Evening Headlines
Bloomberg:
- Swaps on U.S. Government Debt Climb to Highest in Six Weeks. The cost to hedge against losses on U.S. government debt rose to the most in six weeks as investors bet the Federal Reserve will put more cash into the economy and a report showed home prices continued to drop. Credit-default swaps on U.S. Treasuries climbed 1.7 basis points, the biggest increase in more than three weeks, to 49.4, according to data provider CMA. The Fed said yesterday that slowing inflation and sluggish growth may require further action. The statement positioned the central bank to expand its near-record $2.3 trillion balance sheet as soon as November. “It goes right along with the gold trade and the dollar trade and the idea that the U.S. is debasing its currency and accumulating obligations beyond that which it will repay,” Dan Greenhaus, the New York-based chief economic strategist at Miller Tabak & Co., said in a telephone interview. The Dollar Index fell to a six-month low today and gold climbed to a record.
- Pelosi Urges Action on China Currency as Panel Considers Measure. House Democratic leaders began a final pre-election push for legislation that would authorize trade sanctions against China if the nation’s currency remains undervalued. “It is time for Congress to pass legislation that will give the administration leverage in its bilateral and multilateral negotiations with the Chinese government -- so that U.S. businesses and workers have a more level playing field in world trade,” House Speaker Nancy Pelosi said yesterday in a statement, as the Ways and Means Committee set a session for tomorrow to draft the legislation.
- Goldman Sachs(GS), Morgan Stanley(MS) Split on Junk as Prices Soar: Credit Markets. Morgan Stanley says investors should buy the lowest-rated corporate debt, while Goldman Sachs Group Inc. says stay away, underscoring the dilemma faced by investors as junk-bond prices rise to the highest since 2007.
- How to Get Housing Off Government's Juice: Peter J. Wallison. In a year when angry voters are demanding a reduced government role in the economy, it is remarkable that most of the ideas for supplanting Fannie Mae and Freddie Mac are just imaginative ways of keeping government in the business of housing finance.
- Vision Capital Says It's Cooperating With SEC's Request for Information. Vision Capital Advisors LLC, a New York-based hedge-fund and buyout firm, said the U.S. Securities and Exchange Commission has asked it for information and it is cooperating with the request.
- CBOE Plans to Challenge CDS Market With Credit-Default Options. CBOE Holdings Inc. is seeking to resurrect credit-default options, or contracts that pay off when companies fail to repay their debt, as regulators try to shift some trading of over-the-counter derivatives onto exchanges.
- Commodity Assets Under Management Decline to $293 Billion, Barclays Says. Commodity assets under management fell by $7 billion from a record last month on renewed investor concern that economic growth may slow, curbing demand for raw materials, Barclays Capital said. Assets fell to $293 billion, the first drop since January, London-based analyst Amrita Sen wrote in a report e-mailed today. Investors withdrew $5 billion from commodity index swaps, the first monthly decline in at least five years, Sen said. “There was concern about the U.S. and concern about China that spooked the market,” Sen said.
- Central Banks Have Tough Time Finding Exit as Recovery Weakens. The world’s major central banks are having a tough time exiting crisis mode, prolonging aid or raising the prospect of reviving unconventional stimulus tools as the global recovery loses momentum.
- Oil Trades Below $75 After Falling on Unexpected Increase in U.S. Supplies. Oil traded below $75 a barrel in New York after a government report showed that U.S. crude inventories unexpectedly increased, adding to signs of slowing economic growth. “The builds aren’t good for the market,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “There just doesn’t seem to be the demand around at the moment. The major industries that use oil intensely in the U.S. are still sluggish.” Total consumption of petroleum products averaged 19.2 million barrels a day last week, down 1.8 percent from the seven days ending Sept. 10, the Energy Department report showed.
- California Budget Impasse Set to Break 85-Day Record as No Vote Scheduled. California is poised this week to break its record of going 85 days without a budget as Governor Arnold Schwarzenegger and lawmakers remain at odds over closing a $19 billion deficit in the most populous U.S. state. “We can solve this in three seconds if the Democrats wanted to cut enough so the state could live within its means,” the 63-year-old Republican said in an interview before meeting with legislators in his Santa Monica office today. “The second that happens, we could have a budget,” he said. “It’s a very difficult time for all of us.”
