Today's Headlines

Bloomberg:

• Merkel Rejects Euro-Area Breakup, Presses Debt Cuts. German Chancellor Angela Merkel rejected a breakup of the euro area, saying the currency’s failure would threaten European unity and prosperity built up since World War II. A return to national currencies by debt-strapped countries such as Greece and Spain, or a German return to the deutsche mark, isn’t a solution to the debt crisis that requires all European countries to commit to austerity, Merkel said in a speech in the eastern German city of Magdeburg today. “Do we peoples of Europe want to return to going it alone?” she said. “Or do we want to move forward together? Are we ready to recommit to Europe and sacrifice more for Europe, so Europe and the euro can survive the severe test it is facing during these months and emerge stronger than before? I’m in favor of us daring to do exactly that.” Merkel’s remarks came as polls show a majority of Germans wary of bailouts for other euro-area countries and lawmakers in her coalition seek to limit the scope for future contributions by Germany, Europe’s largest economy and the biggest single contributor to the aid packages. “If the euro fails, the European project will be put at risk,” she said in Magdeburg’s medieval cathedral after receiving the city’s Emperor Otto Prize for leadership on European integration. “That is why we are doing everything possible to bolster the currency.”
• Greek Two-Year Yields Surge to More Than 44% on Deepening Bailout Concern. Greek two-year notes slumped, driving yields to a euro-era record, on concern the nation’s second bailout will be delayed as its euro-region partners squabble over a collateral deal. Italian two-year notes fell before the nation sells 10.5 billion euros ($15.1 billion) of debt this week, even as the European Central Bank bought the securities today. The ECB also purchased Spanish debt, according to people familiar with the transactions. Greek yields have surged since Finland said on Aug. 16 it secured a collateral deal to ensure its contribution would be repaid, garnering criticism from other euro-area nations. German bonds fell as the nation sold 10-year debt. “There are concerns that the second aid package won’t go through,” said Christoph Rieger, head of fixed-income strategy at Commerzbank AG in Frankfurt. “If Finland sticks to its word and demands collateral, we will be in a gridlock situation.” Greek two-year yields soared more than 4 percentage points to a record 44.08 percent as of 3:58 p.m. in London.
• Gold Tumbles Most Since December 2008. Gold plunged in New York, heading for the biggest drop in 18 months, on speculation that financial markets may be stabilizing, eroding the appeal of the precious metal as a haven. Bullion has tumbled more than 5 percent in two days, erasing gains in the past two weeks that sent the metal up as much as 16 percent since Aug. 5 to a record $1,917.90 an ounce yesterday. On Aug. 16, Wells Fargo & Co. said rising speculative demand from investors had pushed the market into a “bubble that is poised to burst.” “This is liquidation from a crowded trade,” Adam Klopfenstein, a senior market strategist at MF Global Holdings Ltd. in Chicago, said in a telephone interview. “In the short run, there’s more optimism and that doesn’t bode well for gold. Investors have been using gold more as a fear barometer than a proxy for inflation.” Gold futures for December delivery plunged $72.30, or 3.9 percent, to $1,789 an ounce at 12:11 p.m. on the Comex in New York. A close at that level would be the biggest loss since Feb. 4, 2010.
• Bank Default Swaps at Record High as Fed Boost Bets Evaporate. Credit-default swaps insuring bank debt rose to a record in Europe as investors pared bets the Federal Reserve will pledge a third round of stimulus measures to boost the U.S. economy. The cost of contracts on the Markit iTraxx Financial Index of swaps linked to senior debt of 25 banks and insurers climbed 4 basis points to 255, according to JPMorgan Chase & Co. at 5:30 p.m. in London. The subordinated index was up 15 at an all-time high of 460, based on closing prices. The cost of insuring company debt is also increasing, with the Markit iTraxx Crossover Index of default swaps on 40 companies with mostly high-yield credit ratings rising 24 basis points to 720.5, according to JPMorgan, the highest since July 2009. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 7 basis points to 172.5 basis points. The Markit iTraxx SovX Western Europe Index of swaps linked to 15 governments was little changed at 302 basis points.
• BofA(BAC) Has No Urgent Capital Need: Whitney. Meredith Whitney, the bank analyst who correctly predicted Citigroup Inc.’s dividend cut three years ago, said Bank of America Corp. (BAC) has no urgent need to raise capital. The shares rose as much as 11 percent. “I don’t think that there’s a mad dash to raise capital immediately,” Whitney said today in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “They’re going to steadily raise capital over time.”
• Qaddafi Vows 'Martyrdom' as Hunt Intensifies. Muammar Qaddafi vowed “martyrdom” or victory a day after Libyan rebels overran his Bab Al Aziziya compound in Tripoli. Qaddafi, 69, also called on his supporters to “cleanse” Tripoli of “rats,” Al Arabiya television reported, citing a recording of comments broadcast early today by a local radio station.
• Orders for Durable Goods in U.S. Rise 4%. Orders for U.S. durable goods climbed more than forecast in July as a surge in demand for aircraft and autos eclipsed a decrease in business equipment, including computers and machinery. Bookings for goods meant to last at least three years rose 4 percent, the most in four months, after falling a revised 1.3 percent in June, a Commerce Department report showed today in Washington. The median projection of 81 economists surveyed by Bloomberg News called for a 2 percent gain. Orders excluding the volatile transportation category, unexpectedly advanced 0.7 percent. Orders for non-defense capital goods excluding aircraft, a proxy for future business investment, dropped 1.5 percent, the most in six months, after a revised 0.6 percent gain in June. Shipments of those items, used in calculating gross domestic product, increased 0.2 percent after rising a revised 1.9 percent the prior month that was more than previously estimated.
• Hurricane Irene Heads for U.S. Northeast. Irene strengthened to a Category 3 major hurricane as it churned through the Bahamas today on a path forecast to take it to North Carolina’s Outer Banks and into New England. The storm, with winds of 115 miles per hour (185 kilometers per hour), may cause “devastating damage,” the National Hurricane Center said in an advisory at 11 a.m. Eastern time. Evacuations began today on the Outer Banks.
• Wall Street Banks Plan $5 Billion in CMBS Sales as Spreads Soar. Wall Street banks are planning to sell as much as $5 billion of bonds tied to commercial mortgages as they offload loans agreed to before credit markets stumbled and amid growing concern that the economy is faltering. The securities will be offered in September and October, bringing 2011 sales to about $25 billion, according to Julia Tcherkassova, a commercial-mortgage debt analyst at Barclays Capital in New York. The extra yield buyers demand to own top-ranked commercial- mortgage debt rather than Treasuries jumped 69 basis points since the end of July to 295 basis points, or 2.95 percentage points, according to a Barclays Plc index. The spread reached 298 basis points on Aug. 9, the widest level since July 2010.

