RBS Leads Bank Offerings With Yields Lowest in Five Years: Credit Markets. Royal Bank of Scotland Group Plc, issuer of the second best-performing financial bonds this month, led lenders selling $7.5 billion of debt today after bank borrowing costs fell to the lowest in more than five years. RBS’s $3.6 billion bond offering came after average bank yields fell yesterday to 3.815 percent, the lowest since June 2005, Bank of America Merrill Lynch index data show. HSBC Holdings Plc, ING Groep NV, Westpac Banking Corp. and Bank of America Corp. also sold debt in the busiest day for bank issuance in dollars since July 21, according to data compiled by Bloomberg. The Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, dropped 3.4 basis points to a mid-price of 107.2 basis points as of 7 p.m. in New York, according to Markit Group Ltd. In London, the Markit iTraxx Europe Index of credit-default swaps linked to 125 companies with investment-grade ratings, fell 4.02 to 110.94, Markit prices show.
California City With $800,000 Manager Has Ratings Lowered to Junk by Fitch. Bell, the Los Angeles suburb that paid its city manager almost $800,000 a year, had its credit cut to junk grade by Fitch Ratings on concern the city may default on debt and had improperly raises taxes to pay off bonds. Fitch said it lowered the rating on $50 million of general obligation bonds seven steps to BB, or junk, from A+, and to BB- from A+ on $7.5 million of pension bonds sold in 2005. Standard & Poor’s took similar actions Aug. 10. The actions follow Los Angeles Times reports that Robert Rizzo, Bell’s manager, got almost $800,000 a year and that part- time city councilors took home almost $100,000 annually, mostly by serving on municipal boards and commissions.
Investors are paying the most in 22 months to borrow aluminum for a day in London and the highest fees in more than six months for tin, adding to signs of scarce supply for both metals. Aluminum's so-called tom-next spread rose today as high as $8 daily for each metric ton, the highest level since Oct. 15, 2008, London Metal Exchange figures show. The equivalent fee for tin touched $10, the highest level since Feb. 5.
Ukraine to Limit Exports of Wheat, Barley Through Dec. 31; Corn is Exempt. Ukraine, the world’s biggest barley exporter, plans to limit overseas sales of the grain and wheat through the end of the year to shore up domestic food supply, Agriculture Minister Mykola Prysyazhnyuk said. Export quotas will be probably 1 million metric tons for barley and 1.5 million tons for wheat from Sept. 1 through Dec. 31, the minister said today. Corn is likely to be exempt from the curbs, and 1 million tons of grain already at ports for export will be allowed to go before the quotas start, Prysyazhnyuk said.
BHP(BHP) Said to Weigh Hostile Bid for Potash(POT) After Offer Rejected. BHP Billiton Ltd. may go directly to shareholders as early as this week with its $39 billion unsolicited takeover offer for Potash Corp. of Saskatchewan Inc., said two people with direct knowledge of the matter. BHP, the world’s largest mining company, is unlikely to raise the bid before talks with investors, though a final decision hasn’t been made, said the people, who declined to be identified because the plan isn’t public. Potash Corp., the world’s largest fertilizer producer, rejected BHP’s $130-a-share offer yesterday, calling it “grossly inadequate,” and adopted a shareholder rights plan as a defense. “Potash is in play now,” said Prasad Patkar, who helps manage about $1.6 billion at Platypus Asset Management Pty in Sydney, including BHP shares. “Price action overnight on Potash tells you that a higher bid is coming. You can’t rule out BHP going hostile.”
Frank Seeks Meeting With Obama to Push Warren as Chief of Consumer Agency. U.S. Representative Barney Frank, who helped write the law that creates the Bureau of Consumer Financial Protection, requested a meeting with President Barack Obama as part of his push to have Harvard law professor Elizabeth Warrennamed head of the new agency. Frank, the Massachusetts Democrat who leads the House Financial Services Committee, joined 41 other lawmakers in urging “no further delay” on nominating Warren, 61, as the bureau’s first leader in a letter to Obama dated yesterday.
