Saturday, July 26, 2008


7/26/08 Foreclosures

US home foreclosures leapt nearly 14 percent in the second quarter from the previous quarter, research group RealtyTrac said Friday in a sign of deepening housing woes.

On an annual basis, home foreclosure filings soared 121 percent from the same period in 2007, RealtyTrac said in releasing a survey of the country's 100 largest metropolitan areas.

Foreclosures have spiked in the worst housing slump in decades and a related credit crisis that have brought the economy to a crawl.

With home prices falling and unemployment and inflation rising, homeowners are increasingly hard-pressed to make their home loan payments.

RealtyTrac said that foreclosure filings were reported on 739,714 US properties during the second quarter.

The California-based company said that one in every 171 US households had received a foreclosure filing and the distress was nationwide.

According to the survey, 48 of the 50 states and 95 of the 100 major city regions had experienced year-over-year increases in foreclosure activity.

According to the WSJ, Cleveland-Cliffs Inc. forgot to get just one thing before unveiling its $10 billion deal for Alpha Natural Resources Inc. -- Phil Falcone's permission.

As a result, the Cleveland iron-ore producer may have inadvertently put itself into play.

Within two days of the deal's July 16 announcement, Harbinger Capital, Mr. Falcone's hedge fund and Cleveland-Cliffs' largest shareholder, said it opposed the move, leaving the transaction in doubt. With a 16% stake in Cliffs, Mr. Falcone effectively has enough power to block any transaction.

Footnoted.Org provided this info from the Apple 10Q: "The Company’s operations and performance depend significantly on worldwide economic conditions and their impact on levels of consumer spending, which have recently deteriorated significantly in many countries and regions, including without limitation the United States, and may remain depressed for the foreseeable future. For example, some of the factors that could influence the levels of consumer spending include continuing increases in fuel and other energy costs, conditions in the residential real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence and other macroeconomic factors affecting consumer spending behavior. These and other economic factors could have a material adverse effect on demand for the Company’s products and services and on the Company’s financial condition and operating results.”

Munich Re, the world's second-biggest reinsurer, dropped the most in more than five years in Frankfurt trading after it said second-quarter earnings fell 48 percent and warned of ``substantial'' writedowns on stock investments.

Profit this year will be less than Munich Re's earlier forecast, with second-quarter net income dropping to about 600 million euros ($942 million) from 1.16 billion euros a year earlier, it said today in a statement. Munich Re declined as much as 13 percent after saying ``turmoil in the capital markets'' hurt investment results.

Bill Gross (PIMCO): In contrast to prior cycles, the cost of credit is going up, not down--> sign that deleveraging may go on for longer than currently expected.

From RGE Monitor: "The Rising Risk of a Systemic Financial Meltdown With Up To $1.6T in Financial Losses: Could It End In Debt Deflation?"

French building materials giant Compagnie de Saint-Gobain SA said it would slash 6,000 jobs as part of a 435 million euro ($682 million) cost-cutting plan to adapt to worsening global economic conditions.

Orders for U.S.-made durable goods surged in June, rising 0.8% on stronger demand for primary metals, machinery and electronics, the Commerce Department reported Friday. Excluding the 2.6% decrease in transportation goods, orders rose 2.0%, the sharpest gain since last December. The increase far exceeded the expected 0.3% fall forecast by economists surveyed by MarketWatch. It was the largest increase in total orders since February. Shipments rose 0.5% in June, and were up 0.2% excluding transportation goods. Inventories rose 0.5% and unfilled orders rose 0.9%.
Excluding demand for defense equipment, total orders would have been up a much more modest 0.1 percent. Analysts said that the June performance was being propped up by sizable military spending for equipment, reflecting the ongoing wars in Iraq and Afghanistan, and this was offsetting widespread weakness in the rest of the economy.

"With orders excluding defense falling at a 4 percent annualized rate in the second quarter, it is pretty clear manufacturing is hardly thriving," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

The consumer sentiment index from the University of Michigan and Reuters hit 61.2 in July -- up from a reading earlier in the month of 56.6 -- compared with 56.4 in June. The June reading was the lowest since 1980 and the third-lowest reading in the 56-year history of the survey.

U.S. home sales fell 0.6% in June, the Commerce Department estimated Friday. The decline in new-home sales to a seasonally adjusted annual rate of 530,000 was well above the 501,000 pace expected by economists surveyed by MarketWatch. That was because sales for the past three months were revised up sharply. New-home sales in May were revised to a 533,000 level compared with the previous estimate of 512,000. Sales remained above the cycle-low of 513,000 that was set in March. New-home sales are down 33.2% compared with a year ago. The months' supply of homes on the market fell slightly to 10 months in June from 10.4 months in May. Median sales prices have fallen 2.0% in the past year to $230,900.

Nickel headed for the biggest weekly decline in London in four months as stainless-steel mills, the biggest users of the metal, said demand is weakening. Copper and aluminum increased. Jinchuan Group Co., Asia's biggest nickel producer, cut prices by 11 percent from today. Acerinox SA, the world's largest stainless-steel producer, and Finland's Outukumpu Oyj said this week that orders from construction slowed.

Reports from stainless-steel producers reflect ``weaker demand'' for nickel, Leon Westgate, an analyst at Standard Bank Plc in London, said in an e-mailed report late yesterday.

Corn and soybeans may fall on speculation warmer, wetter weather in the next two weeks will improve the yield potential of the two biggest U.S. crops.

Most Midwest fields may get as much as 1.5 inches (3.8 centimeters) of rain in the next five days with temperatures rising to slightly above normal, said Mike Tannura, a forecaster at T-Storm Weather in Chicago. No severe heat is expected in the next two weeks, while more rain may fall late next week, he said.

``The weather forecasts are about as good as they get for this time of the year,'' said Joseph Vaclavik, a grain broker for Advantage Traders Group in Chicago, a division of MF Global Ltd. ``It's the end of the week and prices are likely to trade both sides. There's not much interest in establishing new positions.''

Amgen said late Friday that a Phase 3 study where patients received denosumab, a RANK Ligand inhibitor, demonstrated a significant reduction in the incidence of new vertebral fractures compared with placebo treatment. Women receiving denosumab also experienced a significant decline in the incidence of new non-vertebral and hip fractures. At the same time, the incidence and types of adverse events, including serious infections and neoplasms, were similar between the denosumab and placebo groups, Amgen said. The three-year international study involved 7,800 women with osteoporosis.

The 28 branches of 1st National Bank of Nevada and First Heritage Bank, operating in Nevada, Arizona and California, were closed Friday by federal regulators.

The banks, owned by Scottsdale, Ariz.-based First National Bank Holding Co., were scheduled to reopen on Monday as Mutual of Omaha Bank branches, the Federal Deposit Insurance Corp. said.

