Saturday, March 17, 2007

China And Oil

3/18/07 China and Oil

China's central bank said Saturday it will raise key interest rates by more than a quarter percentage point in a move to cool torrid economic growth. The 0.27 percentage point hike in one-year deposit and lending benchmark rates will go into effect Sunday, the People's Bank of China said. That would raise lending rates to 6.39 percent and deposit rates to 2.79 percent, the bank said in a statement on its Web site. The new rates will "promote the good, fast development of the national economy" by guiding an increase in credit and investment, preserving price stability and steady operation of the financial system, the statement said.

This past week the dollar index dropped 1.5% to 82.94. Rather than watching the headlines on interest rates, it might prove valuable to be extra watchful of the dollar.

Doug Noland: "The transformation of risky Credits into perceived “money-like” instruments - that foreigners have been happy to accumulate - has lent great support to the dollar over these past few years of massive Current Account Deficits. A bursting Mortgage Finance Bubble and what it could mean for the securitization markets, risk intermediaries and leveraged speculating community create the potential for Subprime Contagion Effects to precipitate a serious problem for the dollar."

Kurt Richebacher: "Plainly, Greenspan’s policy has collapsed into uncontrolled money and debt creation that has rapidly diminishing returns on economic activity. The late economist Hyman P. Mynsky would call this a Ponzi economy, where debt payments on outstanding and soaring indebtedness are no longer met out of current income, but through new borrowing. Soaring unpaid interests become capitalized."

Bill Bonner: "Any simpleton could see that 'liars' loans' would be a disaster for someone. But it took a near meltdown in the mortgage market to bring the point home to the geniuses in the financial industry...Even the smartest lenders - the world's leading financial institutions, including Britain's number one bank - were providing money to the subprime salesmen, all of them presumably aware that their collateral rested on white lies."

John Mauldin: "Ok, let's run the math. Almost 50% of the loans made last year were made with little or no documentation check, and 60% of those people overstated their incomes by more than half!!! That means 30% of the loans made were to people who were stretching to buy a home and whose actual income would not qualify them for a home anywhere close to what they bought.
Of course, now that the horse is out of the barn and well into the north 40, lenders are starting to tighten standards. And you can bet that one of the standards is going to be income verification, if for no other reason than that the mortgage company will not be able to re-sell that loan without it! Liquidity for non-conventional loans is going to dry up, if it already hasn't.
And you should care. "Tighter credit means fewer potential buyers, fewer buyers means less demand, less demand means less appreciation. Add a growing volume of homeowners who now owe more than their homes' value and who have no viable options for refinance or repayment and you have the conditions for more folks who will simply opt to walk away, forcing the lender to foreclose and sell at a below-market price. This could make it more difficult for 'innocent bystanders' to sell their home or refinance a mortgage...Bottom line: the mortgage market problems are going to reduce liquidity in the US. And the slowing down, or ending of the yen carry trade is going to reduce liquidity worldwide. And if the US consumer has to re-trench, it could be a bumpy ride. Be careful out there."

Dimitra DeFotis: "Rarely have I seen a period where oil service names sell at a discount to the S&P 500...with 14% earnings growth...Energy is going to do very well. The multiples have been contracting for the better part of 12 months. And we are toward the end of that correction more than we are at the beginning of it." "The White House failed yesterday to turn over documents and commit to allowing high-ranking officials to testify in congressional investigations into whether political chicanery played a role in the firing of eight U.S. attorneys. House judiciary committee chairman John Conyers, a Democrat, responded by saying he would hold a hearing next week to subpoena presidential adviser Karl Rove and other current and former White House officials to testify. The investigation has already prompted bipartisan calls for Attorney-General Alberto Gonzales to resign. White House counsel Fred Fielding told the House and Senate judiciary committees that he needs until Tuesday to decide whether to produce Mr. Rove, former White House counsel Harriet Miers and other officials. Also in the balance is whether to release papers to Congress."

"The House Appropriations Committee removed language from the Iraq war funding bill requiring the Administration, under Article 1, Section 8, Clause 11 of the Constitution, to seek permission before it launched an attack against Iran," Dennis Kucinich said Friday. "Since war with Iran is an option of this Administration, and since such war is patently illegal, then impeachment may well be the only remedy which remains to stop a war of aggression against Iran."

