Data Feed

S&P futures vs fair value: +9.5. Nasdaq futures vs fair value: +16.0.
Futures indications are now trading at their best levels of the morning and pointing to an even stronger start for stocks following key economic data. As expected, retails sales rebounded in July with a modest 0.3% rise (consensus 0.2%) and following a favorable revision to the June data. The more closely-watched sales, ex-autos, rose 0.4%. That matched economists’ forecasts but helps to ease some of the disappointment from last Thursday’s weaker than expected same-store sales figures which signaled a more challenging spending environment.

Retail Sales ex-auto +0.4% vs +0.4% consensus
Retail Sales +0.3% vs +0.2% consensus

Gapping up: NITE +24.6%, CAAS +17.7%, CLWT +15.2%, BX +10.4%, GBN +10.2%, SIRF +9.5%, BEAS +6.9%, VCLK +5.6%, NGA +4.6%… Gapping down: LEND -34.4%, BZH -7.8%, GOLD -3.4%, SAP -2.4%, ASX -2.2%, FNM -2.2%, ALU -1.8%, STM -1.5%, RTP -1.4%, QGEN -1.3%.

Fed says will evaluate if needs to do open market operations at normal operating time at 9:30 AM EST – Reuters
Says stands ready to conduct additional operations later int eh day as needed, according to NY Fed web site.

ADSK Autodesk: AmTech is expecting an in-line quarter despite recent noise to the contrary (43.13 )
AmTech’s channel checks overall were mixed this quarter as resellers digested higher quarterly quotas, 2D and 3D incentive changes, and navigated deal registration changes. While some resellers came up short of quota, they believe quotas were set ahead of ADSK’s rev guidance and do not believe there has been any meaningful degradation in demand trends. It is our understanding that FY08 (Jan) reseller quotas were adjusted higher to encompass prior outperformance resulting in a material year to year change in quotas. Given the pullback, firm believes an inline quarter with maintained guidance would be enough to lift shares from current levels.

AAPL Apple: Nintendo and Apple platforms are gaming each other – NYPost (125.00 ) -Update-
NYPost reports two of the hottest tech companies – Nintendo and Apple – appeared headed for a showdown after Nintendo moved to patent its tilt sensitivity on its best-selling portable system, Nintendo DS – essentially to turn it into mobile Nintendo Wii. Meanwhile, Apple has been secretly plotting its foray into portable video games for months, looking to add games to its hot iPhone, according to various on- and off-the-record sources. Apple is expected to make a gaming announcement soon, “by Macworld in January at the latest,” says Engadget.com Editorial Director Peter Rojas.

Bond Watch: Slipping Into Week
The market was reclaiming a portion of the lost ground from late Fri but gains are slowly evaporating as the open approaches. While equities tentatively get their footing, central banks continue to throw money around & fears of a more painful credit pinch have not completely been removed providing near-term price support. The 2-10-yr yield spread is slinking flatter to 33.3 as curve trade unwinds some of last week’s push steeper. Bond prices in the EuroZone are a little soft as equities pulled themselves higher while in Japan, bonds are firmer on weak data. Treasuries will be eyeing the newswires for more bust-ups in credit/fund-land as Goldman has kicked things off this week by saying it will inject some rescue capital into one its quant funds. A conference call is scheduled for 9. Data will be watched but disounted as dated given recent market adjustments. The buck is aiming higher but meeting with bids on the euro around 1.3640 while against the yen, the dollar is chugging back after suffering some unwinding overnight with offers thickening up around 118.5000. Spot gold is down at 670.92 (-1.88) while crude oil is up at 72.33 (+0.86). The calendar has retail sales (8:30) & business inventories (10). The euro is at 1.3650 & the yen is at 118.3200 while the 10-yr is -02/32nds yielding 4.818%.