Copper Gains as Stockpiles Plunge to 9-Month Low, Boosting Demand Outlook. Copper climbed to the highest in more than a week as inventories slumped a nine-month low, raising speculation that demand is improving. Stockpiles tallied by the London Metal Exchange dropped for a third day to 405,025 tons yesterday, the lowest level since Nov. 13. Canceled warrants, or inventories earmarked for withdrawal, rose for a second day, by 11.5 percent.
Wall Street Journal:
Blagojevich Guilty of Lying to Federal Agents; No Verdict on Other Counts. A federal jury found former Illinois Gov. Rod Blagojevich guilty Tuesday of one count of making false statements to the Federal Bureau of Investigation but failed to reach a verdict on 23 other corruption counts. Prosecutors said they would seek a retrial on the remaining counts, but Mr. Blagojevich claimed a victory moments after the verdict was read. "This jury shows you that the government threw everything but the kitchen sink at me," Mr. Blagojevich said. "They could not prove I did anything wrong—except for one nebulous charge from five years ago." A juror speaking Tuesday evening to the Associated Press said the jury was split 11-1 in favor of convicting Mr. Blagojevich on the charge of selling the Senate seat vacated by President Barack Obama. Juror Erik Sarnello, 21 years old, of Itasca, Ill., said a female holdout "just didn't see what we all saw." Mr. Sarnello said the counts involving the Senate seat were "the most obvious." Mr. Blagojevich is the fourth Illinois governor in recent years to be tried for corruption. The political implications of the trial have taken center stage as campaigning for November's midterm elections has heated up this summer. The case was expected to stretch into the autumn and include a slate of high-profile Democrats. But the government rested its case earlier than expected and Mr. Blagojevich did not present a defense. The prospect of a retrial after 14 days of deliberation raised the possibility that many boldfaced names in political circles could still be called to testify, including Democratic U.S. Rep Jesse Jackson Jr. and White House Chief of Staff Rahm Emanuel.
Chicago Could Have to Pay Up in Order to Sell $160 Million Muni Deal. The city of Chicago could have to pay up to find a home for nearly $160 million in debt it's looking to sell in the municipal bond market this week, offering higher yields to entice investors following two recent ratings downgrades.
Brokers, Critics Spar Over 'Fiduciary' Rule. Every day, brokers call their customers with stock tips, and the brokers can say pretty much what they like so long as the investment they're pitching is "suitable" for the customer. Now the rules underlying those conversations are due for a big change. The new financial law allows the Securities and Exchange Commission to set a tougher standard for brokers' advice, and a battle is already flaring over how strict the SEC should be. The Dodd-Frank law, which took effect last month, says the SEC can hold brokers to a higher "fiduciary duty" standard, compelling them to put the interests of clients before their own. Investment advisers are already held to that standard. That could mean brokers would have to disclose more conflicts of interest to clients, such as the commissions they get for selling certain high-fee mutual funds. Otherwise they could be accused of failing to put the customer first. All that depends, though, on how the SEC makes the rules. The agency is set to complete a study by January, with proposed rules to follow shortly after. Some in the industry paint a picture of brokers paralyzed by red tape, unable to say anything about a stock or mutual fund without risking punishment for failing to uphold fiduciary duty—particularly if the stock tanks later. As a result, they say, average investors might end up online, where they can't get any help at all.
France Prepares to Deport Foreign Gypsies. France is preparing to deport hundreds of foreign Gypsies as part of a drive to clamp down on lawbreaking by Roma, Interior Minister Brice Hortefeux said Tuesday. The deportations, scheduled to start Thursday, follow the dismantling of 51 illegal camps—set up by Roma of eastern origin and by other Gypsies, including French citizens—over the past three weeks. Around 700 of the people expelled from their camps who were staying in France illegally will be flown home to Central and Eastern Europe, he said.
The Avastin Mugging. The FDA rigs the verdict against a good cancer drug. If there's an American precedent for the medical central planning of ObamaCare, it's the Food and Drug Administration. Witness a looming FDA ruling that may deplete the drug arsenal for terminally ill cancer patients. Last month, an FDA advisory board recommended withdrawing government approval of Avastin as a treatment for advanced breast cancer. The decision betrays a bias that puts costs above treatment, and unless the FDA leadership overrules its own experts, the 40,000 women killed by breast cancer each year will be denied an important clinical option.
