Tuesday Watch

Late-Night Headlines
Bloomberg:

- Former Federal Reserve Chairman Alan Greenspan said a rebound in stocks is “re-liquifying” the U.S. economy and housing prices are showing early indications of ending their decline. “We have been very fortunate that the stock markets moved back” and are “re-liquifying the whole process,” Greenspan said at an event in Edmonton, Alberta, presented by Abu Dhabi National Energy Co., the state-controlled energy producer known as Taqa. He said a rebound in house prices might help avert another wave of foreclosures. “It may be too soon, but all the relevant price indexes are turning,” Greenspan, 83, said. “Now whether or not that is temporary is very difficult to tell, because we have never been through anything like this.” Greenspan said inventories are being drawn down as the economy recovers. Manufacturers will need to rev up production lines to prevent stockpiles from being depleted, he said. “An ever-increasing part of your consumption must be met by industrial production,” rather than from inventories, he said, adding that this phase may extend into the second quarter of 2010. After that, the economic outlook “is going to depend to a very significant extent on what stock prices do.” Through stocks comes a “wealth effect” from realized capital gains, he said. Greenspan said the U.S. needs to address the country’s budget deficit. “Our capacity to sell U.S. Treasury issues was never in doubt because we had a very significant cushion between federal debt on the one hand and the capacity to borrow on the other.” With budget shortfalls projected, “that cushion is narrowing,” he said. “We are in a position where we have got to reign in” the national debt.

- More than 40 House Democrats signed a letter to House Speaker Nancy Pelosi vowing to vote against a final health overhaul measure if it includes abortion restrictions contained in legislation approved Nov. 7, said Representative Diana DeGette. The letter circulating among lawmakers calls “unprecedented and unacceptable” language approved by the chamber that would limit access to the procedure for people who use an insurance-purchasing exchange that would be created in pending U.S. health-care legislation. “We will not vote for a conference report that contains language that restricts women’s right to choose any further than current law,” says the letter, released by Democratic Representatives Louise Slaughter of New York and DeGette of Colorado. The two lead a caucus of lawmakers who favor abortion rights. Stupak’s amendment bars the government plan from covering abortions. It also prohibits federal funds from being used to help people purchase private insurance sold on the on-line exchange that covers abortion. Women could use their own money to purchase a separate abortion rider. After the vote, Stupak said that pro-choice lawmakers rejected a compromise that wouldn’t have been as restrictive. The deal fell apart because “some groups overreached and can’t count” votes, he told reporters early Nov. 8, referring to pro- choice lawmakers and abortion-rights advocates.

- American International Group Inc.(AIG), the insurer bailed out by the U.S., will be able to repay its Federal Reserve credit line and “much or all” of the Treasury Department’s investment if financial markets stabilize, Moody’s Investors Service said today. “The slower approach to restructuring could help AIG to generate more favorable values from its business portfolio than would be the case under rushed asset sales,” Moody’s said. A decline in the value of AIG’s assets could impair the company’s ability to repay obligations and lead to downgrades, Moody’s said.

- Priceline.com Inc.(PCLN), the online travel agency, jumped 8.6 percent in extended trading after reporting third-quarter sales and profit that topped analysts’ estimates, buoyed by the summer travel season.

- U.S. lawmakers want to know whether the shooting rampage at an Army base in Texas last week was an unforeseeable, aberrant act or a lesson on missed red flags. The Senate Homeland Security and Governmental Affairs Committee will investigate what motivated the suspect, Major Nidal Malik Hasan, Senator Joseph Lieberman said yesterday. Thirteen people were killed and 30 injured in the Nov. 5 attack at Fort Hood. “We don’t know enough to say now, but there are very, very strong warning signs” that Hasan, an Army psychiatrist, “had become an Islamist extremist and, therefore, that this was a terrorist act,” Lieberman said on “Fox News Sunday.” Those signs might have been enough to have prompted the Army to discharge Hasan, said Lieberman, the chairman of the Senate homeland security panel. Lieberman cited alleged past statements by Hasan justifying suicide bombings, along with witness reports at Fort Hood that he shouted “Allahu Akbar,” or “God is great,” while firing. Senator Susan Collins of Maine, the senior Republican on the homeland security committee, said today a witness list is being drawn up for a hearing that might take place as early as next week.

Wall Street Journal:

- A Conservative Party government in the U.K. would seek to speed up a transformation of the North Atlantic Treaty Organization, encourage a harder Western line against Russia and Iran and reach out to Turkey, the party's top defense official said in an interview. With a general election that must be called by June, and the Conservatives firmly ahead in most polls, the party's views on issues such as foreign policy are drawing more attention and scrutiny.

