Today's Headlines

Bloomberg:

• U.S. Economy: Companies Hire 71,000 Workers, Less Than Forecast. Overall employment fell by 131,000, reflecting the dismissal of temporary census workers, and the jobless rate held at 9.5 percent. “What we are seeing now is more typical of the subpar recovery that we have been dealing with for a while,” said David Greenlaw, chief fixed-income economist at Morgan Stanley in New York. The jobs report “makes it somewhat more likely the Fed goes ahead and pulls the trigger next week, but I don’t think it’s a done deal. They’ll look to just stabilize things where they are and assess whether more is needed” in subsequent meetings. The decrease in overall employment followed a revised 221,000 drop in June that was 96,000 larger than previously estimated, today’s figures showed. The Census Bureau said it let go about 143,000 of the people conducting the decennial population count from mid-June to mid-July. It still had about 200,000 temporary workers on staff as of July 17, indicating additional cuts to come that will keep distorting the payroll figures for months. In addition to census firings at the federal level, today’s report showed state and local government agencies cut payrolls by 48,000 workers as they try to close budget gaps. Among other service providers, financial firms cut jobs for the seventh time in the past eight months and temporary-help agencies reduced staff for the first time since September. Wages were one bright spot in the report as hourly earnings climbed 0.2 percent in June from the prior month, more than anticipated. Employers also lengthened the average workweek by 6 minutes to 34.2 hours. The increase in hours and wages brought the average weekly paycheck to $772.58, up 0.5 percent from June. The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- held at 16.5 percent.
  
• The U.S. participation rate fell to 1985 levels in July as job seekers gave up their search in a "worrying sign" the labor market remains weak, according to Ryan Wang of HSBC Securities USA Inc. The participation rate, or the share of people who are either working or looking for a job, dropped to 64.6% in July, matching a level also seen in December. "Potential job seekers are not seeing any real improvement," Wang, a NY-based economist, said. "It's another worrying sign that labor market conditions are challenging."
  
• Company Bond Risk Heads for 3rd Weekly Drop on Europe Optimism. Indexes measuring the cost of insuring against losses on European corporate bonds headed for a third week of declines as optimism the region’s economic recovery is accelerating fueled demand for risky assets. The Markit iTraxx Crossover Index of credit-default swaps linked to 50 companies with mostly high-yield credit ratings decreased 3 basis points to 468, according to JPMorgan Chase & Co. at 2:30 p.m. in London. The Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers rose 1 basis point to 116.5, little changed in the week and near a 3 1/2-month low, JPMorgan prices show. Swaps on BP fell 10 basis points to 220, the lowest level since June 4, according to data provider CMA. The company’s swaps curve normalized this week, with five-year contracts rising above shorter-dated protection for the first time in two months. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was little changed at 102.25 basis points, and was 2.75 lower than a week ago, JPMorgan prices show. The Markit CDX North America Index rose 1.72 basis points to 145.3, Markit Group Ltd. prices show.
• Codelco Says Tightening to Slow China Copper Demand. Codelco, the world’s largest copper producer, said demand in China for the metal will slow in this half because of government measures to tighten lending and curb inflation. “The big bull run we’ve experienced in 2003-2008 may not occur again,” said Pang Ying, an analyst at Shenzhen Rongtuo Trading Co. “China, Europe, and the U.S. expanded at a fast pace at that time, and we probably won’t see that again in the next few years.”
• Oil Falls on Lower-Than-Expected U.S. Company Payroll Growth. Crude oil fell for a third day as weaker-than-forecast growth in U.S. company payrolls bolstered concern that the economic rebound in the world’s biggest oil- consuming country is slowing. Oil slipped as much as 1.5 percent after the Labor Department said private payrolls that exclude government agencies rose by 71,000, less than forecast, after a gain of 31,000 in June that was smaller than previously reported. U.S. fuel consumption dropped 2.5 percent to 19.3 million barrels a day last week, according to an Energy Department report on Aug. 4. Gasoline supplies increased 729,000 barrels, or 0.3 percent, to 223 million last week, the highest level since April 30, according to the report. Stockpiles of distillate fuel, a category that includes heating oil and diesel, rose 2.17 million barrels to 169.7 million, the highest level since the week ended Oct. 16.
• China Seen Robbing Consumers With Low Interest Rates. Peking University professor Michael Pettis was discussing declining bank-deposit returns when a student interrupted with a story about her aunt that may stymie China’s plan to boost consumer spending. “To send her son to university in six years it means she must replace each yuan in lost income with one from her wages,” the student said, according to Pettis. The government’s policy of keeping interest rates low to reduce the burden of soaring municipal debt is costing savers as much as 1.6 trillion yuan ($236 billion) a year in lost income on bank deposits, according to Pettis, former head of emerging markets at Bear Stearns Cos. To make up the shortfall, savers have to set aside a larger proportion of wages, undermining China’s efforts to counter slower export growth with consumer spending at home. “Consumption is already at a dangerously low level,” said Pettis, author of the “The Volatility Machine,” a 2001 book that examines financial crises in emerging markets. “If it doesn’t begin to rise very quickly, China has a problem because household consumption will continue to drop as a share of GDP.” Pettis isn’t alone in being skeptical about a consumer boom in China. Yale University finance professor Chen Zhiwu and Huang Yasheng at the Massachusetts Institute of Technology also predict constrained consumer spending. Chen estimates the state controls 70 percent of the nation’s assets and says most of its profits don’t flow to consumers. On an inflation-adjusted basis government income surged more than tenfold in the past 15 years while disposable urban income increased less than three times, he said. Pettis said the drag on consumer spending from depressed deposit rates may help slash China’s annual economic expansion to between 5 and 7 percent a year through 2020, from an average of about 10 percent in the past decade. China’s past development has created an “irrational economic structure” and “uncoordinated and unsustainable development is increasingly apparent,” said Vice Premier Li Keqiang in a June article in the government-owned Qiu Shi magazine. Long-term dependence on investment and exports for growth “will grow the instability of the economy,” he said. “Evidence is mounting that the lending spree not only has created bad loans but is now constraining monetary policy,” said Huang. Banks could be saddled with bad loans of more than $400 billion, said Jim Walker, chief economist at Hong Kong-based Asianomics Ltd.
• Breadth Shows U.S. Stocks Rally to Continue: Technical Analysis. U.S. stocks may rally after the ratio of rising to falling shares increased to an all-time high, according to Strategas Research Partners. The advance-decline measure of companies listed on the New York Stock Exchange climbed to a record 95,875 on Aug. 4, according to data compiled by Bloomberg. The indicator, which represents the cumulative number stocks that rise minus those that fall, was set at zero on Aug. 20, 1996. It predicted rallies in July 2009 and February 2010, said Christopher Verrone, lead technical analyst at Strategas. “It’s a significant development,” said New York-based Verrone. “Participation is broadening out. It’s telling us that breadth and momentum are expanding into the rally. The move that we’ve seen off the July low looks a lot healthier than the ones we’ve seen over the last couple of months. It argues for the market to continue to climb higher.”

