Market Talk

- SEC narrowing its investigation into Lehman on its questionable accounting practices makes sense. “Lehman has long looked to be the poster child of likely accounting fraud,” Yves Smith writes at naked capitalism. But she notes that while Lehman looks like a “textbook case of excessively creative accounting…I would not hold my breath about obtaining criminal indictments.”

- Reflecting push for ever-shorter trading horizons, CBOE has asked regulators permission to list options expiring daily. Contracts’ lifetimes would be between one and four days. Move follows growing interest trading options that expire weekly. “I guess the question isn’t why, but why not?” asks Adam Warner at Daily Options Report.

- “Growth is slowing when it should be surging,” at this point, former labor secretary Robert Reich complains on his blog. “We may or may not fall into another hole, but a so-called ‘double dip’ isn’t really the worry,” he says. “The worry is we’re not getting out of the giant hole we fell into.”

- Adobe (ADBE) wastes little time celebrating Apple’s (AAPL) move to loosen the reins over its software developer rules.

- Nokia (NOK) replacing its CEO is a long time coming, but Digital Daily blogger John Paczkowski questions timing of the move. It comes ahead of Nokia World and the company’s major product launch. That means new CEO Stephen Elop isn’t starting off with a clean slate, “but a full one overflowing with a new software platform and a new smartphone portfolio.”

- Reuters blogger Felix Salmon is concerned that the average American remains pretty pessimistic about the US economy, and these viewpoints could manifest as self-fulfilling prophecies. “It would be nice to see the bulls out there come up with some good explanation of how their forecasts are consistent with these survey results,” Salmon says. “Because on the strength of these answers, the double dip is coming.”

- But contrary to Salmon’s belief, Business Insider’s Vincent Fernando says when everyone’s sour on the economy, it’s actually in better shape than many think. “When most people are reported as being extremely negative, your contrarian alarms should be going off as an investor.”

- Our colleague Kristina Peterson hits a home run in today’s C1 story on the Briargate traders who trade at the market’s open and close and chill out for the rest of the day. What a life.

- St. Louis Fed President James Bullard says the central bank has moved closer to providing additional support to the economy, although he added he doesn’t expect that action to become necessary.

- With tomorrow marking the ninth anniversary of 9-11, take a few minutes to read Todd Harrison’s reflection of the horrific day. A well-written and extremely moving piece.

- “The arguments for a slowdown and double-dip recession are basically the same: less stimulus spending, state and local government cutbacks, more household saving impacting consumption, another downturn in housing, and a slowdown in Europe and in China,” Calculated Risk blogger Bill McBride notes. “It is only a question of magnitude of the impact.”

- “Of course, you never know until after the fact whether a correction is just the first leg down in a new bear market,” Tom Petruno says. “That, once again, is the agonizing question for investors.”

- Financial regulatory reform legislation, in its present form, has several positive aspects, writes Mark Thoma. Still, it fails to eliminate the too-big-to-fail problem and, as a whole, leaves him wanting more. “As with health care reform, the legislation is unsatisfactory in many ways — it leaves much of the job yet to be done — and it’s not clear that Congress will have the will to follow through,” Thoma says.

- YouTube is the latest to weigh in on the Great Flash War of 2010, siding with Adobe (ADBE), which makes Flash video technology that Apple (AAPL) has banned from its devices. “Today, Adobe Flash provides the best platform for YouTube’s video distribution requirements,” writes John Harding, a YouTube software engineer. That’s why “our primary video player is built with it,” he adds.

- “Restaurants are a discretionary expense, and they tend to be ‘first in, last out’ of a recession for consumer spending,” Calculated Risk says, as opposed to the housing market, which is considered a first in and first out sector in the recession-dating cycle. “Since restaurants both lead and lag recessions, this contraction could be because of the sluggish recovery or might suggest further weakness in consumer spending in the months ahead.”

- Verizon (VZ) will reportedly begin launching its LTE network in 25 markets starting November 15, according to gadget blog Boy Genius Report.

- “The inventory boost has accounted for over 50% of GDP growth so far during the recovery, so a substantial pickup in final demand growth will be necessary to keep gains in employment and output from slowing  economists from the Dallas Fed write. “That the required pickup will occur is far from obvious.”

