U.S. Junk Bond Risk Gauge Declines to Three-Month Low Amid Grab for Yield. The extra cost traders charge to protect against defaults on junk bonds relative to investment- grade debt fell to a three-month low as speculation the Federal Reserve will keep interest rates near zero prompts investors to reach for higher-yielding assets. The gap between the Markit CDX North America High-Yield Index and its investment-grade counterpart fell to 426 basis points today, the lowest since May 4, and has dropped 66 basis points since July 19, according to Markit Group Ltd. “The reduction in supply relative to increasing demand for credit products illustrates the positive technical conditions supporting risky asset spread compression,” Bank of America credit strategists led by Jeffrey Rosenberg in New York wrote in a note to clients yesterday. The price of the Markit CDX high-yield index gained 0.33 percentage point to 98.9 percent of face value after climbing from 93.9 percent the past month, according to prices from Markit. That equals a cost of about 526 basis points a year, or $526,000 annually to protect $10 million of junk debt from default. The Markit CDX North America Investment Grade Index, which is tied to 125 companies rated BBB- or higher by Standard & Poor’s, declined 0.75 basis point to 99.5 basis points as of 4:39 p.m. in New York. The index has declined from 122.8 basis points on July 5, Markit prices show.
China Must Contain Bank Loans This Year, PBOC Adviser Xia Writes in Daily. China must contain bank lending, keep the yuan’s exchange rate flexible and provide “guidance” for the property market to help ensure “smoother functioning” of the economy, Xia Bin, an adviser to the central bank and director of the Finance Institute at the Development Research Center of the State Council, wrote in a commentary published in today’s China Daily newspaper. The People’s Bank of China set a cap of 7.5 trilion yuan for new bank lending this year, which “must be strictly adhered to,” Xia wrote. Tighter controls on lending has led to “cooperation” between banks and trust companies, with more strict supervision needed for these “undesirable” relationships, Xia wrote. The yuan’s exchange rate must also be kept flexible in the coming months to help stimulate trade and structural adjustments and also ease appreciation expectations, Xia wrote. Efforts are also needed to internationalize the yuan, Xia wrote. China could invest in or lend dollars to nations facing sovereign debt risks in exchange for stakes in “natural assets,” Xia wrote. The real estate market also needs “guidance” and “adjustments,” Xia wrote. Increasing the capital gains tax on property sales may be an effective short-term measure to curb speculative real estate purchases, Xia wrote. Reform of local government investment vehicles is also needed, Xia wrote.
China Stress Tests May Be 'Negative' for Metals, China Future's Fang Says. China’s order of additional stress tests for banks to determine the impact of residential property prices sliding by as much as 60 percent may have a “negative impact” on the metals market, said Fang Junfeng, an analyst at China International Futures (Shanghai) Co. “If it’s true, the news will have a negative impact on the market as it could signal the government’s expectations for further property price falls,” said Fang. Still, “bad news gets ignored these days as the mood in the market is very upbeat.”
Wheat Trades Near 22-Month High as Russia Drought Curbs Exports. Wheat extended gains to the highest price in almost 23 months on concern that Russia may curb exports as record temperatures cut output, raising costs for importers and threatening to drive food inflation higher. Russian officials are discussing export restrictions as traders call for a ban, said Arkady Zlochevksy, president of the Grain Union, which represents the producers and traders in the world’s third-biggest grower. There was panic buying by some consumers, said Brian Grete, the senior analyst at the Professional Farmers of America newsletter in Cedar Falls, Iowa. Surging wheat costs will increase nations’ food inflation as they filter through to consumers, challenging central bankers to restrain price growth even as they attempt to sustain the global economic recovery. Higher wheat prices may also drag up other staples, including rice, Asia’s most important foodstuff.
Lula Credit Risk Rising to Peru, Panama as Brazil Debt Levels Deteriorate. The risk associated with holding Brazilian bonds relative to Peru climbed to a 20-month high on concern President Luiz Inacio Lula da Silva isn’t taking advantage of the fastest growth in two decades to cut debt. The cost of protecting Brazil’s debt against non-payment for five years with credit-default swaps compared with Peru rose yesterday to 10 basis points, or 0.10 percentage point, the highest since December 2008, according to CMA DataVision prices. “The fundamentals of Brazil have been deteriorating whereas the fundamentals of Peru and Panama have improved,” Paulo Vieira da Cunha, a former Brazil central bank director who’s now a partner at Tandem Global Partners LLC in New York, said by telephone. “In Brazil, gross debt to GDP is increasing rapidly. It’s not like an alarm bell. The whole issue is how easily Brazil can get away with.”