- Congress might be a long way from passing legislation to fight climate change, but the Obama administration appears one step closer to creating its own regime for controlling greenhouse gases. On Monday, the Environmental Protection Agency announced it sent the White House Office of Management and Budget its proposed finding that greenhouse gases endanger human health and welfare. Adoption of that endangerment finding is the legal precursor to regulating such gases under the Clean Air Act. The agency proposed its declaration in April, provoking a furious response from business groups – such as the U.S. Chamber of Commerce – who have questioned the agency’s scientific and legal basis. Environmental groups, naturally, are thrilled with the EPA’s move, hoping it will boost the Obama administration’s efforts to forge a global agreement to curb emissions when representatives of more than 190 countries gather next month in Copenhagen, Denmark for a United Nations conference. “As Copenhagen approaches, this step just reinforces that–one way or another–a significant portion of U.S. emissions will be regulated very, very soon,” says Josh Dorner, spokesman for Clean Energy Works, a Washington-based group that advocates regulation of greenhouse gases.

- St. Jude Medical Inc. (STJ), which makes heart-rhythm implants and other complex devices, has withdrawn its membership from the industry's main trade group in a disagreement over the group's approach to managing a government tax proposal. While a rare move, St. Jude's exit from the Advanced Medical Technology Association highlights the tension facing medical industries as Congress debates health-care changes. The group, known as AdvaMed, and St. Jude each confirmed Monday that the company had recently left. St. Jude also suggested that a larger fracture has occurred within the industry, which features companies making products ranging from gauze pads to implantable defibrillators. AdvaMed thinks taxes should be paid based on product complexity, but such a move would hurt companies like St. Jude, which specializes in high-tech implants like defibrillators and pacemakers. "We feel it is inappropriate for AdvaMed to advocate for a specific policy that economically advantages a portion of its membership at the expense of other members," Daniel J. Starks, St. Jude's chairman and chief executive, said in a Nov. 2 letter to Stephen J. Ubl, AdvaMed's president and chief executive. Starks said the letter was formal notification that he was resigning from AdvaMed's board of directors, and that St. Jude was leaving the trade group as well. St. Jude provided Starks's letter to Dow Jones Newswires.

- The number of people caught illegally entering the U.S. dropped by more than 23% during the past year, continuing a longer trend, federal data shows. The struggling U.S. economy and rising joblessness are major factors behind the decline. But government officials say investment in border security since the terrorist attacks of Sept. 11, 2001, also has deterred illegal immigration.

- A provision in the House health-care bill sets up a stark choice for Democrats between the interests of younger voters and older ones. The bill would limit how much insurers can vary premiums based on the age of the person buying the policy. The narrower the range, the lower the premiums for older people, a help to those who currently pay some of the highest rates for insurance and often need coverage the most. But such a limitation tends to raise premiums for younger folks, who are sometimes reluctant to buy coverage.

- KIRKUK, Iraq -- Arab and Kurdish military commanders here are making efforts at cooperation despite their bitter political differences -- a surprising development that offers some hope that one of Iraq's most difficult ethnic divides may be narrowing.

- It can by now come as no surprise that the Fort Hood massacre yielded an instant flow of exculpatory media meditations on the stresses that must have weighed on the killer who mowed down 13 Americans and wounded 29 others. Still, the intense drive to wrap this clear case in a fog of mystery is eminently worthy of notice. The tide of pronouncements and ruminations pointing to every cause for this event other than the one obvious to everyone in the rational world continues apace. Commentators, reporters, psychologists and, indeed, army spokesmen continue to warn portentously, "We don't yet know the motive for the shootings." What a puzzle this piece of vacuity must be to audiences hearing it, some, no doubt, with outrage. To those not terrorized by fear of offending Muslim sensitivities, Maj. Nidal Malik Hasan's motive was instantly clear: It was an act of terrorism by a man with a record of expressing virulent, anti-American, pro-jihadist sentiments. All were conspicuous signs of danger his Army superiors chose to ignore. What is hard to ignore, now, is the growing derangement on all matters involving terrorism and Muslim sensitivities. Its chief symptoms: a palpitating fear of discomfiting facts and a willingness to discard those facts and embrace the richest possible variety of ludicrous theories as to the motives behind an act of Islamic terrorism. All this we have seen before but never in such naked form. The days following the Fort Hood rampage have told us more than we want to know, perhaps, about the depth and reach of this epidemic.

CNBC.com:

- U.S. Federal Reserve Governor Daniel Tarullo on Monday endorsed the idea of requiring big banks to hold more capital and renewed his suggestion that direct efforts to limit the size of banks may be worth considering. Fed Chairman Ben Bernanke and other officials have raised the idea of capital surcharge to prevent banks from getting so big that the government is compelled to prop them up in a crisis. The idea "has substantial appeal," Tarullo said in remarks prepared for a speech at New York University.

- It's "risk on" in global markets, a trend traders say could help keep stocks heading higher for now.

NY Times:

- Jeffry M. Picower, a longtime investor in Bernard L. Madoff’s Ponzi scheme who died in his Palm Beach swimming pool last month, left an estate with assets far in excess of $1 billion — and that could be a spot of good news for Mr. Madoff’s victims, The New York Times’s Diana B. Henriques reports. Although Mr. Picower’s will, which is expected to be filed on Tuesday, leaves the bulk of the estate to charity, that amount depends on how much his family pays to settle legal claims brought by the trustee gathering assets for Mr. Madoff’s victims. But the estate is clearly large enough to add at least several billion dollars to the $1.4 billion that the trustee has gathered so far.