Wall Street Journal:

• Legacy of the 'Flash Crash': Enduring Worries of Repeat.
• From Snowmobiles to Cellphones, a Scramble for Parts. Companies are reconfiguring products and paying up to stockpile parts, as persistent supply shortages in the electronics industry continued to curb sales in the second quarter. Shortages of key electronics components such as transistors, capacitors and integrated circuits became pronounced in the first quarter, and continued in the second. Manufacturers haven't been able to ramp up supply fast enough to meet rebounding demand.
• New U.S. Visa Fees Would Hit Indian Firms. Legislation that passed the U.S. Senate late Thursday would significantly increase fees for skilled-worker visas, a move that would deal a financial blow to Indian technology-outsourcing companies who send thousands of employees to the U.S. each year. The measure, which was attached to a $600 million border-security spending bill that senators passed just before leaving for the August recess, would require companies who have more than half their U.S. employees on H1-B or L-1 visas to pay thousands of dollars in special new fees for each worker. "The way they've done this, the majority of the impact is on the Indian companies," Mr. Mittal said. He said Nasscom has asked India's external affairs and commerce ministries to look into whether the measure would violate World Trade Organization rules. "It seems like indirect protectionism," he said.
• Fitch: CMBS Delinquency Growth Slows For 4th Straight Month. Delinquencies of loans in U.S. commercial mortgage-backed securities continued to rise in July, though the pace of the increase slowed for the fourth-straight month, according to Fitch Ratings. CMBS delinquencies have continued to rise this year after spiking in 2009 as commercial property owners got increasingly behind on their mortgages due to falling occupancy rates and rents. That drove property values down from highs during the real-estate bubble. Fitch said overall CMBS delinquencies rose to 8.25% in July from 8.14% a month earlier. "We continue to expect further weakness to affect loan performance, particularly in later-vintage transactions," said Fitch Managing Director Mary MacNeill.
• Bad Mortgage Bets Continue to Bleed Home Loan Banks. Souring mortgage bonds that aren't backed by the government continued to cause heartburn for some of the Federal Home Loan Banks during the second quarter. Two banks reported second-quarter losses in part because of larger loss provisions for the so-called private-label mortgage securities. In a sign of how losses have spread from the subprime sector to the broader mortgage market, the Indianapolis and Pittsburgh home-loan banks said that they were expecting higher losses on bonds backed by prime loans, or those to borrowers with good credit. Overall, the 12 Federal Home Loan Banks reported $326 million in combined net income for the second quarter, down 71% from a year earlier. The $797 million decrease in net income from one year ago resulted from larger provisions for credit losses and net losses on derivatives and hedging activities.
• Senate Rejects Fed Nominee. The U.S. Senate on Thursday rebuffed the Obama administration on its nomination of Peter Diamond to join the Federal Reserve, putting in flux the White House's effort to fill the central bank's board of governors.

Bloomberg Businessweek:

• US Dollar Will Climb as Global Economy Resumes Slump, Taylor Says. The U.S. dollar will strengthen when the global economy slips back into recession, according to John Taylor, who oversees $7.5 billion at FX Concepts LLC, manager of the world’s largest currency hedge fund.

CNBC:

• Are Jobless Benefits to Blame for High Unemployment? (poll)
• Hedge Fund Hiring Picks Up as Banks Shed Traders.
  

Business Insider:

• Chart of the Day: The Scariest Jobs Chart Ever Takes a Turn for the Worse. (chart)
• Drudge Hilariously Skewers Tim Geithner. Big hats off to Matt Drudge, for brilliantly mocking Tim Geithner's "Welcome to the Recovery" op-ed from earlier this week.

Zero Hedge:

• Goldman Capitulates: Lowers GDP Forecast, Increases Unemployment And Inflation Outlook, Sees Imminent QE "Lite". Goldman's Jan Hatzius just lowered his GDP forecast for 2011 from 2.5% to 1.9% (kiss goodbye all those 93 EPS estimates on the S&P), increased his unemployment forecast from 9.8% to 10.0%, boosted his inflation expectation from 0.4% to 1.0%, and said that QE lite is now on the table, as he expects that "the FOMC to announce that they will reinvest the paydown of mortgage-backed securities in the bond market at next Tuesday’s meeting."
• Euro Libor Jumps to One Year Highs, As Eurobor Hits Fresh 2010 High.
• After 12 Weeks of Plunging, ECRI Reverses Downward Path. (graph)
  

Foreign Policy:

• Obama Sent a Secret Letter to Iraq's Top Shiite Cleric. President Obama has sent a letter to Iraq's top Shiite Muslim cleric, Grand Ayatollah Ali al-Sistani, urging him to prevail upon Iraq's squabbling politicians to finally form a new government, an individual briefed by relatives of the reclusive religious leader said Thursday. The individual, who asked not to be named because of the sensitivity of the topic, said the information came from members of Sistani's family in the Iranian holy city of Qom, where Sistani maintains a large complex of seminaries, libraries, clinics, and other humanitarian organizations.

Patently Apple:

• Apple(AAPL) Introduces Us to the Smart Bike.

FINalternatives:

• Experts Say Pensions Will Drive Growth of Hedge Fund Industry.
• Illinois Teachers' Asks Funds of Funds for Help in Single-Manager Search. The Illinois Teachers’ Retirement System plans to expand the number of single-manager hedge funds it invests in from one to as many as a baker’s dozen. And the $33.1 billion pension is turning to its fund of hedge funds managers for help.

Lloyd's List:

• Tepid Demand in Asia Depresses Australian Thermal Coal Prices. AUSTRALIA’S thermal coal prices, a benchmark for Asia, fell for the fifth straight week to their lowest since mid-February of below $93 per tonne, dragged down by tepid demand from end-users, banks and traders, reports Bloomberg.

