Saturday, October 01, 2005

The Fourth Quarter

10/1/05 The Fourth Quarter

Many Wall Street pundits are wishing for a repeat of last year’s year-end rally, and many expect such a happening. Maybe that will be the case. I prefer to focus on more sure things. When you walk into stores, you will notice the holiday merchandise is beginning to fill the shelves. You also know that $3 a gallon gas is crimping your spending ability. Therefore, two things will happen. More time will be spent shopping online. Secondly, the purchase of gift cards will increase. For example, you can buy a gift card for an entire mall. What companies will benefit the most? Amazon, Wal-Mart.com, and Target.com.

PGE sent out a notice to its customers in San Francisco that heating bills could be 80% higher than last winter. Don’t sound so shocked. The price of natural gas in the third quarter rose by 80%. It means more shopping for blankets, sweaters, sweat pants and sweat shirts, and flannel sheets, flannel nightgowns, and flannel pajamas. Wal-Mart’s prices are the lowest on these items.

If folks conserve and drive less after work, then more time will be spent at home- - not just watching TV, but also listening to music and reading. Amazon will benefit the most.

As we get into the end of the fourth quarter, people will think about their April 2006 tax bill. I have been writing about the alternative minimum tax for years. As a reminder, 2 million Americans were hit by the AMT in 2002, 4 million in 2004, and 20 million will be impacted in 2006. This tax is a cancer. The combination of $3 gas, 80% higher natural gas for heating, the AMT, little or no wage growth after inflation, and higher interest rates- - - these five nails will puncture the air out of consumer spending. You can bank on it. These five nails are a lot more certain than a year-end rally. Hope springs eternal, or saying it more eloquently, if the queen had cajones she’d be king.

In the third quarter that just ended, the focal points were clearly Katrina and Rita. After that, it was the 80% increase in the price of natural gas, gasoline rising 44%, and crude up 13%. By comparison, the Dow rose 2.9%, the S&P 3.1%, and the Nasdaq 4.5%. Gold held its own as it rose 6.4%. Unfortunately, for those who think treasury bonds are a safe investment, that sector declined 0.9% in the third quarter.

"One could argue strongly that a key element driving inflation is indeed energy," says Lakshman Achuthan, managing director of the Economic Cycle Research Institute, which produces a leading inflation indicator that includes energy prices. "I don't know what you accomplish by removing energy from the discussion -- it's 'core' to the discussion."

August personal incomes declined 0.1%, while consumer spending dropped 0.5%, the biggest decline in 4 years. Meanwhile, the personal savings rate was -0.7% in August. You can’t save what you don’t have. Looking at it from another perspective, adjusted for inflation, consumer spending dropped 1% in August. The last time that happened was in September 2001. Not surprisingly, due to the hurricanes, the University of Michigan sentiment index plunged to 76.9 in September from 89.1 in August.

The bulls had something on their plate. The Chicago PMI for September rebounded nicely to 60.5% from 49.2% in August. Unfortunately, the cheering was short-lived with the prices paid sector climbing to 76.3% from 62.9% in August. Inflation is alive and well. Of course, you already knew that from the price of gold near an 18-year high.

The Big Picture: "Investors should be aware that Risk levels are on the rise."

Omnicare will reduce its workforce by 730 employees.

Albertsons continues to close under-performing stores and announced it will close the doors of at least three Colorado grocery stores on November 1, cutting 200 jobs. According to The Shelby Report, Albertsons has 52 stores in Colorado and ranks fourth in market share in that state behind King Soopers, Safeway, and Wal-Mart Supercenters.

According to timesonline.co.uk, Kazakhstan’s proven reserves stand at 26 million barrels of oil and 1.8 trillion meters of gas. The Kazakh government aims to raise oil production to 3 million barrels per day by 2015, making it one of the world’s top ten producers.

Reynaldo Rios, an elementary school teacher in Lajas, Puerto Rico, with permission, installed a sign on Francisco Negron's property that reads "Extraterrestial Route." "I can't say exactly when they will come, but I know it will happen," Rios said. "I want to keep believing in my dreams."

Albert Einstein: ""How I wish that somewhere there existed an island for those who are wise and of good will."


Friday, September 30, 2005

Resiliency, Complacency, Window Dressing, Or Street Magic?