CNNMoney.com:

- Touch is already a big business — estimates indicate that sales will be more than $3.66 billion for this year and will catapult 145% to almost $10 billion in the next five years.

- How Jobs turned PCs into objects of lust.

Forbes:

- Movie Stars Becoming More Irrelevant.

- When Goldman Sachs(GS) boss Lloyd Blankfein told The Times of London recently that bankers are "doing God's work," the cautionary tale of another successful businessman with ties to finance, London and the Almighty came quickly to mind. Back in the early 1980s, Roberto Calvi, head of Italy's Banco Ambrosiano, was known as "God's banker," because of his business connections to the Vatican. In 1982, the bank went belly up in the wake of a massive fraud scandal dealing with offshore accounts.

Boston Herald:

- Massachusetts is owed $160 million from the federal government for a little-known Social Security policy that’s been erroneously overlooked for 35 years, according to Gov. Deval Patrick’s top health and human services adviser. At issue is the way the Social Security Administration handles disability claims. Health and Human Services Secretary Bigby said the federal agency often declines applications for disability payouts on an applicant’s first attempt. However, if an applicant appeals the rejection, the state then covers health care costs for that person until the matter is resolved. If the applicant is ultimately approved, the SSA is supposed to reimburse the state for that interim coverage. “We’re one of the first states that brought it to their attention,” Bigby said in a phone interview. “We are pushing for a mechanism to get that money back to the state.”

Politico:

- Federal prosecutors are seeking the harshest prison sentence ever handed out to a member of Congress for former Rep. William Jefferson (D-La.), arguing that his “stunning betrayal of public trust” warrants what could be a life sentence for the long-time lawmaker. The Justice Department is asking a federal judge in Alexandria, Va, to lock up Jefferson, 62, for up to 33 years, according to documents filed by prosecutors on Friday.

Washington Post:

- The House passage of health-care reform Saturday night should be a moment of celebration. In a country as wealthy as America, no one should have to go without medical care. As in other developed nations, everyone should have access to doctors, to medicine, to preventive services. The House bill would take America a giant step closer to that goal. Here is the dilemma: The bill also could take America a step closer to bankruptcy. And for progressives in particular -- for those who believe that government has a mission to help the poor and protect the vulnerable -- that prospect should be alarming. If federal debt continues rising on its present path, hastened by a $1 trillion health-care bill, it is the poor and vulnerable who will be most harmed.

The Business Insider:

- Chart of the Day: Why Google Dropped $750 Million On AdMob.

- Edward Pinto: How Did Paul Krugman Get It So Wrong About Fannie And Freddy?

USA Today.com:

- Chrysler drops three electric vehicles despite having touted them to get billions in government bailout cash. If you believed all the talk from Chrysler about how our tax dollars would help finance its fast-track electric-vehicle future, you're in for a big disappointment. Chrysler has disbanded the engineering team that was trying to bring three electric models to market as a rush job, Automotive News reports today. Chrysler cited its devotion to electric vehicles as one of the key reasons why the Obama administration and Congress needed to give it $12.5 billion in bailout money, the News points out.

Reuters:

- JPMorgan Chase & Co (JPM) is lifting a salary freeze it put in place last year, according to an internal memo, a sign of its growing confidence in the economic recovery after it reported several quarters of improving investment-banking profits. Separately, the bank said it is adding more than 300 staff to its branches to support a $4 billion increase in small business lending.

Financial Times:

- Energy and commodity groups are bracing themselves for US legislation that would regulate their little-known sideline business of financial derivatives dealing for the first time. The derivatives, such as swaps, allow their clients to buy insurance against volatile commodities prices. While leading banks are the targets of the legislation, the derivatives enterprises in the US of oil companies including BP and Royal Dutch Shell and commodities traders such as Cargill and Koch Supply & Trading would also become subject to strict capital and reporting rules. On top of being leading producers and merchants of physical commodities, these companies also compete with banks such as Goldman Sachs and Morgan Stanley by selling financial derivatives to others seeking protection from price risks. As Washington’s lawmakers target the bank’s commodities businesses, the dual role of some producers and merchants of commodities are also coming into their focus. Cargill, the agribusiness conglomerate, has a risk management arm that deals in a “full spectrum of instruments” in agricultural, energy and metals, according to its website. It also sells swaps and structured products that mimic commodity price swings to hedge funds, pension funds and endowments – the so-called “index trading” that some Commodity Futures Trading Commission (CFTC) leaders worry could artificially inflate prices. The legislation, still pending further debate, makes a distinction between “swap dealers” and “major swap participants” but both would face similar rules if it became law. This would include requiring them to post more money for each trade, hold more capital and adhere to new reporting rules.