Floor talk: Looks to be a less volatile open, with liquidity concerns easing somewhat
There have been a number of headlines out this morning that are acting to calm what have recently been very jittery mkts: 1) the ECB added a lesser sum of money to banks today, with an injection of 47.7 bln euros ($65 bln) — down from 61.05 bln euros on Aug. 10. In addition, according to Bloomberg.com, the ECB said that “money market conditions are normalizing and that the supply of aggregate liquidity is ample.” 2) In the US, the Fed Funds rate opened at 5.25%, in line with the Fed’s Target. This suggests that the Fed may not be as aggressive in adding liquidity to the mkt, which should make for less alarming headlines regarding the cental bank’s open mkt operations. 3) Goldman commented on the performance of its GEO fund, and announced that various parties invested $3 bln into the global equity opportunities fund. 4) Another incremental positive is that a deal in Europe went through, with Imperial Chemical being acquired by Akzo Nobel for about 8 bln pounds. 5) Finally, EMC’s VMware is set to offer its shares through an IPO this week, which could act as a catalyst for technology stocks in general, as Bloomberg is calling it the biggest tech issue since Google… European mkts were strong overnight (FTSE 100 +2.3% DAX +1.2% CAC 40 +1.5%), and US futures are indicating a positive open (DJ futures +98, SPX futures +13, Nas +134).

RBC says low loan-to-deposit ratios a source of strength during a bank liquidity squeeze
RBC says in the event of a liquidity crunch in the United States, firm believes those banks with lower loan-to-deposit ratios should be more readily able to handle potential deposit withdrawals. Banks that have a higher amount of loans than deposits on the balance sheet are not as liquid as banks that have a significant portion of assets in investment securities. They believe liquidity could become an issue for some banks over the next 6-12 months if the problems in the credit markets intensify. Banks that have low loan-to-deposit ratios could become safe havens for investors who want to have some exposure to financials.

NMX NYMEX: Jefferies discusses July volumes (132.08 )
Jefferies notes that on Friday, NMX released its July average daily trading volumes (ADV). They note that July ADV equaled 1.45 mln, increasing 16.3% y/y and up modestly from June levels. Quarter-to-date total ADV has trended below the firm’s expectations at approximately 1.45 mln (as of Aug. 9), compared to their 3Q07 estimate of 1.65 mln. They have been somewhat surprised so far this quarter as volumes have failed to rise to the levels they anticipated. The firm is not changing their estimates currently, as volumes have increased slightly in recent days, but will continue to monitor closely. They note that speculation on the building sale continues, and believe near-term share price movement will be driven by speculation regarding its headquarters building sale as well as take-out rumors.

GS Goldman Sachs says performance of GEO fund has suffered significantly, various investors invest $3 bln in global equity opportunities fund (180.50 )
Co and various investors, including C.V. Starr & Co, Perry Capital and Eli Broad, are making a $3 bln equity investment in Global Equity Opportunities. Existing investors in the fund will also have the opportunity to participate. The investment will also provide the fund with more flexibility to take advantage of the opportunities we believe exist in current market conditions. Goldman Sachs Asset Management also manages Global Alpha. “The market dislocation impacting equity quantitative strategies has adversely affected NAEO’s performance and has been a key contributor to Global Alpha’s disappointing performance. We have reduced risk and leverage in these funds as well. At their current levels of equity capital, we believe the funds are positioned to actively pursue market opportunities”… As well, the said: “Many funds employing quantitative strategies are currently under pressure as recent conditions have resulted in significant market dislocation. Across most sectors, there has been an increase in overlapping trades, a surge in volatility and an increase in correlations. These factors have combined to challenge many of the trading algorithms used in quantitative strategies. We believe the current values that the market is assigning to the assets underlying various funds represent a discount that is not supported by the fundamentals.” A conference call to discuss this investment will be held at 9:00 a.m. (ET).

