Longer-Dated Bond Sales Soar Amid Best Returns: Credit Markets. Investors are buying longer-maturity corporate bonds at the fastest pace in more than three months, speculating that declining inflation expectations will keep the Federal Reserve from raising interest rates.
Australia to Gauge European Bank Stress Tests, Inflation. Australian policy makers will use the results of this month’s European bank stress tests and local inflation figures due next week to decide whether to resume the Group of 20’s most aggressive round of interest-rate increases. “The important question for the board at its next meeting would be whether the new information materially changed the medium-term outlook for inflation,” Reserve Bank of Australia officials said in minutes of their July 6 meeting released in Sydney today.
Amazon.com(AMZN) E-Book Sales Exceed Hardcovers for First Time. Amazon.com Inc., the largest Internet retailer, said growth in sales of its Kindle digital reader accelerated every month in the second quarter and that it’s selling more electronic books than hardcover editions. The pace of Kindle sales also has tripled since the company cut the price to $189 from $259, Amazon.com Chief Executive Officer Jeff Bezos said in a statement.
China Is Coming Under Fire. A series of comments by some of the world's top executives questioning China's treatment of international companies reflects an anxiety that is altering the relationship between foreign business and Beijing. For years companies that do business in China largely avoided public criticism of Beijing's policies, fearing this could jeopardize their standing in the world's fastest-growing major market. But recent months have seen executives from some of the biggest companies in Europe and the U.S. speak out—a testament to mounting concern that China's economy is moving in a direction less friendly to foreign companies that have staked much of their future on it. The latest example came when two of Germany's leading industrialists—Jürgen Hambrecht, chairman of chemical giant BASF SE and Peter Löscher, chief executive of conglomerate Siemens AG—raised complaints about a range of Chinese policies toward foreign business during a public meeting with Chinese Premier Wen Jiabao and visiting German Chancellor Angela Merkel. That followed complaints in recent months from other top executives of General Electric Co., Microsoft Corp. and Google Inc. Foreign businesses are increasingly emboldened, executives and analysts say, by a sense that the Chinese market has become too important to stay silent over policies they feel jeopardize their future. The concerns center on policies that foreign executives feel put them at a disadvantage against increasingly potent Chinese competitors, or compel them to transfer valuable technology to China, or otherwise limit their access to what is now the world's biggest market for everything from trains to cars to cellphones. At Saturday's meeting between German and Chinese executives and officials, Mr. Hambrecht complained about companies facing the "forced disclosure of know-how" in order to do business in China. "That does not exactly correspond to our views of a partnership," he said, according to a report by Germany's Deutsche Presse-Agentur, whose reporter was at the meeting.
BP(BP) Weighs New Way to Kill Gulf Well. Oil giant BP PLC was Monday considering yet another method to kill its ruptured Gulf of Mexico oil well amid concerns that the cap it installed last week could be allowing oil and gas to seep out the sides.
ShoreBank's Ill-Fated Crosstown Expansion. Many of the nation's ailing small banks got into trouble when they expanded into unfamiliar regions across the country. ShoreBank Corp. ran into trouble across town. The Chicago bank, which provides financial services in distressed parts of the city, is reeling, in part, because it made loans to borrowers in low-income neighborhoods away from its historical focus on Chicago's South Side, according to a person familiar with the bank's strategy. ShoreBank's fate is hanging in the balance as it waits to hear if the government will provide a $75 million infusion that could help keep it in business.
IRS Erred in High-Stakes Tax Case. The Internal Revenue Service said it made a more than $325 million error in a high-stakes tax battle with Vi, an operator of upscale retirement communities.
Megabanks Pressure Smaller Players. At the end of May, Florida Business Bank shut down the loan office it opened here just a year ago. It wasn't doomed by the economy. It was surrounded by giant banks that keep getting bigger and bigger. Bank of America Corp., J.P. Morgan Chase & Co. and Wells Fargo & Co., which hold about $3.50 of every $10 in local deposits, are "squeezing" and "hoarding" customers "any way they can," says Jeff Wagner, chief financial officer at Florida Business Bank.
Blagojevich Gambles in Taking the Stand. From almost the day he was arrested 19 months ago and charged with running the state government like a criminal enterprise, former Illinois Gov. Rod Blagojevich has said he couldn't wait for his day in court to tell his side of his story. Tuesday he is expected to get his chance.