- Not all bubbles present a risk to the economy by Frederic Mishkin. There is increasing concern that we may be experiencing another round of asset-price bubbles that could pose great danger to the economy. Does this danger provide a case for the US Federal Reserve to exit from its zero-interest-rate policy sooner rather than later, as many commentators have suggested? The answer is no. Are potential asset-price bubbles always dangerous? Asset-price bubbles can be separated into two categories. The first and dangerous category is one I call “a credit boom bubble”, in which exuberant expectations about economic prospects or structural changes in financial markets lead to a credit boom. The resulting increased demand for some assets raises their price and, in turn, encourages further lending against these assets, increasing demand, and hence their prices, even more, creating a positive feedback loop. This feedback loop involves increasing leverage, further easing of credit standards, then even higher leverage, and the cycle continues. Eventually, the bubble bursts and asset prices collapse, leading to a reversal of the feedback loop. Loans go sour, the deleveraging begins, demand for the assets declines further and prices drop even more. The resulting loan losses and declines in asset prices erode the balance sheets at financial institutions, further diminishing credit and investment across a broad range of assets. The resulting deleveraging depresses business and household spending, which weakens economic activity and increases macroeconomic risk in credit markets. Indeed, this is what the recent crisis has been all about. The second category of bubble, what I call the “pure irrational exuberance bubble”, is far less dangerous because it does not involve the cycle of leveraging against higher asset values. Without a credit boom, the bursting of the bubble does not cause the financial system to seize up and so does much less damage. For example, the bubble in technology stocks in the late 1990s was not fuelled by a feedback loop between bank lending and rising equity values; indeed, the bursting of the tech-stock bubble was not accompanied by a marked deterioration in bank balance sheets. This is one of the key reasons that the bursting of the bubble was followed by a relatively mild recession. Similarly, the bubble that burst in the stock market in 1987 did not put the financial system under great stress and the economy fared well in its aftermath. Because the second category of bubble does not present the same dangers to the economy as a credit boom bubble, the case for tightening monetary policy to restrain a pure irrational exuberance bubble is much weaker.

Yonhap News:

- The navies of South Korea and North Korea clashed in a naval battle off the western coast of the Korean peninsula today, citing an official.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (PCLN), target $200.

- Reiterated Buy on (WU), target $23.

- Reiterated Buy on (DISH), target $22.

Night Trading
Asian Indices are +.25% to +1.25% on average.

Asia Ex-Japan Inv Grade CDS Index 104.50 -10.0 basis points.
S&P 500 futures -.14%.
NASDAQ 100 futures -.16%.

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- (BZH)/-1.40

- (FOSL)/.42

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Other Potential Market Movers
- The Fed’s Lockhart speaking, Fed’s Yellen speaking, Fed’s Rosengren speaking, Fed’s Tarullo speaking, Fed’s Fisher speaking, NFIB Small Business Optimism Index, weekly retail sales reports, IBD/TIPP Economic Optimism Index, API energy inventory report, Treasury’s 10-year Note Auction, (CEPH) R&D Day, Robert Baird Industrial Conference, BofA Banking/Financial Services Conference, Piper Internet Summit, Thomas Weisel Alt Energy Conference, (SE) analyst day, (TSO) analyst meeting, Jeffries Healthcare Summit, Raymond James Coal Conference, (ALK) investors day and the ABC Consumer Confidence reading could also impact trading today.

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

Stocks Finish at Session Highs, Boosted by Gaming, REIT, Bank, Disk Drive, Paper, Gold and Coal Shares

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Stocks Soaring into Final Hour on Short-Covering, Less Economic Fear, Diminishing Financial Sector Pessimism and Technical Buying

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Retail longs, Financial longs, Medical longs and Defense longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is slightly below average. Investor anxiety is very high. Today’s overall market action is very bullish. The VIX is falling -3.39% and is high at 23.38. The ISE Sentiment Index is below average at 116.0 and the total put/call is slightly above average at .86. Finally, the NYSE Arms has been running very low most of the day, hitting .27 at its intraday trough, and is currently .32. The Euro Financial Sector Credit Default Swap Index is rising +.73% today to 67.42 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 -4.13% to 98.70 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is unch. at 23 basis points. The TED spread is now down 441 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is down -2.35% to 33.81 basis points. The Libor-OIS spread is unch. at 13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up +7 basis points to 2.23%, which is down 42 basis points since July 7th. The 3-month T-Bill is yielding .04%, which is unch. today. Cyclical shares are outperforming today, with the MS Cyclical Index jumping +3.3%. REIT, Gold, Coal, Gaming, Paper, Construction, Bank, Disk Drive, Steel and Oil Service shares are especially strong, surging 3%+ today. (XLF)/(IYR) have been very strong throughout the day. Today’s action has that melt-up feel to it that usually occurs when too many large funds are leaning the wrong way and start to panic. Moreover, the Rydex funds switching from bullish to bearish leaning mutual funds, has quickly moved to its lowest level in 2 years. That means there are more market timers leaning bearish than there were in October 2008 and March of this year, right near meaningful market lows. I suspect the S&P 500 will consolidate gains around the 1,100 level before surging again into the holidays. Nikkei futures indicate an +200 open in Japan and DAX futures indicate an +31 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, earnings optimism, investment manager performance anxiety, technical buying, less economic pessimism, buyout speculation, diminishing financial sector fear and lower long-term rates.

