Tuesday Watch

Weekend Headlines
Bloomberg:

- Employers kept Americans’ working hours near a record low in August, signaling that economic growth is poised to reward companies with added profits while postponing any recovery in the job market. The average workweek held at 33.1 hours, six minutes from the 33 hours in June that was the lowest since records began in 1964, the Labor Department said yesterday. The report also showed that while payrolls fell by the least since August 2008, the unemployment rate rose to a 26-year high of 9.7 percent. The preconditions for gains in payrolls, including giving the army of part-timers longer hours and taking on additional temporary employees, weren’t met last month. At the same time, with economic growth forecast to resume this quarter, the figures set the stage for a surge in worker productivity and drop in labor costs that will stoke corporate profits.

- Global mining mergers and acquisitions, down more than 50 percent this year, are set to recover in the first quarter as metal prices surge on signs the worst recession since World War II is easing. “You are going to get a greater number of deals being done with the existing majors and also with the mid-tier companies becoming majors themselves,” said Eric Lilford, head of Australia mining at Deloitte Corporate Finance in Perth. “By the end of first quarter of 2010, we will be looking at a stronger position overall for mergers and acquisitions.”

- 3M Co.(MMM), the maker of 55,000 products from Post-It notes to electronic road signs, will make acquisitions over the next year of small- and medium-sized companies that offer the possibility of growth, Chief Executive George Buckley said. Buckley said the St. Paul, Minnesota-based company finally sees the “signs of improvement” in the global economy it had been looking for, and will begin to make acquisitions. 3M may target “different businesses” in Europe, Asia or the United States, Buckley said in an interview today in Cernobbio, Italy, without giving further details.

- The first new genes tied to Alzheimer’s disease in a decade have been identified by European scientists, adding insight into the biology of the most common cause of dementia and potentially leading to treatments.

- Russia’s ruble will fall 10 percent by March as the government fails to curb its deficit and the central bank comes under political pressure to keep liquidity flowing and raise the money supply, Capital Economics said. “We’re walking a tightrope,” Neil Shearing, emerging Europe economist at Capital Economics Ltd. in London, said by telephone. “If the Kremlin could have it their own way, what they would have is unsecured loans to the banking sector and a bigger deficit.”

- Soybean exporters in the U.S., the largest supplier, have sold as much as they can physically ship in the first months of the harvest as global demand gains, said Oil World, a global provider of information on oilseeds. “The U.S. is almost sold out for exports in October and November for soybeans and soybean meal,” Thomas Mielke, executive director of Oil World, said in an interview. “It’s going to be a very big logistical challenge for the U.S. exporters to satisfy world import demand in a timely manner.”

- Ron Bloom, head of the government’s auto task force, was named President Barack Obama’s senior adviser for manufacturing policy as part of an effort to boost employment in a sector where jobs have been vanishing for 30 years. Bloom, a former United Steelworkers union adviser and Lazard Ltd. investment banker, helped guide General Motors Co. and Chrysler Group LLC through bankruptcy as part of the government’s rescue of the auto industry. In his new role, he will plan Obama’s agenda to “revitalize” manufacturing jobs, according to a statement from the White House Press Secretary.

- The cost of protecting European corporate bonds from default fell, according to traders of credit-default swaps. Contracts on the Markit iTraxx Crossover Index of 44 companies with mostly high-risk, high-yield credit ratings declined 12 basis points to 605, according to JPMorgan Chase & Co. prices at 16:25 p.m. in London.

- Family members of a U.S. Securities and Exchange Commission enforcement official, whose unit got a tip in 2005 that Bernard Madoff may be running a Ponzi scheme, entrusted $2 million to the scam, the agency’s watchdog said.

- September, historically the worst month for European stocks, can also yield gains when markets are within a longer-term bull rally, according to JPMorgan Chase & Co.’s quantitative strategists. The MSCI Europe Index has dropped 1.6 percent in September on average since 1969, losing in 52 percent of cases, JPMorgan’s London-based quant analysts Matthew Burgess and Marco Dion wrote in a report today. When the market has risen in the previous six months, then the European benchmark increased an average 1.1 percent in September, they added. Since the MSCI Europe has rallied 40 percent in the six months to the end of last week, “we consequently see a strong probability (a 2 in 3 chance) of September offering positive returns,” wrote the strategists.