Einhorn Buys Apple(AAPL), Saying Its Growth Prospects Are Undervalued. David Einhorn, the hedge-fund manager known for shorting Lehman Brothers Holdings Inc. before it collapsed, said he bought shares of Apple Inc. in the second quarter because the iPhone maker’s growth is undervalued. Einhorn’s firm, Greenlight Capital Inc., purchased the stock at an average price of $248.09 each, or 15 times the money manager’s estimate for 2010 earnings, according to a letter sent to fund shareholders on July 16. “While growth over the next few years will certainly be slower than it has been over the last few years, AAPL does not appear to have fully penetrated its market opportunities,” wrote Einhorn, referring to Apple by its stock symbol. “Accordingly, the opportunity to invest in this leading company (with a better financial profile than market participants seem to acknowledge) appears iTtractive.”
Tourre Says He Relied on Goldman Sachs(GS), Denies Fraud. Fabrice Tourre, the Goldman Sachs Group Inc. executive director sued by the Securities and Exchange Commission for fraud, disputed the claims and said he relied on his firm’s legal and compliance department. Tourre, in a filing yesterday in federal court in Manhattan, denied making any materially misleading statements or omissions related to the 2007 sale of the Abacus 2007-AC1 collateralized debt obligation linked to subprime mortgages.
CNBC:
TI(TXN) Posts Results in Line With Views, but Shares Tumble. Texas Instruments on Monday posted a quarterly profit that matched what analysts expected, but posted revenue slightly below analyst expectations due to a shortfall from one key mobile phone customer. However, shares of the chipmaker fell more than 6 percent in extended trading.
IBM(IBM) Earnings Rise, Beat Forecasts, but Sales Disappoint. IBM reported a higher profit that exceeded what Wall Street was expecting, but the company's shares lost ground in extended trading as its revenue was lighter than forecast and a decline in services contract signings damaged investors' confidence.
IBD:
Insurers Set Up for Next 'Affordable' Crisis. Subprime Scandal: When Democrats described FinReg as the most sweeping overhaul of Wall Street since the Depression, they didn't say it would also affect your local insurance agent. But it does. Check out Title V of their 2,300-page regulatory fatwah. It sets up a powerful new race-monitoring bureaucracy within the Treasury Department called the Office of National Insurance — the first office in the federal government focused on insurance. According to the final draft of the bill, which President Obama will sign this week to much partisan fanfare, the office "shall have the authority to monitor the extent to which traditionally underserved communities and consumers, minorities, and low- and moderate-income persons have access to affordable insurance products regarding all lines of insurance, except health insurance."
NY Times:
Need a Mortgage? Don't Get Pregnant. Expectant parents shopping for a home are not the only ones concerned about the date of the baby’s arrival. Mortgage lenders are taking a harder look at prospective borrowers whose income has temporarily fallen while they are on leave, including new parents at home taking care of a baby. Even if a parent plans on returning to work within weeks, some lenders are balking at approving the loans. “If you are not back at work, it’s a huge problem,” said Rick Cason, owner of Integrity Mortgage, a mortgage firm in Orlando, Fla. “Banks only deal in guaranteed income these days. It makes sense, but the guidelines are sometimes actually harsher than they need to be.”
Zero Hedge:
37 Year Old Greek Investigative Journalist And Blogger Murdered. The Guardian reports that the prominent Greek reporter and blogger Socratis Giolas was allegedly murdered by the Sect of Revolutionaries terror group, after being shot 16 times in front of his pregnant wife. "The 37-year-old radio chief is the first journalist to be killed in the country since newspaper publisher Nikos Monferatos was gunned down by the infamous 17 November terror group in 1985. Giolas, who was also a frequent blogger, posting reports on popular online newsblog Troktiko, sought to illuminate Greece's seamier underside. The shooting came days before he was due to release an investigative series on corruption, colleagues said."
