8/3/06 Risk Premiums
Before investing at this time, one might consider why risk premiums are low. Should they be priced higher? If so, what does that say about the potential for a decline in equities as we enter Sept/Oct. One would think that risk premiums would be higher at this time of the year. Of course, so many believe it will be different this time.
But do they have their own money invested or simply making suggestions to OPM?
Have you considered why so many insiders are selling shares and yet large corporate buybacks continue at a rapid pace? It's simple to repurchase shares with shareholder money. It doesn't cost the CEO a penny-- unless his name is Gates.
David Lereah is the chief economist for the NAR. Here are some of his recent comments: "I'm hoping for prices to drop...The sellers are not bringing prices down fast enough. They've been very stubborn...A drop of 5% to 10% in California and southern Florida "probably would be enough to bring sales back...The quicker we can get negative prices, the quicker we can get sales coming back." Do you think the head of the NASD made similar comments during the dotcom bubble of 1999? Be careful what you wish for, Mr. Lereah.
The Mogambo Guru: "Total Fed Credit was down another $4.2 billion last week, although credit in the banks is still expanding like crazy, which means, by definition, that debt is still expanding, which means that the money supply should be expanding, but I see that the money supply is not very robust. Confusing.
And, the national debt is still increasing at about $3 billion per day. It’s getting worse every damned day, as if someone actually believes that an always-failed-in-the-past, guns-and-butter fiscal policy is not inflationary and suicidal! Confusing!"
The Indian government Friday said it is preparing a contingency plan to prevent a total shutdown of oil production and refining operations following a threat from executives at state-run firms to go on an indefinite strike from Tuesday.
Have refining margins in the U.S. topped out for the forseeable future?
Job lay-offs are expected to increase in the next few months according to Challenger, Gray & Christmas.
Too many individuals believe honest disagreement equates to spreading propaganda, and too many believe disagreement with a positive outlook for equities equates to spreading doomsday scenarios. I believe those that pontificate their gullible rhetoric are subject to having their self-proclaimed winning portfolios cleansed with a strong probiotic. It might be timely to recall the quote "behind every successful man is a woman with a brush and shovel cleaning up the shit he's too full of himself to notice."
Mike Burk: "Since 1928 the SPX has had an average loss in September of 1.2%, and it has been up 44% of the time, it is the only month that has been up less than 50% of the time. February and May are tied for the 2nd worst month of the year, each averaging a loss of 0.2%, but both have been up over 50% of the time.
Looking at the 2nd year of the Presidential Cycle, the average return in September has been the worst at -1.3% while the index has been up 42% of the time. June runs a close second for worst return at -1.2% and it has been up only 35% of the time."
Saturday, September 02, 2006
Consequences
9/2/06 Consequences
With escalating violence in Iraq, the Pentagon admits that conditions in Iraq exist for a civil war.
With respect to Iran and its on-going nuclear development efforts, Bush stated
"there must be consequences." What are the consequences for invading Iraq?
Did anyone say impeachment?
Opposition lawmakers blocked Mexico's President Fox from delivering his final State of the Nation address. Could a simialr action take place in the U.S. during the Bush
presidency?
John Mauldin: "To be a bull today, you have to think that this time it is different. You must believe that the inverted yield curve, which has yet to be wrong about a future recession, is giving us a false positive. Because if we do get a recession or even a "mere" serious slowdown, then the stock market is going to drop. It always has. Always.
To be a buyer today, you have to think that the housing market is not going to be all that big a problem, that consumers will be able to once again maintain their increase in spending.
I suggest you read the end of the fairy tale. Goldilocks, rested and comfortable in the moment, ended up fleeing for her life in the end."
Nationwide the price of regular unleaded gasoline fell to $2.79 a gallon.
Nonfarm payroll employment rose by 128,000 in August,
and the unemployment rate was essentially unchanged at 4.7
percent. The employment increase was about in line with the
average monthly gain of 117,000 for the 4-month period from
April to July. During the 12-month period ending in March,
job growth averaged 169,000 per month. Average hourly
earnings rose by 2 cents, or 0.1 percent, in August.
In the service-providing sector, education and health
services employment grew by 60,000; health care contributed
35,000 of the net increase, and social assistance added
13,000 jobs. Over the year, health care employment expanded
by 286,000. Within health care, hospitals added 14,000 jobs
over the month. Employment also increased in doctors'
offices, home health care services, and outpatient care
centers. Manufacturing employment edged down over the month,
largely due to job losses in motor vehicles, wood products,
and furniture and related products. Manufacturing hours
were down 0.1 hour to 41.3 hours, and factory overtime held
at 4.5 hours.
Average hourly earnings for private production and
nonsupervisory workers rose by 2 cents (0.1 percent) in
August, following gains of 8 cents in July and 7 cents in
June. Over the 12-month period ending in August, average
hourly earnings have risen by 3.9 percent.
