Saturday, December 02, 2006

More Thoughts

12/3/06 More Thoughts

Brett Steenbarger: "Corporate bond volatility bottomed out in May of this year and has been on the rise since then; that is not true of SPX volatility. One hypothesis I'm entertaining is that increasing volatility in interest rates and the dollar will be leading increasing equity volatility."

Yesterday, I provided the wrong link to an article on Palatin. Please excuse. Let's try it again.

From George Ure: "Bart's" work over at Nowand which offers a recreation of the Fed's gone-since-March-06 M-3, the broadest measure of the money supply, By his figuring the annual rate of change of M3 is running just about 10%, underscoring out long held belief that since 9/11 which coincided with the first leg down of the Second Depression, but misdirected public attention from that fact, the central banksters have been flooding the markets with liquidity on the theory that deflation can be exactly and precisely counteracted by driving offsetting inflation into the system. "

Alarmed about the baht's 14.2 percent gain against the dollar this year, the Bank of Thailand intervened in the currency market Friday and earlier in the week to try to curb the surge, said Nitaya Pibulratanagit, the assistant governor.
"The baht has risen beyond its fundamentals," said Suchada Kirakul, the central bank's senior director for the domestic economy, blaming at least some of the appreciation on speculative inflows from offshore investors.

The South Korean won is near its strongest levels since 1997. The Philippine peso and Indonesian rupiah have strengthened. China's yuan is steadily inching higher, hitting fresh highs nearly every week.
These gains mean that American consumers could pay higher prices on at least some Asian exports just as the holiday shopping season gets into full swing.

Over the past 20 weeks, total money funds and commercial paper have both expanded at a 21% rate. It's as if they are both growth stocks in the nifty fifty category.

In case you believe volatility is dead, take a look at Meritage Homes. From Jan. to mid-July the stock dropped from 71 to 34. From mid-July thru Friday, the stock has risen from 34 to 48. Not for the faint hearted.

Doug Noland: "Considering the liquidity and speculative backdrop, I’d be willing to bet that sinking market yields foster some extraordinary (inflationary) consequences. And it is my view that heightened compensation pressures are today a major Inflationary Bias, nurtured through years of Credit and liquidity excess. Barring financial crisis or some development that restrains Credit expansion or incites de-leveraging, the combination of ballooning corporate liquidity and the worsening skilled labor shortage would appear poised to manifest in continued Income Inflation. All bets are off, however, when the marketplace turns against the Corporate (“Credit arbitrage”) Trade. For now, I’m going to force myself to see it before I believe it. Wall Street and the global leveraged speculating community have become incredibly powerful. I don’t expect they’ll be willing to let go of this pot of gold without a hell of a fight."

Deepcaster: "Regarding "Juiced Numbers," John Williams has created an excellent Newsletter "Shadow Government Statistics" at which is a welcome antidote to Federal Reserve and government data manipulation. In late November, 2006, Shadowstats issued its report of the "real" numbers as opposed to the government ones. Williams found that annual money supply growth, calculated as if M3 had been continued (the Federal Reserve discontinued the calculation and release of M3 figures earlier this year), indicates that the annual money supply growth as of 3/4 of the way through 2006 was approaching 10%. A 10% increase in the money supply signals massive monetary inflation! Coupled with the massive credit inflation of recent years, we are truly in a massively inflating economy.
Of course, the Fed-led Cartel's manipulation of a variety of markets has temporarily masked this hyperinflationary reality and has, coupled with the juiced CPI numbers, created an illusion of deflation. Late in this year of 2006, the United States government's CPI number was just under 2% but (which calculates it the old fashioned way) indicated a 9% CPI rate of inflation.
As well, real numbers show the U.S. GDP contracting by nearly 2% a year rather than the government number of plus 2% per year .
Conclusion: while the Fed-led Cartel has created the illusion of deflation, in fact what we have is stagflation. A declining GDP and massive increases in credit and money supply and OTC derivatives are facts. It is only the "juiced numbers" and manipulated markets which disguise this stagflationary reality, albeit only temporarily.
In Deepcaster's view this explosion of derivatives cannot continue because, inter alia, the amount of derivatives necessary to maintain the Cartel's control of the markets continues to increase. This is similar to the situation in which the volume of drugs which a drug addict has to use has to continually increase to achieve the same "high." And at some point the desired effect cannot be obtained at all."