- New York, Hawaii Top Earners Face Highest Tax Under Obama Plan, Study Says. High-income residents of New York City and President Barack Obama’s home state of Hawaii would have the highest marginal tax rates in the U.S. if Congress adopts the president’s proposal to increase taxes for top earners, a study found. The Tax Foundation, a Washington research group that advocates for lower taxes, said state, local and federal levies would result in a top 50.8 percent rate on high-income New York City residents. Affluent Hawaiians would pay 49.7 percent. Residents of California, Vermont, Maryland and New York round out the five states with the heaviest burdens, with top federal- state rates of 49.4 percent, 48.8 percent, 48.6 percent and 48.4 percent, respectively.
- Former Fed Governor Heller Says 'Too Little' Inflation Concern Misplaced. Former Federal Reserve Governor Robert Heller said the central bank’s concern that inflation is too low is misplaced. “Gold prices are up, commodity prices are up and the Fed is concerned about too little inflation,” Heller said today in an interview on Bloomberg Radio’s “The Hays Advantage” with Kathleen Hays. “There’s a lot of inflation, as far as I can see, in the pipeline.”
- California's Bell Used as 'Cash Drawer,' State Controller Says After Audit. Bell, California, the Los Angeles suburb that paid its city manager almost $800,000 a year, illegally raised taxes, mismanaged bond funds and entered into improper contracts and land purchases, according to an audit by state Controller John Chiang. The city used $93,000 to repay two personal loans extended to its former manager, Robert Rizzo, and approved $1.5 million in other loans to city employees without legal authorization, the controller’s office said today. “The city had almost no accounting controls, no checks or balances, and the general fund was run like a petty-cash drawer,” Chiang, a Democrat who is running for re-election in November, said in a statement. “The city’s purse-strings were tied to only one individual, resulting in a perfect breeding ground for fraudulent, wasteful spending.”
- Pension Shell Games Threaten Market: Arthur Levitt, Lynn E. Turner.
- Banks Pressed on Sour Home Loans. Investors in Pool of Securities Seek to Force Lenders to Buy Back or Modify Problem Mortgages. Big U.S. banks are facing legal pressure to make up for losses tied to pools of soured low-end mortgage loans. In the latest effort, a group of investors in 2,300 mortgage securities worth roughly $500 billion is seeking to force several banks that originated or are now servicing faulty subprime-mortgage loans to repurchase or modify them.
- Exodus Could Shift White House Tone. White House Chief of Staff Rahm Emanuel is likely to resign in a matter of weeks, hastening a remake of the Obama White House that could lead to a lower-key, more cooperative approach after the November midterm elections.
- SEC Blasted on Goldman(GS). Suit's Timing 'Suspicious,' Watchdog Says; Heat on Agencies as Crisis Cases Lag. The Securities and Exchange Commission's internal watchdog said the timing of a fraud lawsuit against Goldman Sachs Group Inc. filed by the SEC was "suspicious," suggesting agency officials tried to distract attention from a report criticizing the SEC for failing to detect an alleged Ponzi scheme.
- How Seniors Will Pay for ObamaCare. In many areas, Medicare Advantage enrollees will lose about one-third of their health insurance benefits. The cuts will finance new subsidies for younger people.
- Breakfast With Ahmadinejad. Lox, bagels and the 'Zionist regime.
- Big Yuan Rise Would Mean Bankruptcies: Chinese Premier. An appreciation of 20 percent in China's currency would cause widespread bankruptcies in China's export sector, where firms operate on thin margins, Chinese Premier Wen Jiabao said on Wednesday. "The conditions for a major appreciation of the renminbi do not exist," Wen said in a speech to U.S. businessmen in New York. He said the appeciation of China's currency demanded by U.S. lawmakers would not bring jobs back to the United States because U.S. firms no longer make such labor-intensive products.
- Destroying King Dollar is Not the Solution by Larry Kudlow.
IBD:
- Software Maker Finds Growth, But Not Investors' Love, In Insurance. The chief executive of software supplier Ebix (EBIX) looks at his company's financial performance, then its stock price, and wonders why the former hasn't pushed the latter much higher.
- Facebook CEO Mark Zuckerberg Donates $100 Million to Fix Newark New Jersay Public Schools.
- Star Reporter Quits Yahoo Because They Wouldn't Let Him Write About Big White House Salaries.
- The Government's "Year End Cliff" Gamble on 2% of GDP and 10% of Disposable Income. With mid-term elections a month and a half away, and the expiration of the Bush tax cuts approaching at a rapid pace, the stakes for Obama's dwindling administration on the tax cut extension issue loom.