- There’s increasing evidence the economy’s poised for another rough patch in 2H and beyond,” Pete Davis writes. “What more can Washington do? We’ve already done about everything anyone can think of to stimulate the economy. It’s had some beneficial effect, but it may not be enough.”

- Just as the S&P 500 keeps making lower lows, the VIX run-ups can’t quite reach their previous highs. “The increasing sluggishness in the VIX reflects what I call a progressive desensitization to fundamental factors…and technical factors that investors experience after the novelty of various threats — including very serious ones — begins to wear off,” VIX and More blogger Bill Luby says.

- He’s human? Six-time Wimbledon champ Roger Federer ousted in quarterfinals.

- A wider probe of Wall Street may ease the heat on Goldman. “If everyone is guilty, nobody is guilty,” Joe Weisenthal writes at Business Insider. “That principle doesn’t apply in a legal sense, but we think it applies in a reputational sense. There’s no good reason to leave Goldman for some other firm, if in the end their behavior was very similar.”

- Determining what caused the financial crisis has taken on a shift in narrative, Mark Thoma notes at Economist’s View. “Fraud, deception, and other questionable if not illegal behaviors are beginning to take on a larger role in the story of what happened to bring about the problems in the financial sector.”

- Gold surged to another all-time high yesterday as fears of EU’s bailout plan represents another “step down the road to severe inflation or debasement of paper currencies, or both,” Tom Petruno says. “And after last week’s stock market ‘flash crash,’ prudence is all the more in vogue.”

- Initial jobless claims dropped 4,000 to 444,000. The four-week moving average also ticked lower to 451,000, a six-week low. But “for an economy that has begun creating jobs again, claims should be running below 400k at this point in the recovery and thus implies that this recovery is not your typical one,” writes Miller Tabak equity strategist Peter Boockvar.

- Claims have been bouncing around 450,000 for much of 2010, and “it’s still unclear if claims will break through this floor any time soon,” James Picerno says. Still, two months of job growth have renewed hope, suggesting either jobless claims will finally begin to tail off or the rebound in nonfarm payrolls will stall out. If that happens, investors should watch out.

- Adobe (ADBE) hearts Apple (AAPL) in its latest newspaper ad. And it was only a matter of time before the Adobe founders jumped into the Apple-Adobe-Flash fray. They published their own essay about the importance of open standards on a new section of Adobe’s website dedicated to choice.

- Recovery chatter is running rampant, especially with retail sales up and the labor market improving. But Mike Shedlock, an investment advisor for SitkaPacific Capital, still isn’t convinced. “Believe what you want, but I refuse to believe a recovery is in progress when federal income tax collections are off a half trillion dollars, and state after state is still showing declining revenue,” Shedlock says.

- Rumored BlackBerry tablet doesn’t sound so hot. Boy Genius Report confirms the device will be 9.9″ large and should be ready for a December launch. But “RIM employees have privately voiced their frustration to us regarding this initiative,” BGR says.

- “It’s not a promising sign for RIM if its own employees are thinking the BlackBerry tablet will be DOA,” Jay Yarow writes at Silicon Alley Insider. “Overall, the tablet sounds pretty dull and uninspired.”

- “History books will one day describe this stretch as one of the most interesting and important junctures ever for the financial market construct,” Todd Harrison writes at Minyanville. “The script is still being written, which is why we need proactive stair-step solutions rather than reactive blame and haphazard policy. I’m not exaggerating when I say the future of free-market capitalism hangs in the balance.”

- Greece’s historic bailout proves what many have believed for some time: Greece’s problems quickly turned into a “death spiral,” Paul Krugman says. “The EU has now, in effect, given up on trying to restore market confidence; instead, it’s going to break the death spiral by main force, providing Greece with all or almost all the financing it needs directly, at an interest rate much lower than the market was demanding.”

- The Greek bailout isn’t a bond cure-all as some investors expect government bond yields to keep increasing for many debt-laden countries, WSJ reports.

- Most asset classes saw minimal gains in April. But REITs were the lone exception, posting a 7.1% monthly return and have now gained 18% in 2010. At The Capital Spectator, James Picerno discusses whether they are they ripe for some profit-taking.

