A Podcast With Technical Analyst Vinny Catalono on 1050 S&P

” Do not anticipate “

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Scrolling Headlines From Yahoo In Play

XLNX Reports $376.2 Mln in Sales or $0.14 cents per share

SAN JOSE, Calif., July 15 /PRNewswire-FirstCall/ — Xilinx, Inc. (Nasdaq: XLNX – News) today announced first quarter fiscal 2010 sales of $376.2 million, down 5% sequentially and down 23% from the first quarter of the prior fiscal year. First quarter net income was $38.0 million, or $0.14 per diluted share, including previously announced pre-tax restructuring charges totaling $15.8 million, and the reversal of $8.7 million of interest income previously accrued on the tax prepayment as a result of the recent adverse court case ruling. Collectively, these items represented approximately $0.07 per diluted share after tax.

CTAS Sees a 4% Decrease in Revs

CINCINNATI–(BUSINESS WIRE)–Cintas Corporation (Nasdaq:CTAS – News) today reported revenue for its fiscal year ended May 31, 2009, of $3.8 billion, a 4 percent decrease from the prior fiscal year. Net income for the year was $226 million and earnings per diluted share were $1.48. For the fourth quarter ended May 31, 2009, revenue was $879 million, a 13 percent decrease from prior year fourth quarter revenue. Fourth quarter net income was $4 million and earnings per diluted share were $0.03.

The Company announced on May 29, 2009, that, in response to economic conditions, current year results would include a restructuring, fixed asset impairment and inventory valuation charge. The $54 million after-tax charge was recorded in the fourth quarter. Excluding this charge, earnings per diluted share were $1.83 for the year and $0.38 for the fourth quarter.

Scott D. Farmer, Chief Executive Officer, stated, “As we mentioned in May, the U.S. economy continues to lose employment at a rapid rate, directly impacting our customers and prospects. According to the US Department of Labor, the largest calendar year job loss on record was over 60 years ago when in 1945 the U.S. economy lost 2.75 million jobs. Over the last twelve months, the U.S. economy has lost approximately 5.5 million jobs, or twice that historical high. During May and June alone, over 800,000 U.S. jobs were lost.”

Mr. Farmer continued, “The severity of these job losses resulted in the need for us to take significant cost reduction measures. We have continued to right-size our workforce and reduced our operating capacity to reflect current revenue levels. Over the last year we have also implemented stringent controls over discretionary spending.”

ABT Confirms Double Digit Growth Outlook

• Diluted earnings per share, excluding specified items, were $0.89, at the high end of Abbott’s second-quarter guidance range of $0.87 to $0.89. Diluted earnings per share under Generally Accepted Accounting Principles (GAAP) were $0.83.
• Worldwide operational sales, which excludes an unfavorable 8.0 percent effect of exchange rates, increased 10.5 percent. Reported sales, including the impact of exchange, increased 2.5 percent. Excluding the expected decline in Depakote® sales due to generic competition, worldwide operational sales increased 14.6 percent.
• Worldwide medical products operational sales, which excludes an unfavorable 9.5 percent effect of exchange rates, increased 27.0 percent. Worldwide operational vascular sales increased 43.0 percent driven by the continued success of the XIENCE V® drug-eluting stent (DES).
• Worldwide pharmaceutical operational sales, which excludes an unfavorable 8.3 percent effect of exchange rates, increased 4.0 percent. Excluding the impact of Depakote, worldwide pharmaceutical operational sales increased 11.4 percent. Worldwide HUMIRA® operational sales increased 32.8 percent, which excludes an unfavorable 12.4 percent effect of exchange rates. U.S. HUMIRA sales were $635 million, up 20.9 percent.
• Worldwide nutritional operational sales, which excludes an unfavorable 5.2 percent effect of exchange rates, increased 9.2 percent. U.S. nutritional sales increased 10.0 percent, driven by market share gains in the infant formula business.
• Submitted CERTRIAD(TM), the fixed-dose combination of TRILIPIX® and CRESTOR®, for U.S. regulatory approval and received CE Mark for XIENCE PRIME(TM), both ahead of the company’s forecast.

“We achieved our performance goals for the quarter, with results at the high end of our previous expectations,” said Miles D. White, chairman and chief executive officer, Abbott. “Our diverse mix of market-leading products and global businesses delivered double-digit operational sales growth, with strong performance from our key growth drivers.”

The following is a summary of second-quarter 2009 sales.

ADTN Earns .30 cents per share & declares a divi

HUNTSVILLE, Ala.–(BUSINESS WIRE)–ADTRAN, Inc. (NASDAQ:ADTN) reported results for the second quarter of 2009. Sales were $121,528,000 for the quarter, compared to $131,183,000 for the second quarter of 2008. Net income was $18,839,000 for the quarter, compared to $22,414,000 for the second quarter of 2008. Earnings per share, assuming dilution, were $0.30 for the quarter, compared to $0.34 for the second quarter of 2008.

ADTRAN Chief Executive Officer Tom Stanton stated, “In the second quarter, each of our growth businesses – Broadband Access, Optical Access and Internetworking – grew both sequentially and year over year, and combined achieved a record revenue level. Most notable during the quarter was Internetworking revenue growing an impressive 28% year over year, as our success in this area continued to reflect the broad-based support we are seeing in our carrier distribution and value added reseller channels. Our growth businesses represented a record 54% of total company revenues for the quarter compared to 46% for the same period last year.”

The Company also reported that stock-based compensation expense for the second quarter of 2009 reduced diluted earnings per share by $0.02 compared to $0.03 for the second quarter of 2008.

The Company also announced that its Board of Directors declared a cash dividend for the second quarter of 2009. The quarterly cash dividend is $0.09 per common share to be paid to holders of record at the close of business on July 30, 2009. The ex-dividend date is July 28, 2009 and the payment date is August 13, 2009.

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Credit Card Defaults Up Less Than Expected

NEW YORK (Reuters) – Two of the biggest U.S. credit card companies, Capital One Financial Corp (NYSE:COF – News) and Discover Financial Services (NYSE:DFS – News), reported lower-than-expected defaults and delinquencies in June, sending their shares sharply higher.