Bill Bonner: "Mightn’t we some other day - if we live long enough -- pick up a copy of the Random House Dictionary of Financial Terms, published in 2030, and read the following entry: ‘U.S. Dollar...currency used by America, from 1780 to 2025, when hyperinflation rendered it valueless. It was replaced by the gold-backed American Yuan.’"

The VIX closed the week at 11.66, and one year earlier it was 11.01.

On Friday, the closing TICK on the NYSE was quite strong at +1451.

Friday, December 01, 2006

Interesting Points

12/2/06 Interesting Points

An article well worth reading on Palatin:

In addition, we will have this information presented on Palatin:
At the meeting of the European Society of Sexual Medicine Palatin will be represented in two (2) Podium Discussions as follows: 1.REVIEW OF POTENTIAL ROLE OF BREMELANOTIDE
Speaker- Michael A. Perlman of Cornell University Medical School.
Speaker- W.Hellstrom-Professor of Urology-Tulane Medical School -Chief of Andrology(Male infertility and sexual dysfunction).

GM said its first-quarter 2007 production plans are off 9% from a year ago, mainly because of the automaker's move away from rental fleet sales.

February gold closed at $650.60 an ounce Friday. March silver added 7.5 cents to close at $14.19 an ounce. March copper closed at $3.172 a pound.

Ford said it plans to build 620,000 vehicles in the fourth quarter, down 15,000 units from prior forecasts. In the first quarter 2007, Ford plans to produce 750,000 cars and trucks, which the automaker said is consistent with the high end of its prior targets. Ford earlier said first half 2007 production would be down 8% to 12% from a year ago.

Robert Nardelli, chief executive of Home Depot Inc., downplayed speculation Friday that his company was the target of a $100 billion takeover, according to the Atlanta Journal Constitution. Home Depot Inc.said late Friday in a regulatory filing that it has had no discussion about a potential leveraged buyout or recapitalization.

Financial markets expect the Federal Reserve to begin aggressively cutting interest rates in the first half of 2007, according to the federal funds futures market at the Chicago Board of Trade. Following a report that the factory sector contracted in November, the futures market was pricing in 28% odds of a cut to 5% in January and an 80% chance of a cut in March.
The ISM index fell to 49.5% in November from 51.2% in October. This is the first time the index has been below the 50 threshold since April 2003. New orders fell to 48.7% in November from 52.1% in October. Production fell to 48.5% from 51.9%.

Spending on U.S. construction projects dropped by 1.0% in October, as outlays on private residential construction matched a low hit in July 2006, the Commerce Department said Friday. Private residential construction spending fell by 1.9% in October, the latest evidence the U.S. housing market has pulled back sharply. Private construction spending dropped by a sharp 1.5% in October. Spending on private nonresidential construction projects fell by 0.7%. Meanwhile, the homebuilding stocks continue to rally as interest rates on treasuries decline.

Claire's Stores Inc. said Friday it is exploring strategic alternatives, including a possible sale of the company. The company said it hired Goldman Sachs as its financial adviser.

January crude closed at $63.43 a barrel Friday, up 30 cents for the day and up $4.19, or 7.1%, for the week. It recovered from an earlier session low of $62.30.

The commander of coalition forces in northern Iraq said Friday that four Iraqi army divisions in his area will be put under Baghdad's control by next March, just the kind of transfer that a U.S. study commission reportedly is ready to embrace.

