Today's Headlines

Bloomberg:

• Stock Buying Hits Bull Market Record at Mutual Funds. Mutual funds, pensions and endowments are spending more on stocks than at any time since the start of the bull market, just as individuals grow the most pessimistic in a year. Institutions pushed equities up to 68 percent of their holdings in July, the highest level in 15 months, from 63 percent in April, a Citigroup Inc. survey showed. The ratio of bullish to bearish respondents in a survey by the American Association of Individual Investors has fallen to 0.68, the lowest level since July 2009, based on a four-week average. The last time money managers and individuals were this far apart was in March 2009, before the Standard & Poor’s 500 Index began its 63 percent rally, according to data compiled by Bloomberg. The U.S. equity benchmark has posted an average return of 8.8 percent in the 12 months after individuals’ skepticism rose this high in the past 20 years, according to data compiled by Bloomberg. Profits may rise an average 34 percent in 2010 and 17 percent in 2011, the fastest two-year growth since 1995, according to forecasts tracked by Bloomberg. The AAII measure of pessimism peaked on July 8 at 57 percent, the most since March 5, 2009. Bullishness has averaged 29 percent during the past four weeks, compared with 45 percent who were bearish, according to the weekly survey. The last time optimism fell this low relative to pessimism was July 24, 2009, two weeks after the S&P 500 began a 38 percent rally, data compiled by AAII and Bloomberg show. Investors have withdrawn $22.9 billion from mutual funds that hold U.S. stocks since April 2009, while piling more than $350 billion into bond funds, according to data compiled by the Washington-based Investment Company Institute. Individuals accounted for the majority of U.S. mutual fund assets in 2009, owning 84 percent, the data show. Hedge funds that wager on both gains and losses in equities have boosted speculation shares will fall, according to Bank of America Corp. The lightly regulated private pools of capital have on average 27 percent more money in bets on rising prices than falling prices, below the historical average of 35 percent to 40 percent, based on data from the Charlotte, North Carolina- based bank. The S&P 500 trades at 14.9 times annual earnings, compared with an average of 16.5, according to data compiled by Bloomberg that dates back to 1954. The index is cheaper relative to estimated earnings for the next 12 months, with a multiple of 11.7, the data show. Mutual funds, endowments, hedge funds and pensions say they’re preparing for a rally, according to Citigroup’s questionnaire from 120 respondents among those groups. Fifty- four percent said U.S. equities may gain 10 percent to 20 percent, compared with 50 percent in the previous reading.
• Bank Bond Risk Drops to 13-Week Low on Stress-Test Transparency. The cost of insuring against losses on bank bonds fell to the lowest level in 13 weeks as analysts said European Union stress tests provided greater-than-expected transparency about holdings of sovereign debt. The Markit iTraxx Financial Index of credit-default swaps on 25 banks and insurers dropped for a fifth day, down 15.5 basis points to 117.5, according to JPMorgan Chase & Co. at 5 p.m. in London. It’s the biggest one-day decline since May 10 and the index is now the lowest since April 26. “They provided a lot of fairly detailed information on the banks so that everyone can do their own stress tests,” said Philip Gisdakis, a Munich-based strategist at UniCredit SpA. “Having the detailed information you don’t need to rely only on the headline figures, you can do it on your own.” The Markit iTraxx Europe Index of swaps 125 companies with investment-grade ratings fell 7.25 basis points to 104.75, and the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings decreased 29.5 basis points to 477, JPMorgan prices show.
• June Sales of U.S. New Homes Climb More Than Forecast. Sales of U.S. new homes rose in June more than forecast following an unprecedented collapse the prior month, a signal the worst of the slump triggered by the end of a government tax credit is over. Purchases increased 24 percent from May to an annual pace of 330,000, figures from the Commerce Department showed today in Washington. The rate was the second-lowest in data going back to 1963 after May’s downwardly revised 267,000 pace. Sales are “bouncing along the bottom,” said Eric Green, chief market economist at TD Securities Inc. in New York, who forecast an increase to 335,000. “The future is going to be dependent on job growth. There’s no demand because confidence is weak and employment is weak.” The government had initially estimated May sales at a 300,000 rate and revised down figures for every month since March. The 37 percent plunge in May was the biggest on record. The median price decreased 0.6 percent from June 2009 to $213,400. Purchases increased in three of four regions, led by a 46 percent jump in the Northeast and a 33 [percent surge in the South, the largest area. Demand dropped 6.6 percent in the West to a record low 57,000 pace. The supply of homes at the current sales rate fell to 7.6 months’ worth from 9.6 months in May. There were 210,000 new houses on the market at the end of June, the fewest since 1968.