Wall Street Journal:

• Rebels Set Gadhafi Bounty; Tripoli Fighting Goes On. With fresh gunfire erupting in and around Tripoli on Wednesday, Libya's rebel leadership acknowledged that the battle to control the North African country is far from over, and offered a financial reward of more than $1 million for anyone who captures Col. Moammar Gadhafi.
• Tens of Thousands of Greek Businesses Face Closure - Survey. Tens of thousands of small Greek businesses could shut down in the next year, a local trade group warned Wednesday, adding that a quarter of a million jobs could soon be lost as a result.
• IHS Ups Media-Tablet Forecast On Strong iPad Growth. Industry researcher IHS iSuppli raised its forecast of media tablet shipments this year, saying Apple Inc.'s (AAPL) iPad will continue to dominate the fast-growing market for years.
  

CNBC.com:

• CBO Warns of Recent Negative Economic Data. The United States could be in for a prolonged economic "slump," Congressional Budget Office Director Douglas Elmendorf said on Wednesday as his agency released its latest estimates of the country's fiscal situation. In a blog released along with the unveiling of CBO's updated budget and economic outlook, Elmendorf said that recent turmoil in global financial markets "threatens to prolong" a "severe slump" the United States finds itself in. He also said that the CBO forecast released on Wednesday did not take into account some economic indicators released over the past several weeks and some other developments. "Incorporating that news would have led CBO to temper its near-term forecast for economic growth," Elmendorf said.

Business Insider:

• Why China's Debt Problems Are Worse Than America's.

Zero Hedge:

• Downside Hedge Fund Bets on S&P 500 Highest Since 2008. Who says hedge funds are ambivalent about the current market? As of last week, they have not been more bearish on the S&P since before Lehman. From SocGen: "Hedge funds have opened the biggest net short positions since early 2008, concentrated on the most liquid segment of the market, i.e. the S&P 500.
• Dozens of Italian Businessmen Send Letter to Parliament Demanding Imposition of Capital Controls Instead of EPS Cutting Austerity.
  

Harvard Journal of Law & Public Policy:

• Obama Should Change Course On Climate Fight. Although Congress did not put climate change legislation on President Obama's desk, the Obama Administration still moved ahead with various regulatory measures to control greenhouse gas emissions. Using authority under the Clean Air Act and other existing environmental statutes, the EPA and other agencies have been expanding existing regulatory programs to cover GDG emissions and address climate change concerns. Several measures are already in place and others are in the regulatory pipeline, although citizen suit litigation could produce still more. These initiatives will produce a dramatic expansion of federal environmental controls on private economic activity. Taken together, these controls could represent the largest expansion of federal environmental regulation in decades, and yet they have never been explicitly endorsed, yet alone authorized, by Congress. Worse still, there is little reason to believe that these measures will do much to reduce the threats posed by global climate change. Extensive GHG regulation will not notably mitigate projected warming.

Gallup:

• Obama Job Approval: Approve 39%, Disapprove 53%. (graph)

Reuters:

• "Black Box" Hedge Funds Profit in Volatile Markets. Hedge funds run by sophisticated computer programs are profiting from large falls in stock markets and a rocketing gold price this month, even as funds managed by human beings struggle to cope with high market volatility. Insiders say so-called managed futures funds, which try to latch onto market trends, are making money from declining bond yields and falling equities, as investors seek safe havens amid the eurozone debt crisis and after the U.S.'s credit rating downgrade. These "black box" funds are up 4.2 percent so far this month, according to Hedge Fund Research's HFRX index, while the average hedge fund is down 4.0 percent and managers betting on rising and falling stock prices have lost a hefty 7.3 percent on average.

Telegraph:

• Germany Fires Cannon Shot Across Europe's Bows. German President Christian Wulff has accused the European Central Bank of violating its treaty mandate with the mass purchase of southern European bonds.

Handelsblatt:

• The euro region's bailout fund won't get blanket powers from the German parliament to help indebted nations, the president of the country's lower chamber said, denying an earlier report. Norbert Lammert, a member of the ruling Christian Democrats and parliament's most senior lawmaker, said a report in the newspaper today citing plans by Finance Minister Wolfgang Schaeuble to pass parliamentary control over bailouts to the fund would "definitely not happen."
  

Finanza & Mercati:

• Italy may extend the so-called Robin-Hood tax to telecommunications and highway companies.

Middle East News Agency:

• The European Commission approved a $145 million aid package to Egypt to help improve living conditions in Cairo and create jobs, citing a statement by the commission. Some of the funds will go toward recycling and renewable energy projects, citing the statement.

Bear Radar

Style Underperformer:

• Small-Cap Growth (+.10%)

Sector Underperformers:

• 1) Gold & Silver -3.10% 2) Networking -1.39% 3) Oil Tankers -.89%

Stocks Falling on Unusual Volume:

• VLTR, EXK, SA, LFC, UTHR, GSM, HGSI, PAAS, IAU, GLD and NVO
  

Stocks With Unusual Put Option Activity:

• 1) PXP 2) AEO 3) XLU 4) ETR 5) DANG
  

Stocks With Most Negative News Mentions:

• 1) PSA 2) UTHR 3) CF 4) BSX 5) SANM
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Small-Cap Value (+.49%)

Sector Outperformers:

• 1) Gaming +2.09% 2) Banks +1.98% 3) Utilities +1.11%

Stocks Rising on Unusual Volume:

• TIN, AZPN, AVGO, FOSL, SODA, DY, PRX, TOL and CHU
  

Stocks With Unusual Call Option Activity:

• 1) BHI 2) MTG 3) UTHR 4) LXK 5) IAU
  

Stocks With Most Positive News Mentions:

• 1) AAPL 2) CVS 3) SKS 4) BAC 5) BA
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume
  

Wednesday Watch

Evening Headlines

Bloomberg:

• Japan Debt Rating Cut to Aa3 by Moody's. Japan’s debt rating was lowered by Moody’s Investors Service, which cited “weak” prospects for economic growth that will make it difficult for the government to rein in the world’s largest public debt burden. Moody’s cut the grade one step to Aa3, with a stable outlook, it said in a statement today. Rebuilding costs from the March 11 earthquake and tsunami, along with continuing efforts to contain the Fukushima nuclear crisis, may make it hard for officials to meet their borrowing target this year, it said. The first Japan downgrade by Moody’s since 2002 reflects deteriorating credit quality across developed nations from Italy to the U.S., which lost its AAA status at Standard & Poor’s this month. “I hope this serves as a warning to the soon-to-be new administration,” said Noriaki Matsuoka, an economist at Daiwa Asset Management Co. in Tokyo. “It’s imperative to begin to raise the sales tax.” Moody’s is in final discussions on whether to downgrade Japan’s biggest lenders, a person with direct knowledge of the matter said. Banking units of Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. (8411) are among those being examined, said the person, who asked not to be identified before a decision. Moody’s put Japan on review in May, calling on the government to step up efforts to narrow the budget gap. S&P lowered the nation’s grade to AA-, equivalent to the current Moody’s grade, in January, and has the nation under review for a further cut. Fitch Ratings has Japan at AA- with a negative outlook. Moody’s said today’s decision was “prompted by large budget deficits and the build-up in Japanese government debt since the 2009 global recession.” Japan’s public debt is projected to reach 219 percent of gross domestic product next year even before accounting for borrowing to fund reconstruction after the March 11 earthquake, according to the Organization for Economic Cooperation and Development. The government has amassed a debt of 943.8 trillion yen, according to the Finance Ministry, after two decades of fiscal spending to energize an economy hobbled by the collapse of an asset bubble in 1990 and lingering deflation that’s sapped private demand. “Insufficient fiscal adjustment could lead to a spike in JGB yields which, even if the effects were contained, could trigger financial volatility and prove highly disruptive,” according to the IMF, referring to Japanese government bonds. The IMF also said that outstanding government bonds could exceed total financial assets owned by households in five to 10 years barring policy changes, suggesting the government may need to rely more on foreign investors to fund its deficits.
  
• Merkel Rejects Seeking Collateral in European Bailouts as Splits Emerge. German Chancellor Angela Merkel rejected demands that Greece provide collateral for emergency loans as splits emerged in her Cabinet, reflecting euro-area divisions on the issue. Merkel told lawmakers from her Christian Democratic bloc that a call by Labor Minister Ursula von der Leyen for countries to put up gold as security for bailouts is “not the right way,” Ulrich Scharlack, a spokesman for the parliamentary group, said yesterday in Berlin after they were briefed by Merkel on the region’s debt crisis. The disagreement at the top of Europe’s biggest economy underscores risks over a second Greek aid package after the Finnish government said Aug. 16 that it secured a collateral arrangement to ensure its contribution would be repaid. Austria and the Netherlands, which both share Finland’s AAA rating, called for similar deals, as did Slovakia and Slovenia. “We expect other euro-area members to ultimately reject the Finland-Greece deal,” Moody’s Investors Service said. “But the message sent by the calls for such agreements confirms that Europe is conflicted over the very decision to provide financial support to its members, not just the amount of support.”
• European Bank Job 'Bloodbath' Surpasses 40,000. UBS AG (UBSN)’s decision to cut 5 percent of its workforce brings to more than 40,000 the number of jobs cut by European banks in the past month as the region’s worsening sovereign debt crisis crimps trading revenue. UBS, Switzerland’s biggest bank, said yesterday it will eliminate 3,500 jobs, mainly from its investment bank. It follows HSBC Holdings Plc (HSBA), which announced 30,000 cuts on Aug. 1, Barclays Plc (BARC), which is cutting headcount by 3,000, and Royal Bank of Scotland Group Plc (RBS), which is eliminating 2,000 posts. Credit Suisse Group AG (CSGN) announced 2,000 reductions on July 28. European banks are slashing jobs this year six times faster than their U.S. peers, according to data compiled by Bloomberg, as concerns about the creditworthiness of Italy, Spain and France roil financial markets and reduce income from fixed- income trading, stock and bond underwriting as well as mergers and acquisitions. Financial firms are also cutting costs as regulators force banks to hold more and better quality capital to withstand future shocks. “It’s a bloodbath, and I expect things to get worse before they get better,” said Jonathan Evans, chairman of executive- search firm Sammons Associates in London. “I cannot see a lot of those who have lost their jobs getting re-employed. Regardless of how good someone is, no one wants to talk about hiring. Life will be very difficult for two or three years.”
• Homeowners on East Coast May Find Insurance Won't Cover Earthquake Damage. Homeowners won’t be covered by standard property insurance policies if there’s any damage following today’s 5.8 magnitude earthquake centered near Richmond, Virginia. Earthquake protection is generally excluded from standard homeowners’ insurance policies, and consumers have to purchase coverage either as a separate policy or an endorsement to an existing policy, said Michael Barry, a spokesman at the Insurance Information Institute in New York.
• Ford(F) Said to Face Hearing on Union's Equal-Sacrifice Complaint. Ford Motor Co. (F) is facing a Sept. 15 hearing on a complaint by the United Auto Workers union that salaried employees didn’t sacrifice as much as hourly workers, said two people familiar with the matter. The hearing before an independent arbitrator is scheduled for the day after Ford’s contract expires with its 41,000 U.S. hourly workers, said the people, who asked not to be identified revealing details of the grievance process. More than 35,000 Ford workers, who gave up pay increases and bonuses, signed the grievance last year after the company reinstated raises, tuition assistance and 401(k) matches to white-collar employees. The union’s “equality of sacrifice” grievance has become a topic at the bargaining table with Ford, said one of the people. Ford is seeking to reduce labor costs while the UAW tries to recover what workers gave up to help U.S. automakers survive. UAW President Bob King has said members must be rewarded for concessions of $7,000 to $30,000 each since 2005. “It’s going to be difficult to get anything else done with this hanging over the Ford talks,” said Kristin Dziczek, labor analyst at the Center for Automotive Research in Ann Arbor, Michigan. “It will be tough to get a contract ratified if this is not resolved first.”
• Fed Made State Street(STT) Profitable as Middleman. State Street Corp. (STT) and JPMorgan Chase & Co. (JPM) profited during the financial crisis by borrowing $200 billion almost risk-free from the Federal Reserve under a program intended to rescue money-market mutual funds. The Fed lent State Street a total of $89 billion to buy securities from the funds in 2008 and 2009 after the credit crisis triggered by the collapse of Lehman Brothers Holdings Inc., according to Fed data compiled by Bloomberg News from information released in response to Freedom of Information Act requests, related court orders and an act of Congress. The central bank also guaranteed against losses on the short-term notes as long as they met eligibility guidelines. State Street, based in Boston, held the securities to maturity and collected a return of $75.6 million, according to regulatory filings. JPMorgan borrowed and bought $111 billion in securities under the same program, records show. While New York- based JPMorgan hasn’t disclosed its profit from the transactions, it would have been about $93 million at the same rate of return State Street reported. “The program was enacted without any bidding process and awarded on the basis of whoever was there at the moment,” said Joseph R. Mason, a finance professor at Louisiana State University in Baton Rouge. While the banks’ return may have been appropriate, the lack of competitive bids is troubling, Mason said. He noted that for State Street, JPMorgan and other participants, “there was virtually no risk.”
• Japan's Government Unveils $100 Billion Effort to Cope With Yen's Strength. Japan’s government unveiled a $100 billion effort designed to cope with persistent strength in the yen that threatens to thwart the nation’s recovery from three straight quarters of economic contraction. Officials will release $100 billion to fund loans by Japan Bank for International Cooperation, Finance Minister Yoshihiko Noda told reporters today in Tokyo. JBIC, as the lender is known, is a state-run export credit agency.
• Banks Pay Record Rate for Government Cash on Tightening Risk: China Credit. Chinese lenders are paying record interest rates for government funds as rising yields on central bank bills fan speculation policy makers will further tighten supplies of cash. The Finance Ministry received a rate of 6.5 percent for 30 billion yuan ($4.7 billion) of six-month money offered at an auction yesterday, the highest level in central bank data going back to December 2006. The People’s Bank of China raised rates on one-year bills last week for the first time since June, boosting the yield by eight basis points to 3.58 percent, compared with the 0.10 percent yield on 12-month U.S. Treasuries. China has limited scope to stimulate the world’s second- biggest economy even as a faltering recovery in the U.S. and Europe’s sovereign debt crisis dim the outlook for global expansion. Inflation has exceeded Premier Wen Jiabao’s target every month this year and economic growth that’s double the pace of Brazil and Russia may give the government confidence to continue raising benchmark rates that have already been boosted by a total 75 basis points in 2011. “Increases in the one-year bill yield have proved a good leading indicator of interest-rate hikes in China,” said Kevin Lai, a Hong Kong-based economist with Daiwa Capital Markets Ltd. “The turbulence in global markets has settled down and with inflation pressure still strong the central bank needs another rate increase to fully contain inflation expectations.”