Yesterday, Barrons Online ran the following story:
"Private Equity Stalks Oil-field Services." In my view, the best risk
reward can be found with BJ Services. I have written about this company on numerous occasions, and yes, it is up from $29 to Friday's close of $33.87; however, for the year that ends 9/30/07, the company is expected to earn about $3.25 a share or roughly a third higher than earnings in 2006. BJ Services should sell at a much higher multiple than 10+. A fifteen p/e would still be only half of the earnings growth. If there were a buyout, a price of $48 would not be rich, in my view. Take a look at the January 2008 calls. They went out at $3 bid on Friday.

Thursday, November 30, 2006

The Home Stretch

12/1/06 The Home Stretch

PIRA Energy said that OPEC crude exports had fallen by 1.28 million bpd in the four weeks to November 19 and were 1.7 million bpd below their recent peak in mid-October.

U.S. initial weekly jobless claims highest in more than year
The number of U.S. workers applying for jobless benefits climbed by the highest amount in more than a year last week, to 357,000, the Labor Department said Thursday. First-time claims for state unemployment benefits rose by 34,000 to 357,000 for the week ending Nov. 25. The rise in claims is up from a revised 323,000 the prior week, the Labor Department said. The number of workers continuing to collect unemployment benefits jumped by 45,000 during the week ending Nov. 18, to 2.48 million. The four-week average of continuing claims also rose, by 18,750 to 2.45 million.

Real consumer spending in the United States rose 0.4% in October, the Commerce Department reported Thursday. Core inflation rose slightly faster than expected at 0.2%, keeping the year-over-year gain in the core personal consumption expenditure price index at 2.4%. Nominal incomes rose 0.4%, the weakest growth since June, and a tenth lower than expected. However, with prices falling 0.2%, real (inflation-adjusted) after-tax incomes rose 0.6%, the second-best growth in more than a year. Nominal spending increased 0.2 in October.

In early Thursday trading, crude topped $63 a barrel and gold traded at $653 an ounce. Meanwhile, the dollar remained in the toilet-- where it belongs as long as these MO MO's
remain in the Administration.

Business activity in the Chicago region slowed to its lowest level in more than three years in November, according to Chicago purchasing managers index released Thursday. The Chicago purchasing managers index fell to 49.9% in November from 53.5% in October. This is the lowest level since April 2003. The employment index dropped to 49.4% from 57.0%. The prices paid index fell to 60.2% from 62.5% in October. The new orders index fell to 52.0% from 54.1%. Inventories fell to 57.7% from 67.2% in the previous month. The deliveries-diffusion index fell to 43.0% from 54.1%. This is the lowest since March 2001.

The Energy Department said natural-gas inventories fell 32 billion cubic feet for the week ended Nov. 24. Total stocks now stand at 3.417 trillion cubic feet, up 185 billion cubic feet from the year-ago level, and 230 billion cubic feet above the five-year average, the government data said. Meanwhile, prices hit a 2-month high at $9.05 per million cubic feet.

Crude ended the day at $63.13 a barrel, natural gas at $8.84 per million cubic feet, Deceember gold at $646.90 per ounce, December silver at $13.92 an ounce, and December copper at $3.17 a pound. Meanwhile, the U.S. dollar index stumbled down to 82.80.

The poor economic data was the reason for the 10-year government bonds to end the day at a yield of 4.46%, while the 2-year yield declined to 4.62%. The lower interest rates assisted the homebuilding index to continue its climb, and that despite the poor housing numbers.

Many analysts thought that the disappointing November Wal-Mart same-store sales were simply a company specific problem. Obviously, that was not the case. Gap's November same-store sales were down 8%, Abercrombie and Fitch 3%, Dillard's 3%, Ann
Taylor 4.3%, Cato 6%, Sharper Image 27%, Pacific Sunwear 3.8%, Finish Line 3.3%, Gottschalks 0.9%, Pier I 1.3%, and Fred's 2%.
To put the icing on the cake, Wal-Mart projected that December same-store sales would be in a range of flat to up 1%. You can bet this will not be company specific.