The Detroit News:
Chevy Volt Doesn't Get Leno Charged Up. It's 'a people mover, not a people impresser,' comedian says. Late-night comic and "Tonight Show" host Jay Leno, who has been courted by General Motors Co. to help build buzz for the Chevrolet Volt, zinged the automaker with a backhanded compliment to the highly anticipated electric car. GM executives gave Leno a Volt late last year to test drive, but the noted gearhead -- who says he is excited about the Volt launch later this year and hasn't ruled out buying one -- likened the extended-range electric car to an underwhelming compact model being phased out by GM's Chevrolet brand. "If you didn't know, you might think it's a Cobalt or a Camry," Leno said in an interview with The Detroit News to promote a Saturday charity performance at the Chrysler Museum in Auburn Hills.
Ford(F): New Explorer Ups Fuel Efficiency by 30%. Ford Motor Co. today confirmed the all-new 2011 Ford Explorer will be 30 percent more fuel-efficient than the outgoing model. Ford has been building up the crossover's debut with Facebook teaser pictures of parts of the vehicle and a steady diet of snippets about features and attributes. The new Explorer goes on sale later this year, but the production model has not been shown on the auto circuit.
Rasmussen Reports:
California Voters Divided Over Stimulus Plan. Voters in California are divided over whether the $787 billion economic stimulus plan enacted by President Obama and Congress last year has been good or bad for the economy. A new Rasmussen Reports telephone survey of Likely Voters in the state finds that 36% of voters think the stimulus plan helped the economy, while 35% say it hurt the economy. Another 24% feel the stimulus plan had no impact on the economy. Nationally, voters are much less divided on the issue: 29% say the stimulus plan helped the economy and 43% say it hurt the economy. Half (49%) of voters in California feel the U.S. economy is getting worse. Twenty-seven percent (27%) think it is getting better, and another 20% think the economy is about the same.
Generic Congressional Ballot: Republicans 45%, Democrats 36%. Republican candidates now hold a nine-point lead over Democrats on the Generic Congressional Ballot for the week ending Sunday, July 18, the widest gap between the two parties in several weeks. A new Rasmussen Reports national telephone survey finds that 45% of Likely Voters would vote for their district's Republican congressional candidate, while 36% would opt for his or her Democratic opponent. Support for Republicans inched up a point from last week, while support for the Democrat fell two points. While solid majorities of Democrats and Republicans support the candidates of their respective party, voters not affiliated with either party prefer the Republican candidate by a 47% to 21% margin.
Politico:
Reality Gap: U.S. Struggles, D.C. Booms. America is struggling with a sputtering economy and high unemployment — but times are booming for Washington’s governing class. The massive expansion of government under President Barack Obama has basically guaranteed a robust job market for policy professionals, regulators and contractors for years to come. The housing market, boosted by the large number of high-income earners in the area, many working in politics and government, is easily outpacing the markets in most of the country. And there are few signs of economic distress in hotels, restaurants or stores in the D.C. metro area. As a result, there is a yawning gap between the American people and D.C.’s powerful when it comes to their economic reality — and their economic perceptions. A new POLITICO poll, conducted by market research and consulting firm Penn Schoen Berland, underscores the big divide: Roughly 45 percent of “Washington elites” said the country and the economy are headed in the right direction, while roughly 25 percent of the general population said they felt that way.
Reuters:
Credit Managers' Sentiment Turns Negative - Report. International credit portfolio managers' sentiment turned negative in the second quarter amid worries economic growth will suffer as governments cut spending, according to a survey released on Monday. The survey by the International Association of Credit Portfolio Managers contrasts with strongly positive sentiment found in the previous survey, conducted at the end of March, according to IACPM.
Atheros(ATHR) Q2 Beats Street; PC Revenue Falls Sequentially. Wireless networking chipmaker Atheros Communications Inc (ATHR) posted better-than-expected quarterly results, but revenue from the PC segment fell 10 percent sequentially due to uncertainty in European markets. The company remains cautious on near-term demand in the PC market, Chief Executive Craig Barratt said on a conference call. Shares of the company were down 8 percent at $28.05 in trading after the bell.
Telegraph:
Cameron Can Teach Obama a Thing or Two on Deficit Reduction. If there is a double dip, there is plainly going to have to be a rethink, but actually President Obama’s anti-business rhetoric and increasingly impotent populism threaten to do far more damage to the recovery than measured deficit reduction. Indeed, America’s failure to take the deficit seriously is a large part of the problem. You are never going to see a strong, investment led recovery in the US while there is so much uncertainty on economic policy. US business leaders have meanwhile rarely felt so unloved, vilified and demoralised. That’s hardly a conducive backdrop to investment. Obama needs urgently to show some leadership and switch his approach. Perhaps Cameron can persuade him, but I’m not holding my breath. I’ve reflected in a more considered fashion on all this in a longer piece for tomorrow’s print edition of The Daily Telegraph.
