Saturday, April 26, 2008

Two-Year U.S. Treasury Bonds

4/25/08 Two-Year Government Bonds

Yields on two-year U.S. securities, among the most sensitive to changes in borrowing costs, rose 72 basis points over the two weeks. Futures traders pared odds the central bank will lower rates after a quarter-point reduction on April 30, sending two- year yields above the Fed's rate for the first time since 2006. Japan's five-year notes were set for the biggest drop in nine years as consumer prices rose at the fastest pace in a decade.

Hundreds of thousands of utility customers are at risk of disconnections as the sagging economy drives up the number of past-due home heating bills and the amounts owed, utility companies in cold-weather states say.

American Express Co.'s first-quarter profit slipped 6 percent as the credit card lender saw more U.S. cardholders fail to make their payments.

John M. Berry: "The prospect of elevated inflation and the risk to Fed credibility make it likely that if the Federal Open Market Committee chooses to reduce its 2.25 percent target for the overnight lending rate at its meeting April 29-30, the cut will be only a quarter-percentage point after a series of larger ones. Fed funds futures contracts indicate investors yesterday put about an 80 percent probability on such a 25-basis-point cut next week. The contracts also put a 20 percent probability on the FOMC's leaving the target unchanged, which would be the better policy choice at this point because of the threat to the Fed's credibility...A gesture by the Fed, such as leaving the lending-rate target unchanged next week, might help hold down inflation expectations and discourage passing on higher costs. With all the rest of the Fed's efforts to add to market liquidity solidly in place, why not make the gesture?"

Mike Shedlock: "Interest-rate derivatives are signaling that the rate banks charge for loans in dollars in London may rise further as financial institutions remain reluctant to lend...Hoping to ease credit woes, Fed to auction another $75 billion in Treasuries. The Federal Reserve announced Wednesday it will auction an additional $75 billion in super-safe Treasury securities to big investment firms, part of an ongoing effort to help strained credit markets. The auction -- the fifth of its kind -- will be held Thursday. In exchange for the 28-day loan of Treasury securities, bidding firms can put up more risky investments, including certain shunned mortgage-backed securities, as collateral. In the four auctions held so far, the Fed has provided close to $158.95 billion worth of the Treasury securities to investment firms...Today, another $75 billion will be added to the swap-o-rama total. That will make the Fed's balance sheet look something like this: $394 Billion Garbage to $473 Billion Treasuries. One additional swap will make the Fed's balance sheet more than 50% garbage."

For its 2009 fiscal year beginning 7/1, Microsoft is projecting revenues in the range of $66.9bn-$68bn, with earnings per share of $2.13 to $2.19. At $30+, the risk appears small.

Yahoo Inc. plans to make its Web site a social hub by hosting applications from other online services, part of the Internet pioneer's effort to spawn more advertising opportunities. "We are going to rewire the entire experience at Yahoo to make it social in every dimension," Ari Balogh, Yahoo's chief technology officer, said Thursday at a "Web 2.0" conference that drew a crowd of more than 1,000.

Mazda Motor Corp., based in Hiroshima, was an exception in reporting a 48 percent jump in profit for the January-March period on strong overseas sales, especially in Europe, on way to a record annual profit for the one bright spot in the Ford family of automakers. The Japanese affiliate of Ford Motor Co. of the U.S. reported a 46.8 billion yen ($450 million) profit for the quarter through March, and a rise in quarterly sales of 1.2 percent to 969.5 billion yen ($9.3 billion), partly on strong demand for the Mazda 6 in Europe.

The militant group behind a string of recent attacks in Nigeria's southern oil region said today it had sabotaged another pipeline. The Movement for the Emancipation of the Niger Delta, or MEND, said its fighters hit a pipeline late Thursday in the southern Rivers State — bringing to four the number of pipelines the group has reportedly blown up in the past week.The group said in a statement that the pipeline belongs to a Royal Dutch Shell PLC joint venture.

AMGEN guided for GAAP EPS for the year to be in a range of $3.66 to $4.01.

Rachel Ziemba: " Like oil, the natural gas market is undergoing a geographic shift in its center of gravity in terms of consumption growth (increasingly in Asia) and its producers. Yet also like oil there are The countries with the largest proven gas reserves are Russia, Iran and Qatar. Russia is the current largest gas exporter but Qatar exports the most LNG - and hopes to double output within the next few years. Asian countries used to have little opportunity to use natural gas. LNG is changing this, and natural gas is gaining a place in the energy mix, with many countries have been locking in contracts - even if it is at a higher price...Yet for now, the Federal Reserve Bank of Dallas suggests, inventories are high enough to keep prices relatively moderate and far below the normal link with oil.
OPEC estimates that natural gas demand will almost double by 2030 - or almost 2.4% annual growth, outpacing demand for oil or coal."

Brazil's Agriculture Ministry said it has temporarily banned exports of government-owned stocks of rice to guarantee domestic supply amid rising world prices, but other shipments will still be allowed.

The Reuters/University of Michigan consumer sentiment index came in at 62.6 for April, down from 69.5 a month earlier as Americans contended with rising energy and food prices.

U.S. average retail prices for a gallon of unleaded gasoline rose 2 cents to $3.58 from $3.56 in the last day, according to the Fuel Gauge Report published by AAA.

Crude-oil futures jumped more than $3 in mid-morning trading Friday after news reports that U.S. military force fired at an Iranian boat. A ship contracted by the U.S Military Sealift Command fired at least one shot toward an Iranian boat, Reuters reported, citing an unnamed U.S. defense official.

Jake Tapper: "House Majority Whip Jim Clyburn, D-SC, the highest-ranking African-American in the Congress, has some tough assessments of la famille Clinton today. To Reuters, Clyburn -- who is officially neutral in the Democratic presidential race -- repeated the speculation that Sen. Hillary Clinton, D-NY, is looking to destroy Sen. Barack Obama, D-Illinois, so that Sen. John McCain, R-Ariz., wins the White House in November and Clinton can make another run in 2012. "I heard something, the first time yesterday (in South Carolina), and I heard it on the (House) floor today, which is telling me there are African Americans who have reached the decision that the Clintons know that she can’t win this," Clyburn said. "But they're hell-bound to make it impossible for Obama to win." Clyburn did not call for Clinton to bow out, just to take the rhetoric down a notch. "There's a difference between dropping out and raising all this extraneous scurrilous stuff about the guy (Obama). Just run your campaign … you don’t have to drop out to be respectful of other people."

Crude oil for June delivery gained $2.46, or 2.1%, to close at $118.52 a barrel on the New York Mercantile Exchange. Gold for June delivery ended up 30 cents at $889.70 an ounce on the New York Mercantile Exchange.