AOL News:

• Drenching America's Can-Do Spirit. The recent disappointing gross domestic product numbers showing an abnormally sluggish recovery cause me to ask: Where is the "can do" America in which I grew up and where we got back on our feet quickly after downturns? Is it being drenched by nanny-state rules that dictate just about everything we can do or buy these days? Consider:
  

Politico:

• State Aid Bill a Gamble for Dems. When the House returns next week to rubber-stamp the Senate’s $26 billion state-aid package, Democrats will take a political crapshoot. Even though party leaders expect that approval will be a slam-dunk, some early responses from rank-and-file Democrats have raised red flags about the optics of returning to a special session to vote on more spending — even if it’s framed as saving teachers’ jobs.

Reuters:

• Bernanke: Many Ways to Replace Fannie, Freddie. It should be possible to create a U.S. housing finance system without the need for potentially risky entities like government-sponsored mortgage finance agencies Fannie Mae and Freddie Mac, Federal Reserve Chairman Ben Bernanke said. Bernanke, in a letter to Representative Marcy Kaptur that was released on Friday, said the housing finance system should ensure successful funding of mortgages and support a secondary mortgage market even during times of financial stress without creating firms that pose systemic risk. "There are a variety of organizational forms that might replace Fannie Mae and Freddie Mac that could likely provide mortgage credit without the systemic risks associated with these institutions in the past," he said in the letter.

Kydo News:

• North Korean leader Kim Jong Il's third son is expected to join the leadership of the communist nation's Workers' Party in early September.

China Government:

• China Plans to Boost Existing Ties With Iran. (Chinese)

Xinhua:

• The average home price in China's southern province of Hainan has fallen -42.9% to 8,000 yuan per square meter from 14,000 yuan, citing Cai Renjie, director of the provincial housing department.

Bear Radar

Style Underperformer:

• Small-Cap Value (-1.64%)

Sector Underperformers:

• 1) Education -4.54% 2) Disk Drives -3.20% 3) Banks -2.67%

Stocks Falling on Unusual Volume:

• ATPG, FITB, TIN, LUK, LGCY, OSK, APEI, NILE, LMIA, OSTK, LINC, RUE, ATVI, IPSU, OMPI, SAPE, CECO, LOPE, STRA, RBCN, TESO, FARO, CBEY, CMCSA, DGIT, KYN, HAR, OCR, WPO and CEC
  

Stocks With Unusual Put Option Activity:

• 1) CMA 2) ROST 3) EOG 4) ATPG 5) GNA
  

Stocks With Most Negative News Mentions:

• 1) AIG 2) RIG 3) DYN 4) STP 5) BA
  

Bull Radar

Style Outperformer:

• Large-Cap Value (-1.41%)

Sector Outperformers:

• 1) Gold +1.14% 2) Agriculture +.38% 3) HMOs -.23%

Stocks Rising on Unusual Volume:

• MHK, ANDE, IAG, AEM, GDP, RADS, NANO, MSG, HANS, CAGC, ACLI, MELI, TLVT, SGMS, CLMS, PWRD, AIRM, ALKS, FEIC, AGO and MGA
  

Stocks With Unusual Call Option Activity:

• 1) ALL 2) URBN 3) CROX 4) TIE 5) AGO
  

Stocks With Most Positive News Mentions:

• 1) AAPL 2) MGA 3) LUV 4) RL 5) KFT
  

Friday Watch

Evening Headlines
Bloomberg:

• BP(BP) Cementing Well Caps Confidence Crisis for Energy Bonds: Credit Markets. The bond market’s crisis of confidence in companies tied to the biggest accidental offshore oil spill on record is ending as BP Plc moves closer to permanently plugging its well in the Gulf of Mexico. One-year credit-default swaps on bonds from BP and its partner in the well, Anadarko Petroleum Corp., cost less than five-year protection, reversing an inversion that began in June amid a rush to hedge against the risk of the companies’ sudden failure. London-based BP’s $3 billion of 5.25 percent bonds due in 2013 have regained 69 percent of the value they lost after the spill began. Mounting expectations that the costs to clean up the spill and compensate victims are being contained are sparking energy companies such as Hess Corp. and Pride International Inc. to sell debt.
• Fannie Mae Seeks $1.5 Billion From U.S. Treasury After 12th Straight Loss. Fannie Mae, the mortgage-finance company operating under federal conservatorship, is seeking $1.5 billion in aid from the U.S. Treasury Department after a 12th straight quarterly loss. Fannie Mae had a loss of $1.2 billion in the second quarter, compared with a loss of $14.8 billion in the same period a year earlier, it said today in a filing to the Securities and Exchange Commission. The Washington-based company posted more than $147 billion in losses in the preceding 11 quarters, according to data compiled by Bloomberg. The Treasury Department seized Fannie Mae and McLean, Virginia-based Freddie Mac, the biggest sources of U.S. mortgage funding, in September of 2008 and has spent $145 billion already to keep them solvent.
• Mortgage Refinancing Rises Among Lower-Rate Loans, Fannie Mae Data Shows. Mortgage refinancing likely rose last month only among borrowers with lower rates, showing reduced home prices and tighter credit standards are keeping some property owners from taking advantage of record-low interest rates, bond prepayment data show. The constant prepayment rate for Fannie Mae 30-year fixed- rate notes with 5 percent coupons, backed by loans with average rates of about 5.5 percent, rose to 20, from 16.5, JPMorgan Chase & Co. said in a note to clients, based on data released today. The CPR, or the share of debt that would be retired in a year at the current pace, for bonds with 6.5 percent coupons, with loan rates of about 7 percent, fell to 21.7, from 23.4.
• Wheat Futures May Surge to $10 a Bushel, CWA Says. Wheat futures may surge to $10 a bushel on concern that Ukraine and Kazakhstan, the second- and third-largest exporters in the former Soviet Union, will follow Russia in banning exports, according to CWA Global Markets Pty. “It’s got $10 written all over it,” said Peter McGuire, CWA’s managing director, who correctly predicted on Aug. 3 that prices would surge to $8.50 a bushel. The new forecast implies a 23 percent jump from yesterday’s close. Russia yesterday banned exports of wheat, barley, rye, corn and flour from Aug. 15 to Dec. 31.
• Wheat Importers to Turn to U.S., Australia, Rabobank Forecasts. Wheat buyers will turn to the U.S., Australia and Argentina for supplies as Black Sea region output slumps, raising the risk of price gains if there are Southern Hemisphere crop problems, Rabobank said in a report. “The outlook for new-crop Russian winter wheat plantings is less than desirable, while production in Australia and Argentina is less than assured,” London-based analysts Luke Chandler and Doug Whitehead wrote yesterday. “Additional supply-side shocks would leave the wheat market extremely vulnerable to a considerable upside price move.”
• China Unlikely to Relax Existing Property Policy 'Anytime Soon,' BNP Says. China is unlikely to relax measures aimed at slowing the real-estate industry “anytime soon,” damping a recent recovery in sales and disappointing investors, according to BNP Paribas. “The sector will be under downward pressure in the short term,” BNP analysts led by Frank Chen said in a report. “Existing policies are unlikely to be relaxed anytime soon.”
• U.S. Warns Terrorists May Enter the Country From Mexico as Drug War Rages. Mexico’s drug-related violence is straining local law enforcement in the northern part of the country, making it easier for terrorists to enter the U.S. through the border, the U.S. State Department said. Mexican drug cartels are stepping up attacks on police and the army in the northern swath of the country, as well as marijuana-growing regions, the State Department said today in a report on its website. That’s overwhelming security forces and creating potential vulnerabilities that international terrorists may exploit, the report said.
• Obama Grants $1 Billion in Stimulus Funds for Illinois Carbon-Capture Plan. The Obama administration said it will give $1 billion in stimulus funds to Ameren Corp., Babcock & Wilcox Co. and a group of energy companies for an Illinois project to lower carbon emissions from coal-fired power plants. The FutureGen 2.0 project will revamp a 200-megwatt unit at Ameren’s power plant in Meredosia, Illinois, Energy Secretary Steven Chu and Senator Dick Durbin, an Illinois Democrat, said in an e-mailed statement today.
• Obama No-Shows Come to Life on Veteran Death Benefits. A half-dozen members of President Barack Obama’s Cabinet sit on an advisory council overseeing life insurance for U.S. military forces, a program facing investigations of whether insurers are unfairly profiting from policies of dead soldiers and veterans.
• Monsanto(MON)-backed Mahyco Plans India's First Gene-Modified Wheat in 5 Years. Maharashtra Hybrid Seeds Co., an Indian seed breeder partly owned by Monsanto Co., plans to develop the country’s first genetically modified wheat and rice in the next three to five years, a company official said. The company is working on various traits of genetically altered grains that can withstand drought and salinity, Usha Barwale Zehr, the chief technology officer at Mahyco, said in a telephone interview yesterday.