Gulf States Endorse "Military Option" Against Iran. The latest development in the neverending saga of Iran, comes via the Middle East Media Research Institute (MEMRI) which states that according to the Gulf states, the military option may be the best option to deal with the Iranian nuclear program, as the contra-Iran (no pun intended) axis is now complete. The article also reflected "the Gulf states' growing tension and concern regarding Iran's nuclear program, and mentioned their proximity to the Bushehr reactor." What is scary is that the straw man of military intervention is pretty much presented as a fait accompli, and alternatives to military intervention are not even considered as an option.
Execs S0und Off on Sourcing Woes at Footwear News Platform. Top footwear executives said this morning that sourcing challenges in China are likely to get even worse over the next year, translating into sizeable price increases across the supply chain.
The Huffington Post:
Will Anyone Be Punished For Citibank's(C) $40 Billion Subprime Lie? Finally, some good news on Wall Street accountability. A federal judge is holding up the SEC's effort to let Citigroup's top executives off the hook for misleading their own shareholders about $40 billion in subprime debt.
UNHCR Says Vast Scale of Emergency in Pakistan Still Not Being Grasped. Pakistan's emergency continues to worsen as bloated rivers head southwards, flooding new areas and triggering massive further displacement. Urgent needs continue to overwhelm the capacity of agencies and authorities to respond. Overall, we see a risk that the full scale of the emergency is still not being grasped by the world community.
Rasmussen Reports:
Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 26% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-five percent (45%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -19 (see trends).
Reuters:
Analog Devices(ADI) Q3 Profit Beats Street, Outlook Strong. Microchip maker Analog Devices Inc. posted a third-quarter profit that topped market estimates, helped by strong growth at its industrial segment, and gave a better-than-expected fourth-quarter outlook. The company, which makes chips for cars, video game consoles and defense equipment, said revenue from its key industrial segment rose 69 percent. Third-quarter net income rose to $199.5 million, or 65 cents a share, from $65.5 million, or 22 cents a share, a year ago. Revenue rose 46 percent to $720.3 million. Analysts were expecting earnings of 60 cents per share, on revenue of $706.5 million, according to Thomson Reuters I/B/E/S. For the fourth quarter, the company forecast earnings of $0.68-$0.72 per share, on revenue of $740-$770 million. Analysts are projecting earnings of 61 cents per share, on revenue of $715.5 million. The Norwood, Massachusetts-based company's shares, which have gained 4 percent in the last 52 weeks, were up 2 percent at $29.27 after the bell.
Connecticut May Have Just a Week's Worth of Cash. Connecticut this autumn probably would have just a little more cash than it needs to pay a week's expenses unless it issues $520 million of debt, according to the state comptroller.
Democrat Says Abolish Freddie, Fannie. Fannie Mae and Freddie Mac should be abolished rather than reformed as part of the Obama administration's planned overhaul of the government's role in housing finance, Rep. Barney Frank, chairman of the House Financial Services committee, said on Tuesday. "They should be abolished," Frank said in an interview on Fox Business, when asked whether the mortgage giants should be elements in housing market reform. "They only question is what do you put in their place," Frank said.
US Says Bankruptcies Reach 5-Year High. U.S. bankruptcy filings have reached the highest level since 2005, government data released on Tuesday show, as the economy slows and the unemployment rate hovers just below double digits. There were 422,061 bankruptcy filings between April and June, according to the Administrative Office of the U.S. Courts, up 9 percent from 388,148 in the prior three-month period, and up 11 percent from 381,073 a year earlier. For the year ended June 30, there were 1.57 million bankruptcies, up 20 percent from 1.31 million a year earlier. Consumer bankruptcies rose 21 percent to 1.51 million, and business bankruptcies rose 9 percent to 59,608.