According to the WSJ, a large California land partnership involving one of the largest U.S. pension funds has received a notice of default on a $1 billion loan after failing to meet certain terms of its lenders. LandSource Communities Development LLC, a partnership that involves the California Public Employees' Retirement System, received the default notice Tuesday, amid talks to restructure $1.24 billion of debt. The partnership, which owns 15,000 acres in Southern California, had received an extension to meet its current loan terms, including a required payment, but the deadline expired on April 16. The default notice applies to about $1 billion of the total debt.

Doug Noland: "Today, post-crash, no amount of policymaker intervention can repair broken confidence in all facets of Wall Street finance, including subprime and “exotic” mortgages, the “monoline” financial guarantee business, CDOs, “private label” MBS, auction-rate securities, and so forth. Indeed, their problems are poised to only worsen as the economy falters. It is one thing to stem implosion and something altogether different when it comes to restoring the Wall Street Credit mechanism to the point of fostering new Bubbles. Wall Street “alchemy” is a spent force unless it melds in some type of government obligation. The best policymakers can do today is place a federal government guarantee on 90% of new mortgage debt and hope this somewhat stabilizes U.S. housing...Most conspicuously, powerful price pressures throughout global energy, food, and commodities markets are stoking growth in various sectors of our economy. Our export sector continues to boom. Less obvious, I would argue that rampant global financial excess is a contributing factor in our financial institutions’ capacity to raise new “capital” from the global markets – and more generally in bolstering marketplace liquidity in the face of the collapse of Wall Street-backed finance. Foreign demand for our assets is a not insignificant issue. Moreover, the global leveraged speculating community - and international liquidity flows more generally - are a major Stage II wildcard...t is my argument that Stage II Means another year of massive U.S. Current Account Deficits. This would Mean, for one, a prolonging of the massive flow of liquidity into international central bank reserves (creating domestic Credit in the process), sovereign wealth funds, and (to a lesser extent) the hedge fund community. The consequences from a further ballooning of this Unwieldy Global Pool of Speculative Finance are not at all clear. Secondly, another year of U.S. Deficits would Mean another year of excessive liquidity flows into the already overheated economies throughout Asia, the Middle East and elsewhere. These flows are hitting economies with already acute inflation pressures and related problems. Importantly, these Monetary Processes and Inflationary Dynamics are by now well entrenched and extraordinarily powerful after years of unrelenting excess. Resulting Monetary Disorder should be expected to go to increasingly destabilizing extremes (think NASDAQ 1999 and subprime 2006!) – and indeed we’re seeing evidence of as much in near $120 crude, the global food price spike and related hoarding, and wildly unstable and speculative global financial markets.
It is in this context that I believe U.S. policymakers are today unknowingly risking global financial and economic catastrophe...Stage II Means great risk to the heart of contemporary “money.” The problem rests on the reality that “pre-adjustment” Credit (borrowings associated with many businesses and enterprises that will be uneconomic come the arrival of the post-Bubble backdrop) is inherently weak and vulnerable... today’s U.S. Credit is extraordinarily destabilizing in its effects upon the Global Credit Bubble and Resulting Monetary Disorder....One is then left with the disconcerting view that Stage II will lead our authorities to exhaust all policy measures in a futile attempt to sustain the unsustainable. The obvious question: how long does the lead up to Crisis Stage II last? I would today guess a number of months, although I wouldn’t at all be surprised if it was rather short. What will be the impetus for Crisis Stage II? A spike in interest rates, a run from U.S. Treasury and agency debt, a disorderly drop in the dollar, another bout of derivative and Credit market implosion, or acute global financial tumult should be considered leading candidates based upon Stage II ramifications. Or it could easily be something completely unexpected, perhaps even war. "

Friday, April 25, 2008

New Home Sales

4/24/08 New Home Sales

Wendy's shareholders will receive 4.25 shares of Triarc Class A stock for each share of Wendy's stock they own.

Looking forward, Potash expects continued food-supply pressures, resulting in moves to increase supplies and further boost the need for fertilizers. In that light, the company sharply raised its full-year earnings forecast to a range of $9.50 to $10.50 a share from $6.25 to $7.25.

Whirlpool cut its earnings outlook for the year after reporting a 20% profit fall for the first quarter. Net income fell to $94 million, or $1.22 a share, while sales rose 5% to $4.61 billion. It now sees 2008 earnings per diluted share from continuing operations to be in the $7.00 to $7.50 range and to generate $500 million to $550 million in free cash flow. The refrigerator and washing machine maker said macroeconomic challenges, primarily material and oil-related costs, have intensified.

Mining giant Rio Tinto said Thursday that it won't start talks with parties whose proposals do not fully value the firm. It noted that the 12% stake recently taken by the Aluminium Corporation of China, or Chinalco, in the company at a premium to market price, gives directional support to its view on value. Momentum in the business continues to develop strongly, the firm said, and non-core asset sales are progressing well. Strong demand for metals and minerals is continuing and the firm estimates that volumes will grow at a compound annual rate at more than 8% from 2008 to 2015.

Ford Motor Co posted an unexpected quarterly profit on Thursday, led by strong results in Europe and South America and a narrowing loss in North America and sending its shares up 5 percent in premarket trade. Ford said it expects the rest of 2008 to be challenging, cutting its full-year North American outlook for sales, but said it remains committed to its goal of returning North America and its whole auto business to profitability in 2009. Ford reported net income of $100 million, or 5 cents per share, compared with a net loss of $282 million, or 15 cents per share, a year earlier. Ford reported a revenue decline of 8 percent to $39.4 billion, which excludes its Jaguar Land Rover unit that it is selling to Tata Motors Ltd .

MMM reported lower first-quarter profit on Thursday but beat analysts' estimates as strong international sales offset economic challenges in the United States. Net income fell to $988 million, or $1.38 per share, from $1.4 billion, or $1.85 per share, a year earlier. Analysts' average earnings forecast was $1.35 per share, according to Reuters Estimates.

According to the Financial Times, mortgage approvals by UK banks slumped to the lowest level in a decade last month, the British Bankers' Association reported on Wednesday, illustrating the extent to which tighter lending practices are curbing activity in the housing market. The BBA said its members approved 35,417 mortgages for house purchase in March, the lowest since the series began in 1997. The level of approvals had dropped 18 per cent since February and was 46 per cent lower than a year earlier.

According to the Washington Post, a letter that President Bush personally delivered to then-Israeli Prime Minister Ariel Sharon four years ago has emerged as a significant obstacle to the president's efforts to forge a peace deal between the Israelis and Palestinians during his last year in office. Ehud Olmert, the current Israeli prime minister, said this week that Bush's letter gave the Jewish state permission to expand the West Bank settlements that it hopes to retain in a final peace deal, even though Bush's peace plan officially calls for a freeze of Israeli settlements across Palestinian territories on the West Bank. In an interview this week, Sharon's chief of staff, Dov Weissglas, said Secretary of State Condoleezza Rice reaffirmed this understanding in a secret agreement reached between Israel and the United States in the spring of 2005, just before Israel withdrew from Gaza.