Friday, July 25, 2008


7/25/08 Illusion

Jon Markman: "The recent updraft is probably an illusion. There's no indication the bear market has ended and plenty of evidence it has a long way to fall yet."

Obama maintained a lead of 47%-41% over McCain in a WSJ/NBC poll.

According to the WSJ, states are being forced to slash spending and cut jobs in order to close a projected $40 billion shortfall in the current fiscal year. That gap, more than triple the size of the previous year's, is the result of broad economic weakness at the state and local levels that could cause pain throughout this year and into 2010, a report found.

Japanese exports shrank for the first time in nearly five years, increasing the likelihood of a second-quarter economic contraction as exporters struggle against falling global demand.

The 1.7 per cent year-on-year fall in the value of June shipments, the first in 55 months, shows that growth in exports to Asia, Russia and the Middle East are no longer enough to compensate for sharply falling shipments to the US and Europe.

The Houston Chronicle reported about 2 million Americans get a raise today as the federal minimum wage rises 70 cents. The bad news: Higher gas and food prices are swallowing it up, and some small businesses will pass the cost of the wage hike to consumers.

The National Association of Realtors reported that sales dropped by 2.6 percent last month to a seasonally adjusted annual rate of 4.86 million units. That was more than double the decline that had been expected and left sales 15.5 percent below where they were a year ago.

The downward slide in sales depressed prices, too. The median price for a home sold in June dropped to $215,100, down by 6.1 percent from a year ago. That was the fifth largest year-over-year price drop on record.

The drop in sales pushed inventories of unsold single-family homes and condominiums to 4.49 million units, up by 0.2 percent. That represented a 11.1 month supply at the June sales pace, the second highest level in the past 24 years.

Brett Steenbarger: "49% of financial stocks now above 50 day MA; only 8% of energy stocks and 36% of tech stocks."

Outokumpu Oyj, the world's fourth- biggest stainless steel maker, declined the most in at least 18 years in Helsinki trading after profit missed analyst estimates and it said construction demand is weaker.

The shares fell as much as 20 percent after it said net income from continuing operations declined 77 percent to 130 million euros ($204 million). That missed the 150 million-euro median of seven analyst estimates compiled by Bloomberg.

Water is set to replace oil as the commodity to watch, as soaring global demand and scarce supplies bring home the value of this most basic resource to investors, a director at an asset manager told CNBC Thursday.

"You're going to see with the growing population, the greater need for water; it's the one thing we can’t do without," Ian Morley, Director at DDQ, said.

Stuart Hill: "Firstly, there is the fact that many of the benefits of Globalisation have been taken upfront, namely lower prices for manufactured goods and a cap on wage demands by workers due to the overseas outsourcing threat. Now there are, instead, the downsides of Globalisation, which are striking both the Corporate and Consumer sector.

This includes the increased competition for Scarce Resources that Globalisation necessarily entails as Developing Countries become richer – it was clearly unrealistic to expect that the West could reap only benefits forevermore from deeper integration with China et al , as the world Stock Markets seemed to assume until recently. What many analysts appear not to appreciate though is that this process of competition for resources was temporarily suspended while Developing Countries chose to accumulate Dollars (mainly Treasury Bonds) in order to stop their currencies from appreciating.

Now however the game has changed. Not only is China in particular desperately trying to exchange some of its stock of Dollars for the Real Resources that it needs to continue its growth , but also Inflation has become a key issue in Developing countries generally ( not least with rising food prices leading to rising wage demands there). This brings the added danger that LDC’s will allow their currencies to appreciate in order to reduce domestic Inflationary Pressures – this will of course mean that the US loses the disinflationary effects of Globalisation just at the moment when it needs them most.

The final key disadvantage that we face compared to the 1970’s is the changed Financial Landscape. We now (as Doug Noland has eloquently demonstrated) have a Global Monetary System with no anchor or restraint, where Central Bank Reserves and Credit generally have exploded higher. We also have a sophisticated array of Financial Products (think ETF’s , Options and Futures) that allow all (even retail) participants to switch from Financial to Real Assets at the push of a button."

The U.S. Agriculture Department said Wednesday it expects U.S. food prices to climb an additional 4% to 5% in 2009 as high grain prices continue to squeeze their way into the American diet.

Fertilizer prices continue to surge according to data released by the World Bank. Prices for diammonium phosphate (DAP), Phosphate rock, Potassium chloride, triple superphosphate (TSP), and Urea were 235 percent higher in the quarter ending June 30 over the prior period a year earlier. The biggest gainer was Phosphate rock which has risen 514 percent between April-June 2008 and April-June 2007. Although prices have leveled off for these five fertilizers in the past few months, they are still 22 percent higher than in March 2008.

Malaysia's consumer price inflation soared to a 26-year high in June, official data showed Wednesday, heightening expectations that the central bank will hike interest rates at its meeting later this week.
The consumer price index rose by 3.9% month-on-month in June to 7.7% year-on-year, Malaysia's department of statistics reported Wednesday. In comparison, the CPI index rose by 3.8% in May.

The Oil Drum: "Yesterday, a report from a credible institution was released detailing why at least one of the high oil price bogeymen, 'the speculators', are not to blame. In this report, the Commodity Futures Trading Commission (CFTC), threw cold water on the recent rhetoric in Congressional testimonies and television commentary that high oil prices are caused by investment speculators."

According to Bloomberg, platinum fell, extending the longest losing streak in six years, and palladium slid on concern that slowing economic growth will cut demand for the metals.

More than half of all platinum consumption is for emissions-control components for car and truck engines. U.S. auto sales fell to the lowest annual pace in 15 years last month, raising concerns purchases of the metal for industrial use will decline. Earlier today, palladium futures in Tokyo fell by the exchange-imposed daily limit on signs of lower demand.

David Fry: "In just 10 days, the market has pulled off a complete turn-around, going from extreme oversold to overbought conditions. Keep that in mind if you're thinking of joining the party now."

France took a step toward ending its decade-long experiment with a 35-hour work week, with lawmakers passing a bill that gives companies greater latitude to extend working hours.

Diamond Offshore Drilling Inc., a provider of contract drilling services for energy companies, said Thursday its second-quarter profit soared 65 percent as revenue skyrocketed about 47 percent. For the period ended June 30, the company reported earnings of $416.3 million, or $2.99 per share, compared with profit of $251.9 million, or $1.81 per share, in the year-ago period.

First-time claims for state unemployment benefits rose to their highest level since late March in the latest week, the Labor Department reported Thursday. The number of initial claims in the week ending July 19 rose 34,000 to 406,000. It's the highest level since the week ended March 29. The consensus forecast of Wall Street economists was for claims to rise to 380,000. Claims in the previous week were revised to an increase of 24,000 to 372,000 compared with the initial estimate of a rise of 16,000 to 366,000. The four-week average of initial claims rose 4,500 to 382,500. A Labor Department official said that claims have been very volatile this month given the annual auto plant shutdowns, the Fourth of July holiday, and the end of the second quarter. Economists expect the volatility to subside in coming weeks. Meanwhile, the number of Americans receiving state jobless benefits held fell 9,000 to 3.11 million in the week ending July 12. The four-week moving average of continuing claims fell 7,000 to 3.13 million.