Wall Street Journal:

• Gadhafi's Compound Falls. Triumphant rebel fighters and thousands of ordinary Libyans stormed Col. Moammar Gadhafi's fortress compound here Tuesday after a daylong battle, but the elusive strongman was nowhere to be found.
• Live Blog: The Battle for Tipoli.
  
• Oil Exports to Start Faster Than Thought, Some Say. With Libyan opposition forces now in control of much of the country's oil fields, refineries and export terminals, Libyan crude could start returning to world markets far quicker than previously forecast, analysts say. That has big implications for the price of oil. The prospect that Libyan barrels could soon be flowing again, amid weakening demand in the U.S. and Europe, has led some banks this week to make downward revisions to their crude price forecasts for 2012. Ross Cassidy, an analyst at oil and gas consultancy Wood Mackenzie, said he expected Libya to get back up to 600,000 barrels a day of production within three months, "assuming a swift end to hostilities," and a focus by the new government on repairing infrastructure and stabilizing the sector. The consultancy had previously only said that it would take around three years for Libya's oil production to rebound to preconflict levels.
• Goldman Sachs(GS), Citigroup(C) Hire Moody's To Rate Pulled $1.5 Billion CMBS - Sources. Goldman Sachs Group Inc. (GS) and Citigroup Inc. (C) have hired Moody's Investors Service to provide a rating on their $1.5 billion commercial mortgage-backed security in an effort to salvage the issue that was abruptly shelved last month.
• Hilton Is Unlikely to Stay in Vegas. Hilton Worldwide Inc.'s namesake brand, a fixture in Las Vegas since 1970, is set to vanish from the city's gambling scene unless Hilton finds another property to fly its flag there before year end.
• Investors Pay Price for Fund's Success. Billionaire investor Paul Tudor Jones II has decided to lower some fees charged by his largest hedge fund after years of grumbling by some clients, according to people close to the matter. But Mr. Jones, who runs hedge-fund firm Tudor Investment Corp., is raising other key fees charged by the fund. And he will maintain overall charges that top most hedge funds and other investment vehicles, a sign of the interest that continues for brand-named funds.
• Euro Zone Weighs New Plan on Greek Bailout Collateral. Euro-zone governments are discussing a plan to have noncash Greek government assets, including real estate, offered as collateral for a new round of rescue lending to Greece, backing away from a bilateral agreement reached last week between Greece and Finland, officials said Tuesday. The discussions come as opposition is mounting among the governments to the Finnish-Greek deal—which would see Greece pay Finland hundreds of millions of euros in cash as collateral against the loans. Crucially, German Chancellor Angela Merkel has rejected the deal, said a German lawmaker.
• Slower Business Spending Spells Trouble. Business spending has been the recovery's bright spot. Now, it too may be fading. It is difficult to exaggerate the importance of such business capital expenditures, or capex, to recent economic growth. In the eight quarters since the recession's official end in June 2009, business spending on equipment and software has accounted for about a third, or 0.8 percentage-point, of average gross domestic product growth.
• Toronto Wary of Condo Correction. A condominium-building boom is lifting Canada's largest city into the same stratosphere as London, Sydney, Vancouver and Miami, but deepening the worries about a potential tumble. Buyers snapped up 1,986 condominiums in Toronto in July, up 28% from a year earlier, according to the Canadian Real Estate Association. Average prices have surged 8% to 9% a year for the past five years, climbing to 304,000 Canadian dollars (US$306,900). Rows of sparkling condo towers line the shores of Lake Ontario, while cranes dot the inland skyline near the tony neighborhood of Yorkville, a magnet for visiting pop-music and Hollywood celebrities.
• A Value-Added Tax Fuels Big Government. In Europe the VAT hasn't substituted for income taxation. It's merely added to the tax burden.