Dow Chemical Co. on Thursday reported a 3 percent drop in first-quarter profit because of higher feedstock and energy costs, but still managed to top Wall Street's expectations.

PepsiCo says its first quarter profit rose 5 percent on a big revenue boost in its international division that helped offset higher commodity costs. The world's second-largest soft drink maker says net income jumped to $1.15 billion, or 70 cents per share, from $1.10 billion, or 65 cents per share.

Inventories of durable goods at the factory jumped 1.1% in March, a troublesome sign that could lead to further layoffs and production cutbacks if demand doesn't rebound. Shipments of durable goods fell 0.4% in March after sinking 2.6% in February. Orders for core capital equipment goods were flat in March after declining in January and February. Bookings rose 1.5 percent for goods meant to last several years, outside of cars and planes, following a 2.1 percent decline for February, the Commerce Department said. Total orders unexpectedly fell 0.3 percent, restrained by a decrease in defense-related hardware.

The number of initial claims in the week ending April 19 fell 33,000 to 342,000. It's the lowest level since the week ended February 16. The consensus forecast of Wall Street economists was for claims to rise 3,000 to 375,000. Claims in the previous week were revised to an increase of 20,000 to 375,000 compared with the initial estimate of a rise of 17,000 to 373,000. The four-week average of initial claims fell 7,250 to 369,500. Meanwhile, the number of Americans receiving state jobless benefits fell 65,000 to 2.93 million in the week ending April 12. The four-week moving average of continuing claims rose 20,500 to 2.96 million.

Japan, self-sufficient in rice, will delay seeking imports of the grain required under a World Trade Organization agreement until international prices that have soared to a record stabilize.

ConocoPhillips said net income rose to $4.14 billion, or $2.62 a share, for the January-March period, from $3.55 billion, or $2.12 a share, in the year-ago quarter. On average, Wall Street analysts surveyed by Thomson Financial expected earnings per share of $2.42.

The Oil Drum: "Brazil's discoveries of what may be two of the world's three biggest oil finds in the past 30 years could help end the Western Hemisphere's reliance on Middle East crude, Strategic Forecasting Inc. said. Saudi Arabia's influence as the biggest oil exporter would wane if the fields are as big as advertised, and China and India would become dominant buyers of Persian Gulf oil, said Peter Zeihan, vice president of analysis at Strategic Forecasting in Austin, Texas."

U.S. MARCH NEW-HOME SALES SINK 8.5% TO 17-YEAR LOW. The decline in new-home sales to a seasonally adjusted annual rate of 526,000 was much weaker than the 577,000 pace expected by economists surveyed by MarketWatch. New-home sales are down 36.6% compared with a year ago. The months' supply of homes on the market rose to 11 months, the most in 27 years. Median sales prices have fallen 13.3% in the past year to $227,600, the biggest year-over-year price decline since a 14.6 percent plunge in July 1970.

Alliance Data Systems Corp. is "very comfortable" with its 2008 profit target. ADS expects cash earnings per share of at least $4.30.

Yiddish Proverb: "“If you want your dreams to come true, don't sleep”

With Steve Ballmer's deadline for going hostile rapidly approaching, Microsoft has named a slate of directors to potentially supplant Yahoo's current board.
The list has 10 nominees and three alternates, says The Wall Street Journal, and includes:

* John Chapple, former Nextel Partners CEO
* Edward Meyer, former Grey Global Group CEO
* Jaynie Studenmund, former chief operating officer of Overture Services (acquired by Yahoo in 2003)
* Vanessa Wittman, former Adelphia Communications Corp. CFO

Microsoft Chief Financial Officer Chris Liddell:"Unless we make progress with Yahoo towards an agreement by this weekend, we will reconsider our alternatives," he said. "These alternatives clearly include taking an offer to Yahoo shareholders or to withdraw our proposal and focus on other opportunities." Microsoft's net profit for the three months ended March 31 fell to $4.39 billion, or 47 cents per share, from $4.93 billion, or 50 cents per share, in the same period last year, the company reported. Revenue edged up to $14.45 billion from $14.4 billion in the year-ago quarter.The results came in ahead of Wall Street's expectations on both measures. Analysts surveyed by Thomson Financial forecast a profit of 44 cents per share on $14.4 billion in sales. "Despite a difficult economic environment, it was a very good performance," Liddell said in an interview. Liddell said a rash of unlicensed software in China kept Microsoft from meeting its targets.

Crude for June delivery lost $2.24, or 1.9%, to settle at $116.06 a barrel on the New York Mercantile Exchange. Gold for June delivery dropped $19.60 to end at $889.40 an ounce on the New York Mercantile Exchange.

An unexpected tax bill sent Honda Motor Co's quarterly profit tumbling 86 percent, and Japan's No.2 carmaker warned of a weak year ahead due to a stronger yen, rising materials costs and a soft U.S. car market.

Ten-year bond futures plunged as much as 1.8 percent, forcing the Tokyo Stock Exchange to order a 15-minute halt in trading for the first time since September 2002. The statistics bureau said consumer prices climbed 1.2 percent from a year earlier in March, adding to speculation the Bank of Japan will increase its overnight interest rate this year.

Thursday, April 24, 2008

Foreclosures

4/23/08 Foreclosures

Tens of thousands of Californians lost their homes during the first three months of the year as foreclosures soared more than 300 percent across the Bay Area and the state. Many experts expect those numbers to climb higher this year and beyond. "The problem isn't going away anytime soon," said Andrew LePage, an analyst with DataQuick Information Systems. "We're still looking for some sign of a peak in foreclosure activity." Lenders took back 6,579 homes in the nine-county Bay Area during the first quarter, up from 1,493 a year ago and 4,573 in the fourth quarter, according to a report released by DataQuick on Tuesday. Throughout California, 47,171 homes were foreclosed on, up from 11,032 a year ago. The regional and state figures are now at their highest level in more than 15 years.

Rice climbed to a record after World Bank officials said Thailand, the largest exporter, may restrict shipments, worsening a global food crisis. ``If a key exporter like this limits foreign sales, it would be very much like Saudi Arabia reducing oil exports,'' said James Adams, vice president of the bank's East Asia and Pacific department. China, Vietnam, India and Egypt have curbed sales abroad to safeguard domestic supplies and cool inflation.

Yale University economist Robert Shiller, pioneer of the widely watched Standard & Poor's/Case-Shiller home price index, said there's a good chance housing prices will fall further than the 30 percent drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15 percent since their peak in 2006, he said.