Wall Street Journal:

• Dealers Preparing Tradeable 'Bond of Bonds' to Hedge Risk. Wall Street dealers are preparing to introduce a tradeable bond certificate in the U.S. that will give investors exposure to a basket of 75 liquid, investment-grade corporate bonds through a single instrument, according to people familiar with the plan. The note will function like a bond of bonds, they said, giving investors pro-rata exposure to an underlying basket of securities. A spokesman for Markit, which is partly owned by dealers and will administer the certificate, confirmed the plan.
• BofA(BAC) Seeks Sanction's End. Bank of America Corp. wants out of a secret U.S. sanction imposed during the financial crisis, but regulators are keeping the 15-month-old penalty in place as they evaluate whether the giant lender has satisfied all of their requirements, said people familiar with the situation.
• Lockerbie Release Flawed. Scotland Lacked Medical Consensus in Returning Convicted Bomber to Libya. Scotland released the convicted Lockerbie bomber from prison in August 2009 on the grounds he likely had three months to live, even though there was no consensus among specialists treating his prostate cancer that his prognosis was so dire, according to publicly available documents and people familiar with the case.
• Wall Street Firms Still Trying to Figure Out Volcker Rule.
• An Argentinaville Stimulus? Wall Street comes to life with rumors of a back-door stimulus. A wire service put out the story that Wall Street was abuzz that the Administration might lower Fannie Mae's and Freddie Mac's mortgage refinancing standards or trim mortgage balances for homeowners, thereby putting billions of dollars overnight into the pockets of benefiting consumers, thereby producing a "free stimulus," estimated by one Morgan Stanley analyst at $46 billion. And this stimulus "spending" would be achieved without a moment spent passing it through the Congressional appropriations process.
• U.S. Ends Private Talks on Web Rules. U.S. officials called off closed-door talks with lobbyists aimed at reaching a compromise on ways to regulate Internet traffic, saying they couldn't reach a solution. The meetings, which involved Internet and telecommunications giants, sought to give the Federal Communications Commission authority to act as an Internet traffic cop without the need to adopt controversial wholesale changes to the law.
• Big Democratic Fund Raiser Indicted. A major Democratic lobbyist and fund-raiser was arrested Thursday and indicted on charges of making hundreds of thousands of dollars of illegal campaign contributions to members of Congress. The 11-count indictment by the Department of Justice against Paul Magliocchetti, the founder of the now-defunct lobbying outfit PMA Group, brings for Democrats new and unwelcome attention to continuing ethics controversies ensnaring some of the party's lawmakers.

CNBC:

• Hedge Fund Trade of the Week: Crown Castle(CCI).
• Cramer: Russian Wheat-Export Ban Means Ag Bull Market.
  

Zero Hedge:

• Senators Introduce Legislation to Eliminate SEC FOIA Exemption.

Forbes:

• Clouds, Big Data and Smart Assets: 10 Tech-Enabled Business Trends to Watch.

Pensions & Investments:

• Illinois Teachers to Directly Invest With Up to 12 Hedge Fund Managers.

Politico:

• Kagan Win Warns of Battles Yet to Come. Chosen by President Barack Obama for her ability to build consensus on a deeply divided Supreme Court, Elena Kagan didn’t have much of a unifying effect on the Senate. Though it confirmed her Thursday as the newest justice by a 63-37 vote, Kagan has the dubious distinction of receiving one of the lowest total of “yes” votes for a nominee during the past three presidencies — and the lowest number of confirmation votes ever for a justice picked by a Democrat.
• Dems Accused of Tea Party Tampering. Nationally, Democrats say they intend to campaign against the tea party movement. But locally, Democratic officials and activists in at least four states now stand accused of collaborating with tea party candidates in an attempt to sabotage Republican challengers in some of the closest House races in the nation. The charges of dirty tricks are being leveled in Pennsylvania, Michigan, New Jersey and Florida — and they involve more than a half-dozen contests that could tip the balance of power in the House. The accusations range from helping tea party activists circulate candidate petition sheets to underwriting the creation of official tea parties, which then put forth slates of candidates that local conservatives accuse of being rife with Democratic plants.
• Romer to Leave White House Post. Council of Economic Advisers Chairwoman Christina Romer will leave the White House Sept. 3 to resume teaching economics at the University of California at Berkeley, the White House said Thursday. Romer's departure follows that of another key adviser: Office of Management and Budget Director Peter Orszag left last month.

AP:

• US Warns Citizens in Saudi of Threat. The U.S. Embassy in Saudi Arabia has warned American citizens that extremists may be planning to attack Westerners in the country.