Financial Times:
$60 Billion Saudi Arms Deal Poised for Smooth US Passage. One of the largest arms deals in US history, involving the sale of weaponry worth some $60bn to Saudi Arabia, is likely to go through Congress without significant objections, according to people on Capitol Hill. The deal would include 84 Boeing F-15 fighter aircraft along with Blackhawk and Apache helicopters.
US Law to Squeeze 'Conflict Minerals'. The links between electronic devices such as smartphones and the bloody conflict in the Congo may to date have been largely invisible to most consumers. But a combination of increasing public pressure and a far-reaching new regulation in the US could well change this. A fresh law, buried in section 1,502 of the Wall Street reforms passed last month, will force many manufacturers to overhaul checks on their supply chain in an attempt to identify any “conflict minerals” that can be traced back to the Democratic Republic of the Congo or adjoining countries. Thousands of companies will be affected by the law. The Congo region is a widely used source of important industrial metals and minerals such as tantalum, copper, germanium, gold, manganese and cobalt. Tantalum, for example, is used in very small amounts in crucial electronic components such as capacitors, which find their way into everything from cars, to personal computers and mobile phones. The existing practice of many manufacturers on relying on undertakings from their supply chain is unlikely to satisfy the law, due to be codified by the regulator, the Securities and Exchange Commission, before April. “It’s not good enough for companies to just say their suppliers have told them that they don’t use conflict minerals,” Darren Fenwick, senior manager of government affairs at anti-genocide campaign group the Enough Project, said. “They need to undertake proper due diligence.” That task of due diligence is not an easy one, given that the minerals pass through several stages – including a smelter process – between the mines and the assembly plant. Industry groups warn that too onerous an audit requirement could deter companies from using the Democratic Republic of the Congo entirely, cutting off a financial lifeline to the region. The American action is also likely to have a wider international effect. The disclosure requirement will affect companies listed in the US, even if their headquarters are elsewhere, drawing a number of Chinese, European and Latin American manufacturers within its scope.
Accounting Change Set to Burden Companies. Retailers, airlines and ship operators can expect to assume billions of dollars more liabilities on their balance sheets as the result of a radical overhaul of lease accounting proposed by US and international standard setters. The new rules have been drawn up in spite of fierce opposition from multinationals, which worry that the shake-up will make their corporate accounts more volatile and vastly increase their liabilities. Some companies fear they may breach bank loan covenants as a result. Under the rules, the liabilities of many companies would increase as they are forced to move rented assets such as aircraft, ships, shops and even photocopiers on to their balance sheets. On average, the changes will increase a company’s reported debt load by 58 per cent, according to PwC and Erasmus University. Senior accountants say few companies and investors are prepared for the volatility the new rules will bring to corporate reporting. The rare joint proposals from the International Accounting Standards Board and the US Financial Accounting Standards Board have also been criticised for failing to reduce complexity. Veronica Poole, a senior partner at Deloitte, the accountancy firm, believes the financial impact of the proposed standard could go so far as to cause some companies to breach loan covenants. “A lot of companies, particularly in the current turbulent times, are very much on the edge of their covenant compliance,” she said.
International Finance News:
China's National Development and Reform Commission recommended stabilizing the country's real estate prices after new property prices rose recently in some second and third tier cities, citing the economic planner.
Financial News:
Chinese central bank adviser Xia Bin said China shouldn't make any short-term changes to its property market measures. The nation shouldn't rush when dealing with the property market and should take two years to "solve" real estate issues.
Beijing Evening News:
Beijing may prohibit real estate developers from directly taking advance payments from purchases of houses and condominiums, citing developers. Homebuyers must make payments to a designated account at a bank under new rules that may be implemented this year.
Evening Recommendations Citigroup:
Reiterated Buy on (HD), target $38.
Night Trading
Asian equity indices are -.25% to +.75% on average.
Asia Ex-Japan Investment Grade CDS Index 118.0 -8.0 basis points.
Asia Pacific Sovereign CDS Index 116.0 -4.0 basis points.