• FedEx(FDX) Boosts Profit Forecast as Shipment Demand Rises. FedEx Corp. boosted its profit forecast for the quarter and full year, exceeding analysts’ estimates, on rising demand for international express shipments. The shares climbed in New York trading. Earnings for the quarter ending in August will be in a range of $1.05 to $1.25 a share, an increase from the previous outlook of 85 cents to $1.05, the Memphis, Tennessee-based company said today in a statement. Analysts projected $1 a share, the average of 17 estimates in a Bloomberg survey. FedEx said volume for international priority packages, which are among its most profitable offerings, will jump more than 20 percent this quarter, adding to signs of a strengthening global economy.
• Biggs Buys Stocks Three Weeks After Cutting Holdings: Tom Keene. Barton Biggs, the hedge fund manager who sold half his equity holdings at the start of July, said today that signs the U.S. economy will avoid a recession spurred him to build the stakes back up. Biggs, whose Traxis Partners LLC gained 38 percent in 2009 when he bought shares as the Standard & Poor’s 500 Index fell to a 12-year low, said bets that stocks will advance make up 75 percent of his fund, up from about 35 percent three weeks ago.
• Copper Prices Rise to 10-Week High on Improving Demand Outlook. Copper climbed to a 10-week high as shrinking inventories, a rally in equity markets and rising U.S. home sales signaled improving demand. Stockpiles monitored by the London Metal Exchange have slumped 7.7 percent in July, heading for the biggest monthly decline since June 2009. Copper for September delivery gained 4.9 cents, or 1.5 percent, to $3.234 a pound at 11:39 a.m. on the Comex in New York.
• Corn, Soybeans, Wheat Drop as Favorable Weather Aids U.S. Crops. Corn fell to the lowest price in more than three weeks, while soybeans and wheat declined, on speculation that rain is reviving U.S. crops that were threatened by dry weather earlier this month. Weekend rain significantly increased soil moisture in previously dry areas of the Midwest and South, said Drew Lerner, the president of World Weather Inc. in Overland Park, Kansas. Forecasts call for showers and no sustained heat over the next two weeks, which will be good for crops, Lerner said in a report. “Weather conditions are improving,” said Greg Grow, the director of agribusiness for Archer Financial Services Inc. in Chicago. “Farmers are going to be active sellers because they are more confident in raising a big crop.” Corn futures for December delivery fell 6 cents, or 1.6 percent, to $3.785 a bushel at 10 a.m. on the Chicago Board of Trade, after touching $3.78, the lowest level for a most-active contract since July 1.
• CFA Pass Rate for Level 1 and 2 Exams Falls From Year Earlier. A lower percentage of hopefuls for the Chartered Financial Analyst designation passed the first and second level of their three-part exam in June compared with a year earlier, as a record number of people tried to get an edge in Wall Street hiring. Forty-two percent of applicants passed the exam’s first test, CFA Institute spokeswoman Kathy King said today, down from 46 percent on the June 2009 exam. Thirty-nine percent of applicants passed the second, compared with 41 percent a year earlier. A record 139,900 candidates enrolled to take CFA exams in June, aiming to capitalize as Wall Street begins to recover from the worst shakeout in decades.
• Utility Companies 'Exhausted' After Climate Defeat.
• Stock Short Sales at 2-Year Low, Data Explorer Says. Investors are exiting bearish bets on global equities, pushing bullish wagers on stocks to a two- year high versus short sales, according to Data Explorers. The firm’s long-short ratio has risen to 9.5, having surged from 5.75 in September 2008 when Lehman Brothers Holdings Inc.’s collapse intensified the financial crisis, the London- and New York-based securities-research company said. The reading is the highest of the data that goes as far back as July 2008.
• Genzyme(GENZ) Said to Rebuff Sanofi-Aventis Buyout Approach. Genzyme Corp., the world’s largest maker of drugs for rare genetic diseases, rebuffed Sanofi- Aventis SA’s takeover approach last week, two people with knowledge of the matter said today. Genzyme can command at least $22 billion, or $80 a share, on the potential for revenue to surge after the company resolves manufacturing defects depressing sales of existing products and introduces new medicines, investors and analysts said today. That is a 48 percent premium over Genzyme’s closing price on July 22, the day before reports of Sanofi’s interest.

