Today's Headlines

Bloomberg:

- U.S. stocks fell, led by financial shares, as concern banks will report more losses overshadowed manufacturing and pending home sales data that topped estimates. Europe’s Dow Jones Stoxx 600 Index slid 1.8 percent, the most in two weeks, as HSBC Holdings Plc and UBS AG slumped.

- Paul Tudor Jones, the billionaire hedge-fund manager who outperformed peers last year, is wagering that Goldman Sachs Group Inc. and Morgan Stanley got it wrong in declaring the start of an economic recovery. Jones’s Tudor Investment Corp., Clarium Capital Management LLC and Horseman Capital Management Ltd. are taking a bearish stand as U.S. stock and bond prices rise, saying that record government spending may be forestalling another slowdown and market selloff. The firms oversee a combined $15 billion in so- called macro funds, which seek to profit from economic trends by trading stocks, bonds, currencies and commodities. “If we have a recovery at all, it isn’t sustainable,” Kevin Harrington, managing director at Clarium, said in an interview at the firm’s New York offices. “This is more likely a ski-jump recession, with short-term stimulus creating a bump that will ultimately lead to a more precipitous decline later.”

- EBay Inc.(EBAY) agreed to sell 65 percent of its Skype Internet-calling unit to an investor group led by Silver Lake for about $2 billion to focus on reviving sales at its main e-commerce site. The buyers will pay $1.9 billion in cash and will also give EBay a $125 million note, the company said in a statement today. Ebay, which had planned an initial public offering for Skype, will retain 35 percent of the business. The deal values Skype at $2.75 billion.

- American manufacturing expanded for the first time in 19 months, and pending sales of existing homes rose more than forecast, indicating the worst recession since the 1930s has ended. The Institute of Supply Management’s factory index posted its biggest two-month gain since 1983, rising to 52.9 in August; readings higher than 50 signal an expansion. The National Association of Realtors said signed purchase agreements for existing properties jumped 3.2 percent in July, for a record sixth consecutive gain. “We’re now in a recovery; for the next few months, the data should look relatively strong because of all the stimulus,” Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania, said in a Bloomberg Television interview. “The worry is for early next year when the benefit of the stimulus begins to fade.” The jump was led by new orders, with that measure increasing to 64.9, the highest level since December 2004. The production index reached 61.9. A gauge of export orders advanced to 55.5.

- Corn fell the most in a week and soybeans declined for a second day on signs that cool, wet weather in July and August improved prospects for crops in the U.S., the world’s biggest producer and exporter. About 69 percent of corn plants were in good or excellent condition as of Aug. 30, compared with 61 percent a year earlier, the U.S. Department of Agriculture said yesterday. An estimated 69 percent of soybeans got the top ratings, up from 57 percent a year earlier, the USDA said.

- Contracts on the Markit iTraxx Crossover Index of 44 companies with mostly high-yield credit ratings climbed 11 basis points to 609 basis points, according to JPMorgan Chase & Co. prices in London.

- Crude oil fell to the lowest price in almost two weeks as U.S. equities slipped on concern that the recent stock-market rally has outpaced the outlook for financial-company earnings. Crude oil for October delivery fell $1.38, or 2 percent, to $68.58 a barrel at 11:41 a.m. on the New York Mercantile Exchange. The contract touched $68.43, the lowest since Aug. 19.

- Hebei Iron & Steel Group, China’s second-biggest steelmaker, cut prices of reinforcing bars by 19 percent, the first reduction since April, according to Umetal Research Institute. The Hebei province-based mill cut benchmark prices of the product, used in buildings, by 950 yuan to 3,950 yuan ($578) a metric ton for September delivery, Hu Yanping, Beijing-based analyst with Umetal, an industry publication, said today. Benchmark spot steel prices in China have dropped 13 percent since Aug. 4 after gains this year led buyers to run down inventories.