LEND Accredited Home Lenders: Wiliness to litigate makes outcome of transaction difficult to predict – FBR (8.90 ) -Update-
Friedman Billings notes after the markets close on Aug 10, LoneStar announced it does not expect to accept shares tendered due to its belief that as of August 10, LEND would fail to satisfy closing conditions. LEND responded that it believes all conditions will be satisfied by the expiration of the current tender period (Aug 14) and strongly disagreed that as of August 10, it would fail to satisfy the conditions of the tender offer. Firm believes LoneStar’s announcement regarding its expectation to not accept shares tendered may dissuade some investors from tendering. Firm believes both sides are willing to litigate, making the outcome of the transaction more difficult to predict.

Filings: SatCon Tech (SATC) files for a 1.81 mln share common stock offering by selling shareholders… Goodrich Petroleum (GDP) files for a $200 mln mixed shelf offering… Star Scientific (STSI) files for a 3.15 mln share common stock offering by selling shareholders… Offerings: Sigma Designs (SIGM) announces a 4 mln share common stock offering; 3.8 mln being offered by the co and 200k being offered by selling shareholders.

China’s inflation rate jumps to highest in 10 yrs – Bloomberg.com
Bloomberg.com reports inflation in China, the world’s fastest-growing major economy, accelerated to the highest rate in more than 10 years, fueling speculation that the government may raise borrowing costs for a fourth time in 2007. Consumer prices jumped 5.6% in July from a year earlier, after gaining 4.4% in June, the National Bureau of Statistics said today. That beat the 4.6% median estimate of 17 economists surveyed by Bloomberg News. Food costs climbed 15.4% after a shortage of pigs pushed up meat prices and bad weather destroyed crops. The central bank is concerned that food inflation will spread, overheating an economy forecast to contribute more to global growth than the U.S. this year.

TSCM TheStreet.com: Corsis acquisition accelerates transition to an online media business model – Merriman (10.76 )
Merriman likes the Corsis acquisition as it should 1) help the co attract more online advertisers, 2) help grow high-margin ad revs, 3) diversify the customer base and rev streams, and 4) be accretive to earnings. Firm raised their ests and continue to believe that as the co’s transition to the online media business model continues and the mix of high-margin advertising rev grows, firm should see expansion in margins, bottom-line growth rates, and valuation multiples.

FNM Fannie Mae: Release ‘06 earnings early, OFHEO keeps portfolio caps – FBR (66.46 )
Friedman Billings notes FNM is scheduled to report FY06 earnings on Aug 16, before the open. Mgmt had loosely guided to Sept for the FY06 release, so this comes as a pleasant surprise and could indicate that FNM could file current financials before its previous guidance of March of ‘08. Firm believes the quicker FNM files current financials, the greater flexibility the co will have with respect to the capital mgmt, which could be used for either growing the portfolio or returning capital to shareholders. However, firm notes OFHEO’s refusal to lift portfolio caps will be the focus on Monday, and the stock will most likely trade down. Firm encourages investors to buy on weakness, as they believe FNM will be a winner in the current crisis. They urge investors not to focus on the FY06 earnings, as it does not reflect the improving fundamentals over the last few months.

Upgrades: Friedman Billings upgrades Marathon Oil (MRO 51.86) to Market Perform from Underperform and maintains their $50 tgt, based on valuation… Bear Stearns upgrades Innophos Holdings (IPHS 14.59) to Outperform from Peer Perform… CIBC upgrades Earthlink (ELNK 6.40) to Sector Perform from Underperform. Downgrades: Friedman Billings downgrades Ruddick (RDK 35.67) to Market Perform from Outperform and raises their tgt to $37 from $35, based on valuation.

BX Blackstone reports Q2 (25.28 )
Does not report Q2 EPS, Reuters Estimates has a consensus of $0.45; revenues rose 200.5% year/year to $975.3 mln vs the $991.5 mln consensus. “We are pleased to report such strong results in each of our business segments. In the face of current market volatility and challenges, we remain confident about delivering superior long-term returns for the investors in our funds, which we believe is the key to driving value and growth for our unit holders… Throughout much of the second quarter, the operating environment was fundamentally positive, with global equity markets approaching near-record levels and the global economy, particularly in the U.S., remaining healthy. Concerns over weakness in the U.S. housing market and sub-prime mortgage market, coupled with a large volume of debt financing backlog related to leveraged equity transactions, served to create more challenging financing conditions starting in the last week of the quarter, which continue to date.”

