Saturday, February 03, 2007

The Way It Is

2/4/07 The Way It Is

More than a quarter of Americans have skipped or postponed an essential visit to a doctor because it was too expensive, a new MSN-Zogby poll says.
The ranks of the nation's uninsured have grown by 11.2% since 2000, according to a study by the Kaiser Commission on Medicaid and the Uninsured. Tens of millions of Americans lack insurance, and millions more are underinsured, with gaps in their coverage that leave them exposed to catastrophic medical bills.
I believe Kaiser understates the gravity of the situation. They ignore the fact that millions only can afford catastrophic insurance and are unable to pay for regular monthly health insurance premiums. Hence, from a statistical standpoint, they are counted as insured. In a real sense, day to day they are not.

Herbalife Ltd. has received an acquisition offer of $38 a share from Whitney V L.P. and its affiliates. Whitney and its related parties already own roughly 27% of the Los Angeles-based vitamin and nutritional supplement company's outstanding stock.

March crude closed at $59.02 a barrel, up 3%, or $1.72 and had a gain of 6.5% for the week. March natural gas fell 5.4 cents to close Friday at $7.476 per million British thermal units, but it was up 4.4% for the week.

April gold closed at $651.50 an ounce Friday in New York, down 1.7%, or $11.50, for the session, but up 80 cents from last Friday's closing level. March silver fell 35 cents to end $13.375 an ounce, unchanged for the week. March copper dropped 10.75 cents to end at $2.423 a pound, down 8.2% for the week.

The Reserve Bank of India raised its repo rate by 25 basis points to 7.5 per cent. It increased its gross domestic product growth forecast for the year to March 2007 to 8.5-9 per cent, up from 8 per cent.

Doug Noland: "There are now five Service Producing jobs for every one Goods Producing job, up from a ratio of four-to-one ten years ago...a good percentage of the seven million “services” jobs added over the past five years owe much of their existence to rampant Credit and asset inflation. They’re (seductively and dangerously) Bubble Manifestations similar to the tech employment boom that proved so susceptible and disruptive. And, clearly, accelerating Income Growth is at this point very much a Credit Bubble phenomenon. For now, these dynamics ensure extraordinary uncertainty. Yet we should expect the eventual bursting of this Bubble to initiate job and Income losses that will make post-tech Bubble dislocations look inconsequential by comparison."

Wal-Mart recorded a same-store sales gain of 2.2% for January.

Mexicans working abroad sent home a record $25 billion last year, most of it from the United States, according to a study released Friday. The estimated figure represents a 25 percent increase over 2005 and a nearly 80 percent surge since 2003, the Inter-American Development Bank, or IDB, said in its report.

Pickering, president of Houston-based Pickering Energy Partners, said any leveraged buyout of Nabors is "possible, but not likely." Swings in oil and gas prices may hurt profit for drillers such as Nabors, making them risky investments for private equity groups, Pickering said.

Utility E.On AG said Friday it raised its offer for Spain's Endesa SA to $53.4 billion as it delivered its final bid in a more than year-long takeover saga. Duesseldorf-based E.On had previously offered 36.5 billion euros ($47.5 billion). It was left alone in the race for Endesa, Spain's biggest electricity company, after Spanish rival Gas Natural SA withdrew its bid on Thursday.

The foreign companies that partner Venezuelan state oil firm PDVSA in Orinoco upgrade projects have until May 1 to adapt their structures to new joint ventures in which PDVSA is to have at least 60%, President Hugo Chavez said.

when President Bush proposes a new nearly $3-trillion federal budget next week, he also will be seeking another $245 billion for the wars in Iraq and Afghanistan.
That includes $99.6 billion in additional war-spending for the remainder of the 2007 budget year, which closes at the end of September, plus another $145.2 billion in supplemental war spending for the 2008 budget year, according to a senior administration official. Not worry. Iraq will repay us in oil!!!

Some Iranian officials earlier said that the Islamic Republic would install 3000 centrifuges concurrent with nuclear celebrations in the Decade of Fajr (also known as the Ten-Day Dawn festivals beginning from February 1 to 11, marking the victory of the Islamic Revolution in Iran back in 1979).
The source who asked to remain anonymous told FNA that Iran does not intend to officially announce the start of the installation of the 3000 centrifuges.
Diplomatic sources announced in Vienna on Friday that Iran has started installation of 3000 centrifuges in Natanz nuclear facility.

Chief Red Cloud: "We were told that they wished merely to pass through our country. . . to seek for gold in the far west . . . Yet before the ashes of the council are cold, the Great Father is building his forts among us. . . . His presence here is . . . an insult to the spirits of our ancestors. Are we then to give up their sacred graves to be allowed for corn?"

Abraham Lincoln: "The best way to destroy an enemy is to make him a friend."

Friday, February 02, 2007


2/3/07 Toast

November and December payrolls were revised up by a combined 81,000. Employers in the U.S. added a smaller- than-forecast 111,000 workers to payrolls in January, and the unemployment rate rose to 4.6%. Workers' average hourly earnings rose 3 cents, or 0.2 percent, after increasing 0.4 percent the previous month. Average weekly hours worked by production workers fell to 33.8 from 33.9. Average weekly earnings fell to $577.64 last month from $578.33 in December.The Labor Department officially revised the payroll numbers after reviewing more complete tax data not available earlier from state unemployment insurance programs and making adjustments to its estimates of seasonal hiring patterns.The revision added 754,000 jobs to the previously estimate for the year ended March 2006, the biggest revision since Labor started adjusting the numbers in 1991.
It is because of the on-going revisions that I ceased spending a good deal of time on these payroll numbers. Like all government numbers, they are a moving target.