- Threats by President Barack Obama and congressional leaders to push health-care legislation through the Senate without Republican support may be undercut by some Democrats whose support they need. With bipartisan efforts stalled, Democratic leaders are considering abandoning protocol to pass a measure with as few as 50 votes. Senate Budget Committee Chairman Kent Conrad and West Virginia’s Robert Byrd, the longest-serving senator in history, have warned against the idea. They aren’t alone. Democrats are looking at the reconciliation process because it provides a way around the 60-vote requirement, allowing a simple majority to pass measures aimed at cutting the federal budget deficit. “Using reconciliation to ram through complicated, far- reaching legislation is an abuse,” Byrd said in an April 29 statement. Besides Byrd and Indiana Senator Evan Bayh, one of the four Democrats who voted against the budget was Pennsylvania’s Arlen Specter, who said he disagreed with the provision allowing reconciliation for health care. The fourth, Nebraska Senator Ben Nelson, “opposes using reconciliation,” though he hasn’t ruled out voting for it, said spokesman Jake Thompson. Connecticut Senator Joseph Lieberman, an independent who caucuses with Democrats, told CNN on Aug. 23 the process would be a “real mistake.” Leaders may not be able to count on votes from Bayh and Democrat Senators Mary Landrieu of Louisiana and Blanche Lincoln and Mark Pryor of Arkansas, who prefer bipartisan legislation. “There are a number of moderate Democrats who are going to feel uncomfortable voting for a bill that no Republicans support,” said Andrew Laperriere, managing director of the International Strategy and Investment Group in Washington.

- US companies will spend less on land, buildings and equipment through next year than analyst anticipate, according to David J. Kostin, Goldman Sachs’ chief US investment strategist. Kostin and his team expect S&P 500 companies to lower so-called capital spending by 22% this year and 15% next year, according to a report. Such a drop would be the worst in more than 25 years. The team’s projection contrasts with the outlook of Goldman’s own industry analysts. The analysts expect a smaller decline – 18% - in 2009, followed by a 2% increase in 2010. Companies with relatively high levels of capital spending will benefit as investors “shift their focus from cost-cutting to sales growth” in the next two quarters, Kostin wrote.

- Ford Motor Co.(F) said August U.S. sales rose 17 percent and Chrysler Group LLC reported a 15 percent decline as the government’s “cash for clunkers” rebates lured shoppers to showrooms. The results trailed analysts’ estimates.

NY Times:

- The Case Against a Super-Regulator by Shelia C. Bair.

- Unemployment in the 16 countries that use the euro rose in July to the highest level in more than 10 years, showing that despite signs of recovery, the European economy continues to struggle. The jobless rate in the euro zone rose to 9.5 percent in July, the highest reading since May 1999, from 9.4 percent in June, Eurostat, the statistical service of the European Union, said Tuesday in Luxembourg.

Rapaport News:
- Chain store sales across the U.S. for the week ending August 29, 2009, fell 0.7 percent on a same-store basis, according to the weekly sales snapshot provided by the International Council of Shopping Centers (ICSC) and Goldman Sachs. The reading was the third consecutive slide for chain store sales as measured against comparable weeks in August 2008. ICSC predicts that this past month's same-store sales at the major chains will fall between 3.5 percent and 4 percent from one year ago. “Although the back-to-school calendar shifts will, on balance, boost year-over-year sales in August a tad, there was little discernible improvement in the trend during the entire month otherwise,” said Michael P. Niemira, ICSC chief economist.

Forbes:

- Polygon's Reade Griffith is a poster child for what's wrong with the hedge fund industry these days. A year ago, Griffith, heading into a disastrous year where he wound up losing 48%, gated investors, barring them from yanking out their money. Now he is getting the word out that he is trying to raise money for two new hedge funds, a Convertible Opportunity Fund and the European Equity Opportunity Fund. The funds, Griffith said in a recent letter to investors, have been launched with partner and employee capital.

Blogging Stocks:

- Schapiro said that regulators need the data to construct an audit trail to find out who is doing insider trading and market manipulation. The U.S. Senate is investigating the derivatives markets but is up against a brick wall because it cannot pin down who it is that actually pulled the trigger on the trades. So they are relying on the SEC to provide this data. Schapiro said that the SEC is having difficulty identifying derivative investors and the size of their trades.

NY Post:

- Disgraced former Gov. Eliot Spitzer has been privately talking with friends about a possible comeback, and is considering a run for statewide office next year, several sources told The Post. Less than 18 months after he left Albany in a prostitution scandal, Spitzer has held informal discussions in recent weeks about the possibility of making a bid for state comptroller or the US Senate seat currently held by Kirsten Gillibrand, sources said.The hooker-happy Democrat has also discussed his own halfway-decent poll numbers in recent surveys, which have shown him more popular than Gov. Paterson, whose own numbers have tanked.