The reports may signal that American consumers’ credit positions are not deteriorating as rapidly as feared, despite rising unemployment and the continuing housing slump. The U.S. savings rate has been increasing, which may help.

“A lot of the weaker customer base has already charged off,” said Sanjay Sakhrani, an analyst at KBW. “You have a better core portfolio. But that is not to say that portfolio is not immune from what is going to be a weaker macro economic backdrop.”

Credit card chargeoffs — loans the companies do not expect to be repaid — remain on track to reach record highs before peaking around the end of 2009 or in early 2010.

Accounts at least 30 days delinquent — often an indicator of future defaults — fell in June. But analysts said the drop was largely a seasonal trend as consumers used tax refunds to pay off debts; they expect delinquencies to rise in coming months.

Capital One’s charge-off rate rose less than expected, to 9.73 percent in June from 9.41 percent May. Discover’s defaults fell for the first time since October 2008, to 8.75 percent from 8.91 percent.

Both companies, which had conservative lending policies during the credit boom of 2003-2007, have consistently outperformed bigger rivals such as American Express Co (NYSE:AXP – News) and Citigroup Inc (NYSE:C – News).

AXP sees Lower Write Downs From Credit Cards

By Peter Eichenbaum

July 15 (Bloomberg) — American Express Co., the best performer this year in the Dow Jones Industrial Average, said write-offs on credit cards for the second half of 2009 may be better than its previous forecast.

Costs tied to uncollectible debt fell in June to 9.9 percent of managed U.S. card loans, compared with 10 percent for May, the New York-based lender said today in a federal filing. Loans at least 30 days overdue — an indicator of future charge-offs — fell to 4.4 percent from 4.7 percent in May.

“Assuming delinquency and bankruptcy trends continue to be below previously expected levels, the company believes that it is highly likely” that write-offs for the third and fourth quarters on U.S. cards “will be better than previously forecasted,” the filing said.

The report added to signs that record defaults by consumers on credit cards may be near a peak. JPMorgan Chase & Co. and Discover Financial Services also reported fewer soured loans today. Charge-offs at U.S. credit-card lenders have nearly tripled since January 2007 as the U.S. unemployment rate climbed to 9.5 percent in June, the most since 1983.

JPMorgan charged off 8.04 percent of card loans, compared with 8.36 percent in May, the New York-based bank said in a regulatory filing. JPMorgan is the biggest credit-card lender among U.S. banks. Bad loans at Riverwoods, Illinois-based Discover fell from 8.91 percent in May to 8.75 percent in June.

Capital One Financial Corp. wrote off 9.73 percent of U.S. card loans on an annualized basis, compared with 9.41 percent reported for May, the McLean, Virginia-based bank said today in a federal filing.

American Express gained 8.6 percent to $26.56 in New York Stock Exchange composite trading at 1:26 p.m. The shares advanced 32 percent this year through yesterday, compared with a 4.8 percent drop for the 30-company Dow benchmark.

T-Bone Pickens Accused of Theft & Vandalism

Homeowner wants oilman Pickens charged with theft

By SEAN MURPHY
The Associated Press
Tuesday, July 14, 2009 3:03 PM

OKLAHOMA CITY — As a youngster, Texas oil tycoon T. Boone Pickens scratched his name in wet concrete in the driveway of his grandmother’s Oklahoma house.

Now the man who owns the century-old home is pursuing theft and vandalism charges against the 81-year-old billionaire, saying workers for Pickens came to the house recently without permission and removed the concrete slab with the well-known name.

David McCart, who bought the two-story, 17-room home in Holdenville nearly 20 years ago – partly because of Pickens’ signature – said he went to the property to mow the grass on June 22 and noticed the 3-by-5-foot slab was missing.

“It’s really the arrogance of it that bothers me,” McCart said Tuesday. “They just cut the whole section out.”

McCart said he filed a theft and vandalism report with local police the next day and wants to pursue criminal charges against Pickens. Although the missing concrete was replaced, he said the removal left cracks and damaged his driveway.

Holdenville Police Chief Jerry Young, who would make a decision about recommending charges, didn’t immediately return a call for comment.

Neighbors told McCart three men in a truck with Texas tags used cement saws and pry bars to remove the slab last month and loaded it into the truck bed. The house currently is vacant, but McCart said he planned to rent it out.

Pickens previously purchased his boyhood home in Holdenville, which was adjacent to McCart’s property, and moved it to his Texas ranch.

Jay Rosser, a spokesman for Pickens, said the section of concrete was removed when Pickens was in town recently to inspect enhancements to a family plot at a local cemetery. Holdenville, a town of 4,700 people, is 75 miles southeast of Oklahoma City.

“He carved his name in that cement 70 years ago, in his grandmother’s driveway,” the statement said. “It means a lot to him, and is now with his childhood home which has been carefully restored and relocated to his ranch in the Texas Panhandle to help commemorate his Oklahoma roots.”

Rosser declined to answer further questions about the incident and did not say who actually removed the slab.

McCart said he suspects the property belongs to the city since the section of driveway is located between the sidewalk and the street.

“I understand the city has the right to do it if they need to repair pipes or something like that,” McCart said. “But it was not a city crew that was in there doing it.”

Rosser did not say whether anyone received permission from the city to remove the slab.

Ken Chestnut, an attorney for the city, said he’s not sure if anyone sought permission to remove the slab. But it’s “a private matter between the parties” and the city does not need to get involved, Chestnut said.

Rosser said Pickens is open to commemorating his history in Holdenville through some sort of historical marker or other initiative. “We are clearly open to any thoughts the McCarts might have regarding how to best commemorate his association there for their purposes,” he said.

AMR Fly’s into A Ditch

By Kyle Peterson

CHICAGO (Reuters) – American Airlines parent AMR Corp (AMR.N) on Wednesday posted a smaller-than-expected quarterly loss as capacity cuts and new revenue streams helped offset weak travel demand.

The No. 2 U.S. carrier was the first major U.S. airline to report its second quarter earnings, and its results easily beat expectations, sending its shares higher.