Bloomberg consensus estimates call for a weekly crude oil inventory drawdown of -1,000,000 barrels versus a -2,988,000 barrel decline the prior week. Gasoline supplies are expected to fall by -375,000 barrels versus a +409,000 barrel increase the prior week. Distillate inventories are estimated to rise by +1,500,000 barrels versus a +3,456,000 barrel gain the prior week. Finally, Refinery Utilization is expected to fall by -.63% versus a -3.1% decline the prior week.
Upcoming Splits
None of note
Other Potential Market Movers
The weekly MBA mortgage applications report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and automaker shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 106.75 bps -2.72%
European Financial Sector CDS Index 112.37 bps -4.21%
Western Europe Sovereign Debt CDS Index 134.33 bps -3.98%
Emerging Market CDS Index 224.12 bps -3.87%
2-Year Swap Spread 19.0 -1 bp
TED Spread 20.0 -1 bp
Economic Gauges:
3-Month T-Bill Yield .15% unch.
Yield Curve 213.0 +5 bps
China Import Iron Ore Spot $148.40/Metric Tonne +.07%
Citi US Economic Surprise Index -53.20 +4.1 points
10-Year TIPS Spread 1.62% unch.
Overseas Futures:
Nikkei Futures: Indicating +95 open in Japan
DAX Futures: Indicating -4 open in Germany
Portfolio:
Higher: On gains in my Tech, Ag, Retail, Medical and Biotech long positions
Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges, covered some of my (EEM) short, added to my (DISCA) long
Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 is trading near session highs and is moving back above its 50-day moving average. On the positive side, Gaming, Ag, Oil Tanker, Coal, Defense, Road & Rail, Restaurant and REIT stocks are especially strong, rising 2.75%+. Small-Cap and cyclical shares are outperforming. The Libor-OIS and TED spreads continue to trend lower. The 10-year yield is climbing +7 bps to session highs at 2.64%. Copper is +1.8% higher on the day, while lumber is jumping ++3.57%. The European Investment Grade CDS Index is falling -3.33% to 103.91 bps, the Spain sovereign cds is falling -3.99% and the Ireland sovereign cds is declining -5.52% to 278.64 bps. On the negative side, Education, HMO, Bank and Disk Drive shares are underperforming. (XLF) has also underperformed throughout the day. Market volume remains anemic, which is also a negative. I suspect stocks will build further on today's rally before week's end. I expect US stocks to trade mixed-to-higher into the close from current levels on less economic fear, declining sovereign debt angst, short-covering, bargain-hunting and technical buying.
U.S. Industrial Production Rises More Than Forecast. Production jumped twice as much as forecast in July, signaling manufacturing is shouldering a U.S. economic recovery that is showing signs of moderating in the second half of the year. Output climbed 1 percent as factories churned out more computers, appliances, automobiles and industrial machinery, the Federal Reserve said today in Washington. Another report showed work began last month on fewer houses than forecast. This year, GM kept most of its U.S. plants open during the traditional shutdowns, a move that economists said propelled auto output last month. Production jumped twice as much as forecast in July, signaling manufacturing is shouldering a U.S. economic recovery that is showing signs of moderating in the second half of the year. “This is encouraging,” said Lou Crandall, chief economist at Jersey City, New Jersey-based Wrightson ICAP LLC, who correctly forecast the jump in output. “This is a welcome interruption in the softening trend of economic data. Factory output is still growing solidly.” Output of motor vehicles and parts surged 9.9 percent in July after falling 2.5 percent a month earlier. Excluding autos and parts, manufacturing still increased 0.6 percent after declining 0.3 percent.
A benchmark gauge of corporate credit risk in the U.S. fell the most in more than two weeks, as companies reported profits that topped estimates and wholesale costs increased last month. The Markit CDX North America Investment Grade Index dropped 3.5 basis points to a mid-price of 107.1 basis points as of 12:02 pm in New York, according to Markit Group. Swaps on Ford Motor Credit fell 27 basis points to a mid-price of 360 basis points, according to CMA. Contracts on Bank of America(BAC) fell 6.5 basis points to 148, CMA prices show.