Vanity Fair:

- Like the economy, V.F.’s annual ranking of the top 100 Information Age powers has been truly shaken up, with new blood emerging. Who’s in? Who’s out? Who’s top dog?

AP:

- Farmer’s Almanac predicts numbing cold this winter. Americans, you might want to check on their sweaters and shovels — the Farmers' Almanac is predicting a cold winter for many of you. The venerable almanac's 2010 edition, which goes on sale Tuesday, says numbing cold will predominate in the country's midsection, from the Rocky Mountains in the West to the Appalachians in the East. Managing Editor Sandi Duncan says it's going to be an "ice cold sandwich." "We feel the middle part of the country's really going to be cold — very, very cold, very, very frigid, with a lot of snow," she said. "On the East and West coasts, it's going to be a little milder. Not to say it's going to be a mild short winter, but it'll be milder compared to the middle of the country."

Rassmussen:

- Forty-two percent (42%) of U.S. voters say a group of people randomly selected from the phone book would do a better job than the current Congress. The latest Rasmussen Reports telephone survey finds that an identical number (42%) disagree, but 16% are not sure.

Politico:

- The raucous debate over health care could thwart the Senate’s enactment of sweeping energy and climate legislation this year, say Democratic aides, energy lobbyists and environmentalists. If Democrats fail to push through a health care bill — or get embroiled in even more contentious debate this fall — experts fear they’d lose much of the momentum necessary to get the controversial climate and energy legislation through the Senate.

- Democratic lawmakers will not be able to count on the AFL-CIO's support if they drop the public insurance option from the health care reform legislation, union officials said Tuesday. The AFL-CIO’s incoming president, Richard Trumka, outlined "three absolute musts" in any overhaul package: a public option, an employer mandate and no tax on employer-provided health benefits.

- White House officials are increasingly worried liberal, anti-war Democrats will demand a premature end to the Afghanistan war before President Barack Obama can show signs of progress in the eight-year conflict, according to senior administration sources. These fears, which the officials have discussed on the condition of anonymity over the past few weeks, are rising fast after U.S. casualties hit record levels in July and August.

Zogby:

- President Barack Obama's job approval rating has sunk to a record low of just 45%, the latest Zogby Interactive poll shows. Fifty-one percent of likely voters now say they disapprove of the President's job performance. The Zogby Interactive survey of 2,530 likely voters nationwide was conducted Aug. 18-20, 2009, and carries a margin of error of +/- 2.0 percentage points. Zogby International also uses a four-point scale of job performance. Using that measure, this latest survey finds 16% rate his job performance as excellent and 27% as good. Another 11% gave him a fair rating while 45% said his job performance is poor. Both scales show a significant drop from a Zogby International telephone poll conducted July 31-Aug. 4, which showed 53% approving of Obama's job performance, and 38% disapproving.

The Hill:

- The nation’s largest labor union and some allied Democrats are pushing a new tax that would hit big investment firms such as Goldman Sachs reaping billions of dollars in profits while the rest of the economy sputters. The AFL-CIO, one of the Democratic Party’s most powerful allies, would like to assess a small tax — about a tenth of a percent — on every stock transaction. Small and medium-sized investors would hardly notice such a tax, but major trading firms, such as Goldman, which reported $3.44 billion in profits during the second quarter of 2009, may see this as a significant threat to their profits. “It would have two benefits, raise a lot of revenue and discourage speculative financial activity,” said Thea Lee, policy director at the AFL-CIO.

USA Today:

- If the economy is slowly rebounding, ticket sales for many NFL teams have yet to take the corresponding bounce for the upcoming season. Two teams — the San Diego Chargers and the Jacksonville Jaguars— say it's likely they will have home TV blackouts this season due to an inability to sell out their stadiums. At least 10 other teams could also face blackouts.