RIM(RIMM) Refuses to Give Customer Codes as BlackBerry Faces Bans. Research In Motion Ltd., whose BlackBerry smartphone faces bans in Saudi Arabia and Indonesia, risks losing out on expansion in emerging markets after saying it won’t reveal codes for reading some users’ communications. RIM can’t meet requests for corporate customers’ encryption keys since it doesn’t have the codes, the company said in an e- mailed statement. The BlackBerry corporate service was designed to prevent RIM, or anyone else, from reading encrypted information and any claims that RIM provided “something unique to the government of one country” are unfounded, it said.
New York's Cuomo Opens Kickback Probe Into GE CareCredit Health-Care Card. New York Attorney General Andrew Cuomo unveiled an investigation of CareCredit, a division of General Electric Co.’s(GE) GE consumer finance unit, saying users of its health-care credit card were misled about terms. Cuomo issued subpoenas to the GE unit and 10 health-care service providers as part of a probe of what he called predatory lending involving the card, he said.
Petraeus Stresses Shielding Afghans, Self-Defense in New Rules. U.S. Army General David Petraeus issued revised rules on the use of force in Afghanistan that emphasize protecting civilians while clarifying conditions in which troops can defend themselves. The new directive from the top coalition commander in Afghanistan seeks to eliminate confusion about rules that some soldiers and commanders in the field said restricted them from defending themselves because of the need to protect civilians. Petraeus barred subordinate commanders from issuing limits on the use of force that go beyond the rules. “All commanders must reinforce the right and obligation of self-defense of coalition forces, of our Afghan partners and of others as authorized by the rules of engagement,” Petraeus wrote in the memo issued in the Afghan capital of Kabul today. “We must give our troopers the confidence to take all necessary actions when it matters most, while understanding the strategic consequences of civilian casualties,” he said.
BlackRock(BLK) Seeks to Sell Index ETFs That Can Short Stocks, Bonds. BlackRock Inc. is seeking regulatory clearance to create exchange-traded funds that can bet against stocks or bonds, as the $826 billion industry’s largest player seeks new products to boost revenue. The company applied today with the U.S. Securities and Exchange Commission for the right to engage in short sales when running ETFs that track market indexes. Until now, the New York- based company’s ETFs have been based on indexes that buy stocks rather than selling them short, a strategy that generates profits when the underlying asset declines in value.
Google(GOOG), Verizon(VZ) Said to Strike Deal on Web Traffic Rules. and Verizon Communications Inc.Google Inc. reached a deal on how to handle Internet traffic, striking their own accord on policy being weighed by U.S. officials, two people briefed by the companies said today.
Venezuela Cuts $20 Billion China Debt With 200,000 Barrel Shipments of Oil. Venezuela, the largest oil producer in South America, is shipping 200,000 barrels a day of oil to China to repay $20 billion of debt borrowed from the Asian nation to finance power, agriculture and technology projects. The OPEC nation, planning to ramp up China shipments to 1 million barrels a day by 2012, is selling oil at market prices to repay the 10-year loan, Oil Minister Rafael Ramirez said yesterday in an interview in Caracas. Shipments to repay the cash represent half Venezuela’s daily crude exports to China.
Commodity Demand to Falter if China's Property Dip Worsens, Essence Says. Demand for steel and cement may falter should China’s property prices continue to slide, said Heng Kun, a Shanghai-based analyst at Essence Securities Co. China’s banking regulator last month asked lenders to conduct stress tests to gauge the effect of a drop of as much as 60 percent in residential property prices, a person with knowledge of the matter said. Tests last year assumed home-price declines of 30 percent. “Steel, cement producers will be mostly hurt if China’s property prices tumble because over half of the demand of the commodities comes from construction. “For base metals, demand for nickel, used in stainless steel, and zinc in galvanized steel, will be cut significantly as these base metals are used in building materials. “A decade ago when China’s government curbed property prices, lots of buildings in the Hainan province were left uncompleted and unsold, which led to a huge number of bad loans. “But the wealth of individuals was little affected as most lived in government-subsidized apartments. Now, if such a slump happens again, it would not only lead to bad loans, but a significant shrinking of personal wealth. The economy could be in very bad shape. That’s not what the government wants to see.”