- Iran said it developed a defense system to combat cruise missiles, state-run Press TV reported, citing the commander of the Iranian air defense headquarters. “Today, we are able not only to identify stealth cruise missiles, but also destroy them,” Press TV cited Brigadier General Ahmad Miqani, who commands the Khatam al-Anbiya air base, as saying yesterday.

- Iranian President Mahmoud Ahmadinejad ruled out negotiations on his country’s nuclear program while saying he is willing to discuss other international issues in public with President Barack Obama. At his first formal press conference since his June 12 re- election, Ahmadinejad said today he didn’t recognize deadlines for talks on Iran’s nuclear plans. “Iran’s nuclear issue is over,” he said. “We will never negotiate Iran’s undeniable rights.”

- Israeli Defense Minister Ehud Barak approved the building of 455 housing units in the West Bank, defying U.S. demands for a freeze on settlement construction. The Palestinian Authority immediately condemned the move, saying it “undermines the belief that Israel is a credible partner for peace.” A settler leader pledged to fight any move by Prime Minister Benjamin Netanyahu to halt further building.

- Former Federal Reserve Chairman Alan Greenspan said banks should be forced to hold more capital on their balance sheets, reinforcing a weekend push by finance chiefs from the Group of 20 nations. “Capital requirements even during non-crisis periods have to have a larger buffer,” the 83-year-old former policy maker said today via teleconference to the Antique India Markets Conference in Mumbai. “We do need significant changes.” Noting the world economy was emerging from of the financial crisis “fairly quickly,” Greenspan made his call for tighter capital requirements two days after a G-20 meeting in London proposed having banks increase the quantity and quality of assets they keep in reserve for when economies stumble.

- Geneva funds of hedge funds have failed to repair the damage caused by market losses and Bernard Madoff as investors withdrew money four times faster than the global average in July. Withdrawals climbed to $2 billion from $500 million in June, according to data compiled by Eurekahedge Pte., which collects data on hedge funds worldwide. Assets invested in Geneva-based funds of hedge funds have slumped 74 percent to $14.2 billion since the end of 2007. Outflows, relative to the size of Geneva’s funds of funds industry, outpaced those worldwide as local banks struggled to restore investor confidence after Madoff-related losses of about $7 billion.

Wall Street Journal:

- Tens of thousands marched through Venezuela's capital on Saturday to protest what they call growing authoritarianism by President Hugo Chávez.

- Van Jones, President Barack Obama's adviser on "green jobs," resigned his post overnight, after a series of controversial comments came to light triggering withering attacks from conservatives. At midnight, the White House released Mr. Jones' resignation letter from the White House Council on Environmental Quality. Mr. Jones has been in the center of a maelstrom on conservative radio and television talk shows since a video surfaced last week showing him calling Republicans a vulgar epithet. Since then, other controversies have emerged, such as Mr. Jones saying black students would have never committed a massacre such as the one at Colorado's Columbine High School. His name also appeared on a 2004 petition calling for the government to investigate its own culpability in the attacks of Sept. 11, 2001.

- Warning: The Deficits Are Coming! The former head of the Government Accountability Office is on a crusade to alert taxpayers to their true obligations.

- The Jobless Stimulus. It’s still not too late to redirect $400 billion to business tax cuts.

- Agencies across the federal government Tuesday will start ordering contractors to use an electronic immigration system to verify the legal status of their roughly 3.8 million workers, barring an emergency stay from a federal appeals court in Virginia. The sweeping new mandate, crafted by the Bush White House but being implemented by the Obama administration, represents a significant expansion for the so-called E-Verify system, which government officials and independent experts expect to become mandatory for all private employers nationwide in the future. About 169,000 federal contractors and subcontractors will eventually be covered by the program taking effect Tuesday. U.S. District Court Judge Alexander Williams, Jr., of Maryland, rejected an 11th-hour-effort late Friday by the U.S. Chamber of Commerce and other business groups to delay the mandate while a federal appeal is pending.

- MGM Mirage(MGM) has seen a "profound" improvement in the performance of its struggling casino in Macau this summer, Chief Executive Jim Murren said in an interview Friday.

- Cadbury PLC's quick rejection of Kraft Foods Inc.'s surprise 10.2 billion pound ($16.73 billion) takeover offer sets up what could be a drawn out struggle for the iconic U.K. confectioner, which has long harbored bigger ambitions of its own. Kraft's cash-and-stock bid was disclosed early Monday and swiftly rejected by the Cadbury board, which said the bid "fundamentally undervalues" the company.