Financial Times:

• China Needs Slower, Better Growth by Yu Yongding. Although China’s huge stimulus package was a great success, it also stored up serious problems for the future. Rushed investment in roads and buildings leads to waste, which will have dire long-term consequences for China’s improved, but still fragile, banking system. Investment in infrastructure avoids overcapacity, but bring returns only if it goes hand-in-hand with stronger manufacturing and other growth. Where will tolls come from if there is no traffic on an eight-lane highway? How then will the bank loans be repaid? Such issues have been under-examined as Chinese policymakers grapple with how to halt a housing boom. Low interest rates and excess liquidity created by 2009’s huge credit expansion have driven house prices to dizzying heights. From January 2009 to May 2010, in 36 big cities, residential house prices increased by 40 per cent. In Beijing, Shanghai, and Shenzhen rises were even greater. Justifiable or not, high house prices have caused immense public resentment, and as a result China’s leaders have of late been attempting to undo some of their own work. For the first time, both a property tax and a capital gains tax are under discussion. Now the real economic debate in China focuses on whether the government should move again, this time to reverse the new slowdown it itself initiated. Some western economists, in particular, worry that China’s property market is beginning a collapse that will hit the nation’s banking system. But, in my view, wobbling because of the current dip in growth would be a mistake. Yes, at the moment there is a tug of war between house buyers and property developers. Whether prices fall will depend on who blinks first. But this, in turn, depends on whether both believe in the credibility of government policy. If the government stands firm, house prices will fall. Of course, if controls are implemented haphazardly the government risks such a collapse. But currently a 30 per cent drop is the worst-case scenario. Chinese households have low debt levels and even a dramatic fall could be borne by well-capitalised banks. Overall, therefore, China’s short-term fiscal position remains much better than almost all other big economies. It is in the long-run that all is not well. A viable economy cannot be built on steel and concrete alone, and China’s problem is more its poor allocation of resources than the bursting of a property bubble. At present real estate, at around a quarter of total investment, simply takes up too much economic room. The economy’s list of structural problems is also long, including over-dependence on investment and external demand, an unacceptably wide gap in incomes, too few social goods and an underdevelopment of the service sector. Slow progress in anti-corruption campaigns and institutional reforms are also worrying. In the long-run, however, it is the pattern of growth that needs most urgent attention. Investment and exports have been the twin engines of China’s growth. But investment growth will soon hit a ceiling imposed by social, environmental and natural resources. The danger is that deflation will set in and the growth process will break down. Increasing exports can postpone, but not prevent, this reverse. Following the increase in the size of the Chinese economy and the general slowdown of the global economy, China’s export drive is also crashing into a stone wall of trade friction and protectionism. To sustain growth it must lower investment and rebalance its current account. Improving the quality, rather than the quantity, of growth should be the priority. China has concentrated obsessively on GDP growth for far too long. But growth is not a good excuse for postponing much-needed structural adjustment. This readjustment, when it comes, will inevitably lead to a slowdown. But it is the only way to lay a solid foundation for sustainable growth in the long-run. And the longer the delay, the more painful the adjustment will be.

Yonhap News:

• U.S. to Send Aircraft Carrier to Yellow Sea Despite China's Opposition. The aircraft carrier USS George Washington will take part in joint naval exercises in the Yellow Sea, the Pentagon said Thursday, amid China's opposition to such maneuvers off its coast.

China Daily:

• The world economy will "almost certainly" see a prolonged period of slow growth, resulting in an end to the era of high profitability for banks, Bank of China Ltd. Chairman Xiao Gang wrote.

South China Morning Post:

• China's Sales of cars will rise about 10% this year, slowing in the second half from the 48% increase in the first six months, citing figures provided by Dong Yang, secretary general of the China Assoc. of Automobile Manufacturers.

China.org:

• US-Vietnam Nuke Deal 'Destabilizing'. The "advanced negotiations" between the United States and Vietnam to share nuclear fuel and technology disrupt international stability, Chinese analysts have said. "The US is used to employing double standards when dealing with different countries ... as a global power that has promoted denuclearization, it has challenged its own reputation and disturbed the preset international order," said Teng Jianqun, deputy-director of the China Arms Control and Disarmament Association, on Thursday. The US and Vietnam - two former Cold War foes - are in advanced talks to share nuclear fuel and technology, which could "unsettle" China, The Wall Street Journal reported on Wednesday. Under the agreement, Hanoi will reportedly be allowed to enrich uranium on its own soil, a move that is also expected to hamper global nuclear nonproliferation efforts.

Evening Recommendations
Citigroup:

• Reiterated Buy on (REG), target $47.50.
• Reiterated Buy on (CCOI), target $16.
• Reiterated Buy on (NILE), target $53.
  

Night Trading

• Asian equity indices are -.50% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 118.0 +4.0 basis points.
  
• Asia Pacific Sovereign CDS Index 114.50 +2.0 basis points.
  
• S&P 500 futures +.16%.
  
• NASDAQ 100 futures +.21%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AIG)/.99
• (AES)/.21
• (MIR)/.29
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Economic Releases
8:30 am EST

• The Change in Non-farm Payrolls for July is estimated at -65K versus -125K in June.
• The Change in Private Payrolls for July is estimated at +90K versus +83K in June.
• The Unemployment Rate for July is estimated to rise to 9.6% versus 9.5% in June
• Average Hourly Earnings for July are estimated to rise +.1% versus a -.1% decline in June.

3:00 pm EST

• Consumer Credit for June is estimated at -$5.3 Billion versus -$9.1 Billion in May.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• None of note
  

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

Stocks Slightly Lower into Final Hour on Economic Worries, Profit-Taking

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Mixed
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 22.18 -.14%
  
• ISE Sentiment Index 93.0 -36.5%
  
• Total Put/Call .93 +14.81%
  
• NYSE Arms 1.0 -18.33%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 101.77 bps +1.69%
  
• European Financial Sector CDS Index 99.0 bps +4.15%
  
• Western Europe Sovereign Debt CDS Index 116.33 bps +3.33%
  
• Emerging Market CDS Index 208.81 bps +.46%
  
• 2-Year Swap Spread 18.0 unch.
  
• TED Spread 28.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .14% unch.
  
• Yield Curve 237.0 -2 bps
  
• China Import Iron Ore Spot $143.60/Metric Tonne +1.56%
  
• Citi US Economic Surprise Index -31.60 -1.2 points
  
• 10-Year TIPS Spread 1.84% unch.
  