Today's Headlines

Bloomberg:

- Insurers such as WellPoint Inc. and Blue Cross Blue Shield and drugmakers are redoubling their efforts to fight proposals to overhaul the U.S health-care system, adding another obstacle as legislative hurdles mount. The insurers oppose competition from a new government-run program that’s included in both the House and Senate plans. The trade group representing drugmakers such as Pfizer Inc. says a House provision to allow the government to negotiate drug prices for Medicare would cost tens of thousands of jobs. House Speaker Nancy Pelosi won passage of her version of the legislation on Nov. 7 only after forcing her party’s liberal wing to make concessions and can’t count on those votes for a final version. In the Senate, time is running out to get a bill passed this year, leaving the effort vulnerable to a loss of momentum and a new backlash from Republicans in 2010. “They know they don’t have 60 votes,” said former Senator John Breaux, who now heads a lobbying firm that represents the Pharmaceutical Research and Manufacturers of America, the drug industry’s Washington trade group. “They have to go back to the drawing board” on the plan to set up a government-run insurer, he said. Without Snowe and Lieberman, Reid is at least one vote shy of the 60 he needs, and he risks losing weeks to a fruitless push for the public option. Should work spill into next year, breaks in the schedule and looming elections may open the effort up to the same types of criticism that dogged Democrats during their August recess. Reid faces additional pressure because just one senator can effectively block legislation through procedural means. His colleagues say he will struggle to find enough votes to even begin a debate that senators say may last as long as six weeks. “We are far from the end of the debate in the Senate,” said Senator Jack Reed, a Rhode Island Democrat, on yesterday’s “Face the Nation” program on CBS. The Blue Cross and Blue Shield Association, a federation of plans that it says cover more than 100 million members, released a statement criticizing the House plan minutes after it passed. The legislation “undermines the goals of comprehensive health-care reform,” the group said. “This legislation will significantly increase health-care costs and force many Americans to accept changes to the insurance plans they currently have and value,” said Angela Braly, chief executive officer of Indianapolis-based WellPoint, in an Oct. 28 earnings conference call. At least on the House side, the insurers’ battle is being joined by drugmakers. “While well-intentioned, the bill -- as passed -- would have the unintended consequences of killing tens of thousands of jobs in our industry,” said Ken Johnson, senior vice president of PhRMA, which represents New York-based Pfizer, Whitehouse Station, New Jersey-based Merck & Co. and other drug manufacturers. Pelosi lost the votes of 39 House Democrats this weekend and can’t count on all the votes she did win for a House-Senate compromise. Some Democrats who favor abortion rights and voted for the legislation said they won’t support a final bill that contains the funding restriction. “To say that this amendment is a wolf in sheep’s clothing would be an understatement of a lifetime,” Representative Diana DeGette, a Colorado Democrat, said during the debate. The prospect of having the bill fail may force negotiators to include scaled-back versions of both proposals, said Clinton Stretch, a former congressional aide and principal at the Deloitte Tax LLC consulting firm in Washington. “The political risks of failure are pretty high,” he said.

- Stocks around the world are falling at the fastest rate since the worst of the credit crisis on concern central banks will start raising rates, a signal that triggered the biggest rallies over the past three decades. Benchmark indexes from New York to Tokyo to Frankfurt have lost an average of 3.3 percent since Oct. 19 on speculation policy makers will curtail stimulus measures before the global economy revives. History shows stocks have climbed 92 percent of the time in the six months before government borrowing costs began the biggest increases, data compiled by Bloomberg show. “You should buy stocks now,” said Duessel, who helps manage $400 billion. “There’s an idea that they’re taking away the punch bowl by indicating they’re raising interest rates. But you can still get a decent rally after that.” The S&P 500 rose an average 8.4 percent in the six months before the last five increases in the Fed’s target rate for overnight loans between banks and added another 82 percent in the bull markets that followed, Bloomberg data show. “You absolutely want to front-run the Fed,” said Douglas Ciocca, who helps oversee $1.7 billion as the managing director at Renaissance in Leawood, Kansas, and recommended corporate bonds in November 2008 before they rallied 30 percent, according to Merrill Lynch & Co. indexes. “If I’m an investor and I see that there’s a small progression toward stimulus extraction, it says to me that the economy is being re-established on a much firmer footing, and that’s very positive.” Investors should buy stocks before rates rise, wrote Tobias Levkovich, a New York-based strategist at Citigroup, in an Oct. 28 report to clients. Since 1915, the S&P 500 climbed in 25 of the 38 years when the benchmark U.S. discount rate increased. Energy, information technology, industrial and commodity stocks tend to outperform just before the Fed tightens policy, he said.

- Oil and natural gas companies in the Gulf of Mexico are evacuating workers and halting some output as Tropical Storm Ida blows through the region, which accounts for more than a quarter of U.S. crude production.

- Iraq expects three of its oilfields will together pump more than 6 million barrels a day once foreign companies complete development work they were awarded this year. BP Plc and other international oil companies have signed contracts for the Rumaila, Zubair and West Qurna fields, which were originally offered in Iraq’s first post-war licensing round in June. “Total production from the three fields exceeds 6 million barrels a day and this is higher than what we were hoping for from all the eight fields in the first bid round,” Oil Minister Hussain al-Shahristani said in an interview recorded in Baghdad yesterday.