9/30/05 Resiliency, Complacency, Window Dressing, Or Street Magic?

Itay Slonim: “In 2003 and 2004, world central banks (mainly in Asia) printed roughly $1.2 trillion, which has increased the global money base by over 60%[1]. In 2005, the annual rate of printing is roughly $500 billion. This is the greatest quantity of money printed in history (other than in wartime).”

The total notional value outstanding of credit derivatives rose to $12.4 trillion in June, up 48% from January and up 128% from a year earlier, according to the International Swaps and Derivatives Association. However, many of these trades have not been confirmed because of a processing backlog. Our GDP is less than the notional value of derivatives outstanding, and yet, many of the derivative trades have not been confirmed due to back office overload. The potential fallout from this backlog could clearly dim complacency.

The S&P has been up for six straight days. Today is the last day of the quarter and the last day of September. It is quite probable that the Dow will end on the plus side for September, and that has not been the case in recent years.

Heading into its final day, the Dow industrials have climbed 2.7 percent, the Nasdaq is up 4.1 percent and the S&P is up 3.1 percent during the third quarter.

Is the Fed raising interest rates in an effort to fight inflation or rather to attract foreign capital to cover our twin tower deficits as well as bolstering the dollar? Would the money supply be increasing faster than the stated inflation rate if the Fed’s primary concern were fighting inflation? Does the price of gold at $475+ an ounce indicate the Fed is trying to monetize the country’s $8 trillion debt?

The Conference Board’s help-wanted index in August fell to 35 from 39 in July. One year ago it was 37. Only 20% of the labor markets had rising want-ad volume compared with 47% one year ago. Online job ads rose 4% from June 2005.

Jesse Ventura: “When the government lies to the American people, they start a war. When the American people lie to the government, they go to jail.”

Recently, our country has experienced Katrina, Rita, rising interest rates, a flattening yield curve, a huge decline in consumer confidence, a 9.9% decline in new home sales, record natural gas prices, $3 gas at the pump, consumer pocketbooks getting pinched from rising costs, a rising death toll in Iraq, the lowest support for the Iraq war, the lowest support for Bush, and yet, the stock and bond markets are resilient and investors appear quite complacent. Yesterday and today’s results will be masked by end of the quarter window dressing.

"We were able to make progress, particularly with product coverage and quota levels, but we did not reach an agreement with the Chinese, "lead U.S. textile negotiator David Spooner said in a statement announcing that the talks ended Wednesday night.
"We will be meeting with the Chinese again next month and will be consulting with them soon on the location and exact date of the next round of negotiations," Spooner said.
According to insiders, the differences mainly focus on the duration of the pact, the base figure for determining exports and the growth rate.
The United States wants to calculate annual growth based on the 2004 figure but China would not accept the proposal because textile trade that year was skewed under a regime of international quotas, said Zhou Shjian, an expert on WTO issues.

Here’s a little street magic for you. It’s not David Blaine but still pretty good. The government reported that GDP rose 3.3% in this year’s second quarter. Are you sure that is a real number? If the government measures GDP by actual output rather than price increases, how accurate is the 3.3%? If the Fed is fighting inflation, then why not measure GDP with price increases too? It’s just a shell game.

NASA and the National Snow and Ice Data Center at the University of Colorado stated that the Arctic ice which floats at the North Pole melted to its smallest size - ever! - in records going back for at least a century. In fact, this summer ships could travel through both the North East and North West passages. Unlike the bond and stock markets, Mother Nature reflects reality and does not get complacent. There is no street magic at the North Pole.

OAO Lukoil, Russia's biggest oil company, offered to pay $2 billion to buy Nelson Resources Ltd. to expand in Kazakhstan. The price is a 15% discount from yesterday’s closing price for Nelson, and Dmitry Lukashov from Aton Capital brokerage stated the price is “37% below our fair value, and the reasons for this discount are not clear. We will recommend to those of our clients, who are shareholders in Nelson, to vote against this deal.” Nelson stated its net proven and probable reserves are around 270 million barrels.