The Architecture Billings Index dropped to 39.7 last month from 41.8 in February, the Washington-based institute said today in a statement. The score was the lowest since the survey's inception in November 1995. Any score below 50 indicates a decrease in billings from the previous month.

The biggest threat to the future security of oil supplies is the lack of spare production capacity worldwide, Saudi Arabia warned on Tuesday. In unusually frank remarks, Ali Naimi, the kingdom's oil minister, said: "Limited capacity along the entire supply chain is the real source of current global supply tightness and represents the greatest threat to ensuring adequate energy to fuel future economic growth."

The federal deficit hit an all-time high of $311 billion for the first half of this budget year, reports the Treasury Department, up from $162 billion in the prior year!

More than 100 million people are being driven deeper into poverty by a "silent tsunami" of sharply rising food prices, which have sparked riots around the world and threaten U.N.-backed feeding programs for 20 million children, the top U.N. food official said Tuesday.

Apple has acquired PA Semi for what an unnamed source suggested was $278 million in cash. Apple’s move suggests that the company may be considering a move away from Intel, which provided the chips for successful offerings like the iPhone and the MacBook series of notebook computers.

The Bush administration is proposing that Congress authorize it to buy billions of dollars in federal student loans to make sure the nation’s credit crunch does not block borrowing for higher education.

EMC said it remains "on target" to achieve its 2008 financial targets. The company in January projected earnings of 78 cents a share and earnings excluding items of $1.04 a share for the year. EMC also projected revenue growth of 13% to $15 billion in 2008.

WellPoint Inc.'s first-quarter profit fell 25 percent, badly missing Wall Street expectations, as the health insurer cut its full-year outlook again. Indianapolis-based WellPoint said Wednesday its earnings dropped to $588.1 million, or $1.07 per share, from $783.1 million, or $1.26 per share, a year earlier. Investment losses of 6 cents per share hurt results. Revenue rose 3 percent to $15.55 billion from $15.09 billion, as medical enrollment climbed by 564,000 members. Analysts polled by Thomson Financial forecast earnings of $1.19 per share including the investment losses on $15.4 billion in revenue. The company's benefit expense — or medical loss — ratio rose to 85.1 percent, up from 83.1 percent the previous year. The company cut its 2008 earnings per share outlook to between $5.42 to $5.67, including 6 cents of investment losses, from a revised range of $5.76 to $6.01. Analysts currently forecast $5.73 per share.

Nouriel Roubini: "I expect a longer and deeper U-shaped recession, lasting at least 12 months and possibly as long as 18 months –- one of the most severe US recessions in decades – because today’s macroeconomic and financial conditions are far worse."

JP Morgan assumed coverage of Alliance Data Systems Corp with an "overweight" rating, compared with its prior "neutral" rating, saying the current price offered an attractive entry for value-conscious investors. "We think fiscal 2008 consensus estimates are safe (if not conservative)," analyst Reginald Smith said, while adding that the stock trades at about 12 times his 2008 estimates.

General Dynamics Corp. said Wednesday its first quarter earnings rose nearly 32 percent, led by big sales increases in the division that makes armored vehicles, tanks and combat tools.

Australia's inflation rate accelerated to more than 4 percent for the first time in seven years, driving the nation's currency to the highest against the dollar since 1984 on speculation the central bank may raise interest rates next month.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ended April 18 fell 14.2 percent to 637.6.

Liberty Mutual to acquire Safeco for $68.25/share in cash.

Freeport-McMoRan Copper & Gold Inc.'s first-quarter net income more than doubled amid near-record prices for gold and other metals as year-earlier results were weighed down by costs associated with the company's Phelps Dodge purchase. Freeport also raised its 2008 cash-flow forecast. The mining giant reported net income of $1.1 billion, or $2.64 a share, up from $476 million, or $2.02 a share, a year earlier. Revenue rose to $5.67 billion from $2.25 billion. Analysts' mean estimates were for per-share earnings of $2.12 on revenue of $4.69 billion, according to a poll by Thomson Reuters.

Norfolk Southern earned 76 cents per share in the first quarter, 2 cents off Wall Street estimates, according to a poll of analysts by Thomson Financial.

China cut a tax on share trading to support the stock market after the benchmark index plunged 35 percent this year. Stamp duty will be lowered to 0.1 percent from 0.3 percent effective tomorrow, the government said in a statement on its official Web site after the close of trading today.

U.S. crude inventories rose by 2.4 million barrels to 316.1 million barrels in the week ending April 18, U.S. Energy Information Administration reported on Wednesday. Analysts surveyed by energy information provider Platts expected an increase of 2 million barrels. After the data, crude-oil futures for June delivery fell 47 cents to $117.60 a barrel on the New York Mercantile Exchange. Gasoline supplies fell by 3.2 million barrels in the latest week, while distillate stocks fell by 1.4 million barrels, EIA reported. U.S. refineries operated at 85.6% of their operable capacity in the week ending April 18, up more than 4% from previous week's 81.4%, the Energy Information Administration reported.

Gold for June delivery dropped $16.20 to end at $909 an ounce on the New York Mercantile Exchange.

AK Steel Holding Corp. increased spot market prices for its carbon steel products by $50 a ton for all new orders. The move follows a $150-a-ton increase earlier in the month.

Microsoft Corp is prepared to walk away from its $43.6 billion bid for Yahoo Inc if the two sides can't agree on a price, Chief Executive Steve Ballmer said on Wednesday.

Amazon posted a rise in 1Q earnings to $143 million, or 34 cents a share, up 29% from $111 million, or 26 cents a share a year ago. Revenue rose 37 percent to $4.14 billion from $3.02 billion. Profit margin concerns may weigh on the stock.

Apple reported fiscal 2Q earnings of $1.05 billion, or $1.16 per share, up 36% from $770 million, or 87 cents a share a year ago. Revenue jumped 43 percent in the period to $7.51 billion, beating expectations of $6.96 billion. Shares traded lower on a lower-than-expected profit forecast, though many will note Apple has traditionally been conservative with these.

Credit Suisse took additional writedowns of $5.26 billion yesterday related to credit.

Motorola reported a 1Q loss of $194 million, or 9 cents a share, wider than the loss a year ago of $181 million, or 8 cents a share. Net sales fell to $7.45 billion from $9.43 billion. Reuters reports that the company has seen weakness in its mobile devices business which sold 27.4 million phones in the quarter compared with 45.4 million in the year ago quarter.

Starbucks warned that its estimates for fiscal 2Q earnings, scheduled for April 30, were lower than expected. According to The Wall Street Journal, the company expects to report earnings of 15 cents a share, compared with 19 cents for the same period a year ago. Slow sales in the US, particularly in places hit hard by the subprime crisis like California and Florida, have hurt the company.