Potash(POT) Rejects $39 Billion Bid From BHP Billiton(BHP). Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer, rejected an unsolicited $39 billion takeover proposal from BHP Billiton Ltd. as too low, prompting speculation of a higher bid. Potash Corp. turned down the $130-a-share offer, saying it was “grossly inadequate,” and adopted a so-called shareholder rights plan as a defense. Potash Corp. jumped as high as C$151.08 ($146.18) in Toronto trading and competitors rallied on expectation the industry will consolidate. The shares of competitors Intrepid Potash Inc.(IPI) and Mosaic Co.(MOS) also advanced today, gaining 6.4 percent and 8.4 percent respectively. Yara International ASA, the largest publicly traded nitrogen-fertilizer maker, jumped 5.9 percent to 254.2 kroner in Oslo, the highest closing price since March.
Hefty Bag Maker Pactiv(PTV) to Be Bought by Rank. Pactiv Corp., the maker of Hefty trash bags, agreed to be bought by Rank Group Ltd. in a transaction valued at about $6 billion, helping the New Zealand packaging company expand in takeout-food containers and cutlery. The per-share price is $33.25, 39 percent more than the $23.97 close on May 14, before talks were disclosed. The financing includes equity from Rank Group and unit Reynolds Group Holdings Ltd., as well as debt financing from Credit Suisse, HSBC and Australia New Zealand Bank. The acquisition is the biggest deal for Rank Group’s owner and New Zealand’s richest man, Graeme Hart, a former tow-truck driver who amassed a fortune investing in businesses from lumber to dairy and built a global packaging empire through takeovers. His holdings include the world’s second-biggest drink-carton company and the maker of Reynolds Wrap foil.
Soros Boosts Stake in Massey Energy(MEE), Adds 1.7 Million Shares of Coal Miner. Billionaire George Soros’s hedge fund boosted its stake in Massey Energy Co., owner of the West Virginia mine where 29 people died in April, to 2.2 million shares during the second-quarter. Soros Fund Management LLC, which oversees $25 billion, purchased 1.7 million shares of Massey during the quarter, according to a filing with the U.S. Securities and Exchange Commission yesterday. The New York-based fund’s position was valued at $59.4 million at the end of June.
PMI Group(PMI) Leads Mortgage-Insurer Rally on John Paulson's 'Pure Play' Bet. PMI Group Inc., the insurer that posted 12 straight quarterly losses, rose the most in three months, leading mortgage guarantors higher after billionaire John Paulson’s hedge fund disclosed it bought 5 million shares. Paulson’s stake in the Walnut Creek, California-based company makes his hedge fund the ninth largest holder of PMI, according to data compiled by Bloomberg. “The mortgage insurers are the most pure play” to bet on stabilization and recovery of the housing market, said Matthew Howlett, a New York-based analyst at Macquarie Group Ltd. in an interview today. “He views PMI as surviving, and it’s got the largest discount to others in the group.” The insurer climbed 15 percent, or 38 cents, to $2.98 at 11:38 a.m. in New York Stock Exchange composite trading, making it the biggest gainer in the Russell 2000 Index. MGIC Investment Corp., the largest U.S. mortgage guarantor, rose 6 percent to $7.82 and No. 2 Radian Group Inc. gained 8.9 percent to $7.22.
Copper Prices Climb to One-Week High. Copper climbed to the highest price in a week after a drop in the dollar boosted demand from buyers seeking alternative assets. Copper prices also gained today as inventories monitored by the London Metal Exchange sank to the lowest level since Nov. 13. Copper futures for December delivery added 5.5 cents, or 1.7 percent, to $3.3555 a pound at 9:16 a.m. on the Comex in New York. “Copper is a bellwether, and the fact that it is holding up is a good sign” for the economy, McGhee said. “It is acting as a leader rather than a follower.”
U.S. Household Debt Shrank 1.5% in the Second Quarter. U.S. household debt fell 1.5 percent in the second quarter as consumers, facing an unemployment rate near a 26-year high, reduced mortgages and credit-card accounts, according to the Federal Reserve Bank of New York. Respondents to a quarterly survey of consumers conducted by the New York Fed for the first time showed total consumer indebtedness was $11.7 trillion at the end of June, down 6.5 percent from its peak in the third quarter of 2008. Household delinquency rates declined in the second quarter for the first time since early 2006, falling to 11.4 percent of outstanding debt from 11.9 percent on March 31, the New York Fed said.