Hungary's IMF Revolt Augurs Ill for Greece. The collapse of Hungary's talks with the International Monetary Fund and the EU is a chilly reminder that sovereign debt crises do not end with a rescue package and a click of the fingers. As austerity drags on for year after year, democracies react. "We told the IMF/EU that further austerity was out of the question," said Hungary's economic minister Gyorgy Matolcsy, offering no hint that the Fidesz government is willing to back down despite yesterday's surge in Hungarian default costs by 51 basis points. The Fidesz movement – an amalgam of libertarians and nationalists with a Left-populist tilt – won a crushing victory in April on a campaign of defiance against both Brussels and the IMF. It has been spoiling for a fight ever since.
CTV.ca:
Toronto's Year-Over-Year Home Sales Down. While Toronto's real estate sales volume is significantly down over the same period in 2009, housing prices continue to rise, says the Toronto Real Estate Board. In figures released Monday, the board said there were 2,790 sales through the Multiple Listing Service for the first two weeks of July. That is a 37 per cent decrease from the 4,437 sales made in the first two weeks of July 2009.The average price recorded for the first two weeks of this month was $427,931. That figure is eight per cent higher than the average of $394,750 recorded for the same period of July 2009.
Dong-a Ilbo:
North Korea executed a former Cabinet official who had been responsible for negotiations with South Korea, citing an official in Beijing. Kwon Ho Ung, North Korea's chief delegate to ministerial-level talks between the two sides from 2004 to 2007 was killed by firing squad, the paper said. The Ministry of People's Security and the Ministry of Sate Security, the North's two main security arms, are rounding up "impure elements" to show their loyalty to Kim Jong Un, the heir apparent to North Korean leader Kim Jong Il, the newspaper said in an editorial July 17.
Securities Times:
The monetary supply normalization is key to the objective of China's current macroeconomic control, citing Ba Shusong, a researcher at the State Council's Development and Research Center.
China Daily:
China should give the nation's central bank greater independence in drafting monetary policy as part of the government's bid to achieve economic stability, Ma Jun, Deutsche Bank AG's chief Greater China economist, wrote in a commentary today. The nation should also modify its system for appraising the performance of local government officials, as the current system encourages the pursuit of growth and excessive investment, Ma wrote. China should also increase its use of "economic leverage" including interest rates and exchange rates to guide the economy and reduce the use of administrative decrees, Ma said. The government should also strengthen China's social security system to minimize the effects of economic policy adjustments, Ma wrote.
Shanghai Securities News:
China's banking regulator has called on local authorities to step up inspections of property loans, citing an official with the China Banking Regulatory Commission. The regulator also called for prevention of "excessive" lending for land purchases. The regulator has also ordered that bank loans account for at most 50% of financing for property developments, according to the report. The banking regulator also called for China's national policies should be followed strictly.
China Business News:
Home prices in the Chinese cities of Beijing, Shanghai, Tianjin, Guangzhou and Shenzhen may decline 20% from current levels in the second half, citing real estate broker Centaline Property Agency Ltd. Prices may fall in the second half as a result of an increased supply of new homes on the market, the report said.
perthnow:
Falling Chinese Demand to Hit Ore Price. A SLOWING Chinese economy has led Credit Suisse to slash iron ore price forecasts for next year by 20 per cent. This also prompted it to cut the rating on BHP Billiton(BHP) to neutral and slash the big miner's profit forecast by $US4 billion ($4.6bn). In its most recent quarterly commodities review, Credit Suisse chopped its 2010 iron ore price forecast by $US23 a tonne to $US106 and for 2011 from $US132 to $US104. Analysts at the bank said Chinese Government cooling measures had cut steel production dependent on iron ore imports by about 4 million tonnes a month. Concerns about Europe have led to steel demand being reduced there by up to 2 million tonnes a month across the continent. In the past three months, iron ore spot prices at Chinese ports slipped 35 per cent.
Evening Recommendations BMO Capital:
Rated (PNC) Outperform, target $73.