Business Insider:

• Washington Monument to Remain Closed "Indefinitely" After Quake Causes Cracks.
• Hollywood Is Investing Gobs Of Money In The Chinese Film Market.
• Berlusconi Ally: Italy Is Doomed, Will Have To Split In Two. Umberto Bossi, leader of the Northern League and a coalition partner of Silvio Berlusconi, has embarrassed the Italian Prime Minister with a series of negative comments about the country's future, reports The Telegraph. Bossi made the comments at rallys for the Northern League, claiming that "the Italian system is condemned to death" and that his followers should prepare for the creation of 'Padania' – an breakaway state in the wealthy north that would include Lombardy, Piedmont, the Veneto and other regions. Berlusconi apologized today for his ally's outbursts, telling reporters, "I am sorry, this time, to not agree with my friend Umberto Bossi. I am deeply convinced that Italy will always exist."
  

Zero Hedge:

• Mid-August Complete Hedge Fund Performance Update.
• Precious Metal Margin Warfare Jumps The Pacific, As Shanghai Hikes Gold Margins For Second Time In A Month, Prepares To Crush Silver.
  

IBD:

• AutoZone(AZO) Benefits As Consumers Hang On To Cars.

NY Times:

• New S&P Chief Knows Crisis and Change. The new president of Standard & Poor’s is used to dealing with crises, including mollifying angry government officials and navigating complex new regulations. That experience should serve the executive, Douglas Peterson, the chief operating officer of Citibank, well at his new job at a ratings agency under fire on multiple fronts. Yet his appointment is not likely to ease the pressure from investors on its parent company, McGraw-Hill, to break itself up even as the company presses ahead with a likely spinoff of its education business.
• Romney Condemns Biden's Comments on China's One-Child Policy. On Tuesday he condemned Vice President Joseph R. Biden Jr. for comments that seemed to condone China’s controversial one-child policy. Calling China’s policy “gruesome and barbaric,” Mr. Romney said in a statement Tuesday morning, “Vice President Biden’s acquiescence to such a policy should shock the conscience of every American.” Mr. Romney was responding to comments Mr. Biden made during a question-and-answer session focused on United States debt and entitlement reform at Sichuan University in China, in which he seemed to condone China’s policy of allowing families to have just one child in order to limit the country’s population. The policy has been linked to coerced abortions and forced sterilization, and has been challenged as a human rights violation. “Your policy has been one which I fully understand — I’m not second-guessing — of one child per family,” Mr. Biden said. Mr. Romney’s campaign was quick to attack Mr. Biden for his remarks. “Instead of condoning the policy, Vice President Biden should have condemned it in the strongest possible terms,” Mr. Romney’s statement read. “There can be no defense of a government that engages in compulsory sterilization and forced abortions in the name of population control.”
• Oil Reserves Sidestep U.S. Vessels. In its hurry to transport millions of barrels of oil from federal stockpiles to stabilize world oil prices earlier this summer, the Obama administration has repeatedly bypassed federal law by allowing nearly all the oil to move on foreign-owned vessels, drawing protests from domestic maritime operators.

Boston Globe:

• Lawmakers Propose Three Casinos, One Slot Parlor as Gambling Plan Emerges. House and Senate leaders today proposed building three sprawling casinos in three regions of the state as well as a fourth gambling hall with up to 1,250 slot machines, according to a copy of the proposal obtained by the Globe. The 133-page bill would require developers to invest a minimum of $500 million per casino and specifies that each casino must also include a hotel. Licenses for the casinos would be auctioned off at a starting price of $85 million.

AppleInsider:

• Sprint Estimated to Sell 6 Million More US iPhones for Apple(AAPL) in 2012. Adding Sprint as an iPhone carrier this fall could help Apple's growth grow from 30 to 37 percent, adding 6 million more iPhone users over the next calendar year.
  

DesMoinesRegister:

• Steffen Schmidt: Some Dems Think The Unthinkable: Not Obama. I literally choked on my next sip of a nice New England summer ale when one of them said, “New Hampshire was right. Hillary Clinton would have made a better president.” Whoa! Then the other shoe dropped. “I think we need a write-in candidate for the 2012 Iowa Democratic caucuses and Hillary would be my choice.”

The Blaze:

• NJ School Reading List Featured Books On Lesbian Sex, Gay Orgy. Most of us can remember many of the books on the assigned reading list in middle and high school — from Charles Dickens’ “Great Expectations” to Fyodor Dostoyevsky’s “Crime and Punishment.” Today, however, required reading for students apparently includes “Tweak: Growing up on Methamphetamines,” a book that features a scene depicting a homosexual orgy and “Norwegian Wood,” a book that features a sex scene between a 31-year-old woman and a 13-year old girl. That’s right. Books on gay orgies and lesbian sex as required reading for students. Fox Nation reports that a New Jersey school district has apologized to parents after requiring high school students to read the graphic books. “Some of the language is inappropriate,” said Chuck Earling, superintendent of Monroe Township Schools in Williamstown, NJ. “We were not trying to create controversy. We were just trying to get students to read.” Even more disturbing, is that the books reportedly on the required reading list were not just for high school students, but for middle school students as well.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 19% 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 -26 (see trends).

Reuters:

• Groupon Shuts Some China Offices and Cuts Staff - WSJ.
• Sino-Forest Shares Slide After S&P's 2nd Downgrade. Shares of Sino-Forest (TRE.TO) fell more than 15 percent on Tuesday after rating agency Standard & Poor's once again lowered its credit rating on the Chinese forestry company, which has been accused of fraud.

Telegraph:

• Finland Threatens to Withdraw Greek Bailout Support. Jyrki Katainen, the Finnish prime minister, has threatened to withdraw support for the Greek bailout in a move that could crush the fragile signs of recovery on global markets. Mr Katainen said that if Finland's bilateral agreement with Greece over collateral payments was overruled, the Nordic country could back out of the rescue programme. He told reporters that the private collateral agreement, in which Greece agreed to give Finland €1bn (£875m) in cash in return for its suppport, was "our parliament's decision that we demand it as a condition for us joining in".

