Today's Headlines

Bloomberg:

- The cost of protecting corporate bonds in the U.S. from default fell to the lowest level in 16 months as investor confidence in an economic recovery increased. An index of credit-default swaps tied to U.S. investment- grade bonds fell below 100 basis points for the first time since May 20, 2008, while contracts tied to high-yield debt in Europe declined for a 10th straight day. A decrease typically signals an improvement in the perception of credit quality. Federal Reserve Chairman Ben S. Bernanke said yesterday that “the recession is very likely over,” and billionaire investor Warren Buffett said he’s buying equities because the economy is responding to government stimulus measures. Inflation remains subdued in the U.S. and the housing market is improving, data due later today is forecast to show. “There is clear evidence that credit market conditions have improved significantly,” London-based BNP Paribas SA credit analysts led by Rajeev Shah wrote in a note to investors. “From a year on after the Lehman collapse, credit market conditions have largely normalized.” Credit swaps on the Markit CDX North America Investment- Grade Index, used to speculate on the creditworthiness of 125 companies in the U.S. and Canada or to protect against losses on their debt, declined 4 basis points to 100 basis points as of 11:24 a.m. in New York after earlier falling to as low as 99 basis points, according to broker Phoenix Partners Group. That’s the lowest since the index was at 93.4 basis points on May 20, 2008, according to CMA DataVision.

- Confidence among U.S. homebuilders rose in September for the third straight month, another sign the industry is past its worst point and is starting to recover. The National Association of Home Builders/Wells Fargo confidence index climbed to 19, the highest level since May 2008, from 18 in August, the Washington-based group said today. “Virtually all the data on housing has taken on a better tone,” Michael Larson, a housing analyst at Weiss Research in Jupiter, Florida, said before the report. “That’s giving builders more reason for optimism. The turn is largely being driven by the fact that housing is a bargain again.” The gain was led by a gauge that tracks current sales, which rose two points to 18, while a measure of prospective buyer traffic rose one point to 17. A measure of expectations for single-family housing sales over the next six months fell one point to 29, in part because the Obama administration’s $8,000 tax credit for first-time home buyers expires Dec. 1, the report said. Confidence increased in all four regions of the U.S., led by a three-point jump in the Midwest to 19. “We are fairly well convinced that the bottom has been turned and therefore we are not increasing incentives or lowering prices anywhere,” Toll Brothers Inc. Chief Executive Officer Robert Toll said Aug. 27 on a conference call with investors and analysts.

- Consumer prices rose 0.4 percent in August, underscoring the Federal Reserve’s view that inflation will be contained. Compared with a year earlier, prices were down 1.5 percent. For the core index, prices were up 1.4 percent from a year earlier, the smallest gain since February 2004. A lack of inflation will probably give Fed policy makers leeway to keep interest rates near zero in the foreseeable future to secure a recovery. “What we’re seeing is a gradual disinflation that reflects the persistent slack in our economy,” said Richard DeKaser, chief economist at Woodley Park Research in Washington, who accurately forecast the monthly increase in overall prices. “This is providing the Fed with lots of patience in reversing monetary policy.”

- Comerica Inc., Marshall & Ilsley Corp. and Regions Financial Corp. led bank stocks to their best gains in two months after Warren Buffett said the economy “hit a plateau at the bottom.” Marshall & Ilsley, the biggest bank in Wisconsin, and Alabama’s Regions jumped as much as 11 percent. Comerica advanced more than 10 percent and Zions Bancorporation, the largest based in Utah, gained as much as 12 percent. Buffett, the billionaire who runs Berkshire Hathaway Inc., said the residential real estate slump may be easing. That helped lenders held by Berkshire including Bank of America Corp. and Wells Fargo & Co., which both told an investor conference in New York this week they’re expecting more losses on home loans. “We’re a lot better off than we were a year ago,” Buffett said today on CNBC. “Some of the toxic assets have been flushed through. There’s been capital raised.”

