Friday, August 01, 2008

Run Away

8/2/08 Run Away

Jeremy Grantham: “I thought things would be bad enough but they turned out to be a lot worse. I thought a year ago we were looking at the ‘first truly global bubble’ in asset prices. The credit crisis looked to be so predictably powerful and unstoppable then that I likened the experience to ‘watching a slow-motion train wreck’, and I predicted that ‘one major bank (broadly defined) will fail within 5 years’, for which I got considerable grief as a doomsayer, as the less optimistic strategists usually do. Well, a year later one bank failure looks positively quaint as a prediction.

“Ironically for a ‘perma bear’, I underestimated in almost every way how badly economic and financial fundamentals would turn out. Events must now be disturbing to everyone, and I for one am officially scared!” “Don’t be brave, run away. Live to fight another day.”

Seeking Alpha on Cleveland Cliffs: "Mittal may crash Cleveland party. ArcelorMittal (MT) is considering whether to disrupt the $8.8B takeover of Alpha Natural Resources (ANR) by Cleveland-Cliffs with a counter-bid. It may also sit on the sidelines until the deal closes, and then make a move for the combo. Sources say MT indicated it was willing to make an all-cash offer of about $110/share for ANR in June, prompting it to seek other bids."

General Motors Corp posted a $15.5 billion quarterly loss on Friday, as North American sales dropped by 20 percent and plunging prices for SUVs prompted deep charges for its auto finance business.

Ingersoll Rand confirmed its 2008 full-year forecast of $3.80 to $3.90 a share earnings from continuing operations, excluding one-time items.

Lehman Brothers is engaged in talks with prospective buyers about offloading some $30 billion in commercial mortgage assets and other hard-to-value securities that have dogged its balance sheet for months, The New York Post reported Friday without attribution.

The July purchasing managers index for the British manufacturing sector signaled a sharper contraction in activity from June, news reports said. The PMI reportedly fell to 44.3 from 45.9 in June.

The final purchasing managers index for the euro-zone manufacturing sector in July dipped to 47.4, off slightly from the preliminary estimate of 47.5, news reports said.

The purchasing managers index in China fell to a series low of 48.4 in July, a level indicating economic contraction, according to news reports. The reading was 52.0 in June.

U.S. banks' direct primary credit borrowing from the Federal Reserve rose to a record high in the latest week. Banks primary credit borrowings averaged $17.45 billion per day in the latest week, up from the previous record set last week of $16.38 billion, the Fed said on Thursday. On the day of July 30, banks' primary credit borrowings inched lower to $17.38 billion, down from $17.68 billion on July 23. Banks' overall discount window borrowings averaged $17.64 billion per day in the week ended July 23, up from an average of $16.51 billion per day the week before. Dealers borrowed $3 billion average per day from the Primary Dealer Credit Facility in the latest week after not borrowing at all the week before.

In Houston, the average price had dropped to $3.77 per gallon. While that's a 19-cent drop from its high point in mid-July, a gallon of regular self-serve was selling for $2.73 in Houston one year ago.

IndyMac Bancorp, the third-largest banking failure in United States history, said Friday that it had filed for bankruptcy protection, less than three weeks after being seized by federal regulators following a bank run by depositors. The company, based in Pasadena, Calif., filed for Chapter 7 protection on Thursday with the federal bankruptcy court in Los Angeles, indicating it plans to liquidate.

Total, the world's fourth-largest oil and gas company said it earned 4.73 billion euros ($7.38 billion) in the three monrths ended June 30, up from 3.41 billion euros in the same period a year ago.

Jim Marrs, Author, The Rise of the Fourth Reich: “Without habeas corpus in the United States today, what we now have is a Fourth Reich, somebody in a position of power - the President, the Attorney General, the head of Homeland Security – can simply point a figure at you and designate you as an undesirable and hence, an enemy combatant, and they can grab you and imprison you and you don’t even get a day in court, much less a lawyer.”

Commodities prices suffered their largest monthly drop in 28 years in July as crude oil prices nose-dived more than $20 from an all-time high of $147.27 a barrel.

The Jefferies-Reuters CRB index, a global commodities benchmark, lost 10 per cent, its largest monthly decline since it fell 10.5 per cent in March 1980, amid worries about lower economic growth damping demand for raw materials.