Real average weekly earnings fell by 0.3 percent from January to February
after seasonal adjustment, according to preliminary data released today by the
Bureau of Labor Statistics of the U.S. Department of Labor. A 0.3 percent
decline in average weekly hours and a 0.4 percent increase in the Consumer Price
Index for Urban Wage Earners and Clerical Workers were partially offset
by a 0.4 percent rise in average hourly earnings.

Mike Burk: "Last week new lows came close to their highest levels of this decline which were reached on March 5. Seasonally next week has been weak and there is no evidence the decline is over.I expect the major indices to be lower on Friday March 23 than they were on Friday March 16."

Friday, March 16, 2007

Another Storm

3/17/07 Another Storm

The clocks may have been changed but it's still the winter season. About 400 flights in the northeast were canceled due to the storm expected in this region of the country.

Production is up 2.3% in the past 12 months. Output of utilities rose 6.7% in February, the biggest monthly gain since December 1989, and that was primarily due to the severe winter weather. Manufacturing output rose 0.4%. The gains were widespread. All major market groups except construction supplies recorded increases in February.

U.S. consumer prices increased 0.4% in February, led by higher prices for food, energy, shelter and tobacco, the Labor Department reported Friday. Core prices, excluding food and energy, increased 0.2% in February. In the past year, consumer prices are up 2.4%, while core prices are up 2.7%, unchanged from last month's 12-month increase.

Oil tanker company OMI Corp. may put itself on the block by announcing it's considering strategic options, The Wall Street Journal reported Friday.

Premier Wen Jiabao: ``China's investment growth is too high, lending growth too fast, liquidity excessive and trade and international payments very imbalanced,'' Wen said at a press conference in Beijing today. Energy efficiency and environmental protection issues haven't been ``properly resolved."

Barry Ritholtz: "Consider that February prices for "crude foodstuffs and feedstuffs" were up 18.8% above year-ago levels, its no surprise that food companies are passing those higher costs to consumers. Wholesale consumer food prices are 6.8% above year-ago levels. The WSJ noted that Energy prices increased by 0.9% in February, while Gasoline prices rose 0.3%. Natural gas prices swelled 5%. Those begging the Fed for a rate cut can forget about the next 2 FOMC meetings; Barring a full-blown market meltdown, cuts at those gatherings simply aint gonna happen.

The Reuters/University of Michigan consumer sentiment index fell to 88.8 in March from 91.3 in February, Reuters reported. Attitudes about the current economy fell to 103.6 from 106.7 in February. The expectations index dropped to 79.3 from 81.5 in February.

Caremark Rx Inc. shareholders on Friday approved a $24.3 billion takeover offer from drug-store chain CVS Corp. , effectively ending a months-long takeover fight with Express Scripts Inc. for the rival pharmacy benefits manager.

I urge you to take some time and read the following article written by Gary Carmell. It's entitled Housing: Game Over. Gary is an extremely bright guy and real estate is his industry.

Nymex April crude closed at $57.11 while Brent spot closed at $60.14. That wide spread will close. Meanwhile, April natural gas fell 3.5 cents to close at $6.924 per million British thermal units.

April gold closed at $653.90 an ounce Friday, up $6.80 for the day and up $1.90 for the week. May silver added 14 cents to end at $13.215 an ounce, up 1.9% for the week. May copper gained 2.3 cents to end a three-month high of $3.011 a pound, up 8.2% for the week. Just an aside, copper demand is closely related to the strength in the world economy. If copper is gaining strength, then the thought that demand for crude will lessen for economic reasons is bogus. You can't have it both ways. In fact, the same dynamics creating copper demand- namely China and India- are the same driving demand for crude.

According to Baker Hughes, the U.S. rig count fell 17 from last week to 1,740, while the Canadian rig count dropped 144 to 409. The U.S. offshore rig count fell by 13 to 76.

The median consumer price index rose 0.3% in February, the Cleveland Federal Reserve Bank reported Friday. The median CPI is an alternative method of computing core inflation without automatically excluding food and energy prices. The median CPI is up 3.6% in the past year, unchanged in the past four months.

Thursday, March 15, 2007

The Numbers

3/16/07 The Numbers

The producer price index rose 1.3% in February, vs. expectations of a 0.5% increase. Core PPI, which excludes food and energy, was up 0.4%, exceeding expectations of a 0.2% rise.

The New York Federal Reserve bank's Empire State Manufacturing index fell to 1.9 in March from 24.4 in February. New orders fell sharply. The shipments and unfilled orders indexes also declined. The prices paid index rose again.