- Both consumption and spending rose in March, but spending growth outpaced income growth, forcing the savings rate down again to its lowest level in a year and a half. But “this isn’t the worst thing in the world,” Ryan Avent writes at The Economist’s Free Exchange blog. Not at least in the short-term.

- Newspaper ad sales are still falling, but the declines have significantly abated throughout first three months of 2010, Newsosaur blogger Alan Mutter reports.

- As the tiff between Apple (AAPL) and Adobe (ADBE) heats up, Microsoft (MSFT) weighs in, detailing its side of the debate.

- IPad 3G’s launch weekend was a success, though not as successful as original Wi-Fi-only release last month. Overall, Apple says iPad sales have already topped 1 million.

- US auto sales increased 20% in April compared to depressed levels a year ago as Chrysler, Ford and Toyota all reported sales up at least 25%.

- MarketWatch’s Mark Hulbert offers advice on how to gain exposure to financials without betting on Goldman Sachs (GS).

-Details of the Times Square bomb plot continue to unfold.

- “Betting against the American consumer is one of the biggest mistakes Wall Street bears have made this year,” Tom Petruno says.

- No one wants to back down in this Apple/Adobe tiff. Adobe CTO Kevin Lynch offers his two cents in a blog post. And Adobe CEO Shantanu Narayen sits down with WSJ’s Alan Murray and fires back at Apple. Here’s Jobs’ lengthy missive posted yesterday on Apple’s website.

- Yahoo (YHOO) CEO Carol Bartz tries to downplay the recent exodus of executive talent. But BoomTown blogger Kara Swisher begs to differ. “The continuous brain drain is perhaps the company’s most profound dysfunction.”

- Economy has been expanding for three consecutive quarters, but the overall picture remains mixed, The Economist’s Free Exchange blog says. “Growth is clearly better than no growth. But there are real concerns with the composition of output.”

- GDP growth at 3.2% should confirm the recession’s over. But delving deeper into the details shows the report’s not quite so rose. “But I suppose an optimist could see in all this the potential for much better numbers to come once the recovery gets on track,” James Hamilton writes.

- The new GM’s back and its poised for success. At least that’s the message Vice Chairman Bob Lutz relays on GM’s FastLane Blog today, which marks his last day at GM. “I only have about 47 years of experience on which to base this opinion, but I believe GM is poised to win.”

- “Was Goldman a badder bank than other banks? No. Did other firms put their own free-wheeling interests before those of their clients? Yes. Is Goldman now a victim of its own, home-grown, blinding arrogance? Absolutely,” FT’s Alphaville says.

- “Google is going to have a problem because Google is only known for search,” Yahoo CEO Carol Bartz tells BBC. “They’ve got to find other things to do. Google has to grow a company the size of Yahoo every year to be interesting.”

- In the wake of Microsoft (MSFT) shelving plans for its two-screen, tablet-style device, is Hewlett-Packard (HPQ) also stopping the development of its tablet computer? That’s what Michael Arrington alleges at TechCrunch, citing a source who has been briefed on the matter.

- The Kentucky Derby looks even more wide open than ever this year.

- The Apple/Adobe war over Flash jumps to a new level: Apple (AAPL) CEO Steve Jobs uncharacteristically pens a post weighing in on his decision not to support Flash.

- Adobe’s (ADBE) CEO responds.

- Hewlett-Packard (HPQ) acquiring Palm prompts Digital Daily blogger John Paczkowski to ask: “Why spend $1.2 billion on a company whose downward spiral has been the talk of Silicon Valley for the past year?” The answer is relatively simple — H-P wants its own operating system, which is exactly what Palm has to offer.

- What does the Fed’s “extended period” really mean? NYT’s Economix and Calculated Risk weigh in.

- Hewlett-Packard (HPQ) is taking a page out of Apple’s playbook: It wants an operating system it completely controls without relying on Microsoft’s (MSFT) Windows. Unfortunately, Dan Frommer at Silicon Alley Insider isn’t optimistic about the plan.

- Greece fizzles…But the Dow sizzles.