- China, the world’s second-largest energy user, will raise gasoline, diesel and jet fuel prices by as much as 8 percent tomorrow, the first increase in more than two months, as crude costs and demand climbed.

- Fannie Mae(FNM) is reviewing whether it will have to write down $5.2 billion in low-income housing tax credits after the U.S. Treasury rejected its request to sell the investments, the mortgage-finance company said today. The Treasury found an agreement to sell about half of Fannie Mae’s credits would have cost taxpayers more than the company would gain from the deal, according to a letter sent Nov. 6 to the Washington-based company. The Treasury was considering whether to let Goldman Sachs Group Inc.(GS) buy credits, which could be used to lower the firm’s tax bill.

- Goldman Sachs Group Inc.(GS) is underwriting $400 million of bonds backed by an Ohio real estate company’s shopping centers in the first sale to tap a U.S. program to unlock lending in the commercial mortgage market. The bond is backed by 28 properties owned by Developers Diversified Realty Corp., according to people familiar with the transaction who declined to be identified because terms are private. The offering comes a month after Goldman Sachs made a loan to the Beachwood, Ohio-based company in part to repay debt on the properties and others.

- OPEC is increasing output at the fastest pace in two years, adding to near-record inventories and threatening speculators betting on $100 crude with losses. The number of options contracts to buy oil at $100 by March almost quadrupled in October and increased another 5.9 percent so far this month. As traders piled in, OPEC boosted production 4 percent, or 1.1 million barrels a day, since March amid the worst global recession since World War II. The prospect of more supply comes with inventories in industrial countries already the highest since 1998, when oil collapsed to $10. “It’s not in OPEC’s interest to see $100 oil,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. “They know that it’s the speculators that are the main driver in sending prices higher. At some point this market will implode, because this isn’t sustainable.” Inventories are mounting as the Organization of Petroleum Exporting Countries produced 28.76 million barrels a day in October, up 80,000 from September and the highest in 10 months, according to data compiled by Bloomberg. Saudi Arabia has raised shipments in four of the past six months, the data show. The desert kingdom has idled about 4 million barrels a day, or one-third of its capacity, according to data from the country’s oil ministry. “The Saudis can close or open the valve and control the flow of oil at any time,” said Robert Ebel, chairman of the energy and national security program at the Center for Strategic and International Studies in Washington. “They realize it’s not in their interest to see prices climb to an unacceptable level.” “Prices are probably at the upper end of what they are comfortable with right now because they are concerned about the health of the global economy,” said David Kirsch, an Overland Park, Missouri-based analyst with PFC Energy, an energy strategist to companies and governments.

- Electronic Arts Inc.(ERTS), the world’s second largest video-game publisher, will acquire Playfish Inc., a maker of games played on Facebook’s Web Site, for $400 million in a bet that social networking will be a platform for growth.

- RadioShack Corp.(RSH), the second-largest U.S. electronics chain, climbed to its highest level in two years in U.S. trading after announcing plans to start selling Apple Inc.’s iPhones in the U.S. next year. The Forth Worth, Texas-based retailer surged $2.55, or 14 percent, to $20.29 at 10:50 a.m. in New York Stock Exchange composite trading, after reaching $20.57, the highest intraday price since November 2007.

- Abercrombie & Fitch Co.(ANF) jumped the most in five months in intraday trading after Goldman Sachs Group Inc. added the U.S. retailer to its “conviction buy” list, citing the potential for international sales growth. Abercrombie, based in New Albany, Ohio, rose $2.48, or 7.1 percent, to $37.49 at 10:56 a.m. in New York Stock Exchange composite trading.

- Google Inc.(GOOG), owner of the world’s most popular Internet search engine, agreed to pay $750 million in stock for AdMob Inc., a mobile-phone advertising startup backed by Google investor Sequoia Capital. The purchase is designed to shore up Google’s position in the market for mobile advertising as the growth of Internet ads on desktop computers slows. AdMob, which sells ads displayed on the small screens of wireless devices, has benefited from the popularity of smart phones, such as Apple Inc.’s iPhone and Research In Motion Ltd.’s BlackBerry. “Mobile advertising has enormous potential as a marketing medium and while this industry is still in the early stages of development, AdMob has already made exceptional progress in a very short time,” Susan Wojcicki, Google’s vice president of product management, said in the statement.