The number of Americans applying for unemployment benefits fell by 12,000 last week to 318,000, the lowest in five weeks, the Labor Department reported Thursday. The four-week average of initial claims fell by 10,250 to 329,250 after hitting a 17-month high of 339,500 the previous week. The number of Americans collecting unemployment checks in the week ending March 3 increased by 48,000 to 2.58 million. The four-week average of continuing claims edged up by 5,500 to 2.56 million, the highest since January 2006. The insured unemployment rate - the portion of all workers covered by unemployment insurance who are collecting benefits - climbed back to 2.0% from 1.9%.

Mohamed Bin Dhaen Al Hamli, the president of the OPEC conference minister of energy of the United Arab Emirates, said " we remain concerned about the continuing weakness of the U.S. dollar against other major currencies, notably the euro and the pound sterling, because this is having a significant effect on the purchasing power of oil-producing developing countries in many parts of the world."

Cadbury Schweppes intends to separate its confectionery and U.S. beverages divisions. The company said its board is evaluating possible options for separating the divisions and will provide further information in its June 19 trading update. The move is intended to maximise shareholders value, Cadbury said.

Russia will take ``military measures'' to counter the U.S. plan to install a missile- defense system in Central Europe and the Caucasus, Deputy Foreign Minister Alexander Losyukov said.
``Expansion of that kind into the area which is absolutely right next to our borders is increasing the military potential in that area,'' Losyukov said in an interview at the Foreign Ministry in Moscow yesterday. ``Russia cannot but react to that increase.'' He didn't specify what measures Russia would take.

Peter Schiff: "
In reality, the problem goes way beyond housing. Nearly every big ticket item that Americans consume is paid for with borrowed money, with foreign lenders supplying the credit. Without access to low cost credit, the spending stops. When the spending stops the service sector jobs associated with robust spending will disappear as well. Without paychecks, even those with low fixed-rate mortgages and high credit scores will not make their payments.
The bursting of the technology stock bubble of the 1990's was simply the opening act. What we are about to experience with the real estate bubble is the main event. In that respect, though it may be March of 2007 it sure feels a lot like March of 2000. However, instead of a mild recession, this collapse will be followed by the most severe recession since the Great Depression. The main risk is that Ben Bernanke and his buddies at the Fed panic, producing something far worse; a hyper-inflationary bust similar to the one experienced by the Weimar Republic in Germany. Let's hope that cooler heads prevail, but get your wheelbarrow ready just in case."

Henry To: "Unless we experience an across-the-board decline in U.S. home prices and unless gasoline rises to $4 a gallon, the secular story of the U.S. consumer remains intact for now."

Tighter credit standards among mortgage lenders might lower U.S. home prices by 10 percent this year and push the economy into recession if the Federal Reserve doesn't respond by lowering interest rates, a Merrill Lynch & Co. analyst said in a report.

From Daily Reckoning: "And since the Fed CANNOT, let me repeat, CANNOT afford to raise rates right now with the subprime mortgage meltdown going on… Guess what gets discounted? The dollar!"

Cisco Systems agreed to acquire WebEx Communications for roughly $3.2 billion, or $57 per share. Net of WebEx's existing cash balance, the deal is worth $2.9 billion. Shares of WebEx, a Santa Clara, Calif., provider of business communications applications, closed Wednesday at $46.20.

The Organization of the Petroleum Exporting Countries agreed at a Vienna meeting on Thursday to leave production quotas unchanged, according to Oil Minister Abdullah bin Hamad Al Attiyah. The minister was quoted by Dow Jones Newswires.

Monthly capital flows to the U.S. posted a big gain in January, reversing a rare outflow in December. Capital flows to the U.S. totaled $74.6 billion in January, as private and official investors bought more short and long-term securities, the Treasury Department said. In December, the U.S. recorded a revised outflow of $14.7 billion, the first outflow since June 2005.

Russian President Vladimir Putin, Greek Prime Minister Costas Karamanlis and Bulgarian Prime Minister Sergei Stanishev attended the signing of the accord that ended almost 15 years of negotiations on the creation of the 279-km (173-mile) pipeline.
Once launched in 2009, the 950 million euro ($1.25 billion U.S.) link will run from the Bulgarian Black sea port of Burgas to the north Aegean port of Alexandroupolis, bypassing the congested Turkish Bosphorus Straits.
It will pump 700,000 barrels per day, or 35 million tonnes of crude a year, with potential to rise to 50 million per year.