- JPMorgan Chase & Co.(JPM), the second- biggest U.S. bank, sold $2.53 billion of bonds backed by credit- card payments, according a person familiar with the transaction. The top-rated securities, which will mature in a little less than one year, priced to yield 45 basis points more than the one-month London interbank offered rate, said the person, who declined to be identified because terms aren’t public. The sale was increased from $2 billion and was offered without the aid of a Federal Reserve program to encourage lending. The issue provides evidence of growing appetite for bonds backed by consumer loans after the market was shuttered last year when the credit crisis sapped demand. The finance arm of General Electric Co. also sold bonds backed by credit-card payments this week outside of the Fed’s Term Asset-Backed Securities Loan Facility.

- Simon Property Group Inc.(SPG), the largest mall owner in the U.S., said retailers may see pent-up demand this holiday season after paring inventory to cope with a plunge in consumer spending. “It could be a little bit better than what the retailers are anticipating,” David Simon, chairman and chief executive officer of Indianapolis-based Simon Property, said yesterday in an interview in New York. Sales at U.S. retailers surged in August by the most in three years, the Commerce Department said yesterday. Some have been too conservative in their inventory reductions, he said. “We’ve heard this every recession: ‘The consumer’s never going to come back,’” Simon said. “I just don’t buy it.”

- US companies are destined to “reverse the purge” that has brought down capital spending, business inventories and employment, according to James W. Paulsen, chief investment strategist at Wells Capital Management. “In the last year, businesses have been preparing to survive a second coming of the Great Depression,” Paulsen wrote. Now that the US economy has started to recover, he added, most companies “find themselves understaffed without any goods on the shelf.” Paulsen estimated that gross domestic product will increase at a 4% annual rate during the next 18 months.

- Discord over trade agreements between labor unions and companies including Chevron Corp., FedEx Corp. and Campbell Soup Co. will test President Barack Obama’s bid for “credibility” on expanding global commerce. Ratifying accords with Colombia and South Korea would “send a strong message for future trade and investment agreements and promote major new economic opportunities,” Chevron Vice President Lisa Barry said in a filing submitted to the U.S. Trade Representative’s office before a deadline yesterday for public comment. Five Democratic House members, including Louise Slaughter of New York, said in a letter to the office that they and labor groups are “adamantly opposed” to any accord with Colombia until attacks on that nation’s labor leaders end.

- Jones Lang LaSalle Inc.(JLL), the second-biggest publicly traded commercial property broker, is joining with Real Estate Disposition Corp. to start an online auction service to sell commercial property and loans. “In a stagnant sales market where interested investors are limited, using an auction opens up a property to a viable buyer marketplace,” Jay Koster, president of Chicago-based Jones Lang LaSalle’s capital markets practice, said today in a statement.

- Diverting overseas aid from economic development to fight global warming may threaten the lives of at least 4.5 million children in the poorest nations, the anti-poverty group Oxfam said.

- Investor sentiment deteriorated from Tokyo to Paris and New York on speculation a six-month rally in stocks has outstripped the prospects for earnings as indexes trade at the most expensive valuations since 2003. Optimism for equities fell in seven of 10 countries in the Bloomberg Professional Confidence Survey. Users expect stocks to drop during the next six months in the U.S., Japan and Spain, while investors in Brazil and the U.K. were the most bullish. Sentiment had improved in all 10 nations in August.

- U.S. President Barack Obama has failed to appoint advisers and regulators who understand the complexity of financial systems, Nassim Taleb, author of “The Black Swan,” told a group of business people in Toronto. “I want my vote back,” Taleb, who said he voted for Obama, told the group. The U.S. has three times the debt, relative to the country’s economic output, as it had in the 1980s, Taleb said.

Wall Street Journal:

- Chief financial officers are growing more optimistic about the U.S. economy and their own companies' prospects, according to a new survey. But they still worry about weak consumer demand and tight credit, and 43% expect their companies to shed jobs in the next 12 months. Nearly 60% of the 657 U.S. finance executives surveyed this month by Duke University's Fuqua School of Business and CFO Magazine said they are more optimistic about the U.S. economy than they were in May, and nearly 50% said they are more optimistic about their companies' prospects.
- Transfield Services Ltd. (TSE.AU) Chief Executive Peter Goode said Tuesday the company has seen "life" returning to the U.S. consumer in the past three months given a pick-up in maintenance activity at the companies it services. The Australian engineering and asset management company said its North American unit, US Maintenance, is benefiting from the return of U.S. consumers to big-box stores. Transfield provides services to retailers that include gardening, parking lot management, painting and maintenance to chains such as Kmart, owned by Sears Holding Corp. (SHLD) and Home Depot (HD).