Wall Street Journal:

• Report Finds Labor Laws Restraining Europe. European businesses are struggling to compete with their U.S. rivals who are far more agile at maximizing profit from their investment in people according to new research that warns firms in the EU are being hampered by strict labor laws. The findings, from a report on the efficiency of employees by PricewaterhouseCoopers, shows that Western European companies are failing to compete with their global rivals and lack the key skills to operate in the new global business environment.
• Madoff Investors Brace for Lawsuits. Trustee Pursues Account Holders Who Withdrew More Than They Deposited; 'I Will Be Penniless'. The court-appointed trustee recovering money for Bernard L. Madoff's victims is preparing a wave of new lawsuits seeking to wrest funds away from investors who also were duped by the Ponzi scheme. In an interview, Irving Picard said he could wind up suing about half the estimated 2,000 individual investors he has called "net winners" from their dealings with Mr. Madoff. Such investors withdrew more from Mr. Madoff's firm than the amount of principal they invested.

Bloomberg Businessweek:

• Iron Ore Price Jumps Most in 7 Months as China Buyers Return. The spot price of iron ore delivered to China, the biggest buyer of the steelmaking ingredient, jumped the most in almost seven months as buyers from the Asian nation returned to the market. The cost of 62 percent iron ore delivered to the port of Tianjin rose 5 percent to $133.40 a metric ton, the biggest one- day gain since Dec. 30, according to The Steel Index. The price hasn’t posted a decline for nine consecutive days after posting 16 straight days of losses through July 13. The spot price has risen 13 percent since July 15 after dropping to a 2010 low on July 13. It’s unclear whether the gains can be attributed to fundamental buying or are driven by traders, ING’s Hatch said.

CNBC:

• Obama's 'Slamming of Business' Unhealthy: Diller.
• Retail Demand is 'Pretty Good': Jarden CEO. The company is seeing a very tight supply chain, with costs going up. For that reason, more companies are shipping goods to retailers. If "retail demand wasn't pretty good, you wouldn't see that happening," Martin Franklin, CEO of Jarden, said today.
• 10 Ways Government Can Reduce Wasteful Spending.
  

Business Insider:

• The ONLY 10 Things That Are Known About North Korea's Next Leader.
• Chart of the Day: Americans Have a Serious Household Net Worth Problem.
  

Forbes:

• Brace Yourselves, New Macs Are On The Way. Apple(AAPL) could be updating its iMac and Mac Pro computers soon, if depleted stock at some of its retail stores are any indication. MacRumors has been tracking in-store pre-order availability for Apple's desktop Macs, and the fact that many are unavailable at several Apple Stores suggest that new, updated models could be announced soon.

OCRegister:

• Mark Landsbaum: Is It Time to End Climate Alarmism? Five allegedly independent investigations claim to have cleared U.S. and British climate scientists of chicanery in their global warming research. It's more likely the investigations will be among the final nails in the coffin for the global warming alarmist movement. That's a position shared not only among respected skeptics in the scientific community, but increasingly in the mainstream press and even by some global warming believers. Sure, government funding for climate change research probably will continue for a while. And propagandists will continue to crank out new studies claiming we're cooking the planet to death. They will hold more international confabs and issue more dire proclamations, but to less and less avail. Most likely, this was the tipping point. Global warming zealots have lost. It's only a matter of time until they realize it and move on to a new contrived catastrophe, where doubtless they'll be warmly received by a compliant press and amply rewarded with more tax-subsidized grants. It seems there are insatiable appetites and never-ending tax dollars for the proper causes.

NYDailyNews.com:

• Governor Paterson Says Planning for Layoffs to Start Immediately. Gov Paterson had some grim news for state workers - and their union leaders - this morning. It’s time to start planning for layoffs. “I think the planning for layoffs is going to have to begin immediately,” Paterson told reporters after throwing out the first pitch at an Albany t-ball game. Paterson was uncertain how many layoffs would be needed or when they would start. But he was certain about who’s to blame - union leaders for refusing to negotiate concessions such as lag pay or furloughs.

Rasmussen Reports:

• 58% Favor Repeal of Health Care Bill. Most voters continue to favor repeal of the national health care bill, but nearly half see repeal as unlikely. A plurality believes repeal would be good for the economy. The latest Rasmussen Reports national telephone survey finds that 58% of voters favor repeal, including 48% who Strongly Favor it. Thirty-seven percent (37%) are opposed to repeal, with 28% who are Strongly Opposed. Forty-four percent (44%) believe repeal of the health care bill would be good for the economy. Twenty-eight percent (28%) say repeal would hurt the economy.

Politico:

• House Leaders Squeeze Rangel. Increasingly impatient House Democratic leaders are prodding Rep. Charlie Rangel (D-N.Y.) to make a deal with the ethics committee before charges against him are unveiled Thursday, top Democratic officials told POLITICO. Fellow Democrats told POLITICO that they believe he’s dragging his feet in a futile effort at total vindication. Democrats worry that his stubbornness could add to their losses in November by helping Republicans, who have vowed to build a “culture of corruption” narrative using ads, mailings and talking points.

Reuters:

• Onyx Pharma(ONXX) Calls Myeloma Data 'Impressive'. Nearly a quarter of patients with multiple myeloma who had stopped being helped by current medicines responded to Onyx Pharmaceuticals Inc's experimental cancer treatment carfilzomib, according to data from a clinical trial. Onyx (ONXX), whose shares jumped 18 percent, said it planned to use the study results, released on Monday, as the basis for seeking U.S. approval with the Food and Drug Administration before the end of the year.

The Independent:

• Stephen King: Austerity Can Be Postponed by a Fiscal Stimulus - But it Can't Be Avoided Altogether. It is their attachment to models which partially explains the failure of governments, central banks, ratings agencies and banks to see the error of their ways. Some of you may have been following the "austerity versus stimulus" debate in the Financial Times.