An interesting letter to Rep. Barbara Lee of California:

Gold for April delivery closed up $4.60 at $647.10 an ounce on the New York Mercantile Exchange. Copper was the biggest winner among the metals, closing at its highest level since Dec. 19. May copper rose 15.9 cents at $2.985 a pound. May silver rose 24 cents at $13.075 an ounce, April platinum added $14.70 to $1,215.70 an ounce and June palladium fell $1.80 to $351.70 an ounce.

The Philly Fed diffusion index fell to 0.2 in March from 0.6 in February. The new orders index increased to 1.9 from -0.5, while the shipments index rose to 6.8 from 1.7. Inflationary pressures increased. The prices paid index rose to 21.8 from 15.8, while the prices received index rose to 16.3 from 9.4.

April crude fell 61 cents to close at $57.55 a barrel Thursday. April natural gas fell 12.4 cents to close at $6.959 per million British thermal units. The Energy Department said natural-gas inventories fell 115 billion cubic feet for the week ended March 9. Total stocks now stand at 1.516 trillion cubic feet, down 324 billion cubic feet from the year-ago level, but 158 billion cubic feet above the five-year average, the government data said.

Wednesday, March 14, 2007


3/15/07 Housing

KB Home, whose customer base is comprised of about 40 percent first-time buyers, has estimated its subprime exposure at 13 percent.
Hovnanian Enterprises Inc. assessed its exposure at 18 percent in 2006, and that has gone down to 14 percent in its fiscal first quarter.
Beazer Homes USA Inc. has the most exposure to first-time buyers, followed by M.D.C. Holdings Inc. and KB Home. Lennar Corp. and KB have the most exposure to buyers with lower credit scores.
Companies with the least exposure to both of these factors are luxury builder Toll Brothers and Pulte. Only 17 percent of Pulte's customers are first-time buyers, and 40 percent of its business is derived from retired and older buyers.
KB and D.R. Horton Inc., the largest U.S. home builder, won't begin construction of a home for a subprime buyer until the mortgage is approved.

The Dow Jones Industrial Average was up 57.44 points at 12,133.40 at its unofficial close. The S&P 500 rose 9.22 points to 1,387.17 and the Nasdaq Composite advanced 21.17 points to 2,371.74.

April crude rose 23 cents to close at $58.16 a barrel Wednesday. April natural gas rose 2.8% to end at $7.083 per million British thermal units.

April gold fell 1.1%, or $6.90, to close at $642.50 an ounce. May silver fell 13 cents to close at $12.83 an ounce. But copper closed modestly higher, up 0.15 cent at $2.826 a pound.

The American Petroleum Institute reported a rise of 6.3 million barrels in crude supplies for the week ended March 9. The Energy Department had reported a climb of 1.1 million barrels. Motor gasoline supplies were down 501,000 barrels, the API said, vs. the government's reported fall of 2.5 million. Distillate supplies were down 4.3 million barrels, the API said, compared with the government's 2.8 million-barrel decline.

The prices of goods imported into the United States rose 0.2% in February, pushed higher by imported petroleum and natural gas prices, the Labor Department reported Wednesday. Import prices fell a revised 0.9% in January. Petroleum prices rose 2% and natural gas prices rose 2.5%. Outside of fuels, however, prices fell 0.2%, the biggest drop since July 2005.

The U.S. current account deficit narrowed by 14.6% to $195.8 billion in the fourth quarter from a revised $229.4 billion in the third quarter, the Commerce Department reported Wednesday. The deficit amounted to 5.8% of gross domestic product in the fourth quarter, down from 6.9% in the third quarter. Despite the improvement, for all of 2006, the current account deficit grew to a record $856.7 billion, totaling 6.5% of GDP.

Tuesday, March 13, 2007

Tough To Beat

3/14/07 Tough To Beat

When a company reports extraordinary numbers, one might consider pondering whether it's likely for the performance to continue. Goldman Sachs produced an annualized return on average tangible common shareholders' equity of 44.7% and annualized return on average common shareholders' equity was 38.0% for the first quarter of 2007. Those are super human numbers. If these were produced by an athlete, they'd be checking for steroids.

Citigroup launched a tender for 100% of Nikko Cordial in Japan in a 25% higher bid of more than 1700 Yen.

Accredited Home Lenders is looking at raising cash and plans layoffs. The subpar mortgage lending fallout is beginning to mushroom into a fire storm.

Clearwire traded at $27.95 on its first day. Monday, it dropped as low as $19.52.

According to Reuters, Countrywide Credit said that foreclosures rose to five year high and that its earnings would be hurt.

Chevron expects 3% production volume growth through 2010.