Night Trading
Asian equity indices are -.25% to +1.25% on average.
Asia Ex-Japan Investment Grade CDS Index 132.0 -5.0 basis points.
Asia Pacific Sovereign CDS Index 126.75 -4.75 basis points.
Housing Starts for June are estimated to fall to 577K versus 593K in May.
Building Permits for June are estimated to rise to 575K versus 574K in May.
Upcoming Splits
None of note
Other Potential Market Movers
The Fed's Tarullo testifying before Senate on FinReg, weekly retail sales reports and the ABC consumer confidence reading could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
North American Investment Grade CDS Index 113.45 bps +2.57%
European Financial Sector CDS Index 129.40 bps +2.77%
Western Europe Sovereign Debt CDS Index 136.0 bps +1.84%
Emerging Market CDS Index 244.74 bps -.40%
2-Year Swap Spread 23.0 -2 bps
TED Spread 37.0 -1 bp
Economic Gauges:
3-Month T-Bill Yield .15% unch.
Yield Curve 237.0 +2 bps
China Import Iron Ore Spot $118.10/Metric Tonne +.17%
Citi US Economic Surprise Index -34.10 -.6 point
10-Year TIPS Spread 1.70% -2 bps
Overseas Futures:
Nikkei Futures: Indicating -118 open in Japan
DAX Futures: Indicating +48 open in Germany
Portfolio:
Higher: On gains in my Biotech and Technology long positions
Disclosed Trades: None
Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 reverses to session highs on light volume despite some negative eurozone sovereign debt news and another poor US housing reading. On the positive side, Education, REIT, Wireless, Computer Service, Disk Drive, Semi, Software, Oil Service and Utility stocks are especially strong, rising 1.0%+. The MS Tech Index is jumping +1.2%. The 2-year swap spread is falling to the lowest level since early May. Gold is falling to the lowest level since mid-May, which is also a positive. The 10-year yield is also rebounding +4 bps today. On the negative side, Airline, Road&Rail, Gold, Ag and Oil Tanker shares are under pressure, falling more than -1.0%. Small-caps are underperforming. (XLF) has been unable rebound despite recent losses and today's broad market reversal. The European Investment Grade CDS Index is rising +3.5% to 116.5 bps today. Moreover, the Hungary sovereign cds is soaring +16.08% to 371.05 bps and the Russia sovereign cds is rising +4.6% to 180.25 bps. So far, the euro is ignoring this development. I would like to see better breadth and volume materialize before becoming more aggressive on the long side. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, rising economic fear, increasing financial sector pessimism, tax hike worries and regulatory concerns.
Homebuilder Confidence in U.S. Falls to One-Year Low. Builders in the U.S. turned more pessimistic in July than forecast, a sign the expiration of a government tax credit will depress home construction. The National Association of Home Builders/Wells Fargo confidence index dropped to 14 this month, the lowest level since April 2009, from 16 in June, data from the Washington- based group showed today. “The housing sector is going to be in a hangover for a few months and it looks like it will be quite a nasty one,” said David Sloan, a senior economist at 4Cast Ltd. in New York, who correctly forecast the decline. “This will weigh on growth in the third quarter and well into the fourth quarter as well.” The builders group’s index of current single-family home sales fell to 15 from 17. The gauge of buyer traffic dropped to 10 from 13 the prior month. A measure of sales expectations for the next six months decreased to 21, the lowest level since March 2009, from 22. Home seizures climbed 38 percent in the second quarter from a year earlier, RealtyTrac Inc. said last week, putting lenders on pace to claim more than 1 million properties this year.
Commodity Manipulation May Be Easier to Prove After Overhaul. Traders will face new rules aimed at making it easier for regulators to prove manipulation in markets for commodities such as oil, wheat and natural gas under the financial overhaul awaiting President Barack Obama’s signature. The regulations, written in part by Senator Maria Cantwell, a Democrat from Washington state, attempt to relieve the Commodity Futures Trading Commission of the burden of proving a trader intended to manipulate prices. Instead, the CFTC will have to show the trading was “reckless.” “It will make it easier for the CFTC to bring cases and get people to settle, because people will be reluctant to go to court,” said Geoffrey Aronow, former director of enforcement at the commission and a partner at the Washington law firm Bingham McCutchen LLP.