- Honda Motor Co. will likely launch an all-electric car in the U.S. in a few years, according to executives familiar with the matter, as rising interest in fuel efficiency prompts increasing interest in battery-powered vehicles.

CNBC.com:
- Large U.S. industrial manufacturers are far more optimistic about domestic and global economies than they were three months ago, but most still expect revenue to be flat or down over the next 12 months, according to a quarterly survey. The survey, by the PricewaterhouseCoopers (PwC) consultancy, found 43 percent of respondents are optimistic about the U.S. economy over the next 12 months, up a whopping 27 percentage points from the first quarter. Those saying they are pessimistic fell to 18 percent, down an even larger 37 points. Asked about prospects for the global economy, 43 percent said they were optimistic, more than triple the number who said so in the first quarter.

IBD:
- For nearly 20 years, American Superconductor (AMSC) limped along without a single profitable quarter. Then, over a lobster dinner in Boston, founder and CEO Gregory Yurek cut a deal that put it in the forefront of a blossoming global industry. American Superconductor had struggled to find commercial uses for its high-powered, supercooled cables. But in acquiring Windtec, a small Austrian designer of wind turbines, Yurek was suddenly poised to play in the rapidly developing Chinese wind-farm market.

NY Times:

- PRECISELY one year ago, we lucky taxpayers took over Fannie Mae and Freddie Mac, the mortgage finance giants that contributed mightily to the wild and crazy home-loan-boom-turned-bust. In that rescue operation, the Treasury agreed to pony up as much as $200 billion to keep Fannie in the black, coughing up cash whenever its liabilities exceed its assets. According to the company’s most recent quarterly financial statement, the Treasury will, by Sept. 30, have handed over $45 billion to shore up the company’s net worth. It is still unclear what the ultimate cost of this bailout will be. But thanks to inquiries by Representative Alan Grayson, a Florida Democrat, we do know of another, simply outrageous cost. As a result of the Fannie takeover, taxpayers are paying millions of dollars in legal defense bills for three top former executives, including Franklin D. Raines, who left the company in late 2004 under accusations of accounting improprieties. From Sept. 6, 2008, to July 21, these legal payments totaled $6.3 million. With all the turmoil of the financial crisis, you may have forgotten about the book-cooking that went on at Fannie Mae. Government inquiries found that between 1998 and 2004, senior executives at Fannie manipulated its results to hit earnings targets and generate $115 million in bonus compensation. Fannie had to restate its financial results by $6.3 billion.

- His publicist has described the book, published by Phoenix Books, as a “six-figure deal.” But in his writing, Mr. Blagojevich seems to have a specific message for the public, and perhaps more precisely, for those who might sit on his jury in a federal trial next year: He did nothing corrupt, though others have. He then lays out what he portrays as Chicago’s gritty, crass political rules, established long before him, in which power is traded for favors. Amid descriptions of his childhood in a working-class, immigrant family; comparisons of himself to numerous Shakespearean characters; and his reflections on finding himself briefly inside a federal cell, where he did push-ups, he says, to pass the time, Mr. Blagojevich repeatedly mentions President Obama and his aides. The former governor seems eager to remind readers of his links (and similarities, in his eyes) to President Obama, who also came out of Illinois Democratic Party politics. Although most Democrats here say Mr. Obama was never especially close to Mr. Blagojevich, the former governor devotes space in the book to describe meeting Mr. Obama for the first time 14 years ago, greeting Mr. Obama at Mr. Blagojevich’s victory party when he was elected governor in 2002, and reminding readers of both politicians’ contacts with Antoin Rezko, a real estate developer and political fund-raiser who was convicted last year of fraud and bribery.

- In a last effort to give the Senate a bipartisan health care bill, the chairman of the Senate Finance Committee circulated a comprehensive proposal on Sunday to overhaul the health care system and proposed a new fee on insurance companies to help pay for coverage of the uninsured. The proposal is the culmination of more than a year of work by the chairman, Senator Max Baucus, Democrat of Montana. A similar fee was proposed by several liberal Democrats in July. In making it part of his proposal, Mr. Baucus may help cover the costs of the bill but also risks alienating Republicans whom he is trying to win over. Mr. Baucus is struggling to forge a bipartisan consensus among 6 of the 23 senators on his committee before President Obama puts new pressure on lawmakers in an address to a joint session of Congress on Wednesday evening. The proposal by Mr. Baucus does not include a public option, or a government-run insurance plan, to compete with private insurers, as many Democrats want.