Nothing has changed. Few high-paying jobs are created. The number of
new jobs is on the down slope. Wages continue to lag the rate of inflation.
For most, their standard of living is on the decline. These are not
opinions. They are facts.
A panel of experts appointed by India's central bank has recommended an easing of the country's capital controls over the next five years to make the currency fully convertible.
Despite more than four years of economic growth, the inflation-adjusted wages of all but the most highly paid Pennsylvanians declined in 2005 as it has over the last several years.
"To a degree that is stunning, the benefits of a strong economy have
been concentrated at the very top of the Pennsylvania income scale," says
Dr. Mark Price, co-author of The State of Working Pennsylvania 2006.
Inflation-adjusted hourly wages for typical Pennsylvanians - right in
the middle of the earnings distribution - fell from $14.55 to $14.21 in
2005. Even relatively high-wage earners, those who earn more than nine out
of every 10 Pennsylvanians, saw their wages decline in 2005 for third year
in a row.
The decline of wages for all but the highest earners has occurred at a
time when corporate profits, CEO pay, and productivity growth are at high
or record levels.
-- In 2005, corporate profits in the United States rose by 16%.
-- The average CEO now earns more in one day than the average U.S. worker
earns in a year.
-- A recent study found that economy-wide productivity grew faster from
early 2001 to early 2005 than in any period back to 1954.
"Recent trends look like the wage and income stagnation of 1980 to
1995," said Dr. Stephen Herzenberg, co-author of the study, "except that
the slice at the top benefiting from growth is now even thinner. The last
five years represent a sharp departure from the broadly shared prosperity
of 1995-2000."
Pennsylvania families are also getting squeezed by falling pension
coverage and rising health care costs.
-- 51% private sector Pennsylvania workers had employer-provided pensions
in 2005, down from 57% in 2000.
-- The number of Pennsylvanians without health insurance rose about
300,000 from 1999 to 2005. (There was some progress on the health
insurance front in 2005 compared to 2004. According to Census Bureau
numbers released August 29 the number of uninsured Pennsylvanians
declined by 143,000 from 2004 to 2005.)
Recent declines in wages have hit particularly hard those earning the
least according to the report. Taxable income for the 10th percentile
Pennsylvania taxpayer (with an income greater than 10% of taxpayers and
less than 90% of taxpayers) declined by an astounding 21% between 2000 and
2004.
"Not surprisingly," adds Price, "poverty has increased in Pennsylvania.
Between 2000-
-01 and 2004- -05 the share of
Pennsylvanians living in poverty increased by roughly a quarter. Today,
nearly one out of every six Pennsylvania children live in poverty."
"Well-educated Pennsylvanians are not immune to recent wage and income
trends," adds Herzenberg. "Contrary to what many have assumed, more
education is not, by itself, a guarantee of a rising income or a solution
to the problem of stagnant wages."
-- The median wages of college-educated Pennsylvania workers fell from
$22.76 per hour in 2002 to $21.72 in 2005.
In the most recent Barron's, I suggest you read the article entitled "Time to Bet Big on Options written by J. Kyle Rosen.
My best idea is to sell January 2007 puts on Goldcorp with a $20 strike price for
40 cents. Just an aside. I only make suggestions on transactions I am trying to do or have done for myself.
Warren Buffett: "A contrarian approach is just as foolish as a follow-the-crowd strategy. What’s required is thinking rather than polling. Unfortunately, Bertrand Russell's observation about life in general applies with unusual force in the financial world: ‘Most men would rather die than think. Many do.’"
With escalating violence in Iraq, the Pentagon admits that conditions in Iraq exist for a civil war.
With respect to Iran and its on-going nuclear development efforts, Bush stated
"there must be consequences." What are the consequences for invading Iraq?
Did anyone say impeachment?
Opposition lawmakers blocked Mexico's President Fox from delivering his final State of the Nation address. Could a simialr action take place in the U.S. during the Bush
presidency?
John Mauldin: "To be a bull today, you have to think that this time it is different. You must believe that the inverted yield curve, which has yet to be wrong about a future recession, is giving us a false positive. Because if we do get a recession or even a "mere" serious slowdown, then the stock market is going to drop. It always has. Always.
To be a buyer today, you have to think that the housing market is not going to be all that big a problem, that consumers will be able to once again maintain their increase in spending.
I suggest you read the end of the fairy tale. Goldilocks, rested and comfortable in the moment, ended up fleeing for her life in the end."
Nationwide the price of regular unleaded gasoline fell to $2.79 a gallon.
Nonfarm payroll employment rose by 128,000 in August,
and the unemployment rate was essentially unchanged at 4.7
percent. The employment increase was about in line with the
average monthly gain of 117,000 for the 4-month period from
April to July. During the 12-month period ending in March,
job growth averaged 169,000 per month. Average hourly
earnings rose by 2 cents, or 0.1 percent, in August.