- Four chief executives whose government-funded non-profit corporations are paid to deliver U.S. foreign assistance earned more than half a million dollars in 2007, a USA TODAY review of public tax records shows. Although President Obama and Congress placed a $500,000 cap on salaries at companies getting taxpayer bailouts, there is no such restriction on those that subsist on federal grants — even those delivering aid to some of the world's poorest regions. Two senior senators say the pay is excessive. "It seems to me that these are salaries that are outrageous, particularly if they're government contractors," said Sen. Chuck Grassley of Iowa, the ranking Republican on the Finance Committee, which has jurisdiction over non-profit compensation.

Financial Times:
- Gordon Brown has pledged tough action to clamp down on excessive remuneration for bankers as part of an international effort to rectify the systemic weakness that led to the global financial crisis. The prime minister said in an interview with the Financial Times that pay and bonuses should be based on long-term success not short-term speculative gains; banks should “claw back” bankers’ rewards if their performance suffered in subsequent years; and regulators should be able to impose higher capital requirements on financial institutions.

Globe and Mail:

- The potash market won't recover until 2011, CIBC World Markets warned on Tuesday as it cut its price target on Potash Corp. of Saskatchewan(POT) – the industry's largest producer of the fertilizer component.

Bear Radar

Style Underperformer:
Small-Cap Value (-2.76%)

Sector Underperformers:
Airlines (-4.19%), Banks (-4.10%) and REITs (-3.78%)

Stocks Falling on Unusual Volume:
AIG, HIG, UBS, DLLR, REP, AMX, VIP, RMBS, CMED, BAMM, BCRX, AIXG, STEC, CLNE, VPRT, NETL, DECK, BOLT, RUSHA, CIEN, OGXI, EWQ, EWP, HCN, PRF, CPY, EWO, AU and CGV

Stocks With Unusual Put Option Activity:
1) DFS 2) RMBS 3) AFL 4) UNH 5) HBC

Bull Radar

Style Outperformer:
Small-cap Growth (+.10%)

Sector Outperformers:
Semis (+.97%), Road & Rail (+.77%) and Biotech (+.36%)

Stocks Rising on Unusual Volume:
ISIL, SRX, TTM, KSS, TXT, USMO, AHL, CRMT, NEOG, RDEA, SINA, EBIX, CISG, SGEN, ITWO, ULTA, ARST, ACAP, NICE, CYOU, BRLI, APSG, ACLI, CTRP, CME, SHPGY, DY, BJS, ALJ, HGT and CBE

Stocks With Unusual Call Option Activity:
1) NVAX 2) FDX 3) MOS 4) NOK 5) RMBS

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Tuesday Watch

Late-Night Headlines
Bloomberg:

- The U.S. Internal Revenue Service is shifting authority to audit wealthy Americans suspected of offshore tax evasion to an elite division usually assigned to examining corporations as it prepares to receive data on 4,450 UBS AG Swiss bank accounts.

- American International Group Inc.(AIG) Chief Executive Officer Robert Benmosche told employees that New York Attorney General Andrew Cuomo was “unbelievably wrong” for drawing attention to staff who got retention bonuses. Benmosche criticized Cuomo and lawmakers during a town-hall style meeting this month for life insurance workers in Houston. Cuomo subpoenaed AIG in March during a national furor about $165 million in retention bonuses sent after the firm’s bailout and said those who returned the cash wouldn’t have their names published. That month, some employees received death threats and protesters visited the Connecticut homes of two AIG executives. “What he did is so unbelievably wrong,” Benmosche said during the Aug. 11 remarks, according to a record obtained by Bloomberg. “He doesn’t deserve to be in government, and he surely shouldn’t be the attorney general of the state of New York. What he did is criminal. You don’t create lynch mobs to go out to people’s homes and do the things he did.” After being approached by Bloomberg today about the remarks, AIG said that Benmosche “regrets his comments regarding Mr. Cuomo and the tone of those comments” and said that Cuomo resisted pressure to release names. Benmosche has blamed regulators for the company’s near collapse in remarks he’s made to employees since being appointed CEO this month. While comments in an earlier address focused on unnamed officials at the Federal Reserve and Treasury, Benmosche in Houston singled out Cuomo, the chief prosecutor of New York, where some of the world’s largest financial firms are based.