Airlines are struggling to gain financial altitude in a lingering recession that has drained demand for business travel, especially on lucrative international routes.

“International passengers and (revenue) will be down more significantly than domestic. I think that’ll probably be the big thing,” said Morningstar analyst Basili Alukos.

He said he was encouraged by AMR’s plans for additional capacity cuts and by the increase in ancillary revenue the carrier has drawn from new fees for in-flight perks.

AMR shares were 1.9 percent higher in morning trade at $4.26 on Nasdaq. The Amex airline index .XAL was up 3.7 percent.

The airline industry responded to weaker recessionary demand last year by downsizing. AMR said in June that it increased its planned 2009 capacity reductions to 7.5 percent versus 2008.

Calpers Sues Rating Agencies Over Losses on Bogus Ratings

By Joseph A. Giannone

NEW YORK (Reuters) – Calpers, the biggest U.S. public pension fund, has sued the three largest credit rating agencies for giving perfect grades to securities that later suffered huge subprime mortgage losses.

The California Public Employees’ Retirement System said in a lawsuit filed last week in California Superior Court in San Francisco that it might lose more than $1 billion from structured investment vehicles, or SIVs, that received top grades from Moody’s Investors Service Inc, Standard & Poor’s and Fitch Inc.

SIVs are complex packages of loans and debt, including subprime mortgages and collateralized debt obligations, pooled by investment banks and which then issue debt to investors.

By giving these securities their highest ratings, the agencies “made negligent misrepresentations” to the pension fund, Calpers said. Such ratings, which typically accompany investments with almost no risk of loss, “proved to be wildly inaccurate and unreasonably high.”

Calpers seeks unspecified damages….

JPM Has its Swagger Back

By ROBIN SIDEL

J.P. Morgan Chase & Co., freed from the government’s strictures after repaying $25 billion in federal money, is back to playing hardball.

The bank’s tougher stands include stepping up its opposition to the government’s proposed legislation on derivatives and telling the Treasury Department it is fed up with haggling over the value of warrants that the government holds in J.P. Morgan. The bank also is talking tough with clients and taking market share and top performers from competitors.

The renewed swagger comes as J.P. Morgan is poised to report strong quarterly results on Thursday, solidifying its place as the strongest major commercial bank. Although the bank’s mortgage and credit-card businesses are being hurt badly by rising unemployment and the recession, its traditional Wall Street businesses are booming. The bank also is expected to provide a strong showing from retail branches that it acquired last fall from failed thrift Washington Mutual.

Analysts surveyed by Thomson Reuters expect J.P. Morgan to earn four cents a share in the second quarter. Although a blockbuster earnings report from Goldman Sachs Group Inc. means that J.P. Morgan could beat those expectations, the results still will likely fall well short of the 54 cents that the company reported last year for the same period.

“While some banks have spent the cycle shrinking to survive, J.P. Morgan has been investing, acquiring and expanding,” John McDonald, a banking analyst at Sanford C. Bernstein & Co., wrote in a recent report.

The bank’s latest effort to promote its views involves the Obama administration’s plan to step up regulation and transparency in the derivatives market. The bank supports a proposal to send standard derivatives contracts through an industrywide clearinghouse that can be monitored by regulators. J.P. Morgan, however, opposes a requirement that the trades should be moved onto an exchange, in part, because it would inhibit the use of customized derivatives that clients require.

J.P. Morgan’s strong voice starts at the top. Although he initially supported the Troubled Asset Relief Program, Chief Executive James Dimon bristled when the government added restrictions to banks that received the funds. He was particularly furious when the government banned firms that received TARP funds from hiring foreigners to work in U.S. offices. Over the next few months, Mr. Dimon’s indignation grew each time a customer or politician referred to the company as a bailed-out bank, according to people familiar with the matter.

Leading one of the few financial behemoths that skirted the types of problems that led to the collapse of Merrill Lynch & Co., Bear Stearns Cos. and Lehman Brothers Holdings Inc., Mr. Dimon has benefited enormously from those woes by scooping up Bear Stearns and WaMu in government-assisted transactions. Although both deals have been expensive and difficult, they also have bolstered the firm’s market presence in retail banking and prime brokerage.

Since repaying the funds, J.P. Morgan has taken a tougher stance with the government. Last week, the bank waived its rights to buy warrants that the government received as part of the financial bailout. After the government rejected the bank’s offer, the bank opted to allow the Treasury to auction the warrants in the public market.

Elsewhere, J.P. Morgan is taking issue with portions of the White House’s financial plan that deals with the regulation of derivatives. The bank’s derivatives contracts were valued at roughly $81 trillion at the end of the first quarter, representing 40% of the derivatives held by banks, according to the Office of the Comptroller of the Currency. The bank has played down its potential exposure from the contracts, saying that notional value isn’t equivalent to the amount of risk facing the bank.

The unregulated derivatives market has taken the heat for much of the financial crisis, leading the White House to propose measures aimed at regulating the instruments by funneling trades through exchanges where regulators can monitor them. Such a move could crimp the derivatives industry, eating into the billions of dollars that J.P.Morgan earns each year in helping clients navigate the contracts and assuming counterparty risk in such transactions.

The bank also is using its industry standing to bolster its ranks. Just two weeks after it repaid the TARP funds, the bank swiped William Rifkin, one of Wall Street’s best-known investment bankers, away from Bank of America Corp. and named him as vice chairman of its mergers-and-acquisitions department. Mr. Rifkin had worked at Merrill Lynch for more than a decade before the brokerage was subsumed by the Charlotte, N.C., bank.

BAC Asked To Pay For MER Backstop

By David Mildenberg

July 15 (Bloomberg) — Bank of America Corp., the largest U.S. bank by assets, benefited from implied federal backing on about $118 billion of Merrill Lynch & Co. assets and owes the government compensation, the chairman of a House of Representatives committee studying the purchase of Merrill said.

“If you or anyone at Bank of America made a commitment, verbal or otherwise, to enter into this deal with the United States government, I urge you to honor that commitment,” Edolphus Towns, a New York Democrat, said in a letter yesterday to Chief Executive Officer Kenneth Lewis that was obtained by Bloomberg News. “It is the right thing to do.”

