Market Talk

- The main difference between Citigroup’s (C) $75M settlement with SEC Goldman Sachs’ (GS) $550M settlement is GS was guilty of misleading clients while Citi was guilty of negligently misleading shareholders. But the public is much angrier over GS case, which the “Kid Dynamite” blogger finds hard to fathom. “People should be furious about this Citi case and settlement, but you’ve probably hardly heard a whisper about it.”

- Prospects aren’t looking bright for the restaurant industry. Same-store sales and customer traffic both declined for a third-straight month in June, Calculated Risk reports. “Restaurants are a discretionary expense, and this contraction could be because of the sluggish recovery or might suggest further weakness in consumer spending in the months ahead.”

- Roughly 25% of Americans sit in FICO’s least-creditworthy category, a significant jump from only 15% before the recession. “Some people will lament this, but it has a silver lining,” FusionIQ CEO Barry Ritholtz says. “Deleveraging is certainly a good thing, and forcing consumers off of the credit treadmill may actually help these folks over the long haul.”

- The commercial real estate market is getting ugly, slowly but surely. Delinquent unpaid balance for CMBS increased $3.1B in June to $60.45, and has more than doubled from a year ago, according to Realpoint. “This isn’t quite the disaster in the making that subprime was,” Yves Smith notes. But “I’m not sure why people say there isn’t a CRE crash. It’s just happening in slow motion, so far.”

- ISM manufacturing index fell for a third-straight month in July, but at 55.5, it exceeded economists’ expectations. “Bottom line, while the ISM remains firmly above 50, just ten of the 18 industries surveyed reported growth, with four reporting outright contraction and the drop in new orders is worth watching,” writes Miller Tabak’s Peter Boockvar. “With this said, the market is breathing a sigh of relief that while down for a third month, the ISM is still hanging in as inventory builds, albeit at a slower pace, and export growth continuing.”

- Newspaper advertising sales were less bad in 2Q vs a quarter ago. “But less bad is not the same as good — and the outlook for the remainder of the year is decidedly murky,” writes Newsosaur blogger Alan Mutter.

- A new website — JailbreakMe.com — has sprung up offering an easy way to hack, or “jailbreak,” an iPhone to run applications not authorized by Apple (AAPL).

- “This market is one that moves largely on the basis of economywide hopes and fears,” NYT’s Floyd Norris says. “Company specifics take a back seat.”

- “Remember when we weren’t allowed to say the word ‘recession?’ Like it was anathema?” Todd Harrison says at Minyanville. “Or when we weren’t ‘patriotic’ if we weren’t ‘bullish’ after 9/11?,” he recalls. “Is ‘deflation’ the modern day equivalent of ‘recession?’”

- Battle over the proposed Ground Zero mosque is picking up steam.

- Nokia’s (NOK) adding its own twist to the Apple/Gizmodo iPhone 4 controversy earlier this year. Nokia’s getting Russian police involved in asking Eldar Murtazin, editor-in-chief of Moscow-based mobile-review.com, to return the prototype N8, a device he gave an unfavorable review earlier this year.

- “Investors have this week been buying up names that have been hit the hardest in recent months, which is usually the case when we see bounces like this,” Bespoke says.

- Banks and regulators must take “appropriate action” to strengthen banks’ resilience to shocks and safeguard the health of Europe’s financial system, ECB President Jean-Claude Trichet says.

- Whatever happened to all those toxic assets on banks’ balance sheets that garnered so much attention a while back?

- Jobless claims dropping 21,000 to 454,000 represents a “tactical victory for the bulls,” James Picerno writes at The Capital Spectator. “But until and if the trend rolls on it’s only marginally encouraging. The strategic outlook, in other words, is still up for grabs.”

- Silicon Alley Insider says the real reason Google (GOOG) is worried about Facebook is that people buying things are more inclined to trust their friends than strangers or search ads. SAI says that’s the key message in a presentation prepared by Google researcher Paul Adams for company execs who are plotting the company’s next social network initiative, rumored to be called “Google Me.”