- Senate Finance Committee Chairman Max Baucus formally unveiled a 10-year, $856 billion bill that would extend health insurance to tens of millions of Americans not now covered, moving an important step forward on President Barack Obama's top domestic priority. "This is a good bill. This is a balanced bill. It can pass the Senate," Mr. Baucus said at an afternoon news conference at which he provided details on the plan. The sweeping measure is designed to steer a more moderate course on health policy than other major bills moving through Capitol Hill, and it doesn't propose to create a new government insurance plan to compete with private insurers, as proposed in rival House legislation and favored by many liberal lawmakers. Instead, the Montana Democrat is proposing to expand coverage by creating a network of nonprofit health-insurance cooperatives. The cooperatives would be seeded with $6 billion in federal money, enough to cover start-up costs and meet insurance solvency requirements.

- The stimulus bill's Buy American provisions -- meant to give U.S. companies a leg up on foreign competition -- are causing Aquarius and other U.S. companies a lot of grief with both suppliers and clients in Canada. Now that grief has boiled over into a major diplomatic row with the largest U.S. trading partner. Canadian communities angered by perceived American chauvinism have started a Buy Canadian campaign to exclude U.S. bidders from municipal contracts. "If that sticks, well, there goes 25% of my business," said Mr. Pokorsky. "To me, Ontario may as well be Indiana."

- 3D technology is coming one step closer to home with the development of a new set-top box system that will allow consumers to browse through and access 3D offerings from their cable or satellite TV company.

- The mortgage-interest deduction claimed by millions of homeowners every year may prove to be a useful window for the IRS to peek into taxpayers' income situation -- and potentially reap millions of dollars in unpaid taxes.

- In the last few days, the Census Bureau has severed ties with the advocacy group Acorn, and the Senate has voted to deny it access to federal housing funds. That's the good news. The not-so-good news is that it took this long and hidden-camera video footage of Acorn workers apparently advising others to commit crimes before federal officials would act. Allegations of fraud have dogged Acorn for years, sometimes resulting in convictions. Last week in Florida, authorities arrested 11 Acorn workers and charged them with submitting fake voter registration papers.

CNBC:

- The Federal Reserve is involved a broad review of commercial real estate exposures at the nation's largest regional banks, which Fed sources say is both the result of concern in that area but part of the "new normal" for how they will be supervising banks.

NY Post:

- State Attorney General Andrew Cuomo yesterday launched an investigation into pork-barrel grants given to ACORN by state lawmakers, as City Council Speaker Christine Quinn froze all city funding earmarked for the scandal-scared community-activism organization. The actions by the Democratic officials followed release of a shocking undercover video that showed employees at a Brooklyn ACORN office giving illicit financial advice to activists posing as a pimp and prostitute who wanted to start a brothel. The agency was among several ACORN affiliates, including offices in Baltimore, Washington and San Bernardino, Calif., exposed in the hidden-camera sting. On Monday, the US Senate voted overwhelmingly to block federal funding to the community group, while Brooklyn District Attorney Charles Hynes opened an investigation into the local office in response to a report in The Post.

NY Times:

- THE advertising industry has been hit hard by the recession, but there are some hopeful signs beginning to appear along Madison Avenue. A case in point: the growth plans of an independent Midwestern agency, Laughlin/Constable. The agency is expanding to New York City, considered to be the toughest ad market to crack regardless of economic conditions. Laughlin/Constable will announce on Wednesday a merger with Partners & Jeary, an independent agency opened three years ago by Michael Jeary, a longtime New York advertising executive. Partners & Jeary will become the New York office of Laughlin/Constable, which has its headquarters in Milwaukee along with an office in Chicago.

- The A.F.L.-C.I.O., the nation’s largest labor organization, has often been criticized for being “male, pale and stale” — dominated by cigar-chomping, golf-playing chieftains. But as Richard L. Trumka assumes the group’s presidency on Wednesday, he says he is determined to improve labor’s image and woo a younger generation that either thinks of unions as irrelevant, or does not think of them at all. Mr. Trumka — a burly former coal miner who comes out of one of the nation’s oldest unions, the United Mine Workers, and looks like Mike Ditka — acknowledges that reversing labor’s seemingly inexorable slide will be a challenge.