The Deal.com reported that the interest in Albertson’s is moving toward the due diligence process, and that three bidding groups have been formed: KKR, Apollo, and Texas Pacific; Thomas H. Lee, Bain, and Yucaipa; and Cerebus and Kimco Realty. They stated the KKR and Lee groups have lined up financing while Cerberus would need to find outside financing. I don’t believe Cerberus would have difficulty in doing so.

Congress dealt a deadly blow to the protections provided by the Endangered Species Act by passing Congressman Pombo's bill weakening this important conservation law.
This bill:
* replaces the current mandatory critical habitat system with a system of
purported recovery plans that are discretionary and fail to protect
habitat essential for recovery;
* allows federal agencies to avoid consultation, resulting in agencies
with little to no experience in wildlife issues deciding if projects
will harm wildlife;
* exempts all pesticide decisions from ESA compliance, taking away the
ability under the ESA to stop pesticide use. even when necessary to
prevent extinction;
* requires the federal government to use taxpayer dollars to pay
developers for complying with the law, setting no limits on these
payments.

Mom, I'll light a birthday candle for you.

Thursday, September 29, 2005

Street Magic

9/29/05 Street Magic

Before I get to this morning’s chief topic, I’d like to cover a few points.
The International Energy Agency says China relies on overseas producers for just about one-third of supplies but accounts for about 7% of world oil demand. In contrast, India, despite importing 70% of its oil needs, consumes a little more than 2 million barrels (3% of world oil demand) a day - compared to China's 6.75 million barrels a day. According to the China National Center for Biotechnology Development, China’s reserves of biomass fuel are estimated to equal 7 times the projected crude oil output capacity of Daqing, China’s major oil field. The director of the Center stated China now has a practical technique for converting aged grains, sorghum, sugarcane, and sweet potato into diesel oil. With oil above $45 per barrel, he stated it was economically feasible to mass-produce biomass fuels without government subsidies

Renewable sources account for 25 percent of Sweden's energy use and 45 percent in Norway. The United States lagged behind, with only 4.2 percent of its energy consumption coming from renewable sources.


In Mumbai, the BSE Sensex closed above 8600 for the first time Buying in ONGC helped to lift the index. The interest in ONGC was attributed to a Bloomberg article stating that ONGC may counter China’s plan to buy PetroKazakhstan. It should be noted that the energy combine of ONGC and Mittal becomes effective in October.

Sanyo stated it would cut 10,000 workers and DaimlerChrysler 8,500 Mercedes employees. Independence Air will cut 600 jobs.

Now to street magic. My favorite magician is David Blaine. He is an extraordinary talent. Having watched him for years, I have yet to figure out how he accomplishes any of his tricks. He makes it look both easy and yet impossible to achieve. Why do I bring up David Blaine and his street magic? In my view, there is street magic being performed every day in the equity markets on Wall Street and the debt markets around the globe. At the center stage is the thought that Americans want to believe. They do not want to be doubters and have their lives interrupted by the likes of Abramoff, DeLay, Rove, and others. Everyone wants to have a nice day and a nice life. So where’s the magic?

The magic is in the false sense of well being. The table is set by government employees proclaiming that everything is okay and not to worry. All bumps in the road are temporary. The ABA reported yesterday that the percentage of credit card accounts 30 or more days past due climbed to an all-time high of 4.81% in the April-June period. I predict it will be higher in the July-Sept. quarter. Jim Chessen, the ABA’s chief economist, stated “the last two quarters have not been pretty. The rise in gas prices is really stretching budgets to the breaking point for some people. Gas prices are taking huge chunks out of wallets, leaving some individuals with little left to meet their financial obligations.”

The problem is that ONLY 69% of Americans own their homes. That 69% can have an equity line of credit using their homes as collateral. If the rise in their income falls below inflation, they simply take money from the equity line of credit to pay for gas, heating bills, and other expenses. There are no worries because the value of the home keeps rising. Of course, the debt levels against the home keep rising too. This ATM crowd should not worry though. Greenspan stated most homeowners are in good shape financially. We know that he pays your bills and you can always borrow more money at increasing rates of interest.

Speaking of increasing rates of interest, there is street magic. We have an $8 trillion national debt (excluding Medicare and Medicaid and other goodies), and that debt is climbing to where in a few years it will equal our GDP. It might exceed our GNP sooner, but we did away with GNP--- magically. Can you imagine twin tower debts amounting to $1.2 trillion this year and 10-year Treasury bond yields not rising? That is not a conundrum. It is street magic.