Guardian:

• Bank of America's(BAC) Share Nosedive Fuels Fears of a Second Credit Crunch. Bank of America continued its tailspin on Tuesday as shares in the largest US bank tumbled by another 6.4% to their lowest level since March 2009, fueling fears of a second banking crisis. As concerns mounted that BoA will need to take huge additional write-offs on bad mortgages, the cost of insuring the group's debt jumped to record levels and investors became increasingly concerned that the financial system could be facing a fresh credit crunch. Graham Turner, of GFC Economics, said it was "small wonder that stocks such as BoA's are under such pressure," adding that banks are holding on to many of the properties they have repossessed for fear of precipitating further price declines. "The recent uptick in the unemployment rate increases the risks that early arrears will climb further in Q3. The Lehman Brothers crisis succeeded in pushing 30-day arrears up by 39 basis points over two quarters. A similar increase over the coming six months would push early arrears up to new highs," Turner said.
• Goldman Sachs(GS) Braced for Legal Battles Over Financial Crisis. US lawyer, Jake Zamanksy – who led pursuit of investment banks after the dotcom crash – predicts wave of legal actions. Goldman Sachs the embattled investment bank, will face an array of legal claims focusing on its conduct during the financial crisis, one of Wall Street's most feared lawyers warned last night. The prediction of an escalation in cases is being made by Jake Zamansky, the US attorney nicknamed "Jaws" who spearheaded the successful pursuit of the investment banks after the dotcom crash.

Welt:

• Carsten Schneider, budget spokesman for Germany's main opposition Social Democratic Party, criticized the labor minister for demanding collateral from euro-area members needing financial aid. Comments from German Labor Minister Ursula von der Leyen that nations in need of a bailout need to put up collateral is a sign of "the chaos in the federal government" and shows that it has "no negotiation strategy," citing Schneider.
  

Xinhua:

• Chinese President Hu Jintao said the nation should implement a land-saving strategy and reduce its reliance on land resources for economic growth. Hu called for more frugal use of land for new construction projects and said developers should stop using arable land for building new projects.
• China's Power Giant, GE(GE) Build Joint Venture. Distributed energy systems, also known as distributed energy resources (DER), refer to the generation of energy from small energy sources. The $100-million joint venture will be called Huadian GE Aero Gas Turbine Equipment Co., Ltd., with Huadian owning a majority share of 51 percent. Located in Shanghai, it will be completed for production in 2013. "It is the first step for us to introduce key DER technical equipment from the US In the next stage we will gradually localize the technology," Huadian vice-manager Deng Jianling said.

Shanghai Securities News:

• China Banking Regulatory Commission Chairman Liu Mingkang told the nation's banks to strictly control asset bubbles and to properly implement differentiated property lending policies. The regulator will also bank bank loans from entering the stock market and bar lenders from providing guarantees for corporate bonds, citing Liu. The regulator also asked banks to set up a country-risk management system.
• China should use interest rate as a priority among tools to curb inflation, while "appropriately" reducing reliance on the reserve requirement ratio to adjust liquidity, citing a Chinese state researcher. Curbing inflation should remain the top priority for the country, Ba Shusong, a researcher with the Development Research Center of the State Council, was cited as saying. The global economy may be entering a "moderate double-dip" recession, which may last longer than the subprime crisis in 2008, Ba said.
  

21st Century Business Herald:

• China's Ministry of Railways will lose about 2.6 billion yuan annually because of the cut in high-speed train ticket prices of about 5%, citing people close to the ministry.

Metro Express:

• Shanghai told banks to ban individuals from using consumer loans to buy commercial properties as part of efforts to curb speculation, citing the China Banking Regulatory Commission's branch in the city. Local banks were also told to extend property loans to buyers of commercial real estate only after the properties have been completed. Banks were previously allowed to extend loans once a property's roof was in place. Unlike residential properties, commercial real estate doesn't have limits on bank borrowings or purchases.
  

People Daily:

• China's consumer price situation in the second half is "not optimistic" and it is "very difficult" to achieve the government's inflation target for this year, the People's Daily said in a front-page commentary today. Worsening sovereign debt turmoil in the world and difficulties for the operations of domestic companies add to instability of the economy. The country's policies should slow price gains and prevent "big fluctuations" in the economy, according to the commentary.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.75% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 160.75 +1.75 basis points.
  
• Asia Pacific Sovereign CDS Index 151.0 +4.5 basis points.
• FTSE-100 futures +.94%.
  
• S&P 500 futures -.52%.
  
• NASDAQ 100 futures -.53%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (TOL)/.03
• (AEO)/.11
• (PSS)/.10
• (SMTC)/.48
• (AMAT)/.33
• (SLH)/.59
• (GES)/.80

Economic Releases
8:30 am EST

• Durable Goods Orders for July are estimated to rise +2.0% versus a -2.1% decline in June.
• Durables Ex Transports for July are estimated to fall -.5% versus a +.1% gain in June.
• Cap Goods Orders Non-defense Ex Air for July are estimated to fall -1.6% versus a -.4% decline in June.

10:00 am EST

• The House Price Index for June is estimated to rise +.2% versus a +.4% gain in May.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,750,000 barrels versus a +4,233,000 barrel gain the prior week. Distillate supplies are estimated to rise by +1,000,000 barrels versus a +2,449,000 barrel gain the prior week. Gasoline inventories are expected to fall by -1,000,000 barrels versus a -3,510,000 barrel decline the prior week. Finally, Refinery Utilization is expected unch. versus a -.9% decline the prior week.