Natural gas, corn, wheat and freight costs plunged last month between 10 and 30 per cent, although from record levels. However, lead, used in car batteries, surged almost 25 per cent on tight supplies.

Chevron Corp.said second-quarter net income for the three months ended June 30 rose 11% to $6 billion, or $2.90 a share, from $5.4 billion, or $2.52 a share in the year-ago period. Analysts expected earnings of $3.03 a share for the San Ramon, Calif. oil production and refining giant, according to a survey by FactSet Research. Chevron's sales and other operating revenue increased to $81 billion, compared with $54 billion. Exploration and production net income nearly doubled to $7.25 billion from $3.64 billion. Chevron lost $734 million in its refining, marketing and transportation business, compared to a $1.3 billion profit in the year-ago period.

Nonfarm payrolls fell for the seventh straight month in July while the unemployment jumped to 5.7%, a four-year high, the Labor Department reported Friday. Nonfarm payrolls fell by 51,000 in July, led by losses in manufacturing, construction, retail and temporary help. Since December, 463,000 jobs have been lost, the strongest signal that the economy is in a recession. Economists surveyed by MarketWatch expected payrolls to shrink by 70,000 and for the unemployment rate to rise to 5.6% from 5.5% in June. Many young people streamed into the labor market looking for summer jobs. This year, however, fewer of them were able to find work, the government said. The unemployment rate for teenagers jumped to 20.3 percent, the highest since late 1992. Manufacturers cut 35,000 positions, construction companies got rid of 22,000 and retailers shed 17,000 jobs. Those losses swamped job gains elsewhere, including in the government, education and health care.

George Ure: " The amount of FDIC Insurance in 1980 was raised to $100,000. Now, not to be 'negative', but just to show how this operates just like a real insurance company, I'd point out that if FDIC coverage had kept pace with inflation alone (using the Federal Reserve's own calculator (left column) then FDIC insurance today should be $261,650.49 basis the 1980 coverage levels. OK, true that IRA accounts are insured to $250,000, but few financially literate people (and no one in my circle of friends) would put $250K in a long term account that doesn't keep up with inflation, but that's another issue."

Federal agents may take a traveler's laptop or other electronic device to an off-site location for an unspecified period of time without any suspicion of wrongdoing, as part of border search policies the Department of Homeland Security recently disclosed.

Also, officials may share copies of the laptop's contents with other agencies and private entities for language translation, data decryption or other reasons, according to the policies, dated July 16 and issued by two DHS agencies, U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement.

Bill Bonner: "But "change" is the one thing people most don't want - not when it involves paying for past mistakes. The homeowners don't want to give up their houses. The lenders don't want to go out of business. Investors don't want to lose money. And so they all hope for a miracle. And along comes the miracle worker himself - Uncle Sam.

What makes it possible for the federal government to perform miracles, as Ben Bernanke might explain it, "is a little technology called the printing press. [The feds] can create new dollars at almost zero cost."

How do the feds get any real money? They can only take it away from real people. The net effect to the economy is zero. The only way they can add to the total supply of money is to…well…add to the supply of money. They have to create it - out of thin air. Otherwise, they are just taking money from people who didn't make mistakes in order to keep people who did make mistakes from being forced to own up to them."

Home prices fell in 23 of 25 U.S. metropolitan areas in May from a year earlier as foreclosure sales pushed down values and most areas remained mired in the housing recession.

Sacramento had the biggest price drop, falling 31 percent from May 2007. Las Vegas declined 29.5 percent, San Diego 27.2 percent, St. Louis 26.9 percent and Phoenix 25.8 percent, said real estate data company Radar Logic Inc. Sales rose in 22 areas in May from April, driven by ``motivated'' sellers including banks, the company said.

Pimco's Mohamed El-Erian said the unemployment rate is headed toward 6 percent, as the year-long global financial market turmoil continues to have a growing effect on the U.S. economy as a whole.

Ford Motor Co said on Friday its U.S. sales fell 14.9 percent in July on an unadjusted basis amid the downturn in the U.S. auto industry, especially for sales of large trucks and SUVs.