Isn’t it interesting that the sale of existing homes remains near record levels but sales of new homes are starting to fall off a cliff? What’s wrong with new homes? There are too many of them. This is similar to having too many GM and Ford vehicles. They left the door at a rapid rate with employee discount sales. Maybe home builders will need to provide prospective buyers with the employee discount. The housing market is beginning to run out of steam. The MBA stated its index of total mortgage applications for home purchase and refinancing loans fell 6.6% in the week ended Sept. 23. The volume of refinancing and purchase loans declined – the first time both sectors fell simultaneously in a month, according to MBA figures. I feel confident that Fed members can blame it on Katrina and Rita. Those storms would not explain the drop in demand for ARMs and refinancings. Americans are not saving through their earnings from work. Expenses are rising. Bills need to be paid. Mouths need to be fed. You can’t eat perceptions.
Street magic can carry you just so far.

Do you think gold would have rallied $200 an ounce over the last few years without inflation fears burning brightly and the purchasing power of the dollar declining? How can inflation be muted if the Goldman Sachs Commodity Index has risen over 45% this year? How can it be muted and under control when natural gas prices reached record high levels and gas at the pump approaches $3 a gallon? There won’t be any street magic to help you pay winter heating bills. I suggest you go to Wal-Mart and buy some blankets and sweaters. Was that Cramer recommending the purchase of Wal-Mart last evening?

Tom Robbins: “Disbelief in magic can force a poor soul into believing in government and business."

Wednesday, September 28, 2005

Exuberance

9/28/05 Exuberance

Greenspan: "History cautions that extended periods of low concern about credit risk have invariably been followed by reversal, with an attendant fall in the prices of risky assets. Because it is difficult to suppress growing market exuberance when the economic environment is perceived as more stable, a highly flexible system needs to be in place to rebalance an economy in which psychology and asset prices could change rapidly."

Montecito Property Company made sales history this past weekend September 24-25, 2005 when the fastest growing property development company in America sold almost 90 percent of its
homes at the grand opening of LaVista at Laguna Niguel. The community of 280 units is the first California condo conversion in a series, planned by the Jacksonville, Florida-based developer.
More than 1,000 potential homeowners converged at the new home community
when the doors opened Saturday morning. "With the median price of a home in Orange County topping out in July,2005 at $706,820 as reported this past week in the Los Angeles Times, Montecito's enclave of luxury condo conversions is a great value for the money," says President Edward "Chip" Conk of Montecito Property Company, LLC. Added Conk, "We were not at all surprised by the overwhelming response and interest in LaVista at Laguna Niguel because of its spectacular location only
three miles from the Pacific Ocean.

Delphi Corp. acknowledged today that it continues to be in discussions with its major unions and General Motors Corp. concerning a comprehensive restructuring designed to address Delphi's existing U.S. legacy liabilities and the resulting high-cost structure of its U.S. operations going forward.
Robert S. "Steve" Miller, Delphi's chairman and CEO, said, "While I'm pleased that we continue to be in discussions on a consensual restructuring, as everyone is aware we have been working on this for quite some time and our board is committed to achieving a successful restructuring of Delphi, one way
or another."

Bush urges Americans to drive less and to van pool. I guess that’s the Administration’s energy policy.

Ann Sexton: "Put your ear down close to your soul and listen hard."

Iran threatened to resume uranium conversion, block inspections of its nuclear sites, and cut trade with countries who backed an IAEA resolution that calls for its referral to the UN Security Council, the Associated Press news agency reported.

Norman Cousins: "Wisdom consists of the anticipation of the consequeces."

China has invited India to take part in its offshore and deep water exploration blocks. During their discussion at the 18th World Petroleum Congress, the two countries also agreed to move together for bidding in third countries. The Indian delegation to the World Petroleum Congress, led by secretary petroleum SC Tripathi, held a series of discussions with Chinese representatives on cooperation in the exploration and production side. The Chinese side has invited India to forge a strategic partnership and wants petroleum sector to be a part of it. The head of the Chinese delegation, Wang Tao, a former minister and now senior vice-president of World Petroleum Congress, said his country attached importance to cooperation with India since both the countries have made tremendous impact with their increasing demand. The China National Petroleum Company in its presentation to the Indian delegation stressed on holding dialogues in advance and not at the last moment when a bid is to be submitted. It said though some competition would continue to happen, there should be an attempt for partnership so that competition could be reduced. The other Chinese companies represented included Sinopec, Sinochem and China National Offshore Oil Company.