Valero is shutting down a coker unit in Pennsylvania for “needed repairs”. The outage will cut gasoline production by 300-450,000 bls and distillate by 250-400,000 bls. "One precursor of a possible more important market peak could be the DJ Utilities Index, which appears to be nearing an important peak from an Elliott point of view. The Utilities are in their final advance after spending eight months within a contracting triangle. Seems as if the 4th wave of (5) is also in a triangle pacing itself for a year end rally. 2 measured moves are just over head where this market could finally peak after a four year advance."

Increased competition from Canada and a dip in new home construction in the U.S. has lumber mill officials in north-central Idaho concerned about possible shutdowns, though so far that step has been avoided. "Prices are not good at all, and we'll have to watch that," said Calvin Hogg, chief financial officer at Three Rivers Timber, which employs about 190 people in Kamiah. "Nobody is very happy where things are." According to the Census Bureau, housing starts dropped from a record high of 2.2 million in February 2005 to 1.48 million last month, reducing the demand for lumber.

Kerkorian sold 14 million shares of GM at $28.75, and that reduces
his ownership to 4.8%. He will be most fortunate to come out of this situation with a small loss. The first loss is the best loss.

With government bonds yielding less than 4.50%, what is the margin of safety in the forecasts for corporate profits in 2007?
If the housing sector is weak, if the auto sector is weak, if manufacturing is weak, if the dollar is weak, then what's strong?-- Prospects for oil service companies, gold and silver companies, and possibly the merger and acquisition business. As the dollar weakens, U.S. companies become cheaper for foreigners to purchase.

India announced that their economic growth had unexpectedly accelerated to 9.2% in the 3rd QTR.

Donald Rumsfeld: "Be precise. A lack of precision is dangerous when the margin of error is small."

Imagine this. “Packard had the highest margin of profit per car in automotive history the year it went out of business."

Wednesday, November 29, 2006

More Government Numbers

11/30/06 More Government Numbers

I do my best to ignore government numbers. For the most part, in my view, a capable person would not be found working in the government sector. As such,
relying on data coming out of this arena is foolish. That includes the Fed and their Beige Book, which stated most areas of the United States reported moderate economic growth through the first weeks of November and labor markets were tight in many regions, especially for high-skilled occupations, the Fed said. At the same time, wage growth remained moderate and most districts reported that prices had moderated for construction materials and energy products. Fed districts reported strong demand for workers in industries, such as, sales, engineering and health care, as well as oil field workers, welders, and truck drivers. Most Fed districts reported that overall housing market activity continued to slow and said they had experienced declining sales of single family homes and rising inventories, the Beige Book said. There were also scattered reports of house price reductions, the Fed said. Several Fed districts said they expect weak housing market conditions to persist for several months. Manufacturing activity was generally positive in most districts, however, with reports of weakness concentrated among producers linked to the housing and automotive industries, the Fed said. Most Fed districts reported increased consumer spending, with the retail sales outlook for the busy winter holiday season "cautiously optimistic," the Beige Book reported.

U.S. GDP expanded at a 2.2 percent annual rate during the third quarter, higher than the 1.6 percent gain first estimated and above Wall Street expectations for a 1.8 percent gain. However, more of the third quarter's output went into inventories than previously believed, while consumer spending was a touch softer. At the same time, After-tax corporate profits during the quarter were far stronger than expected, rising 4.6 percent after a slim 0.3 percent increase in the prior quarter. Economists had been expecting another weak quarterly gain, of 0.4 percent.

Ford said a total of 38,000 employees -- almost half of the automaker's U.S. factory workforce -- had accepted buyout offers to leave the company. The number includes about 30,000 workers who the most recent round of buyout offers that concluded this week and about 8,000 employees who accepted Ford's earlier plant-by-plant buyout offers.The buyouts exceed Ford's goal of cutting 30,000 blue-collar jobs in North America by 2008 and exceeds rival General Motors Corp.'s similar efforts earlier this year, which resulted in 34,400 workers accepting buyout offers.

Pfizer announced cutting 20% of its salesforce or 2200 workers.