- CVS Caremark Corp.(CVS) and Walgreen Co.(WAG), the two largest U.S. drugstore chains, will offer free seasonal flu shots to unemployed and uninsured people as the U.S. jobless rate is predicted to rise to 10 percent. CVS will offer 100,000 free seasonal flu shots valued at about $3 million to job seekers, the Woonsocket, Rhode Island- based company said today in a statement. Walgreen, based in Deerfield, Illinois, will distribute $1 million in shots to the uninsured through its 7,000 U.S. stores and clinics.

- Former Illinois Governor Rod Blagojevich writes in a new book that White House chief of staff Rahm Emanuel wanted a “placeholder” put in the Chicago congressional seat he vacated so he could reclaim it in 2010. Blagojevich, who is awaiting trial on corruption charges, said he talked by phone with Emanuel Nov. 8, two days after his White House appointment was announced, and the then-U.S. representative asked whether it was possible to name someone to fill his seat who would be willing to step aside later. Emanuel wanted to return to the House after two years in the Obama administration to continue his quest to become speaker of the House one day, according to Blagojevich.

Wall Street Journal:

- Recent town-hall uproars weren't just about health care. They were also eruptions of concern that the government is taking on too much at once. That suggests trouble for the president's Democratic Party, and fears of losses in next year's midterm election are likely to shape the party's fall agenda.

- Bank of America Corp.(BAC) is offering to repay part of its bailout money, and the U.S. is pushing for the bank to pay nearly $500 million to shelve a tentative pact that would have had the government share its losses on certain assets. The moves, described by people familiar with the matter, both relate to an extra measure of federal aid given to help BofA complete its acquisition of Merrill Lynch & Co. Both sets of discussions, if completed, would enable BofA to reduce a layer of federal involvement in its affairs.

- Day after day, economists, politicians and journalists repeat the trope that the current recession is the worst since the Great Depression. Repetition may reinforce belief, but the comparison is greatly overstated and highly misleading. Anyone who knows even a bit about the Great Depression knows that this is false. The facts we face today are very different than the grim reality Americans confronted between 1929 and 1932. True, this recession is not over. But it would have to get improbably worse before it came close to the 42-month duration of the Great Depression, or the 25% unemployment rate in 1932. A more accurate comparison is to the 1973-75 recession. Today's recession is as deep and most likely won't be much longer than the one we experienced some three decades ago. By pointing this out, I do not intend to minimize the damage that the economic crisis has had on individuals and businesses. But as policy makers make decisions in order to alleviate the recession, they are not helped when economists overstate its severity.

- The head of the Securities and Exchange Commission on Monday sent a letter to chief executives at brokerage firms warning them against offering certain compensation arrangements that may leave customers at risk. "Recent press articles have reported that some broker-dealer firms may be engaging in a vigorous recruiting program for broker-dealer registered representatives, including large up-front bonuses and enhanced commissions for sales of investment products," SEC Chairman Mary Schapiro wrote in the letter, noting that chief executives have an obligation to police their policies for conflicts. "Certain forms of potential compensation may carry with them enhanced risks to customers," the letter continued. Schapiro said some compensation structures could lead representatives to believe they need to sell securities at a "sufficiently high level" to justify special arrangements they have received. Those pressures in turn, Ms. Schapiro continued, could "create incentives to engage in conduct that may violate obligations to investors' and lead to the sale of unsuitable investment products.

- Dell Inc.(DELL) will start selling networking gear made by Brocade Communications Systems Inc. under the Dell brand.

- Restaurants trying to get more families to dine out have a new recipe: Get rid of the French toast sticks. Put more broccoli and carrots on the menu. Let the kids eat free. The industry is scrambling to counter a tendency by recession-pinched parents to leave their children at home when they go out to eat. Restaurant visits among groups with kids fell 5% in the 52 weeks ended June 30 compared with a year earlier, according to researcher NPD Group. Restaurants are responding with revamped kids' menus, healthier food and kids-eat-free nights. Such moves are tricky to do well because restaurants must appeal to young palates while addressing parents' health concerns. This summer, P.F. Chang's China Bistro Inc.(PFCB) and The Cheesecake Factory Inc.(CAKE) added their first-ever kids' menus.

- Richard Trumka, the third-generation coal miner likely this month to assume the helm of the nation's largest labor federation, is launching a drive to court younger workers, many of whom don't see unions as relevant.