Bear Radar

Style Underperformer:

• Large-Cap Growth (+.25%)

Sector Underperformers:

• 1) Education -2.26% 2) Gold -.31% 3) Computer Services -.15%

Stocks Falling on Unusual Volume:

• RDY and DV
  

Stocks With Unusual Put Option Activity:

• 1) MNTA 2) GENZ 3) RMBS 4) NETL 5) CHRW
  

Stocks With Most Negative News Mentions:

• 1) LO 2) PEP 3) GS 4) KO 5) SAFM
  

Bull Radar

Style Outperformer:

• Small-Cap Growth (+1.53%)

Sector Outperformers:

• 1) Biotech +2.69% 2) Hospitals +2.30% 3) Gaming +2.15%

Stocks Rising on Unusual Volume:

• ONXX, MNTA, AIG, OLN, AIXG, APL, RES, MTL, MXWL, IDSA, GENZ, CYOU, CALM, AONE, RNST, DXPE, SOHU, BIIB, MELI, RMBS, BEAV, AAWW, ACOR, ALGN, TSTC, GIII, MSB, KRO, IBB, ROP, MFW, BEC, ACV, PSO, PIQ and SHS
  

Stocks With Unusual Call Option Activity:

• 1) LPX 2) COH 3) PHM 4) GENZ 5) YRCW
  

Stocks With Most Positive News Mentions:

• 1) FDX 2) AAPL 3) RIMM 4) BA 5) GOOG
  

Monday Watch

Weekend Headlines
Bloomberg:

• EU Stress Tests May Be 'Missed Opportunity' to Fortify Banks. European Union stress tests found banks need to raise 3.5 billion euros ($4.5 billion) of capital, about a tenth of the lowest analyst estimate, leaving doubts about whether regulators were tough enough. “The stress tests are a helpful step forward in a number of areas,” Huw van Steenis, head of European banks research at Morgan Stanley in London, said on a conference call yesterday. “But they are not going to be the game changer that we were really hoping and in some cases are a missed opportunity.” The European tests ignored the majority of banks’ holdings of sovereign debt. Regulators don’t believe there will be a national default, European Central Bank Vice President Vitor Constancio said July 23. The evaluations took into account potential losses only on government bonds the banks trade, rather than those they are holding until maturity, CEBS said. “The fact that they did not stress the bank book is going to be seen as a weakness,” said Robert Talbut, chief investment officer at Royal London Asset Management Ltd., which oversees about $52 billion. “I don’t think the results of the tests will resolve anything.”
• BP(BP) Said to Prepare Dudley as CEO as Board Looks for Recovery. BP Plc to succeed plans to name Robert DudleyTony Hayward as chief executive officer as the board looks to recover the company’s position in the U.S., two people with knowledge of the matter said. Dudley, the director of BP’s oil spill response unit, is ready to be announced as the company’s first American chief and to take the helm Oct. 1, one of the people said, asking not to be identified because a final decision hasn’t yet been made.
• FINRA Said to Probe Morgan Stanley(MS), Credit Suisse, Barclays. A Financial Industry Regulatory Authority investigation of abuses in mortgage-linked investments has focused on the activities of Morgan Stanley, Barclays PLC and Credit Suisse Group AG, a person with direct knowledge of the matter said. The brokerage regulator has sought information on so-called synthetic collateralized debt obligations the firms created, according to the person, who declined to be identified because the inquiry is confidential. Finra has concentrated on whether the banks became mired in a conflict of interest by betting that their own CDOs, tied to home loans, would lose value.The probe has also focused on the firms’ sales practices and on how they picked the mortgage bonds that underpinned the investments, the person said.
• U.S. Condemns Release of Documents on Afghan War. The U.S. condemned as “irresponsible” the disclosure of about 92,000 classified documents on the war in Afghanistan covering the years 2004 through 2009. National Security Adviser James Jones said the release of the documents by the website Wikileaks could put lives at risk and threaten national security. The New York Times said the reports show the difficulties of fighting a war while hamstrung by “an Afghan government, police force and army of questionable loyalty and competence” and by a Pakistani military that at times appeared to be helping the insurgents the U.S. is trying to defeat. The Times said it obtained the documents several weeks ago from Wikileaks. “The United States strongly condemns the disclosure of classified information by individuals and organizations which could put the lives of Americans and our partners at risk, and threaten our national security,” Jones said in a statement issued by the White House yesterday. Wikileaks “made no effort to contact” the administration about the documents, he said.
• Genzyme(GENZ) Rally Prompts Two Circuit Breakers, Spurring Complaints. Genzyme Corp.’s rally after reports the drugmaker was approached about a takeover triggered two halts under market circuit breakers adopted in June, frustrating traders trying to speculate on the stock. Shares of the Cambridge, Massachusetts-based company were paused for five minutes at 1:18 p.m. New York time yesterday after surging 10 percent in less than a minute. A second halt began at 1:25 p.m., when Genzyme climbed another 10 percent.
• California City's $800,000 Manager Quits Amid Outcry. When Bell, California, resident Roger Ramirez heard in 2008 that the manager of his town of 38,000 residents may be the state’s highest-paid municipal employee, he asked City Hall. He got only part of the answer. City Clerk Rebecca Valdez sent him a one-page memo that gave Chief Administrative Officer Robert Rizzo’s annual salary as $185,736 and that of city council members as $8,076. “I should have asked for other benefits,” Ramirez, an emergency-call operator, said in a telephone interview. “I went in and just asked for the salary and that’s what they sent me.” Rizzo resigned July 22 after the Los Angeles Times reported July 15 that his total compensation was almost $800,000 a year and that Bell’s part-time council members took in almost $100,000 annually, mostly by serving on city-affiliated boards and commissions. Had Rizzo been an executive at a public company, his total compensation would have been available on the Securities and Exchange Commission’s website, a convenience not open to citizens or bondholders of local governments. “Transparency, there is none,” former Los Angeles Mayor Richard Riordan said of municipal disclosure in an interview. “The things they hide from the public are just monstrous.”
• Putin Sings Patriotic Songs From Soviet Era With 10 Deported Russian Spies. Russian Prime Minister Vladimir Putin met with 10 spies deported from the U.S. earlier this month and sang Soviet era patriotic songs with them. Their return was the result of betrayal by traitors whose names are known to the Russian state, Putin said in Ukraine yesterday, according to a Russian government website. “Traitors always end badly,” Putin said.
• Obama Defines Dysfunction With One Appointment: Kevin Hassett. If Democrats wonder why their political fortunes have shifted so much, they should study the appointment of Craig Becker to a body that adjudicates labor disputes. It captures everything that is wrong with the Obama administration in a nutshell. Republicans should study the case of Becker as well, as it illustrates everything that is wrong with Washington. Democrats should run from Becker; Republicans should run against him. One of President Barack Obama’s first acts in office was signing Executive Order 13502, which urged agencies to consider requiring that contractors who do government work use unionized workers.
• China Banks Said to See Risks in 23% of $1.1 Trillion Infrastructure Loans. Chinese banks may struggle to recoup about 23 percent of the 7.7 trillion yuan ($1.1 trillion) they’ve lent to finance local government infrastructure projects, according to a person with knowledge of data collected by the nation’s regulator. About half of all loans need to be serviced by secondary sources including guarantors because the ventures can’t generate sufficient revenue, the person said, declining to be identified because the information is confidential. The China Banking Regulatory Commission has told banks to write off non-performing project loans by the end of this year, the person said. Commission Chairman Liu Mingkang said last week borrowing by the so-called local government financing vehicles may threaten the banking industry. The nation’s five-largest banks, including Agricultural Bank of China Ltd., are raising as much as $53.5 billion to replenish capital after the sector extended a record $1.4 trillion in credit last year. “Unfortunately this smells just like déjà vu of China’s last banking crisis a decade ago,” said Shen Minggao, Hong Kong-based head of China research at Citigroup Inc. “Non- performing loans will increase as a result of last year’s lending spree, which to a certain extent was a delayed form of fiscal spending, and eventually the central government will step in and share the costs.”