- Individual investors are turning more bearish, which contrarians could actually view as a bullish indicator. Only 25% of AAII’s respondents are bullish on stocks, compared to 42% who say they are bears. “I always prefer actual buy and sell driven data — prices, volume, asset allocation, etc. — versus mere surveys,” Big Picture blogger Barry Ritholtz says. “They can be useful, but have huge limitations. Us humans are notorious for saying what we hope, rather than what actually is.”

- Double-dip has dominated the market chatter in recent days. While pundits keep saying the economy won’t fall back into a recession, Reuters’ David Gaffen isn’t so sure. “It may not happen — but when a lot of people are trying to convince you that something’s not going to happen, it can make you believe that it’s more likely than not.”

- The commercial real estate market hasn’t collapsed because of a strategy known as “extend and pretend,” essentially banks giving troubled borrowers time to make good on their bets until the economy recovers. “Sometimes, it actually works. But, usually it doesn’t — especially when practiced on an industry-wide scale,” Henry Blodget writes at Business Insider.

- The LeBron James surreality show is about to begin. He’s “leaning” toward Miami, but we still have faith he’s coming to the Big Apple. Let the “LeBronference” begin.

- Fed’s latest move to boost discount rate prompts thoughts that central bank’s ready to tighten. “Let’s hope that this is wrong,” Paul Krugman says, noting Fed waited almost three years to tighten after 2001 recession. “Assuming that the recession technically ended in June 2009, comparable behavior now would say no rate rise – and no tightening through other measures, such as shrinking the Fed’s balance sheet – for at least another two years.”

- Consumer staples and discretionary are only two overbought sectors in S&P 500, while telecom remains the lone oversold sector, according to Bespoke Investment Group. “These levels are in stark contrast to where we were at the start of last week,” when seven out of ten sectors were trading in oversold territory, firm says.

- Insider selling hit a fresh 2010 high last week, while buying also rose but remains near historically low levels, according to Pragmatic Capitalist. “Insider buying has been unusually low throughout the rally
as economic fundamentals remain questionable. Recent signs of recovery have done little to encourage insiders to invest their personal dollars in their own companies.”

- Volcker Rule endorsements keep increasing. “The writing is on the wall for all to see – the major ‘systemic’ banks will ultimately lose their vast prop trading operations,” Josh Brown notes. “The new question becomes, where will all of those exciting and typically profitable trading operations wind up?”

- Regulators and the media focusing on the crisis seem to think regulating derivatives is the best way to prevent a future crisis. But derivatives are only part of the problem, Roger Ehrenberg says. “The issue isn’t derivatives; it’s all financial transactions whose objective is to deceive or to weaken financial transparency.”

- There’s much more than commercial real estate to worry about. “Perhaps the economic miracle fairy casts her wand and cures all these system risks,” Michael Shedlock says. “But I would not bet on it.”

- Hype surrounding Apple’s (AAPL) iPad and the notion it will somehow become traditional media’s savior is getting tiresome, Kara Swisher writes. “Like Goldilocks, that’s just a fairy tale until the iPad is actually out in the wild and subject to consumer use when it begins to be rolled out in late March,” she says.

- Apple’s removed more than 3% of the apps in its App Store since last week, when it began enforcing a stricter policy about risque offerings. The purge continues to anger developers, who take issue with AAPL’s view of what is overtly sexual content.

- Obama proposes nearly $1 trillion, 10-year health-care plan that would allow US to deny or roll back insurance-premium increases and delay a tax on high-end plans until 2018.

As Tishman Speyer tries to salvage its 2007 deal for a handful of prominent buildings in Chicago, its travails illustrate just how overheated commercial real estate got. From The Times:

We clearly bought the real estate at the top of the market,” Rob Speyer, 40, said in an interview at the company’s Rockefeller Center offices. “In retrospect, we overpaid.”

“Anybody who bought property in the last six years has their equity pretty well washed out,” said Ray Torto, chief economist at CB Richard Ellis, a real estate firm. “People are looking back on that period as the peak of the madness, the bubble. The expectation was that there was always someone who would pay a higher price after you.”

The quote that best summarizes what the Aughts were all about came from Citi’s then-CEO Chuck Prince, who said back in 2007, “as long as the music is playing, you’ve got to get up and dance.” That’s what it came down to, ultimately. On Wall Street, in the housing market, for the mortgage lenders, it didn’t matter what you thought; if the music was still playing, you had to keep dancing.

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