Regulators say Bank of America owes at least part of a $4 billion fee it agreed to pay in January because the company benefited from U.S. backing on Merrill assets such as mortgage- backed bonds, Bloomberg News reported on July 13, citing people familiar with the matter. The Charlotte, North Carolina-based bank says it owes the Treasury nothing because the plan was never put into effect, according to the people, who declined to be identified because the negotiations are confidential.

Lawmakers including California Democrat Brad Sherman are questioning whether taxpayers are being adequately rewarded for propping up lenders, and why Bank of America’s January acquisition of New York-based Merrill Lynch required a publicly funded bailout. The U.S. provided the bank $20 billion in capital plus the asset guarantees to keep Lewis from abandoning the takeover of Merrill Lynch.

The bank “is in discussions with Treasury” and had no other comment on Towns’s letter, spokesman Scott Silvestri said. Towns leads the House Oversight and Government Reform Committee.

Bank of America disclosed the guarantees Jan. 16, along with its first quarterly loss in 17 years. Its news release headlined the guarantee and called the program an “agreement.”

‘Ring Fencing’…..

Tim Geithner Expects Growth by Year End

Imminent recoveries in the United States and other leading economies should herald a return to growth by the end of this year or early in 2010, Tim Geithner, the US Treasury Secretary, said yesterday.

In an upbeat message after talks with Alistair Darling in London, on the first leg of an international tour of Europe and the Middle East, Mr Geithner conceded that significant threats to the global outlook persisted.

But he said that the foundations for an upturn in the US and elsewhere had been laid. “I think the policies have been very effective in arresting, in mitigating, the force of the storm and we’re starting to see a better basis for recovery starting to be made in the US,” Mr Geithner said. “We have a very good chance for seeing the US economy get back to the point where it’s going to start growing again in the next two or three quarters.”

Mr Geithner, who also met David Cameron, the Conservative Party leader, and George Osborne, the Shadow Chancellor, yesterday, emphasised that the US fiscal stimulus package had been designed so that its maximum effect would be felt in the second half of this year, with the benefits set to last for up to two years.

“We have a very powerful set of policies in place, coming on stream. I think there is a very good chance we will see the US economy and the world economy get back to recovery, get growing again, over the next few quarters,” he said.

However, he acknowledged that risks remained. “In my view, there are still significant risks and challenges ahead,” he admitted when asked if he was concerned that a recovery relapse into a “double dip” downturn.

Both Mr Geithner and Mr Darling said that America and Britain were cooperating closely on a further overhaul of financial regulation. The next steps are due to be discussed among the Group of 20 key world economies in Pittsburgh on September 24 and 25.

However, senior G20 officials concede that at present the summit looks likely to agree mainly on principles for further action rather than substantive measures.

BA Cuts 1k Defense Jobs

(Reuters) – Boeing Co (BA.N) told employees it will have to cut around 1,000 jobs in its defense division because of Pentagon budget reductions, the Associated Press said, citing an internal memo from Jim Albaugh, the company’s top defense executive.

Albaugh said the job reductions were needed to keep the company competitive, according to the news agency.

The memo did not give a time for the cuts, the news agency’s report, which appeared on the New York Times website, said.

Boeing spokesman Dan Beck declined to say whether the job cuts were part of the 10,000 company-wide job reductions the company announced in January, the report said.

Boeing, the Pentagon’s No.2 contractor, could not be immediately reached for comment by Reuters.

Albaugh had recently rejected speculation that the company, hard hit by U.S. defense cuts announced in April, was being edged out of the military aircraft market.

Sources Say Government Is Mulling Over Aid

WASHINGTON/NEW YORK (Reuters) – U.S. officials are considering giving CIT Group Inc a temporary loan as part of an aid package to help the lender avoid collapse, a source familiar with regulators’ thinking said on Tuesday.

The temporary loan is one option being considered to give CIT room to strengthen its balance sheet by raising additional capital through debt or equity, said the source who requested anonymity because the plans could change.

Other options include access to the U.S. Federal Reserve’s discount window and asset transfers, the source said. The source said there was no guarantee a plan would be reached.

CIT, a lender to thousands of small businesses, is pushing for government aid in its fight to survive. CIT clients tapped their credit lines, drawing some $750 million from the company in two days, the Wall Street Journal reported, citing unnamed sources.

The government’s plan calls for CIT to transfer assets to its bank, use some of them to pledge at the Federal Reserve’s discount window and refinance some debt, the paper reported on its website.

Chief Executive Jeffrey Peek’s future role was also unclear, it said.

CIT was not immediately available to comment….

World Markets Rise On Chip Stocks

By Adria Cimino

July 15 (Bloomberg) — European and Asian shares climbed and U.S. index futures advanced, sending the MSCI World Index higher for a third day, after Intel Corp. and ASML Holding NV forecast sales will climb this quarter.

Intel, the world’s biggest chipmaker, surged 7.8 percent after its revenue outlook exceeded analysts’ estimates. ASML, Europe’s largest maker of semiconductor equipment, gained 3.2 percent. Rio Tinto Group advanced 4 percent as copper rose for a third day and the world’s third-largest mining company reaffirmed its iron-ore output guidance.

The MSCI World added 0.9 percent at 12:12 p.m. in London. The gauge has climbed 3.6 percent this week after companies from Goldman Sachs Group Inc. to Johnson & Johnson reported earnings that beat analysts’ estimates. The measure has still fallen 4.6 percent since June 2 on speculation share prices have outpaced the outlook for the economy after a three-month rally pushed valuations to the highest level since 2004.

“Intel is indicative of what we’ve been talking about: that the economy has tended to bottom out and there are signs of recovery,” John Botham, head of European equities at Aviva Investors in London, which manages about $390 billion, said in a Bloomberg Television interview. “We’re positive on equities. Clearly there’s been stabilization and that’s come from end demand.”

Europe’s Dow Jones Stoxx 600 Index climbed 1.7 percent and the MSCI Asia Pacific Index rose 1.2 percent. Standard & Poor’s 500 Index futures advanced 1.3 percent.