Home Depot(HD) Profit Tops Analysts' Estimates as Sales Increase. Home Depot Inc., the largest U.S. home-improvement retailer, reported second-quarter profit that exceeded analysts’ estimates as U.S. sales rose 1 percent amid high unemployment. Net income increased 6.8 percent to $1.19 billion, or 72 cents a share, in the quarter ended Aug. 1, from $1.12 billion, or 66 cents, a year earlier, Atlanta-based Home Depot said today in a statement. Analysts projected 71 cents, the average of 23 estimates in a Bloomberg survey. Home Depot advanced 4.93% to $28.71 at 2:12 p.m. in composite trading on the New York Stock Exchange.
Pimco's Gross Urges 'Full Nationalization' of Housing Finance. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said the U.S. should consider “full nationalization” of the mortgage- finance system as the Obama administration plots the revival of a market that was at the center of the 2008 credit crisis. “To suggest that there’s a large place for private financing in the future of housing finance is unrealistic,” Gross said today at a U.S. Treasury Department conference in Washington. “Government is part of our future. We need a government balance sheet. To suggest that the private market come back in is simply impractical. It won’t work.”
Fed Buys $2.551 Billion Treasuries in Resumption of Purchases. The Federal Reserve bought $2.551 billion of Treasuries in the first outright purchase of U.S. government debt since October to prevent money from being drained from the financial system. The Fed bought 14 of the 25 securities listed for possible purchase. The notes mature from August 2014 to February 2016, the Federal Reserve Bank of New York said in a statement today on its website. The New York Fed conducts open-market operations to implement the policies of the Federal Reserve System.
Wall Street Journal:
Freddie Mac Ramps Up Pressure On Banks Over Defective Loans. Mortgage finance giant Freddie Mac is getting more aggressive toward banks that it says sold it crummy mortgages. Already, Freddie Mac (FMCC), and its sibling Fannie Mae (FNMA), have recovered billions from the banks as they seek to hold them accountable for improperly underwritten mortgages sold to them in the past. Now, in a regulatory filing, Freddie Mac has said that if banks didn't buy back defectively underwritten mortgages "on a more timely basis," it would saddle slow-poke banks "with financial consequences or with stated remedies for non-compliance, as part of the annual renewals of our contracts with them." In other words: If a bank won't buy back defective mortgages at a reasonable clip, it may face penalties imposed by Freddie Mac.
Were Ireland Fears Overdone? Here’s a read on the good reaction Ireland’s successful bond sale is getting in the market. In the fancy-schmantzy world of derivatives, the cost to insure against an Irish sovereign-debt default is falling. It now costs about $280,000 a year to insure $10 million of Irish government debt, compared with $286,000 before Tuesday’s €1.5 billion bond sale and as much as $305,000 yesterday, according to data provider Markit. Prices of so-called credit-default swaps tied to Spain and Portugal have also fallen, while credit-default swap indexes tied to European companies with less than stellar credit ratings have also improved.
Geithner Sees U.S. Role in Mortgage Market. The U.S. government will likely continue to play a role in guaranteeing mortgages, but policy makers must figure out how to design a system that doesn't lead to a rerun of the collapse of mortgage-finance giants Fannie Mae and Freddie Mac, Treasury Secretary Timothy Geithner told attendees at a housing summit convened on Tuesday.
Barron's:
Research In Motion(RIMM): Torch Price Cut In Half After Weak Launch. The price of the Research In Motion (RIMM) BlackBerry Torch has been cut in half - to $99.99 - on Amazon.com (AMZN) and some other sites, less than a week after the new phone went on sale at $199.99. Early reports from the Street suggest sales of the new phone have been tepid at best.
CNBC:
Economy Not as Bad as Investors Fear: Kocherlakota. The Federal Reserve's decision last week to buy more U.S. government debt should not be viewed as a sign the economic outlook is worse than investors thought, a top Federal Reserve official said on Tuesday.
