Thursday, September 1, 2011

Morning Note Sept 1st

September 1, 2011
US equity futures are trading lower following European Economic data that generally came out weaker than expected abd begative sovereign debt headlines. The market is awaiting ISM Manufacturing data due at 10:00 ET where consensus of 48.5 suggests contraction which was last seen in Jul 2009.

Spanish T-Bond: Spain treasury sells €3.62B in new 5-yr bond. Bid-to-cover ratio 1.8. Average yield 4.489%

Libor fixings 
Overnight Libor: Dollar: 0.142% vs prior 0.144% ; Sterling: 0.581% vs prior 0.580%; Euro: 0.838% vs prior 0.836%
1-month Libor: Dollar: 0.222% vs prior 0.222% ; Sterling: 0.661% vs prior 0.655%; Euro: 1.298% vs prior 1.297%
3-month Libor: Dollar: 0.329% vs prior 0.326% ; Sterling: 0.888% vs prior 0.883%; Euro: 1.484% vs prior 1.483%

WTI ($0.13) at $88.68

Natural gas +$0.04 at $4.01

Spot Gold ($3.00) at $1823.30

10-yr yield 2.20%
30-yr yield 3.575%

Asian Markets
Most Asian markets rose today. A higher PMI in China encouraged risk-taking, though China itself, ironically, did not join in the regional rally.
Auto and machinery shares took Japan to a gain. Exporters rose in response to China’s PMI. Steel companies rose 3% on a report that raw material prices are probably going down. Access (4813.JP) jumped when its H1 loss came in lower than expectations, though it ended flat. In Australia, retail shares gained on news that July sales beat expectations. China fell slightly after Premier Wen Jiabao said the country would prioritize controlling inflation, leading many to suspect that tightening measures are pending. Australia July retail sales +0.5% m/m vs cons +0.3%. China August PMI 50.9 vs cons 51, 50.7 seq. August HSBC China Manufacturing PMI 49.9 vs 49.3 seq. The yen is trading at 76.89 to the US dollar.

European Markets
European equity markets opened modestly higher before reversing gains as disappointing regional economic data, mixed corporate results and parliamentary experts in Greece saying the country's debt is out of control weighing on the periphery, sent indices lower. Spain issued a new 5-yr government bond yielding 4.489%. Declining sectors lead advancers 15-4. Auto (3.4%), basic resources (1.9%), construction (1.8%) lead fallers whilst telecom +0.7%, healthcare and food & beverage both +0.3% lead gainers.

Today's Economic Releases (Eastern Time)

China August PMI 50.9 vs cons 51, month-ago 50.7
France Q2 ILO unemployment rate +9.6% vs prior +9.70%
05:00 Germany GDP (Y-o-Y) Q2 F (Jul); +2.8% y/y vs preliminary +2.8%
08:30 US Initial Jobless Claims (27-Aug); consensus 407K
08:30 US Continuing Claims (20-Aug); consensus 3667K
08:30 US Productivity (Q2 (revised)); consensus (0.5%)
08:30 US Unit Labor Costs (Q2 (revised)); consensus +2.6%
09:45 US Bloomberg Consumer Comfort (28-Aug); consensus n/a
10:00 US Construction Spending (Jul); consensus +0.1%
10:00 US ISM Manufacturing Index (Aug); consensus 48.4
10:30 US EIA Natural Gas Inventories (26-Aug); consensus n/a
—:— US Chain Store Sales (Aug); actual ---; consensus ---
—:— US Vehicle Sales (Aug); actual ---; consensus ---

Today's Key Events (Eastern Time)

11:00 GM monthly sales call for August
12:00 Activision Blizzard Analyst Day
12:15 Activision Blizzard Analyst Day
13:00 Ford monthly sales call for August
19:00 Paladin Energy Business Update:             866.839.8029      
—:— Caris Silicon Valley Tech Tour
—:— Dreamforce ~ Cloud Computing Industry Event
—:— FDA PDUFA (est): Horizon Pharma's sNDA for approval of Sanofi US as manufacturer
—:— International Epilepsy Congress ~ IEC
—:— Monthly Retail Sales
—:— Morgan Stanley Energy Field Trip 9
—:— Needham with Cirrus Logic
—:— Pareto Securities Oil & Offshore Conference