Intel Surges

Intel jumped 7.8 percent to $18.15 in pre-market New York trading after saying third-quarter sales will be as much as $8.9 billion. That compares with an average estimate of $7.86 billion in a Bloomberg survey of analysts, indicating that shoppers in Asia are helping reignite demand for personal computers.

ASML climbed 3.2 percent to 16.29 euros. The Dutch company said revenue this quarter will increase to about 450 million euros ($630 million) from 277 million euros in the second quarter as customers resume investments in machines that allow them to make smaller chips.

STMicroelectronics NV, Europe’s largest chipmaker, soared 6.8 percent to 5.49 euros and Infineon Technologies AG, the second-biggest, gained 6.8 percent to 3.08 euros.

Earnings per share have fallen 12 percent on average for the 13 companies in the S&P 500 to have reported second-quarter earnings, according to data compiled by Bloomberg. That compares with a 32 percent drop in the first quarter and a 56 percent slump in the final period of 2008.

Rio Tinto Gains…..

Global Confidence Falls

By Shamim Adam

July 15 (Bloomberg) — Confidence in the world economy dropped for the first time in four months in July as government stimulus efforts showed little sign of reducing unemployment, a Bloomberg survey of users on six continents showed.

The Bloomberg Professional Global Confidence Index declined to 39.13 in July from 43.57 in June. A reading below 50 means pessimists outnumber optimists. A measure of U.S. participants’ confidence in the world’s largest economy fell to 29.5 from 36.7, the survey showed.

The MSCI World Index is down close to 2 percent since the U.S. Labor Department on July 2 reported higher-than-expected job losses and an unemployment rate approaching 10 percent. Treasury Secretary Timothy Geithner said yesterday the world will probably suffer “more than the usual” setbacks in exiting the worst slowdown since the Great Depression.

“No one can wave a magic wand,” said David Semmens, an economist at Standard Chartered Bank in New York and a regular survey participant. “We aren’t pulling out of the recession in the same way as in past recessions. The economic outlook isn’t improving as strongly as people would have hoped.”

The survey of more than 2,700 Bloomberg users was conducted between July 6 and July 10. Since the previous survey, the International Monetary Fund and the World Bank lowered their forecasts for global growth this year, while leaders from advanced nations say the recovery is too fragile to consider reversing more than $2 trillion in stimulus efforts.

‘Misread the Economy’…..

The Govenator Suffers Another Credit Downgrade As Deficit Cures Do Not Materialize

By Michael B. Marois and William Selway

July 14 (Bloomberg) — California’s credit rating, the lowest of all U.S. states, was cut for the second time in as many weeks amid lawmakers’ failure to close a $26 billion deficit that left the most-populous state issuing IOUs to creditors.

Moody’s Investors Service said it lowered California’s credit rating two steps to Baa1 from A2 and said it could be reduced further if legislators don’t quickly address the state’s cash problem. The new grade is three levels above non-investment grade. Fitch Investors on July 6 lowered its evaluation of California’s general obligation bonds by two steps to BBB from A-, placing the debt two ranks above so-called high-yield, high- risk junk ratings.

California this month began issuing IOUs to pay some creditors, a step taken only once before since the Great Depression, because of a political stalemate over the gap in the $100 billion annual budget. The bid to rewrite the spending plan for the year ending June 30, 2010, comes just five months after leaders agreed to raise taxes and slash spending in a bid to shore up the state’s finances amid the national recession.

“Moody’s believes that as the days and weeks go by without enacted solutions to the current cash crisis and the $26 billion budget gap, the risk to priority payments, and eventually debt service payments, is increasing,” Moody’s said in a statement. “The downgrade incorporates the risk we believe exists at the current time, as well as the state’s inability to solve the current difficulties in a timely fashion.”

General-Obligation Debt

The Moody’s reduction affects about $72 billion of general obligation and lease supported bonds. Moody’s at the same time also lowered its rating on the state’s taxable bonds and debt sold for stem cell research, to Aa3 from A2.

The cuts by Fitch and Moody’s place California’s credit rating where it was in December 2003, when Schwarzenegger tightened the state’s fiscal bind by honoring a campaign pledge to slash a car tax. Before the end of the Cold War, which battered military contractors in California, the state had the highest credit rating from all three bond rating companies.

Standard & Poor’s gives the state its A grade, the sixth- highest of 10 investment levels. The firm reaffirmed that assessment on July 1.

Bond Prices…..

DoJ Begins Investigation of  CDS Trading

The US Department of Justice has started investigating a data provider and dealers in the credit derivatives market for potential violations of the US Sherman Act, which prohibits abuses of monopoly power or other forms of collusion.

Demands were sent to more than a dozen dealers for several years’ of detailed information about trading and pricing, according to people who received the letter. The DoJ letter was sent to banks with an equity stake in Markit Group, which provides pricing data on markets including the credit default swaps (CDS).

The move comes as the regulatory spotlight shines on the CDS market and other privately traded derivatives markets, parts of which grew dramatically in the last decade and generated huge profits for Wall Street.

Markit, which has also been asked for information, has developed many of the most closely watched derivatives pricing benchmarks for CDS such as the mortgage sector’s ABX and the corporate credit CDX and iTraxx Europe indices.

According to people who have seen the letter from the DoJ’s antitrust division, the requests are made under sections one and two of the Sherman Act. The DoJ declined to comment.

Markit said that it “has been informed of an investigation by the Department of Justice into the credit derivatives and related markets. We will work with the Department to provide any information requested.”

Shareholders in Markit include JPMorgan Chase, Goldman Sachs, Citigroup, Deutsche Bank, Bank of America and Morgan Stanley, among others. Banks either declined to comment or were not available for comment…..

Obama Administration Considers Rent To Own After Default

NEW YORK, July 14 (Reuters) – U.S. government officials are weighing a plan that would let borrowers who have fallen behind on their mortgage payments avoid eviction by renting their homes instead, sources familiar with the administration’s thinking said on Tuesday.