Wall Street Journal:

• Website Releases Secrets on War. Thousands of secret military documents were released Sunday by a Web-based organization, a gigantic leak of classified information that appeared to present a bleak view of the Afghanistan war and could have a profound impact on the public perception of the conflict. The release of the documents, which were obtained and made public by the website WikiLeaks, evoked the Pentagon Papers, the secret history of the Vietnam War, which when published contradicted the public narrative of that war and played a role in turning public opinion against it. Coming at a time when President Barack Obama's Afghanistan strategy has come under increasing criticism, the release will likely stoke criticism of the war effort, as well as spark a debate about the manner in which the information was made available.
• Health Law Augurs Transfer of Funds From Old to Young. The new health care law changes how the government spreads its social safety net, by tapping a program for the elderly to help provide insurance to 32 million Americans of younger generations.
• Greek Truck Drivers Call Indefinite Strike Against Reforms. Greek truck drivers have called an indefinite strike beginning 2100GMT Sunday in protest at reforms to open up their profession proposed by the government. Liberalizing and opening up so called "closed professions" like transportation is one of the tough reforms that the socialist government has promised the European Union and the International Monetary Fund it will carry out, in exchange for access to a EUR110 billion bailout package. The truck drivers' main point of contention is that within three years of the passage of the proposed liberalization bill, the expensive vehicle licenses that they had purchased from the state--which until now tightly regulated the sector--will be worthless. "We vow to fight these reforms until the bitter end," said Giorgos Tsamos, president of the truckers' union.
• Genzyme(GENZ) Catches Eye of Others. France's Sanofi-Aventis SA may not be the only large drug maker to set its eyes on struggling biotechnology company Genzyme Corp. After news of Sanofi's interest in the U.S. company became public Friday, investors and bankers are scrambling to find out whether Sanofi's rivals could also be interested in making a play for Genzyme, which makes drugs for rare, inherited disorders. Britain's GlaxoSmithKline PLC(GSK) and New Jersey-based Johnson & Johnson(JNJ) are seen as the most logical suitors for Genzyme, bankers and analysts said.
• The Democratic Fisc. The White House budget office offers a scorecard on Obamanomics.