For the week, the Dow lost 0.4%. The broad S&P 500 index found late support from a rebound in financial shares Friday, but still ended down 7 points at 1,260. For the week, the broad index gained 0.2%. The Nasdaq Composite lost 14 points to 2,310 on Friday and finished flat for the week.

Chrysler LLC on Friday reported a 28.8% drop in July U.S. sales to 98,109 vehicles from 137,728 in July 2007.

September crude closed at $125.10 per barrel in New York Friday. The contract gained $1.02 for the session to end the week 1.5% higher. December gold closed at $917.50 an ounce Friday. The contract lost $5.20 for the trading session in New York and finished the week with a loss of 2.1%.

First Priority Bank of Bradenton, Fla. was closed by the Commissioner of the Florida Office of Financial Regulation, and the Federal Deposit Insurance Corporation was named receiver, the FDIC said late Friday. The closure marks the eighth U.S. bank failure this year.


8/1/08 Inflation

Exxon Mobil Corp.said second-quarter net income rose 14% to $11.68 billion, or $2.22 a share from $10.26 billion, or $1.83 a share in the year-ago period. Excluding items, net income rose to $2.27 a share from $1.83 a share. Capital expenditures rose 38% to $6.97 billion. Exxon Mobil was expected to earn $2.46 a share, according to a survey of analysts by FactSet. On an oil-equivalent basis, second-quarter production decreased 8% from the second quarter of 2007. Excluding impacts related to the Venezuela expropriation, the Nigeria labor strike and lower entitlement volumes, production fell 3%.

Barrick Gold Corp. said Barrick second-quarter net income rose 22% to $485 million, or 56 cents a share, from $396 million, or 46 cents a share in the year-ago period. Operating income rose to 61 cents a share from 39 cents a share. Wall Street analysts surveyed by FactSet forecast earnings of 57 cents a share, on average. The company cited higher gold prices for its bigger profit. Looking ahead, Barrick Gold raised its forecast for cash costs for gold production to $425 to $445 an ounce, from its earlier view of $390 to $415 an ounce. The view assumes a second half gold price of $950 per ounce and an oil price of $125 per barrel.

Inflation in the US could hit 6 per cent by the fall, CIBC World Markets' chief economist said on Wednesday.Consumer prices for June were up 5 percent from the year before, the fastest one-year change since 1991. Jeffrey Rubin, chief economist of Toronto-based investment bank CIBC, predicts a 6 per cent rate for overall inflation, a level last seen in 1982. His reasoning: Increased shipping costs are making goods produced in the United States more competitive with goods shipped from China.
``High energy prices give American manufacturing workers bargaining power that they have lacked for over a decade, while at the same time encouraging them to ask for larger pay raises to keep pace with the soaring price of gasoline,'' Rubin wrote.

Altria forecasts that 2008 adjusted full-year diluted earnings from continuing operations will be in the range of $1.63 to $1.67 a share.

AstraZeneca lifted its annual core earnings per share view by 15 cents a share to a range of $4.60 to $4.90 on a "good" operational and financial performance and further currency benefits.

Consumer inflation in the 15-nation euro zone accelerated at a record annual pace of 4.1% in July, according to a preliminary estimate by Eurostat. Annual inflation hit 4% in June, more than twice the European Central Bank's annual target of near but just below 2%.

U.K. house prices fell 1.7% during July, or down 8.1% on an annual basis, the lender Nationwide reported Thursday. That's the biggest annual fall since Nationwide began recording statistics in 1991.

Royal Dutch Shell became the second oil explorer to top the $10 billion mark for earnings in a single quarter, with its second-quarter profit rising 33% to $11.56 billion. Stripping out price changes on unsold inventories, and Shell's profit rose a more modest 5% to $7.9 billion, and the quarter also included a net $73 million in one-time gains. Production fell 1% to 3.05 million barrels of oil equivalent a day.

Marathon Oil reports quarterly results prior to Thursday's opening. Here are some comments prior to the release: Because demand for gasoline has fallen in recent months, companies like Marathon haven't been able to raise wholesale and retail prices fast enough to keep up with crude prices and other escalating expenses.

BY THE NUMBERS: Analysts polled by Thomson Financial expect a profit of $1.51 per share.