Calgary-based TransAlta Corp. will immediately stop mining at its Centralia, Washington, coal mine and switch to coal from the Powder River Basin in Wyoming to fuel the related power plant.The closure will eliminate about 600 mine-related jobs, but the company said the mine was becoming uneconomical to operate and producing electricity from the Centralia coal-fired power plant too costly."In order to produce competitively priced electricity from our Centralia coal-fired plant we have to meet the fuel requirements for our plant from a more predictable an economic source," the company said in a press release.

January crude climbed $1.47 to close at $62.46 a barrel, marking the contract's highest closing level since Nov. 9. The Energy Department reported on Wednesday its first decline in crude supply in five weeks. January natural gas closed up 31.2 cents, or 3.7%, at $8.871 per million British thermal units. It logged its strongest close since Sept. 13 on cold U.S. weather forecasts.

December gold fell $1.80 to close at $635.50 an ounce Wednesday. December silver fell by 5.4 cents to close at $13.566 an ounce and December copper lost 1 cent to end the day at $3.128 a pound.

Total assets in U.S. mutual funds broke the $10 trillion plateau in October.

Online shoppers bought $608 million worth of items Monday, the highest-ever single day total in e-commerce history and slightly topping expectations for what's known as "Cyber Monday", comScore Networks Inc. reports. The tally for this year's Cyber Monday was a 26% increase from last year's Cyber Monday, and above the $600 million comScore had predicted.

Sales of new-homes fell 3.2% in October to a seasonally adjusted annual rate of 1.004 million, the Commerce Department estimated Wednesday. New-home sales are now down 25.4% in the past year. The sales pace in July, August and September was revised lower by a total of 64,000. Median sales prices were up 2% in the past 12 months to $248,500, reversing a trend toward falling prices year-over-year. The number of new homes on the market dropped 0.7% to 558,000, the third straight decline. The inventory represents a 7-month supply at the current sales pace, up from 6.7 months in September.

Dollar General will close 400 stores.

It was not very long ago that I suggested accumulating natural gas at the $5.50 level. I did not expect it to jump close to $9 in such a short time. Locking in profits makes some sense. Some input from ZMANN makes some sense:
"Even with a repeat of the coldest Dec - Mar period on record, trough storage comes out at 1,235 Bcf which is above average. In the event of an average winter from here on out, we arrive at trough storage that is just short of last year’s record."

Fan Gang, a member of People's Bank of China's policy committee: "The US dollar is no longer a stable anchor in the global financial system, nor is it likely to become one, therefore it is time to look for alternatives."

The British pound is trading at a 14-year high versus the dollar.

The Philadelphia Oil Service Sector Index climbed 3 percent, with all 15 of component stocks marking gains. BJ Services climbed 5.5% to $33.76.

An additional view on Tribune:

Talisman Energy Inc. agreed to sell its indirect 1.25% interest in Syncrude to Canadian Oil Sands Trust's operating unit for $475 million. Talisman said the price tag comprises $237.5 million in cash, and 8.19 million Canadian Oil units. Talisman said it has also sold its 2% gross overriding royalty on Suncor Energy Inc.'s undeveloped Lease 23 to Suncor for $107.5 million. Talisman said the sales are part of its process "to realize value from the company's non-core oil sands assets."

Tuesday, November 28, 2006

Value And Patience

11/29/06 Value And Patience

Sales of existing U.S. homes rose 0.5% to a seasonally adjusted annual rate of 6.24 million in October, the first increase since February, the National Association of Realtors reported Tuesday. September's sales were revised higher to 6.21 million from 6.18 million initially reported. Sales are down 11.5% in the past year. Median sales prices fell a record 3.5% year-over-year, the third decline in a row. Inventories of unsold homes increased 1.9% to 3.854 million, representing a 7.4-month supply at the October sales rate. It's the largest months' supply since April 1993.

U.S. consumer confidence weakened in November, the Conference Board said Tuesday. The consumer confidence index fell to 102.9 in November from a revised 105.1 in October. The present situation index fell to 123.6 from 125.1, while the expectations index slipped to 89.2 from 91.9.