Talking about moving targets, Patrick Fitzgerald has Cheney and Libby firmly in his sights. It is just a matter of time until they are labeled toast. Then it's on to Bush. He will have to explain how he put the matter about Niger and uranium into his State of the Union message after the intel from Wilson and Tenet and then pressured Tenet to provide a different read on the matter. Bush will soon be toast.

Equity Office Properties Trust, the target of the largest real estate takeover, rejected a $41 billion offer from Vornado Realty Trust, saying a $38.3 billion bid by Blackstone Group LP is less risky for shareholders. Equity Office also said a vote on Blackstone's offer will probably take place Feb. 7, two days later than planned, to give shareholders time to review new information about the bid.

Blackstone Group LP, Kohlberg Kravis Roberts & Co. and CVC Capital Partners Ltd. said they're considering an offer for U.K. supermarket company J Sainsbury Plc in what would be Europe's biggest leveraged buyout.

American Axle & Manufacturing Holdings Inc., which makes car and truck components, said Friday it expects its customers' production volumes for North American light trucks to fall 2 percent in 2007.

Russia and Iran are in talks on creating a natural gas organization that could shift the alignment of the energy markets, the Wall Street Journal reported Friday. The cartel would be similar to the structure of the Organization of Petroleum Exporting Countries, but Russian President Vladimir Putin has downplayed talks of setting prices like OPEC, the Journal said.

Richard Iley, an economist at BNP Paribas, said: “The ISM manufacturing index was weaker than expected and dovetails with our assessment that the manufacturing sector is really very weak and on the brink of recession.”

Nouriel Roubini: "Today the conventional wisdom is that the yen carry trades will continue as long as the BoJ keeps rates at 0.25% or raises them slowly over the next few months; this conventional wisdom also argues that as long as macro news remain weak in Japan expectations of BoJ policy will not change much and the yen will remain weak. But the lesson of 1998 is that unchanged macro outlook and unchanged BoJ policies may still trigger a rapid unraveling of yen carry trade if some minor yen supportive news occurs. When everyone is short on yen and doing the carry trade they are looking for some extraneous piece of news that becomes a focal point for covering such shorts. Then, any relevant news can become such focal point. And once can think of plenty of news of surprises that would lead investors en masse to start covering their yen shorts today. So, could what happened in 1998 happen again today? "

The two main Nigerian oil workers' unions on Thursday threatened a strike next week to protest against rising violence in the country's petroleum-producing southern region.

Apache will reduce its 2007 exploration and development spending in North America by $600 million, with further cuts possible if costs don't keep pace with falling gas prices, Chief Executive G. Steven Farris said Thursday.

In an interview with Bloomberg, Matthew Simmons stated that global oil supply has peaked and believes the likelihood oil prices could reach as much as $300 a barrel.

OPEC, producer of 40 percent of the world's oil, began a 500,000 barrel-a-day reduction Feb.1. OPEC supplied 385,000 barrels a day more than its targets in December, according to Bloomberg News estimates. Heating demand in the U.S. Northeast will be 28 percent above normal through Feb. 8, Belton, Missouri-based forecaster Weather Derivatives said.

The Reuters/University of Michigan Surveys of Consumers said the final January reading on the consumer sentiment index rose to 96.9 from 91.7 at the end of December. The final January reading was the highest since December 2004.

Orders for U.S.-made factory goods rose by 2.4% in December, as orders for metals and machinery offset a big drop in demand for defense capital goods, the Commerce Department reported Friday. Excluding defense goods, factory orders rose by 3.1% in December, according to the report. Taking out transportation, orders climbed by 2.2%.

The Helmerich and Payne EPS estimates for 2007 and 2008 have been raised from $3.63 to $3.80 and from $4.39 to $4.47, respectively.

Dustin Cox: "The national debt is nearly $9 trillion today. That means that every single American citizen owes more than $30,000 to pay off our debt. Now, while the lower 98 percent of the American citizenry are receiving our "tax breaks" of around $300 apiece, we should ask ourselves whether the wonderful effects of Bush's tax cuts offset the additional $15,000 each and every one of us owes thanks to George W. Bush. For the overwhelming majority of us, they don't."

Standard Pacific Corp reported a fourth-quarter loss but provided a 2007 profit outlook above analysts' consensus estimates. Meanwhile, Brookfield Homes Corp.'s posted a lower-than-expected quarterly profit decline.

Tim Adams has served as undersecretary for international affairs since 2005, where he has helped lead efforts to get China to loosen the peg between its yuan currency and the dollar. In a letter to Bush, Adams said the demands of the job are "simply incompatible" with his family responsibilities. Another smart decision to leave a sinking ship.

According to Vickers, the sell-to-buy ratio for all insider transactions over the last six months stands at about 13 to 1, far in excess of the long-term average of 2.5 to 1.

Michael Kahn: "Technically, breakouts in Treasury yields coupled with the background condition of a continuing bull market in commodities make the likelihood that the multidecade decline in interest rates is long over, and the new path of least resistance is up. For investors, there is no incentive to own any credit-market securities other than those with the very shortest of maturities."

Barron's points out that, in 2007, Wyeth is expected to receive Food and Drug Administration approval for several new drugs, including Pristiq for depression, Vivant for osteoporosis, and bifeprunox for schizophrenia.

An extra week in the quarter gave a boost to revenue at Gannett's 90 newspapers and helped overcome a shift in advertising to the Internet. Ad sales at USA Today, the largest newspaper by circulation in the U.S., rose 13 percent. Midterm elections held on Nov. 7 in the U.S. helped drive a 30 percent jump in revenue at the company's 23 television networks.