Under one idea being discussed, delinquent homeowners would surrender ownership of their homes but would continue to live in the property for several years, the sources told Reuters.

Officials are also considering whether the government should make mortgage payments on behalf of borrowers who cannot keep up with their home loans, tapping an unused portion of a $50 billion housing aid kitty.

As part of this plan, jobless borrowers might receive a housing stipend along with regular unemployment benefits, the sources said.

The Colbert Report With Paul Krugman On The Economy – Pod Cast

GM Sales Appear weak So Far This Month

ANN ARBOR, Mich. (AP) – General Motors Co.’s top executive described July auto sales as weak compared with the same month last year, but said it’s still early.

CEO Fritz Henderson, speaking to reporters Tuesday at an event to launch the redesigned Buick LaCrosse sedan, said it seems like industrywide U.S. sales will once again fall below an annual rate of 10 million vehicles this month.

The new GM, which just emerged from Chapter 11 bankruptcy protection on Friday, has said its debt load and other expenses have been reduced so much that it can become profitable at a 10 million to 10.5 million annual sales rate. The struggling automaker has lost more than $80 billion in the past four years and has received $50 billion in loans from the U.S. government.

U.S. industry sales so far this year have been running below a 10 million annual sales rate as the economy has sputtered. GM’s sales for the first half of the year are off 40 percent, while the overall U.S. market is down 35 percent.

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INTC Has The Bull Back In Swing

By Jonathan Burgos

July 15 (Bloomberg) — Asian stocks rose for a second day after Intel Corp.’s sales forecast exceeded analyst projections, Goldman Sachs Group Inc. reported record earnings and metal prices climbed.

Samsung Electronics Co., the world’s second-largest maker of semiconductors after Intel, jumped 3.8 percent in Seoul on optimism demand for personal computers is recovering. Advantest Corp., the world’s biggest maker of memory-chip testers, added 1.5 percent in Tokyo. Rio Tinto Group, the world’s third-largest mining company, rose 1.6 percent. PetroChina Co., China’s largest oil producer, may be active when Hong Kong trading opens after its parent said the company’s refining profit climbed.

“Confidence in the market is returning as economic data have been showing signs of stability and earnings have been positive as well,” said Chris Hall, who helps manage $2.4 billion at Argo Investments Ltd. in Adelaide. “The recovery is still fragile. We’re still waiting for signs that U.S. consumption is recovering.”

The MSCI Asia Pacific Index added 0.4 percent to 100.92 in Tokyo at 10:32 a.m. in Tokyo, adding to yesterday’s 2.5 percent gain. The gauge has rallied 43 percent from a five-year low on March 9 on optimism government stimulus policies will revive the global economy.

Japan’s Nikkei 225 Stock Average rose 0.2 percent. South Korea’s Kospi Index climbed 2 percent, while Australia’s S&P/ASX 200 Index advanced 0.8 percent.

The U.S. Standard & Poor’s 500 Index added 0.9 percent yesterday as a government report showed retail sales advanced 0.6 percent last month from May, exceeding the 0.4 percent gain projected by economists. Goldman Sachs also reported a 65 percent jump in quarterly net income as revenue from trading and stock underwriting reached record highs.

Intel Sales

Futures on the S&P 500 climbed 0.9 percent after Intel, the world’s largest chipmaker, forecast sales will reach as much as $8.9 billion in the current quarter, surpassing the $7.86 billion estimated by analysts. The report came after U.S. markets closed.

Technology shares were the second-biggest boost to the MSCI Asia Pacific Index today. Samsung climbed 3.8 percent to 658,000 won, while Advantest gained 1.5 percent to 1,741 yen. Taiwan Semiconductor Manufacturing Co., the world’s largest maker of customized chips, added 1.5 percent to NT$53.30.

Intel’s forecasts and Goldman’s profit “indicate company earnings here won’t be as bad as some fear,” said Hiroichi Nishi, an equities manager at Tokyo-based Nikko Cordial Securities Inc.

Metal Prices

Rio gained 1.6 percent to A$49.86 after a gauge of six metals in London gained 3.4 percent, while copper futures added 3.4 percent in New York. Fortescue Metals Group Ltd. added 1.9 percent to A$3.67.

Rio also said it’s continuing to sell iron ore on the spot market to Chinese customers, denying a report in the Financial Times.

PetroChina’s American depositary receipts rose 1.7 percent yesterday. The company’s refining profit climbed to a record in the first half, parent company China National Petroleum Corp. said in a statement in Beijing today.

Australia’s Future Business Indicator Falls Signaling A Staggered Recovery

By Jacob Greber

July 15 (Bloomberg) — An Australian index of leading economic indicators fell in May for the first time in three months as dwelling approvals declined.

The index, a gauge of future economic growth, declined 0.2 percent to 248.2 points from 248.7 in April, Westpac Banking Corp. and the Melbourne Institute said in Sydney today. The index shrank at an annualized rate of 3.9 percent in May after contracting 4.1 percent the previous month.

Central bank Governor Glenn Stevens left the benchmark lending rate at a half-century low of 3 percent last week and said he has scope to cut further to spur demand. Australia’s joined China and India as one of the few economies to expand in the first quarter.

“This reading supports the reasonable expectation that we have passed the worst, although the index is still contracting on a six-month annualized basis,” said Bill Evans, chief economist at Westpac in Sydney.

The central bank reduced the benchmark interest rate by a record 4.25 percentage points to 3 percent between September and April.

Westpac’s leading index tracks eight gauges of activity, such as company profits and productivity, to give an indication of how the economy will perform over the next three to nine months.

Two of the four monthly components fell, including dwelling approvals, which slipped 12.5 percent. Australia’s stock market index and real money supply gained.

Westpac’s coincident index, a measure of the current state of the economy, rose 0.2 percent in May to 238 points.

Petro China Profits Rise

By Bloomberg News

July 15 (Bloomberg) — PetroChina Co., the world’s largest company by market value, increased its refining profit to a record in the first half after the government’s revised fuel pricing mechanism allowed refiners to pass on rising costs.