ObamaCare Meets the Voters. Missouri voters overwhelmingly rejected a key tenet of ObamaCare, as 71% supported a ballot proposition yesterday to prohibit penalizing people who fail to procure health insurance. The measure carried all but two of the state's 115 counties. It even managed to win 42% of the vote in the black-majority city of St. Louis. "The Show-Me State just picked up a megaphone and sent a message like you wouldn't believe to Washington, D.C., to stay out of our health care decisions," says State Senator Jane Cunningham, who sponsored the bill creating the ballot measure.
Vote Sets Stage for New Health-Plan Challenges. Missouri Referendum Result Could Aid Opponents of Measure in Other States. Opponents of the Obama administration's health-care overhaul said Missouri voters' rejection of a key plank could re-energize the push in other states to challenge the measure.
U.S., Hanoi in Nuclear Talks. Vietnam Plan to Enrich Uranium May Undercut Nonproliferation Efforts, Rile China. The Obama administration is in advanced negotiations to share nuclear fuel and technology with Vietnam in a deal that would allow Hanoi to enrich its own uranium—terms that critics on Capitol Hill say would undercut the more stringent demands the U.S. has been making of its partners in the Middle East. The State Department-led negotiations could unsettle China, which shares hundreds of miles of border with Vietnam. It is the latest example of the U.S.'s renewed assertiveness in South and Southeast Asia, as Washington strengthens ties with nations that have grown increasingly wary of Beijing's growing regional might.
Geithner Pushes Tax Boost for Wealthy. Treasury Secretary Timothy Geithner made the Obama administration's economic case for letting tax cuts for high earners expire at the end of this year, saying that failure to do so would harm rather than help economic growth.
Stalkers Exploit Cellphone GPS. Phone companies know where their customers' cellphones are, often within a radius of less than 100 feet. That tracking technology has rescued lost drivers, helped authorities find kidnap victims and let parents keep tabs on their kids. But the technology isn't always used the way the phone company intends.
New Law Fuels a Shake-Up at Morgan Stanley(MS). Morgan Stanley is nearing a deal to relinquish control of in-house hedge-fund firm FrontPoint Partners, according to people familiar with the situation, in what would be one of its first high-profile overhauls amid new management and financial regulation. In recent days, executives at the Wall Street firm and FrontPoint, which has $7 billion in assets, have been hashing out terms for a no-cash agreement that would bring Morgan Stanley's full ownership of FrontPoint—purchased at the height of the hedge-fund market—down to between 20% and 25%, said the people close to the matter.
CNBC:
BP(BP) Could Decide Wednesday to Cement Gulf Well: Exec. BP could decide later Wednesday whether to pump cement into its blown-out Gulf of Mexico oil well from the top and begin plugging the leak for good, a company executive said.
Fox News:
Feds Looking into ShoreBank Connections. As if ShoreBank doesn’t have enough problems, the financially troubled but politically connected Chicago-based community lender is now facing a federal investigation into whether political pressure was applied to force several major Wall Street firms to bail out the bank before it was liquidated by banking regulators, FOX Business has learned. Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program, or TARP, which has agreed to earmark $75 million to help ShoreBank survive, has now bowed to pressure from Congressional Republicans and has agreed to investigate charges that key officials in the Obama White House, as well as FDIC chief Sheila Bair, pressured Wall Street firms to donate money to keep ShoreBank alive. Several weeks ago, a number of Wall Street firms agreed to donate $150 million to prevent the liquidation of ShoreBank, which along with a $75 million grant from the TARP program would stave off an FDIC takeover. In recent weeks, however, the Federal Reserve has indicated that ShoreBank may need more money to survive, throwing the bailout into doubt. One potential fix would be to divide the bank into a “good bank” and a “bad bank,” where the soured assets would be taken over by the government and liquidated. One thing is certain: The Wall Street bailout of ShoreBank was unusual. Scores of community banks have been allowed to fail during the economic downturn, and rarely do major banks come to the rescue of a struggling community lender, particularly with a balance sheet as impaired as ShoreBank’s. In fact, Goldman CEO Lloyd Blankfein took time out from his busy schedule to make calls on behalf of ShoreBank to drum up enough money to prevent an immediate takeover of the bank. But senior Wall Street executives tell FOX Business that the political pressure to prevent ShoreBank, which has ties to the Obama administration and has even been singled out for praise by the president himself, was enormous. The pressure included calls from leading Democratic figures with ties to the White House, Wall Street executives say, and Bair herself. Wall Street executives were reminded that the bank has ties to top presidential adviser Valerie Jarrett. Bachus isn’t convinced and he hopes the investigation sheds some light on the politics behind the attempted bailout. "The American people deserve to know whether, and to what extent, the Administration pressured banks that previously received TARP fund to inject capital into the Chicago-based bank,” he said.