Company Specific News

COO (Cooper Companies reports Q3 non-GAAP EPS $1.15 vs Reuters $1.07. Reports Q3: Revenues $351.4M vs Reuters $331.3M)
CIEN (Ciena reports Q3 EPS $0.08 ex items vs Reuters ($0.08); Reports Q3: Revenues $435.3M vs Reuters $443.9M)
CWTR (Coldwater Creek reports Q2 EPS ($0.27) ex-items vs Reuters ($0.19). Segment sales: Retail segment: $142.2M versus $195.4M y/y)
OXM (Oxford Industries reports Q2 adjusted EPS from cont ops $0.57 vs Reuters $0.53. Reports Q2: Revenues $180.6M vs Reuters $178.1M)
TD (Toronto-Dominion Bank reports Q3 EPS C$1.72 ex-items vs Reuters C$1.66 (09/01/2011 06:34 ET)
Reports Q3: Revenues C$5.35B vs Reuters C$5.05B)

Positive NewsCCJ (Cameco Corporation announce agreement to increase annual uranium production at JV Inkai from 3.9M pounds to 5.2M pounds)
TD (Toronto-Dominion Bank increases quarterly dividend by 3.0% to C$0.68 from C$0.66)

OfferingsCPG.CN (Crescent Point Energy announces acquisitions, increase in 2011 exit guidance and C$375M bought deal financing)
FET (Forum Energy Technologies files $300M IPO through JPMorgan)
GSX (Gasco Energy files $100M mixed shelf)

Corporate ActionsBK (BNY Mellon president Gerald Hassell named to chairman and CEO, effective immediately. Hassell also continues as BNY Mellon's president Robert Kelly has stepped down as chairman, CEO and director by mutual agreement with the board, due to differences in approach to managing the company.)

M&AIBM (IBM to acquire Algorithmics (FIM.FP) for $387M)
SCHW (Schwab completes acquisition of optionsXpress)
SYK (Stryker announced a definitive agreement to acquire privately held Concentric Medical for $135M in an all-cash transaction. The deal is expected to close in early 4Q.)
T (With the DoJ suing to block AT&T’s proposed acquisition of T-Mobile, AT&T is looking for an expedited hearing from a federal judge (Ellen Segal Huvelle) in Washington D.C. According to Reuters, “Any trial in the AT&T case would be lengthy and complicated, with experts predicting that both sides would put on a parade of witnesses including consumers, economists, and possibly competitors or state regulators.”)

Retail CompsBKE (The Buckle reports August Comps +8.3% vs StreetAccount +5.0%; Reports August: Revenues +11.9% to $95.3M )
LTD (Limited Brands reports August Comps +11% vs StreetAccount +7.6%; Reports August: Revenues +11.4% to $702.4M )
PIR (Pier 1 Imports reports Q2 comps +10.8% vs StreetAccount +7.6%. Reports Q2: Revenues of $340.0M vs Reuters $333.3M )
WTSLA (Wet Seal reports August Comps +5.5% vs StreetAccount +4.1%; Reports August: Revenues +10.3% to $58.0M )