Light, sweet crude for November delivery on the New York Mercantile Exchange dropped 14 cents to $64.93 a barrel. Heating oil was down nearly 2 cents at $2.0510 a gallon, while gasoline was trading at $2.1615 a gallon, down half a cent.

Nouriel Roubini:” And yes oil will go above $100 per barrel in the next three years. Why? Because of the basic laws of demand and supply. Global demand for oil is growing at about 2.1% per year or about 2 mmb/d (million barrels a day) per year. So, new net supply has to increase by as much just to maintain prices at current high levels. But since existing production fields get depleted at the rate of over 4 mmb/d per year, new production from new oil fields has to be at least 6 mmb/d per year just to ensure that the additional net demand is satisfied.”

There are Fed members worrying about inflation and providing indications for future rate hikes. This sentiment is counterbalanced by the economic fallout from Katrina and Rita and the rapid deterioration in consumer confidence. So far this year, the 10-year Treasury bonds have ranged from a yield of 3.90% to 4.45%. Presently, the yield is 4.31%. Once again, Greenspan stated that investors should not be lulled into a false sense of security just because interest rates have remained low for such a long stretch of time. On the other hand, he noted it is “difficult to suppress growing market exuberance when the economic environment is perceived as more stable.” How stable is the environment when August new home sales decline 9.9% and the supply of homes reaches a record high at 4.7 months? How stable is the consumer-dependent economy when the U.S. September Conference Board’s Consumer Confidence Index has its biggest decline in 15 years to 86.6 from August’s 105.5? Possibly more telling was the sharp decline in the expectations index to 71.7 from 93.3. Especially troubling was the finding that 25% of respondents expect fewer jobs in coming months, down sharply from 17.3% one month earlier.

Sidonie-Gabrielle Colette: "Look for a long time at what pleases you, and for a longer time at what pains you."

Yesterday, on the NYSE, there were 86 new highs and 108 new lows.

In a recent CNN survey, 63% were in favor of a strategy to leave Iraq. One year ago it was 38%.

Google Inc. is expected to announce plans today to build a 1million-square-foot campus at NASA Ames Research Center in Mountain View, California.

The U.K. economy expanded at the slowest annual pace in more than 12 years in the second quarter, reinforcing expectations Chancellor of the Exchequer Gordon Brown will have to scale back plans to increase spending. Europe's second-largest economy grew 1.5 percent from a year earlier instead of the 1.8 percent estimated on Aug. 26, the Office for National Statistics said in London today.

At least 5,000 workers with the Mercedes Car Group faced the prospect Wednesday that their jobs could be cut as the flagship brand of DaimlerChrysler AG struggles to cut costs.

Those affected by Hurricane Rita have until November 30 to file for Disaster Unemployment Assistance, the Louisiana Department of Labor announced today.

Tuesday, September 27, 2005

Surprise

9/27/05 Surprise

Finally, at last, Greenspan stated consumers have become enormously dependent on borrowing against their homes to fuel their spending, and that a rise in mortgage rates could trigger a spending pullback. However, he observed that homeowners are not overly in debt. "The vast majority of homeowners have a sizable equity cushion with which to absorb a potential decline in house prices," he said. Meanwhile, existing-home sales climbed 2% in August, and the median price of a home increased close to 16% over the past 12 months.

Congress already has given the president about $350 billion for combat and reconstruction in Iraq and Afghanistan and fighting terrorism worldwide since the Sept. 11 attacks, according to the Congressional Research Service. That total includes $82 billion that lawmakers approved in May. Now, the Senate would give President Bush $50 billion more for wars in Iraq and Afghanistan as part of a $440 billion defense-spending measure a panel approved yesterday. In my view, any Senator and/or member of Congress who votes to approve this added spending should not be re-elected.