Google(GOOG) Buys Slide for $182 Million, Getting More Serious About Social Games. We’ve just learned that Google has agreed to buy Slide for $182 million, in a deal to be announced Friday. And sources also tell us that this is not the last move Google is going to be making to cobble together a serious social gaming and apps strategy to counter Facebook.
Politico:
Obama Courts Wealthy Donors. Four times in the last week, President Barack Obama has quietly departed from his official White House schedule and slipped into private, exclusive Democratic Party fundraisers around town, glad-handing well-heeled donors away from the eyes of the press – and contradicting his pledge to run the most transparent administration in history. According to White House press secretary Robert Gibbs, Obama had nothing “formal” to say at these small Democratic National Committee fundraisers – some of which cost as much as $30,400 a ticket – so there was no need for reporters to observe. A Democrat familiar with the fundraisers described the routine: First, the President would briefly address the group of a few dozen donors to express his gratitude, in cursory, impromptu remarks. Then, he would spend roughly an hour, speaking one-on-one with supporters or addressing groups of up to five of them at a time. At events where the donors are seated at tables, Obama might sit down at each table to chat, with someone more familiar with the donors to guide him and make introductions. “It’s more than just shaking hands and taking a picture,” said the Democrat, who is not authorized to publicly talk about the events on the record. “It’s fair to say that he’s having a conversation, but he’s not delivering remarks.” Two of last week’s closed-press, 50-person fundraisers were held at the New York estate of Vogue editor Anna Wintour and the Washington home of Sen. Jay Rockefeller (D-W.Va.). A third private event was at the Four Seasons hotel in Manhattan, while another 50 Democrats ate dinner with him behind closed doors at Washington’s tony Mandarin Oriental hotel. During the 2008 presidential campaign, at an exclusive fundraiser in San Francisco, Obama was caught on tape telling donors that working-class people hurt by the economy “get bitter” and “cling to guns or religion” in reaction. The remark, posted on the internet, ignited a firestorm of criticism; in the aftermath, Obama’s campaign said it would allow more press access to similar fundraising events.
Judge Overturns Gay Marriage Ban. San Francisco-based U.S. District Court Judge Vaughn Walker effectively overturned Proposition 8, a ballot measure California voters passed in 2008, changing the state constitution to prohibit gay marriage. Walker’s ruling stems from a lawsuit filed by two gay couples who claimed the law violated their civil rights.
K Street Bets on Harry Reid. K Street has placed a big bet in the Nevada Senate race, putting a bundle of cash behind Harry Reid. During just a few weeks, the Senate majority leader racked up $56,000 in individual contributions from registered lobbyists, according to an analysis of his latest campaign fundraising records, which cover the final days before the Nevada primary through the end of June. Republican Sharron Angle’s haul: just $500 from a single lobbyist in Washington.
Reuters:
Barnes & Noble(BKS) Draws Private Equity Interest - Sources. A number of private equity firms are interested in taking a look at Barnes & Noble (BKS), including names such as Bain Capital, Apollo [APOLO.UL], TPG Capital [TPG.UL] and others, sources familiar with the matter said on Wednesday.