ANALYST TAKE: Caris & Co. expects the company to report a profit of $1.21, well below the consensus. "Derivate-related losses in its Canadian oil sands and refining business segments will unfortunately overshadow a strong performance from its oil and gas operations as well as its integrated gas business," the investment bank said in a note to clients this week.

Marathon Oil Cop.said second-quarter net income fell by half to $774 million, or $1.08 a share, from $1.55 billion, or $2.25 a share in the year-ago period. Adjusted net income fell to $1.20 a share from $2.25 a share. Analysts expected earnings of $1.54 a share, on average, according to a FactSet Rearch survey. The Houston oil and gas firm said the three months ended June 30 were challenging. Marathon cited, "significantly lower" refining and wholesale marketing margins and a derivatives loss incurred in its Oil Sands Mining segment. However, its upstream business posted a record quarter and its gas segment continues to perform well, Marathon said.

"While the downstream environment remains challenged with tight margins, Marathon is focused on lowering feedstock costs and increasing efficiency and flexibility by expanding our coking capacity. The 180,000 barrels per day (bpd) refinery expansion at our facility in Garyville, La., is almost 60 percent complete, on budget and scheduled for late 2009 startup. Construction recently started on the Detroit Heavy Oil Upgrading Project, and upon completion in late 2010, it will allow us to refine an additional 80,000 bpd of heavy crude oil," Cazalot said.

Marathon continues to ramp up production in the Bakken Shale resource play in North Dakota. The Company currently has seven rigs drilling which are achieving best-in-class drilling performance and continue to improve drilling time and well costs. Marathon expects to drill approximately 65 company- operated Bakken wells in 2008, and will have approximately 100 wells in the play by the end of the year. The Company's net production from the Bakken Shale increased 130 percent from the fourth quarter 2007 rate of 2,170 boepd to the second quarter of 2008 rate of 5,070 boepd, and is currently producing 6,200 boepd.

Marathon Oil Corp.said it's mulling a split of its operations into two publicly traded entities. One of the firms would consist of Marathon's exploration-and-production, integrated-gas and oil-sands-mining businesses, while the other would include its refining, marketing and transportation operations, the company said in a statement on Thursday. The board will decide in the fourth quarter whether to execute the split, Marathon said. If the directors give the go-ahead, the split likely would occur in 2009's first quarter.

Deutsche Bank took another €2.3bn hit on the value of its securities as second-quarter profits declined sharply at Germany’s largest bank.

Announcing net income of €645m for the three months to June – down from €1.8bn in the same period in 2007 – Josef Ackermann, chief executive, on Thursday highlighted measures taken to cut exposure to some of the bank’s riskiest investments.

Peter Goodman: "The number of Americans who have seen their full-time jobs chopped to part time because of weak business has swelled to more than 3.7 million — the largest figure since the government began tracking such data more than half a century ago."

BASF, the German chemical giant, is reportedly considering a major acquisition, with United States-based W.R. Grace said to be a possible target, according to a report in The Financial Times Deutschland.

In one of the largest rounds of job cuts to hit the legal community since mortgage meltdown began, Cadwalader, Wickersham & Taft announced that it is laying off 96 lawyers in the United States and Britain due to continued slowness in real estate finance and securitization, the firm’s core practices.

The latest round of layoffs comes after the New York law firm let go 35 lawyers in January.

Houston Chronicle: "The Houston company formed to develop nanoshells, Nanospectra Biosciences, has just begun its first human clinical trial, treating a patient with head and neck cancer.

The company hopes to heat nanoshells in the tumor with near-infrared light, burning the cancerous growth away.

For the company and for Houston, the trial marks a big step.

Nanoshells -- tiny spheres of glass coated with gold -- are the first engineered nanomaterial to enter into human trials. And discoveries made in Houston labs are typically developed by biotechnology firms elsewhere, such as Boston or San Diego.

"I'm thrilled," said Naomi Halas, the Rice chemist who created nanoshells in 1997 and realized a few years later their potential to treat cancer. "There's no question it's been a long road, but we always knew it was going to be that way."

Royal Dutch Shell said as much as 220,000 barrels a day of crude production in Nigeria is shut in because of militant attacks.