Wednesday, April 23, 2008

New Records

4/22/08 New Records

The U.S. housing market weakened slightly in March, as resales of U.S. homes fell, inventories climbed and prices continued to decline, the National Association of Realtors reported Tuesday. Resales of U.S. homes and condos dropped 2% to a seasonally adjusted annualized rate of 4.93 million from 5.03 million in February, matching economists' expectations. Resales have sunk 19.3% in the past year. Inventories of homes for sale rose 1% to 4.06 million, representing a 9.9-month supply at the March sales pace. The median sales price fell 7.7% in the past year to $207,000.

U.S. home prices rose 0.6% in February from the prior month, the Office of Federal Housing Enterprise Oversight reported Tuesday. For the 12 months ending in February, prices fell 2.4%. For February, prices rose a seasonally adjusted 2.2% in New England, and 0.3% in the Pacific region. In the Mountain region, prices fell 0.6%. The OFHEO index is based on repeat sales of homes mortgaged through Fannie Mae and Freddie Mac.

The central Bank of Canada cut its target for the overnight rate by 50 basis points to 3%, with the bank projecting a "deeper and more protracted slowdown in the U.S. economy."

The Federal Reserve has auctioned another $50 billion in short-term loans to squeezed banks. It is part of an ongoing effort to relieve stressed credit markets. Counting the latest results, the central bank now has provided a total of $360 billion in the short-term loans to commercial banks through 10 auctions conducted since December. The latest auction was held on Monday, with the results announced on Tuesday.

European Central Bank council members Christian Noyer and Yves Mersch signaled the bank may have to raise interest rates to contain inflation. The ECB will ``move rates'' if needed to push inflation below 2 percent in 2009, Noyer, who heads France's central bank, told RTL radio today. Luxembourg central banker Mersch said the question of whether the ECB should raise rates is a valid one, the Financial Times Deutschland reported, citing an interview.

Costco is now posting signs limiting how much rice you can buy based on your previous purchases. They are trying to combat hoarding. In addition, Costco is placing purchasing limits on flour and cooking oil.

Rice futures had their biggest weekly gain in at least seven years last week on concerns export curbs by China and Vietnam will spread as importing nations struggle to feed their people. The Philippines, the biggest rice importer, received offers for only two-thirds of the grain it sought to buy on April 17.

Rob Hanna: "It appears buying interest is drying up. In the past the market has not fared well under these conditions."

McDonald's had net income of $946.1 million, or 81 cents per share, in the first quarter, compared with its year-earlier net income of $762.4 million, or 62 cents per share.

The Oil Drum: "In March world production of total liquids decreased by 100,000 barrels per day from February according to the latest figures of the International Energy Agency (IEA). Resulting in total world liquids production of 87.34 million b/d, which is the all time maximum liquids production. Average global production in 2007 was 85.41 million b/d according to the IEA. In the first three months of 2008 an average of 87.34 million b/d was produced. The EIA in their International Petroleum Monthly puts the average global 2007 production at 84.60 million b/d and January 2008 production at 85.80 million b/d."

For the quarter ended March 31, 2008, AT&T’s revenues totaled $30.7 billion, up 6.1 percent versus reported results in the year-earlier quarter. The company reported first-quarter 2008 net income totaled $3.5 billion, up 21.5 percent from $2.8 billion in the year-earlier first quarter, and reported earnings per diluted share totaled $0.57, up 26.7 percent from $0.45 in the first quarter of 2007.

UPS reported increased revenue in all segments with double-digit gains in both international package and supply chain and freight operations. A sharp decline in U.S. economic activity, however, led to a 9.4% drop in diluted earnings per share to $0.87 compared to a prior-year adjusted $0.96. The slowing U.S. economy not only reduced average daily volume in the U.S. by 0.3% for the quarter but also contributed to a shift away from premium products. Volume declined 3.8% for Next Day Air® and 2.9% for Deferred, while increasing 0.3% for Ground. Revenue per piece remained stable for all service levels, with consolidated revenue per piece increasing 2.7%. The volume decrease, shift away from premium products and increased fuel costs during the quarter contributed to the declines in operating profit and margin. The company expects earnings for the quarter in a range of $0.97 to $1.04 per diluted share compared to $1.04 for the second quarter of 2007. Commenting on annual earnings guidance, Kuehn said, “Most forecasters are projecting that current anemic conditions will prevail for the remainder of the year. Therefore, we are reducing our 2008 earnings expectations to a range of $3.90 to $4.20 per diluted share.

BJ Services Company reported net income of $127.3 million for the fiscal 2008 second quarter ended March 31, 2008, or $0.43 per diluted share, a 26% decrease from the $0.58 per diluted share reported in the previous quarter and a 33% decrease compared to the $0.64 per diluted share reported in the fiscal 2007 second quarter. Revenue in the second quarter of fiscal 2008 was $1,283.2 million, slightly below the $1,285.1 million reported in the previous quarter and up 8% compared to $1,186.6 million reported in the prior year's March quarter. Operating income for the quarter was $186.5 million, a 26% decrease compared to $252.6 million for the previous quarter and a 36% decrease compared to $290.2 million reported in the second quarter of fiscal 2007. Commenting on the results, Chairman and CEO Bill Stewart said, "During the quarter, the Company experienced significant pricing pressure in North America. Most of the price loss occurred in January as we completed a number of pricing agreements with our customers. I am, however, encouraged that pricing was relatively stable in February and March. The fundamental outlook is quite positive in the U.S. with natural gas prices at levels that should lay the foundation for higher drilling levels. This is supported by a number of our customers announcing budget increases for the second half of the calendar year. "Looking at our third fiscal quarter, we expect drilling activity in the U.S. to be up modestly compared to the second fiscal quarter. Pricing is expected to continue to be under pressure; however, we are forecasting the rate of price declines experienced in previous quarters to moderate in the third fiscal quarter. Canada is in full Spring break-up and drilling activity for the quarter is not expected to be significantly different than the same quarter last year. In the International Pressure Pumping segment, we are anticipating modest revenue improvement with slightly improved margins in the third fiscal quarter. The largest sequential improvement is expected to be in the Asia Pacific region, as business is expected to improve after experiencing weather disruptions and project delays in the second fiscal quarter.
"We anticipate sequential revenue and margin improvement for our Oilfield Services group. We are projecting our Tubular Services business to recover from delays experienced during the second fiscal quarter. We are also expecting seasonal improvement from our Process & Pipeline Services business. Based on these assumptions, we are currently projecting diluted earnings for the third fiscal quarter to be in the range of $0.39 to $0.43 per share."