Overseas Futures:

• Nikkei Futures: Indicating -48 open in Japan
• DAX Futures: Indicating +23 open in Germany

Portfolio:

• Higher: On gains in my Retail, Technology and Medical long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is neutral as the S&P 500 trades near session highs, despite more weak economic data and recent stock gains. On the positive side, Retail, Telecom, Ag, Oil Service, Alt Energy stocks are especially strong, rising .50%+. The S&P GSCI Ag Spot Index is surging another +2.58% and is up +32.6% from its June 7th low. The AAII % Bulls fell to 30.4% this week, while the % Bears rose to 38.2, which is another positive. On the negative side, Education and Disk Drive shares are under pressure, falling 1.5%+. The European Investment Grade CDS Index is rising +4.2% to 98.08 bps. Reports that equity-focused hedge funds finished July just slightly higher, while the S&P 500 rose 7%, lead me to believe that many managers will feel great pressure to increase market exposure on any further push higher in the major averages. Agriculture plays have strongly outperformed of late on the recent rise in grain prices and I expect this trend to continue awhile longer. Tomorrow's jobs report will likely be disappointing, however I suspect stocks will recover in the afternoon from any morning weakness. 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 bargain-hunting.

Today's Headlines

Bloomberg:

• Growth Stocks Cheapest to Value in Two Decades. Companies with the fastest earnings growth have sunk to the cheapest levels in two decades relative to value stocks in terms of projected earnings, indicating they will rally more, according to Morgan Stanley Smith Barney LLC. The Russell 1000 Growth Index's price-earnings ratio was 19% higher than the Russell 1000 Value Index's multiple at the end of July. The last time the difference was this small, the growth index quadrupled between September 1993 and March 2000, while the value index rose 131%. "The typical performance pattern is for value stocks to outperform in the early stage of economic recovery. Then, as the pace downshifts, growth stocks typically outperform."
• Jobless Claims Unexpectedly Rose Last Week to Three-Month High. More Americans than projected filed applications for unemployment insurance last week, indicating firings remain elevated as the recovery moderated. Initial jobless claims climbed by 19,000 to 479,000 in the week ended July 31, the most since April and exceeding the highest estimate of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. “There really is no upside momentum in the labor market, and that’s a critical long-term determinant of where the economy is going,” said Steven Ricchiuto, chief economist at Mizuho Securities USA Inc. in New York. “People just aren’t getting jobs.” The four-week moving average of claims, a less-volatile measure, increased to 458,500 last week from 453,250, today’s report showed. Those who’ve used up traditional benefits and are now collecting emergency and extended payments increased by about 258,000 to 3.92 million in the week ended July 17.
• Mortgage Rates Fall to Record for Seventh Week. Mortgage rates for U.S. home loans fell to a record low for the seventh straight week, aiding a three-month trend of rising applications to refinance. The average rate of a 30-year fixed-rate mortgage dropped to 4.49 percent, from 4.54 percent last week, McLean, Virginia- based Freddie Mac said. The rates were the lowest in records dating to 1971. The average 15-year rate was 3.95 percent, the company said in a statement.
• Russia Banks Grain Exports From Aug. 15 on Drought. Russia, the world’s third-biggest grower of wheat, banned grain exports from Aug. 15 to Dec. 31 as the country’s worst drought in half a century cuts yields. Prime Minister Vladimir Putin said today that the ban is “appropriate” to contain domestic prices that gained 19 percent last week, after drought and record heat in central Russia and along the Volga River forced the government to declare a state of emergency in 28 crop-producing regions. He proposed that Kazakhstan and Belarus, Russia’s partners in a customs union, join the ban. “As of today, Russia has no grain market,” said Kirill Podolsky, chief executive officer of Valars Group, the country’s third-biggest grain trader.
• ADM(ADM), Monsanto(MON), Potash(POT) Advance as Wheat Climbs to 23-Month High. Archer Daniels Midland Co., Monsanto Co. and Potash Corp. of Saskatchewan Inc. rose in New York trading amid speculation that U.S. wheat exports will gain as the grain traded at a 23-month high and Russia banned exports. Dry weather in Russia, Kazakhstan, Ukraine and the European Union, and flooding in Canada have also ruined crops and drove a surge in Chicago wheat prices of as much as 92 percent since June 9. Russia’s drought is now threatening sowing plans for winter grain and damaging other crops including sugar beets, potatoes and corn, the national weather center said this week. “It will increase our tonnage coming out of U.S.,” said Roger Baker, head of the North American wheat-trading desk in St. Paul, Minnesota at CHS Inc., the largest U.S. cooperative grain marketer.
• Builder Option Bulls Boost Bets Shares to Rally 20%. Options traders betting U.S. builders and home-furnishings companies will overcome a record slump in housing sales are boosting bullish wagers to the highest level in eight months. The ratio of outstanding calls to buy the SPDR S&P Homebuilders exchange-traded fund versus puts to sell has almost doubled in the past six weeks to 1.66. The biggest increase was in the ETF’s January $17.50 calls, which now have the largest total of all options on the fund, according to data compiled by Bloomberg. They pay off if the ETF gains 20 percent by January.
• Baidu(BIDU) Says Google(GOOG) Gains by Avoiding Censorship Cost. Baidu Inc., operator of China’s most- popular website, said the cost of complying with domestic self- censorship laws is giving Google Inc. a competitive advantage in the world’s biggest Internet market. “We have to spend a lot of resources to make sure our content and services abide by Chinese law, and they don’t,” Chief Executive Officer Robin Li said in a Bloomberg Television interview in Beijing today. “Even if they decide not to block certain types of content, they’re still very accessible.”
• Oil Futures Contango Collapses as Cushing Fills: Energy Markets. Record oil stockpiles in the U.S. Midwest are reducing the premium traders will pay for later deliveries amid signs that fuel demand may be ebbing as the pace of the economic recovery slows. Inventories in the 15-state region that includes Illinois rose to 97.7 million barrels in the week ended July 30, the highest level recorded since the data started in 1990, according to an Energy Department report yesterday. Supplies in Cushing, Oklahoma, the delivery point for New York futures contracts, were less than 1 percent below the all-time high set in May, the report showed.
• This Is Your Grandfather's iPad as Japan Elderly Embrace Apple(AAPL). Yasuda and his peers, looking for easier ways to browse the Web and send e-mails, are a potentially lucrative demographic for Apple as the proportion of people aged 65 and over climbs to records each year in countries including the U.S., China and France. Japan has the world’s oldest society, with the elderly accounting for an estimated 22 percent of the population, almost triple the global average. “The iPad is a good tool for the elderly because it’s very forgiving of mistakes, something the seniors fear when dealing with computers,” said researcher Takahiro Miura of the University of Tokyo, whose team is working with International Business Machines Corp. on using computers to help senior citizens rejoin the workforce. “Unlike the PC, it doesn’t require prior knowledge.”
• Pentagon Demands Wikileaks Return All Documents Leaked to Them. The U.S. Defense Department demanded that WikiLeaks return all classified military documents leaked to them and expunge all copies from their records.
• U.S. Storm Forecast Reduced Because of Slow Start. The U.S. reduced its forecast for the 2010 Atlantic hurricane period to 14 to 20 named storms, down from 14 to 23, because of less activity than expected in the first two months of the season.
• Chicago's Rating on $6.8 Billion of Debt Lowered to AA by Fitch. Chicago, the third most-populous U.S. city, had its creditworthiness on $6.8 billion of general- obligation debt cut one level by Fitch Ratings because declining tax revenue has weakened its finances. The one-step downgrade to AA, third-highest, from AA+ was also influenced by the city’s accelerated use of reserves to balance its budget, Fitch said in a press release. Fitch maintained a negative outlook on the city’s debt, meaning the rating might be lowered further.