CalPERS Launching Review of High Salaried Officials. The California Public Employees' Retirement System (CalPERS) said on Wednesday it was launching a comprehensive review of high pay for public officials, after a public outcry over an official's salary in Los Angeles County.The scandal erupted last month over reports that Bell, a city of 37,000 in Los Angeles County, had been paying its city manager $787,637 a year, or nearly twice U.S. President Barack Obama's salary, along with a pension that could top $30 million if he lives to age 83.CalPERS said in a statement that it was reviewing its members who earn more than $400,000 annually in salary and has started to draft new reguations to increase transparency of public agency salaries.The group also said it was joining California's attorney general in an investigation into the salaries and other compensation of Bell officials and was conducting its own review of Bell.It is also putting the retirement accounts of individuals under investigation on hold and committing not to approve any pensions until it is satisfied that they are appropriate under the law.
US Lawmakers Urge Action on China Currency Policy. A group of U.S. Senators raised concerns about China's currency practices on Wednesday, urging the Obama administration to do more to combat "unfair trade" practices abroad. In a letter to U.S. President Barack Obama, 11 senators called for stronger action to level the playing field for U.S. businesses. "There is no doubt that the Chinese government is manipulating its currency to keep its value lower than it otherwise would be which gives its exports a significant price advantage over U.S. manufactured goods," the senators wrote.
Dodd to Obama: Consumer Pick Should Be Confirmable. Senate Banking Committee Chairman Christopher Dodd said on Wednesday he hopes the White House does the ground work to ensure its nominee to head a new consumer agency has the votes to be confirmed by the Senate.
China's banking regulator ordered banks to stop mortgage loans to third-home buyers in Beijing, Shanghai, Shenzhen and Hangzhou, citing bankers. The China Banking Regulatory Commission also orders banks to raise down-payments to 60% and increase the mortgage rates 50% higher than the central bank's benchmark rate for such property buyers in other cities.
Yonhap News:
Iran Sanctions Could be Biggest Challenge for South Korea in Future: Scholar. The Iranian nuclear crisis will weigh more heavily on South Korea in the future, although Seoul has been trying to distance itself from international politics in doing business with the oil-rich Islamic country, a scholar said Wednesday. "The Iranian nuclear crisis is Seoul's biggest future challenge," Alon Levkowitz, a professor at Hebrew University of Jerusalem, told a forum here. "If the Iranian nuclear crisis peaks and significant sanctions are imposed on Iran, or if the situation deteriorates further, Seoul will have to take a stand and deal with the implications this crisis will have on its trade and investments in the region."
China Daily:
China's trade with Iran is "legal" and not in violation of UN resolutions, citing Foreign Ministry spokeswoman Jiang Yu as saying. Trade with Iran does "not harm the interests of other countries and the international community," Jiang said.
Evening Recommendations Citigroup:
Reiterated Buy on (AXP), target $55.
Reiterated Buy on (AGU), boosted estimates, raised target to $80.
Night Trading
Asian equity indices are -.50% to +1.0% on average.
Asia Ex-Japan Investment Grade CDS Index 114.0 +3.0 basis points.
Asia Pacific Sovereign CDS Index 112.50 +4.5 basis points.
Initial Jobless Claims for last week are estimated to fall to 455K versus 457 the prior week.
Continuing Claims are estimated to fall to 4515K versus 4565K prior.
Upcoming Splits
None of note
Other Potential Market Movers
The Treasury's Geithner speaking, Fed's Yellen speaking, ICSC July Chain Store Sales, weekly EIA natural gas inventory report, BMO Capital Healthcare Conference and the (RF) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and automaker shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day
North American Investment Grade CDS Index 100.08 bps -.15%
European Financial Sector CDS Index 95.0 bps +3.77%
Western Europe Sovereign Debt CDS Index 112.66 bps +2.11%
Emerging Market CDS Index 207.98 bps -.27%
2-Year Swap Spread 18.0 +2 bps
TED Spread 228.0 -2 bps
Economic Gauges:
3-Month T-Bill Yield .14% unch.