From The Guardian Unlimited: "The intriguing aspect of the Plame hearing is that she may have to give some hint about her work - in broad terms, sketch the kind of subject matter and the region in which she was deploying her expertise. There have been suggestions swirling through Washington that while her husband was chasing shadows in looking into Saddam's all-but-defunct nuclear interest and activity, Plame was set on a more deadly serious business of trying to find out what Iran was up to in trying to acquire nuclear technology and material.

If this is so, the case against Cheney becomes urgent. True, in the light of the Libby trial, he cannot be charged with perjury himself, but if he trashed an agent working on a real enough threat to the security of the US and Europe, out of personal spite, then there must be a prima facie case for impeachment. So, watch the glamorous CIA officer's lips when she is called to the stand. Any hint of the above, and you will hear the vice presidential motorcade heading for the clinic - though, under the circs, you can bet it will not be the Walter Reed Clinic for wounded veterans.

If a case is brought against Cheney, then the man at the top will have to look out. Remember Spiro T Agnew? Nixon always said they would never go after him as long as an old rascal like Spiro T was VP. If Cheney is cross-examined under oath, there will surely be a move to do call the President to discuss why he took his nation, and a few allies besides, to war on what now looks very like a false prospectus."

U.S. business inventories grew again in January after a one-month drawdown in December, the Commerce Department reported Tuesday. Business sales fell 0.7% in January, while inventories increased 0.2%, the government said. In relation to sales, inventory levels equaled a two-year high. The inventory-to-sales ratio rose to 1.30 from 1.28. The typical business has nearly 40 days' worth of sales on hand.

Airbus' chief commercial officer and supersalesman said Monday he's hearing from suppliers that Boeing's 787 could be up to six months late. Though he'd prefer that didn't happen, he added. "In this particular case, misery doesn't love company," said Leahy, "We wish them well, to get an airplane out the door on time."

TheOilDrum: "The International Energy Agency warned Tuesday that global oil and fuel inventories were being sucked lower at an unusually high pace this year, leading it to fret about demand being met in the coming months and amplifying the need for more crude from the Organization of Petroleum Exporting Countries. The agency's widely-anticipated monthly assessment of the global oil balance said that stockpiles of crudes and fuels held by the Organization for Economic Cooperation and Development group of industrialized nations were falling at a pace of 1.26 million barrels a day so far this year and could spell the largest stock draw in a January-to-March period in more than 10 years."

Oil Daily reports "After enjoying healthy profit margins for some time, US retailers and wholesalers are now suffering due to the recent sharp climb in refined product prices. Since the beginning of the year, retail margins have been trending downward as prices at the pump have lagged behind the sharp increases seen at the refinery gate."

Oil Daily noted " In a move that could tighten the spot crude market, top oil producer Saudi Arabia has cut its April crude export volumes to Asia and Europe, but left unchanged volumes to the US, trading sources said Monday."

According to the sources, the Howe Robinson Container Index (HRCI), a measure of the container shipping rate, gained 12.8 percent to 1,140.4 on March 2. The index was established on July 7, 1997 with a base of 1,000.
The Baltic Dry Index (BDI), a yardstick of dry bulk shipping rates that is seen as a good indicator of future economic growth and production, has risen 6.4 percent this year to 4,766 on March 2, they said. The BDI was set up January 4, 1985 with a base index of 1,000.
"Since 2002, the container shipping has risen 10 percent annually, while the supply of container ships is tight," said Ji Hun-seok, an analyst at NH Securities Co.

A study published Tuesday of more than 100,000 veterans who have sought medical care since returning from war shows that one-quarter have mental-health problems. Half of those — more than 13,000 people — were diagnosed with PTSD, according to the report in the Archives of Internal Medicine. The disorder affects less than 4 percent of the general public.

On Tuesday, the Dow Jones Industrial was down 242.66 points at 12,075.968 at its unofficial close. The S&P 500 lost 28.65 points to end at 1,377.95 and the Nasdaq Composite dropped 51.72 points to 2,350.75. Percentage losses were almost 2% for the Dow, 2% for the S&P 500 and 2.15% for the Nasdaq.

April crude fell 98 cents to close at $57.93 a barrel Tuesday.

April gold closed at $649.40 an ounce Tuesday, down 90 cents for the day. May silver fell 12.5 cents to close at $12.96 an ounce and May copper closed at $2.8245 a pound, down 2.45 cents.