Led by falling order for new airplanes, demand for U.S.-made durable goods fell 8.3% in October, erasing September's 8.7% gain, the Commerce Department said. Excluding transportation goods, orders fell 1.7%. It was the biggest drop in orders for durable goods since July 2000. New orders for civilian aircraft plunged 44.5% last month. Orders for core capital goods fell 5.1% in October, the first decline in six months. Based on this weak durable goods report, the 10-year Treasury yield dipped below 4.50% for the first time since Feb.10. The weak data and the falling yields contributed to the dollar declining further against the euro. Meanwhile, December natural-gas futures climbed 32 cents, or 4%, to close at $8.318 per million British thermal units Tuesday, its highest closing level since late October. January natural gas became the lead-month contract and it closed at $8.559, up 20.2 cents, or 2.4%. January crude added 67 cents to close at $60.99 a barrel, its strongest closing level in more than two weeks.

The Federal Reserve may need to raise its overnight interest rate target above 5.25% to keep inflation under control, said Charles Plosser, president of the Philadelphia Federal Reserve Bank, in a speech on Tuesday in Rochester, N.Y. Plosser said it's possible inflation could return to acceptable levels without further hikes, but stressed that the Fed must act to back up its words or it will lose credibility.

Bernanke said the economy is still on track to expand at a moderate pace over the next year without slowing too much.He said the inflation is already "better behaved of late" and should continue to slow gradually.

I would like to spend some more time on the Tribune Company, the owner of 11 daily newspapers--including the LA Times, Baltimore Sun, and the Chicago Tribune-- 25 TV stations, the Cubs, a cable network, a radio station, the Williamsburg Magazine, the Chicago Magazine, and many classified and entertainment sites. The current market values the shares at about $7.5 billion. In addition, there is outstanding debt of $5.3 billion. Lots of rumors have circulated that the bids for the whole company have been low and, at the same time, there have been many bids for parts of the company- the LA Times, the Cubs, the Chicago Tribune, the Baltimore Sun, and the South Florida Sun-Sentinel. In my opinion, there is terrific value in this company, and therefore, I strongly suggest the reader consider taking a position. My best idea is to buy the January 2009 (not a misprint) $20 call at roughly $12.30. This let's you leverage your purchase and yet pay only a tiny premium.
After the close of trading on Tuesday, Tribune Company said it's extending its deadline for deciding whether to sell the company until the first quarter of 2007.Tribune Chairman Dennis FitzSimons says response to a possible sale has been strong and the company extended its timetable to thoroughly consider the proposals.
Chicago-based Tribune had said it would decide whether to sell all or parts of the company by the end of the year.
"We are committed to a complete review process that will yield maximum value for all Tribune shareholders," William A. Osborn, chairman of an independent committee set up to review offers, said in a statement. "We anticipate a final recommendation to the full board during the first quarter of 2007."
Tribune Chairman Dennis FitzSimons said response to the company's proposed sale has been "strong" and the timeline was being extended so the company could thoroughly consider all the proposals.
"This process has generated strong interest from a number of parties," he said in a statement.
Separately, the company said that the FCC has approved the sales of WCWN-TV in Albany and WLVI-TV in Boston. Both transactions are expected to close in December and are part of a performance improvement plan announced earlier this year. To date, the company has sold or agreed to sell approximately $450 million of non-core assets.
In sum, with a little patience, I believe the company's substantial value will accrue to
the shareholders. This is company with first class assets, and they should bring a good return over the present $32 market price.

ServiceMaster Co.,the lawn care and pest control company, said on Tuesday it was considering putting itself up for sale, sending shares up nearly 7 percent.
The company's solid cash flow has attracted the interest of private equity firms in recent weeks, according to industry sources.