Wall Street Journal:

• Hedge Funds Turn in Mixed Performance in July. Hedge funds turned in a mixed performance in July, as managers betting on the world economy turned out to be too bearish and stock specialists failed to benefit from the market rally. The lackluster performance so far this year is curbing new allocations from investors, people in the industry say, as the sector struggles to get back on its feet after 2008's heavy losses from performance and redemptions. Some well-known funds losing money in July include Brevan Howard Asset Management's $25 billion Master Fund, down by about 2%; and RAB Capital PLC's (RAB) Special Situations Fund, plummeting 12.5%. The Brevan Howard fund is slightly down on the year, after making about 18% in 2009 and 20% in 2008. RAB Special Situations is down 8.6% year-to-date, reversing double-digit gains earlier in the year. Overall industry performance for the month is likely to be flat to slightly up, based on the returns of funds of hedge funds that have posted returns, and on Hedge Fund Research Inc.'s HFRX index. "A combination of being in bearish positions and short the euro was very bad for macro managers," said one head of a London-based fund of hedge funds, estimating that his firm's portfolio of managers will post a small return for July. He said equity funds that take long and short positions in stocks should have made money, since most of them were net long, but returns instead have come in largely flat. Among the winners, CQS Management Ltd.'s Directional Opportunities Fund is estimated to have made 6.9%, amid rallies in the stock, credit and convertible bond markets it invests in. Dan Loeb's Third Point Offshore Fund, a fund that looks to capitalize on company mergers, debt restructurings and other corporate events, gained 3.2% from stock and bond positions in companies such as Atlas Pipeline Partners LP (APL), whose share price nearly doubled in the month. The $1.86 billion Third Point fund is up 13.7% on the year and the $800 million CQS fund has gained around 11%. The S&P 500 rose 7% in July and is flat on the year. London's Lansdowne Partners Ltd. also had a good month, with its financials fund up about 4%. The fund is slightly down on the year. The HFRX ended July up 1.23%, reversing two months of decline and leaving the index flat on the year, at +0.02%. Within the index, equity hedge strategies, taking long and short positions in stocks, gained 2.28%, while macro funds taking bets on the world economy were down on the month, at -0.63%. Flat July returns were also seen at Man Group PLC's (EMG.LN) Athena Guaranteed Futures Ltd., a product tracking its $21.1 billion AHL strategy. It rose 0.33% in July. The strategy is bouncing back from a rough 2009 and is up 9.5% this year. Goldman Sachs Dynamic Opportunities Ltd. (GSDO.LN), a publicly traded fund of hedge funds with big names such as Moore, D.E. Shaw and The Children's Investment Fund in its portfolio, gained 0.17% in the month, for a 0.03% year-to-date return. Inflows at hedge funds stalled in the second quarter, at a net $9.5 billion, after having reached $13.8 billion the first quarter. Because of the performance losses in the quarter, HFR estimates the industry shrank to $1.648 trillion at June 30, from $1.668 trillion at March 31. Industry assets reached a peak in mid-2008 of about $1.93 trillion.
• Toyota Exec: Doubts Co. Would Allow UAW to Organize in Plants. The war of words between the United Auto Workers and Toyota Motor Co. (TM) continued Thursday after one of the auto maker's executives said that he doubts the union would be allowed to hold organizing rallies in the company's plants and that workers are angry over the union's picketing at dealerships. "I still don't understand why they are picketing our dealerships when the dealerships have nothing to do with the workers," said Toyota executive vice president Steve St. Angelo, who oversees Toyota's North America engineering and manufacturing. "Our workers make the ultimate decision if they want to unionize or not and for the past 25 years they have said no." The UAW is now in its third week of protesting Toyota after the company decided to move production of its Corolla from a unionized plant in California to a non-unionized plant in Mississippi. Union members are now protesting at 52 dealerships in California. Toyota said it moved production after General Motors Co., a partner in the plant, decided to pull out of the facility. "When the UAW pickets our dealerships, our team members get angry because they want to build cars that are their livelihood," St. Angelo said on the sidelines of an automotive gathering in Traverse City.
• Mo. to O.: 'NO'. They said voters would learn to stop worrying and love ObamaCare. They were wrong.
• U.S. Charges 14 Linked to Somali Terror Group. U.S. authorities charged 14 people with terrorism-related crimes, including providing money and recruits in support of the Somali Islamist group al Shabaab. The group, alleged by U.S. authorities to have ties to al Qaeda terrorists, is one of several vying for control of Somalia in a long-running war. Al Shabaab is believed to be behind bombings in Uganda last month that killed dozens of people as they watched the televised World Cup soccer final.

CNBC:

• Goldman(GS) May Spin Off Part of Proprietary Trading Friday. Goldman Sachs may spin off part of its proprietary trading operations into an independent hedge fund as soon as Friday, people familiar with the matter told CNBC, speeding up the firm's move to comply with new rules limiting Wall Street firms from betting their own money in financial markets.
• Senate Approves Higher Government Mortgage Fees. Higher monthly fees are coming for consumers who take out home loans guaranteed by the Federal Housing Administration, the primary source of mortgages for first-time homebuyers. The Senate late Wednesday unanimously approved legislation giving the FHA the power to hike monthly premiums it charges to consumers. The measure now goes to President Barack Obama, who is expected to sign it.
• Many Retailers Post Weak July Sales, Short of Estimates.
• Major US Ports Predict Holiday Shopping Boom. If shipments into one major U.S. port are any indication, we could be in for a stellar holiday shopping season. “I think we’re seeing the imported goods and the containers like what you see here obviously filled with holiday items and we’re seeing those in larger numbers,” said Richard Steinke, the executive director of the Port of Long Beach, which sits on a complex alongside the Port of Los Angeles. Together the ports are responsible for 40-45% percent of all goods coming into the United States.