Drug store and pharmacy operator CVS Caremark says its second-quarter profit grew 7 percent due to improved sales at its retail drug stores.

The Financial Accounting Standards Board postponed a measure, opposed by Citigroup Inc. and the securities industry, forcing banks to bring off-balance-sheet assets such as mortgages and credit-card receivables back onto their books.

FASB, the Norwalk, Connecticut-based panel that sets U.S. accounting standards, voted 5-0 today to delay the rule change until fiscal years starting after Nov. 15, 2009. The board needs to give financial institutions more time to prepare for the switch, FASB member Thomas Linsmeier said at a board meeting. What a bunch of crap!

Brett Steenbarger: "You will never achieve great things surrounded by mediocrity. If you want to see what to change in yourself, look at what's missing around you."

Bristol-Myers Squibb Co.has offered to purchase the remaining shares of ImClone for $4.5 billion, or $60 each.

Just when American International Group Inc. shareholders figured things couldn't get worse at the world's largest insurer, profit from the company's private equity and hedge fund investments is evaporating.

Earnings from so-called alternative holdings were probably close to zero in the second quarter, after soaring 77 percent to $1.02 billion a year earlier, said Citigroup Inc. analyst Joshua Shanker. The drop follows the worst first half for hedge funds in almost two decades and a 73 percent decline in the value of announced leveraged buyouts, according to data compiled by Chicago-based Hedge Fund Research Inc. and Bloomberg.

The Oil Drum: "An important Dutch energy institute, the Clingendael International Energy Program (CIEP), recently published a report that confirms most of the conclusions about the oil market reached over the years at the oildrum. That the floor price of oil is now 110 dollars per barrel, that supply will not rise beyond 100-105 million b/d in the coming decades, that there will be an oil supply constraint for most of the next decade, that there are insufficient quantities of alternative fuels available and that thus demand destruction is inevitable. CIEP is especially important because it is endorsed by amongst others BP, Shell Netherlands, Total E&P Netherlands, three Dutch Ministries, Wintershall, Vopak Oil Europe Middle East and several Dutch energy companies. The report in english can be downloaded here (PDF 2.8 megabytes, 108 pages)...'This outlook of new scarcity is now exacerbated by the fact that not only available supply will determine what amount of demand can be satisfied; it will also bring about a new allocation of the available oil due to a lack of adequate supply growth compared with demand. In practice this means that demand rationing will be required in the OECD countries and particularly in the US, in order to accommodate growth in the newly developing countries, notably China and India. Different fuel prices for end-consumers in the different countries will be the dominant factor behind this ‘oil redistribution’.

GMAC Financial Services reported Thursday a 2008 second-quarter net loss of $2.5 billion, compared to net profit of $293 million in the second quarter of 2007. Affecting results in the quarter were a $716 million impairment of vehicle operating lease assets in the automotive finance business as a result of declining vehicle sales and lower used vehicle prices for certain segments, as well as significant losses at Residential Capital, LLC (ResCap) related to asset sales, valuation adjustments, and loan-loss provisions, the company said. These items were partially offset by profitable results in the insurance and international auto finance businesses, it said. Credit losses increased in the second quarter to 1.40% of managed retail assets, versus 0.92% in the second quarter of 2007, it said.

The costs of employing a U.S. worker held steady in the June quarter, the Labor Department reported Thursday. Overall compensation costs rose 0.7%, matching the prior quarter's gain. Economists were expecting a rise of 0.8%. In the June quarter, wage and salary costs rose 0.7%, compared with 0.8% growth in the prior quarter. Benefit costs in the June quarter increased 0.6%, matching the prior quarter. However, state and local government compensation rose 9%--big government is a cancerous growth.

The U.S. economy contracted in the fourth quarter of 2007, the first quarter of negative growth since the 2001 recession, the Commerce Department said Thursday in its annual revision to gross domestic product. Real GDP fell 0.2% in the quarter, compared with the 0.6% increase previously reported. Many economists who believe the economy is in recession believe it began in the fourth quarter. Growth in this year's first quarter of 2008 was revised lower. Separately, the Labor Department said initial claims for unemployment benefits rose 44,000 to 448,000 in the week ended July 26. The four-week moving average of initial claims rose 11,000 to 393,000. Meanwhile, the number of Americans receiving state jobless benefits rose 185,000 to 3.28 million in the week ending July 19. The four-week moving average of continuing claims rose 42,750 to 3.17 million.