Yield Curve 239.0 +2 bps
China Import Iron Ore Spot $141.40/Metric Tonne -.98%
Citi US Economic Surprise Index -30.40 +3.4 points
10-Year TIPS Spread 1.84% +1 bp
Overseas Futures:
Nikkei Futures: Indicating +146 open in Japan
DAX Futures: Indicating +14 open in Germany
Portfolio:
Higher: On gains in my Biotech, Retail, Technology and Medical long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades near session highs, despite euro weakness and recent gains. On the positive side, Internet, Hospital, HMO, I-Banking, Steel, Gold and Coal stocks are especially strong, rising 2.0%+. Cyclicals and small-caps are outperforming. The TED spread is falling to the lowest level since May 13th, which is a major positive. The UK sovereign cds is falling another -1.88% to 54.44 bps. The S&P GSCI Ag Spot Index is surging another +3.15% and copper continues to trade well, rising +1.34%. The 10-year yield is at session highs, rising +5 bps to 2.96%. On the negative side, Airline and Tobacco shares are under pressure, falling 1.0%+. Banks and homebuilders aren't participating in today's rally. The China sovereign cds is rising +3.49% to 80.20 bps. Gold is rising for the sixth straight day, which is also a negative. The S&P 500 looks poised to test the 1,150 level over the coming weeks. A convincing break above this level would likely lead to a significant increase in investment manager performance angst, which could spur further buying. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, technical buying, mostly positive earnings reports and less economic fear.
Junk Bonds Make New Run at Par in 'Bubblelicious' Rally: Credit Markets. Junk bonds are closing in on par for the second time this year as fixed-income investors bet recent signs of economic weakness won’t be enough to derail corporate profits and the ability of the neediest borrowers to repay debt. High-yield bonds rose to 98.99 cents on the dollar today after falling as low as 94.47 cents on May 25, according to Bank of America Merrill Lynch index data. In the prior rally, the debt climbed to 99.67 cents on April 30. Prices last rose to par in June 2007, just before credit markets began to seize up as losses on subprime mortgages spread. Investors are pouring money into bond funds at the fastest pace in 15 months as defaults slow and on signs the Federal Reserve won’t raise its target interest rate from a record low. High-yield funds had $2.8 billion of inflows in July, the most since April 2009, and have received $3.6 billion in cash this year, Bank of America Merrill Lynch analysts wrote Aug. 2 in a report. Junk bonds yield 8.492 percent, according to the bank’s U.S. High Yield Master II index.
ACLU Says It Sued Geithner Over Lawyer Licensing for Terrorism Suspects. The American Civil Liberties Union said it sued U.S. Treasury Secretary Timothy Geithner over licensing for lawyers seeking to represent terrorism suspects including those allegedly marked for death by the CIA. The ACLU claims the Treasury Department regulation improperly inhibits the right to legal counsel for U.S. citizens accused of having terrorism ties, some of whom it said the government seeks to kill. “Targeting individuals for execution who are suspected of crimes but have not been convicted,” without due process or disclosed standards, “poses the risk that the government will erroneously target the wrong people,” the group said today in a statement announcing the filing. A copy of the lawsuit, which isn’t available from court records, was provided by the ACLU. The group is joined in the suit by the New York-based Center for Constitutional Rights.
California Democrats Seek Higher Income Tax, Oil Levy. The plan from Democrats in the state Legislature would bring in $1.8 billion by increasing income-tax rates 1 percentage point on all but the wealthiest Californians. It would cut spending by $8 billion and raise $1.5 billion by increasing vehicle-registration fees, $600 million by taxing oil wells and $2 billion by suspending corporate tax breaks.
Kindergarten Attacker Kills at Least Four Children in Shandong, China. A Chinese man stabbed kindergarten children and teachers in the eastern province of Shandong, killing at least four children, citing locals. The attacker, who also injured 12 other children and teachers, broke into the kindergarten in the city of Zibo at about 4:30 p.m. local time. He then turned himself in to police.
Priceline.com(PCLN) Rises After Forecasts Top Estimates. Priceline.com Inc., the second- biggest online travel agency, rose 16 percent in extended trading after its second-quarter earnings and third-quarter forecast topped analysts’ estimates. Excluding some costs, earnings will be at least $4.78 a share, the Norwalk, Connecticut-based company said today in a statement. That compares with the $4.18 predicted on average by analysts surveyed by Bloomberg. “Guidance is well above expectations,” said Imran Khan, an analyst at JPMorgan Chase & Co. in New York. He rates the shares “overweight.” Priceline.com climbed $37.44 to $268.11 in extended trading. The shares, up 5.6 percent this year, had risen $3.29, or 1.5 percent, to $230.67 at 4 p.m. New York time in Nasdaq Stock Market trading.
Wall Street Journal:
Pimco's Worah: Deflation 'Extremely Unlikely'. A senior fund manager at bond-fund giant Pacific Investment Management Co. said Tuesday it is "extremely unlikely" the U.S. could see Japan-like deflation given that the Federal Reserve has the tools to combat a downward spiral in consumer prices.