In the service-providing sector, education and health
services employment grew by 60,000; health care contributed
35,000 of the net increase, and social assistance added
13,000 jobs. Over the year, health care employment expanded
by 286,000. Within health care, hospitals added 14,000 jobs
over the month. Employment also increased in doctors'
offices, home health care services, and outpatient care
centers. Manufacturing employment edged down over the month,
largely due to job losses in motor vehicles, wood products,
and furniture and related products. Manufacturing hours
were down 0.1 hour to 41.3 hours, and factory overtime held
at 4.5 hours.
Average hourly earnings for private production and
nonsupervisory workers rose by 2 cents (0.1 percent) in
August, following gains of 8 cents in July and 7 cents in
June. Over the 12-month period ending in August, average
hourly earnings have risen by 3.9 percent.
Nothing has changed. Few high-paying jobs are created. The number of
new jobs is on the down slope. Wages continue to lag the rate of inflation.
For most, their standard of living is on the decline. These are not
opinions. They are facts.
A panel of experts appointed by India's central bank has recommended an easing of the country's capital controls over the next five years to make the currency fully convertible.
Despite more than four years of economic growth, the inflation-adjusted wages of all but the most highly paid Pennsylvanians declined in 2005 as it has over the last several years.
"To a degree that is stunning, the benefits of a strong economy have
been concentrated at the very top of the Pennsylvania income scale," says
Dr. Mark Price, co-author of The State of Working Pennsylvania 2006.
Inflation-adjusted hourly wages for typical Pennsylvanians - right in
the middle of the earnings distribution - fell from $14.55 to $14.21 in
2005. Even relatively high-wage earners, those who earn more than nine out
of every 10 Pennsylvanians, saw their wages decline in 2005 for third year
in a row.
The decline of wages for all but the highest earners has occurred at a
time when corporate profits, CEO pay, and productivity growth are at high
or record levels.
-- In 2005, corporate profits in the United States rose by 16%.
-- The average CEO now earns more in one day than the average U.S. worker
earns in a year.
-- A recent study found that economy-wide productivity grew faster from
early 2001 to early 2005 than in any period back to 1954.
"Recent trends look like the wage and income stagnation of 1980 to
1995," said Dr. Stephen Herzenberg, co-author of the study, "except that
the slice at the top benefiting from growth is now even thinner. The last
five years represent a sharp departure from the broadly shared prosperity
of 1995-2000."
Pennsylvania families are also getting squeezed by falling pension
coverage and rising health care costs.
-- 51% private sector Pennsylvania workers had employer-provided pensions
in 2005, down from 57% in 2000.
-- The number of Pennsylvanians without health insurance rose about
300,000 from 1999 to 2005. (There was some progress on the health
insurance front in 2005 compared to 2004. According to Census Bureau
numbers released August 29 the number of uninsured Pennsylvanians
declined by 143,000 from 2004 to 2005.)
Recent declines in wages have hit particularly hard those earning the
least according to the report. Taxable income for the 10th percentile
Pennsylvania taxpayer (with an income greater than 10% of taxpayers and
less than 90% of taxpayers) declined by an astounding 21% between 2000 and
2004.
"Not surprisingly," adds Price, "poverty has increased in Pennsylvania.
Between 2000-
-01 and 2004- -05 the share of
Pennsylvanians living in poverty increased by roughly a quarter. Today,
nearly one out of every six Pennsylvania children live in poverty."
"Well-educated Pennsylvanians are not immune to recent wage and income
trends," adds Herzenberg. "Contrary to what many have assumed, more
education is not, by itself, a guarantee of a rising income or a solution
to the problem of stagnant wages."
-- The median wages of college-educated Pennsylvania workers fell from
$22.76 per hour in 2002 to $21.72 in 2005.
In the most recent Barron's, I suggest you read the article entitled "Time to Bet Big on Options written by J. Kyle Rosen.
My best idea is to sell January 2007 puts on Goldcorp with a $20 strike price for
40 cents. Just an aside. I only make suggestions on transactions I am trying to do or have done for myself.
Warren Buffett: "A contrarian approach is just as foolish as a follow-the-crowd strategy. What’s required is thinking rather than polling. Unfortunately, Bertrand Russell's observation about life in general applies with unusual force in the financial world: ‘Most men would rather die than think. Many do.’"
Thursday, August 31, 2006
Progressing Or Illusory
9/1/06 Progressing Or Illusory
Discussions between French carmaker Renault SA and General Motors are "progressing well," Renault CEO Carlos Ghosn said today. "It is progressing well but it is still too soon to reach a conclusion," Ghosn said.
Investors pulled an estimated $658 million from stock mutual-funds in the five trading days through Wednesday, following withdrawals of $1.4 billion in the previous week, data firm TrimTabs Investment Research said late Thursday. U.S. stock funds saw outflow of $998 million, vs. an inflow of $446 million a week earlier. International stock funds saw $340 million in new money, following the prior week's $978 million inflow. Bond funds, meanwhile, added $234 million vs. $611 million in new money a week earlier. Hybrid funds, which invest in stocks and bonds, added $101 million, building on $263 million in new money a week ago.