Intel(INTC), Yum(YUM) Show Dual-Speed Economy as Technology Outperforms. Intel Corp. Chief Executive Officer Paul Otellini told investors July 13 he is seeing “renewed economic momentum.” A day later, Yum! Brands Inc. Chief Financial Officer Richard Carucci predicted “sustained unemployment and a concerned U.S. consumer.”The contrasting views of companies reporting second-quarter earnings illustrate the two-speed economic recovery: Production of business equipment has jumped 5 percent this year through June, while consumer goods have risen 0.2 percent, Federal Reserve data show.
Gulf Oil Spill May Cost 17,000 Jobs, Moody's Says. BP Plc’s(BP) oil spill may cost the U.S. Gulf Coast region 17,000 jobs and about $1.2 billion in lost economic growth by year-end even if the flow is stanched permanently next month, Moody’s Analytics said in a report. Under a more pessimistic scenario in which the oil spill continues through December and President Barack Obama’s six- month moratorium on deepwater drilling is extended, economic losses may reach $7.4 billion, and more than 100,000 jobs would be lost, Moody’s said today in a report written by Marisa Di Natale, a director based in West Chester, Pennsylvania.
ExxonMobil(XOM) Eyes .26M B/D From Iraq W Qurna-1 1Q 2011. Exxon Mobil Corp. (XOM) is planning to raise production from Iraq's supergiant West Qurna oil field to 250,000-260,000 barrels a day during the first quarter of next year, the company's vice president said Monday.
Hungary-IMF Talks Breakdown Is 'Bad News,' Moody's Says. Moody’s Investor Service said the breakdown of talks between Hungary and the country’s international creditors on the further availability of a 2008 rescue loan “is bad news.” Failure to agree on fiscal targets to secure the backing of the International Monetary Fund and the European Union triggers “market volatility” and increases uncertainty about government policies, said Dietmar Hornung, Moody’s lead analyst for Hungary, in a telephone interview from Frankfurt. “If you have a large debt to gross-domestic-product ratio you are susceptible to an increase in financing costs.”
Wheat Prices Peaking as Glut Subdues Best Performer. The five-week rally in wheat that made it the best performer of any commodity is under threat as prospects for the second-biggest stockpiles in almost a decade overwhelm damage caused by drought. Wheat rose 35 percent to $5.78 a bushel in Chicago since June 9 as a lack of rain in Russia, Kazakhstan and the European Union and floods in Canada hurt crops. That prompted the U.S. Department of Agriculture on July 9 to cut harvest estimates by 1.1 percent, while global inventories will be the second-highest since 2002. Prices will drop 15 percent to $4.94 by Dec. 31, based on the median in a Bloomberg survey of 14 analysts. “I don’t think prices will hold these higher levels,” said Pete Sorrentino, who helps manage $13.1 billion at Huntington Asset Advisors in Cincinnati and correctly predicted the 2008 crash in commodity prices. “We’re going to be getting some massive harvests, and that’s going to keep stockpiles swelling.”
Bin Laden Son Says U.S. May Agree to Let in Family. A son of Osama bin Laden said about 20 members of his family stranded in Iran are seeking sanctuary in a third country and that the U.S. may agree to accept them. Omar bin Laden, the al-Qaeda leader’s fourth son, said in an interview with Al Arabiya television that Iran is refusing to allow his relatives to go to Saudi Arabia. Shiite Muslim- dominated Iran is a regional rival of Sunni-ruled Saudi Arabia. Al-Qaeda, a Sunni group, is hostile to Iran. “The Americans offered to help them out of Iran and even hinted at the possibility of receiving them in the U.S.,” he said in the interview, which was aired late yesterday and posted on the Dubai-based channel’s website.
For-Profit Schools Gain Amid Optimism Over Government Regulation. Education Management Corp. led gains among shares of for-profit colleges amid speculation U.S. President Barack Obama's proposed industry regulations won't reduce profit as much as had been projected.
CNBC:
FinReg Will be 'Disastrous' for Economy: FCIC's Wallison. The Wall Street Reform bill, an overhaul of US financial rules that won final approval in the Senate on Thursday, will be “disastrous” for the US economy and will slow economic growth permanently, according to Peter Wallison, a member of the Financial Crisis Inquiry Commission.
