Half Of Hedge Funds Worldwide May Close In Credit Rout

" Jeremy Grantham, the money manager who oversees $150 billion as chairman of Grantham, Mayo, Van Otterloo & Co. LLC, said a credit crisis may force as many as half of hedge funds worldwide to close in the next five years.

The loss of investors' appetite for risk also may cause at least one global bank and ``one or two'' of the largest private- equity firms to go out of business, Grantham, known for his pessimistic outlook, said in a July 30 interview from his Boston office. The 68-year-old investor said he's still bullish on emerging-markets stocks.

Hedge-fund firms such as Boston-based Sowood Capital Management LP have collapsed as investors shun riskier debt including subprime mortgages and loans to fund buyouts. Bill Gross of Pacific Investment Management Co. in Newport Beach, California, said on July 24 he sees "severe ramifications'' for some investors who had benefited from cheap borrowing costs.

"Probably the most stretched silly credit that ever walked the face of the earth was subprime, and that was the start of it,'' Grantham said. ``And then you started to see more of the fixed-income market getting contagion.'' "

Source: Grantham Says Hedge Funds, LBO Funds to Collapse in Credit Rout (http://www.bloomberg.com/apps/news?pid=20601087&sid=aZdtk8hhjZr4&refer=home)

U.S. Consumer Confidence Index Climbs More Than Forecast

" Consumer confidence in the U.S. climbed more than forecast in July to the highest in almost six years, spurred by job and income growth and lower gasoline prices.

The New York-based Conference Board's index of consumer confidence rose to 112.6 in July from a revised 105.3 the prior month. The index averaged 105.9 in 2006.

Robust confidence would help consumer spending, which accounts for more than two-thirds of the economy, pick up from a second-quarter slump. Greater job stability, cheaper gasoline and rising stock prices through most of the month outweighed concerns about falling home values. "


Source: U.S. Consumer Confidence Index Climbs More Than Forecast (http://www.bloomberg.com/apps/news?pid=20601087&sid=aeZ2P2C0bjwM&refer=home)

Chicago Purchasers Index Falls as Orders, Output Slow

" A measure of U.S. business activity fell more than forecast in July, adding to doubts that corporate investment will continue to grow.

The National Association of Purchasing Management-Chicago said today its business barometer fell to 53.4, from 60.2 in June. Readings greater than 50 signal expansion.

Measures of new orders and production both fell, indicating companies are curbing spending as consumer demand slows. That would be a further drag on the economy as it continues to confront weakness in the housing market. "

Source: Chicago Purchasers Index Falls as Orders, Output Slow (Update1) (http://www.bloomberg.com/apps/news?pid=20601087&sid=apDlO8BTUDU0&refer=home)

U.S. S&P/Case-Shiller Home Price Index Declined 2.8% in May

" Home values in 20 U.S. cities fell the most in at least six years as a glut of unsold properties, mounting defaults and higher mortgage rates suggest the housing recession has yet to touch bottom.

The S&P/Case-Shiller index of home prices in 20 metropolitan areas declined 2.8 percent in May from the same month a year earlier, led by Detroit and San Diego, according to the report issued today by Standard & Poor's and MacroMarkets LLC. It was the fifth straight year-on-year drop and the biggest decline since the index started in 2001. The drop was less than economists had forecast.

The declines suggest that housing will continue to hamstring the world's largest economy, economists say. Sluggish sales and falling prices prompt builders to scale back construction and hinder consumer spending as homeowners are less able to borrow against home equity. "

Source: U.S. S&P/Case-Shiller Home Price Index Declined 2.8% in May (http://www.bloomberg.com/apps/news?pid=20601087&sid=aRT2l0Qx0IPc&refer=home)

Crude: Probably Time To Take A Breather.