- “The uptrend remains in place, and until it is broken we maintain an upside bias,” Barry Ritholtz says. “We are not at the sorts of extremes yet that make the contrarian in us scream ‘sell.’”

- Why do markets pay any attention to ratings agencies?

- Initial jobless claims dropped 11,000 to 448,000 last week. “If you’ve been following the soap opera with this data series you know that we’ll need to see something more dramatic before the central bank changes its monetary tune of standing pat,” James Picerno writes at The Capital Spectator.

- Paul Kedrosky looks at stocks vs flows relating to consumer solvency.

- Don’t dismiss the notion that retail spending is being partly driven by homeowners strategically defaulting on mortgages, even though it’s hard to quantify exactly hoe many people are “spending the mortgage,” Paul Jackson writes at HousingWire.

- Small businesses, which have led job creation in previous recoveries, may be finally contributing to job growth now as the economy rebounds, Atlanta Fed’s macroblog says.

- “The Squid has been living for years off the simple fact that, like the fabled IBM of yore, no-one ever got fired (or sued) for picking Goldman Sachs,” the Epicurean Dealmaker notes. “That calculus has been changed,” and everyone knows it.

- Google’s (GOOG) recent acquisition of secretive early-stage start-up Agnilux ranks as the “most curious” deal in its history, Digital Daily blogger John Paczkowski says.

- Picking apart Apple’s (AAPL) blowout earnings, Silicon Alley Insider’s Dan Frommer says Apple’s iPhone business is growing much faster internationally than it is in the US.

- Lots of merger chatter swirling swirling around UAL Corp’s (UAUA) United Airlines. And while a deal might make sense for operational reasons, Footnoted’s Theo Francis notes the company has made it “substantially more attractive” for its top executives to seal a deal.

- Facebook’s launching an ambitious plan to essentially take over the Internet.

- Looks like Adobe (ADBE has finally given up on getting Flash on the iPhone. “We will still be shipping the ability to target the iPhone and iPad in Flash CS5,” Mike Chambers, Adobe’s principal product manager for the Flash platform, writes on his blog. “However, we are currently not planning any additional investments in that feature.”

- Investors take note: A stock-market indicator with a good long-term record has flashed a buy signal.

- The grudge match over your 401(k)

- VIX volatility index can be a great contrarian indicator — problem is, it’s a backward-looking gauge, Tom Petruno says.

- Crude oil’s getting sneaky high and no one seems to care. “One explanation is that oil prices haven’t climbed as fast as they did in early 2008, with the slope of the ascent being a primary source of worries,” Paul Kedrosky writes.

- “The key to long term economic health, though, will be a greater contribution from exports and less on borrowing and spending all over again,” Peter Boockvar notes.

- He’s chairman and CEO of the world’s largest health-care conglomerate, Johnson & Johnson (JNJ), but yesterday Bill Weldon took on a new role: blogger.

- Twitter users will not abandon the microblogging service just because it will start running search-based advertising, Forrester analyst Josh Bernoff says.

- Rumor du heure for Palm: Let Intel buy them, Jason Perlow writes.

- Google (GOOG) reportedly developing a new tablet device compatible with Android would be great for Adobe (ADBE), but not so good for Apple (AAPL).

- Tech blogger Om Malik gets his hands on Microsoft’s (MSFT) new Kin smartphones, but doesn’t exactly offer a stellar review.

- “If the US economy was about to reach “escape velocity” as Larry Summers says, small business optimism would not be in the gutter and sinking,” Mish says.

- “We live in an age of unprecedented bailouts,” Simon Johnson writes. “The Greek package of support from the eurozone this weekend marks a high tide for the principle that complete, unconditional, and fundamentally dangerous protection must be extended to creditors whenever something “big” gets into trouble.”

- Distressed home sales accounted for 29% of all homes sold in January, the highest level since April 2009. “This is not a good sign,” Barbara Kiviat says. “There’s long been a worry that after last year’s various foreclosure moratoria lifted, we’d see a fresh surge of trouble in the housing market. The latest figures on distressed sales…lend some weight to that argument.”

- Looks like the music industry’s digital sales boom may be over, Peter Kafka notes. Last quarter marked first-time ever that the number of digital songs sold in US decline.