Upgrades: Morgan Stanley upgrades China Unicom (CHU 15.61) to Overweight from Equal Weight… Morgan Stanley upgrades Applied Micro (AMCC 2.86) to Equal Weight from Underweight… BofA upgrades Pactiv (PTV 29.61) and Sealed Air (SEE 26.43) to Buy from Neutral… J.P Morgan upgrades Compass Minerals (CMP 32.66) to Overweight from Neutral… CIBC upgrades CIT Group (CIT 34.29) to Outperform from Sector Perform with a $52 tgt saying they believe there are several negative headline events on the horizon, but near $30, downside risk looks sufficiently discounted… CIBC upgrades CryptoLogic (CRYP 22.16) to Sector Perform from Underperform following earnings and because they reorganization is complete; 15 new sites to be launched by Q3 in time for positive seasonality; and new growth opportunities in Asia that should develop during H2/07 and into F08. Downgrades: Morgan Stanley downgrades eTelecare Global (ETEL 14.76) to Equal Weight from Overweight… J.P Morgan downgrades DR Horton (DHI 17.44) to Neutral from Overweight… CIBC downgrades Sirenza (SMDI 14.17) to Sector Perform from Outperform based on valuation. Miscellaneous: BB&T initiates KHD Humboldt Wedag International (KHD 59.20) with a Buy and sets a $72 tgt… J.P Morgan initiates Aruba Networks (ARUN 19.29) with a Neutral.

Upgrades: UBS upgrades Eagle Bulk Shipping (EGLE 24.97) to Buy from Neutral… JP Morgan upgrades National CineMedia (NCMI 22.81) to Overweight from Neutral… JP Morgan upgrades ValueClick (VCLK 19.08) to Overweight from Neutral… Lehman Bros. upgrades Syngenta (SYT 37.64) to Overweight from Equal-weight… UBS upgrades Schering-Plough (SGP 27.26) to Buy from Neutral… Citigroup upgrades Avnet (AVT 36.76) to Buy from Hold… Citigroup upgrades Arrow Electronics (ARW 36.28) to Buy from Hold… Citigroup upgrades Adolor (ADLR 3.41) to Hold from Sell… BofA upgrades BEA Systems (BEAS 11.41) to Buy from Neutral and raises their tgt to $14 from $13, based on valuation and believe the potential leverage in the business remains untapped while checks indicate that BEA is finally starting to take a tighter line in terms of expenses… SunTrust upgrades Energizer Holdings (ENR 94.07) to Buy from Neutral and sets a $125 tgt, based on the strength of the core business that should continue to see an 8-10% EBIT growth rate given current operating momentum, the announced acquisition of Playtex and siginficant cost and revenue synergies that will be generated by the Energizer/Playtex combination over the next two years. Downgrades: Citigroup downgrades ProLogis (PLD 59.61) to Sell from Hold… Citigroup downgrades AMB Property (AMB 51.54) to Sell from Hold… Morgan Stanley downgrades AstraZeneca (AZN 47.96) to Equal-weight from Overweight.

GS Goldman Sachs: After the storm, ‘Quant’ updates – WSJ (180.50 )
WSJ reports quantitative funds, which rely on computer models to make mkt bets, roiled the mkts last week, with several such funds facing losses. Early this week, managers of several high-profile funds will start explaining themselves. Barclays Global Investors, one of the world’s biggest fund managers, with $2 trln in assets under mgmt, is expected by tomorrow to provide investors its weekly update for its 32 Capital Fund. The fund’s performance has been “challenging,” but it hasn’t faced large-scale redemption requests from clients or liquidations of its holdings, a person familiar with the fund said. And Goldman Sachs Group, whose well-known Global Alpha fund has been hard hit, is expected to put out a statement this morning and hold a conference call to walk investors and analysts through some of the losses its “quantitative equity” funds have suffered. It is all but unheard of for Goldman to hold an unscheduled call with investors, but such calls are starting to occur on Wall Street as trading losses mount.