George Ure: " Apollo Astronaut Edgar Mitchell, the 6th man to walk on the moon, has a bit of a bombshell: He says earth has been visited by off-planet beings; something that's been covered up for 60 years."

Burlington Northern Santa Fe Corp. reported late Thursday second-quarter net income fell to $350 million, or $1 a share, from $433 million, or $1.20 a share, a year ago. The latest results include one-time charges that reduced earnings by 34 cents a share. Revenue for the railroad rose nearly 17% to $4.48 billion from $3.84 billion. Analysts polled by FactSet had forecast the Fort Worth, Texas-based company would report earnings of $1.32 a share on $4.42 billion in revenue.

The Dow Jones Industrial Average fell 283 points, or 2.4%, to 11,349. The S&P 500 dropped 29 points, or 2.3%, to 1,252, while the Nasdaq Composite declined 45 points to 2,280.

Crude oil for September delivery gained $1.05, or 0.8%, to end at $125.49 a barrel on the New York Mercantile Exchange. September natural gas fell 55.8 cents, or 5.7%, to $9.23 per million British thermal units. Gold for August delivery ended down 50 cents at $922.30 an ounce on the New York Mercantile Exchange.

Microsoft Corp. plans to bring its Web search and search ads to social-networking site Facebook Inc., The Wall Street Journal reported Thursday in its online edition, citing people familiar with the matter. The deal is likely to be a major boost for the software giant as it will allow searches from Facebook's 90 million members to pass through its system, the newspaper said.

According to AMG Data Services, Including ETF activity, Equity funds report net cash outflows totaling -$9.608 billion in the week ended 7/23/08 with Domestic funds reporting net outflows of -$10.522 billion and Non-domestic funds reporting net inflows of $914 million;

Excluding ETF activity, Equity funds report net cash outflows totaling -$4.224 billion with Domestic funds reporting net outflows of -$3.198 billion and Non-domestic funds reporting net outflows totaling -$1.026 billion;

Exchange Traded (Equity) funds report net outflows of -$5.384 billion.

Thursday, July 24, 2008

Housing Package

7/24/08 Housing Package

House and Senate leaders have largely hammered out a compromise deal on a mammoth housing package that would permit the government to bolster Fannie Mae and Freddie Mac in an emergency, overhaul supervision of the housing-finance giants and allow the government to insure up to $300 billion in refinanced mortgages.

DataQuick reports today that foreclosures in California soared 33% from the first quarter to the second quarter of 2008, and are running 261% ahead of year-ago levels.

George Ure: "If your 401(k) has retained even half its value by the end of this year, you will be doing very, very well, compared to most. If you're thinking "Gee, wonder if that means a Dow under 9,000?" You may be horrified how far under. Plus, a few more thoughts on PCP (personal contingency planning) for October."

The US Treasury’s rescue plan for Fannie Mae and Freddie Mac could cost taxpayers $25bn, congressional researchers said as evidence mounted that turmoil at the two companies is helping push up interest rates for homebuyers

Five big lenders led by Wachovia and WaMu reported combined quarterly losses of more than $11 billion, but their shares jumped an average of 14% on hopes that battered bank stocks have hit bottom. Some of the hardest hit banks are considering selling their lucrative money-management units to raise cash.

President George W. Bush said Wall Street had “got drunk” and was experiencing a hangover at a recent closed-door fundraiser in Houston in which he also made light of the US housing crisis.
In a video recording that emerged on Tuesday, Mr Bush questioned how long Wall Street banks would remain sober and “not try to do all these fancy financial instruments”.

The recording, obtained by an ABC outlet in Houston and filmed even after the president apparently asked for cameras to be turned off, represents the first time Mr Bush has fallen victim to a “YouTube moment”.

IN 2006, THERESA GUSMAN, the head of Deutsche Asset Management's global commodities team, told Barron's Online that we were "in the midst of a long-term secular bull market in commodities."

Some might call that prescient. (See Electronic Q&A, "Seeing Many Stocks Worth Liking," Oct. 17, 2006) Over the past 12 months, Gusman's DWS Commodity Securities Fund (ticker: SKNRX) had a total return of 27%, while the Standard & Poor's 500 index fell by 17% on a total return basis, according to Morningstar data.
Despite the outperformance, Gusman is holding firm with respect to commodities. She believes the bullish run remains young and has a ways to go.

Mobile phone group Vodafone announced a surprise 1 billion-pound ($2 billion) share buyback program on Wednesday, saying a big share price fall in the wake of Tuesday's trading update left the stock undervalued.

Chateau Montelena, one of two wineries that put Napa Valley on the world stage when it beat out France's top wines in a tasting, is being purchased - by one of France's top vintners.

Montelena's sale to the owner of storied Bordeaux property Cos d'Estournel is the latest in a string of purchases of pioneering Napa wineries by outside investors. But it also serves as a reminder that the weak dollar has made even the most American of brands appealing to foreign investors.

A bigger-than-expected rebound in land drilling in North America this year is giving a boost to several Houston oil field service companies that struggled with a downturn on the continent in 2007.

Light, sweet crude for September delivery fell $1.57 to $126.85 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract fell $3.40 to settle at $128.42 in the previous session.

The August contract fell $3.09 to settle at $127.95 a barrel as it expired at the end of floor trade.

The overnight sell-off dragged oil prices to their lowest level since early June and was crude's fifth decline in the last six sessions.

“The placement of the George W. Bush library and the establishment of an institute to promote the policies of this president at SMU would be a tragedy," retired Bishop William Boyd Grove of West Virginia told "The policies of the Bush administration are in direct conflict with the Social Principles of The United Methodist Church on issues of war and peace, civil liberties and human rights, care for the environment, and health care."

Thomas Tan: "To understand leverage, just look at one of the WSJ articles from last Wednesday (7/16). Lehman's (LEH) market cap of $9B is only 40% of their book value of $23B, and it sounds very cheap. But then look at their assets: They have $160B hard-to-value Level 2 assets and $41B impossible-to-value Level 3 assets. The WSJ article applies a 5% haircut on Level 2 and 25% on Level 3 to come up with $19B future write-offs. However, based on analysis from many other public sources, most of the Level 3 assets are MBS CDOs, even if they are AAA rated, the recovery rate is only about 50%. And anything under AAA rating is pretty much wiped out. For Level 2 assets, it would be very lucky if only 10% haircut is true. The combination of both more realistic haircuts will result in $36B additional losses, which would more than wipe out their book value of $23B plus their market cap of $9B. This is leverage in the working, unfortunately at the downside."