Boosted by stimulus checks from Uncle Sam and big drop in imports, real growth in the U.S. economy accelerated in the second quarter to a 1.9% annual rate, the Commerce Department reported Thursday. Consumer spending was supported by the largest increase in disposable personal income in six years, thanks largely to about $75 billion in tax-rebate checks from Washington. The economy was held back by the crumbling housing market and by a huge drop in inventories. Investments in equipment and software also fell during the quarter. The economy grew a revised 0.9% annual rate in the first quarter.

Romania's central bank raised its benchmark interest rate by 25 basis points to 10.25% Thursday to fight inflationary pressures in the economy.

The Chicago business barometer rose to 50.8% from 49.6% in June.

Apache Corp.reported second-quarter net income more than doubled on 58% higher revenue. Earnings reached $1.45 billion, or $4.28 a share, from $633.5 million, or $1.89, in the year-earlier period. Revenue rose to $3.9 billion from $2.47 billion.

"It's the deal from hell," says Sam Zell, never one to mince words. "And it will continue to be the deal from hell until we turn it around." Zell is talking, of course, about his $8.5 billion purchase of Tribune Co. in December 2007, a transaction that's shaping up to be one of the most disastrous the media world has ever seen.

Top U.S. refiner Valero plans to cut gasoline production by an average of 330,000 barrels per day (bpd) in the third quarter at its 16 plants. At the same time Valero is looking to increase diesel production and export the diesel to foreign markets where the demand is high.

U.S. natural gas inventories rose 65 billion cubic feet in the week ending July 25, the Energy Information Administration reported on Thursday. At 2,461 billion cubic feet, natural gas stocks were 357 billion cubic feet less than last year at this time and 12 billion cubic feet below the five-year average, the EIA said.

According to AMG Data Services, including ETF activity, Equity funds report net cash inflows totaling $2.747 billion in the week ended 7/30/08 with Domestic funds reporting net inflows of $3.074 billion and Non-domestic funds reporting net outflows of -$327 million;
Excluding ETF activity, Equity funds report net cash outflows totaling -$1.304 billion with Domestic funds reporting net outflows of -$785 million and Non-domestic funds reporting net outflows totaling -$520 million;
Exchange Traded (Equity) funds report net inflows of $4.051 billion.


Including ETF activity, Equity funds report net cash inflows totaling $2.747 billion in the week ended 7/30/08 with Domestic funds reporting net inflows of $3.074 billion and Non-domestic funds reporting net outflows of -$327 million;

Excluding ETF activity, Equity funds report net cash outflows totaling -$1.304 billion with Domestic funds reporting net outflows of -$785 million and Non-domestic funds reporting net outflows totaling -$520 million;

Exchange Traded (Equity) funds report net inflows of $4.051 billion

Wednesday, July 30, 2008

The Crude Rally

7/31/08 The Crude Rally

Barack Obama told House Democrats on Tuesday that as president he would order his attorney general to scour White House executive orders and expunge any that "trample on liberty," several lawmakers said.
Obama also met with Pakistan's new leader, Prime Minister Yousuf Raza Gilani.

At a fundraising luncheon, he said he told Gilani "the only way we're going to be successful in the long term in defeating extremists ... is if we are giving people opportunities. If people have a chance for a better life, then they are not as likely to turn to the ideologies of violence and despair."

Bernard M. Baruch: "During my eighty-seven years I have witnessed a whole succession of technological revolutions. But none of them has done away with the need for character in the individual or the ability to think."

S&P said Tuesday it sees the default rate on high-yield corporate debt rising to 4.9% over the next 12 months - from a current 1.9%.

Economic sentiment plunged across the 15-nation euro zone in July, with the European Commission's economic sentiment indicator falling to 89.5 from 94.8 in June -- the biggest monthly drop since October 2001.

Japan's industrial production fell by a seasonally-adjusted 2% in June from the previous month on a decrease in the output of passenger cars and semiconductor products machinery, according to preliminary data released by the government Wednesday.