Although Chinese steel mills have agreed with the world's main iron ore suppliers on a 9.6 percent price rise for 2007, which is much lower than the 19 percent increase last year and the 71.5 percent hike in 2005, the ultimate price they pay could largely depend on international dry-bulk shipping rates.
"Dry-bulk shipping rates are expected to stay high this year and the average rate could possibly be higher than last year," said Yu Jun, a transportation analyst with CITIC Securities.
The possible rise is a result of the slow growth of the dry-bulk fleet and strong iron ore demand.
"The global fleet expansion in recent years has concentrated on supertankers and container ships. Shipbuilders also prefer to use the limited space in shipyards to build more expensive vessels rather than dry-bulk carriers," said Li Lei, an analyst with China Securities.

Speculation returned to Nabors Industries on Friday. The stock rallied over $1 and traded above $31 and over 14,000 February call options with a strike price of $32.50 changed hands.

The number of rigs drilling for oil and natural gas in North America rose by 11, or 0.5%, to 2,374, according to a weekly update by Baker Hughes Inc. on Friday. The number of active oil rigs rose by 9 to 264, while the number of gas rigs increased by 6 to 1,446. The U.S. rig count rose by 15 to 1,714, while the Canadian rig count decreased by 4 to 660. The offshore rig count fell by two to 81.

The Wall Street Journal reported that a metals- trading hedge fund lost 20 percent in January. This could have been a reason for the weakness in zinc, copper, silver, and gold on Friday.

Thomas Paine: “It has been the political career of this man to begin with hypocrisy, proceed with arrogance, and finish with contempt." Those words could be fitting today.

Thursday, February 01, 2007


2/2/07 Results

Helmerich and Payne reported operating income of $146,654,000 for the first quarter of fiscal 2007, which represents an increase of over 80% as compared to operating income of $80,904,000 for the first quarter of fiscal 2006, and a sequential quarterly increase of over 20% as compared to operating income of $121,994,000 for the quarter ended September 30, 2006. The most recent quarter-to-quarter growth in operating income was mostly a result of increased activity in the Company's U.S. land operations and increased margins in its international operations. Segment operating income in the Company's U.S. land operations increased for the 11th consecutive quarter to $118,408,000 for the first quarter of fiscal 2007, from $70,991,000 for the same period last year and from $103,679,000 for last year's fourth fiscal quarter. The average rig margin per day was up slightly compared to the previous quarter as a result of a lower average rig expense per day. Total activity days in U.S. land operations during the quarter increased to 10,548, compared with 8,035 activity days during the same period last year and 9,577 activity days during the fourth quarter of fiscal 2006. Additional rig activity days associated with the Company's new FlexRig®* construction program are estimated to continue at 900 to 1,100 per quarter during this fiscal year as three to four rigs per month are completed and sent to the field. Company President and C.E.O., Hans Helmerich commented, "We continue to experience strong demand for the H&P brand, which is based on delivering savings to our customers through high efficiency rigs and an organization focused on safety and field execution. Although the U.S. land market has recently experienced a softening in dayrates and lower utilization rates, we expect our customers' strong preference for FlexRigs to sustain better margins and utilization rates for our fleet as compared to our competition. Whereas much of the industry's new builds and rig refurbishments will actually go to replace aging and less capable equipment, our current new build program drives an 80% expansion to our fleet. The incremental number of fully contracted new FlexRigs that we are scheduled to deliver this year will significantly contribute to earnings going forward." The company has a rig fleet that currently includes 127 U.S. land rigs, nine U.S. platform rigs located in the Gulf of Mexico and 27 international land rigs. In addition, the Company expects to complete another 35 new H&P-designed and operated FlexRigs during calendar 2007, expanding its total number of FlexRigs to 123 and its total number of U.S. land rigs to 162.

The monthly purchasing manager's index, or PMI, improved nearly two points to 54.2 last month from 52.3 in December.

Exxon Mobil Corp. reported a slight decline in fourth-quarter earnings Thursday due to lower natural gas prices and shrinking profits from gasoline sales.

Eurozone economies started the year on sharply diverging paths, with Germany's industrial recovery powering ahead, but French and Italian manufacturing sectors seeing marked slowdowns, a closely-watched survey showed.
Manufacturing growth in the 13-country region fell more than expected to the lowest for almost a year, according to the purchasing managers' index for the sector, which dropped from 56.5 in December to 55.5 last month.

Dell said CEO Kevin Rollins resigned and that Michael Dell would take over as head of the PC company he founded. Dell also said it expects to miss earnings and revenue estimates for this quarter.

Insurance broker Marsh & McLennan Companies Inc. said on Thursday that it would sell its troubled money manager, Putnam Investments, to a unit of Canada's Power Financial Corp. for $3.9 billion.

Personal income increased $60.6 billion, or 0.5 percent, and disposable personal income (DPI)
increased $50.8 billion, or 0.5 percent, in December, according to the Bureau of Economic Analysis.
Personal consumption expenditures (PCE) increased $67.1 billion, or 0.7 percent. In November,
personal income increased $32.4 billion, or 0.3 percent, DPI increased $25.4 billion, or 0.3 percent,
and PCE increased $51.1 billion, or 0.5 percent, based on revised estimates. In sum, the personal savings rate was -1.2%.
The 2006 figure was lower than a negative 0.4 percent in 2005 and was the poorest showing since a negative 1.5 percent savings rate in 1933 during the Great Depression.