Upcoming Splits

• (RYN) 3-for-2
  

Other Potential Market Movers

• The 5-Year Treasury Auction, weekly MBA Mortgage Applications Report and the (MU) Analyst Conference could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Surging into Final Hour on Short-Covering, Bargain-Hunting, Less Tech Sector Pessimism, Euro Bounce

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Almost Every Sector Rising
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 36.74 -13.43%
  
• ISE Sentiment Index 182.0 -19.6%
  
• Total Put/Call .99 -8.33%
  
• NYSE Arms .97 +9.37%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 127.92 +3.63%
  
• European Financial Sector CDS Index 240.64 +7.42%
  
• Western Europe Sovereign Debt CDS Index 296.17 +.34%
  
• Emerging Market CDS Index 305.86 +4.99%
  
• 2-Year Swap Spread 33.0 +1 bp
  
• TED Spread 31.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .00% +1 bp
  
• Yield Curve 192.0 +3 bps
  
• China Import Iron Ore Spot $177.90/Metric Tonne +.06%
  
• Citi US Economic Surprise Index -76.60 +2.1 points
  
• 10-Year TIPS Spread 1.99% -5 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +112 open in Japan
• DAX Futures: Indicating +97 open in Germany

Portfolio:

• Higher: On gains in my Tech, Medical, Biotech and Retail sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges, covered some of my (EEM) short, then added back some (IWM)/(QQQ) hedges
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is very bullish, as the S&P 500 trades substantially higher despite rising eurozone debt angst, more weak economic data, rising food/energy prices and emerging markets inflation fears. On the positive side, Coal, Alt Energy, Oil Service, Steel, Internet, Software, Disk Drive, Networking, Medical Equipment, Hospital and HMO shares are especially strong, rising more than +4.0% on the day. Small-Caps are outperforming. "Growth" stocks are substantially outperforming "value" shares. Tech sector shares have traded well throughout the day. Gold is dropping -3.2%, Silver is falling -4.5%, Copper is gaining +1.33% and Lumber is rising +1.1%. Weekly retail sales rose +4.4% this week versus a +4.8% gain the prior week. On the negative side, Homebuilding shares are relatively weak, rising less than 1.0%. Cyclicals are underperforming. (XLF) has also lagged throughout the day. Oil is gaining +2.02% and the UBS-Bloomberg Ag Spot Index is rising +.91%. Rice is still near a multi-year high, rising +28.0% in about 8 weeks. The US price for a gallon of gas is unch. today at $3.57/gallon. It is up .43/gallon in about 7 months. The Germany sovereign cds is rising +2.79% to 85.0 bps, the France sovereign cds is rising +3.4% to 162.0 bps, the Greece sovereign cds is rising +5.04% to 2,123.0 bps, the Portugal sovereign cds is gaining +7.92% to 1,014.63 bps, the Italy sovereign cds is rising +1.60% to 377.66 bps, the Spain sovereign cds is gaining +5.26% to 377.38 bps, the Brazil sovereign cds is soaring +11.97% to 163.66 bps, the China sovereign cds is gaining +3.2% to 115.92 bps, the Russia sovereign cds is gaining +4.56% to 206.0 bps, the Japan sovereign cds is climbing +3.38% to 109.31 bps and the UK sovereign cds is rising +2.27% to 84.60 bps. Moreover, the European Investment Grade CDS Index is gaining +3.06% to 145.53 bps. The FRA/OIS Spread made another new multi-year high today and is rising +2.9 bps to 50.25 bps. The 2-Year Swap Spread is still very near its recent high and the TED spread is also near a new multi-year high. The Eurozone Financial Sector CDS Index is surging to another new all-time high today. The China Corporate Blended Spread Index is hitting an new multi-year high today, rising +22.0 bps to 629.0 bps. Spanish and Italian equities could not rally with the rest of Europe and the US today. China's 7-day repo rate is surging another +21 bps today to 5.21%. The UBS-Bloomberg Ag Spot Index made a new record closing high today, which is a huge negative. Despite the large gain in stocks, the 10-year yield rose just +4 bps to 2.15%. Gauges of credit angst in Europe continue to deteriorate rapidly despite today's equity gains, which remains a large negative. Volume is uninspiring on today's equity advance. Growth stock leaders were extremely strong today. I suspect much of today's advance was related to hedge fund short-covering ahead of Bernanke's speech. As well, some global economic datapoints came in better-than-feared. Given how oversold stocks were, further near-term gains are likely, however gauges of European credit angst must begin to improve very soon or equity weakness will likely resume over the coming weeks. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting, less tech sector pessimism, buyout speculation and a bounce in the euro.

Today's Headlines

Bloomberg:

• Euro-Area Services, Manufacturing Grow at Slowest Pace in Almost Two Years. European services and manufacturing growth held steady in August at the slowest pace in almost two years, adding to signs the euro-region recovery is losing momentum as the sovereign debt crisis persists. A composite index based on a survey of euro-area purchasing managers in both industries held at 51.1, the same as July’s reading and the lowest since September 2009, London-based Markit Economics said today. Economists forecast a drop to 50, the median of 15 estimates in a Bloomberg News survey showed.
• Bank Risk Rises to Record in Europe as Investor Confidence Ebbs. The cost of insuring European bank debt against default rose to a record as German investor confidence fell to the lowest in more than 2 1/2 years on concern the region’s debt crisis will curb growth. The Markit iTraxx Financial Index of credit-default swaps linked to the senior debt of 25 banks and insurers increased 11.5 basis points to 261.5, according to JPMorgan Chase & Co. at 1 p.m. in London. The Markit iTraxx SovX Western Europe Index linked to 15 governments widened 12 basis points to 308.5. “Investors are worried that during times of quickly deteriorating asset prices, high volatility, and rising risks to the economic recovery, banks could be left with too little capital and a potential lack of support since governments are constrained by high indebtedness,” Christian Weber, a strategist at UniCredit SpA in Munich, wrote in a note. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict developments six months in advance, dropped to minus 37.6 from minus 15.1 in July. That’s the lowest since December 2008. Credit-default swaps on Portugal rose 93 basis points to 1,028, according to CMA. The cost of insuring Norway’s government bonds increased 3.5 basis points to 46, while Greece climbed 25 basis points to 2,025. Contracts on the Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings rose 27.5 basis points to 729.5, the highest since July 2009. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings increased 5.5 basis points to 172 basis points, the highest since April 2009.
• Bank of America(BAC) Credit Swaps Soar to Record, Goldman Sachs(GS) Debt Risk Jumps. The cost to protect debt issued by Bank of America Corp. (BAC) surged to the highest level on record as investor confidence in U.S. bank bonds deteriorated to the worst since May 2009. Credit-default swaps tied to Bank of America, the nation’s largest lender, soared 47 basis points to 427 as of 9:22 a.m. in New York, according to data provider CMA. Contracts on Goldman Sachs Group Inc. (GS), the fifth-biggest U.S. bank by assets, climbed 28 basis points to 283 basis points, the highest level since April 2009. Bank of America credit swaps have more than doubled from 178 basis points at the end of July, CMA data show, as concern mounts that the lender may face larger losses tied to mortgages and will need to raise additional capital. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 2.3 basis points to a mid-price of 129.1 basis points as of 10:21 a.m. in New York, Markit Group Ltd. data show. Contracts on Goldman Sachs debt soared 40 basis points yesterday, after Chief Executive Officer Lloyd Blankfein and others hired attorneys in relation to a U.S. probe of matters raised by the Senate’s Permanent Subcommittee on Investigations. The swaps have increased from 149 basis points since July 29. Credit-default swaps on Citigroup Inc. (C) climbed 29 to 260 and contracts on Morgan Stanley (MS) rose 30 to 335, CMA data show. Investor confidence in high-yield, high-risk debt plunged for a fourth day. The Markit CDX North America High Yield Index, which falls as investor confidence deteriorates, dropped 0.6 percentage point to 91.3 percent of face value, the lowest level since September 2009.
• Lilbyan Rebels Break Into Qaddafi Compound. Libyan rebels stormed Muammar Qaddafi’s compound in Tripoli after battling loyalist forces for control of the capital for a third day. Gunfire and explosions were heard from the presidential headquarters in Bab Al Aziziya after the rebels broke into the heavily fortified compound and raised their flag there, Al Arabiya television reported. NBC News broadcast live reports from inside the compound, in which gunfire could be heard as crowds of young men ran into buildings and around the grounds of the compound. Much of the gunfire was celebratory.
• FDIC 'Problem' Banks Shrink, First Time Since '06. The Federal Deposit Insurance Corp.’s list of “problem” banks fell in the second quarter for the first time since 2006 as the industry’s income improved and costs tied to bad loans eased. The confidential list of banks deemed at greater risk of collapse shrank by 23 firms to 865, the FDIC said today in its Quarterly Banking Profile. The last time that happened was the third quarter of 2006 before the credit crisis began, the agency said. Net income rose 38 percent to $28.8 billion from a year earlier, the eighth consecutive quarterly improvement, boosted by a seventh straight drop in provisions for bad loans.
• Gold Declines From Record Above $1,910. Gold dropped for the first time in seven sessions as some investors sold the metal after signs of slowing growth spurred a rally to a record $1,917.90 an ounce. Gold futures for December delivery fell $33.30, or 1.8 percent, to $1,858.60 at 12:58 p.m. on the Comex in New York. The metal for immediate delivery declined as much as 2.5 percent after touching a record $1,913.50 in London.
• July New-Home Sales Fall to Five-Month Low. Sales of new U.S. homes declined more than projected in July to the lowest level in five months, indicating the industry is struggling to stabilize two years into the economic recovery. Purchases fell 0.7 percent to a 298,000 annual pace after a 300,000 rate in June that was slower than previously estimated, figures from the Commerce Department showed today in Washington. The median projection in a Bloomberg News survey of economists called for a 310,000 rate in July.

Wall Street Journal:

• Earthquake Shakes U.S. East Coast.
  
• Greek Tourism Workers Stage Strike, Protest Over Cutbacks. Greek tourism workers walked off the job Tuesday in a 24-hour strike over government pension cuts, as dozens demonstrated outside three luxury hotels in the Greek capital to protest the cutbacks.
• Beijing Communist Party Chief Issues Veiled Warning to Weibo. Beijing's Communist Party chief issued a veiled warning to Chinese Internet portal Sina over its Weibo microblogging service after a visit to the company's headquarters, a sign of the government's growing anxiety over Weibo's explosive growth and spreading influence that threatens the government's media controls. Internet companies should "step up the application and management of new technology, and absolutely put an end to the fake and misleading information," Liu Qi, secretary of the Beijing Municipal Party Committee and a member of the Party's powerful Politburo, told company executives during Monday's visit according to state media.

Business Insider:

• Greenspan: "The Euro Is Breaking Down". Some dramatic comments from former Federal Reserve Chairman Alan Greenspan. "The euro is breaking down and the process of its breaking down is creating very considerable difficulties in the European banking system,” Greenspan said today, according to Bloomberg.
• 5.9 Magnitude Earthquake Shakes The East Coast, Centered Near DC.
• PETA Takes Its Sex-Crazed Marketing To The Next Level By Launching Porn Site.
• National Debt Has Increased Under Obama Faster Than Any Other President in History. An analysis by CBS News shows that the national debt has skyrocketed under President Barack Obama — increasing more than $4 trillion during his presidency. On average, the national debt increased $4.247 billion during each day Obama has been in office.
  

Zero Hedge:

• 7 Charts Showing The Lock Out Of European Capital Markets and The Surge In Counterparty Risk.
• Pershing Square Loses -6.7% In First 2 Weeks of August, Down -11% For The Year.
  

AppleInsider:

• Apple(AAPL) Struggles to Meet 13-Inch MacBook Air Demand Trigger Price Gouging.

Institutional Investor:

• Many Hedge Funds Weathered S&P Downgrade Storm. The first broad report of how hedge funds fared during the recent market decline is beginning to emerge. And so far it looks like a number of high-profile managers did a pretty good job of protecting their investors. This is especially true among the largest macro, multi-strategy and systematic traders.

Gallup:

• Obama Job Approval: 38% Approve, 54% Disapprove. (graph)

Reuters:

• Exclusive - Apple(AAPL) Suppliers Building Cheaper, 8GB iPhone 4 - Sources. Asian suppliers to Apple Inc have begun manufacturing a lower-priced version of its hot-selling iPhone 4 with a smaller 8 gigabyte flash drive, according to two people with knowledge of the matter.

Der Spiegel:

• Merkel Seeks to Forestall a Conservative Revolt. Chancellor Angela Merkel will meet conservative parliamentarians on Tuesday evening to try to allay their concerns about her management of the euro crisis. Many are unhappy about the EU deal to increase the scope of the bailout fund -- and are dissatisfied with Merkel's leadership style.

Handelsblatt:

• The German DIHK chamber of industry and commerce is against joint euro bonds as a solution for the current crisis in Europe, citing an interview with the DIHK head Hans Heinrich Driftmann. He considers euro bonds to be "absolutely counterproductive" at this point in time, the newspaper reported. Common euro-area bonds would be the equivalent of inviting countries to continue doing as before, Driftmann said. Countries need incentives "to regain their footing by their own efforts," he said.