Howard L. Simons: "The equity market is subjetc to a form of money illusion; newly created money tends to flow into real plant and equipment. As a result, stocks appear to welcome rising inflation when in fact they are welcoming excess liquidity...If we map the dollar index against the ten-year TIPS breakeven rate of inflation line, we find the dollar has anticipated changes in expected inflation by the 13-week lag embedded in the standard 90-day non-deliverable currency forward...The recent tendency of the dollar to weaken on hints of looser monetary policy argues for the imbalance of risk toward higher inflation in the U.S. relative to othermajor currencies."
Core consumer prices rose at an annual rate of 3.1% in July, the Dallas Federal Reserve Bank said Thursday. Core prices rose at a 3% rate in June. The bank's trimmed-mean PCE price index is an alternative method of computing core inflation without automatically excluding food and energy costs. The trimmed-mean PCE index has risen at a 3% annual rate in the past six months, the fastest growth since June 2001. The index has risen 2.7% in the past year, the same as in June. On an unrounded basis, however, year-over-year core inflation is at the highest level in 14 years.
Henry Ward Beecher: "Laws and institutions are constantly tending to gravitate. Like clocks, they must be occasionally cleansed, and wound up, and set to true time."
General Motors Corp. is expected to update its fourth-quarter production plans Friday, and Calyon Securities analyst Joseph Amaturo is looking for the automaker to announce a reduction of at least 10%.
Marsoft: "The dry bulk market posted strong counter-seasonal gains over the past month, with freight rates rising sharply from mid-July to mid-August. The Baltic Dry Index jumped from 3,000 in mid-July to more than 3,800 by mid-August, before the rally finally began to lose momentum in the latter half of August.
Cape rates have seen the most dramatic gains over the past month, with earnings on our Tubarao/Rotterdam iron ore route climbing from $40,000 per day to $60,000 per day, before falling back in the third week of August.
Panamax rates also moved up significantly from mid-July to mid-August, with earnings for a USG/Japan grain voyage rising from $18,000 per day to $23,000 per day over this period. Panamax trip charter rates rose from $22,000 per day to $29,000 per day in the past month.
Meanwhile, rates for the smaller bulkers have seen more moderate gains over the past month, although these came on top of the strong increases registered in June and early July. From mid-July to mid-August, Supramax earnings for a transatlantic round trip moved up from $22,000 per day to $25,000 per day, while small Handy rates remained relatively flat at $16,000 per day."
CNET reported that Intel may cut up to 10 percent of its work force as early as next Tuesday.
Electronic Arts Inc. said Thursday that sales of its latest "Madden" football video game grossed more than $100 million in its first week, the biggest launch in the franchise's 17-year history.
Dollar General reported August sales of $687 million, showing a 10 percent increase from a year ago. Same-store sales increased 4.8 percent compared to a 1.2 percent increase last year.
Microsoft Corp. paid out performance bonuses totaling almost $1 billion in restricted stock to 900 of its top executives. One-third of the 37 million shares vest immediately. Chairman Bill Gates and Chief Executive Officer Steve Ballmer were excluded. Unfortunately, the stockholders have not made a penny in years. Where does performance begin and end?
Goldcorp Inc., Canada's third- largest gold producer, agreed to buy Glamis Gold Ltd. for about $8.6 billion, increasing output by more than a third and adding mines in Nevada and Honduras. Glamis holders will get 1.69 shares in Toronto-based Goldcorp for each share.
Soren Kierkegaard: "Truth always rests with the minority, and the minority is always stronger than the majority, because the minority is generally formed by those who really have an opinion, while the strength of a majority is illusory, formed by the gangs who have no opinion -- and who, therefore, in the next instant (when it is evident that the minority is the stronger) assume its opinion... while truth again reverts to a new minority."
Discussions between French carmaker Renault SA and General Motors are "progressing well," Renault CEO Carlos Ghosn said today. "It is progressing well but it is still too soon to reach a conclusion," Ghosn said.
Investors pulled an estimated $658 million from stock mutual-funds in the five trading days through Wednesday, following withdrawals of $1.4 billion in the previous week, data firm TrimTabs Investment Research said late Thursday. U.S. stock funds saw outflow of $998 million, vs. an inflow of $446 million a week earlier. International stock funds saw $340 million in new money, following the prior week's $978 million inflow. Bond funds, meanwhile, added $234 million vs. $611 million in new money a week earlier. Hybrid funds, which invest in stocks and bonds, added $101 million, building on $263 million in new money a week ago.