- One aftershock of the collapse of Lehman Brothers 12 months ago was the drastic reshaping of the prime brokerage business. The firm’s failure shook confidence in Morgan Stanley and Goldman Sachs, driving away hedge fund clients. A year later, Deutsche Bank and Credit Suisse have emerged among the winners. It’s meaningful business, too. Estimates from Sanford Bernstein put global prime brokerage revenues at a peak of $12.4 billion last year. The relationships also help attract hedge fund trading business, which spins off an additional $12 billion or so of revenue. All told, that amounts to nearly a tenth of global investment banking revenues in 2007.

- The A.F.L.-C.I.O.’s president has signaled a significant shift to try to move a long-stalled pro-union bill, saying he would support a change that calls for speedy unionization elections, a provision that would replace the much-attacked card-check provision.

- This August, the teenage unemployment rate — that is, the percentage of teenagers who wanted a job who could not find one — was 25.5 percent, its highest level since the government began keeping track of such statistics in 1948. Likewise, the percentage of teenagers over all who were working was at its lowest level in recorded history.

- After the mortgage business imploded last year, Wall Street investment banks began searching for another big idea to make money. They think they may have found one. The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die. The earlier the policyholder dies, the bigger the return — though if people live longer than expected, investors could get poor returns or even lose money. Either way, Wall Street would profit by pocketing sizable fees for creating the bonds, reselling them and subsequently trading them. But some who have studied life settlements warn that insurers might have to raise premiums in the short term if they end up having to pay out more death claims than they had anticipated.

- At least 2,000 students at Washington State University have reported symptoms of the H1N1 flu virus, university and local health officials said, in what appeared to be one of the largest outbreaks of the virus on a college campus. “It’s real,” Sally Redman, a registered nurse who works in student health services at Washington State, said Saturday. “We’ve had a constant stream of people.”

- Movie Studios See a Threat in Growth of Redbox.

- The inside of computers has been Intel’s territory, as the world’s biggest maker of microprocessors reminds consumers with its “Intel Inside” campaign. The cellphone’s guts have been the domain of Qualcomm. As the cellphone becomes more like a computer and the computer more like a cellphone, it was inevitable that the two chip makers would clash.

- The natural gas industry has enjoyed something of a winning streak in recent years. It found gigantic new reserves, low prices are encouraging utilities to substitute gas for coal, and cities are switching to buses fueled by natural gas. But its luck has run out in Washington, where the industry is having trouble making its case to Congress as it writes an energy bill to tackle global warming. For all its pronouncements that gas could be used to replace aging, inefficient coal-fired power plants — and reduce greenhouse gas emissions in the process — lawmakers from coal-producing states appear committed to keeping coal as the nation’s primary producer of power. Those influential lawmakers, from both parties, say that new technologies under development to capture and bury emissions of coal are a better bet than gas for long-term solutions to climate change.

LA Times:

- California's Gov. Arnold Schwarzenegger has just offered a public reward of $100,000 for information leading to the arrest and conviction of the arsonist(s) who set the largest wildfire in Los Angeles County's history. Authorities have traced the ignition point just off a public road and say they found the substance used to start the historic blaze, but they would not identify it.

- After a summer of healthcare battles and sliding approval ratings for President Obama, the White House is facing a troubling new trend: The voters losing faith in the president are the ones he had worked hardest to attract. New surveys show steep declines in Obama's approval ratings among whites -- including Democrats and independents -- who were crucial elements of the diverse coalition that helped elect the country's first black president.

Business Week:
- Housing’s Hidden Strength. Industry lobbyists are urging more tax credits, but home sales seem to have momentum of their own.

- Hovnanian Enterprises disappointed Wall Street this week with an earnings report that showed deep revenue and profit declines. But CEO Ara Hovnanian, who said that new home contracts have improved in recent months, sounded upbeat about the future. Hovnanian said the company would raise prices, cut incentives, buy land and reopen two projects it mothballed in Southern California and Arizona. Hovnanian’s announcement is just the latest sign of new-found confidence in the housing market.

- Why China’s Chip Industry Won’t Catch America’s.