Upgrades: Jefferies upgrades GlobalSantaFe (GSF 67.30) to Buy from Hold and maintains their $83 tgt, based on valuation… Wachovia upgrades Monster Worldwide (MNST 35.53) to Outperform from Market Perform, as they believe N. American weakness is largely confined to the e-comm channel, enterprise growth is ongoing, and Int’l remains strong… Morgan Keegan upgrades Semtech (SMTC 15.69) to Outperform from Market Perform, as they see a sustainable turn in the co’s fundamentals toward above average growth and predict a penny earnings beat for the July quarter… BofA upgrades Lockheed Martin (LMT 94.31) to Buy from Neutral and raises their tgt to $110 from $109, based on valuation… BofA upgrades BMC Software (BMC 27.83) to Buy from Neutral and raises their tgt to $34 from $33, as they believe a combination of improving business trends in the mainframe business, continued strength in the core BSM division, diligent cost management and strong FCF generation and aggressive buyback activity should help drive upside to EPS estimates and share appreciation in FY08 and FY09… Piper Jaffray upgrades Nordstrom (JWN 48.66) to Outperform from Market Perform. Downgrades: Lehman Bros. downgrades Hawaiian Electric Industries (HE 22.43) to Underweight from Equal-weight. Miscellaneous: Rodman & Renshaw initiates Array Biopharma (ARRY 10.91) with a Market Outperform and sets an $18 tgt, as the co has advanced 17 molecules that are in various stages of development on its own and in conjunction with partners while owning the majority of its pipeline… Rodman & Renshaw initiates Tapestry Pharma (TPPH 1.70) with a Market Outperform and sets a $5 tgt, as they believe TPI 287 is one of the key contenders poised for commercial success amongst the next-generation taxane compounds with improved clinical characteristics… JP Morgan adds Greenfield Online (SRVY 13.70) to Focus List.

Upgrades: Deutshce Bank upgrades Telecom Argentina (TEO 21.60) to Buy from Hold and maintains their $28 tgt, based on valuation… Deutsche Bank upgrades Homex (HXM 53.53) to Buy from Hold, following strong Q207 results… Deutsche Bank upgrades U.S. Bancorp (USB 29.96) to Hold from Sell and maintains their $31 tgt, based on valuation and believe the franchise should have fair credit quality given balance sheet and business line actions taken in prior periods… Deutsche Bank upgrades JPMorgan (JPM 44.25) to Buy from Hold and maintains their $60 tgt, as they believe its financial conglomerate structure gives it strength to gain market share during times of stress… Deutsche Bank upgrades National CineMedia (NCMI 22.81) to Buy from Hold and raises their tgt to $28 from $27, based on raised estimates, a newly declared dividend that is 25% above high end of prior guidance and a new affiliation deal with Kerasotes points to an improving outlook for industry consolidation… Deutsche Bank upgrades Websense (WBSN 19.50) to Buy from Hold and raises their tgt to $24 from $22, due to potential synergies from Surf Control, stabilization in the core business and industry low valuations… Deutsche Bank upgrades FirstEnergy (FE 60.28) to Buy from Hold and raises their tgt to $71 from $69, based on valuation and see attractive upside in earnings and cash flow through the 2011 timeframe… Jefferies upgrades Transocean (RIG 100.77) to Buy from Hold and raises their tgt to $123 from $115, based on valuation.

Sensex ends up 149pts at 15,017 – The Business Standard
The Business Standard reports the Sensex opened with a positive gap of 98 points at 14,966. Profit-taking in intra-day deals saw the index pare gains and touch a low of 14,869 -just a point short of negative territory. The index, however, however bounced back to higher levels on the back of steady buying in select heavyweights like Hindustan Unilever, HDFC, NTPC and Tata Steel. Auto stocks, too, posted smart gains today. The index rallied to a high of 15,045, and finally ended with a gain of 149 points at 15,017.