Foreclosed On - By the U.S. With Bear Stearns Assets, Fed Balances Preserving Investment and Helping Borrowers. James Currell is struggling to prevent his Minnesota home from being foreclosed. But his lender isn't a bank. It is the U.S. government. The Federal Reserve Bank of New York is facing the prospect of foreclosing on a number of properties in the coming months, from homes to commercial buildings, a result of a souring mortgage portfolio it took over when it helped bail out Bear Stearns in 2008.
Trading Slows at Futures Exchanges. The biggest futures-exchange operators saw trading activity decline in July from prior-month levels as a seasonal slowdown in volumes was exacerbated by reduced market volatility. CME Group Inc.(CME) and IntercontinentalExchange Inc.(ICE) on Tuesday reported double-digit dips in average contract volume from June.
Mortgage, Treasury Traders Say 'No Thanks' To More Fed Help. Even if the Federal Reserve were willing to spend $200 billion buying Treasury and mortgage bonds to try to stimulate the economy, as officials have hinted, participants in the markets for those securities say "please stay away." Continued government intervention isn't needed to keep markets healthy, as it was in the depths of the crisis, they say, and they worry that more aid at this point may fail to stimulate growth--and, conversely, spur concerns about a weak economy.
Lehman Makes Its Next Property Gamble. Firm Puts More Cash Into Existing Deals, a Risky Strategy Whose Success Depends on Real-Estate Values Going Higher. Lehman Brothers Holdings Inc., brought down in part by its huge property investments, is doubling down on some of its existing deals in a bet that commercial property markets are near bottom. Since the investment bank's collapse in September 2008, the firm overseeing Lehman's bankruptcy has reinvested more than $1 billion in apartments, office buildings and other commercial property already owned or financed by Lehman. Those properties, located from Austin, Texas, to New York to Washington, faced varying levels of distress. Lehman also has spent nearly $1 billion to pay off partners and creditors and reach other settlements that resulted in the return of real-estate assets to the firm. By piling more cash into these deals, executives at Alvarez & Marsal, the advisory firm overseeing Lehman's bankruptcy proceedings, are hoping to salvage the maximum amount from the $14.4 billion of commercial real estate on the bank's books.
Coming Soon to City, Wi-Fi on the Go. Livery cars are on the verge of becoming roaming wireless-Internet transmitters under a New York venture capitalist's plan to broaden web access.
Tech Gadgets Steal Sales From Appliances, Clothes. Americans are spending more on electronics like iPads and flat-screen televisions and less on durable goods like furniture, washing machines and lawn mowers, according to government data released Tuesday.
Work Shooting Kills Nine. Driver at Connecticut Beer Distributor Faced Dismissal Before Morning Rampage.
ObamaCare and the Constitution - An Update. A federal court denies the government's motion to dismiss the challenge. Last November, a reporter asked House Speaker Nancy Pelosi if it was constitutional for Congress to require Americans to buy health insurance. Ms. Pelosi responded, "Are you serious?" On Monday, U.S. District Judge Henry Hudson got serious. He denied Health and Human Services Secretary Kathleen Sebelius's motion to dismiss a lawsuit brought by the state of Virginia challenging the new health law. His ruling stated that it is far from certain Congress has the authority to compel Americans to buy insurance and penalize those who don't.
Fear Empty Flats in China's Property Bubble. Commentary: Even worse than price bubble of vacant flats. How many flats in China are sitting empty? The media recently floated a story -- denied by power companies -- that 64.5 million urban electricity meters registered zero consumption over a recent, six-month period. That led to a theory that China has enough empty apartments to house 200 million people.
No Oil on the Beach. No Tourists, Either. Tourists have been acting like the beaches of the Florida Panhandle are covered by oil, and for communities like Destin, their absence hurts. About the only thing on Destin's beaches at the end of July was "June grass," harmless green algae that washes up in Gulf waters every year. And a sunbather here and there. Very few sunbathers. Very few people, in fact.