- European leaders are set to endorse a call for more government control over bank pay ahead of the G-20 summit meeting next week in Pittsburgh.

Washington Post:

- The Obama administration has for the first time set out its views on the controversial USA Patriot Act, telling lawmakers this week that legal approval of government surveillance methods scheduled to expire in December should be renewed, but leaving room to tweak the law to protect Americans' privacy. In a letter from Justice Department officials to key members of the Senate Judiciary Committee, the administration recommended that Congress move swiftly with legislation that would protect the government's ability to collect a variety of business and credit card records and to monitor terrorism suspects with roving wiretaps.

Washington Times:

- The White House is collecting and storing comments and videos placed on its social-networking sites such as Facebook, Twitter and YouTube without notifying or asking the consent of the site users, a failure that appears to run counter to President Obama's promise of a transparent government and his pledge to protect privacy on the Internet. Marc Rotenberg, president of the Electronic Privacy Information Center, said the White House signaled that it would insist on open dealings with Internet users and, in fact, should feel obliged to disclose that it is collecting such information.

Seeking Alpha:

- We've got two portfolio adjustments to cover regarding the holdings of quant focused D.E. Shaw & Co. Firstly, in a 13G filed with the SEC, David E. Shaw's hedge fund firm has disclosed a 5.1% ownership stake in Priceline.com (PCLN). Shaw now owns 2,096,755 shares and the filing was made due to activity on August 31st, 2009. The fund has boosted its stake in this name because as of June 30th, 2009 (Shaw's 13F filing), it owned 336,302 shares of common stock as well as 411,100 shares represented by Calls in options markets. Additionally, Shaw also owned 202,000 shares worth of Puts on PCLN. So, in the last 3 months, the hedge fund has certainly boosted its holdings and has acquired a sizable stake. This is interesting to see mainly because numerous other prominent hedge funds we track have entered large positions in Priceline. Secondly, we see that D.E. Shaw & Co has filed a 13G on Spectrum Brands (SPC) as well. The hedge fund now shows a 14% ownership stake with 4,201,138 shares.

Blogging Stocks:

- "The smart move in today's market is to stick with companies that are growing right through the recession, such as WMS Industries (NYSE: WMS)," says Mark Skousen.

OCRegister:

- U.S. housing prices apparently have hit bottom, the UCLA Anderson Forecast for September says. And new home construction is likely to pick up in the next two years — in Orange County and in the state and nation as a whole — after falling to the lowest level in more than 60 years. “Now that prices have adjusted to levels which make existing homes more affordable, sales are increasing and conditions are becoming ripe for new residential construction,” wrote Jerry Nickelsburg, a senior economist with the Anderson Forecast and the author of the California economic outlook.

Rassmussen:

- One week after President Obama’s speech to Congress, opposition to his health care reform plan has reached a new high of 55%. The latest Rasmussen Reports daily tracking poll shows that just 42% now support the plan, matching the low first reached in August. A week ago, 44% supported the proposal and 53% were opposed. Following the speech last Wednesday night intended to relaunch the health care initiative, support for the president’s effort bounced as high as 51% (see day-by-day numbers).

- Twelve percent (12%) of voters nationwide believe that most opponents of President Obama’s health care reform plan are racist. The latest Rasmussen Reports national telephone survey finds that 67% of voters disagree.

Politico:

- Sen. Jay Rockefeller (D-W.Va.) continued his attack on Senate Finance Committee Chairman Max Baucus’ (D-Mont.) health care bill, sharply questioning the chairman’s decision to conduct months of bipartisan talks that failed to win a single Republican backer, while shutting out Democrats on the committee. Hours after Baucus released his sweeping health care plan, Rockefeller said he could not vote for the bill as it stands – and questioned why Baucus allowed the so-called “Gang of Six” talks between three Republicans and three Democrats to progress for months.