“Even though the impact of the financial crisis reduced the processing volume and the operating rates at our refineries, PetroChina’s refining and chemical subsidiary achieved remarkable performance in the first half,” parent company China National Petroleum Corp. said in a statement posted on its Web site today. The refining profit was PetroChina’s highest since its listing in 2000, it said.

China, the world’s third-largest economy, raised its domestic gasoline and diesel prices three times this year under a revised pricing formula that takes into account the cost of crude oil, taxes and an “appropriate profit” for refiners. Benchmark crude oil in New York has gained 34 percent since the start of the year.

“The company’s refining margins on a barrel of oil are very strong now,” said Wang Aochao, an analyst at UOB-Kay Hian Ltd. in Shanghai. “I’m very bullish on the company. I can see it increasing profit in the coming quarters.”

PetroChina boosted the imports of high-sulfur crude oil at its Dalian refinery to trim costs, China National said today.

China’s second-biggest refiner increased the production of gasoline and cut diesel output because of a “noticeable decline” in diesel demand and a shortage of gasoline supplies in the first quarter, China National said.

PetroChina made a profit 53.6 billion yuan ($7.8 billion) in the first half of last year.

China Petroleum & Chemical Corp. is the nation’s biggest refiner.

— Wang Ying. With assistance from John Duce in Hong Kong. Editors: Ang Bee Lin, Jane Lee.

HSBC Expects The Yuan To Play A Larger Role Sooner Than Expected

By Anchalee Worrachate

July 14 (Bloomberg) — The role of China’s yuan, or renminbi, in global trade may increase at a faster pace than most economists expect as the country surpasses Japan as the world’s second-biggest economy, according to HSBC Holdings Plc.

As much as half of Chinese trade, or about $2 trillion, will be settled in yuan by 2012, from less than 10 percent today, said Qu Hongbin, China chief economist at HSBC, Europe’s biggest bank.

“China is beginning an ambitious scheme to make the renminbi one of the major international currencies in global trade and to reduce reliance on the U.S. dollar,” Qu said in a telephone interview from Hong Kong today. “It will be a multi- year and gradual process. Yet we believe the pace is likely to be faster than many expect.”

The country expanded yuan settlement agreements last week from border zones to its largest financial centers, including Shanghai, Guangzhou, and Hong Kong. The program is being rolled out across Malaysia, Indonesia, Brazil and Russia, all of which have said they aim to reduce the dollar’s role in world finance and trade.

China, the world’s third-largest economy, first brought up the concept of a supranational currency in place of the dollar in March, urging the International Monetary Fund to manage part of its members’ foreign-exchange reserves.

Economic Growth

“The process of expanding the renminbi’s role in trade settlements is likely to expand China’s trade flows, slowing dollar accumulation and helping Hong Kong to become an offshore renminbi trading center,” Qu said. “That will be fairly fast. The more challenging part will be to open the capital market for investment flows. That might take a bit longer.”

The yuan has been managed against a basket of currencies including the euro, yen and South Korean won since a peg against the dollar was scrapped in July 2005.

China may surpass Japan as the world’s second-largest economy by 2010 and pull ahead of Germany to become the second- biggest trading nation by the end of this year, HSBC said.

The country has accumulated an average of $334 billion in foreign reserves a year since 2005 because of its trade surplus and capital inflows, the bank said. The expansion of the yuan’s role in international trade will slow the pace, HSBC said.

The yuan will need to be a fully convertible currency if the government wants to encourage its use for investment in capital markets such as stocks and bonds in a “meaningful way,” the bank said.

Illiquid Market….

Japanese Stocks Rise On Material Demand

By Masaki Kondo and Toshiro Hasegawa

July 15 (Bloomberg) — Japanese stocks rose as Nippon Steel Corp.’s plan to restart an idled furnace and a media report Asahi Glass Co. will post better-than-forecast earnings raised optimism demand for materials is increasing.

Nippon Steel, the world’s No. 2 maker of the alloy, added 1.9 percent. Asahi Glass, Asia’s largest glassmaker, jumped 3.6 percent. Dowa Holdings Co., the nation’s second-biggest zinc smelter, surged 6.6 percent after the metal price gained. Kawasaki Kisen Kaisha Ltd., Japan’s No. 3 shipping line, added 2.6 percent on higher cargo fees. Mizuho Financial Group Inc. sank 3.5 percent as it starts to determine the price of new shares it will sell.

The Nikkei 225 Stock Average climbed 36.94, or 0.4 percent, to 9,298.75 as of 9:56 a.m. in Tokyo. The broader Topix index rose 1.76, or 0.2 percent, to 870.33.

Nippon Steel jumped 1.9 percent to 331 yen, while closest domestic rival JFE Holdings Inc. gained 2.3 percent to 2,960 yen. Nippon Steel will restart a furnace next month in southwestern Japan as it expects a “moderate” demand recovery in Asia.

Asahi Glass, Asia’s largest glassmaker, leapt 3.6 percent to 752 yen. The company will likely report an operating profit of as much as 4 billion yen ($43 million) in the six months to June, the Nikkei newspaper reported today. The company forecasts it will break even in the first half.

Shipping Lines

Kawasaki Kisen added 2.6 percent to 351 yen, and Mitsui O.S.K. Lines Ltd., Japan’s No. 2 shipping line, advanced 2.1 percent to 574 yen. The Baltic Dry Index, a measure of shipping costs for commodities, surged 4.1 percent, breaking a nine-day losing stretch.

Dowa surged 6.6 percent to 374 yen. Mitsui Mining & Smelting Co., Japan’s top zinc smelter, leapt 4.5 percent to 231 yen. A gauge of six metals in London gained 3.4 percent, with zinc climbing 3.9 percent.

Mizuho, Japan’s No. 2 listed bank, dived 3.5 percent to 191 yen, making it the most actively traded stock by value in Tokyo. The lender said earlier this month it will offer 3 billion common shares and set the price between July 15 and July 17.

“People are selling Mizuho on speculation the price of a new share will be set today. This is the final stage of the market reflecting the impact of the dilution of shareholder value,” said Toshikazu Horiuchi, a market analyst at Cosmo Securities Co.