Others News
Eurozone sovereign debt crisis- IMF and Eurozone clash over estimates: The FT reported that IMF staff have circulated estimates showing serious damage to European banks' balance sheets from their holdings of troubled sovereign debt. The paper noted that this analysis has been strongly refuted by the ECB and Eurozone governments, which contend that it is partial and misleading. According to the article, the IMF's work, contained in a draft version of its regular Global Financial Stability Report, uses credit default swap prices to estimate the market value of government bonds in Ireland, Greece and Portugal, together with those of Italy, Spain and Belgium. One estimate reportedly showed that marking sovereign bonds to market would reduce European banks' tangible equity by ~€200B.
- Europe rejects IMF call for more bank capital: Reuters reported that European bankers and politicians have quickly rejected an IMF estimate that the banking system may need ~€200B in new capital to reflect sovereign debt losses. The article noted that experts say that the fight over whether European banks have sufficient capital highlights a flaw in the accounting treatment of sovereign debt.
Euro rescue fund faces political demands: Bloomberg said that Europe's rescue fund faces political demands that risk constraining its response to emergencies as the 17 Eurozone governments prepare to ratify its overhaul. The article noted that the EFSF would have to wait for a government request to buy bonds in the secondary market, a condition that was not part of the 21-Jul emergency summit statement. Bloomberg added that this extra step, along with conservative German lawmakers' demand for control, may make the EFSF less responsive than the ECB, which has purchased €115.5B of bonds in the past 16 months to help calm markets.
- More Greek collateral discussions next week: Reuters, citing a German government source, reported that the finance ministers of Germany, the Netherlands and Finland will meet on Tuesday in Berlin to discuss the issue of collateral for loans to Greece. The article reiterated concerns that the collateral backlash could jeopardize the next Greek bailout package.
- Spanish bond sale sees sluggish demand: Reuters reported that Spain's first bond auction in a month drew lackluster demand, forcing it to pay a high premium to place €3.6B of new five-year paper. The average yield was 4.489% vs 4.25% on a different five year bond with a different coupon on the secondary market late on Wednesday. The bid-to-cover was 1.8x, down from 2.9x at Spain's last auction of five-year debt in July.
- Bundesbank warns of loss of trust in ECB: Reuters noted that Bundesbank President Jens Weidmann said on Thursday that trust in the ECB could be lost if it continues with its crisis-fighting policies that go beyond its conventional role. Weidmann argued that the lines between monetary and fiscal policy have been blurred as a result of the financial and Eurozone debt crises.
- Italian austerity plan drama: The WSJ noted that in just two months, Italian Prime Minister Berlusconi has unveiled a flurry of austerity measures and countermeasures, triggering confusion on the part of both his supporters and his critics. The paper added that sources said yesterday that Berlusconi's government was planning to scrap a multi-billion euro program to delay pension payments for scores of Italians, potentially marking the fourth and fastest change of course in the government's recent austerity push. According to the article, the changes risk exacerbating investor concerns that Berlusconi does not have the stomach to pursue the unpopular measures needed to reduce the country's 120% debt-to-GDP ratio.
- Berlusconi says VAT hike possible: Reuters reported that Italian Prime Minister Berlusconi was quoted as saying that the Italian government could increase value-added tax by one percentage point if needed to close a funding gap in its revised austerity package. Berlusconi reportedly told the Il Tempo daily that "we would prefer not to touch it because we don't want to provoke any recessionary effects but if it were necessary, we could increase the 20% tranche by one percentage point, bringing it to 21%". He added that this would be in line with what happens in many other European countries.
- Germany's resiliency buoys Europe: The WSJ reported that Germany appears to be weathering the global slowdown, dampening concerns about a spillover of Europe's problems from the periphery to the core. The article cited a pair of bullish employment and manufacturing reports out on Wednesday and noted that a number of economists now say that predictions of a German recession were overdone.

Newspaper Articles / Headlines
- Barron's Weekday Trader is positive on General Electric. Barron's Weekday Trader is positive on GE citing: Orders strengthening for the company's aviation segement. Trading levels off ~25% from the 14-Feb highs; currently trading around 11x forward earnings. Dividend yield of 3.7%.
The company is expected to grow earnings at about a 15% rate longer term.

Detroit News
- UAW, General Motors discussing buyouts. Sources tell the Detroit News that buyouts are only one of many options being discussed. But the paper notes that GM has an older workforce than Ford (F) or Chrysler (F.IM), and buyouts would allow GM to put more cheaper, second-tier workers on its lines. A source says that Chrysler is not looking for more buyouts.

Economic Times
- Indian Income-Tax Department steps up monitoring of foreign companies that underreport revenues. The article is a summary, not breaking any news. The Economic Times reports that foreign companies tend to use their freedom to price transactions with their subsidiaries to avoid taxes. The article says that in FY10/11, the department made Indian subsidiaries restate their revenues by INR228B ($4.98B), more than double the restatements for the previous FY. IBM (IBM), Accenture (ACN), and Capgemini (CAP.FP) are specifically named.