Robert Scheer: " Can there be any more egregious example of betraying the oath of office of the president to uphold the Constitution than his deceiving Congress from the very well of the House on the reasons for going to war? The Constitution clearly delegates to Congress, and not to the president, the exclusive power to declare war, and deceiving our representatives in making the case for war is a far more important crime than the perjury charge against Libby."

Christie's International, the world's biggest auction house, is in Dubai ``for the long-term'' and is betting that it will develop into a $250 million market faster than the 20 years it took Hong Kong, according to Jussi Pylkkanen, president of Christie's Europe.

Profit margins reached a record in 2006 after rising in 18 straight quarters. That helped propel a four-year bull market and sent the Standard & Poor's 500 Index to a six-year high. Now, almost half of the S&P 500 companies to report fourth- quarter earnings have said margins shrank or were unchanged.

From "Oil production in North America peaked in 1973 and has been declining slowly ever since. Although onshore oil output is rapidly diminishing, this is partly offset by growing production from the Gulf of Mexico and from offshore eastern Canada. However offshore output increases are expected to cease by 2013."

Factory activity in the United States contracted in January, the Institute for Supply Management reported Thursday. The ISM index fell to 49.3% in January from 51.4% in December. New orders fell to 50.3% in January from 51.9% in December. The employment index inched higher to 49.5% from 49.4%. The price index rose to 53.0% from 47.5%.

The Energy Department said natural-gas inventories fell 186 billion cubic feet for the week ended Jan. 26. Total stocks now stand at 2.571 trillion cubic feet, up 152 billion cubic feet from the year-ago level, and 454 billion cubic feet above the five-year average, the government data said.

Pending sales of existing U.S. homes advanced a stronger-than-expected 4.9 percent in December, the biggest monthly gain since 2004, a real estate agents' trade association said on Thursday in a report showing some stability in the housing market. The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in December, rose to 112.4 from an upwardly revised level of 107.2 in November. The monthly gain was the biggest since a 6.9 percent advance in the index logged in March 2004. But, for all of 2006, pending sales were down 4.4 percent from 2005.

Between the end of August and the end of November Russia, according to the I.M.F., increased its ‘Official’ holdings of gold by 9.2 tonnes.

Frequently, over the last year, I have written about the rapid decline of oil production at Mexico's Cantarell field. At this time, it might be prudent to keep an eye on Saudi Arabia's Ghawar field, the largest in the world. It accounts for 30% of Saudi Arabia's oil reserves.
Most new oilfields produce almost pure oil or oil mixed with natural gas--with little water. The Saudis inject large quantities of water into the reservoir in order to keep up the pressure for the oil to flow. An increasing amount of sea water is being pumped into the reservoir, and that is beginning to approach a water cut of roughly 35%. This should serve as a danger sign. The Saudis will say everything is fine with this field. I would recommend taking their statements with gallons of water.

March crude fell 84 cents to close at $57.30 a barrel Thursday. March natural gas lost 13.7 cents to end at $7.53 per million.

General Motors posted a 16.4% decline in January U.S. sales to 247,464 vehicles, due mainly to its move away from lower-margin rental fleet sales. GM also cut its production outlook to 1.08 million vehicles in the first quarter, down 3.6% from last month's guidance. Ford Motor Co posted an 18.9% plunge in January U.S. sales to 166,835 cars and trucks, down from 205,671 a year ago due in large part to the move away from fleet sales.
February gold climbed $5.40 to close at $657.40 an ounce. March silver added 1.1%, or 15.5 cents, to finish at $13.725 an ounce, but March copper fell by 6.4 cents to end at $2.5305 a pound.

Wednesday, January 31, 2007

Battle Lines

2/1/07 Battle Lines

Tata Steel of India won the battle to control Anglo-Dutch steelmaker Corus with a £6.2bn ($12.2bn) offer on Wednesday, after more than eight hours of head-to-head bidding against Companhia Siderúrgica Nacional of Brazil.

Total compensation costs for civilian workers increased 0.8 percent from September to December 2006, seasonally adjusted, moderating from the 1.0 percent gain from June to September, the Bureau of Labor Statistics of the U.S. Department of Labor reported. Wages and salaries increased 0.8 percent between September and December, compared with the 0.9 percent gain of the previous quarter. Benefit costs during the quarter rose 1.1 percent, unchanged from the gain of the previous quarter. For state and local government workers, compensation costs increased 1.0 percent from September to December, after increasing 1.4 percent for the quarter ended in September.

The Chicago Purchasing Managers Index fell to 48.8 in January from 51.6 in December, suggesting a contraction in the regional manufacturing sector. Among the components of the index, the prices paid index fell to 54.9 from 56.9 in December. New orders slumped to 46.3 from 56.3. The employment index fell to 42.8 from 48.2.

Spending on private residential construction projects fell for the ninth consecutive month in December, pushing total construction outlays down by 0.4%, the Commerce Department reported Wednesday. Compared with December 2005, outlays in December 2006 were down 1.4%. In December, spending on private projects fell 0.8%. Private housing outlays fell 1.6%. Private nonresidential outlays rose 0.9%. Public construction outlays rose 0.6%.

ElkCorp said Wednesday that Carlyle Group won't revise its takeover offer above the $43.50-a-share bid by Building Materials Corp of America.

The U.S. economy surged ahead at a greater-than-expected 3.5% annual growth rate in the fourth quarter, the Commerce Department estimated Wednesday. Consumer prices fell 0.8% annualized in the quarter, the first quarterly decline in 45 years. The core personal consumption expenditure price index, which excludes food and energy prices, rose 2.1%, slightly above the Federal Reserve's 1% to 2% comfort zone.