At least 40 percent of current state employees in 20 states will be eligible for retirement by 2015, according to a 37-state survey released earlier this year by the Government Performance Project. Washington, Maine, Tennessee, Michigan and Pennsylvania will have the most employees reaching retirement age in the next 10 years, according to the study by GPP, which like Stateline.org is funded by The Pew Charitable Trusts.
In addition to an aging workforce, CanagaRetna of CSG said other factors are creating unfunded liabilities in state pension programs. For example, states such as Illinois, New Jersey and North Carolina decreased payments into their retirement systems to help balance their books during the fiscal crisis and are now scrambling to catch up, he said. Experts say states, counties and cities are short $292.4 billion in money promised through their public employee retirement systems.

Fed’s Moskow: "We feel it's necessary to reduce accommodation.”

The 10-year Treasury bond yield has risen to 4.29%, and the 118 point basis point yield spread with the 10-year German bond is the widest in 5 years.

Palatin Technologies, Inc. announced that it will present at the UBS Global Life Sciences Conference at 9:30 a.m. Eastern Time on Tuesday, September 27, 2005 at the Grand Hyatt New York in New York City.
Yesterday, PTN had this year’s best day of trading. The vast majority of the heavy volume, 737,500 shares, traded on the upside, and the stock closed at $2.28, the highest closing price in 6 months. This morning, Palatin issued an important announcement that today the company is in receipt of $10 million from King Pharmaceuticals, Inc. pursuant to their strategic alliance to jointly develop PT-141 for the treatment of male and female sexual dysfunction. King will receive 4,499,336 shares of common stock plus warrants to purchase 719,894 shares of common stock at an exercise price of $2.22. Stephen Wills, Palatin’s CFO, commented: "We are very pleased with our relationship with King and the progress of the PT-141 program. With ongoing Phase 2 trials in both male and female sexual dysfunction patients, the commercial development program is in full swing and we look forward to the successful and continued advancement of the program towards Phase 3 pivotal trials."


Lowe’s, one of the great ones, estimates its 2006 EPS will increase by 17-20% and 16-20% in 2007.

Lennar lifted its estimate for 2005 t $8.05 per share.

The dollar advanced to its best level versus the euro since July.

Some refineries, such as Valero’s Pt. Arthur refinery, may be down for weeks. As such, gasoline rose to $2.04 and crude to $65.50 per barrel.

The Big Picture: “Ignoring energy - the inflationary data in the CPI - is less than pointless; It shifts the focus away from exactly where it should be: On the part of CPI that has been rapidly increasing in price.”

Dreamworks terminated talks to be acquired by NBC Universal.

According to the Financial Times, Wellpoint is near a deal to acquire WellChoice for about $6.5 billion in cash and stock.

Had Frist not voted to support stem cell research would he have had a problem over his sale of HCA stock?

Had Cindy Sheehan not camped out in Crawford, TX and held news conferences against the Iraq war would she had been arrested yesterday in DC for not having a permit to demonstrate?

Bush and his Administration will come to be known as the gang that couldn’t shoot straight. Unfortunately,
he is taking a nation down with him. By the way, are the Democrats still a political party? When did they ever offer a viable plan on any important national subject? Criticism is not an action plan.

Gary Lammert, The Economic Fractalist: “By this fractal reckoning the first decay base low will be reached in 5-6 more days and the entire three phase fractal decay cycle will be reached in 77 more trading days. Considering the enormity of imbalances, entitlements, and outstanding debt, this devolution could
potentially represent the 147 year nonlinear fall into the abyss. The collapsing financial picture will tax the American banking system with its inadequate fractional cash reserves in its ability to redeem deposits of concerned savers. This is not investment advice. It is a rather specific prospectively identified potential pattern that can be tested. Again as the daily fractal valuations evolve, further prognostic refinements may be indicated. However, the odds that the preceding identified daily Wilshire's fractals since March 2003, characterized by easily identifiable valuation lows, are occurring by chance and randomness alone -
resulting in exquisitely perfect quantum fractal patterns must, from a statistical point of view, approach zero. Based on this significant statistical improbability, the macro economy may very well operate via
its own predictable scientific fractal law. Time will tell.”

The U.S. Minerals Management Services reported that, in the Gulf of Mexico, shut-in oil production is 1,527,630 BOPD. This shut-in oil production is equivalent to 100% of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.