Bloomberg Businessweek:

• Commodity Traders Boost Bets on Price Gains by 50%, Data Shows. Commodity traders increased bets on price gains for raw materials by 50 percent in the past two weeks at futures exchanges in New York and Chicago. Hedge-fund managers and other large speculators held net- long position in gold, copper, crude oil and 17 other commodities totaling 782,247 contracts in the week ended July 20, according to data from the U.S. Commodity Futures Trading Commission compiled by Bloomberg. That compares with 520,530 contracts in the week ended July 6. The 50 percent gain was the biggest two-week jump since May 2009.
• Anadarko(APC), BP(BP) Lead Energy Bonds in Biggest Gains: Credit Markets. Energy bonds are leading corporate debt returns this month after BP Plc sealed a well that had been spewing oil into the Gulf of Mexico and investors wagered on higher demand for petroleum in the global economic recovery.

CNBC:

• 5 New Internet Companies You Should Know About.

NY Post:

• The Fix Was In. In 2007, when Washington Post blogger Ezra Klein founded JournoList, an online gathering place for several hundred liberal journalists, academics and political activists, he imagined a discussion group that would connect young writers to top sources. But in the heat of a bitter presidential campaign in 2008, the list’s discussions veered into collusion and coordination at key political moments, documents revealed this week by The Daily Caller show.

Business Insider:

• JPMorgan(JPM) Shreds The Stress Tests, Says 54 Banks Should Have Failed, And That Investors Will Lose Confidence. Here are the key bullet points:
• If Obama Doesn't Nominate Elizabeth Warren, He's Going to Infuriate His Base. There's been some chatter that perhaps President Obama might not nominate Elizabeth Warren to head the Consumer Financial Protection Agency (her brainchild, basically), especially since Tim Geithner was said to oppose the nomination.
• There Are Now 40% More Chinese Property Loans Than Just One Year Ago. Outstanding property loans held by Chinese financial institutions in June were 40.2% higher year over year according to the People's Bank of China (PBOC).
• Tim Geithner: Sorry, We're Letting The Bush Tax Cuts Expire. If you're still holding out hope that perhaps the Obama administration is going to keep the Bush tax cuts, you can stop that now. Tim Geithner is making the administration's views known pretty clearly.

Zero Hedge:

• How Goldman's(GS) Counterparty Valuation Adjustment Desk Saved the Firm From an AIG Blow Up(And Opens Up a Whole New Can of Wormy Questions). In today's NYT, Gretchen Morgenson does a good summary of how Goldman was demonstratively net short AIG (or net long its CDS, depending how you look at it) via nearly 100 counterparties to the tune of just over $1.7 billion in net notional, after Chuck Grassley released several previously classified documents disclosing Goldman's CDS position as of September 15, 2008, the day of Lehman's bankruptcy.
• German Banks Hiding Stress Test Data Further Undermine Geithner's European Scammery Tour. Hot on the heels of our earlier disclosure that the Landesbank stress test passage is either a joke or a scam, comes the knowledge that 6 out of the 14 tested German banks, including Landesbanks, have decided against posting their stress test details, specifically withholding the breakdown of their sovereign debt holdings.

NJ.com:

• Centenary College Closes Satellite Schools in China, Taiwan After Finding Rampant Cheating. Centenary College is closing its satellite business schools in China and Taiwan after discovering rampant cheating among local students, campus officials said. The cheating was so extensive that the Hackettstown college is withholding degrees from all 400 Chinese-speaking students in its master’s of business administration programs in Beijing, Shanghai and Taiwan, said Debra Albanese, Centenary’s vice president for strategic advancement. The students were told they have until the end of the month to decide whether to take a comprehensive exam to earn their degree or accept a full tuition refund So far, school officials said, most students have opted for the refund of their $1,200-to-$1,400 tuition. Centenary isn’t the first college to run into problems regarding academic integrity in China, which has a long history of student-cheating scandals.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows that 25% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-five percent (45%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -20 (see trends).

Politico:

• Veto Likely on Bills Blocking EPA Regs. President Barack Obama would veto legislation suspending the EPA's plans to write new climate change rules, a White House official said Friday. Coal-state Democrats, led by Sen. Jay Rockefeller (W. Va.), Reps. Rick Boucher (Va.) and Nick Rahall (W. Va), are trying to limit the federal government’s ability to control greenhouse gases from power plants. The coal-state proposals, which would block the Environmental Protection Agency's authority for two years, would undercut what is widely seen as Obama’s alternative climate policy, now that Congress has punted on cap-and-trade legislation for the year. The Obama aide said the proposals won’t win the president’s signature if they managed to pass on Capitol Hill.
  

USA Today:

• Quarterly Economic Forecast Takes a Turn for the Worse. More than eight in 10 economists surveyed by USA TODAY have downgraded their economic outlook amid the European debt crisis and a flurry of disappointing reports, but nearly all expect the nation to avoid a double-dip recession.

AP:

• White House Predicts Record $1.47 Trillion Deficit. New estimates from the White House on Friday predict the budget deficit will reach a record $1.47 trillion this year. The government is borrowing 41 cents of every dollar it spends. Next year's predicted $1.42 trillion worth of red ink — that's 37 cents of borrowing for every dollar spent — is looking worse. It's about $150 billion more than previously predicted, because of still-slumping tax revenues. The new estimates paint a grim unemployment picture as the economy experiences a relatively jobless recovery. The unemployment rate, presently averaging 9.5 percent, would average 9 percent next year under the new estimates. The Office of Management and Budget report has ominous news for President Barack Obama should he seek re-election in 2012 — a still-high unemployment rate of 8.1 percent. That would be well above normal, which is closer to a rate of 5.5 percent to 6 percent. Private economists don't think the unemployment rate will drop to those levels until well into this decade. The gaping deficits are of increasing concern to voters. But Obama and Democrats controlling Congress are mostly taking a pass on deficit reduction this year as they await possible recommendations from Obama's deficit commission.