California Pension Fund Knew About High Bell Salaries But Didn't Stop Them, Memo Shows. Officials at California’s state pension fund became aware four years ago of the exorbitant pay raises being given to administrators in the city of Bell and did nothing to stop them, according to an internal memo obtained by The Times. The memo, which pension staff sent to board members today, shows that the California Public Employees’ Retirement System granted an exemption to its rules in 2006 so the Bell city manager could get a 47% pay hike and still receive a full pension on his salary. The pension system learned of the salary hike during the course of an audit and informed Bell officials that the exemption would be needed.
Washington Examiner:
New ID Theft Targets Kids' Social Security Numbers. The latest form of identity theft doesn't depend on stealing your Social Security number. Now thieves are targeting your kid's number long before the little one even has a bank account. Hundreds of online businesses are using computers to find dormant Social Security numbers — usually those assigned to children who don't use them — then selling those numbers under another name to help people establish phony credit and run up huge debts they will never pay off. Authorities say the scheme could pose a new threat to the nation's credit system.
Politico:
Stark's Town Hall Answer Goes Viral. Faced with angry constituents at a recent town hall meeting in his California district, Democratic Rep. Pete Stark gave an answer about federal power that has spread rapidly throughout the conservative blogosphere: "The federal government … can do most anything in this country." A woman sitting in the front row at the July 24 event pressed Stark about his vote in favor of health care reform, the passage of which she called “unconstitutional.” She called into question Stark’s characterization of health care as a “right,” noting that “such a right is actually beyond the power of the federal government to confer.” The woman concluded by asking, “How can legislation such as this be constitutional when it seems to be in direct conflict with the 13th amendment? … And … if this legislation is constitutional, what limitations are there on the federal government’s ability to tell us how to run our private lives?” “I think there are very few constitutional limits that would prevent the federal government from rules that could affect your private life,” Stark replied.
Senate Democrats Punt on Spill Bill. Senate Democrats on Tuesday punted their oil spill response bill to next month, but the extra time doesn’t guarantee the measure will pass — far from it. The delay virtually ensures that strategists from both parties will use the congressional recess to hone their plans, talking points and poison-pill amendments for any floor debate, all with an eye toward the midterm elections.
Reuters:
Missouri Votes to Block US Health Insurance Law. Missouri voters on Tuesday rejected the new U.S. healthcare bill, approving a measure that would forbid the federal government from penalizing people who do not buy health insurance. With 78 percent of precincts reporting, 72.6 percent of voters supported the Health Care Freedom Act, also known as Proposition C, while 27.4 percent rejected it. In approving the measure, Missouri won a victory in a series of planned assaults around the country against the sweeping reform, which was a major part of President Barack Obama's domestic agenda and became law in March. "Proposition C will be a boon to other states that are trying to repeal the individual mandate," said American Legislative Exchange Council task force director Christie Herrera. "Having that grassroots groundswell will give political courage to lawmakers."
Dendreon(DNDN) Says Cancer Vaccine Launch Going Well. Dendreon Corp (DNDN) said on Tuesday that more than 500 prescriptions for its new prostate cancer vaccine Provenge have already been written, and its shares rose nearly 5 percent.
Chosun Ilbo:
North Korea has advanced the placement of long-range SA-5 missiles toward the border with South Korea in the past few months, citing South Korean military officials. The missiles have a range of about 250 kilometers.
Evening Recommendations Citigroup:
Reiterated Buy on (LEA), raised estimates, boosted target to $102.
Reiterated Buy on (PCLN), target $325.
Reiterated Buy on (DOW), target $34.
Night Trading
Asian equity indices are -1.0% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 111.0 +2.0 basis points.
Asia Pacific Sovereign CDS Index 108.0 -3.0 basis points.
The ADP Employment Change for July is estimated at 30K versus 13K in June.
10:00 am EST
The ISM Non-Manufacturing Composite for July is estimated to fall to 53.0 versus 53.8 in June.
10:30 am EST
Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,650,000 barrels versus a +7,308,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,000,000 barrels versus a +91,000 barrel increase the prior week. Distillate inventories are expected to rise by +1,000,000 barrels versus a +938,000 barrel increase the prior week. Finally, Refinery Utilization is estimated to fall by -.5% versus a -.9% decline the prior week.
Upcoming Splits
None of note
Other Potential Market Movers
The Challenger Job Cuts report for July, weekly MBA mortgage applications report and the (AXP) Semi-Annual Financial Community Meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and automaker shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day