Asian stocks rise as central banks pledge cash; Kookmin gains – Bloomberg.com
Bloomberg.com reports Asian stocks rose, following their biggest drop in five months, as the region’s central banks moved to ease a credit crunch sparked by losses on higher risk mortgages. Japan’s Nikkei 225 Stock Average advanced 0.2% to 16,800.05. It earlier fell as much as 0.2% after a government report showed the economy expanded at a slower pace last quarter. China’s CSI 300 Index fell 0.1%. Kweichow Moutai dropped on concern costs will rise after a government report showed inflation accelerated. Australia’s S&P/ASX Index added 1.3%, the region’s biggest gain. Thailand’s market is close today for a holiday.

European stocks climb; Axa, Credit Suisse, ICI pace the advance – Bloomberg.com
Bloomberg.com reports European stocks rose for the first time in three days after Morgan Stanley recommended buying shares in financial companies. Axa SA and Credit Suisse Group paced the advance. National benchmarks advanced in all of the 18 western European markets. The U.K.’s FTSE 100 gained 1.7%, France’s CAC 40 added 0.9%, and Germany’s DAX increased 0.7%.

People’s Bank of China says “No plans” to sell off greenback – Xinhua
Xinhua reports the U.S. dollar plays an important role in the global monetary system and dollar assets are an important part of China’s foreign exchange reserve, the central bank said Sunday. The announcement by the People’s Bank of China, experts said, should scotch rumors that Beijing would sell off its U.S. dollar reserve in response to Washington’s pressure to revaluate the yuan. Last week, the UK’s Daily Telegraph reported that two Beijing “officials” had sent an “economic threat” saying China could “liquidate its vast holding of U.S. treasuries if Washington imposes trade sanctions to force a yuan revaluation”. Economists Xia Bin and He Fan, of the State Council Development Research Center and the Chinese Academy of Social Sciences, were quoted as saying that if Beijing triggered a dollar crash now, when the U.S. dollar is weak, it could cause a spike in U.S. bond yields, ruin the country’s housing mkt and even slow down its economy.

LEND Accredited Home Lenders recommends shareholders tender shares (8.90 )
Co announces that it has filed a lawsuit against Lone Star Fund V and two of its affiliates seeking specific performance of Lone Star’s obligations to close Lone Star’s tender offer for the outstanding common stock of Accredited and to complete the merger with Accredited… Accredited further announced that neither Lone Star’s filing indicating its intent not to close the tender nor its actual failure to close the tender offer does or will constitute an event of default under any of the Company’s warehouse facilities. Additionally, the co has communicated with each of the warehouse credit providers and plans to continue to fund its mortgage loan originations. As previously disclosed, LEND maintains committed warehouse facilities with a total capacity of $1.6 bln for U.S. loan originations and $150 mln Canadian for Canada loan originations. Accredited remains open for business and is continuing to operate in the normal course and to fund mortgage loans in both the U.S. and Canada.

C Citigroup faces the $700 mln music – FT (47.00 )
Financial Times reports Citigroup lost more than $700 mln in credit securities in July, making it one of the biggest casualties of the crisis, according to a person briefed on the situation. The scale of the losses is not a serious problem for a co that earned more than $20 bln last year and bankers believe some Wall Street rivals may have lost more. But it will be embarrassing for Chuck Prince, chairman and chief executive, who has been widely criticized for saying last month that Citi was “still dancing” in the credit mkts. The losses were made largely in the structured credit business run by Michael Raynes, hired from Deutsche Bank last summer. They are in addition to those Citi faces from lending commitments to leveraged buyouts.