Howard L. Simons: "The equity market is subjetc to a form of money illusion; newly created money tends to flow into real plant and equipment. As a result, stocks appear to welcome rising inflation when in fact they are welcoming excess liquidity...If we map the dollar index against the ten-year TIPS breakeven rate of inflation line, we find the dollar has anticipated changes in expected inflation by the 13-week lag embedded in the standard 90-day non-deliverable currency forward...The recent tendency of the dollar to weaken on hints of looser monetary policy argues for the imbalance of risk toward higher inflation in the U.S. relative to othermajor currencies."
Core consumer prices rose at an annual rate of 3.1% in July, the Dallas Federal Reserve Bank said Thursday. Core prices rose at a 3% rate in June. The bank's trimmed-mean PCE price index is an alternative method of computing core inflation without automatically excluding food and energy costs. The trimmed-mean PCE index has risen at a 3% annual rate in the past six months, the fastest growth since June 2001. The index has risen 2.7% in the past year, the same as in June. On an unrounded basis, however, year-over-year core inflation is at the highest level in 14 years.
Henry Ward Beecher: "Laws and institutions are constantly tending to gravitate. Like clocks, they must be occasionally cleansed, and wound up, and set to true time."
General Motors Corp. is expected to update its fourth-quarter production plans Friday, and Calyon Securities analyst Joseph Amaturo is looking for the automaker to announce a reduction of at least 10%.
Marsoft: "The dry bulk market posted strong counter-seasonal gains over the past month, with freight rates rising sharply from mid-July to mid-August. The Baltic Dry Index jumped from 3,000 in mid-July to more than 3,800 by mid-August, before the rally finally began to lose momentum in the latter half of August.
Cape rates have seen the most dramatic gains over the past month, with earnings on our Tubarao/Rotterdam iron ore route climbing from $40,000 per day to $60,000 per day, before falling back in the third week of August.
Panamax rates also moved up significantly from mid-July to mid-August, with earnings for a USG/Japan grain voyage rising from $18,000 per day to $23,000 per day over this period. Panamax trip charter rates rose from $22,000 per day to $29,000 per day in the past month.
Meanwhile, rates for the smaller bulkers have seen more moderate gains over the past month, although these came on top of the strong increases registered in June and early July. From mid-July to mid-August, Supramax earnings for a transatlantic round trip moved up from $22,000 per day to $25,000 per day, while small Handy rates remained relatively flat at $16,000 per day."
CNET reported that Intel may cut up to 10 percent of its work force as early as next Tuesday.
Electronic Arts Inc. said Thursday that sales of its latest "Madden" football video game grossed more than $100 million in its first week, the biggest launch in the franchise's 17-year history.
Dollar General reported August sales of $687 million, showing a 10 percent increase from a year ago. Same-store sales increased 4.8 percent compared to a 1.2 percent increase last year.
Microsoft Corp. paid out performance bonuses totaling almost $1 billion in restricted stock to 900 of its top executives. One-third of the 37 million shares vest immediately. Chairman Bill Gates and Chief Executive Officer Steve Ballmer were excluded. Unfortunately, the stockholders have not made a penny in years. Where does performance begin and end?
Goldcorp Inc., Canada's third- largest gold producer, agreed to buy Glamis Gold Ltd. for about $8.6 billion, increasing output by more than a third and adding mines in Nevada and Honduras. Glamis holders will get 1.69 shares in Toronto-based Goldcorp for each share.
Soren Kierkegaard: "Truth always rests with the minority, and the minority is always stronger than the majority, because the minority is generally formed by those who really have an opinion, while the strength of a majority is illusory, formed by the gangs who have no opinion -- and who, therefore, in the next instant (when it is evident that the minority is the stronger) assume its opinion... while truth again reverts to a new minority."
Wednesday, August 30, 2006
Delusion And Illusion
8/31/06 Delusion And Illusion
George Ure: "Regular humans took $62.2 billion out of their savings to make ends meet in the quarter. But hey, that's gotta fuel some kind of market rally, in this "things work backwards world" right?
Personal outlays are exceeding personal income and by a wider margin in this report, perhaps due in part to the notion that bankers are doing a fine job of hypnotizing today's young people into the idea of "renting their lives" - and that debt/interest/making bankers fat is just now the world ought to operate. In their freakin' dreams."
Robert McHugh: "The Dow Industrials have declined sharply every Autumn for the past nine years in a row, from 1997 through 2005, reflecting an interesting market psychology, and it is setting up to do so again in 2006." But wait. Interest rates are going down. Crude is hovering only at $70 a barrel. The Dow, S&P, and the Nasdaq are chugging along at 7-week highs or more. The national debt is only increasing by $3 billion a day. The U.S. dollar index is not much below 85. Maybe this autumn will be different from the 1997 thru 2005 period. For my money, the 5% overnight funds rate looks pretty good.
Richmond Fed President Lacker: "Obviously the July inflation number was a little better than the previous month. I don't think we're out of the woods yet."