Nikkei futures expiring in September added 0.5 percent to 9,300 in Osaka and Singapore.

Deflation May Push Japanes Bond Yields To A Six Year Low

By Yasuhiko Seki and Yumi Ikeda

July 15 (Bloomberg) — Kokusai Asset Management Co., which runs the world’s second-biggest bond fund, said Japanese government debt yields may fall to the lowest level in six years as deflation worsens.

Benchmark 10-year yields may drop to 0.9 percent this year, the lowest since August 2003, from 1.335 percent yesterday as falling consumption makes Japan’s economic recovery the slowest of major industrialized nations, said Akio Kato, group leader at the company’s fixed income fund management department. Kokusai’s $47 billion Global Sovereign Open fund is the second-biggest managed bond fund after Newport Beach, California-based Pacific Investment Management Co.’s $157 billion Total Return Fund.

“Consumer-price declines will gain further momentum toward the autumn and that situation is likely to prevail for the next one or two years,” Kato said in an interview with Bloomberg News. “When prices are falling, yields are prone to decline.”

Investors who buy Japan’s 10-year bonds today and sell at the end of this year may earn 3.2 percent should Kato’s forecast prove accurate, Bloomberg calculations show. Japanese bonds will beat Treasuries this year for the first time in a decade as the economy shrinks at twice the pace of the U.S., the largest traders in the securities said.

Japan’s 10-year yield will end 2009 at 1.30 percent, based on the median estimate in a Bloomberg News survey of the 23 primary dealers that bid at government debt sales. Treasury yields will rise to 3.76 percent by year-end from 3.35 percent yesterday, for a 1.7 percent loss, based on another Bloomberg survey, with the most recent forecasts given more weight.

‘Slowest Recovery’

“Japan is likely to see the slowest recovery among the developed economic nations due to the weakness of domestic private demand,” Kato, who is based Tokyo, said…..

India Expected To Outperform Other BRIC Markets

By Catarina Saraiva

July 15 (Bloomberg) — Indian stocks will outperform other emerging markets because of the Asian nation’s economic and earnings growth prospects, according to Carlos Asilis, the new chief equity strategist at Mumbai-based Prabhudas Lilladher Pvt.

“Growth is increasingly becoming a scarcer commodity,” said Asilis, 47, a former global chief investment strategist at JPMorgan Chase & Co. “That’s the reason why over the last four or five years I have become increasingly involved with the India market.”

India’s economic growth may accelerate to as much as 7.75 percent this year, the finance ministry said this month. The economy grew 6.7 percent in the year ended March 31, the slowest pace since 2003.

Asilis’s hiring is part of the brokerage’s efforts to tap into rising interest from international investors in Indian stocks. The Bombay Stock Exchange’s Sensex Index has rallied 44 percent this year, spurred by foreign-fund inflows as the Indian economy rebounds from the financial crisis.

Overseas funds bought $4.8 billion more Indian equities this year than they sold, according to data released by the Securities and Exchange Board of India on June 30. They dumped a record $13.3 billion in 2008.

The “stability” of Indian earnings and competitiveness of the rupee should also allow Indian stocks to outpace rivals, Asilis said in a phone interview from Miami, where he manages Glovista Investments, a firm he founded in 2007. He will be based in New York and travel to India four to six times a year. He had been on the investment committee of ICICI Bank Ltd., India’s second-largest lender.

Asilis is also a former economist at the International Monetary Fund who has worked at Merrill Lynch & Co., UBS AG and Credit Suisse Group AG, according to a press release.

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Convert Mortgage to Equity

Nassim Taleb and his hedge-fund partner Mark Spitznagel weigh in in the FT with an analysis of the world’s problem (too much debt) and a reasonable solution (convert some of the debt to equity).

As usual, Taleb lards up his argument with guru-speak and smug swipes at every other economist on the planet, which undermine the point.  But in this case, the point is a good one.

Converting debt to equity is what corporations do when they go bankrupt.  GM and Chrysler just did it, and the airlines will do it next time they go bust.  Same for the hundreds of other companies that go broke every year.

For some reason, however, this solution has NOT been seriously considered as way to mend the housing market.  It should be.  Reducing a strapped homeowners monthly payments (as in Obama’s mortgage-mod plan) will help, but it won’t address the fact that many homeowners are underwater.  Converting some of the mortgage to equity, however, will.

(This can be done in a variety of ways.  John Hussman has been proposing “property appreciation rights” for years.)

Here’s Taleb:

Against this background [mountains of debt], we have two options. The first is to deflate debt, the other is to inflate assets (or counter their deflation with a collection of stimulus packages.)

We believe that stimulus packages, in all their forms, make the same mistakes that got us here. They will lead to extreme overshooting or extreme undershooting. They lead to more borrowing, by socialising private debt. But running a government deficit is dangerous, as it is vulnerable to errors in projections of economic growth. These errors will be larger in the future, so central bank money creation will lead not to inflation but to hyper-inflation, as the system is set for bigger deviations than ever before.

Relying on standard models to build policies makes us all fragile and overconfident. Asking the economics establishment for guidance (particularly after its failure to see the risk in the economy) is akin to asking to be led by the blind – instead we need to rebuild the world to make it resistant to the economist’s mystifications.

Invoking the pre-internet Great Depression as guidance for current events is irresponsible: errors in fiscal policy will be magnified by this kind of thinking. Monetary policy has always been dangerous. Alan Greenspan, former Federal Reserve chairman, tried playing with the business cycle to iron out bubbles, but it eventually got completely out of control. Bubbles and fads are part of cultural life. We need to do the opposite to what Mr Greenspan did: make the economy’s structure more robust to bubbles.

The only solution is to transform debt into equity across all sectors, in an organised and systematic way. Instead of sending hate mail to near-insolvent homeowners, banks should reach out to borrowers and offer lower interest payments in exchange for equity. Instead of debt becoming “binary” – in default or not – it could take smoothly-varying prices and banks would not need to wait for foreclosures to take action. Banks would turn from “hopers”, hiding risks from themselves, into agents more engaged in economic activity. Hidden risks become visible; hopers become doers.

Read the whole thing >

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