USA Today:

- The Democrat-driven Cash for Clunkers program appears to have been a bigger boon for blue states than red. Eight of the top 10 states taking advantage of the rebate program voted for Barack Obama in 2008 (blue states), while seven of the bottom 10 backed Republican John McCain (red states), according to a Gannett state-by-state analysis of rebates per licensed driver.

Politico:

- School districts from Maryland to Texas are fielding angry complaints from parents opposed to President Barack Obama’s back-to-school address Tuesday – forcing districts to find ways to shield students from the speech as conservative opposition to Obama spills into the nation’s classrooms. The White House says Obama’s address is a sort of pep talk for the nation’s schoolchildren. But conservative commentators have criticized Obama for trying to “indoctrinate” students to his liberal beliefs, and some parents call it an improper mix of politics and education.

Rasmussen Reports:

- Leading liberals are already thinking the unthinkable: Challenging President Obama for the Democratic nomination in 2012. According to a report on the left-leaning Huffington Post website, MSNBC host Keith Olbermann and Eugene Robinson, an African-American national columnist for The Washington Post, discussed just such a possibility Thursday night. Robinson said Obama needs to be careful how he handles the health care reform issue and the continuing wars in Afghanistan and Iraq. Olbermann said the president has “compromised on everything so far and as self-defeating as it may be, the progressive caucus and progressives would abandon him if necessary, if this was to be the policy of this administration into 2012. If it’s necessary to find somebody to run against him, I think they’d do it, no matter how destructive that may seem.”

- Forty-seven percent (47%) of U.S. voters say global warming is caused by long-term planetary trends rather than human activity. However, the latest Rasmussen Reports national telephone survey finds that 42% still blame human activity more for climate change, while five percent (5%) say there is some other reason. Except for June when the two points of view were virtually tied, voters have been trending away from blaming human activity since January.

- The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 28% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-one percent (41%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -13 (see trends). Sixty percent (60%) now believe the President is at least as ethical as most politicians. On health care reform, 83% say that proof of citizenship should be required before anyone can receive government subsidies.

Forbes:

- Consumer staples, information technology, health care and dividend-paying stocks haven't gotten the attention they deserve. Look into it.

Foreign Policy:

- How China Cooks Its Books. It's an open secret that China has doctored its economic and financial statistics since the time of Mao. But could it all go south now? In February, local Chinese Labor Ministry officials came to "help" with massive layoffs at an electronics factory in Guangdong province, China. The owner of the factory felt nervous having government officials there, but kept his mouth shut. Who was he to complain that the officials were breaking the law by interfering with the firings, he added. They were the law! And they ordered him to offer his workers what seemed like a pretty good deal: Accept the layoff and receive the legal severance package, or "resign" and get an even larger upfront payment. "I would estimate around 70 percent of workers took the resignation deal. This is happening all over Guangdong," the factory owner said. "I help the Department of Labor, and they'll help me later on down the line." Such open-secret programs, writ large, help China manipulate its unemployment rate, because workers who "resign" don't count toward that number. The government estimates that roughly 20 million migrant factory workers have lost their jobs since the downturn started. But, with "resignations" included, the number is likely closer to 40 million or 50 million, according to estimates made by Yiping Huang, chief Asia economist for Citigroup. That is the same size as Germany's entire work force. China similarly distorts everything from its GDP to retail sales figures to production activity. This sort of number-padding isn't just unethical, it's also dangerous: The push to develop rosy economic data could actually lead China's economy over the cliff.

Reuters:

- A weekly measure of future U.S. economic growth rose in the latest week, while its yearly growth rate surged to a 38-year high that suggests the recovery is on track. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to 124.7 in the week to August 28 from a downwardly revised 124.3 in the previous week, originally reported as 124.4. The index's annualized growth rate rose to 20.8 percent from 19.6 percent a week earlier. The latest reading was the index's highest yearly growth rate since the week to May 21, 1971, when it stood at 21.3 percent. "With WLI growth rising to a new 38-year high, U.S. economic growth is poised for a stronger snap-back than most expect," said ECRI Managing Director Lakshman Achuthan. The index was pulled higher this week by stronger housing activity, he said. ECRI has predicted that the longest U.S. recession in more than a half-century will end before the summer is out. Last week, Achuthan said a double-dip recession in the fourth quarter is "out of the question."