The Reuters/Jefferies CRB Index of 19 commodities dropped 0.2 percent to 327.09, after earlier reaching 324.60, the lowest since March 23. The CRB is down more than 10 percent since reaching a record high on May 11, when copper was at a record high and gold was near a 26-year high. The CRB is down 1.4 percent this year.
Ethan Allen Interiors Inc.'s chairman and chief executive Farooq Kathwari after Wednesday's closing bell said sales have further slowed in August.
Albert Einstein: "Not everything that counts can be counted, and not everything that can be counted counts."
Wal-Mart Stores,Inc. has been named as one of the "50 Best Companies for
Latinas to Work for in the United States" by LATINA Style Magazine.
Wal-Mart was chosen because of its programs and initiatives that help
Latina professional working women in the workplace.
BHP Billiton reached a preliminary agreement in Chile with union leaders at its Escondida copper mine, the biggest in the world, signaling a possible end to a 24-day strike that disrupted production.
Brazil's central bank cut its benchmark lending rate by a larger-than-expected half point on Wednesday in an apparent bid to spur the economy.
The central bank's monetary policy committee unanimously decided to reduce its Selic rate to an annual 14.25 percent from 14.75 percent.
David Chapman: "Contrary to popular opinion, October is not the worst month of the year. September is. Since 1950, September has seen 19 ups and 36 downs. No other month comes close. There were particularly nasty Septembers in 2002 and 2003, as the market lost more than 10 percent each time. (Note: statistics here are based on the Dow Jones Industrials.) The market also lost more than 10 percent in September 1974. Indeed, those three Septembers rank amongst the worst months ever since 1950. There are no Septembers amongst the best months."
My best idea is to sell puts on ConocoPhillips stock with a $50 strike price for
55 cents.
Albert Einstein: "Reality is merely an illusion, albeit a very persistent one."
George Ure: "Regular humans took $62.2 billion out of their savings to make ends meet in the quarter. But hey, that's gotta fuel some kind of market rally, in this "things work backwards world" right?
Personal outlays are exceeding personal income and by a wider margin in this report, perhaps due in part to the notion that bankers are doing a fine job of hypnotizing today's young people into the idea of "renting their lives" - and that debt/interest/making bankers fat is just now the world ought to operate. In their freakin' dreams."
Robert McHugh: "The Dow Industrials have declined sharply every Autumn for the past nine years in a row, from 1997 through 2005, reflecting an interesting market psychology, and it is setting up to do so again in 2006." But wait. Interest rates are going down. Crude is hovering only at $70 a barrel. The Dow, S&P, and the Nasdaq are chugging along at 7-week highs or more. The national debt is only increasing by $3 billion a day. The U.S. dollar index is not much below 85. Maybe this autumn will be different from the 1997 thru 2005 period. For my money, the 5% overnight funds rate looks pretty good.
Richmond Fed President Lacker: "Obviously the July inflation number was a little better than the previous month. I don't think we're out of the woods yet."
The Reuters/Jefferies CRB Index of 19 commodities dropped 0.2 percent to 327.09, after earlier reaching 324.60, the lowest since March 23. The CRB is down more than 10 percent since reaching a record high on May 11, when copper was at a record high and gold was near a 26-year high. The CRB is down 1.4 percent this year.
Ethan Allen Interiors Inc.'s chairman and chief executive Farooq Kathwari after Wednesday's closing bell said sales have further slowed in August.
Albert Einstein: "Not everything that counts can be counted, and not everything that can be counted counts."
Wal-Mart Stores,Inc. has been named as one of the "50 Best Companies for
Latinas to Work for in the United States" by LATINA Style Magazine.
Wal-Mart was chosen because of its programs and initiatives that help
Latina professional working women in the workplace.
BHP Billiton reached a preliminary agreement in Chile with union leaders at its Escondida copper mine, the biggest in the world, signaling a possible end to a 24-day strike that disrupted production.
Brazil's central bank cut its benchmark lending rate by a larger-than-expected half point on Wednesday in an apparent bid to spur the economy.
The central bank's monetary policy committee unanimously decided to reduce its Selic rate to an annual 14.25 percent from 14.75 percent.
David Chapman: "Contrary to popular opinion, October is not the worst month of the year. September is. Since 1950, September has seen 19 ups and 36 downs. No other month comes close. There were particularly nasty Septembers in 2002 and 2003, as the market lost more than 10 percent each time. (Note: statistics here are based on the Dow Jones Industrials.) The market also lost more than 10 percent in September 1974. Indeed, those three Septembers rank amongst the worst months ever since 1950. There are no Septembers amongst the best months."
My best idea is to sell puts on ConocoPhillips stock with a $50 strike price for
55 cents.
Albert Einstein: "Reality is merely an illusion, albeit a very persistent one."
Tuesday, August 29, 2006
Close But No Cigar
8/30/06 Close But No Cigar
The Federal Reserve’s policy makers, in what many described as a “close call,” chose to keep interest rates unchanged at their last meeting although several thought that increases “could well be needed” in the future.