Richard Daughty: "An adult-club owner named Joe Redner says that although business is down 25%, 'the economy does have one upside for the business - it's bringing out more women willing to give pole dancing a try.' Hahaha!"

Nickel prices may average as much as 46 percent lower this year as steelmakers increased production of low-nickel content products, said Jindal Stainless Ltd., India's largest stainless steel producer.

Nickel will average between $20,000 and $25,000 a metric ton this year compared with an average $37,089 a ton last year, said Arvind Parakh, a director at the New Delhi-based company.

The metal is headed for a second straight annual drop, after last year's 21 percent decline as stainless-steel mills resorted to products containing less nickel. The use of nickel in making stainless steel may fall 9.5 percent this year, metals research firm Heinz H. Pariser said July 9.

In its weekly pump spending survey, MasterCard found U.S. gasoline demand dropped last week for the thirteenth week in a row. Demand fell 3.3% compared with the same week a year earlier, according to the survey. Since the start of 2008, gasoline demand is down 2.2%.

Lawmakers in Alaska's House voted to support Gov. Sarah Palin's proposal to award TransCanada Corp. an exclusive license to pursue federal certification for the 1,715-mile pipeline estimated to cost between $26 billion and $30 billion.

"We have to find a solution where government intervention prevents a disorderly outcome" in the housing market that leads to a "systemic banking crisis," Nouriel Roubini says.

The housing bill, which earmarks $300 billion to backstop mortgages after lenders agree to lower mortgage payments, is "a step in the right direction" but "doesn't do enough," he says, predicting the government will ultimately need to spend more than $1 trillion.

Roubini's main concern stems from a view that the "housing recession is not bottoming by any standards," in contrast to hopeful comments from Paulson on Fox News and Barron's last weekend.

The economist believes U.S. home prices will ultimately fall 30% from their peak -- vs. 18% to date according to the S&P Case-Shiller Index -- "before bottoming out some point in 2010."

Ten-year note yields rose 4 basis points to 4.14%, the highest since June 23.

Northwest Airlines sees its merger with Delta Air Lines Inc. deal closing in fourth quater of this year.

Philip Morris lifted its forecast of adjusted earnings for 2008 to $3.32 to $3.38 a share. That would represent a rise of 19% to 21% from a pro-forma $2.79 a share in 2007. Philip Morris previously had estimated the year's profit at $3.18 to $3.24 a share.

In early trading gold for August delivery dropped $11.20 to $937.30 an ounce on the New York Mercantile Exchange. The September Nymex crude contract was down $2.12 at $126.30 a barrel.

Peabody Energy said Wednesday that second-quarter earnings were $233.4 million, or 86 cents a share, compared with $107.7 million, or 40 cents a share, in the year-ago period. Income from continuing operations rose 143% to $242.6 million versus the prior year, with related earnings per share of 89 cents. Revenue rose 43% to $1.53 billion. For the third quarter earnings are expected to be 80 cents to $1.05 per share.

EMC said it expects earnings of 74 cents a share for the full year; excluding items, it projects a 78-cent profit.

Adjusted earnings from continuing operations were $1.04 a share, up 44%. Revenue reached $6.08 billion from $5.84 billion. A survey of analysts by FactSet Research produced consensus estimates of 86 cents of profit on $5.95 billion of revenue. U.S. comparable-store sales rose 3.4% and operating profit increased 6%, McDonald's reported.

Boeing reaffirmed its full-year earnings in the range of $5.70 to $5.85 a share, and said earnings in 2009 should come in between $6.80 and $7 a share. Wall Street is looking for '08 and '09 earnings of $5.91 and $6.95 a share, respectively.

AT&T Inc.said Wednesday that its second-quarter earnings rose to $3.77 billion, or 63 cents a share, from $2.90 billion, or 47 cents a share, in the year-earlier period. Excluding items, earnings were 76 cents a share for the quarter.

Pepsico expects 3% to 5% volume growth in 2008, with low-double-digit net revenue growth, and earnings at least $3.72 a share, excluding items.

Pfizer's adjusted net income rose to 55 cents a share from 42 cents a share. Revenue increased 9% to $12.13 billion.

WellPoint expects earnings between $5.42 and $5.57 a share, with enrollment dropping by around 150,000 members in the second half. Analyst polled by FactSet Research expected a profit of $1.36 a share for the quarter and $5.52 for the year.

Industrial orders across the 15-nation euro zone fell more than expected in May, posting a 3.5% monthly drop and a 4.4% annual decline, Eurostat reported Wednesday, underlining worries about the single-currency area's economic prospects.

ConocoPhillips benefited from the record crude oil prices, as the company earned $3.50 per share in the second quarter, which is $0.05 better than the consensus estimate.

Wyeth increased its 2008 adjusted earnings forecast to $3.47 to $3.55 a share.

VMWare made a new 52-week low.

Genzyme repeated that it expects non-GAAP earnings for the year of $3.90 a share. The company lowered its GAAP earnings estimate in 2008 to about $2.20 a share from prior guidance of approximately $2.65. GAAP figures also includes Genzyme's equity investment in Isis Pharmaceuticals.

Total ad revenue plunged nearly 11%. New York Times Co. Chief Executive Janet Robinson warned: "To date in July, we have seen the effects of the deepening economic slowdown, particularly in [advertising] categories sensitive to the price of oil - airlines, hotels and autos, and we expect that will continue for some time."

Manufacturing activity in the central Atlantic region contracted again in July, according to the Richmond Fed’s latest survey. Respondents reported somewhat greater declines in factory shipments and new orders and more moderate weakness in employment. Most other indicators also implied weaker activity. District contacts reported capacity utilization declined further and vendor delivery times reversed the positive reading seen last month. Moreover, manufacturers noted orders backlogs were virtually unchanged and finished goods inventories grew on pace with June.
Looking ahead, manufacturers’ optimism about future business prospects dropped considerably in July. Firms anticipated that growth in shipments, new orders, backlogs, employment, and average workweek would turn negative during the next six months.
Survey assessments of current prices were on par with a month ago. Looking forward, respondents expected price growth to quicken over the next six months.

1440 Wall St: "The negative wealth effect of declining home values and increase in “underwater” mortgages will lead to more Americans walking away from their homes. Such “jingle mail” threatens to ultimately cost $1 trillion in credit losses, wiping out 75% of the capital of U.S. financial institutions, Roubini warns.

It is that “disorderly” outcome Roubini says the government cannot afford to let happen. With “the charade” that Fannie and Freddie weren’t already government agencies over, he believes a nationalization of the 50% of mortgages not owned or guaranteed by Fannie and Freddie will be necessary, and the Frank-Dodd Bill is a small step down that road.

From Roubini’s view, nationalizing housing avoids the government having to nationalization the entire banking system, making it the lesser of two evils."

"There is less freight available," said C.H. Robinson chairman and chief executive John Wiehoff during the company's conference call Tuesday. "When you add diesel fuel increases of 50%-plus to that environment, things get pretty challenging."