Financial Times:

- Yukio Hatoyama, Japan’s incoming prime minister, has vowed to stick by his Democratic party's manifesto goal of slashing greenhouse gas emissions by 2020 and has promised to draw up a “Hatoyama Initiative” laying out how rich nations should support the developing countries build low-carbon economies. In an election manifesto issued before the DPJ toppled the long-ruling Liberal Democratic party in last month's historic general election, the decade-old opposition said it would aim to cut emissions of the gases blamed for global warming by 25 per cent from 1990 levels by 2020.

- Leading US trade unions on Monday launched a week of public rallies urging Barack Obama to stand by his campaign pledge to include a controversial government insurance option in his signature healthcare reform effort. But Mr Obama, who will gamble his healthcare reform efforts on a prime-time speech on Wednesday to the joint houses of Congress, in an echo of what Bill Clinton unsuccessfully tried in 1993, is coming under equally intense pressure from moderate Democrats to abandon the public option. The union campaign, which coincided with Labor Day, the public holiday, follows unmistakable signs that the Obama administration is prepared to bargain away the public option with senior officials at the weekend describing it as a “valuable tool” of healthcare reform – rather than an indispensable one. According to MoveOn.org, a liberal group that helped whip up the surge of volunteers to help deliver victory to Mr Obama last November, it managed to get 200 former Obama election staffers, 13,000 volunteers and 23,000 campaign donors to sign a petition insisting Mr Obama retain the public option on its first day of circulation last week. “Letting the [private] insurance companies win would not be change we could believe in,” the group said. But moderate Democrats such as Mr Warner, a former governor of Virginia who was seen as a frontrunner for the 2008 Democratic presidential nomination before he unexpectedly withdrew, thus paving the way for Mr Obama’s candidacy, say the president should recalibrate his whole approach tomorrow night. They point to growing public concern at the endless horizon of budget deficits, with $9,000bn in added debt projected over the coming decade. They point out that the cost of healthcare, which eats up about 17 per cent of US gross domestic product, is set to rise to a quarter of national income over that period. In addition, they point out that opinion polls show that most Americans rate healthcare reform as a low priority compared with generating jobs, controlling the budget and restoring the economy. “The president should set out a plan to reduce the costs of healthcare because it is on course to bankrupt our economy,” said Mr Warner. “Then he should lay out how we would pay for the expansion of healthcare coverage to the uninsured through the savings we have generated.”

TimesOnline:
- Cut bankers’ bonuses and we will all suffer.

- We will sink, not swim, in a sea of new rules. Pay controls are a sign of panic. Leaders from Edward III to Edward Heath have discovered that they do not work.

Telegraph:

- Jack Straw has reignited the row over the release of the Lockerbie bomber by admitting for the first time that trade and oil were an essential part of the UK Government’s decision to include him in a prisoner transfer deal with Libya. The Justice Secretary said he was unapologetic about including Abdelbaset al Megrahi in the agreement, citing a multi-million-pound oil deal signed by BP and Libya six weeks later. The admission directly contradicts Gordon Brown's insistence only days ago that oil deals were not a factor in the prisoner's release.

- The IMF has widened its forecast for Britain’s economic contraction to 4.5% this year, compared with an earlier forecast of 4.2%, citing a leaked report due for release in October. The fund expects global gross domestic product to shrink 1.3%, less than the former forecast of 1.4%.

- Nobel economist sees a roaring recovery. While the banking crash no doubt had its frightening moments, the crisis has in his view been overstated to advance a sweeping collectivist agenda. Stripped of drama, the US recession is following the pattern of typical downturns. It is no worse than 1973-1974, he says. Unemployment, now 9.7pc, will peak at levels far below the post-War high of 10.8pc in the early 1980s. "It's over. Forecasts of a Great Depression turned out to be wrong," he said. As keeper of the free-market flame at the University of Chicago, Dr Becker has been watching Washington long enough to know that once Big Government intrudes deeply into wide areas of the economy it becomes nigh impossible to dislodge.

Handelsblatt:

- HSBC Holdings Plc Chairman Stephen Green said world economic activity shows signs of bottoming out, predicting Europe and the US will recover “only very slowly,” citing an interview. Central banks should make managing credit expansion one of their primary tasks to prevent the formation of credit bubbles, Green said.

Toronto Star:

- Ottawa is eyeing a climate change plan that would allow Alberta's oil sands to continue growing – and polluting – but would clamp down on industries in the rest of the country, multiple sources have told the Toronto Star.