Financial Times
- Presenting results yesterday, Aer Lingus CFO said sale of Ireland's 25% stake unlikely to happen this year.
- Bank of New York Mellon not changing strategy with ouster of Robert Kelly. People close to the situation also tell the FT that Kelly did not leave over recent job cuts, litigation, or any integrity issues. One source says that Kelly did not leave to take any job like being CEO of Bank of America.
- BP's Moscow office raided by at least 15 bailiffs, armed special forces. The FT reports that yesterday's raid was ordered by a court in Siberia, and notes that the company's stock price was hardly affected, suggesting that such events are considered par for the course in Russia.

Globe and Mail
- Blockbuster to be wound down in Canada. The Globe and Mail reports that 55 parties, which industry sources say included Rogers Communications (RCI.B.CN) and BCE (BCE.CN), looked at the assets, but no offers met the receiver's standards. Industry advisers say that Dish Network (DISH) may try to launch Blockbuster doors in Canada.

Les Echos
- Sanofi's Zentiva to make Lipitor generics. Citing sources, the newspaper reports that Sanofi's generic drugmaker Zentiva will be allowed to produce Lipitor's active ingredient atorvastatine in France possibly even before the patent's expiry on 7-May 2012.
Accordign to the newspaper the deal is part of France's Strategic Council of Health Industries (CSIS) programme, a cooperation agreement between the sector and the government, which gives the original drugmaker a tax break if it allows a generic drugmaker to produce and sell cheaper copies as the branded drug's patent expires.

Le Figaro
- Georges Soros likely holds 1.70% of Valeo's capital. The newspaper reports that Geroges Soros which seldom invests in France is likely to have invested in the company and holds 1.65% of the voting rights of Valeo.

Globe and Mail
- Google launches Canadian YouTube Movies site. The Globe and Mail reports that rental prices are C$4-5/movie vs Netflix's (NFLX) C$8/month subscription fee, and the article notes that YouTube faces competition from numerous other companies, as well.

New York Post
- Telefonica (TEF.SM), China Mobile (941.HK), America Movil (AMXL.MM) may be interested in T-Mobile USA

New York Times
- Obama economic address has been moved from Wed Sept 7 to Thurs Sept 8 – originally the address, which is scheduled to take place before a joint session of Congress, was to happen Wed night Sept 7. However, Boehner rejected that date and asked if the president would move the speech to Thurs night to accommodate a Republican presidential debate scheduled for Wed. Congressional historians said the Boehner request was “unprecedented”. There apparently has never been an instance in which Congress refused the president permission to speak before a joint session of Congress. The dispute between Obama and
Boehner over a relatively minor issue doesn’t bode well for when the two actually sit down and attempt to pass substantive legislation dealing w/the economy (NYT).

- The debt ceiling debate caused a “scary erosion of confidence”. “The debt ceiling negotiation is an extremely significant event that is profoundly and sharply reshaping views of the economy and the federal government”

- Obama administration talking about selling Northrop Grumman's Global Hawk to South Korea. People familiar with the matter say consultations have begun, though they do not give any potential timing or value for the proposed sale of the remote-control surveillance planes and ground stations. A NOC spokeswoman says South Korea may buy four RQ-4 Global Hawk "Block 30" drones, and if a deal is signed this year, they could be delivered in 2014-5. She adds that Japan, Singapore, and Australia are interested in the system.

Sacremento Bee
- offers California 7K jobs in exchange for two-year delay in internet sales-tax law. Sources with knowledge of the offer tell the Sacramento Bee that 30-Aug, Amazon said it would open six distribution centers in the state if the internet tax were delayed. Existing bricks-and-mortar booksellers are unimpressed, as are Democratic legislators.

- Bank executives to meet with Chancellor Osborne ahead of ICB report on reforms. Citing sources, SkyNews says executives from some of Britain's largest banks, including Barclay's Bob Diamond and Santander UK's Ana Botin, will lobby Chancellor Osborne in the coming days ahead of the ICB's 12-Sep report on financial reforms. The article notes that the executives are likely to stress a number of issues including "ring-fencing in 'universal' banks", capital buffers, the need for an extended implementation period, as well as the potential impact on bank stability.