A newly-discovered virus has killed dogs in at least seven states, and veterinarians, kennel operators and pet owners are concerned because researchers say there is no vaccine and dogs do not have immunity to the new flu.

The Financial Times notes that Fitch Ratings pointed out that, in addition to the growth impact, higher oil prices could push the US current account deficit higher, thus accentuating global imbalances. It calculates, for example, that a higher oil import bill could see the US current account deficit reach $1,000bn in 2006, over seven per cent of GDP – and warns this could “amplify concerns about its sustainability and the risk of increased volatility in global currencies and other asset markets.”

The European Union posted a 3.2 billion euro ($3.86 billion) overall trade deficit in July, nearly double the total of the previous month, according to first estimates from the EU statistics agency Eurostat released Tuesday.The total deficit for the 25 nations of the EU increased from a deficit of 1.8 billion euros ($2.17 billion) in June, and compared with a 1 billion euro surplus in July 2004.

Helen Keller: "We could never learn to be brave and patient, if there were only joy in the world."

Monday, September 26, 2005

Good News

9/26/05 Good News

Boeing and the Machinists Union have reached agreement on a new contract, and the 3+ week strike will come end. Terms of the contract offer include:

-- A pension multiplier of $70 per month for each year of service,
-- Maintaining existing health care plans under the same cost provisions
of the IAM's previous contract with Boeing,
-- A ratification bonus equaling 8 percent of each employee's total pay
during the past 12 months, which will average about $5,200 per
individual, and
-- Two lump sum bonuses, of $3,000 each, which will be paid at the end of
2006 and 2007.

The new three-year agreement at DaimlerChrysler has been overwhelmingly ratified by CAW members at meetings across Ontario, Canada. In addition to modest improvements in wages, pensions, and other benefits, the agreement ensures the continued operation of all existing facilities and shifts and commits the company to a major new investment in its Windsor assembly plant. The contract also provides for changes in the delivery of health benefits that will save tens of millions of dollars annually. Without harming the quality of the benefits which CAW members receive.

Only 3 refineries were hurt by Rita, and major damage was averted. Crude has declined to $63.20 per barrel.

The Nikkei hit a new 4-year high.

India’s GDP grew 7.1% in this year’s second quarter.

China’s GDP is expected to grow at a 9.2% rate this year.

According to the WSJ Online and Business Week Online, the buyout interest for Albertson’s is heating up.

China continues to aim for full yuan convertibility.

According to the Lundberg survey, in the past two weeks the retail price of gasoline declined 20 cents a gallon nationwide.

The United States has called for expansion of the Group of Seven, a club of world's wealthiest nations, to include India.

During Katrina and Rita, the nation has witnessed the toll on human capital and, to a much less important extent, political capital. Through all the devastation, life will continue. Life will change for many, but life will still go on. Hopefully, our citizens can now have a more keen focus on the daily quality of life and the pursuit of mutual caring and the respect for the rights and freedoms of the individual. The hurricanes have proven that government cannot deliver well being to your doorstep. Only the individual has the power to accomplish such a feat.

Sunday, September 25, 2005

Lost Control

9/25/05 Lost Control

According to Reuters, U.S. Federal Reserve Chairman Alan Greenspan told France's Finance Minister Thierry Breton the United States has "lost control" of its budget deficit, the French minister said on Saturday.
"'We have lost control,' that was his expression," Breton told reporters after a bilateral meeting with Greenspan.
"The United States has lost control of their budget at a time when racking up deficits has been authorized without any control (from Congress)," Breton said.
"We were both disappointed that the management of debt is not a political priority today," he added.

People’s Bank of China Governor Zhou Xiaochuan: "Along with time, we are going to allow our exchange rate to depend more and more on stabilizing market relationships.
That also means that the role of the reference basket of currencies will gradually be reduced. We are not in a hurry to move forward, but we have this direction,"

Porsche AG, the maker of the Boxster sports car, said it plans to buy 20 percent of Volkswagen AG to prevent a takeover of that company.

Overall, Rita did minimal damage to the oil refineries along the Gulf coast, crude declined close to $1 per barrel. However, Valero Energy Corp. said it will take two weeks to a month to repair and restart its 255,000-barrel-per-day Port Arthur refinery, which sustained "significant damage to two cooling towers and a flare stack." It’s important to remember that the hurricane season does not end until November.