Nouriel Roubini: "
Clearly the strongest driver of the rebound of growth in Q4 was private consumption that rose at an annualized rate of 4.4%; given that consumption is about 70% of GDP consumption contributed 3.05% to the Q4 growth of 3.5%. Net exports were also another significant contributor to Q4 growth; with export growth accelerating to 10% and imports falling 3.2% the contribution of net exports to growth was 1.64%. The third component that contributed to growth was government spending that grew at a 3.7% (mostly driven by the whopping 11.9% increase in defense spending) and that contributed 0.7% to Q4 growth."

Altria's distribution of about 89 percent of Kraft's shares will be made on March 30 to shareholders of record as of March 16, the company said in a statement.Altria will distribute about 0.7 of a share of Kraft for every one share of Altria. Fractional amounts will be paid in cash. The exact ratio will be determined on the record date.

The American Petroleum Institute reported a rise of 5.7 million barrels in crude supplies for the week ended Jan. 26. The Energy Department had reported a rise of 2.7 million barrels. Motor gasoline supplies were up 1.3 million barrels, the API said, vs. the government's reported rise of 3.8 million. Distillate supplies fell 1 million barrels, the API said, compared to the government's 2.6 million-barrel decline.

"Obesity is increasing at an alarming rate and is a primary factorbehind the growing prevalence of type 2 diabetes, cardiovascular disease, and certain cancers," said Dr. Trevor Hallam, Executive Vice President, Research and Development of Palatin. "We have made considerable progress with the pre- clinical development of our melanocortin receptor-based programmes, especially in the obesity area and we are quite excited to take this programme to the next level with a world-class organisation like AstraZeneca." "This collaboration with AstraZeneca points to the progress we have made with our melanocortin receptor obesity programme and the potential of melanocortin receptors as targets for obesity. It recognises the value Palatin has built and provides the necessary resources to advance the programme. AstraZeneca has a longstanding record of achievement in drug development and commercialisation and their global leadership in relevant therapeutic areas makes them the ideal party to maximise the potential ofour obesity programme," stated Carl Spana, Ph.D., Palatin's President & Chief Executive Officer. "This collaboration highlights the potential ofour internal research and development capabilities."

The Chinese stock market is developing into a "bubble" and investors may be behaving irrationally, a leading
Chinese legislator told the Financial Times.
Cheng Siwei, vice-chairman of the National People's Congress, warned the mainland
stock market could be overheating, after a rise of 130 pct last year.
"There is a bubble going on. Investors should be concerned about the
risks," Cheng said in an interview with the Financial Times.

US Air withdraws bid for Delta Air.

Dr. Kurt Richebacher: "
Private households in the United States have embarked on their greatest borrowing binge of all time, fostered and facilitated by the rampant house price inflation and a most aggressive financial system. What has been developing in the balance sheets of private households, therefore, is a race between booming "wealth creation" through rising house prices and soaring indebtedness. It appears that indebtedness will
win this race and wealth creation will lose."

February gold climbed $7.80 to close at a two-month high of $652 an ounce in New York.
Additionally, under an accord known as the Washington Agreement, European central banks agreed to limit sales to 500 tons a year. The banks are falling behind schedule with weekly sales, said Dennis Gartman, trader, economist and editor of Suffolk, Virginia-based Gartman Letter.``Some enormous selling lies ahead, or, more plausibly, the banks have sold what they want and are reducing their efforts,'' Gartman said. ``The latter is enormously positive for gold.''
Ford Motor Co. said its U.S. sales of cars and trucks fell about 20 percent this month from a year
earlier, mostly because of a planned reduction in purchases by
rental-car companies.

Former Time magazine reporter Matthew
Cooper testified today that top presidential aide Karl Rove was
the first person to tell him that an Iraq war critic's wife was a
CIA agent. Cooper, testifying in Lewis ``Scooter'' Libby's perjury
trial, also contradicted Libby's account of a conversation the
two had the following day, on July 12, 2003, about war critic
Joseph Wilson's wife, Valerie Plame.

First-time applications for
state unemployment benefits fell by 20,000 to a seasonally adjusted,
two-week low of 307,000 in the week ending Jan. 27, the Labor
Department reported Thursday. The four-week average of initial claims,
considered a better gauge of underlying labor market strength because
it smoothes out often-volatile data, dropped by 4,500 to 304,750, an
11-month low. The number of people collecting unemployment checks rose
by 71,000 to a seasonally adjusted 2.55 million in the week ending Jan.
20. It's a two-week high. The four-week average of continuing claims
rose by 30,500 to 2.48 million, the highest since Dec. 23.

energy prices dragged down growth in real consumer spending and real
disposable incomes in December, the Commerce Department reported
Thursday. Core inflation, meanwhile, rose an unexpectedly low 0.1%, the
second straight month of relatively stable prices excluding food and
energy. Headline inflation rose 0.4% in December, backed by a 0.9% gain
in prices of nondurable goods, such as energy goods. Real, or
inflation-adjusted, consumer spending rose 0.3%. Real disposable
incomes rose 0.2%, the weakest growth since May.

Vornado Realty Trust raised its bid for office manager Equity Office Properties Trust to $56 a share.

Dutch Shell cut its 2007 oil and gas production forecast to a range of
3.3 million to 3.5 million barrels of oil equivalent a day. Shell had
previously predicted 2007 production between 3.5 million and 3.6
million barrels of oil a day.

Trusts has extended the deadline on an offer for Tribune Co. that had
been scheduled to expire Wednesday, according to a media report. The
Associated Press, citing a person close to the Chandler family,
reported that the extension allows Tribune's board more time to
consider the highest-valued bid for its assets.