Business Insider:
Does Tim Geithner Think Elizabeth Warren Will Destroy the Banking System? The financial reform bill will create a new consumer protection agency, and TARP watchdog, and Harvard professor Elizabeth Warren has widely been seen as one of the frontrunners. But last week the Huffinton Post reported that Tim Geithner opposes the nomination of Warren to the position.
Fannie Mae to Prohibit Lenders From Changing Home Appraisals. The mortgage giant addresses complaints that home sales have been sabotaged by arbitrary reductions in appraisers' valuations. Lenders unilaterally may be lowering the numbers on the appraisals submitted to them to avoid accusations that the loans they sell to giant investors Fannie Mae or Freddie Mac are based on inflated appraisals — even slightly inflated. Such value inflations can expose lenders to "buyback" demands, forcing them to repurchase loans at huge costs. The vice chairman of the National Assn. of Realtors' Appraisal Committee, Frank K. Gregoire of St. Petersburg, Fla., says it's a widespread problem — large numbers of legitimate home sales "sabotaged by lenders and underwriters arbitrarily reducing the value estimate" provided by the appraiser. Effective Sept. 1, Fannie Mae is prohibiting lenders who sell it loans from changing appraisers' numbers. In guidance issued June 30, Fannie Mae said lenders must contact appraisers to resolve any disagreements about the valuation. If that's not possible, they should order a second appraisal — not just chop the value supporting the real estate contract. Appraisers applauded the new rule. "This is huge," said Gary Crabtree, president of Affiliated Appraisers of Bakersfield and a member of the national government relations committee of the Appraisal Institute, an industry group. Pat Turner, an appraiser in Richmond, Va., said Fannie's new requirement "is great news for consumers" because loan underwriters hundreds of miles from the property "no longer will be able to change the appraiser's valuation" simply because they pulled a lower number off a computer.
New Yorker:
The Volcker Rule. Volcker Disappointed in FinReg Bill. Obama’s economic adviser and his battles over the financial-reform bill.
Ag Professional:
World Development Movement Report Blames Commodity Derivatives for Food Crisis. In the report "The Great Hunger Lottery," the World Development Movement says it has compiled extensive evidence establishing the role of food commodity derivatives in destabilizing and driving up food prices around the world. This in turn, has led to food prices becoming unaffordable for low-income families around the world, particularly in developing countries highly reliant on food imports.
CNN:
U.S. Citizen Believed to be Writing for al Qaeda Website, Source Says.A senior U.S. law enforcement official has told CNN that U.S. intelligence believes the principal author of the new online al Qaeda magazine is an American citizen who left for Yemen in October 2009. The magazine -- called "Inspire" -- appeared last week. Running to nearly 70 pages online, it included articles on bomb-making and encrypting electronic messages, as well as an interview with fugitive Yemeni-American cleric Anwar al Awlaki. The source has identified the driving force behind "Inspire" as 23-year-old Samir Khan, who previously lived in North Carolina and was involved in radical Islamist blogs, including one he ran called "Jihad Recollections."
Reuters:
Baidu(BIDU) Promotes Fake Drug Sites: Chinese TV Station. China's main state-run television station accused the country's top Internet search engine Baidu Inc of directing users to websites that sell counterfeit drugs, the People's Daily reported on Monday. CCTV reported on Sunday that Baidu and other search engines had profited from promoting three websites offering counterfeit drugs that duped more than 3,000 people in China, said the newspaper, the mouthpiece of the ruling Communist Party.
Financial Times:
China's Partners Set to Reject Trade Plan. The US and China’s other big trading partners are expected to demand major improvements to Beijing’s latest proposal to join a global pact on government purchases because it does not go far enough in opening the $500bn Chinese procurement market to foreign businesses. The US and China’s other big trading partners are expected to demand major improvements to Beijing’s latest proposal to join a global pact on government purchases because it does not go far enough in opening the $500bn Chinese procurement market to foreign businesses.
China may experience an inflation crisis within two years, former Morgan Stanley economist Andy Xie wrote. China will raise its interest rates twice this year by 27 basis points each time, Xie wrote. These measures may ease inflation expectations without stabilizing inflation, Xie wrote.
National Business Daily:
China should raise interest rates now to counterbalance the impact from a high level of actual inflation, citing former Morgan Stanley economist Andy Xie.