Rapidly deteriorating U.S. household finances under the strain of increased debt and falling home prices are threatening the health of the U.S. economy, said Moody's in a report released Wednesday. "Household credit quality is rapidly eroding, and overleveraged households are at the heart of the economy's problems. The mounting losses on household debt are straining financial institutions and will keep the economy struggling to grow for the remainder of this year and well into 2009," said Mark Zandi, chief economist for Moody's Deterioration is most evident in mortgages and the ratings agency predicted that mortgage loans defaults could hit 3 million in 2008, up from about 1.5 million in 2007, citing information from

New Zealand stocks jumped after the central bank cut its benchmark interest rate in a surprise move.

Brazil's central bank rate committee late Wednesday raised its key interest rate by 75 basis points, to 13%, as it moved to curb rising inflationary pressures.

Pulte Homes Inc. on Wednesday posted a second-quarter loss of $158.4 million, or 63 cents a share, compared to a loss of $507.6 million, or $2.01 a share in the same period a year earlier.

Offshore oil driller Noble Corp reported late Wednesday second-quarter net income of $375.7 million, or $1.40 a share, up from $290 million, or $1.08 a share, a year ago. Inc. said Wednesday that earnings for the second quarter more than doubled thanks to a strong growth in sales. For the second quarter ended June 30, the online retail giant reported earnings of $158 million, or 37 cents a share, compared to earnings of $78 million, or 19 cents a share, for the same period last year.

The Ryland Group said its inventory of unsold homes stood at 680 at the end of June. That's 17% lower than at the end of 2007.

Crude-oil futures fell nearly $4 Wednesday, as data showed U.S. inventories fell less than expected and as concerns faded that Hurricane Dolly would pose much of a threat to energy infrastructure in the Gulf of Mexico. Crude for September delivery, the new front-month contract, fell $3.98 cents, or 3.1%, to settle at $124.44 a barrel on the New York Mercantile Exchange. U.S. crude inventories fell 1.6 million in the week ended July 18, the U.S. Energy Information Administration reported. Analysts surveyed by Platts had expected a decline of 1.9 million barrels. The hurricane is not expected to have a major impact on oil and natural gas operations in the Gulf, weather analysts said.

The Federal Reserve's Beige Book said the U.S. economy slowed somewhat while price pressure intensified over the past six weeks.

Gold for August delivery dropped $25.70 to end at $922.80 an ounce on the New York Mercantile Exchange.

Ford posted a second-quarter loss of $8.7 billion, or $3.88 a share. Ford's second quarter pre-tax operating loss from continuing operations, excluding special items, was $1 billion, down from a year-ago profit of $483 million.

EnCana boosted its outlook for full-year 2008 cash flow to between $10 billion and $11 billion, from a previous outlook of $9.6 billion to $10 billion. EnCana CEO Randy Eresman said previously announced plans to split the company into two independent firms, one focused on unconventional natural gas and the other on integrated oil -- are on track for completion in early 2009.

Bunge hiked its full-year profit forecast to a range of $11.60 to $11.90 a share, compared to its prior view of $9.35 to $9.65 a share, citing strong fertilizer fundamentals and solid agribusiness margins.

Potash Corp. for the year upped its earnings view to a range of $12 to $13 a share, up from $9.50 to $10.50 a share.

Wednesday, July 23, 2008

Business Bankruptcies Soaring

7/23/08 Business Bankruptcies Soaring

Driven by a sour economy and skittish consumers, U.S. business bankruptcies saw their sharpest quarterly rise in two years, jumping 17 percent in the second quarter of 2008, according to an analysis by McClatchy.

Commercial filings for the first half of 2008 are up 45 percent from last year, as the national climate for commerce continues to deteriorate amid rising energy and food costs, mounting job losses, tighter credit and a reticence among consumers to part with discretionary income.

From April through June, 15,471 U.S. businesses called it quits, according to data from Automated Access to Court Electronic Records, an Oklahoma City bankruptcy management and data company.
States that saw the biggest increase in filings were Delaware, Montana, Oregon, Maryland and Connecticut, suggesting that the economic gloom is spreading beyond large population centers.

Costco Wholesale said fourth-quarter ending August 31 earnings per share will be well below analyst estimates of $1 a share. It blamed energy costs, a greater-than-forecast inventory charge, a negative swing in gasoline operations profitability and lower-than-planned merchandise profits due to holding selling price points. It said its comparable sales results are strong compared to other retailers. Its board authorized a new stock buyback plan of up to $1 billion, which is in addition to the $5.8 billion stock buyback plan of which $4.6 billion has been used.

Wachovia Corp , the fourth-largest U.S. bank, on Tuesday posted an $8.86 billion second-quarter loss, slashed its dividend and announced 6,350 job cuts after losses tied to mortgages soared.

Its shares fell $1.67, or 12.7 percent, to $11.51 in premarket trading.

The net loss for the Charlotte, North Carolina-based bank equaled $4.20 per share, and compared with a profit of $2.34 billion, or $1.22, a year earlier. On short covering the stock rallied from 12 to 17. Another craziness.

BJ Services Company reported net income of $141.8 million, or $0.48per diluted share, for the third quarter of fiscal 2008, which ended June 30, 2008.These results represent a 12% increase from the $0.43 per diluted share reported in the previous quarter and a 16% decrease compared to the $0.57 per diluted share reported in the third quarter of fiscal 2007.
"The significant milestone of achieving price and margin stabilization in U.S. Pressure Pumping operations appears to have occurred during the quarter," the company said.
BJ Services said it expects fourth-quarter net income of 54 to 57 cents a share, ahead of the latest Wall Street estimate of 50 cents a share.

Caterpillar Inc said on Tuesday quarterly earnings rose 34 percent as strong growth in emerging economies offset weakness in North America, Western Europe and Japan.

The company, a component of the Dow Jones industrial average and a U.S. business bellwether, reported a second-quarter profit of $1.11 billion, or $1.74 a share, compared with $823 million, or $1.24 a share, a year earlier.

Sales rose 20 percent to $13.64 billion.

Monetary policy is currently very accommodative and needs to be reversed and the rate hikes will likely need to begin soon, said Charles Plosser, the president of the Philadelphia Federal Reserve Bank on Tuesday. "To keep inflation expectations anchored means that monetary policymakers will have to back up their words with action," Plosser said.

Supervalu lowered its full-year profit forecast to as much as $3.16 a share from a previous projection of as much as $3.22.

Paccar said Tuesday that second-quarter earnings were $313.5 million, or 86 cents a share, compared to $298.3 million, or 79 cents a share, in the year-ago period. The average of analysts polled by FactSet was for earnings per share of 83 cents. Total revenue was $4.11 billion. up from $3.72 billion in 2007. "Robust demand for Paccar products in Europe and international markets continues to generate excellent earnings and provide opportunities for growth, tempered by the continued softness in the U.S. and Canadian truck markets," said CEO Mark Pigott.