The Age:

- Australian will be told to drink and smoke less and consumer less junk food by a new preventive health watchdog that will begin monitoring the health system within months. Laws for a national preventative health agency will be introduced to Parliament within the next fortnight, forming part of the government’s plan to cut rates of preventable illnesses such as diabetes, heart disease and some cancers, citing federal Health Minister Nicola Roxon.

China Securities Journal:

- China will take “effective” steps to prevent bank loans from being diverted to the stock and property markets, citing the head of the banking regulator’s disciplinary department. The China Banking Regulatory Commission will demand banks keep their loans-provision coverage at a minimum of 130% and increase that ratio to 150% by the end of this year to safeguard their assets, citing Wang Huaqing, the regulator’s discipline chief.

Nikkei English News:
- Advantest Corp. expects July-September orders for its chip-testing equipment to exceed levels for the preceding quarter, citing President Haruo Matsuno. The Japanese company had earlier forecast orders would fall 14% from the previous quarter to $107 million, the report said.

Alrroya Aleqtissadiya:

- New car registrations in Dubai fell 40% in the year to August as the global credit crunch prompted a slowdown in automobile purchases, citing official statistics form the Dubai Roads and Transport Authority. Car Sales in the emirate have decline by 20% in the same period.

Weekend Recommendations
Barron's:
- Made positive comments on (MS), (SOHU), (AMZN), (TGT), (SKS), (KSS), (PAYX), (PM), (KR), (AMGN), (EOG), (MBT) and (MRVL).

Night Trading
Asian indices are +.25% to +1.0% on avg.

Asia Ex-Japan Inv Grade CDS Index 134.50 +1.5 basis points.
S&P 500 futures -.27%.
NASDAQ 100 futures -.18%.

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Company/Estimate
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Economic Releases

3:00 pm EST

- Consumer Credit for July is estimated at -$4.0B versus -$10.3B in June.

Other Potential Market Movers
- The weekly retail sales reports, ABC consumer confidence reading, TAF auction and the Treasury’s 3-year note auction could also impact trading today.

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

Weekly Outlook

Click here for Wall St. Week Ahead by Reuters.

Click here for Stocks to Watch Tuesday by MarketWatch.

Click here for TradeTheNews.com Weekly Calendar.

BOTTOM LINE: I expect US stocks to finish the week modestly higher on less financial sector pessimism, diminishing economic fear, short-covering and investment manager performance anxiety. My trading indicators are giving mostly bullish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,016.40 -1.22%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 1,016.40 -1.22%
DJIA 9,441.27 -1.08%
NASDAQ 2,018.78 -.49%
Russell 2000 570.50 -1.61%
Wilshire 5000 10,361.50 -1.24%
Russell 1000 Growth 448.08 -.47%
Russell 1000 Value 522.44 -1.93%
Morgan Stanley Consumer 616.08 -1.42%
Morgan Stanley Cyclical 709.52 -1.30%
Morgan Stanley Technology 509.31 unch.
Transports 3,762.88 +1.06%
Utilities 369.62 -1.98%
MSCI Emerging Markets 36.25 +.49%

Lyxor L/S Equity Long Bias Index 928.96 -1.11%

Lyxor L/S Equity Variable Bias Index 852.26 -.28%

Lyxor L/S Equity Short Bias Index 1,082.20 +2.05%

Sentiment/Internals
NYSE Cumulative A/D Line +51,910 -1.26%
Bloomberg New Highs-Lows Index +173 +28.15%
Bloomberg Crude Oil % Bulls 24.0 -60.0%
CFTC Oil Net Speculative Position +28,594 -27.67%

CFTC Oil Total Open Interest 1,164,511 +.47%
Total Put/Call .88 +17.33%
OEX Put/Call 1.08 -30.32%
ISE Sentiment 93.0 -27.34%
NYSE Arms .62 -6.06%
Volatility(VIX) 25.26 +2.02%
G7 Currency Volatility (VXY) 12.85 +.94%
Smart Money Flow Index 8,913.20 -1.08%

Money Mkt Mutual Fund Assets $3.559 Trillion -.60%.
AAII % Bulls 38.0 +11.76%
AAII % Bears 38.0 -22.45%

Futures Spot Prices
CRB Index 247.58 -3.97%

Crude Oil 68.02 -6.64%
Reformulated Gasoline 177.63 -6.70%
Natural Gas 2,73 -9.61%
Heating Oil 172.05 -9.02%
Gold 996.70 +4.15%
Bloomberg Base Metals 180.74 -2.45%
Copper 286.65 -3.47%

US No. 1 Heavy Melt Scrap Steel 239.33 USD/Ton unch.