The procedure involving endovascular repair of arterial aneurysms behind Cheney’s right and left knees lasted 6 hours. The procedure was performed by Dr. Anthony
Venbrux, Director of Interventional Radiology, Dr. Jonathan Reiner, Director of the Cardiac Catheterization Laboratory, and Dr. Joseph Giordano, Chairman of Surgery. Joining the team were Dr. Barry Katzen, Director of the Baptist Heart and Vascular Institute at Baptist Hospital in Miami and Dr. PeterGloviczki, Chair of Vascular Surgery at Mayo Clinic. Cheney will remain in the hospital for 48 hours. The procedure went well, but at the same time, it was a big deal, and going forward, significant risk exists.

Jim Williams of Williams Inference Center: "The medication for Parkinson's, the desire to gamble and the craving for excess food have one common denominator, dopamine.
Dopamine is a pleasure-inducing brain chemical, a neurotransmitter that controls action. Dopamine is associated with addiction of all types…Dopamine has been associated with the novelty of drinking, gambling and other addictions, but it is also connected with curiosity, adventure, entrepreneurship and accomplishments.”

China has developed its own typing reagent of hematopoietic stem cell, which could be used to cure leukemia, according to sources with the Chinese Academy of Military Medical Sciences. The home-made HLA-DRB1 typing reagent is cheaper than imported reagent of its kind and is easier and quicker in use, said Wang Shengqi, head of the key laboratory of biological genetic chips under the academy, who has led the team of this research for five years.
The new typing reagent can be used to test all the 13 discovered genetic types of HLA-DRB1, covering all the 18 known serological types, according to Wang.

Yesterday, there was gibberish from Lukoil that they would try to make trouble at the 11th hour on the acquisition of PetroKazakhstan. It’s always vital to take note of what actions are taken rather than words spoken. The most important task for Lukoil's new representative office in China, which was officially registered in Beijing on Thursday, is to develop and deepen business in the Asia-Pacific region and in China in particular, Lukoil Vice-President Valery Golovushkin told Russian journalists. The representative office's main activities will be preparing information and developing projects that will enhance cooperation between Lukoil and its Chinese partners in such areas as oil exploration and production, the development of infrastructure in the oil industry, oil refining and the sales market, Golovushkin said. Lukoil is prepared to establish such cooperation with China based on understandings and conditions the two sides set together, he said. At the current stage, Lukoil will work on expanding trade activities in China and in the region as a whole, Golovushkin said. Lukoil plans to deliver about 1 million tonnes of oil to China in 2005 mainly by sea, the vice-president said. Golovushkin did not rule out the possibility that Lukoil may participate in filling the Kazakh-Chinese oil pipeline with oil from Western Siberia.

Swiss Bank UBS’ global shipping analyser said freight fees would tumble 15pc in 2006 and a further 5pc in 2007, ending the profits bonzana for shipping companies. It said oil tanker rates would remain strong.
"Not only is demand softening, but the supply order-book is shortening," said the bank, predicting that container capacity would rise by 14.5pc next year. It said the "staggering growth" led by Chinese exports since December 2001 was now clearly over. "Total sea export growth to the US and northern Europe is now slowing across all industry, with the exception of clothing," it said. Exports of Chinese furniture, toys and shoes have reached "saturation level", while there are signs that China is "moving up the value chain" to more sophisticated products that required less ship space. Freight rates for shipping manufactured goods have shot up 46pc since 2002 on the main Atlantic and Pacific routes but may now have peaked.
The Baltic Exchange Dry Index, which measures the cost of shipping coal, grain, iron ore and other goods worldwide, soared over 500pc from the beginning of the decade to late 2004, but has since given up half the gains.

The Gulf IT (GITEX) opened at the World Trade Center in Dubai. A design center was established in Dubai to attract the world’s multi-national high technology firms to establish cost-effective R&D and manufacturing operations. Today, it was announced that LSI Logic Corporation is establishing a semiconductor design and engineering development center focused on the design of high performance consumer electronics solutions. The LSI Logic development center will be located at Dubai’s DSO Microelectronics Innovation Center.

Logan.P. Smith: “It is through the cracks in our brains that ecstasy creeps in.”