UPS said Tuesday that second-quarter earnings were $873 million, or 85 cents a share, compared to $1.1 billion, or $1.04 in the year-ago period. The average of analysts polled by FactSet was for earnings per share of 98 cents a share. Revenue was $13 billion, compared to $12.2 billion a year ago. The company cited increasing fuel costs and a stagnant U.S. economy caused the earnings decline in both the U.S. Domestic and International Package segments. For the full year 2008 UPS sees earnings-per-share within a range of $3.50 to $3.70.

Lockheed Martin raised its full-year earnings outlook to a range of $7.45 to $7.60 a share, from its prior guidance of $7.15 to $7.35 a share.

For the full year Biogen Idec sees earnings per share of at least $2.51 and on an adjusted basis of at least $3.50.

UnitedHealth said it still expects full-year 2008 earnings of $2.95 to $3.05 a share and plans to continue its share repurchase program, buying back more than $3 billion in repurchases over the full year, after considering cash payments for legal settlements.

Halliburton said earnings from continuing operations rose to 68 cents a share from 63 cents a share.

Oil field services firm Baker Hughes Inc.said second-quarter net income rose to $379.3 million, or $1.23 a share, compared to $349.6 million, or $1.09 a share, a year ago. The second-quarter 2008 figure includes a net after-tax charge of $40.3 million, or 13 cents a share, tied to a previously announced legal settlement. It also includes an after-tax gain of $18.4 million, or six cents a share, from the sale of Houston-based BHI's surface safety systems product line.

Vodafone said it expects full-year sales to be at the low end of its guidance range, even as the U.K. mobile-phone company reported a 19.1% increase in first-quarter sales.

The United States says it would limit trade-distorting farm subsidies to a lower level of $15 billion a year as part of a global trade deal.

The offer is an improvement from Washington's previous offer of a $16.4 billion limit.

But it is contingent on Brazil, China and India opening up their industrial markets — a key demand of rich countries in the World Trade Organization's seven-year-old negotiations.

Jason Trennertcalculates that dividends on stocks exceed the yield on 3-month Treasury bills. That has happened two other times in the last 50 years and both coincided with major market bottoms. However, would this calculation hold should the Fed raise rates?

"I'm advising my clients to hold all shipments at this time due to a lack of communication from Mervyns management," said Bob Carbonell, chief credit officer at Bernard Sands, a credit monitoring company. "To the best of my knowledge, virtually all of my clients have stopped shipping goods."
Mervyns declined to comment on its current troubles, first reported Monday by the Wall Street Journal, which quoted anonymous sources saying the chain could ultimately be forced to seek bankruptcy protection

Randolph Buss: " I believe we may be facing the forerunner of a hyperinflationary scenario and complete collapse of the US Dollar - hard to believe, but so was the collapse of the Roman Empire to every Roman...Recent history of the last 8 years has shown us that if politicians can lie and cheat and get away with it, while the consumers continue to swallow it all, then why not try the re-inflationary route. It's less painful and can be spun continuously as a good story. If that's in the pipeline, then get all the commodities you can get your hands on.

For the third quarter, AK Steel said it expects to generate operating profit of between $170 and $175 per ton, which it said would represent a record performance.

XTO Energy Inc. said second-quarter net income rose 33% to $575 million, or $1.11 a share, from $432 million, or 91 cents a share in the year-ago period. Adjusted earnings rose to $1.07 a share, up from 93 cents a share. Revenue increased to $1.94 billion from $1.33 billion. Analysts surveyed by FactSet forecast earnings of $1.03 a share on revenue of $1.84 billion, on average, for the Fort Worth, Texas domestic natural gas producer. Separately, XTO said it'll spend about $1.3 billion to buy more properties in its core production areas. It also announced $800 million to buy 12,900 acres in the Barnett Shale. XTO said it'll spend about $4.6 billion for its 2009 development budget. Another $700 million will be allocated for pipeline infrastructure.

The parent company of Redmond-based Olympic Boat Centers, a seller of boats and yachts including Bayliner, Maxum, Meridian and Trophy, filed for bankruptcy protection along with several affiliates.

OBC Holding Co., based in Redmond, listed as much as $50 million in assets and as much as $100 million in debt. Together, the companies operate 21 dealerships in California, Washington and British Columbia, according to OBC's Web site.

Iranian Oil Minister says his country is opposed to any crude output increase by the cartel in its September meeting in Vienna, Austria.

United Airlines parent UAL Corp. said Tuesday it lost $2.73 billion in the second quarter on a combination of accounting charges and high fuel prices, and said it would reduce its work force by 7,000 people by the end of 2009 as it permanently reduces the amount of flying it does.

Swedish auto safety systems maker Autoliv on Tuesday said it will cut up to 3,000 jobs — about 7 percent of its work force — to reduce costs and improve profitability.

The Stockholm-based company, which makes air bags and seat belts, didn't specify where the cuts will be made, but spokesman Henrik Kaar said its biggest production plants would probably be affected.

Autoliv has 43,000 employees worldwide, with the biggest units in Mexico, France and the U.S.

Short selling on the New York Stock Exchange rose to 4.6 percent of total shares last month, the highest since at least 1931, according to data compiled by Bespoke Investment Group LLC.

U.S. home values declined 0.3% in May, falling for the 12th time in the past 13 months, the Office of Federal Housing Enterprise Oversight reported Tuesday. Home values were 4.8% lower than a year ago, the largest year-over-year decline in the history of the data.

Robert McHugh: "

Gold and Precious metals are facing a trend change, and stocks are following a trend change we called last Tuesday, July 15th, 2008.

The Industrials rose 135.16 points, closing at 11,602.50 Tuesday.

The NASDAQ 100 rose 1.86 points Tuesday, closing at 1,821.62. The Russell 2000 rose 19.19 points Tuesday, closing at 716.82. The HUI Amex Gold Bugs Index fell sharply, down 13.49 points, closing at 432.50 Tuesday. August Gold fell sharply to 948.5. Silver fell to 17.96, and Oil closed down at 127.95. The Dollar rose 0.53 to 72.50, along its journey toward the sixties, then eventually the 40's. Bonds fell half a point to 114^05. The VIX fell to 21.18, on a "buy" signal."

Tokio Marine said it's going to buy Philadelphia Consolidated Holding Corp. for $4.7 billion, or $61.50 a share in cash, as the Japanese insurer seeks a significant expansion into the U.S. market. Shares of Philadelphia Consolidated, a property and casualty insurer offering specialty services, ended Tuesday at $35.55, up $1.40.

BHP Billiton said it achieved quarterly production records in alumina, copper, iron ore and manganese ore to cap off a year to June 30 where annual production was significantly up in 13 commodities, with records achieved in seven commodities.