Baker Hughes Inc, the Houston oil-services provider, reported that first-quarter net income rose 5.4% on 8% higher revenue. Earnings reached $395 million, or $1.27 a share, from $374.7 million, or $1.17, in the year-earlier period. The latest share figure reflects a gain of 6 cents a share from the sale of BHI's surface-safety-systems product line. Revenue reached $2.67 billion from $2.47 billion. A survey of analysts by FactSet Research produced a consensus estimate of $1.21 a share for the quarter.

Nabors Industries Ltd. reported first-quarter net income of $230.5 million, or 81 cents a share, down from $262.2 million, or 92 cents a share, a year earlier. Net income from continuing operations before taxes came in at $287.1 million, down from $341.8 million a year ago. Revenue at the oil drilling company rose to $1.32 billion from $1.28 billion. Analysts polled by FactSet Research were looking for a profit, on average, of 77 cents a share, with revenue of $1.29 billion. The company said its international business fell from the fourth-quarter due primarily to downtime on rigs operating in Mexico.

Oil field services company Weatherford International said its first-quarter profit fell 6.2 percent because of costs related to exiting some countries and a government investigation. Net income dropped to $264.2 million, or 76 cents a share, from $281.6 million, or 81 cents, a year earlier, the Houston-based company said Monday. Revenue increased 19 percent to a quarterly record of $2.2 billion. Half of that was from North America, where sales rose 8.3 percent to $1.09 billion.

Royal Bank of Scotland said Tuesday it had suffered $11.7 billion in additional losses and was forced to raise $23.9 billion in new capital to cover exposure to toxic U.S. loans.

Light, sweet crude for May delivery rose as high as $118.05 a barrel in electronic trading on the New York Mercantile Exchange, eclipsing Monday's all-time high of $117.83.

Lockheed Martin Corp said on Tuesday quarterly profit rose 6 percent, helped by higher sales of its electronic, information and space systems. Lockheed also raised its full-year earnings outlook to the range of $7.15 to $7.35 a share from a range of $7.05 to $7.25 a share.

UnitedHealth reduced its 2008 outlook by 40 cents per share to a range of $3.55 to $3.60 per share. Analysts expect $3.86 per share.

DuPont still sees adjusted 2008 earnings between $3.40 and $3.55 a share and first-half earnings per share growth of about 10%. For the remainder of 2008, the company expects that slowing demand in U.S. markets, including construction and motor vehicle, will offset growth in agriculture and other markets outside the United States.

Tribune Co. has reached an agreement in principle to sell Newsday to News Corp for $580 million, The Wall Street Journal and Reuters reported, citing unnamed sources.

The yield on the benchmark two-year Treasury rose 4 basis points to 2.21 percent by 7:06 a.m. in New York, according to bond broker BGCantor Market Data.
The yield on the benchmark two-year Treasury rose 4 basis points to 2.21 percent by 7:06 a.m. in New York, according to bond broker BGCantor Market Data. The price of the 1.75 percent security due in March 2010 fell 2/32, or 63 cents per $1,000 face amount, to 99 4/32. Ten-year yields rose 2 basis points to 3.75 percent. The yield on the two-year note, most sensitive to the outlook for interest rates, also climbed to within 5 basis points of the highest since Jan. 30 as traders raised bets the Federal Reserve will keep its benchmark rate on hold, or limit a reduction to a quarter-percentage point on April 30.

Global trade growth is expected to slow to a six-year low of 4.5 per cent this year but China has overtaken the US as the world's second-biggest exporter, the World Trade Organisation (WTO) said yesterday. Germany continues in first place.

Mike Burk: "As of Friday most of the blue chip indices had been up for 4 consecutive days, an event we have not seen since late December when it marked a short term high...The recent strength in the market was probably caused by the dramatic increase in money supply.The market is a bit overbought right now and volume on last weeks advance left a little to be desired, but, aside from volume, the breadth indicators look pretty good. I expect the major indices to be lower on Friday April 25 than they were on Friday April 18."

Mike Shedlock: "Office vacancies rose sharply in the first quarter, a trend that is expected to continue as a result of layoffs and new construction adding to supply. According to the real estate services firm Grubb & Ellis, first-quarter office vacancies rose to an average 13.6% nationally, up from 13% in the previous three quarters."With demand turning negative at the same time that the construction pipeline will deliver the 94 million square feet still underway, vacancy is expected to peak at 18% by the end of 2009," Grubb & Ellis economist Robert Bach wrote in a research note today."

Mortgage lender and real estate investment trust Thornburg Mortgage said Friday that a unit has defaulted on $300 million of short-term notes due under a commercial paper program.

According to the Washington Post, the freight railway industry is enjoying its biggest building boom in nearly a century, a turnaround as abrupt as it is ambitious. It is largely fueled by growing global trade and rising fuel costs for 18-wheelers. In 2002, the major railroads laid off 4,700 workers; in 2006, they hired more than 5,000. Profit has doubled industrywide since 2003, and stock prices have soared. This year alone, the railroads will spend nearly $10 billion to add track, build switchyards and terminals, and open tunnels to handle the coming flood of traffic. Freight rail tonnage will rise nearly 90 percent by 2035, according to the Transportation Department.

UAL Corp , parent of United Airlines, posted a wider quarterly loss on Tuesday as the carrier grappled with soaring fuel costs. UAL said it lost $537 million, or $4.45 per share in the first quarter, compared with $152 million, or $1.32 per share, a year earlier.

Coal producer Peabody Energy Corp. on Tuesday raised its 2008 profit guidance based on recent and pricing of contracts beginning April 1.The company now expects income from continuing operations to be between $2.20 and $3 per share. Previously, the company forecast full-year earnings between $1 and $1.85 per share.

Yahoo's results due later on Tuesday will not affect the company's value to Microsoft , which has offered to buy it for $44.6 billion, Microsoft Chief Executive Steve Ballmer said. "We think we can accelerate our strategy by buying Yahoo and will pay what makes sense for our shareholders," Ballmer said. "I wish Yahoo all the success with its results, but it doesn't affect the value of Yahoo to Microsoft."

Al-Maliki is looking for relief from Iraq's $67 billion debt-- most of it owed to Saudi Arabia, Kuwait, the United Arab Emirates, and Qatar.

Union Pacific's automotive volume fell 13 percent and lumber is down 27 percent for the first 14 weeks of this year.

Seadrill Ltd, the Oslo-based oil services group, has taken a 9.9 percent in Pride Int'l, and options traders are buying calls on speculation this could possibly be the start of a takeover bid.

On an adjusted basis, Yahoo earned 11 cents per share.Revenue rose to $1.82 billion from $1.67 billion. Excluding traffic acquisition costs, revenue rose to $1.35 billion from $1.18 billion. Analysts polled by Thomson Financial had expected adjusted earnings of 9 cents per share on $1.32 billion in revenue, excluding traffic acquisition costs.