Reuters:

• Chavez Threatens U.S. Oil Cut in Colombia Dispute. Venezuelan President Hugo Chavez threatened on Sunday to cut oil supplies to the United States in case of a military attack from Colombia as a dispute escalated over charges his country harbors Colombian rebels.

Financial Times:

• Merger Arbitrage Funds Eye Takeover Revival. Investors are rushing to put money into merger arbitrage funds ahead of an expected recovery in dealmaking in spite of growing fears for the health of western economies. After a dearth of M&A for much of the past two years, the first half of 2010 has seen a series of start-ups of hedge funds looking to profit from higher levels of takeover activity. Merger arbitrage specialists, which aim to profit from the spread between a target group’s share price after a takeover announcement and the closing price at completion of the deal, have seen $841m in net inflows since January, according to Hedge Fund Research. Managers see increasing opportunities to put new money to work. “M&A activity tends to go in cycles. There is a growing view that we’re at the beginning of a new cycle,” Gerard Griffin, head of GLG Partners’ event-driven team, said. “Companies have built up larger cash balances and the economy is not looking particularly strong, so earnings growth will have to come through synergies.”
• Goldman(GS) Threatened With Audit by US Panel. Goldman Sachs is facing a threat by the Financial Crisis Inquiry Commission to bring in outside accountants to comb through the bank’s systems for data on its derivatives business, the panel’s chairman has said. The commission will not back down from demands for information Goldman’s executives have maintained they do not track, Phil Angelides told the Financial Times. “We have a deep level of questioning about whether we’re getting the straight scoop here and whether Goldman is working with us on information that they surely have,” Mr Angelides, chairman of the US Congress-appointed commission.His comments mark the latest episode in the dispute between Goldman and the commission, which has scolded the bank for its “abysmal” response to the inquiry.

Telegraph:

• Obama signs a bill that lets banks have US over a barrel once more. "Because of this law, the American people will never again be asked to foot the bill for Wall Street's mistakes," Obama boomed at the schmaltzy signing ceremony, amid bursts of applause. "These reforms will put a stop to a lot of the bad loans that fuelled this debt-based bubble," the President gushed to America and the rest of the world. "This bill also empowers consumers, delivering the strongest consumer financial protections in history." It would be reassuring if we could agree with Obama, concluding that Dodd-Frank will help to prevent the next systemic crisis and associated bail-out of "too-big-to-fail" banks. Reassuring, but wrong. For despite some marginal regulatory improvements, this is no Rooseveltian legislative milestone. Amid the hype and back-slapping of last week's launch, the sad reality is that Dodd-Frank fails to address the fundamental problems that resulted in the sub-prime fiasco and the related damage to not just America, but the entire global economy. The inherent feebleness of this door-stopping bundle of statute and its lack of desperately needed substance, was brilliantly captured by Laurence Kotlikoff, a highly-respected professor of economics at Boston University. "This law is like being invited to dinner and served pictures of food," Kotlikoff remarked. It would be tempting to smile at such a wry observation if the situation it described wasn't so depressing. For what the US political establishment's non-response to the credit crunch illustrates is this: such is the lobbying power of the big Wall Street institutions that they not only caused a global economic crisis and then forced the US government to pay for a massive bail-out, but then used a slice of that bail-out cash to bribe politicians with campaign donations in order to block rule changes that might prevent a repeat performance. That leaves the politicians and high-flying bankers happy, of course, while regular citizens – and their children and grandchildren – foot the multi-billion dollar bill. The principal function of a financial services industry is to link savers with investors and creditors with borrowers, so facilitating broader commercial activity. Such intermediary functions are crucial to economic progress and can be the basis of a profitable and socially useful business. What we've created, instead, is a group of institutions that between them comprise nothing less than a financial oligarchy. These guys have Western taxpayers over a barrel. And what's alarming is that there is almost nothing in this bill that will stop yet more too-big-to-fail calamities. Mr President, you have missed a historic opportunity and, for that, history's judgment will be severe.

Kathimerini:

• Greece's economy will shrink further in the second half of the year with the full-year contraction seen at 4%, citing comments from a European Union official. Greece's economy will begin recovering from the middle of next year, Servaas Deroose, deputy director general of the European Commission's economic and financial affairs department, said in an interview. Deroose is a member of the team of EU and IMF officials who begin an evaluation of Greece's austerity measures under a $137 billion package of rescue loans this month.

Der Spiegel:

• Death Toll Rises to 19. Focus Shifts to Organizers after Love Parade Stampede. German officials confirmed on Sunday that 19 people died and 342 were injured during the mass panic that turned Saturday's Love Parade in Duisburg into a tragedy. Prosecutors have launched an investigation, with initial questions focusing on the organizers' crowd control strategy.