Silicon Alley Insider
- Six companies have submitted informal bids for Hulu. The bids reportedly came in the expected range of $500M-$2B, weighted toward the upper end of the range Among the bidders are Yahoo (YHOO), Amazon (AMZN) and Google (GOOG), all of whom were expected to bid SK Telecom (SKM), who Business Insider reported was expected to join the bidding, as well as Apple (AAPL) were not among the bidders

- Melrose (MRO.LN) raises 840p/share offer for Charter by about 20p/share. The Charter board is likely to approve the bid, and an announcement will probably come this week. The cash-and-shares offer will be mostly Melrose stock. Charter shareholders have told the board that they would prefer Melrose shares to the all-cash bid that a mystery suitor has reportedly made. Melrose is said to be planning a rights issue for the cash part of the bid, and shareholders are likely to support it

Wall Street Journal
- WSJ says Judge Ellen Segal Huvelle (who will also be jury and possibly executioner) will be key for AT&T's chances against Justice. A "Heard on the Street" column notes that the judge really could rule either way, but it advises that regardless, AT&T's merger goose may be cooked if Huvelle does not grant the company an expedited hearing.
- Competitors will not unequivocally benefit if Justice prevents AT&T's takeover of T-Mobile USA (DTE.GR). The WSJ observes that other companies stand to have their top lines hit, too, if a low-priced provider sticks around, and they will not be able to purchase assets that AT&T would likely be ordered to sell if the purchase goes through.
- WSJ speaks unkindly of BP. A "Heard on the Street" column says that short-term happiness that BP's Russian expansion is no longer an option will eventually be replaced by the realization it is missing out in the country.
- Goldman Sachs (GS), Litton Loan Servicing, Ocwen Financial (OCN) to sign mortgage deal with New York's nascent Department of Financial Services. People familiar with the matter tell the WSJ that in a deal that will probably be announced today, the firms will promise to end robo-signing, cut mortgage payments for some New Yorkers, and look for evidence that they mishandled paperwork. The WSJ reports that the agreement could be used by other regulators to settle similar claims against other mortgage servicers/banks.
- WSJ says T-Mobile USA need not fear AT&T takeover's falling apart. A "Heard on the Street" column reminds readers that the company would walk away with $3B in cash and other benefits (which StreetAccount notes would total another $3B), and says T-Mobile might then find Sprint Nextel (S), Clearwire (CLWR), or Dish Network (DISH) all willing suitors.

Argus Research: upgraded MDT
Bank of America: upgraded Russian Steels
Citi: upgraded CELL
Goldman Sachs: upgraded SID
ISI Group: downgraded GS
Jefferies: downgraded KAMN
Macquarie: upgraded DYN; downgraded MAA
Morgan Stanley: upgraded CXO
Needham: upgraded CTSH
Oppenheimer: upgraded WCC; downgraded B, GWW
Piper Jaffray: upgraded MGI, HWAY, TRMB
RBC Capital: upgraded DUK
Stifel Nicolaus: downgraded SAI
Wells Fargo: upgraded AHGP, SXL, APL, EEP, EEQ

Let’s Call it Even…

The VIX is 31.62 down 1.27 (3.8%) on the session (but still 78% higher than where it started 2011) as the equity markets rallied for the 4th stragiht session bringing the Dow back into positive territory for the year. We believe the market is incorrectly assigning a greater than 50% probablility to the Fed enacting some form of “meaningful” market stimulus. Until we get clarification from both the Fed and European policy makers we think there is an implicit mid 20’s “floor” under the VIX. None of this seems likely to happen before September expiration so we fully expect the volatility to continue. In support of this theory and as a hedge on a long-equity portfolio, we like selling the VIX Sep 27.50 puts to buy the 35-40 call spread for $.10. If this trade loses money (VIX below 27.40), the long-equity performance should be outstanding.

The Looooooong Bond

Heading into an FOMC meeting where the market has baked-in a decent probability that the Fed will announce plans to extend the maturity of assets held on their balance sheet, it looks to be another “heads I win tails you lose” situation for the long bond. Looking at the TLT (20+ Yr Bond ETF) implied vol looks exceptionally well priced relative to realized vol  (60-day implied/realized ratio=.83) and skew, steeply inverted just a couple weeks ago has steepened considerably, setting up nicely for investor to put on risk-reversals. For those who expect the bond rally to continue, take a look at selling the TLT Oct 103 put to buy the 110 call for even money.