Excluding one-time items, VMware, the virtualization software developer would have earned $88 million, or 22 cents a share, to meet the estimates of analysts surveyed by FactSet Research, who forecast a profit of 22 cents a share on revenue of $422.7 million. The company said it expects its second-quarter sales to rise about 55% over the $297 million it reported in the same period a year ago.

Crude closed up $1.89, or 1.6%, at $119.37, also a record closing price. Gold for June delivery rose $7.60 to end at $925.20 an ounce on the New York Mercantile Exchange.

The euro rose to a new record high against the dollar of $1.6007 Tuesday.

GlaxoSmithKline Plc agreed to buy biotechnology company Sirtris Pharmaceuticals Inc for $720 million in cash, in hopes its medicines that modulate an aging-related family of enzymes will be effective against a wide range of diseases. Glaxo said it will commence a cash tender offer for all outstanding shares of Sirtris, at $22.50 per share. That reflects a 84 percent premium to their closing price of $12.23 on Tuesday.

Foundation Coal said coal exports will increase 27% to 35% in 2008 to a range of 75 to 80 million tons. Foundation Coal touched a fresh 52-week high on of $66.42 on Tuesday.

Bond insurer Ambac Financial Group Inc. swung to a first-quarter loss of $1.66 billion, or $11.69 a share, from a profit of $213.3 million, or $2.02 a share, a year earlier. The group attributed the loss to a pretax $1.73 billion mark-to-market loss on its exposure to credit derivatives and a $1.04 billion loss provision on its financial guarantee direct exposure to mortgage-related securities. Ambac said its operating loss per share was $6.93.

Japan's merchandise trade surplus in March contracted 30.2% from the same month a year earlier, according to provisional data released by the Finance Ministry Wednesday. The trade surplus totaled 1.12 trillion yen ($10.87 billion) during the month, down from 1.60 trillion yen in the year-earlier period, the data showed. The decline in the size of the trade surplus exceeded consensus estimates among economists for a 15% contraction, according to poll by Dow Jones Newswire.

Boeing reported quarterly profit of $1.2 billion, or $1.62 per share, compared with $877 million, or $1.13 per share, in the year-ago quarter.

Monday, April 21, 2008

Risk Is In The Wind

4/20/08 Risk Is In The Wind

Win Without War, a coalition of 42 groups, is circulating a letter declaring that "it is past time to bring the Iraq war to an end" and that "the best course of action in the upcoming defense supplemental appropriations bill is to provide funding only for the safe and timely redeployment of U.S. troops out of Iraq." Antiwar Democrats are girding for a two-front battle. First, they want to beat back efforts to add popular domestic spending to any war funding, which would bolster support for the underlying bill. Then they want to stop any funding for the continuation of combat in Iraq. "We have two examples of what can happen when the caucus is unified enough to say no," said Rep. Barbara Lee (D-Calif.), a founder of the Out of Iraq Caucus.

R.W. McNeal, a market analyst writing in 1929: "Some pretty intelligent people are now buying stocks… Unless we are to have a panic - which no one seriously believes - stocks have hit bottom."


Venture capital investment fell nationally last quarter for the first time in nearly three years, but the Bay Area bucked the trend, according to numbers released today by Dow Jones. In the United States, venture investments fell 7 percent from the same period a year ago to $6.84 billion invested in 603 deals. Locally, however, investments rose 10 percent to $2.56 billion, which was invested in 213 deals, up four from a year ago.

The Organization of Petroleum Exporting Countries doesn't need to raise oil production and any increase will not affect prices, officials including the group's president, Chakib Khelil, said. ``Any increase in production now will not have an impact on prices because there is a balance between supply and demand,'' Khelil said during a visit to the Kuwait Chamber of Commerce and Industry, Kuwait's state news agency reported today. ``We in OPEC raised production last year and prices remained high. If we increase production we will not find people to buy the increment.''

President George W. Bush said that a free trade agreement with Colombia is ``dead'' unless House Speaker Nancy Pelosi revives it by allowing a vote on the measure.

Royal Bank of Scotland Group Plc will announce writedowns of between 5 billion pounds ($10 billion) and 7 billion pounds this week as it prepares a share sale, the Sunday Times reported, without saying where it got the information. The U.K.'s second-biggest lender, whose board meets today, also plans to announce a stock offering of between 10 billion and 12 billion pounds, and is looking to raise as much as 5 billion pounds by the end of this financial year through asset disposals, the newspaper said.

Former Bank of England policy maker Willem Buiter said the central bank will need to offer loan swaps to financial institutions of at least 100 billion pounds ($200 billion) to kick-start the U.K. mortgage market.

Philip K. Dick: "Reality is that which, when you stop believing in it, doesn't go away."

Pennsylvania, with 15.6 percent of its citizens over 65, is second only to retirement retreat Florida in the percentage of residents who are elderly. Among registered Democratic voters, 26 percent are under 34 and 38 percent are older than 55.

Oil prices spiked to a record $117.40 a barrel after a Japanese oil tanker was hit by a rocket near Yemen and militants in Nigeria claimed two attacks on pipelines. The 150,000-ton tanker Takayama was attacked about 270 miles off the east coast Yemen coast in the Gulf of Aden while it was heading for Saudi Arabia, its Japanese operator, Nippon Yusen K.K., said in a statement.

Bank of America Corp. said Monday that its first-quarter profit fell 77% as credit-loss provisions jumped $4.78 billion, driven by weakness in home-equity loans as well as credit extended to small businesses and homebuilders.

According to the Financial Times, a group of mutual funds and hedge funds led by Corsair Capital, a little-known private equity firm, prepared to invest $7bn (£3.5bn) to $8bn in National City, the 10th-biggest US bank. The deal is expected to be announced on Monday, according to people familiar with the matter.

“There’s been a lot of discussion over the last several days about how this campaign gets so negative, how we get distracted, how we exploit divisions,” Mr. Obama told voters in Reading on Sunday afternoon. “Look, our campaign’s not perfect. There’ve been times where, you know, if you get elbowed enough, eventually you start elbowing back.”

John Hussman: "We are intentionally avoiding such risk sectors on the expectation of further financial sector weakness, and because materials and cyclical stocks currently rely on sustained commodity price strength and “decoupling” between the U.S. and foreign countries. I continue to view commodities as cyclical, and decoupling as implausible – indeed, my impression is that the commodity surge will likely be turned on its head within a few months, about the point where 10-year Treasury yields move above the year-over-year CPI inflation rate...Indeed, to the extent that we can take any information signal from developing market action, it is that we should revise our expectations to allow for a much more significant slowdown in consumer spending than we have anticipated thus far. If anything, the evidence suggests revising our expectations about consumer spending and economic prospects downward....Given that the market is once again overbought in an unfavorable Market Climate, my impression is that the risk of a free-fall is significant. Aside from short-term speculative pressures (largely driven by relief about Bear Stearns), nothing in recent data suggests a material abatement of recession risk, mortgage risk, profit margin risk, or dollar risk."

