war likely will require more U.S. troops to push back the Taliban and reduce the climate of fear in the country, Joint Chiefs of Staff Chairman Admiral Michael Mullen told lawmakers today. “A properly resourced counter-insurgency probably means more forces,” Mullen told the Senate Armed Services Committee in Washington today.

- Lehman Brothers Holdings Inc. said Barclay’s Plc received at least a $5 billion windfall when it bought the collapsed bank’s North American brokerage business and some real estate within days of its bankruptcy filing a year ago and is asking the deal be amended. “Material components of the transaction were not disclosed to the court before and at the sale hearing,” lawyers for Lehman said in a filing today in the U.S. Bankruptcy Court in Manhattan. “The fact is that the deal was actually structured to give Barclays an immediate and enormous windfall profit. Certain Lehman executives agreed to give Barclays an undisclosed $5 billion discount off the book value of securities.” Lehman said Barclays’ windfall may have been more than $8.2 billion when margin deposits and liabilities Barclays assumed are taken into consideration. The collapsed bank is asking U.S. Bankruptcy Judge James Peck to revise the deal and force Barclays to return assets to Lehman’s estate.

- Corn prices soared by a record and soybeans jumped on concern that freezing temperatures next week may hurt plants in the U.S, the biggest producer and exporter of the crops. Damaging cold weather is possible in the northern Great Plains and Midwest beginning Sept. 23, with the lowest temperatures expected Sept. 25 to Sept. 27, according to the National Weather Service. Freezes may affect fields from South Dakota to Michigan, and frost may occur in parts of Nebraska, Iowa, Illinois and Indiana, World Weather Inc. said.

- Crude oil rose more than $1 a barrel in New York as sales at U.S. retailers surged in August and Federal Reserve Chairman Ben S. Bernanke said the worst U.S. recession since the 1930s has probably ended. Oil climbed as much as 2.4 percent and equities advanced for the seventh time in eight days after Commerce Department figures showed that sales climbed by the most in three years.

Wall Street Journal:

- Muslims groups here are pressing city officials to close public schools on two of the faith's holiest days, just as schools do for major Jewish and Christian holidays. But the groups have yet to persuade the man in charge of New York City schools, Mayor Michael Bloomberg.

MarketWatch.com:
- Federal Reserve Board Chairman Ben Bernanke said Tuesday that the recession has ended -- at least based on the numbers. "From a technical perspective, the recession is very likely over at this point," Bernanke told a conference at the Brookings Institution. But "it's still going to feel like a very weak economy for some time," he added. Bernanke said there is a risk that labor markets will remain weak through 2010 because growth will be too anemic to create jobs. Bernanke noted that many economists now expect the labor market to recover slowly.

- S&P 500 edges above major rsistance.

- Shares of Regions Financial Corp.(RF 5.99, +0.47, +8.51%) were up 9% in afternoon trade Tuesday after the bank's chief executive said the company doesn't need to raise additional capital. "The answer is absolutely not; we think we have more than adequate capital," said Dowd Ritter at the Barclays Capital Global Financial Services Conference. The Regions CEO said the company expects its nonperforming loans to begin to see some decline late this year or early next year.

CNBC:

- Here's the latest video from my friend Dan Mitchell over at the Center for Freedom and Prosperity Foundation. It presents real-world data and research showing that the burden of government spending is far too high not only in the United States (where the Bush-Obama policies have increased the federal budget by more than 100 percent), but also in other nations where government budgets sometimes consume more than one-half of an economy's output.

Washington Post:

- Interior Secretary Ken Salazar launched the Obama administration's first coordinated response to the impacts of climate change Monday, which he said would both monitor how global warming is altering the nation's landscape and help the country cope with those changes. Salazar will lead a new "climate change response council" that will coordinate action among the department's eight bureaus and offices. A secretarial order will create eight "regional climate change response centers" in areas ranging from Alaska to the Northeast and build landscape conservation cooperatives that will create strategies for the eight regions with the help of state and local groups, and other federal agencies. Interior manages one-fifth of the nation's land mass and nearly 1.7 billion acres on the Outer Continental Shelf. Salazar noted that while the U.S. Geological Survey had received $10 million to address climate change through its centers, "There is additional money that will be needed."

Miami Herald:

- President Barack Obama has signed a one-year extension of the law used to impose the trade embargo on Cuba, disappointing those who favored allowing the law to expire as a friendly nod to Havana while reassuring others who oppose easing the sanctions.

Rassmussen:

- In what is currently a difficult political climate for Democrats, Senate Majority Leader Harry Reid trails two potential Republican challengers seeking to unseat him as he faces reelection next year in Nevada. The first Rasmussen Reports statewide telephone survey of the 2010 race shows Sue Lowden beating Reid by 10 percentage points, 50% to 40%. Lowden is chairwoman of the Nevada Republican Party and the preferred candidate of the Republican party establishment. GOP hopeful Danny Tarkanian beats Reid by seven points, 50% to 43%.

Politico:

- It’s one of the most persistent — and potent — Republican arguments against health reform: that President Barack Obama and fellow Democrats want a U.S. government takeover of health care. And what evidence do they have to back it up? Obama said so. Just check out YouTube. “I happen to be a proponent of a single-payer, universal health care plan,” then-U.S. Senate candidate Obama said at an AFL-CIO event in 2003, using the terms that commonly refer to a government-run health insurance system.

Apple Insider:

- The iTunes LP album and iTunes Extras movie-enriching bonus material bundles Apple introduced as a new feature of iTunes 9 are built using a new TuneKit JavaScript framework and appear aimed to deliver new big screen content to Apple TV.