China Hot Rolled Domestic Steel Sheet 3,752 Yuan/Ton -2.90%

S&P GSCI Agriculture 291.95 -5.59%

Economy
ECRI Weekly Leading Economic Index 124.70 +.32%

Citi US Economic Surprise Index +58.10 -12.76%

Fed Fund Futures imply 70.0% chance of no change, 30.0% chance of 25 basis point cut on 9/23

US Dollar Index 78.14 -.29%

Yield Curve 250.0 +7.0 basis points

10-year US Treasury Yield 3.44% -1 basis point

Federal Reserve’s Balance Sheet $2.07 Trillion +.84%

U.S. Sovereign Debt Credit Default Swap 24.0 +4.34%

10-year TIPS Spread 1.77% +6 basis points
TED Spread 19.0 -2 basis points
N. Amer. Investment Grade Credit Default Swap Index 122.01 +6.13%

Euro Financial Sector Credit Default Swap Index 88.0 +7.77%
Emerging Markets Credit Default Swap Index 314.32 +.60%
CMBS Super Senior AAA 10-year Treasury Spread 546.0 -.55%

M1 Money Supply $1.639 Trillion -1.04%

Business Loans 712.60 -.59%
4-Wk MA of Jobless Claims 571,300 +.7%

Continuing Claims Unemployment Rate 4.70% +10 basis points
Average 30-year Mortgage Rate 5.08% -6 basis points
Weekly Mortgage Applications 554,100 -2.17%

ABC Consumer Confidence -45 unch.
Weekly Retail Sales -4.30% +10 basis points
Nationwide Gas $2.59/gallon -.02/gallon
US Cooling Demand Next 7 Days 4.0% above normal
Baltic Dry Index 2,415 -.25%

Oil Tanker Rate(Arabian Gulf to US Gulf Coast) 25.0 unch.

Rail Freight Carloads 202,553 +4.84%

Iraqi 2028 Govt Bonds 68.50 -.90%

Best Performing Style
Large-Cap Growth -.47%

Worst Performing Style
Small-Cap Value -2.58%

Leading Sectors
Road & Rail +1.94%
HMOs +1.47%

Semis +1.13%
Wireless +.70%
Biotech +.57%

Lagging Sectors
Education -2.95%
Insurance -3.47%
Homebuilders -4.15%
Banks -4.79%
REITs -5.72%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Finish at Session Highs, Boosted by Homebuilding, Hospital, Technology and Transportation Shares

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Stocks Surging into Final Hour on Less Economic Fear, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Financial longs, Biotech longs and Medical longs. I covered all my (IWM)/(QQQQ) hedges and some of my (EEM) short today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, almost every sector is positive and volume is below average. Investor anxiety is very high. Today’s overall market action is bullish. The VIX is falling 7.12% and is very high at 25.17. The ISE Sentiment Index is low at 95.0 and the total put/call is above average at .91. Finally, the NYSE Arms has been running low most of the day, hitting .35 at its intraday trough, and is currently .64. The Euro Financial Sector Credit Default Swap Index is rising 1.28% today to 89.0 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is falling 1.24% to 122.01 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 5.27% to 19 basis points. The TED spread is now down 447 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is down 2.07% to 35.44 basis points. The Libor-OIS spread is falling 7.78% to 14 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 10 basis points to 1.77%, which is down 89 basis points since July 7th. The 3-month T-Bill is yielding .12%, which is unch. today. Given the mixed jobs report, the market’s reaction to it is quite favorable. Cyclicals are especially strong. Defense, Coal, Oil Tanker, Computer, Semi, Disk Drive, Hospital, Homebuilding, Road/Rail and Airline shares are all jumping 2%+ on the day. It is noteworthy that oil is unable to rally despite the reversal lower in the US dollar, bond weakness and equity strength. I am not convinced we are done with the recent pullback, however I am not ruling it out. It is a big positive that the trend of the market falling on good news has ended, but volume is too light to draw any conclusions as of yet. Nikkei futures indicate an +143 open in Japan and DAX futures indicate an +38 open in Germany on Monday. I expect US stocks to trade mixed-to-higher into the close from current levels on diminishing economic fear, short-covering and investment manager performance anxiety.