Sunday, April 20, 2008

Another Bailiut Plan

4/19/08 Another Bailout Plan

According to the Financial Times, The Bank of England will announce Monday a scheme which will see it lend money to banks in return for collateral in a bid to help the troubled U.K. mortgage market, U.K. Chancellor of the Exchequer Alistair Darling said Sunday."The Bank of England will be making an announcement tomorrow in which what it will do is effectively lend banks money to unfreeze the [mortgage market] situation we've got at the moment," Mr. Darling said in a television interview on the British Broadcasting Corporation.

Alliance Data Systems Corp said on Friday it terminated a $6.76 billion sale to Blackstone Group LP affiliates and has sued to win a $170 million business interruption payment. Alliance said the Blackstone affiliates tried to cancel the contract on Friday. That attempt at cancellation was void because Blackstone was already in breach of the contract, Alliance said.

Wage and fiscal policy in the euro zone could buoy inflation and the European Central Bank may need to act, ECB Governing Council member Axel Weber said in a newspaper interview released on Saturday. "I am concerned that, with regard to the conduct of wage and fiscal policy, the recent temporary heightened inflation rate could be consolidated for longer than is necessary above the tolerance level of the Eurosystem," Weber said. "Should indications of this increase, we must react with interest rate policy," he added.

According to the WSJ, Libor's unexpected rise threatens to add billions to the bills of borrowers around the world. The London interbank offered rate jumped 0.09 percentage point Friday, its highest in nearly six weeks.

Incomes are down, prices are up, and Americans are feeling increasingly grim. That’s not unusual during a recession. What is remarkable is that these patterns have persisted for years — starting long before the current economic woes set in. An article in today’s Wall Street Journal examines the growing angst of the American middle class at a time when incomes of the top 1% of earners have expanded considerably.

Doug Noland: "The “recycling” of our “Bubble dollars” (in the process inflating local Credit systems, asset markets, commodities and economies across the globe) directly back into our securities markets rests at the epicenter of Global Monetary Dysfunction... Destabilizing price movements and myriad inflationary effects are poised to worsen. The specter of yet another year of near-$800bn Current Account Deficits coupled with huge speculative flows out of dollars is just too much for an acutely overheated and unstable global currency and economic “system” to cope with...Together, the Fed and Washington have effectively nationalized a large portion of both mortgage and market liquidity risk. It is, as well, worth noting that JPMorgan Chase expanded assets by $80.7bn during the first quarter (20.7% annualized) to $1.642 TN, with six-month growth of $163.3bn (22.1% annualized). Goldman Sachs expanded its balance sheets by $69.2bn during Q1 (24.7% annualized) to $1.189 TN, with half-year growth of $143.2bn (27.4%). Even Wells Fargo grew assets at an almost 14% pace this past quarter. And we know that Bank Credit overall has expanded at a 12.6% rate over the past 38 weeks. Meanwhile, GSE MBS issuance has been ramped up to a record pace. And let’s not forget the Credit intermediation function now being carried out by the money fund complex – with assets having increased an unprecedented $371bn y-t-d (41.3% annualized) and $900bn over the past 38 weeks (47.7% annualized). It is also worth noting the $184bn y-t-d increase (29% annualized) in foreign “custody” holdings held at the Fed. Sure, the Credit system remains under significant stress, with additional mortgage and corporate Credit deterioration in the offing. But, at least for now, policymakers have successfully stemmed systemic deleveraging. The Credit system is simply not in deflationary collapse mode. I could not be more pessimistic with regard to our economy’s prognosis. And certainly much more severe Credit problems lay ahead. I could argue further that recent Credit system developments are indeed consistent with the unfolding “worst-case scenario”. Yet I tend this evening to see benefits from analyzing the current backdrop in terms of the conclusion of the first Stage of the Crisis. The key aspect of this “first Stage” was a breakdown in Wall Street’s highly leveraged risk intermediation and securities speculation markets. The speed and force of the unwind was extraordinary and in notable contrast to traditional banking crises that track real economy developments. “Resolution” came only through the Federal Reserve and federal government assuming unprecedented risk – and at a cost of a policymaking mix of interest-rate cuts, marketplace interventions, and government guarantees...Fed funds are today ridiculously priced in comparison both to the inflationary backdrop and to global rates... When the Fed and Washington radically altered the rules of U.S. finance last month, they placed in jeopardy huge positions that had been put in place to hedge against and profit from systemic crisis. With the end of “Stage one” arises a major short squeeze in the Credit, equities, and derivatives markets. And when it comes to contemplating the scope and ramifications of today’s “hedging” activities, we’re clearly in Uncharted Waters. It is not beyond reason that a disorderly unwind of “bearish” Credit market positions could incite a mini bout of liquidity, speculation, and Credit excess that exacerbates Global Monetary Instability - while Setting the Backdrop for Stage Two of the Crisis."

Former Labor Secretary Robert Reich on Friday became the fifth former Clinton Cabinet member to endorse Barack Obama, saying that loyalty to his old friends the Clintons had been overwhelmed by unhappiness with the tone of Hillary Rodham Clinton's presidential campaign. "I did not plan to endorse. I wanted to stay out of the whole endorsement racket. But my conscience wouldn't let me stay silent after this latest round of mudslinging," Reich, a UC Berkeley professor of public policy, said in a telephone interview from his campus office. "When millions of Americans are losing their homes and jobs, when the economy is facing its worst crisis in 60 years, when the Iraq war is still causing chaos in the Middle East, to focus on whether Obama should have used the word 'bitter' when he talked about the plight of many in Pennsylvania, and to resurrect the old Republican themes of guns and religion, and to call Obama 'elitist' . . . just put me over the edge."

Soon, S.F. is expected to become America's first major city to pay an average of $4 for a gallon of regular gas.

Iran's president declared that crude oil prices, now above $115 a barrel, are too low, state media reported Saturday. President Mahmoud Ahmadinejad told an oil and gas exhibition in Tehran on Friday that he thought the commodity still had to "discover its real value," according to the Web site of Iran's state-run television.

The chief executive of Eni SpA said Sunday that the share of profits taken by governments of oil-rich countries is cutting international oil companies' profits, in some cases below their capital costs. "The average government take is now moving to overcome the critical barrier of 90 percent, which means that oil companies' profitability is decreasing," Paolo Scaroni, the CEO of Italy's largest oil and gas company by revenue, said in a speech at the International Energy Forum.