HOV Hovnanian Enterprises reports preliminary net contracts and deliveries for Q307 (14.70 )
Co announces preliminary net contracts and deliveries for Q307. HOV delivered 3,179 homes during its Q3, a decrease of 31% from the same quarter a year ago, excluding 329 homes in unconsolidated joint ventures. Net contracts for the quarter were 2,539, a decrease of 24% from last year’s Q3, excluding 255 net contracts for unconsolidated joint ventures. Cancellations for Q307 were 35% of gross contracts, compared to the cancellation rate of 33% for Q306. Contract backlog, as of July 31, 2007, excluding unconsolidated joint ventures, was 7,126 homes, a decrease of 31% from the same quarter a year ago. As a result of continued deterioration in sales pace and pricing in certain communities since the end of the co’s second fiscal quarter, the co also announced that it expects to incur approx $90 mln to $110 mln of pretax charges related to land impairment and write-offs of predevelopment costs and land deposits in the Q3.

ECB, BOJ again add liquidity to markets – WSJ
The Wall Street Journal reports The ECB and BOJ both added liquidity to markets Monday, with the Federal Reserve standing by for when U.S. markets open. The ECB added EUR 47.67 bln ($65.28 bln) in market liquidity at rates of 4.06% and above. The bank received 59 bids worth a total EUR 84.45 bln, signaling strong demand for the funds. The weighted average allotment rate was 4.07%. The quick tender operation matures Tuesday. “The ECB notes that money market conditions are normalizing and that the supply of aggregate liquidity is ample,” the central bank said. “With this fine tuning operation, the ECB is further supporting the normalization of conditions in the money market.” Earlier Monday, the Japanese central bank added 600 bln yen ($5.07 bln) to markets, a spokesman confirmed. The Bank of Japan pumped the funds into the banking system in a one-week operation. The move followed a 1 trln yen injection of overnight funds, which the central bank supplied Friday.

MSFT Microsoft disputes FCC’s rejection of Web devices that use TV airwaves – Washington Post (28.71 )
The Washington Post reports Microsoft (MSFT) today plans to try to convince regulators that it can connect consumers to high-speed Internet over unused television airwaves without interfering with existing broadcasts. In a document that it plans to file today with the FCC, Microsoft disputes the agency’s recent findings that prototype devices either interfered with TV signals or could not detect them to avoid interference. Microsoft’s first prototype was defective, but the firm said another model worked successfully in a demonstration it gave to the FCC last week. The filing is Microsoft’s latest attempt to get FCC commissioners to approve a plan that would let a new generation of portable wireless devices connect to the Internet without relying on existing wireless carriers.

AIG In subprime, AIG sees small risk; others see more – WSJ (64.67 )
The Wall Street Journal reports last week, AIG (AIG) based its all-clear signal for derivatives written against financial instruments that include some subprime debt on the fact that its internal models show that losses are extremely remote in the portions of the investment vehicles it’s insuring. No likely losses means no reason to worry, the co reasoned. Yet valuation models seem to ignore the fact that those derivatives would likely take a haircut if sold in today’s depressed market. “There’s no way these aren’t showing a loss,” says Janet Tavakoli, president of Tavakoli Structured Finance. That’s simply a market reality, she adds, that should be showing up in AIG’s results. AIG counters that it doesn’t see any loss in the instruments’ value because they are insuring portions of financial vehicles that can withstand losses even under severe recessionary conditions. “We disagree” with those questioning the co’s valuation, said Elias Habayeb, CFO for AIG Financial Services, a division of the insurer. “I believe we come up with our best estimate of the fair value [of these instruments] based on all the information available to us and that’s reflected in our financial statements.” Analysts seem satisfied by the co’s response that there isn’t a problem. That’s even though plenty of other companies in recent months have made similar claims only to see them upended by unprecedented developments in mortgage markets. Analysts at Fox-Pitt, Kelton, for instance, said in a research note after AIG’s earnings that the instruments with subprime links were “the least likely to incur any losses in these deals.” Accounting experts don’t fault AIG for using models to value the derivatives since there isn’t a ready market for them. But they also say AIG’s models need to take into account market conditions as well as investors’ views of the value and risks associated with a type of product.