Right Back at Ya…

September is a back-half loaded month with the FOMC meeting on 9/20-21 and a 9/29 German parliamentary vote on expansion of the EFSF, both occuring after September expiration. The existence of quarterly options (expiring 9/30) on both the SPY and IWM, make for a convenient “forward-vol” trade whereby an investor can sell Sep options (9/17 expiry) to buy the quarterlies.

In IWM, look at selling the Sep 69 puts to buy the Sep quarterly 69 puts for $.79
In SPY look at selling the Sep 116 puts to buy the Sep quarterly 116 puts for $.90

Ex-Squeeze me while I cover up…

Post earnings, The Fresh Market (TFM Market Perform) finished up 10.82% on an earnings beat that wasn't impressive due to an obvious and painful short-squeeze as 5.7m shares (33% of float/ 11 days of ADV) were held short. Other names reporting before October expiration (10/22) with high short interest as % of float and short-interest ratios (days to cover) include: ADS, AMSC, ASNA, ESI, FAST, HDY, HOV, KBH, NYT, OCZ, REE, SVU, SYNA, TLB. Look at buying ‘baby’ (way otm) calls on names in this group on their short-squeeze potential.

All Put Spread Collars, All the Time
Look to put spread collars for cheap protection. With vol elevated (SPY 60-day vol at 90th %ile) and skew still uber-steep (SPY 60-day skew at 79th %ile), it’s a great time to employ this structure, particularly if you are willing to sell at some premium to current levels. We screened our ETF universe for put spread collars where: 1) the cost is less than 60bps (of spot) 2) there is at least 7% of upside from current levels 3) protection kicks in less than 4% away on the downside and  remains in place for an additional 7% move down.