Many more U.S. homeowners were unable to keep up with their mortgage payments in the fourth quarter, the Mortgage Bankers Association said Tuesday, with the rate of homes entering the foreclosure process hitting a record 0.54% and the delinquency rate on U.S. home loans leaping to 4.95% from 4.67% three months earlier. The rise was led by subprime mortgages, where delinquencies increased to 13.33% from 12.56%, and FHA loans, which saw a record-high delinquency rate of 13.46%.

Monday, March 12, 2007

Big Deals

3/13/07 Big Deals

Akzo Nobel agreed to sell its Organon BioSciences unit to Schering-Plough for 11 billion euros ($14.4 billion) in cash.

Swiss state-controlled telecommunications group Swisscom AG offered to buy Italian broadband operator Fastweb for 3.7 billion euros ($4.9 billion) or 47 euros a share.

John Mauldin: " The lower end of the housing market is going to find a dearth of buyers, as they will not get financing and a lot of homes are coming back onto the market. It is going to be very hard to get a floating-rate mortgage turned into a fixed-rate mortgage, and consumers are going to see their payments soar. Foreclosures area at an all-time high and rising. Cue the congressional hearings, stage left. A special advisory committee of the Federal Reserve warned Thursday of a rise in thenumber of foreclosures, as new guidelines were issued. Subprime mortgages, about 20% of the total market, were 50% of the foreclosures last year. That is set to rise this year.As the problem spreads, it is going to hit home values and that is going to limit the amount of money that can be borrowed by consumers as Mortgage Equity Withdrawals. It is not just a problem with subprime mortgages, it is starting to hit the prime mortgage world."

Smith & Nephew agreed to buy Plus Orthopedics, a privately held Swiss firm, for $889 million (1.09 billion Swiss francs).

Kohlberg Kravis Roberts & Co. said on Monday that it would acquire discount retailer Dollar General Corp. for $22 a share in cash.

UnitedHealth Group Inc. said on Monday it would acquire Sierra Health Services Inc. for $43.50 per share to help it expand in the fast-growing U.S. Southwest. The transaction, expected to close by year-end, is subject to state and federal regulatory approvals, including in Nevada, California and Texas, and approval by Sierra stockholders.

Halliburton to move its head office to Dubai.

New Century Financial said all of its bank lenders had either cut off their short-term funding to the beleaguered home lender or notified the company of their intent to do so.

John Hussman: "The stock market is not an air balloon into which money goes in or out and expands or contracts that balloon. Nor is it a water balloon that is expanded by pouring in “liquidity.” Prices are not driven by the amount of money that buyers “put in” or sellers “take out” (as those dollar amounts are identical). Prices are determined by the relative eagerness of the buyer versus the seller...
The phenomenon that's being called “liquidity” is nothing more than a combination of fiscal irresponsibility and risk blindness, and will ultimately prove itself to be the time-bomb that it is when investors begin to “re-price” that risk...
My impression is that the probable expectation for total returns on the S&P 500 over the coming 5-years is below 5% annually, in a likely interval that includes zero. It takes implausibly optimistic assumptions to move substantially above that range...Currently, the likely range for S&P 500 returns over the coming decade is between a -3% annual loss and a 5% annual return, centering in the low single digits. That range will seem preposterous to some investors, but remember that it took the late 1990's market bubble to move actual returns even 5% outside of this set of bands. Unless investors anticipate a repeated excursion into similar valuation extremes, it would be a good idea for them to recognize now, rather than later, that stocks are unlikely to produce satisfactory long-term returns from current valuations."

John Mauldin: "If you are only getting a 5% yield on your US bonds and giving up 3% on currency depreciation for a net 2%, that is not a strong argument for continued investment in the dollar."

Mike Burk: "Next week has had a positive bias. During the 3rd year of the Presidential Cycle the OTC and SPX have both been up about 70% of the time. The averages over all years are not as good as they have been during the 3rd year of the Presidential Cycle."

Thanks to Bill Fleckenstein for the following: "Prescient view of a game gone askew. One who does is Lou Ranieri, sort of the father of the mortgage bond market. In a recent interview, he warned: "This is the leading edge of the storm. . . . If you think this is bad, imagine what it's going to be like in the middle of the crisis." In his opinion, more than $100 billion of home loans are likely to default. ("Just divide $100 billion by the average loan amount and you get a lot of people, a lot of families.") He also expects to see some form of bailout at some point, because "foreclosures in those amounts are politically unacceptable."

Ford Motor Co. will sell its profitable Aston Martin luxury sports-car unit for $848 million to investors led by U.K. auto-racing champion David Richards.