Inc. late Wednesday reported fourth-quarter profit nearly tripled,
while sales rose 67%, as the No. 1 Internet search engine captured a
greater share of online ad spending. For the period ended Dec. 31,
Google said net income surged to $1.03 billion, or $3.29 a share, from
$372 million, or $1.22, a year earlier.

March crude closed at $58.14 a barrel, up $1.17 for the session, but
down 6.8% for the month of January. The Energy Department reported the
first fall in distillate supplies in seven week, but also said crude
supplies rose a third week. March natural gas fell 7.3 cents to close
at $7.667 per million British thermal units, though the recent
colder-than-normal temperatures in parts of the U.S. helped the
contract gain 17.9% for the month.

Tuesday, January 30, 2007


1/31/07 Research

I am providing a link for an update on the production, usage, and storage of natural gas. It is an excellent piece of research done by Bentek Energy. I urge the readers to spend some time on this data. Here is the link: http//

The Conference Board said Tuesday that the consumer confidence index rose to 110.3 in January from a revised 110.0 in December. It's the highest since May 2002. Consumers were more upbeat about the present situation, primarily because of a more favorable job market, said Lynn Franco, head of the consumer research center at the organization. Attitudes about the future declined. "All in all, the index suggests a moderate improvement in the pace of growth in early 2007," Franco said.

China's proven crude reserves dropped 12.33% last year to 2.19 billion tonnes from a year earlier while natural gas reserves surged more than 50% to 2.27 trillion cubic metres, far higher than the 1.15% average increase of world reserves, the National Development and Reform Commission (NDRC) said.
China is the only country that posted a significant dip in crude reserves while Kazakhstan in Central Asia and the African country Angola recorded soaring increases of almost 50%, according to the NDRC report.

On Sunday, Gholamhossein Nozari, head of the state-owned National Iranian Oil Company, told Iran's student news agency ISNA that Iran had signed an initial deal worth $10bn (£5bn) with Repsol and Shell to produce liquefied natural gas from the South Pars field.
The Shell spokeswoman said the upstream side of the project would be developed under a buyback agreement. Shell and Repsol would build the production facilities, which would be owned and operated by an Iranian company. Shell and Repsol would be paid back their costs plus a pre-agreed profit.

More than half the Americans, or 58 percent, say they wish the Bush presidency to be simply over, a sentiment that is almost unanimous among Democrats (86 percent), according to a latest Newsweek poll.

Standard & Poor's on Tuesday raised India's sovereign credit rating to investment grade, citing the country's strong economic outlook, its rising foreign exchange reserves and the improved regulation of its stock and bond markets.

From DailyReckoning: Al-Jazeera reports that Turkey's parliament is giving serious thought to sending troops to occupy Kurdish northern Iraq "for security purposes" — an act that could set off a free-for-all in the Middle East.
Onur Oymen, the deputy chairman of the Opposition Republican People?s Party (CHP), said: "Northern Iraq is the only place in the world where a terrorist group can operate without being pursued."
"If the Iraqis and the US are not prepared to take action over this, then we must."

February gold climbed $1 to close at $644.20 an ounce Tuesday. March silver gained 12.5 cents to close at $13.375 an ounce and March copper rose 1.95 cents to end at $2.5615 a pound.

March natural gas climbed 11.6%, or 80.3 cents, to close Tuesday at $7.74 per million British thermal units. March crude rose 5.5%, or $2.96, to close at $56.97 a barrel.

AstraZeneca and Palatin Technologies announced an exclusive global licensing and research collaboration agreement to discover, develop and commercialise small molecule compounds that target melanocortin receptors.
The collaboration is based on Palatin's melanocortin receptor Obesity programme and includes access to compound libraries, core technologies and expertise in melanocortin receptor drug discovery and development. A near- term objective of the collaboration is to finalise selection of a lead drug candidate for clinical evaluation. Data accumulated from genetic, pharmacological and physiological studies identify the central melanocortin system as a key regulator of energy homeostasis. This offers significant potential for the development of novel treatments for obesity, diabetes and metabolic syndrome.
Under the terms of the agreement, Palatin will receive an upfront payment of $10 million from AstraZeneca and is eligible for milestone payments totalling $300 million, with up to $180 million contingent upon development and regulatory milestones and the balance on achievement of sales targets, together with the payment of stepped royalties on product sales to double digit rates, dependent on sales achieved. AstraZeneca will assume responsibility for product commercialisation, product discovery and development costs, with both companies contributing scientific expertise in the research collaboration.

Monday, January 29, 2007


1/30/07 Warning

Conditions in global financial markets look potentially "unstable", suggesting investors need to prepare for a "repricing" of some assets, Jean-Claude Trichet, president of the European Central Bank, said over the weekend in Davos. The recent explosion of structured financial products and derivatives had made it more difficult for regulators and investors to judge current risks in the financial system, Mr Trichet said. "We are currently seeing elements in global financial markets which are not necessarily stable," Mr Trichet said, pointing to the "low level of rates, spreads and risk premiums" as factors that could trigger a repricing.

Robert Bryce: "Iraq's oil output has plummeted since Bush and the neocons rushed to invade the country in March 2003. But that falling output has been offset, at least partially, by higher prices. And given that Iraq will ­ for good or ill ­ be America's colonial possession in the Persian Gulf for the foreseeable future, higher oil prices are far better than lower prices."