MarketWatch:

• Wall of Worry Getting Stronger. Commentary: Latest sentiment data show mounting pessimism.

NY Post:

• White House: Andy Griffith Healthcare Pitch Stays. The Obama administration yesterday dismissed calls by Republicans to halt its $700,000, tax-funded Andy Griffith ad campaign aimed at lifting dismal public approval of health-care reform, even as an independent group trashed the veracity of the TV spot. Republicans say the ad campaign goes well beyond general explanations of Medicare benefits, and argues in favor of the health-care law, whose repeal is favored by 59 percent of voters, according to a poll. The campaign's "promise that 'benefits will remain the same' is just as fictional as the town of Mayberry," wrote Brooks Jackson of FactCheck.org.
• Vast Majority of New Yorkers Oppose Ground Zero Mosque.: Poll. New Yorkers overwhelmingly oppose the controversial Cordoba House mosque near Ground Zero by a massive 61-26 percent, a new poll out this morning found. The Siena College survey of 622 New York residents found strong opposition to the mosque in all parts of the state as city voters turned thumbs down, 56-33 percent against, suburban residents, 66-21 percent against, and upstaters, 64-21 percent in the negative. Opposition cut across party lines although Republicans were most opposed, by a whopping 81-11 percent. Democrats were against the project, 55-32 percent, as were independents, 54-31 percent. Mayor Bloomberg has been urging support for the project - which got the green light from the Landmarks Preservation Commission on Tuesday -- as a symbol of American religious tolerance and Attorney General Andrew Cuomo, the Democratic nominee for governor, has also backed construction. Former Mayor Rudy Giuliani and current GOP gubernatorial hopefuls Rick Lazio and Carl Paladino strongly oppose the project. Meanwhile, the new poll found 52 percent of New Yorkers favor passing an Arizona-like anti-illegal immigration law in the state while 45 percent were opposed.

Business Insider:

• Chart of the Day: There's Still This Huge Housing Bubble Yet to Pop. Eyes are currently on China as the next housing bubble to burst, but there may be another lurking to the south.
• Actually, The New Fannie and Freddie Homeowner Bailout is a Massive Bailout of the Banks.
• Geither: The Entitlements Shortfall is Coming Sooner Than You Think.
  

Zero Hedge:

• Food Stamp Usage Hits 18th Sequential Record High at 40.8 Million.

Institutional Investor:

• How ETFs Can Trip Up Hedge Funds. It’s no secret that more and more hedge funds are aggressively using exchange traded funds, and not just to hedge. Many of them are using these index-like investments to make single-sector — or single-market — bets. For example, at the end of the first quarter, Traxis Partners, headed up by former Morgan Stanley strategist Barton Biggs, held a dozen ETFs, and six of them were his largest holdings, including funds that specialize in health care and Brazil. But as more and more hedge funds use ETFs to make bets on the broad market or on a specific sector, they risk tripping a modest ownership threshold. In a recent memo to clients, the law firm Pillsbury Winthrop Shaw Pittman noted that under the Investment Company Act, private investment funds such as hedge funds are prohibited from acquiring more than 3 percent of ETFs. In addition, they are not permitted to invest more than 5 percent of their assets in a single registered investment company or more than 10 percent in registered investment companies. Pillsbury, however, stresses that only the 3 percent limit applies to hedge funds, because they are not considered investment companies. Hedge funds that do exceed the 3 percent threshold, however, could be forced to liquidate their positions or their managers could be subject to penalties, according to George Mazin, a partner of law firm Dechert.

Washington Post:

• GM Donates $41,000 to Lawmakers' Pet Projects. When General Motors went through bankruptcy last year, it suspended its political donations. Now that it's owned by the U.S. government, it's donating to lawmakers' pet projects again. The carmaker gave $41,000 to groups associated with lawmakers, the vast majority of it -- $36,000 -- to the Congressional Black Caucus Foundation, the company reported on a disclosure form last week.

Detroit News:

• BorgWarner(BWA) CEO: Government Too Focused on Electric Vehicles. The U.S. government is going too far in backing electric vehicles at the cost of other advanced vehicle technologies, the CEO of a top supplier said today. BorgWarner chairman and CEO Tim Manganello told the Center for Automotive Research's Management Briefing Seminars that policymakers were focused on electric vehicles "ignoring" other technologies. "The U.S. government is going a bit too far in trying to dictate the powertrain technologies of the future," Manganello told auto industry insiders. "It's difficult to compete globally when governments try to pick the winning technologies and the direction changes from administration to administration."

AppleInsider:

• Apple(AAPL) Close to Acquiring Chinese Game Maker for $148M - Report. Apple is rumored to be in talks to buy a Chinese mobile Internet service provider and game developer for $148 million, with a final agreement said to be "close." Chinese business news organization SinoCast reported Thursday that Apple is in talks with Handseeing Information Technology Co, a company that specializes in rich Internet applications. The Chinese company's primary business model is said to be online gaming on mobile devices.
  

Lloyd's List:

• NTIC Co., formerly known as National Iranian Tanker Co., borrowed money on "favorable" terms from Chinese banks to build 12 supertankers in the Asian country. The transactions in August 2009 involved a 10% down payment and a 90% loan.

Politico:

• Greens Defend Climate Tactics. Environmentalists went with an all-or-nothing strategy for the 111th Congress. Nothing won. Now, green groups licking their wounds after spending tens of millions of dollars to pass a cap-and-trade bill must answer serious questions about whether they are capable of playing another round of hardball.

USA Today:

• Mosque Is No Way to Build Bridges.

Guardian:

• Rupert Murdoch Says Apple's(AAPL) iPad Is a 'game-changer' For New Media. Rupert Murdoch has lavished praise on Apple's iPad, describing the device as a "game changer" for news media and predicting that "hundreds and hundreds of millions" of similar tablet computers will eventually be sold around the world.

Yonhap News:

• North Korea Avoids Being Listed as U.S. State Sponsor of Terrorism: Sate Dept. The United States Thursday announced a new list of state sponsors of terrorism that does not include North Korea despite concerns over Pyongyang's suspected delivery of weapons to militant groups in the Middle East. Iran, Syria, Sudan and Cuba are still listed under the annual congressionally mandated Country Reports on Terrorism 2009.