Yesterday was not a good day in the market for Goldman, Lehman, or Bear Stearns.
Median U.S. household income rose an inflation-adjusted 1.1% last year after five straight annual declines, the Census Bureau said, while the gap between the most- and least-affluent Americans widened. The 1.1% gainmight get you a token on the subway. Don't spend it all in one place!
Japan's wages unexpectedly slipped for the first time in six months, as record corporate profits and increased demand for workers failed to translate into higher pay.
Crude closed under $70 a barrel but Diamond Offshore had a good gain.
China, South Korea, Turkey and Mexico could win increases in their International Monetary Fund quotas within a few days, signalling the biggest reform of the fund since Bretton Woods.
In the last few days a greater number of our armed forces have been killed in Iraq. The headlines have gone to Katrina but the war is getting bloodier in Iraq. You still believe we attacked Iraq because of failed intelligence? If you believe that, you need to have your head examined.
Paul Mladjenovic: "The mother of all economic problems is government. We could make it sound studious and blame "excessive" government but government by its very nature is excessive and problematic."
Confidence among U.S. consumers fell this month to the lowest since November, rattled by expensive gasoline and a slowing housing market, a private survey showed.
The Conference Board's index of confidence dropped to 99.6 from 107.0 in July, the New York-based business group said.
Consumer confidence in Germany, Europe's largest economy, rose to the highest since 2001 as an increase in sales tax next year encouraged shoppers to bring forward spending. A sentiment index climbed to 8.6 from a revised 8.5 in the previous month, GfK, a market research company in Nuremberg, Germany, said Tuesday.
According to a new census, more than 46 million Americans lack health insurance.
Maggie Gallagher: "When governments become large, voters cannot exercise close oversight, otherwise known as political power." In the case of our government, it is a huge cancerous growth.
The Federal Reserve’s policy makers, in what many described as a “close call,” chose to keep interest rates unchanged at their last meeting although several thought that increases “could well be needed” in the future.
Yesterday was not a good day in the market for Goldman, Lehman, or Bear Stearns.
Median U.S. household income rose an inflation-adjusted 1.1% last year after five straight annual declines, the Census Bureau said, while the gap between the most- and least-affluent Americans widened. The 1.1% gainmight get you a token on the subway. Don't spend it all in one place!
Japan's wages unexpectedly slipped for the first time in six months, as record corporate profits and increased demand for workers failed to translate into higher pay.
Crude closed under $70 a barrel but Diamond Offshore had a good gain.
China, South Korea, Turkey and Mexico could win increases in their International Monetary Fund quotas within a few days, signalling the biggest reform of the fund since Bretton Woods.
In the last few days a greater number of our armed forces have been killed in Iraq. The headlines have gone to Katrina but the war is getting bloodier in Iraq. You still believe we attacked Iraq because of failed intelligence? If you believe that, you need to have your head examined.
Paul Mladjenovic: "The mother of all economic problems is government. We could make it sound studious and blame "excessive" government but government by its very nature is excessive and problematic."
Confidence among U.S. consumers fell this month to the lowest since November, rattled by expensive gasoline and a slowing housing market, a private survey showed.
The Conference Board's index of confidence dropped to 99.6 from 107.0 in July, the New York-based business group said.
Consumer confidence in Germany, Europe's largest economy, rose to the highest since 2001 as an increase in sales tax next year encouraged shoppers to bring forward spending. A sentiment index climbed to 8.6 from a revised 8.5 in the previous month, GfK, a market research company in Nuremberg, Germany, said Tuesday.
According to a new census, more than 46 million Americans lack health insurance.
Maggie Gallagher: "When governments become large, voters cannot exercise close oversight, otherwise known as political power." In the case of our government, it is a huge cancerous growth.
Monday, August 28, 2006
The Big Gamble
8/29/06 The Big Gamble
From Bloomberg: "Speculators at the Chicago Board of Trade own 347,559 more futures contracts betting that prices of 10-year Treasury notes will rise, than they do contracts that would profit from a decline in the benchmark government note. That amounts to an almost $35 billion gamble that the gains will continue.
The record amount, reported by the Commodities Futures Trading Commission, is a sign traders are convinced two years of interest-rate increases by the Federal Reserve are slowing growth enough to curb inflation. They're joining investors such as Bill Gross of Pacific Investment Management Co., who runs the world's largest bond fund, who grew more bullish during the two-month rally that has pushed 10-year yields to five-month lows."
John Hussman: "We did see a modest widening in credit spreads over the past month, which tends to increase recession probabilities, but it is still not abrupt enough to suggest that investors are going to be clamoring for safe havens like Treasuries and currency. So for now, their effect in muting inflation pressures will probably be limited. Generally speaking, I continue to view negative economic surprises and upside inflation surprises to be the probable norm."
China Steel Corp, Taiwan's largest steelmaker, said it will increase prices of seven products for domestic customers in the fourth quarter by an average 4 percent because of rising demand.