"Attorney General Gonzales is a nice man, but he either doesn't accept or doesn't understand that he is no longer just the president's lawyer, but has a higher obligation to the rule of law and the Constitution, even when the president should not want it to be so," Mr. Schumer said on CBS's "Face the Nation." "This department has been so political that I think, for the sake of the nation, Attorney General Gonzales should step down," said Mr. Schumer, a Democrat of New York who sits on the Judiciary Committee.

Anadarko Petroleum has agreed to sell a portion of its interest in the K2 Unit in the Gulf of Mexico to two undisclosed parties for $1.2 billion.

Tony Horrell, CEO of Jones Lang LaSalle's International Capital Group,
commented: "There is currently a large overhang of investment targeting the
sector with $4 of money chasing every $1 of product. Global real estate
markets performed very strongly throughout 2006, and it was the first year
that all major developed and emerging market returns were both aligned and
positive. Investment was driven by increased allocations to the asset
class, growth in investible for investment and by the increased attention
of opportunistic private equity players who identified relative value in
the sector. These increased flows into real estate gave rise to two notable
phenomena in 2006 -- an increasing number of 'mega-deals' and continued
globalization of the asset class."
The United States accounted for 40% of global transactions by value and
the UK accounted for 15%. The German and Japanese markets have almost
doubled their share of global volumes to 9% and 8% respectively, and the
German market now attracts the same share of global cross-border investment
as the U.K.

Valerie Plame will appear before the House of Representatives Committee on Government Reform chaired by Henry Waxman on March 16.

China's General Administration of Customs reported the nation's February trade surplus totaled $23.76 billion, or three times economists' estimates per a Bloomberg survey and was substantially higher than last February's surplus of $2.5b. Exports in February jumped 52%, for their biggest increase since 1995. Bloomberg notes the year to date surplus at $39.6b is more than three times the amount during the same period last year. The governor of China's central bank commented, "China will continue to use a mix of open-market operations, statutory reserve requirements and interest rates to soak up excess liquidity in the financial markets."

The U.S. federal budget deficit widened in February to $120 billion from $119.2 billion a year earlier, the Treasury Department reported Monday. The deficit was a record for the month of February. The improvement largely reflects lower spending on hurricane relief and higher tax collections. Excluding the Social Security and other trust funds, the deficit totaled $123.9 billion in February and $239.6 billion for the fiscal year.

April gold fell $1.70 to close at $650.30 an ounce Monday. May silver climbed 11.5 cents to close at $13.085 an ounce and May copper closed at $2.849 a pound, up 6.5 cents.

Sam Zell said he's had talks to acquire Tribune Co. and, if successful, doesn't plan to sell its newspapers or television stations.
``My intention is not to break it up,'' Zell, 65, said today in an interview. ``My interest in Tribune Co. reflects my own assessment of the value of its assets.'' He said the discussions have been going on for a month.

April crude closed at $58.91 a barrel Monday. It was down $1.14 for the day and the contract has now lost a total of 4.7% over the past three sessions. April natural gas fell 2.4%, or 17.1 cents to close at $6.912 per million British thermal units.

Sunday, March 11, 2007

Spreading Democracy

3/12/07 Spreading Democracy

Bush travels the U.S. and the globe stating his goal is to spread democracy. You might give some thought to that statement. Do you achieve that goal by building hundreds of permanent military bases?