China's tax revenues in the first half of 2008 surged to 3.26 trillion yuan ($477 billion), 30.5% higher than in the same period a year earlier, the South China Morning Post reported Wednesday, citing State Administration of Taxation figures. The surge was helped by strong industrial production and investment.

Australia's inflation rate accelerated at a faster-than-expected 1.5% in the April-June period over the previous quarter, according to official data released Wednesday, hurting expectations the central bank may ease policy rates. On an year-on-year basis, the quarter's consumer price index increased 4.5%.

Onshore oil drilling contractor Nabors Industies reported late Tuesday second quarter earnings fell to $194.4 million, or 67 cents a share, from $228.3 million, or 79 cents, a year ago. Excluding one-time items, the company earned 70 cents a share in the quarter.

Norfolk Southern Corp.on Tuesday reported a second-quarter profit of $453 million, or $1.18 a share, up from $394 million, or 98 cents a share, a year earlier. Sales rose 16% to $2.8 billion.

Yahoo Inc. said Tuesday its second-quarter profit and sales fell short of analysts' estimates, reflecting a weak Internet advertising market and the company's sensitive position as a takeover target. Sunnyvale, Calif.-based Yahoo said net income for the period ended in June fell to $131 million, or 9 cents a share, from $161 million, or 11 cents a share in the same period a year earlier.

Excluding one-time items, VMware would have earned $92 million, or 23 cents a share, on revenue of $456 million. By that measure, Analysts surveyed by FactSet Research had forecast the virtualization software maker to earn 22 cents a share on $459 million in revenue. For its third-quarter, VMware estimates its sales will be between $462 million and $468 million, while analysts had forecast revenue of almost $497 million.

Fundamental supply and demand factors provide the best explanation for the recent crude oil price increases, the Commodity Futures Trading Commission said Tuesday in a report it coauthored with other major government departments.

Washington Mutual reported a net loss of $3.33 billion, or $6.58 a share, late Tuesday. That compares to net income of $830 million, or 92 cents a share, a year earlier. The nation's largest thrift said it boosted loan loss reserves by $3.74 billion to $8.46 billion during the latest quarter. The company also said that the remaining cumulative losses in its residential mortgage portfolios will be towards the upper end of the range it disclosed in April. Excluding one-time items, the lender said earnings per share would have been $3.34 in the second quarter. WaMu was expected to lose $1.05 a share, according to the average estimate of 12 analysts in a Thomson Reuters survey.

Intuitive Surgical Inc.late Tuesday reported its second-quarter net income rose 67% to $51.2 million, or a $1.28 share, compared with $30.7 million, or 79 cents a share, in the year-earlier period. Revenue totaled $219.2 million compared with $140.2 million a year ago, the Sunnyvale, Calif.-based maker of surgical robotics said.

Toyota Motor Corp slashed its 2008 worldwide group sales target to the lower 9.5 million unit level from the previously targeted goal of selling 9.85 million cars and trucks, according to the Japanese business daily Nikkei in a report dated Wednesday.

Monday, July 21, 2008

Genentech Part 2

7/22/08 Genentech Part 2

Timken increased its full-year 2008 earnings estimate to $2.95 to $3.10 a share, excluding special items, up from its previous estimate of $2.75 to $2.95 per share. Timken said it expects continued strong global industrial demand to more than offset weakness in North American automotive markets.

Ametek raised its full-year profit forecast to as much as $2.54 a share from a previous projection of as much as $2.47.

Weatherford's earnings from continuing operations came in at 43 cents a share, compared to analysts' mean estimate, as provided by FactSet Research, of 46 cents a share.

Hong Kong's consumer-price index-based inflation accelerated at a faster-than-expected 6.1% in June from the same month a year-earlier on higher food and energy costs, government data showed Monday. The increase compared with a CPI measure of 5.7% in May.

Tropical Storm Dolly headed for Mexico's Yucatan Penisula.

Unilever said it's selling its Bertolli olive oil unit to Grupo SOS for 630 million euros, or about $1 billion. The transaction includes the sale of the Italian Maya, Dante, and San Giorgio olive oil and seed oil businesses, as well as the factory at Inveruno, Italy.

Brett Steenbarger: "So far, we're seeing lower highs during these rallies and lower price lows on the declines, which is the definition of a bear market. I am not at all convinced that we've seen the ultimate lows for this bear, but I've also learned not to fight the indicators when they're in sharp rally mode off a severely oversold condition."

U.S. home health care workers, particularly those in rural areas, are suffering from financial headaches caused by the escalating cost of transportation, forcing some to borrow cash from co-workers in between paychecks and others to consider leaving the industry altogether.
Providers of home care in New York, California and other states are doling out prepaid gas cards, rental cars and other perks in an effort to retain their workers, who care for roughly 12 million elderly and disabled patients nationwide and drive an estimated 5 billion miles a year, according to a recent study by the National Association for Home Care and Hospice.

Robert Reich: "The great American jobs machine is grinding to a halt. In response, Congress has just extended unemployment benefits 13 additional weeks, over and above the 26 weeks normally provided. That’s good as far as it goes.

But most people who lose their job these days don’t qualify for any unemployment benefits at all.

How can this be? Simple. In order to be eligible, most states require you to have been working in the job you lost full time, and for a certain number of years...

Meanwhile, full-time jobs are vanishing. More companies are contracting out their work. As a result, more people are doing several part-time jobs, or are self employed. They’re also more likely to be part of a couple whose family depends on two sets of paychecks.

So when times get tough, as they are now -- and people lose a job after having it for only a few years or lose their part-time job or lose their client, or one member of a couple loses earnings -- a family can be in real trouble. And there are no unemployment benefits, not even partial benefits based on the proportional loss of income from a part-time job, to help them. Or to help counter-balance the economy as a whole.

It’s a disgrace that most Americans who lose their jobs don’t qualify for unemployment insurance. It's also bad for the economy because unemployment insurance is less effective as a counter-cyclical device. Congress should expand coverage (condition federal UI funding of states) so a majority of American families have some security in these perilous times."

Nouriel Roubini: "Financial conditions of financial firms and banks are much worse than those headline figures and why we the US will experience a systemic financial crisis."

Interesting new financial website:

Georgia State Tax Collections Down 9.4% In June.

The U.S. now imports 75% of their crude oil. This places increased selling pressure on the dollar.

The WSJ reports "The heavy losses banks have taken on mortgage-related securities are forcing them raise cash levels, leading to tighter lending."

Lehman Brothers analyst Jim Birchenough on Genentech:the companies will settle on a buyout price of $105 per share, and said he expects the deal to be finished by the end of 2008. He upgraded Genentech stock to "Overweight" from "Equal weight" and raised his price target to $105 per share from $75.

Baird analyst Christopher Raymond said a majority of non-Roche shareholders need to approve the deal, and they are likely to want a larger premium. He added that Roche needs to make the deal because its three top-selling drugs are made by Genentech.