Navistar International Corp. , the U.S. diesel engine maker, said on Monday it would lay off nearly 400 workers after Ford Motor Co., one of its key customers, announced it was cutting fourth-quarter production by 20 percent.
With a good deal of government data being released this week, the nonfarm payroll report on Friday, and the Labor Day weekend approaching, I would be extra careful about taking on any substantial new positions- and that goes for stocks, bonds, and commodities.
From Bloomberg: "Speculators at the Chicago Board of Trade own 347,559 more futures contracts betting that prices of 10-year Treasury notes will rise, than they do contracts that would profit from a decline in the benchmark government note. That amounts to an almost $35 billion gamble that the gains will continue.
The record amount, reported by the Commodities Futures Trading Commission, is a sign traders are convinced two years of interest-rate increases by the Federal Reserve are slowing growth enough to curb inflation. They're joining investors such as Bill Gross of Pacific Investment Management Co., who runs the world's largest bond fund, who grew more bullish during the two-month rally that has pushed 10-year yields to five-month lows."
John Hussman: "We did see a modest widening in credit spreads over the past month, which tends to increase recession probabilities, but it is still not abrupt enough to suggest that investors are going to be clamoring for safe havens like Treasuries and currency. So for now, their effect in muting inflation pressures will probably be limited. Generally speaking, I continue to view negative economic surprises and upside inflation surprises to be the probable norm."
China Steel Corp, Taiwan's largest steelmaker, said it will increase prices of seven products for domestic customers in the fourth quarter by an average 4 percent because of rising demand.
Navistar International Corp. , the U.S. diesel engine maker, said on Monday it would lay off nearly 400 workers after Ford Motor Co., one of its key customers, announced it was cutting fourth-quarter production by 20 percent.
With a good deal of government data being released this week, the nonfarm payroll report on Friday, and the Labor Day weekend approaching, I would be extra careful about taking on any substantial new positions- and that goes for stocks, bonds, and commodities.
Sunday, August 27, 2006
Developments
8/28/06 Developments
The Detroit News reported that Ford is considering selling a ``significant'' stake in Ford Credit. The possibility of such a sale ``played a role'' in a decision announced yesterday by Citigroup Inc. executive committee chairman Robert Rubin's decision to step down from Ford's board after six years, the newspaper said.
Rating agency Moody’s reported that the quarterly delinquency rate on the riskiest layer of the mortgage market increased by 9 per cent in the first quarter of 2006, the first time that the figure has gone up since 2002.
Karan Chabba, CDO analyst at Bear Stearns, said: “The housing numbers are worrisome to the extent that there could be some losses on the underlying pools [of the CDOs].”
Western Refining is purchasing Giant Industries for about $83 in cash.
Kinder Morgan has raised the ante on its going private transcation to $107.50 in cash.
The price of wholesale unleaded gas has declined to $1.85 a gallon. After Labor Day, we should see at least a 20 cent drop at the pump.
From the N.Y. Times: "The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.
As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”
More than half of U.S. households said gasoline prices caused them to cut back on discretionary spending during August, according to a survey released last week by the International Council of Shopping Centers.
With Ernesto's course moving away from the Gulf and towards Florida, crude took a hit down to $70.40 a barrel.
In a reaction to lower crude prices and lower natural gas prices, Diamond Offshore shares declined to the $71 level.
My best idea for the day is to sell Diamond Offshore Jan 2007 puts with a strike price of $50 for 60 cents.
The Detroit News reported that Ford is considering selling a ``significant'' stake in Ford Credit. The possibility of such a sale ``played a role'' in a decision announced yesterday by Citigroup Inc. executive committee chairman Robert Rubin's decision to step down from Ford's board after six years, the newspaper said.
Rating agency Moody’s reported that the quarterly delinquency rate on the riskiest layer of the mortgage market increased by 9 per cent in the first quarter of 2006, the first time that the figure has gone up since 2002.
Karan Chabba, CDO analyst at Bear Stearns, said: “The housing numbers are worrisome to the extent that there could be some losses on the underlying pools [of the CDOs].”
Western Refining is purchasing Giant Industries for about $83 in cash.
Kinder Morgan has raised the ante on its going private transcation to $107.50 in cash.
The price of wholesale unleaded gas has declined to $1.85 a gallon. After Labor Day, we should see at least a 20 cent drop at the pump.
From the N.Y. Times: "The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.
As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”
More than half of U.S. households said gasoline prices caused them to cut back on discretionary spending during August, according to a survey released last week by the International Council of Shopping Centers.
With Ernesto's course moving away from the Gulf and towards Florida, crude took a hit down to $70.40 a barrel.
In a reaction to lower crude prices and lower natural gas prices, Diamond Offshore shares declined to the $71 level.
My best idea for the day is to sell Diamond Offshore Jan 2007 puts with a strike price of $50 for 60 cents.
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