- The government's pay czar triggered a 60-day clock to rule on pay packages at seven firms receiving significant amounts of federal rescue funds, but he is expected to decide well ahead of that deadline, government officials said. Kenneth Feinberg, the Treasury Department's special master for compensation, has determined that the pay packages proposed by the companies are "substantially complete," a determination that requires him to rule by the end of October.

- Last week, International Atomic Energy Agency (IAEA) Director General Mohamed elBaradei attempted to whitewash Iran's nuclear weapons program by issuing a report ignoring substantial information about weaponization activities and downplaying continued noncooperation. Even the Obama administration apparently now understands that resuming the long-stalled "Permanent-Five plus-one" negotiations (the U.N. Security Council's permanent members plus Germany) with Iran is highly unlikely to halt Tehran's nuclear ambitions.

NY Times:

- Four years after she took over management of the General Motors pension plans, Nancy Everett finds herself in an unexpected controversy. Performance is not her problem. The G.M. pension fund has withstood the unforgiving financial markets of the last year or so better than many other funds, using a conservative strategy that is intended to minimize risk. But the government is looking closely at the pay of all top G.M. employees after bailing out the automaker. And that includes the unit that manages the pension fund, whose name was changed to Promark Global Advisors this year. Ms. Everett, chief executive of Promark, and 14 of her associates are among the 25 highest paid at the automaker. Their compensation has been submitted for review to Kenneth Feinberg, the government’s pay czar.

Business Week:
- Lost amid the talk about Goldman Sachs(GS) being a vampire squid and making money from the subprime mortgage bust is the fact that the firm lost $6 billion trading, of all things, its own stock. Yes, Goldman, which likes to be known as the smartest shop on Wall Street, bought high and sold low, plain and simple. How it happened might even show you how to make money at Goldman’s expense a few years from now. The heart of Goldman’s mistake was excessive self-confidence. In 2006 through early 2008, the firm spent nearly $18 billion buying 100 million shares of its own stock, paying $183 a share on average. Then the financial panic hit in September and Goldman had to replace the money. The firm sold 94 million shares in offerings in the fall and spring to raise $12 billion at $123 a share. It also sold preferred stock and warrants to the government and Warren Buffett at similarly low prices, but even without counting those special deals, the bottom line is clear: Goldman lost more than $6 billion because it was wrong to think it had enough capital to get through the trouble it knew was coming.

Washington Post:

- With weeks to go until a U.S. deadline for opening talks, a spokesman for Iranian President Mahmoud Ahmadinejad said Monday that he plans to travel to New York to give a speech during the annual meeting of the United Nations General Assembly on Sept. 23. The announcement came as international pressure continued to build for sanctions unless Iran is willing to negotiate over its nuclear program. The visit will roughly coincide with a Sept. 15 deadline set by the White House for Iran to respond to an offer to open talks on the nuclear issue.

Politico:

- After two of the deadliest months of the war in Afghanistan, the commander of U.S. forces there said Monday that “success is achievable” but will require a change in strategy. “The situation in Afghanistan is serious, but success is achievable and demands a revised implementation strategy, commitment and resolve, and increased unity of effort,” said Gen. Stanley McChrystal, commander of nearly 60,000 U.S. troops in Afghanistan.

- Buffalo News: Rangel should resign. The Buffalo News has had enough of Charlie Rangel, following the disclosure that the House Ways and Means Chairman massively underreported his assets. It'll be interesting to see if other papers follow suit. If the Times eventually draws the same conclusion [which they aren't likely to do prior to the conclusion of the interminable Ethics Committee probe], look out.