O Globo:

• Petroleo Brasileiro SA(PBR) plans to begin oil production at its Tupi field in the Campos Basin by September, three months earlier than previously forecast, citing an aide to President Luiz Inacio Lula da Silva. Petrobras plans to produce as much as 100,000 barrels of crude a day in five wells.
  

The Economic Times:

• Documents Detail $4.3 Billion in Goldman Sachs(GS) Payouts. A new document discloses the list of banks and hedge funds that received $4.3 billion from Goldman Sachs after the government's bailout of AIG.
  The money was to cover bets that went bad because of the housing bust. According to Republican Sen. Chuck Grassley, American International Group owed the money to Goldman, and Goldman owed the money to the banks and hedge funds. Grassley released the documents, which were supplied by Goldman, showing the payments late on Friday. They include $1.18 billion to DZ Bank AG in Germany and $484 million to Banco Santander Central Hispano SA of Spain. The payments have been controversial because of concerns that the banks should have taken greater losses on their investments rather than be made whole with money that ultimately came from taxpayers.

Shanghai Securities News:

• China's central government plans to issue rules for the "cleanup" of local government financing vehicles. The National Development and Reform Commission, the Ministry of Finance, the People's Bank of China and the China Banking Regulatory Commission plan to jointly issue the rules. Financing vehicles that rely on fiscal government funds to repay loans will no longer be allowed to borrow.
• China plans to announce additional regulations limiting local government liability for debt issued by their financing arms, according to a draft of the proposed rules. Local governments will no longer be able to back financing vehicle debt with revenues or government assets.

China Business News:

• China should maintain the direction of its property measures, central bank adviser Xia Bin wrote in a commentary. Property measures should not be implemented too quickly as China's economic growth may slow in the second half, Xia wrote. Real estate should be treated as a consumer good and not a financial good, Xia wrote.

China Daily:

• Checks of children in the southwestern Chinese province of Yunnan have found 84 kids with excessive levels of lead in their blood, citing the local government.
• China's export growth will slow in the second half of this year on effects from the European debt crisis, inflation expectations and higher costs, citing Zhang Yansheng, a researcher at the National Development and Reform Commission.
  

Financial News:

• Jia Kang, head of the Chinese Ministry of Finance's research institute, said the nation's state-owned companies should pay more dividends to the government. The government should also sell more of its shares in state-owned companies while keeping a controlling stake in the enterprises, Jia said.

China Securities Journal:

• There is no basis for a large-scale appreciation of the Chinese currency, citing a report from the State Information Center, a research unit of the nation's top economic planning agency. The report called for close monitoring of cross-border capital flows and speculative funds that might boost the yuan and hurt China's exports.
• China will introduce credit-default swaps before the end of this year, citing Shi Wenchao, secretary general of the National Association of Financial Market Institutional Investors. The contracts can be a "life buoy" to protect investors because there is a "very large" amount of corporate bonds, financial debt and loans in China, Shi said.
  

Sydney Morning Herald:

• Abu Dhabi Feels Dubai Chill as Emirate Accepts Money is Scarcer. Times have changed for the Alimad Engineering and Contracting Company in Abu Dhabi. Two years ago, the developer was building everything from 20-story glass towers to luxury villas. It's now shelving projects, the latest a $US12 million contract with a client who has $US2 million and the banks won't give him any more money, said Ziad Ali, whose father founded the company 20 years ago. "When investors don't get funding, we don't get their business," Ali, 24, said by telephone from his office. If the palm-shaped islands and skyscrapers of Dubai came to symbolize the excesses of the economic boom in the Gulf, the less glitzy Abu Dhabi represented the sobriety. Yet after Abu Dhabi, home to more than 7 per cent of the world's oil supply, spent $US20 billion bailing out its desert neighbor, it too is having to accept the financial crisis is catching up.

Weekend Recommendations
Barron's:

• Made positive comments on (AAPL), (AFL), (CBI), (TEL), (WMS), (SLW), (MSFT), (PAAS), (SLV) and (RSG).

Citigroup:

• Reiterated Buy on (SLB), target $77.
• Reiterated Buy on (VECO), target $52.

Night Trading

• Asian indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 118.0 -3.0 basis points.
• Asia Pacific Sovereign CDS Index 115.0 -4.0 basis points.
• S&P 500 futures +.15%.
• NASDAQ 100 futures +.29%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (LM)/.32
• (PCL)/.15
• (FLR)/.70
• (VECO)/.84
• (ADVS)/.17
• (SLG)/1.01

Economic Releases
10:00 am EST

• New Home Sales for June are estimated to rise to 311K versus 300K in May.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Chicago Fed National Activity Index for June and the Dallas Fed Manufacturing Activity Index for July could also impact trading today.

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

Weekly Outlook

U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly higher on diminishing sovereign debt angst, short-covering, less financial sector pessimism, technical buying and bargain-hunting. My intermediate-term trading indicators are giving mixed signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,102.66 +3.55%*



The Weekly Wrap by Briefing.com.

*5-Day Change