Apple(AAPL) Reportedly Testing Proximity-Aware iPhone Prototypes. Apple's recent hiring of Benjamin Vigier, an expert in near field communications, led many to wonder if the next iPhone could also be our next wallet. According to TechCrunch, Apple's already testing prototypes of just such a proximity-aware iPhone. According to TechCrunch's sources, Apple's testing contactless payment-capable iPhones equipped with hardware from NXP Semiconductor, suggesting that such functionality is definitely something they're working on for inclusion in the next iPhone.
Just 37% Say Their Congress Member Deserves Reelection. Incumbent members of Congress don’t exactly get a vote of confidence from their constituents in a new Rasmussen Reports national telephone survey. Just 27% of Likely U.S. Voters think their representative in Congress is the best possible person for the job, down six points from November of last year. Only 37% think their local congressional representative deserves reelection, compared to 42% who felt that way last fall.
Politico:
Obama Hits New Polling Low. President Barack Obama's approval rating has dipped to a new low in the latest Gallup poll. Obama's 44 percent average approval in Gallup's daily tracking polls last week marks the weakest level of support he has registered since taking office. His weekly average had been holding steady at 45 percent approval in recent weeks. Additionally, the share of Americans who disapprove of the president's job performance reached 50 percent for the first time over the three-day stretch of Aug. 13-15. The drop can likely be attributed to the loss of independents. Obama's approval rating among independents now stands at 39 percent, down 4 points from June. Obama began his presidency with the support 74 percent of independents.
MoveOn.org Calls for Boycott of Target(TGT). The liberal group MoveOn.org ramped up its campaign against Target Corp. Tuesday with a new TV ad urging shoppers to boycott the retail giant over its $150,000 donation to a Minnesota politician who opposes gay marriage – and its decision not to give a matching amount to pro-gay candidates for balance.
Financial Times:
Agricultural Traders Positioned to Reap Gains. As US farmers reap the benefits from failing crops around the world, the traders that handle the country’s grain exports will cash in too. The windfall highlights the profitability of a multibillion sector led by Cargill, the world’s largest agricultural commodities trader, which rose to prominence during the 2007-2008 food crisis, when agricultural commodities prices hit all-time highs. “The US is the world’s island of wheat supply,” says Dan Basse, president of AgResource, a Chicago-based consultancy, who forecast that traders would ship overseas about 5bn bushels of corn, soyabeans and wheat on the year to June 2011, up more than 15 per cent from 4.3bn bushels in the 2009-2010 season. “The increase in exports bodes very well for US grain traders,” he says, echoing a view widely held in the industry.
AFP:
Israel Has '8 Days' to Hit Iran Nuclear Site: Bolton. Israel has "eight days" to launch a military strike against Iran's Bushehr nuclear facility and stop Tehran from acquiring a functioning atomic plant, a former US envoy to the UN has said. Iran is to bring online its first nuclear power reactor, built with Russia's help, on August 21, when a shipment of nuclear fuel will be loaded into the plant's core. At that point, John Bolton warned Monday, it will be too late for Israel to launch a military strike against the facility because any attack would spread radiation and affect Iranian civilians. "Once that uranium, once those fuel rods are very close to the reactor, certainly once they're in the reactor, attacking it means a release of radiation, no question about it," Bolton told Fox Business Network. "So if Israel is going to do anything against Bushehr it has to move in the next eight days." Absent an Israeli strike, Bolton said, "Iran will achieve something that no other opponent of Israel, no other enemy of the United States in the Middle East really has and that is a functioning nuclear reactor." But when asked whether he expected Israel to actually launch strikes against Iran within the next eight days, Bolton was skeptical. "I don't think so, I'm afraid that they've lost this opportunity," he said.
Caijing:
China will reduce its holdings of Treasuries because of potential risks from the U.S. government's medium-to-long-term debt level, citing Zhang Ming, a China Academy of Social Sciences researcher. China had a fundamental shift in its "risk appetite" for U.S. debt, it said, citing Zhang's research.