Martin Weiss: "A barrel of crude oil -- and virtually every other major source of energy -- is measured in U.S. dollars. So if the value of each dollar declines, the number of dollars per barrel must go up accordingly. For example ...
Approximately one year ago the U.S. Dollar Index was at 92, while crude oil was in the high $50s.
Today, the U.S. Dollar Index is at 83.66, down 9% in value, but crude oil is trading near the same levels as one year ago.
Even assuming no increased oil demand ...
Even assuming no new threats to oil supplies ...
That means the price of crude oil needs to quickly adjust upward by about 9% just to compensate for the dollar's decline. And, as I just explained, that dollar decline has barely begun."

Fourth quarter U.S. GDP growth estimates were reduced to zero from one percent by
Deutsche Bank economists.


11/28/06 Optimism

The UBS/Gallup Index of Investor Optimism jumped 14 points to 93, its highest reading since January, when it also reached 93. The index, which has risen 40 points during the past three months, was 79 in October.

According to data compiled by Private Equity Real Estate, a leading magazine covering the global real estateindustry, private equity real estate funds will raise approximately $55billion in 2006, far surpassing the $37 billion raised in 2005.
Manufacturing activity in Texas continued to expand in November, but several indexes were weaker than lastmonth, according to the Federal Reserve Bank of Dallas' Texas Manufacturing Outlook Survey.The survey's production index was essentially unchanged in November, 8.5 compared with 8.4 in October. Readings above zero denote expansion, while negative levels indicate contraction."The report suggests activity continues to expand overall, but someindustries are doing better than others," said Dallas Fed economist FionaSigalla. "The majority of firms expect increases in production and the volume of new orders and shipments six months from now."The survey found that manufacturers were more optimistic about their companies' operations than the rest of the economy. Sentiment on general business activity, while slightly negative, was unchanged from October.Last year, Texas produced almost 9 percent of the total manufactured goods in the United States. Texas ranks second behind California in factory production and first as an exporter of manufactured products.

A mortar attack ignited a huge fire Monday night at an oil facility in northern Iraq,
shutting the flow of crude oil to a major refinery, and a U.S. Air Force jet with one pilot aboard crashed in Anbar province, a hotbed of the Sunni-Arab insurgency, officials said. Al-Jazeera reported that the pilot was killed.

Worldwide stocks of aluminium fell to their lowest level for nearly four years in October to 2.876 mln tonnes from 2.886 mln in September, according to the International Aluminium Institute (IAI).
The figures exclude stocks from China, Russia or Iran, which do not provide figures to the IAI. Global stocks fell 0.35 pct in October from September and 10.9 pct from October 2005 when they stood at 3.229 mln tonnes, the IAI said.

Gold for December delivery closed at $640.60 an ounce, silver futures at $13.49 an ounce, and copper futures at $3.1875 a pound.

Crude for January delivery closed at $60.32 a barrel. Gasoline futures ended at $1.5937 a gallon, heating oil at $1.7052 a gallon and natural-gas futures at $7.998 per million British thermal units.

Russia is second only to the Saudis in oil exports, and Europe depends on it for a quarter of the crude it consumes. With Russia the world's largest gas exporter and Europe's neighbor, European dependency has grown to the point that the EU now counts on Moscow for nearly half of its gas needs. Russian President Vladimir Putin restated his opposition to giving foreign companies easy access to his country's energy sources, or breaking up oil and gas state monopolies. Klare, author of "Blood and Oil: The Dangers and Consequences of America's Growing Petroleum Dependency," says the world already has entered "a new era, where energy has replaced nuclear weapons as the medium of superpower rivalry."

Paccar Inc. is eliminating one shift each at its Peterbilt Motors Co. plant outside Nashville and its Kenworth Truck Co. plant in Renton, Wash.
Both plants will be left with one daily shift because of an expected downturn in demand due to higher costs associated with meeting new federal emissions regulations, Paccar spokesman Andy Wold said Monday.

Tribune Co. continues to seek a single buyer for all of its properties. At the $32 level, I consider this a low risk arbitrage situation.