Reuters:

- Two prominent Republican congressmen on Monday said trustees for the government's stake in American International Group lacked accountability and requested an audit of the arrangements by the U.S. bailout inspector general. After AIG was bailed out last year with about $180 billion in U.S. taxpayer support, a three-member trust was created to manage and eventually dispose of the government's effective 80 percent stake in the insurance giant. Rep. Darrell Issa, the top Republican on the House of Representatives Oversight and Government Reform Committee, and Rep. Spencer Bachus, the ranking Republican on the House Financial Services Committee, sent the audit request to Neil Barofsky, inspector general for the $700 billion Troubled Asset Relief Program. They said the lack of transparency and accountability in the AIG trust was relevant if Treasury moves forward with a similar trust agreement for its interest in Citigroup (C), another financial institution with extraordinary government support. "It is not clear how the American people can hold the AIG trustees accountable for their actions," wrote Issa and Bachus. "While the trustees have the discretion to exercise full control over AIG, since the American taxpayers own nearly 80 percent of its shares, the trustees cannot be fired if their decisions conflict with the preferences of government officials. This raises a troubling and urgent question: Who can the American taxpayers hold accountable if the trustees make a decision that is not in their best interest?"

- U.S. gold and soybean markets fell on Monday following a weekend report that China's state companies may default on commodity derivative contracts with banks providing over-the-counter hedging services. Traders in other commodities markets in the United States were cautious, underscoring China's predominance as a buyer in global markets from metals to grain to oil after it played a key role in rallying prices to record highs last year.

- Chile said on Monday that copper prices could average $2.13 per lb between 2010 and 2019, based on estimates from a panel of experts used to help draft next year's national budget bill. The 12 experts, which include academics and think tank analysts, based their projections on prices at the London Metal Exchange MCU3.

Financial Times:

- Google(GOOG) has forged a distribution alliance with Sony’s PC division and is in talks with other computer makers as it looks to promote its well-regarded but little-used Chrome browser.

- Tight credit conditions are likely to weaken the UK’s economic recovery, according to a report published on Tuesday. A survey from the Engineering Employers’ Federation showed a rise in the cost of borrowing and a fall in the number of companies reporting lower borrowing costs in the third quarter. The report also noted only a small reduction in the number of UK manufacturers reporting more difficult access to credit, in spite of interest rates falling to record low levels and efforts to free up liquidity in the banking system. The survey showed 47 per cent of companies reported an increase in the cost of finance in the past two months. This compared with 44 per cent in the second quarter and 37 per cent in the first quarter. Furthermore, only 7 per cent of companies saw a fall in the cost of borrowing, down from 10 per cent in the second quarter. Some 56 per cent of manufacturers also reported higher costs for new lines of borrowing, up from 51 per cent in the second quarter. A third of companies saw a reduction in the availability of new lines of borrowing, with 36 per cent of small companies and 17 per cent of larger companies reporting a fall in the availability of new lending lines.

Nikkei English News:

- Toshiba Corp.’s semiconductor business is likely to return to profit in September because of increased demand for consumer electronics. The company’s chip business may have an operating profit of a few billion yen in the July-September quarter. Elpida Memory Inc. may also return to profit in September the report said.

Late Buy/Sell Recommendations
Citigroup:

- Upgraded (LMT) to Buy, target raised to $90.

- Reiterated Buy on (INTC), target raised to $25.

- Upgraded (ALXN) to Buy, target $55.

CSFB:

- Raised (RIMM) to Outperform, target $95.

- Raised (MOT) to Outperform, target $9.50.

- Reiterated Outperform on (PALM), target $18.

- Cut (NOK) to Underperform.

Night Trading
Asian Indices are -.50% to +.75% on average.

Asia Ex-Japan Inv Grade CDS Index 139.0 +4.5 basis points.
S&P 500 futures +.08%.
NASDAQ 100 futures +.11%.

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Earnings of Note
Company/EPS Estimate
- (ADCT)/.14

- (DCI)/.30

- (TTWO)/-.68

- (PAY)/.18

Economic Releases

10:00 am EST

- ISM Manufacturing for August is estimated to rise to 50.5 versus 48.9 in July.

- ISM Prices Paid for August is estimated to rise to 57.8 versus 55.0 in July.

- Construction Spending for July is estimated unch. versus a .3% rise in June.

- Pending Home Sales for July are estimated to rise 1.6% versus a 3.6% gain in June.

Afternoon:

- Total Vehicle Sales for August are estimated at 13.3M versus 11.3M in July.

Upcoming Splits
- None of note

Other Potential Market Movers
- The weekly retail sales reports, ABC consumer confidence reading and Morgan Stanley Global Industrials Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and mining shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Lower, Weighed Down by Commodity, Homebuilding, Airline and Education Shares

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