- CNBC commentator Larry Kudlow argues a 5%-10% pay cut for federal employees could have a major impact on the federal budget deficit. But the Times’ Paul Krugman says those pay cuts would be “trivial” at best, and Kudlow’s picture is a fiscal fantasy.

- Spiking Greek bond spreads aren’t affecting over debt-ridden European nations. “That would appear to indicate that markets are not too concerned with the prospects of the Greek end-game leading to some sort of European contagion, which is the most dangerous risk of the Greek crisis,” Economist’s Free Exchange blog writes.

- February wholesale inventories rise for second consecutive month. If next week’s report on business inventories also rises, “it will confirm that we may be seeing the beginning of some inventory stocking after the slowing rate of destocking over the past six months,” notes Miller Tabak’s Peter Boockvar.

- Goldman Sachs (GS) has hired ex-New York Timesman Stephen
Labaton, who until December covered business from Washington, Politico.com reports, suggesting the bank’s aiming to counter its dreadful PR and help navigate the DC regulatory sphere.

- The war between Apple (AAPL) and Adobe (ADBE) is heating up.

- The American economy appears to be in a cyclical recovery that is gaining strength. Firms have begun to hire and consumer spending seems to be accelerating,” Floyd Norris writes. “That is what usually happens after particularly sharp recessions, so it is surprising that many commentators, whether economists or politicians, seem to doubt that such a thing could possibly be happening.”

- But it’s tough to cheer the economy when 15 million people are unemployed, Free Exchange says. “The state of the labor market is a real worry, and the effect of the drag from high levels of long-term unemployment is difficult to predict. Now is no time to declare victory and take a vacation.”

- FusionIQ CEO Barry Ritholtz toes the line between optimistic and pessimistic. Employment and consumer spending still have a long way to go before each returns to pre-recession levels. But as data continues to “impress,” investors would be wise not to fight the tape, he argues.

- S&P 500′s back in positive territory for 2010. “Small and midcap stocks have led the way up in recent days, which is a positive sign for bulls hoping that the market is about to make that next leg higher,” Bespoke says.

- Defining victim losses in Bernie Madoff’s Ponzi scheme as difference between cash paid into a Madoff account and amount withdrawn before fraud collapsed is the “difficult but correct call,” Barry Ritholtz writes.

- Forecasting firm Macroeconomic Advisers updates its projection of this week’s jobs report, concluding “somewhere between 150,000 and 220,000 jobs were temporarily lost in February due to unseasonably bad weather.”

- Still, take any snow-related monthly employment projections with large grain of salt. “February’s will include weather related job losses, March will see a rebound and, assuming no freak spring snowstorms, April will show the underlying trend,” WSJ’s Real Time Economics says.

- Policymakers are congratulating themselves for avoiding total collapse, when they should be berating themselves for failing to engineer recovery,” Paul Krugman notes.

- Consumer-protection unit within the Fed a “dreadful idea,” Yves Smith writes. “Do we have a single shred of evidence to support the notion that the Fed has undergone a miraculous conversion experience as a result of the crisis and will now act as staunch defender of the little guy? I certainly haven’t seen it.”

- Believers of the recovery focus on consumer spending slowly returning to pre-recession levels, but how consumers will sustain such spending seems questionable given the plunge in income, credit and savings, Peter Schiff says.

- Time to stop fighting speculation, Reuters blogger James Saft argues. “Fighting reality by punishing people who point it out — and yes, may profit in the process — is a lot easier than addressing the fundamental underlying issues.”

- This week’s spat between Disney (DIS) and Cablevision (CVC) has a familiar feeling, MediaMemo blogger Peter Kafka says. “The characters change, but the script is always the same. A programmer wants more money from a cable provider, and threatens to pull its shows.”

- Google’s (GOOG) latest acquisition of online photo editing service Picnik, announced yesterday, represents another head-to-head battle of competing businesses with Adobe’s (ADBE) Photoshop and Apple’s (AAPL) iPhoto.

- “Twitter’s finally pushing ahead with a business plan that could begin to justify the venture capital investment it’s attracted,” John Paczkowski says.