Mexico's average daily production in December was the lowest since November 2000, and well below the 3.39 million barrels a day produced in December 2005. It was also the first time in six years that average daily production has fallen below 3 million barrels daily...After reaching a record 3.38 million barrels a day in 2004, Pemex crude production has been steadily slipping because of decline in heavy crude at its giant Cantarell oilfield...
With output at Cantarell expected to fall by an average of 14 percent a year between now and 2015, Pemex is hoping to replace that production with oil from other projects, including the offshore Ku-Maloob-Zaap and the onshore Chicontepec basin.

China's railway transportation volume accounted for a quarter of the world's total, though the country has only six per cent of global operational railway mileage, the Ministry of Railways has claimed.
China beat all other countries in passenger and cargo traffic last year, with its passenger turnover hitting 662.2 billion person-kilometres and freight turnover reaching 2.87 billion tonne-kilometres, Railway spokesperson Wang Yongping said. The general railway turnover also topped the world with a total of 2.86 trillion tonne-kilometres, 130 billion ton-kilometres more than that of the United States and one and a half times that of Russia.
Meanwhile, the country has only 76,600 kilometres of railways in operation, making the density of its railway transportation the largest in the world.

India has for the first time emerged as the 10th largest trading partner of China in 2006, according to latest Chinese foreign trade statistics.
While the European Union retained the status of China's top trading partner, bilateral trade between China and India hit an all-time record at $24.9 billion last year, exceeding the $20-billion goal two years ahead of target.
Detailed figures are yet to be released. China's total bilateral trade with the EU rose 25.3 per cent to hit $272.3 billion.

China's trade surplus with the European Union soared to 91.66 billion dollars at the end of last year, up 31 per cent from 2005, the commerce ministry said on Sunday.

Senate Intelligence Committee Chairman Jay Rockefeller said he may subpoena Bush administration documents on its controversial domestic surveillance program.

Two U.S. soldiers were killed when their helicopter crashed north of the Shi'ite holy city of Najaf on Sunday, the U.S. military said.

Iraq's deputy prime minister on Sunday said Iran and the United States were using Iraq as a "zone of conflict and competition" and jeopardizing efforts to stabilize the country.

An unsourced report in a French publication said drug titan Sanofi-Aventis -- with whom it sells the blockbuster blood-clot drug Plavix and blood pressure treatment Avapro -- could announce a merger deal with Bristol-Myers within the next few weeks.

Merrill Lynch & Co. Inc. said on Monday it will buy First Republic Bank for $1.8 billion. Merrill Lynch's cash-and-stock offer of $55 a share represents a 44-percent premium over First Republic's closing price on Friday.

Abitibi-Consolidated Inc. and Bowater Inc. announced that they have entered into a definitive agreement to combine in an all-stock merger of equals. The companies stated that the combination will create an operationally and financially stronger company better able to meet changing customer needs, compete more effectively in an increasingly global market, adapt to lower demand for newsprint in North America, and deliver increased value to shareholders. The combined company, which will be called AbitibiBowater Inc., will be the third-largest North American paper company and the eighth largest in the world, they said. It will have pro forma annual revenues of approximately US$7.9 billion or C$9.3 billion, Abitibi and Bowater said.

Kentucky Derby winner Barbaro was euthanized Monday after complications from his breakdown at the Preakness last May. "We just reached a point where it was going to be difficult for him to go on without pain," co-owner Roy Jackson said. "It was the right decision, it was the right thing to do. We said all along if there was a situation where it would become more difficult for him then it would be time."

John Hussman: "A few weeks ago, I noted that historically, we've observed relatively few instances when the S&P 500 traded at a 4-year high, at over 18 times record earnings, with advisory bullishness over 53% and with Treasury bills rising above their level of 6 months earlier. (In addition to the instances noted before, these conditions were also approximately met in December 1961, just prior to a sharp market decline in early 1962).
Of the many abrupt market declines we've observed since 1960, say, where the market dropped by 10% over a period of several weeks, only about half of those instances were preceded by the above conditions. But the outcomes have been unanimously unfavorable when these conditions have been observed...Bayes' Rule currently puts the likelihood of a 5% or deeper market correction beginning within the next few weeks at near certainty, the probability of a 10% correction starting during the next 13 weeks at about 65%, and the probability of a bear market beginning within the next 6 months at over 75%. There is, of course, no such thing as certainty in the financial markets. Suffice it to say that the probabilities aren't good." John Hussman points out that "Essentially, Bayes' Rule tells us that when we evaluate evidence, we should pay special attention to those pieces of evidence that are largely consistent with only one of the possible conclusions."

Rep. Ron Paul: "The Pentagon recently reported that it now spends roughly $8.4 billion per month waging the war in Iraq, while the additional cost of our engagement in Afghanistan brings the monthly total to a staggering $10 billion. Since 2001, Congress has spent more than $500 billion on specific appropriations for Iraq. This sum is not reflected in official budget and deficit figures. Congress has funded the war by passing a series of so-called "supplemental" spending bills, which are passed outside of the normal appropriations process and thus deemed off-budget.
This is fundamentally dishonest: if we're going to have a war, let's face the costs-- both human and economic-- squarely. Congress has no business hiding the costs of war through accounting tricks."

Shanghai has set its 2007 GDP growth target at above nine percent, the lowest target in 15 years, to aim for more balanced and sustainable economic and social development, Mayor Han Zheng said on Sunday.