OC VC:

- Open Letter to Congress. I am writing to you today as a concerned citizen with a truly global perspective who also happens to be a co-founder and managing director of a small (~$30M) venture capital fund that invests in promising seed and early-stage technology and life science companies in Southern California. I want to relay to you my deep concern regarding S.1276 (a.k.a. the “Private Fund Transparency Act”) and any other such legislative proposals that will, unnecessarily, impose new regulatory burdens on the venture capital industry whole-scale. I truly believe these proposals will negatively impact the venture capital industry’s ability to fund and nurture the innovative start-up companies that have been and continue to be critical to U.S. economic growth as well as our country’s ability to effectively compete in the global market. To put the importance of venture capital in perspective, the venture capital industry has created over tens of millions of jobs for the U.S. economy just during my lifetime and venture capital backed companies now make up a significant percentage of our GDP. I have spent a good portion of the past decade in the emerging markets of China, India, Russia, and Brazil/Argentina and have been amazed at the lengths to which these countries have been actively changing their regulatory, financial, and entrepreneurial ecosystems to encourage venture capital all while we, as a nation, seem bent on hindering it.

USA Today:

- The chief of the Environmental Protection Agency said Monday that the Obama administration is studying how to curb global-warming gases from big industrial polluters such as power plants and factories. In an appearance before the USA TODAY editorial board, Lisa Jackson also said the agency will soon propose rules to cut greenhouse emissions from cars. "We will continue to move stepwise down the path toward regulation of greenhouse gases," Jackson said, assuming that the EPA adopts a preliminary finding that greenhouse gases are a danger to public health. Though she is willing to use current law to cut greenhouse gases, Jackson said it would be better if Congress passed climate legislation. A new law would forestall lawsuits, she said. A law is also preferable because it could fund clean-energy efforts and other programs that would help fight climate change, said Lou Leonard of the World Wildlife Fund, an environmental group. However, he said, "if the Congress can't move fast enough, then the EPA should act." Industry groups don't want the EPA to tackle climate in the absence of new legislation, said William Kovacs of the U.S. Chamber of Commerce. The existing law that would be used as the basis of regulations, he said, would require companies to apply for onerous permits if they want to open new facilities. Regulating industrial sources with current law would be "a job killer and a project killer right at the outset," Kovacs said.

Reuters:
- Global market regulators published new rules on Monday spelling out how small investors putting money into funds of hedge funds should be protected. The International Organization of Securities Commissions (IOSCO) published its final set of standards on best practice for funds of hedge funds investing.

- Google Inc(GOOG) has rolled out a new version of its Chrome Web browser and a version of the Mac browser for mainstream users will be available within months, as the company moves to double Chrome's market share. Almost exactly one year into Google's high-profile entry into the browser market dominated by Microsoft Corp, the Internet search giant is a distant No. 4, with a market share of roughly 2.8 percent.

- Some of the largest U.S. banks will remain caught in the government's financial bailout program for months, as officials do not expect to grant the next wave of exit approvals until near the end of the year, according to a source familiar with the matter. Banks such as Citigroup and Bank of America Corp have been chafing under the government's reins and want to exit the Troubled Asset Relief Program (TARP), which delivered capital infusions to banks along with limits on pay, share repurchases and dividends. Citigroup has been in preliminary talks with U.S. officials on how to repay part of government funds but the process could take at least a couple quarters, according to sources familiar with the situation. Regulators want to see that firms have fully taken advantage of the more open credit markets to raise significant capital buffers before they remove the government leash from more of the largest banks.

- Athenahealth Inc (ATHN), which provides business services to doctors' offices, will offer a guarantee to lure small U.S. physician practices as they convert to electronic medical records. If users of the Athenahealth system cannot collect their Medicare bonus incentive for going paperless, then the company will not charge for its services for six months. The government's economic stimulus package included $19 billion in incentive payments for hospitals and physicians to convert to electronic medical records.

- Duke Energy Corp (DUK) has chosen Convergys Corp (CVG) to help its electric and natural gas customers in five states to manage their usage better and lower their costs as part of the utility's smart grid initiative. Duke's smart grid plan, which will cost $1 billion to roll out over five years, includes equipment, sensors and advanced meters that provide two-way communication with customers and allows Duke to bill for power usage depending on the time of day and overall demand.

- The Republican governor of Minnesota has written to the state's U.S. senators asking them to stop a proposed tax on medical device makers as Democratic lawmakers push for health care reform. A draft of a proposal from U.S. Senator Max Baucus, chairman of the Senate Finance Committee and a Democrat, that would assess $4 billion in annual fees on medical device makers as part of a broader effort to pay for health care reform was circulated among lobbyists last week. In the letter, Governor Tim Pawlenty urged Senators Amy Klobuchar and Al Franken, Democrats, to work to remove the tax from the proposal. "The proposed market-share based tax would be a severe burden on this industry, costing jobs and draining away funds needed for innovative research and development," Pawlenty wrote. The tax would apply to medical products ranging from pacemakers to wheelchairs and diagnostic tests, and, he wrote, would increase healthcare costs rather than lower them. A coalition of device industry, biotechnology and medical groups has also opposed the tax.

CENS.com:

- As Apple Inc. will launch its newest tablet PCs next February, a couple of Taiwanese suppliers of PC parts and components have managed to join the supply chain and will start delivery to Apple in December, according to industry sources. The tablet PC features a 9.6-inch screen, finger-touch function and built-in HSPDA (high speed download packet access) module, and adopts a P.A. SEMI processor chip and long lasting battery pack, selling for between US$799 and US$999.