- In Dispute, China Blocks Rare Earth Exports to Japan. Sharply raising the stakes in a dispute over ’s detention of a Chinese fishing trawler captain, the Chinese government has placed a trade embargo on all exports to Japan of a crucial category of minerals used in products like hybrid cars, and guided missiles.
- Shale Gas Means Flat Prices Till 2020. Oil production may have peaked in the U.S. in the early 1970s but fears of dwindling natural gas reserves, which were prevalent even a few years ago, have been demolished by the discovery of huge new shale-gas deposits. Gas prices will likely remain flat at around $5 per 1000 cubic feet through 2020, changing assumptions about everything from the viability of green-energy projects to the prospects of a pipeline to bring stranded gas from Canada to the U.S.
Rasmussen Reports:
- 29% Say U.S. Heading in Right Direction. Two-out-of-three voters (66%) say the country is heading down the wrong track, up one point from last week.
- Republican 'Pledge to America': Spending Caps, Tax Cuts. House Republicans are set to release on Thursday a "Pledge to America," an ambitious and sweeping set of proposed changes to domestic and security policy, including promises to freeze most federal government hiring, cut Congress' budget, place hard caps on domestic spending accounts, prevent the phase-out of tax cuts that are set to expire in 2011 and "repeal and replace" the new health care law. Many of the reforms envisioned by House Republicans are highly unlikely ever to become law, but others foreshadow tough fights with President Barack Obama's administration over spending, taxation and national security policy if Republicans win control of the House in November's mid-term election. Another set would require simple changes to House rules.
- Barack Obama Offers New Global Approach. Unveiling “America’s new approach” to fighting global poverty, President Barack Obama said the United States plans to shift its emphasis to “investing” in developing countries through diplomacy and trade as a way to augment direct U.S. aid – a mission he linked directly to the security and livelihoods of Americans.
- Democrats Guess Wrong on Healthcare. Rarely have so many political strategists been so wrong about something so big. But when it comes to the health care bill, everyone from former President Bill Clinton on down whiffed on some of the more significant predictions. Democrats would run aggressively on the legislation? Nope. Voters would forget about the sausage-making aspects of the legislative process? Doesn’t seem that way, as the process contributed to the sense that the bill was deeply flawed. And Clinton’s own promise to jittery Democrats that their poll numbers would skyrocket after the bill finally passed also didn’t pan out, as the party is fighting for its life in the midterms. At the six-month mark, the law remains a riddle for political analysts, lawmakers and the White House. Here’s a look at some of the predictions that have proved off the mark.
- Bed Bath(BBBY) Sees Better Year After Strong 2Q. Bed Bath & Beyond (BBBY) beat quarterly profit and sales estimates and boosted its full-year view as U.S. consumers spent more on their homes, sending its shares up 5.5 percent.
- Geithner: New Consumer Rules to Wait Until 2011.
- PotashCorp(POT) Files to Halt BHP(BHP) Bid. PotashCorp has stepped up its defence against a $39bn hostile bid from BHP Billiton, asking a Chicago court to block the bid and accusing the miner of misleading shareholders.
- The Vietnam Steel Association expects the volume of steel used for construction in September to fall below 400,000 tons, from 483,000 tons in August, citing Nguyen Tien Nghia, vice chairman of the association.
Susquehanna:
- Rated (AGU) Positive, target $92.
- Rated (CF) Positive, $129.
- Rated (DD) Positive, target $52.
- Rated (MOS) Positive, target $76.
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 123.0 +.5 basis point.
- Asia Pacific Sovereign CDS Index 112.50 unch.
- S&P 500 futures +.31%.
- NASDAQ 100 futures +.35%.
Earnings of Note
Company/Estimate
- (SCHL)/-.57
- (NKE)/1.00
- (FINL)/.35
- (CMTL)/.59
- (TXI)/-.29
8:30 am EST
- Initial Jobless Claims for last week are estimated at 450K versus 450K the prior week.
- Continuing Claims are estimated to fall to 4473K versus 4485K prior.
- Existing Home Sales for August are estimated to rise to 4.1 Million versus 3.83Million in July.
- Leading Indicators for August are estimated to rise +.1% versus a +.1% gain in July.
- None of note
- The weekly EIA natural gas inventory report, Federal Reserve Board Mortgage Meeting, RPX Housing Composite Index, Goldman Sachs Communacopia Conference, (ORCL) Financial Analyst Meeting, (BX) Analyst Meeting, (BG) Investor Day and the (EW) Analyst Meeting could also impact trading today.