Wall Street Journal:

- Is the Environmental Protection Agency trying to stifle dissenting views on climate change? The EPA has told two longtime agency veterans and outspoken critics of the administration’s cap-and-trade plan to remove any references to the agency in their critiques and to get approval for any future “outside writing projects.” That includes removing their critical video from You Tube. Laurie Williams and Allan Zabel, a married couple and EPA lawyers in San Francisco, have been railing against cap-and-trade proposals for a while. Most recently, they had a sharply-worded op-ed in the Washington Post that said current legislation would be ineffective and even counterproductive. The couple stressed that the views they expressed were their own—not the agency’s. But they also stressed that their years of experience with the EPA, and specifically working on other cap-and-trade programs, informed their views. Now Public Employees for Environmental Responsibility has jumped into the fray. The organization, which groups public-sector employees concerned with environmental questions, has re-posted the banned video and come out in defense of the two attorneys: “EPA is abusing ethics rules to gag two conscientious employees who have every right to speak out as citizens,” stated PEER Executive Director Jeff Ruch, who has re-posted the original video and its script. “EPA reversed itself because someone in headquarters had a tantrum about their Washington Post essay.” Even folks who shudder at the lawyers’ arguments worry that the current spat doesn’t look good for free speech, notes Dave Roberts at Grist.

- Wall Street firms that agreed to pay $100 million to settle a lawsuit accusing them of propping up American Business Financial Services Inc. had doubts about the subprime lender's business practices long before it collapsed, according to court documents. ABFS funded its operations partly by selling subordinated debt notes directly to the public, pitching them in newspaper ads and mass mailings that promised above-market interest rates. When ABFS filed for bankruptcy in 2005, the uninsured notes became worthless, leaving 26,000 investors with more than $600 million in losses. Many of the investors were elderly.

- Most investment banks have yet to lay out how they will implement new international guidelines on pay, which means those rules are unlikely to lead to the level playing field that regulators hope to create on compensation, according to industry professionals and consultants. Since the rules were published in September and then clarified by several national authorities including France, Switzerland and the U.K., most large investment banks have said they will become "G-20-compliant" by the start of next year. However, many say firms are nowhere near finalizing details on how new rules will work in practice.

- A U.S. Army hospital spokesman said the man suspected in a deadly shooting spree at Fort Hood is conscious and able to talk.

MarketWatch.com:
- Pfizer Inc.(PFE) said Monday it will "significantly" reduce research and development at some of its sites and shut down six out its 20 sites.

CNBC:

- Civil War is breaking out on the board of directors of Bank of America(BAC) over the selection of a successor to CEO Ken Lewis, pitting board members favoring Greg Curl, a long-time BofA executive located in the bank's home city of Charlotte, N.C., with those who favor Brian Moynihan, who came to the company after its purchase of the Boston-based Fleet Financial, people close to the company say.

- On the way down and on the way up, home prices always lag sales, but they may be beginning to catch up. A new report from Zillow.com finds home values stabilized in the third quarter of this year, as sales of new and existing homes grew. "While 116 metropolitan areas experienced Q3 year-over-year declines in home values, only nine metropolitan areas saw accelerating year-over year home value declines," according to the report. That is resulting in slightly improved negative equity. Zillow finds 21 percent of single-family home owners are in a negative equity position in Q3, as compared to 23 percent at the end of Q2.

- Investors snapped up a record $40 billion in three-year notes as the first leg of another big Treasury auction kicked off to a solid start.

NY Times:

- The Singapore central bank warned Monday that more measures could be needed to curb the risk of speculation in the country’s property market, which has been bolstered by low borrowing costs. The comments underscored a growing concern among policy makers in Asia, who are worried about the possibility of a bubble in residential markets in financial centers like Hong Kong, Singapore and Seoul.

The National Law Journal:

- The nation's largest law firms this year suffered the deepest cuts in their attorney numbers since the NLJ began tracking their census figures more than 30 years ago. It's never been like this. In the three decades that The National Law Journal has been counting lawyers at big law firms, headcount has nearly always grown. In fact, the two times it has dropped, the decline was 1% or less. This year, headcount dived by nearly 4% — or, as Associate Editor Leigh Jones notes in her overview on this year's results, enough to fill a couple of huge law firms. Actually, the numbers are even more stark. For 20 years, the average annual growth rate for the NLJ 250 has been close to 4%. So this year's decline, when coupled with the usual growth rate, is more like 8%. In rough terms, that's 10,000 lawyers.

The Business Insider:

- The idea of a financial transaction tax has never made much sense. But this time it makes less sense than ever.

Washington Post:

- Federal investigators are examining possible links between Fort Hood shooting suspect Maj. Nidal M. Hasan and an American-born imam who U.S. authorities say has become a supporter and leading promoter of al-Qaeda since leaving a Northern Virginia mosque, officials said. Hasan attended the Dar al-Hijrah mosque in Falls Church in 2001, when its spiritual leader was Anwar al-Aulaqi, a figure who crossed paths with al-Qaeda associates, including two Sept. 11, 2001, hijackers, one senior U.S. official said. New leads are being pursued based on information gleaned from a methodical review by investigators of Hasan's computer and his multiple e-mail accounts. Those include visits to Web sites espousing radical Islamist ideas, another senior official said.

SeekingAlpha:

- Sentiment Overview: A Scarcity of Bulls.

EETimes:

- The contract price for the supply of the 2-Gbyte small outline dual-in-line memory modules in the DDR2 DRAM 800-MHz format has increased to $41 from $36 in the first half of November, a jump of 14 percent, according to DRAMexchange Technology Inc., a Taiwan-based market analysis company. The so-called "high" contract price has surpassed the spot price and reached $50 per module, according to the company. The DDR2 contract price is expected to retain upward momentum in November given increased shipments of middle-priced PCs by OEMs, the company said.