The economy may weaken further this year, an economist with the Conference Board said Monday on a report that a key gauge of the economy dipped slightly in June. The index of leading economic indicators, which attempts to forecast turning points in the economy, declined 0.1% in June. The result for May was revised to a decline of 0.2%, compared with a prior estimate of a 0.1% gain. "The domestic economy is showing no sign of strength," said Ken Goldstein, labor economist at the Conference Board. "The deep financial crisis, a prolonged, intense slump in housing, high gasoline and food prices, weak consumer confidence and a weak dollar are all combining to produce unrelenting downward pressure on economic activity."

Apple Inc on Monday warned that its current-quarter earnings would be well below Wall Street targets despite a better-than-expected third-quarter profit on brisk sales of its Macintosh computers and iPod media players.

American Express Co said on Monday its quarterly profit fell 38 percent as it set aside more money to cover credit losses.

The company said it was no longer on track to boost earnings per share by 4 percent to 6 percent this year because the U.S. economy has slowed, particularly in June.

Brocade Inc. has agreed to acquire Foundry Networks for roughly $3 billion in cash and stock in a deal that will combine two data-center network-technology specialists. Under the terms, Brocade will pay $18.50 in cash plus 0.0907 shares for each share of Foundry, representing a total value of $19.25.

Crude for August delivery, which will expire Tuesday, closed up $2.16, or 1.7%, at $131.04 a barrel on the New York Mercantile Exchange. Gold for August delivery rose $5.70 to end at $963.70 an ounce on the New York Mercantile Exchange.

According to Norwegian researchers Monday afternoon, a study for Merck & Co.'s and Schering-Plough Corp.'s cholesterol agent Vytorin failed to show it was effective in stopping progression of a cardiac condition known as aortic stenosis, a partial blockage of the heart's aortic valve.

Tropical Storm Dolly strengthened over the Gulf of Mexico Monday night and threatened to grow into a hurricane by Tuesday as it continued on a path that could threaten Texas' Corpus Christi oil-refining complex.


7/21/08 Genentech

Swiss drugmaker Roche Holding AG offered to acquire all outstanding shares in its U.S. partner Genentech Inc for $43.7 billion in cash to reinforce its position in cancer medicines.

Roche, which already owns 55.9 percent of Genentech, said on Monday it would offer $89 per share to buy up the remaining stake, a 9 percent premium to the biotech company's closing share price on Friday.

Brad Setser: "If oil averages $120, the 08 rise in oil export revenues would be comparable in size — relative to world GDP — to the rise in 74 and 79. An average oil price of $120 a barrel would increase the export revenue of the oil exporters by about $900 billion. This calculation assumes that the oil exporters will export about 45 million barrels a day of oil.
Each $5 increase in the average price of oil increases the oil exporters’ revenues by about $80 billion, so if oil ends up averaging $125 a barrel this year rather than $120 a barrel, the increase in the oil exporters revenues would be close to a trillion dollars."

Mike Shedlock: "But if you look at how the banks “beat” their earnings the coincidence becomes clear. WFC took the unprecedented step of extending charge-off acknowledgment from 120 days to 160 days. And JPM was even more aggressive. It actually lowered its loan loss reserves quarter to quarter.
The list of financial companies where shorting regulations are being enforced/enhanced is precisely the banks and dealers (and FNM/Freddie Mac (FRE)) that have access to the Fed's balance sheet (dealers through the PDCF and FNM/FRE through the recently-allowed access to the discount window). So we can speculate on the nature of the "coincidence": Perhaps the Fed is getting worried about the value of all that collateral these dealers have posted to the Fed balance sheet and must boost the capital of these companies to protect that value."

Corey Rosenbloom: "I think initially, my first thoughts are that short-sellers are covering en masse which helped ignite this deeply oversold technical rally. Second, buyers have found immense value at these levels, and bottom fishers are emerging.

This has led to a ‘uniformity of thought’ and direction, resulting in three trend-style days in a row where buyers dominated sellers mercilessly. Call this the “Revenge of the Bulls” if you will. Notice the classic momentum divergence that preceded this rally underway.

That being said, the reason I call this a confirmed bear rally is because of the ‘violence’ of the buying. Also, the broader trend is down, and price has now breached the falling 20 day moving average, confirming the rally. The first major zone of overhead resistance comes in at 11,800, which is the same area as the January/March lows and also is the zone of the 50 period EMA.

For Fibonacci lovers (I myself am one), it’s important to pay attention to the following key retracement areas, drawn from the intraday high to low of the May to July move:

38.2% Retracement: 11,708
50% Retracement: 11,982
61.8% Retracement: 12,256

The impetus shifts to the bulls for their turn at driving the market for the short term - risk is now to the downside (short-side) until proven otherwise."

Union officials say offshore oil workers have ended their five-day strike.

The Sindipetro-NF union says workers returned to their jobs as scheduled on Saturday without reaching a deal with Brazil's state oil company.

Democratic presidential candidate Barack Obama pledged steadfast aid to Afghanistan in talks with its Western-backed leader Sunday and vowed to pursue the war on terror "with vigor" if he is elected, an Afghan official said.

John Hussman: "In 2001, the U.S. initiated a series of major tax cuts amounting to about $500 billion, benefiting primarily individuals with a high marginal propensity to save, despite an already large fiscal deficit. (As an investor, my only defense to the inherent hypocrisy of criticizing this is that all of my own benefit has gone to charity). In addition, the Iraq war heaped on further direct costs of $500 billion. Nobel economist Joseph Stiglitz recently estimated the long-term total of direct and indirect costs of the war to the U.S. economy at $3 trillion.

It is widely believed that the enormous fiscal deficit created by these policies has been “stimulative.” The key question is, “stimulative to what?” Surely, not much of the answer can be found in stock valuations. Stock prices reflect the discounted present value of future cash flows. Even if the entire $500 billion was the present value of long-term cuts in dividend taxation, the “fair” present value of the U.S. stock market would increase by exactly the amount of the reduced tax burden. On a total stock market capitalization of about $15 trillion, $500 billion in tax cuts work out to a gain in value of about 3.3%. Clearly, the Bush tax cuts provided little impetus for anything but a short-term bounce in stock prices.

Combined with the costs of the Iraq war, however, they did produce a chain of transactions that weakened the U.S. economy and debased the U.S. financial system."

Bank of America Corp , the largest U.S. retail bank, on Monday posted lower but better-than-expected quarterly results, offsetting a surge in bad debts tied to falling home prices and a slowing economy.

While the 41 percent drop in second-quarter profit was the fourth straight quarterly decline, Bank of America was the latest big U.S. bank to exceed analysts' forecasts.

Yahoo said Icahn would be appointed to the board. In return Icahn had agreed to withdraw his nominees for consideration at the annual meeting and to vote his Yahoo shares in support of the board's nominees. The board will be expanded to 11 members following the meeting, Yahoo said.