AP:

- Americans decidedly oppose the government's efforts to save struggling companies by taking ownership stakes even if failure of the businesses would cost jobs and harm the economy, a new poll shows. The Associated Press-National Constitution Center poll of views on the Constitution found little support for the idea that the government had to save AIG, the world's largest insurer, mortgage giants Fannie Mae and Freddie Mac, and the iconic American company General Motors last year because they were too big to fail. Just 38 percent of Americans favor government intervention — with 60 percent opposed — to keep a company in business to prevent harm to the economy. The number in favor drops to a third when jobs would be lost, without greater damage to the economy. Similarly strong views showed up over whether the president should have more power at the expense of Congress and the courts, if doing so would help the economy. Three-fourths of Americans said no, up from two-thirds last year. "It really does ratify how much Americans are against the federal government taking over private industry," said Paul J. Lavrakas, a research psychologist and AP consultant who analyzed the results of the survey.

- The Senate voted Wednesday to permit passengers on the Amtrak passenger railroad to transport handguns in their checked baggage. The proposal, approved by a 68-30 vote, seeks to give Amtrak riders rights comparable to those enjoyed by airline passengers, who are permitted to transport firearms provided that they declare they are doing so and that the arms are unloaded and in a securely locked container.

Reuters:
- Steel producers were too quick to restart idled capacity as demand remains weak and increased supply is putting downward pressure on steel prices, the chairman of a leading steel association said."Producers around the world very quickly ramped up their production, overfeeding the market," said Mel Wilde, chairman of UK-based International Steel Trade Association (ISTA), which has 85 members, including divisions of steel giants such as ArcelorMittal and Corus.Wilde's comments late on Tuesday came after the chairman of the world's top steel producer ArcelorMittal braced to say that he believes U.S. and European steel markets will not return to pre-crisis levels next year.

- Commercial mortgage backed securities got a lift on Wednesday from new U.S. Internal Revenue Service rules that make it easier to modify securitized mortgages without tax penalties. The rules allow distressed property owners and servicers of mortgage-backed securities to negotiate over modifying the property's loan at any time. The mortgage no longer needs to be in default or imminent default to procure a modification under the rules. The rule change, one of several actions the Treasury has considered to ease financing pressures in the recession-hit commercial real estate sector, applies mainly to borrowers, servicers and investors in loans that are part of trusts called real estate mortgage investment conduits (REMICs). CMBS indexes rallied on Wednesday, especially portions tied to riskier classes of bonds. The CMBX-5 "AJ" index jumped nearly 5 points to a mid-market price of 53.75, according to one dealer. The price has climbed about 15 points in the past month.

Bear Radar

Style Underperformer:
Large-Cap Growth (+1.02%)

Sector Underperformers:
Road & Rail (-1.50%), Telecom (-1.04%) and Education (-.56%)

Stocks Falling on Unusual Volume:
ADBE, CSX, NSC, HOLX, EPIQ, TIN, HITK, FSYS and LH

Stocks With Unusual Put Option Activity:
1) SII 2) ACI 3) OSK 4) UPL 5) HL

Bull Radar

Style Outperformer:
Small-Cap Value (+1.87%)

Sector Outperformers:
Banks (+3.0%), Airlines (+2.83%) and Homebuilders (+2.03%)

Stocks Rising on Unusual Volume:
PL, GNW, CLF, FO, OLN, HBC, DB, CCJ, HES, SU, OMTR, DRIV, THOR, HSU, CNMD, ZOOM, NTCT, CFSG, QGEN, CWEI, LNCR, ELON, ZION, GMXR, MELI, VCLK, LFUS, AMAG, GOLD, ZINC, AMZN, BIDU, NICE, CMS, PII, ROG, FO, APC and USG

Stocks With Unusual Call Option Activity:
1) FLEX 2) ZION 3) NVDA 4) VRSN 5) BUCY

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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%.

Morning Preview

BNO Breaking Global News of Note

Google Top Stories

Bloomberg Breaking News

Yahoo Most Popular Biz Stories

MarketWatch News Viewer

Asian Financial News

European Financial News

Latin American Financial News

MarketWatch Pre-market Commentary

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TradeTheNews Morning Report

Briefing.com In Play

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US AM Market Call
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IBD New America
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Conference Calendar

Who’s Speaking?
Upgrades/Downgrades

Politico Headlines
Rasmussen Reports Polling

Earnings of Note
Company/EPS Estimate
- (DBRN)/.36

- (CKR)/.21

- (ORCL)/.30

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

Evening Review
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