Jacques Chirac bowed out of what might be his last European Union summit by warning that US plans to install missile defense bases in Europe could split the continent and provoke a fresh cold war.
The French president said Europe and the US needed to consider Russia’s concerns about the projected missile bases in Poland and the Czech Republic.
“We should be very careful about encouraging the creation of a new dividing line in Europe or a return of the order of the past,” he said.
Chalmers Johnson: "It's not easy to assess the size or exact value of our empire of bases. Official records on these subjects are misleading, although instructive. According to the Defense Department's annual "Base Structure Report" for fiscal year 2003, which itemizes foreign and domestic U.S. military real estate, the Pentagon currently owns or rents 702 overseas bases in about 130 countries and HAS another 6,000 bases in the United States and its territories. Pentagon bureaucrats calculate that it would require at least $113.2 billion to replace just the foreign bases -- surely far too low a figure but still larger than the gross domestic product of most countries -- and an estimated $591,519.8 million to replace all of them. The military high command deploys to our overseas bases some 253,288 uniformed personnel, plus an equal number of dependents and Department of Defense civilian officials, and employs an additional 44,446 locally hired foreigners. The Pentagon claims that these bases contain 44,870 barracks, hangars, hospitals, and other buildings, which it owns, and that it leases 4,844 more.
These numbers, although staggeringly large, do not begin to cover all the actual bases we occupy globally. The 2003 Base Status Report fails to mention, for instance, any garrisons in Kosovo -- even though it is the site of the huge Camp Bondsteel, built in 1999 and maintained ever since by Kellogg, Brown & Root. The Report similarly omits bases in Afghanistan, Iraq, Israel, Kuwait, Kyrgyzstan, Qatar, and Uzbekistan, although the U.S. military has established colossal base structures throughout the so-called arc of instability in the two-and-a-half years since 9/11.
For Okinawa, the southernmost island of Japan, which has been an American military colony for the past 58 years, the report deceptively lists only one Marine base, Camp Butler, when in fact Okinawa "hosts" ten Marine Corps bases, including Marine Corps Air Station Futenma occupying 1,186 acres in the center of that modest-sized island's second largest city. (Manhattan's Central Park, by contrast, is only 843 acres.) The Pentagon similarly fails to note all of the $5-billion-worth of military and espionage installations in Britain, which have long been conveniently disguised as Royal Air Force bases. If there were an honest count, the actual size of our military empire would probably top 1,000 different bases in other people's countries, but no one -- possibly not even the Pentagon -- knows the exact number for sure, although it has been distinctly on the rise in recent years."

An international network for the abolition of foreign military bases has been created at a conference attended by over 1,000 activists and experts from 30 countries, which opened in Ecuador's capital city on Monday. The No Bases Network will coordinate action strategies against the more than 1,000 military bases worldwide.
Lina Cahuasquí, an activist with the Ecuador No Bases Coalition, told IPS that the No Bases Network will be "a plural, democratic space, linked to the permanent struggles of social organisations for a military-free system that is based on respect, equity, justice and a culture of peace."...Cahuasquí said that most of the 1,000 foreign military bases on the planet belong to the United States, which has 737 in different countries. Others belong to Russia, China, the United Kingdom and Italy. "And these do not include secret military bases, like the four operated by the U.S. in Iraq," she said.
"But the United States doesn't only have bases in developing countries. It has 81 bases in Germany and 37 in Japan," she added. In Latin America and the Caribbean there are 17 U.S. military bases, located in Colombia, Peru, El Salvador, Aruba, Curaçao, Honduras, Ecuador, and Guantánamo Bay in Cuba, she noted.

In sum, 737 military bases installed on all five continents, with approximately two million troops, according to revelations by Elsie Monge, president of the Human Rights Commission in Ecuador and by U.S. historian Chalmers Johnson, a scholar on the issue.
The figures, confirmed by the Pentagon, do not include — according to the professor — the 106 military garrisons in Iraq and Afghanistan, nor those in Israel, Qatar, Kirghizstan or Uzbekistan, nor the 20 it shares with Turkey.
Diverse sources affirm that, given its control over those installations, the United States has become the largest landowner in the world, situated on 2,202,735 hectares of land.

Pakistan would not provide military bases to the United States if it launches attacks on Iran, Foreign Minister Khurshid Mehmood Kasuri has said.

On a daily basis, U.S. is a growing resemblance to the Roman Empire and the British Empire. It didn't end too well for either.

Prior to reading the above figures, you might ask yourself how many permanent military bases you thought the U.S. had around the globe. You were probably off by at least 500.

President George W. Bush asked Congress to revise his emergency spending request for the wars in Iraq and Afghanistan to pay for as many as 4,400 more troops to support the deployment of additional combat forces. The president, in a letter to House Speaker Nancy Pelosi, said he wants to redirect $3.2 billion within the $93 billion supplemental spending request for this fiscal year to pay for operations in Iraq and Afghanistan, according to Gordon Johndroe, spokesman for Bush's National Security Council. The additional troops, on top of 21,500 soldiers and Marines Bush previously announced he would send to Iraq, would be designated to help with detainees captured during security sweeps and other support roles, Johndroe said. The extra force was requested by General David Petraeus, commander of U.S. troops in Iraq.

Switching subjects, Helmerich & Payne recently completed the sale of its Rig 91 and Rig 106 for nearly $35 million, which generated pretax profits of about $31.2 million. It might be prudent to consider that several companies own rigs that maybe greatly undervalued on their books. Helmerich and Payne, Nabors, and Bronco are just a few.