Talks continue following lawsuit vs. AT&T/T-Mobile deal. The Justice Department is reportedly continuing discussions with AT&T (T) and T-Mobile USA (DTEGY.PK) over their $39B merger after the DOJ yesterday filed a suit to block the deal, saying it would harm competition and lead to higher prices. Still, with the FCC also expressing "serious concerns" about the transaction, its chances of success look slim. AT&T has the motivation to fight, given that it would have to pay T-Mobile parent Deutsche Telekom an estimated break-up fee of $6B in cash and other assets, including extra spectrum.
Costco CEO Jim Sinegal to step down. Costco (COST) CEO Jim Sinegal plans to step down in January and will be replaced by COO Craig Jelinek. Sinegal, who will stay at Costco throughout 2012 as an advisor, built the company into the country's third-largest retailer, steering the firm through the recent recession without layoffs or cutting health benefits. He said he is quitting because of his age, 75, and because Costco is in good shape. That was underscored by same-store sales for August, which rose an annualized 11%, beating forecasts of 9.3%.
BNY Mellon fires CEO. Bank of New York Mellon (BK) CEO Robert Kelly has stepped down due to "due to differences in approach to managing the company," and will be replaced by bank veteran and President Gerald Hassell. Sources say Kelly was asked to leave, as he was viewed as being difficult to work with and he had alienated some directors and top executives, with the board fearing an exodus of valued employees. Despite being fired, Kelly could receive over $30M in cash compensation, retirement benefits and stock awards.
German manufacturing growth downgraded. German final August PMI data for manufacturing fell to 50.9 from 50.4 in July, dropping to its weakest level in almost two years. The reading was also below a flash estimate of 52, and indicates the eurozone slowdown is spreading to its engine. Notwithstanding, the reading of above 50 signals that PMI is growing, unlike in the eurozone as a whole, where PMI dropped to 49 from 50.4. Two sets of Chinese PMI data painted a mixed picture, with one showing growth and the other contraction.
IMF pours further doubt on strength of EU banks. An IMF analysis shows that marking the sovereign bonds of six highly indebted eurozone countries to market would reduce the tangible common equity of EU banks by about €200B ($287B), or 10%-12%. The countries concerned are the usual suspects of Ireland, Greece, Portugal, Italy and Spain plus Belgium. IMF officials said the estimates indicated that EU banks need to raise more capital, an argument that Christine Lagarde made at the weekend. However, Spain's Finance Minister criticized the analysis for not including German Bunds, which have risen.
Ireland: Finland's collateral deal with Greece axed. A controversial agreement in which Greece promised to provide collateral to Finland in exchange for rescue loans is "off the table," Irish Finance Minister Michael Noonan said today. "There are other arrangements being made to compensate," he added. The deal prompted calls from other eurozone countries for similar agreements, and sparked opposition from Germany and Austria, with the fissure threatening to cause a fresh eurozone crisis.
Spain sells bonds in disappointing auction. Spain has sold €3.6B ($5.14B) of five-year bonds in an auction that received tepid demand, leading the country to pay yields of 4.489%. That was higher than a yield of 4.25% in the secondary market for a different five-year paper late yesterday. As with Italy's disappointing sale earlier this week, the ECB supported Spain's auction in the resale market, where the yield on 10-year bonds rose following the sale. More happily, France experienced few problems as it sold €7.8B in three bonds that analysts said were well-received.
Sanofi wins Lipitor license. Sanofi (SNY) has reportedly obtained a licence from Pfizer (PFE) to produce a generic version of the latter's cholesterol treatment Lipitor - the world's top-selling pharmaceutical - possibly even before the expiry of the drug's patent in May next year. The license approval is part of Sanofi's strategy of seeking growth in the market for copycat drugs as it prepares for the loss of patents on several of its own treatments.
Goldman and others reach mortgage deal with NY. Goldman Sachs (GS), its Litton Loan Servicing unit and Ocwen Financial (OCN) have reportedly reached a deal with New York in which they have pledged, among other things, to end robo-signing, although there's no word of any fines. The agreement will allow Ocwen's $264M purchase of Litton to proceed, and could provide a framework for other mortgage deals between large banks and regulators. It comes after New York raised objections to a prospective agreement between states and five leading banks, not including Goldman.
Panel: Up to $60B wasted in Iraq and Afghanistan. A Congressional panel has found that the U.S. has misspent $31B-$60B on contracting for services in Iraq and Afghanistan, due to waste, fraud and abuse. One example is an extortion letter sent by Afghan insurgents to a contractor working on a U.S.-funded construction project. The study also cites schemes that were poorly conceived, badly executed and unsustainable. The panel urged Congress to strengthen oversight, including with the creation of a permanent inspector general.
UAW workers OK strike option. In advance of a contract expiration on September 14, UAW workers in Detroit have voted to give union leaders the option of calling a strike against Ford (F). The authorization follows similar actions by local unions in other cities. Ford is the only major carmaker without a no-strike clause, but investors seem unperturbed - shares have easily outperformed GM (GM) over the last month. This could be because such votes are considered routine and are aimed at providing union negotiators with more leverage.
Apple iPhone prototype goes missing in bar - again. So, an Apple employee and his iPhone walk into a bar...In a repeat of an incident last July, Apple's (AAPL) yet-to-be-released iPhone 5 has gone missing after being left in a San Francisco tequila lounge. The company, with the assistance of the police, is mounting a furious search for the device. 

Trader Commentary:
Oil & Gas:
Crude off their highs flattish after manufacturing growth in China & U.S.bode well for demand...late yesterday Canadian Oil names caught a bid after Sec. Chu said energy concerns may aid Keystone & that Canada supply oil �is much more comforting� than having other countries; eyes on the oil field service names buzz is that we may see more industry mergers off cheap valuation their had been a Bear cloud over the service names which got beaten down on the down draft 3 weeks Nat gas count @ 10:30AM street @ 60BCF & Day 2 of the Simmons Energy Conf & Pareto Oil & Offshore Conf. in Oslo...
*OPEC Output Climbs to Highest Level Since 2008...Saudi Arabia pumped the most since 1989 *Exxon Sells Offshore XTO Assets to Dynamic for $183m *Foster Wheeler, Ltd Awarded Contract for Hydrogen Production Unit in Kazakhstan laza

friend, in very senior
management at one of the
world�s largest gold mining
companies, was kind enough to
send us this chart comparing
gold to its own price movement
in �71-�82 and to the NASDAQ
1990-2002, and it argues rather
strongly that gold has not even
come close to at �Bubble-like�
stage. This chart we find very,
very interesting.  gartman

 *Special thanks to Option Radar, BMO Capital, MEB Options, Bloomberg, Reuters, Optionistics, LiveVolPro, CBOE, AMEX, Option Monster, T.O.P. group, and all of the options desks and traders we work with to provide the option flow! 

 No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

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