Stratos International had a great quarter. The stock jumped to $7.50 in after hours trading. The CEO expects to report news on seeking alternatives (buyout) in "a matter of weeks not months." A takeout at the $9.50 level would not surprise me.

Monday, November 27, 2006

Tis The Season

11/27/06 Tis The Season

According to ShopperTrak RCT Corp., which tracks total sales at more than 45,000 mall-based retail outlets, total sales rose 6 percent to $8.96 billion on Friday, the start of the holiday shopping season, compared to the same day a year ago.

Stephen Roach: "For my money, the risks of the 'global fizzle' are being taken
too lightly." "In conclusion, according to the EIA the world through August 2006 has produced roughly 100 million fewer barrels of crude + condensate than if we had simply maintained the December 2005 production level. This is consistent with the Hubbert/Deffeyes model. It is not consistent with the Yergin/Jackson model. The early data suggest that Deffeyes is correct and that Jackson is wrong, but we can't yet say with certainty who is correct."

According to an Associated Press analysis, during the 1999-2006 price boom, the oil industry drilled an average of 7 percent fewer new wells monthly than in the seven preceding years of low, stable prices.
—The national supply of unrefined oil, including imports, grew an average of only 6 percent during the high-priced years, down from 14 percent during the previous span.
—The gasoline supply expanded by only 10 percent from 1999 to 2006, down from 15 percent in the earlier period.

The National Retail Federation survey predicts consumers plan to spend $24.8
billion on gift cards for presents this year, a 34% increase from last year. In addition,
the survey anticipates an increase of 5% in sales to $457 billion during this holiday

Mike Burk: "Historically the major indices have been up about 80% of the time on the Friday after Thanksgiving, this year they were all down. The weeks following a down Thanksgiving Fridays have been just about evenly mixed...The market is still overbought, but pretty strong technically. For the past 50 years next week has had a positive seasonal bias, but weeks following a down Friday after Thanksgiving have been mixed. I expect the major indices to be higher on Friday December 1 than they were on Friday November 24."

In September, the Fed estimates that, including mortgages, outstanding household debt amounted to $12.3 trillion. That's a not-so-pretty penny.

Matthew Simmons, Chairman of energy investment bank Simmons & Company International: "We are in a rusty industry. We have the world heading to astonishing growth in oil and gas demand. To meet that demand envisages an awful lot of drilling."

Is Palatin working on an alliance with a big drug company?

The Thanksgiving weekend accounts for 9 percent to 10 percent of holiday sales, according to data compiled by the Telsey Group, an independent research firm.

Had the Republicans not been decimated in the mid-term elections, I wonder whether Bush and Cheney would be making as many trips out of the country.

The Daytona Beach News Journal's Mike Joyce: "We all mourn the loss of our uniformed sons and daughters in Iraq. Almost 3,000 have died. Some 22,000 more have been wounded, many in ways that will severely diminish their ability to lead normal lives. We grieve for them.
Neither do we forget the hundreds of U.S. contract personnel who have died. We worry about the mounting costs of the war. The Bush team has borrowed virtually every cent we have spent on it. This burden will be borne by our children, and their children, well into the future. Estimates of the total, including interest, veteran benefits and rebuilding military inventories, vary, but a middle ground is at least $1 trillion dollars. And because each family in the United States already owes $150,000 as its portion of the national debt, it may be even more, for it will surely be a while before we pay off this additional debt load."

John Hussman: "Our emphasis on risk management means that I take a fairly dull view of rallies in overvalued, overbought, overbullish markets. Historically, these advances have little likelihood of being retained over the full cycle, and it's extremely hard to “time” their exit because the overbought/overbullish part invites abrupt reversals."

According to Reuters, Wall-Mart will enter the Indian market through a tie-up with Bharti Enterprises. The joint venture plans to have several hundred stores in the next four to five years.

The Saudi oil minister said there could be an output cut coming out of the next OPEC
meeting on Dec. 14.

The Swift Transportation board of directors rejected the $29 bid from its largest shareholder as inadequate and will work to get the bid improved.