AdvertisingAge:

- Verizon's(VZ) droid is pitching itself as the anti-iPhone, and nowhere is that more evident than in the look and feel of its campaign -- a blanket push you won't be able to escape. The integrated campaign, the largest in Verizon history, will receive an estimated $100 million in support, most of it spent before the end of the year.

Rassmussen:

- Over the weekend, Democratic leaders spoke of an historic moment as health care reform legislation passed the House of Representatives. But that legislative victory failed to significantly move public opinion. The latest Rasmussen Reports national telephone survey finds that 45% now favor the health care plan proposed by President Obama and congressional Democrats. Most (52%) remain opposed. Only 25% Strongly Support the plan while 42% are Strongly Opposed.

Politico:

- Within minutes of Saturday’s historic House vote on health care reform, Republicans pronounced the political death of Rep. Thomas Perriello (D-Va.), pointing to the vulnerable freshman congressman’s vote in favor of the bill. And in the aftermath of the politically charged vote, Perriello wasn’t the only Democratic congressman whose fortunes were being reassessed. The GOP, which voted nearly in lock step against the measure, began crowing about the demise of various other vulnerable members and seized on the moment as a milestone in the path back to a House majority.

Lloyd’s List:

- EA Gibson Shipbrokers Ltd. estimates the amount of oil being stored at sea has climbed to the highest level in 10 years, citing the broker’s data and its head of research, Steve Christy. There are 19.2 million metric tons of crude and oil products being stored at sea. That equates to 143 million barrels, it said.

TechCrunch:

- Last month Skype was in talks to acquire VoIP startup Gizmo 5. It was a perfect backup plan in case all that IP litigation didn’t work out. – Gizmo5’s SIP infrastructure could theoretically replace Skype’s proprietary P2P back end. After the Skype settlement, though, Gizmo5’s strategic value to Skype sort of plummeted. In the meantime, Google bought them, say multiple sources with knowledge of the deal, for around $30 million in cash. The deal is done, say our sources, and will be announced shortly. Gizmo5 is a good fit with a number of Google products.

Reuters:

- Angola's oil industry is booming as money pours in after the end of three decades of civil war, and officials say output could increase by as much as two-thirds over the next five years. Buoyed by a scramble for energy and raw materials by China and other emerging nations, oil companies are spending tens of billions of dollars drilling oil and gas wells deep below the Atlantic many miles off the African coast. Production capacity has increased steadily over the last two years and oil analysts say Angola could now comfortably pump at least 2 million barrels per day (bpd) and is increasingly only held back by political constraints. Angola is a member of the Organization of the Petroleum Exporting Countries (OPEC), holding the presidency of the 12-member grouping this year, and has been limiting output with other OPEC states to help stabilize oil prices in the wake of the global economic crisis. But dozens of new Angolan oilfields will come on stream between 2011 and 2015 and oil analysts expect output to increase steadily to between 2.5 and 3.0 million over this period. "By 2015, Angola should be looking at oil production closer to 3 million bpd," said Thomas Pearmain, African energy analyst at IHS Global Insight. Angola has probable oil reserves of 13-19 billion barrels, giving it the third largest hydrocarbon resources in Africa behind Libya and Nigeria, analysts say, but the rate of discovery of new Angolan oilfields is outpacing its rivals and its production is beginning to accelerate.

- Forget the buzz over the next "Twilight" film or James Cameron's "Avatar." The biggest entertainment hit of the holiday season may come on Tuesday, when "Call of Duty: Modern Warfare 2" hits stores. The video game published by Activision Blizzard Inc (ATVI) is the most highly anticipated of the year, winning accolades from gaming blogs and Wall Street analysts alike.

- Russian car sales fell 52 percent in October year-on-year to 116,700 units, figures compiled by the Association of European Businesses in the Russian Federation (AEB) showed on Monday.

Financial Times:

- General Electric(GE) India is resetting its targets from the ambitious $8bn in revenue a year goal by 2010 it forecast three years ago as it juggles businesses affected by the global slowdown. Tejpreet Singh Chopra, president and chief executive of GE India, said the group had scaled back some of its businesses, such as unsecured consumer lending and was pushing ahead with others, such as healthcare and bids for government fighter jet and train contracts.

- Iran has charged three US citizens with spying two months after the trio were arrested having walked across the border from neighboring Iraq, a top judiciary official said On Monday. “Their charge is espionage,” Abbas Jafari Dolatabadi, Tehran’s prosecutor general told the official IRNA news agency, adding that the results of the ongoing investigation would be announced in the “not-so-distant future”. The charges could further sour relations between Iran and the US. Hillary Clinton, US secretary of state, immediately called on Tehran to release the three hikers. ”We believe strongly that there is no evidence to support any charge whatsoever,” Mrs Clinton said on a visit to Berlin.

Globe and Mail:

- General Motors Corp. will invest about $94 million to increase production capacity at one of its Canadian auto assembly plants.