Tehran, political analyst Hermidas Bavand said U.S. force increases were leading many Iranians to believe Washington is looking to pick a fight, perhaps one that would overshadow America's disastrous intervention in Iraq.
"It's an extremely dangerous situation. I don't think Tehran wants war under any circumstances. But there might be an accidental event that could escalate into a large confrontation," Bavand said. "It could be difficult to contain." As I stated back in 2002, Bush's real eye has been on Iran from the very beginning. Iraq was suppose to be simply an opening round.
Iran's military has more than 500,000 troops and an antiquated collection of ships, aircraft, ballistic missiles and other weapons. U.S. military analysts describe the Iranian military as large but ineffective.
Surrounding Iran are more than 200,000 U.S. troops in bases scattered across Iraq, Afghanistan, Bahrain, Kuwait, Kyrgyzstan, Turkey, Qatar and the United Arab Emirates. The U.S. Navy has a carrier battle group in the region and another on the way, and dozens of U.S. bombers and strike aircraft are arrayed on bases surrounding Iran.

The yen declined to the lowest against the dollar in more than four years after a Japanese government report showed a drop in retail sales last month.

February gold fell $1.50 to close at $643.20 an ounce. March silver was down 12.5 cents to end at $13.25 an ounce and March copper lost 9.5 cents to finish at $2.542 a pound.

Interest rates continue to move higher with the 2-year at 4.99%, the 10-year at 4.90%, and the 30-year at 5%.

According to the EIA, OPEC members’ crude oil production in the fourth quarter averaged 0.7 million barrels per day below third quarter levels, with Saudi Arabia accounting for half of this reduction. Preliminary data suggest commercial inventories in Organization for Economic Cooperation and Development [OECD] countries dropped by about 1 million barrels per day in the fourth quarter, about 0.45 million barrels greater than the normal seasonal decline, leaving inventories at near normal levels at year-end. On a days-of-supply basis, OECD inventories are projected to decline from close to the top of the normal range during the third quarter of 2006 to near the bottom of the normal range by the end of 2007.

Feb. natural gas falls 3.6% to close at $6.917/mln BTUs and this contract will now go off the board with the March contract the new spot month.

March crude was down 2.5%, or $1.41, to close at $54.01/brl.

Sunday, January 28, 2007

Less Americans Back Bush

1/28/07 Less Americans Back Bush

According to the latest Newsweek Poll, taken in the days following the
speech, the president's job approval rating hit an all-time low in the
Newsweek Poll at 30 percent. Sixty-one percent of all those polled says
they are dissatisfied with the way things are going in the United States at
this time; just 30 percent are satisfied. Sixty-seven percent of those polled believe Bush's decisions about policy in Iraq and other major areas are influenced more by his personal
beliefs regardless of the facts, while just 22 percent say his decisions
are influenced more by the facts. And 71 percent say Bush will not have
enough support over the next two years to make a difference in getting
things done in Washington; just 21 percent say he will.

Riki Ellison, President of the Missile Defense Advocacy Alliance, announced that the intercept test of the Terminal High Altitude Area Defense system (THAAD) was successful off of the coast of Hawaii at the Pacific Missile Range Facility near Kauai. "This intercept once again validates the United States technical and political will to defeat and
destroy ballistic missiles from rogue nations such as Iran and North
Korea." He informed his 9,000 membership that today's test was another
positive step in the development of the system.

Tank tracker Lloyds Marine Intelligence Unit said Friday that oil exports from the Organization of the Petroleum Exporting Countries fell to less than 23 million barrels a day in December from just under 24 million barrels a day in November, according to a Dow Jones newswire report.
Saudi Arabia, the world's largest crude oil producer and exporter, was the quickest to implement OPEC's production cuts; its exports in December were 1.1 million barrels a day lower than before the OPEC's October call for production cuts.

In a boost to India's prospects in picking up stakes in the coveted Sakhalin-III oil exploration project, Russian President Vladimir Putin Friday asked Indian oil companies to 'deal directly' with their Russian counterparts and assured his government's support for it.
'Indian - companies need to deal directly with Russian companies. We are ready to provide all administrative support for it,' Putin replied when he was asked about India's prospects in the Sakhalin-III.
India has already invested $2.7 billion in the Sakhalin I oil fields where it has 20 per cent stake. India will get an estimated 2.5 million barrels of crude oil annually from the oilfields. The first shipment of oil from this project came in December last year.

USDA Cattle on Feed Report released Friday was generally neutral to somewhat negative. The December placement effort turned out to be somewhat larger than the trade was anticipating. Also last month’s marketing was the smallest since the data series began in 1996. Finally, the January 1 on feed total also represents a new record high. The report showed January 1 on feed at 101 percent, December placements 91 percent, marketed in December 95 percent.

Mike Burk: "The good news is:
• Since 1887 (120 years) the Dow Jones Industrial Average (DJIA) has been up 70% of the time in the coming week (the last 3 trading days of January and the first 2 days of February) during the 3rd year of the Presidential Cycle (next week)...
Most of the technical indicators are direction free. Seasonally the period has been quite strong, but seasonal influences have not had much effect on the market recently. For example, last week the S&P was down for only the 2nd time since 1953 while the mid and small cap indices were up. Right now, there is little to go on but seasonality which has been positive.
I expect the major indices to be higher on Friday February 2 than they were on Friday January 26."

M.A. Nystrom: "It takes a full dollar today to buy what a nickel would have bought in 1913, according to the Fed's own CPI calculator!"

Motley Fool: "While it is easy see that BJ Services was hurt this quarter by a correction in energy prices, the long-term trend that Schlumberger's CEO Andrew Gould is so bullish about also holds true for BJ Services."

Laboring in a war with no discernible front line, more than 770 civilian contractors have died in Iraq since the U.S.-led invasion began in March 2003.
Statistics kept by the Labor Department indicate fatalities among civilian contractors working for American firms escalated rapidly late last year, with at least 301 dying in Iraq in 2006 — including 124 in the final three months.
U.S. military deaths totaled 818 during the year, the Defense Department has reported.