Paul Kasriel: "Current corporate profit behavior is consistent with past behavior in periods of recession."

Jesse Livermore: “And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine – that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.”

Back in March, I discussed the value in Amgen in the $41-$42 range. With the stock at $62+, I think it's prudent to ring the register. The risk/reward has changed significantly.

Garmin, which makes GPS devices, also said it expects to report full-year earnings of $4.13 a share, excluding foreign exchange, on revenue of $3.9 billion, citing macroeconomic conditions and high fuel prices. Previously, the company said it expected earnings to exceed $4.40 per share. Estimates include 27 cents per share related to the tender of Tele Atlas NV shares.

Avon Products Inc. said Wednesday that its second-quarter profit more than doubled to $235.6 million, or 55 cents a share, from $112.7 million, or 26 cents, a year earlier.

Comcast's free cash flow in the quarter quadrupled to $1.16 billion from $368 million.

Cameron said second-quarter net income rose 23% to $152 million, or 65 cents a share from $123.2 million, or 54 cents a share in the year-ago period. The Houston oil services firm said revenue increased 30% to $1.5 billion.

SPX now expects to earn $6.40 to $6.60 a share this year. That's up from the previous estimate of $6.20 to $6.40. The company had lifted the estimate for the first time in April, from a range of $6 to $6.20.

The US Securities and Exchange Commission on Tuesday night extended an emergency order against abusive short-selling in a select group of financial stocks as it prepares new rule proposals to ban the practice across the entire market.

The emergency order, which bars so-called “naked short-selling” in shares of the mortgage financiers Fannie Mae and Freddie Mac and 17 banks, including big Wall Street firms, was due to expire late Tuesday night. It will now be in effect until August 12 and will not be further extended, the SEC said.

Mortgage application volume tumbled 14.1 percent during the week ending July 25, hitting its lowest level of the year, according to the Mortgage Bankers Association's weekly application survey.

Volume fell even though interest rates on fixed-rate mortgages retreated from sharp increases a week earlier.

Refinance volume plunged 22.9 percent during the week, while purchase application volume fell 7.8 percent. Refinance applications accounted for 35.2 percent of total application volume during the week.

The overall application index fell to 420.8 from 489.6 a week earlier.

WSJ Editorial: "Meeting with us last December, before the primaries, he declared that "I will not agree to any tax increase," repeating the phrase for emphasis. He did not say any tax increase with the exception of Social Security. If Mr. McCain can't convince voters that he's better on taxes than is a Democrat who says matter-of-factly that he wants to raise taxes, the Republican is going to lose in a rout."

"I'd rate (earnings so far) as pretty bad," said Sam Stovall, chief investment strategist at S&P Equity Research. S&P forecast a 10% drop at the start of the quarter but now sees about a 20% shortfall, he said."

Office Depot Inc., the world's second-largest office-supplies retailer, posted a second-quarter loss as smaller businesses and consumers pared purchases at its U.S. and Canadian stores.

The loss was $2 million, or 1 cent a share, compared with net income of $105.6 million, or 38 cents, a year earlier, the company said today in a statement distributed by Business Wire. Excluding one-time items, earnings beat analyst estimates. Revenue fell to $3.61 billion from $3.63 billion.

S & A Restaurant Corp and some of its affiliates, which are popularly known as Bennigan's, Steak & Ale and Tavern restaurants, filed for Chapter 7 bankruptcy, said a statement from Plano, Texas-based Metromedia Restaurant Group, which ultimately owns all three restaurant chains.

Richard Daughty: "The historical high for silver was set 531 years ago in 1477, topping at (using the purchasing power of 1998 dollars) a princely $806 an ounce. By comparison, the price of silver less than $19 an ounce today, and was only about $5 an ounce in 1998, after having bottomed at under $4 an ounce in 1992.

Now, fast-forward to today as our 2008 dollars, which have fallen 50% in purchasing power since 1998, means that the all-time high price for silver, set in 1477, now stands at $1,012 an ounce, measured in the buying power of 2008 dollars! Over a thousand dollars an ounce! For silver! Whee!

In case you ain't noticed, we're unmistakably coming off the lows of a 530-year bear market in silver and, theoretically, entering a long bull market, which ought to be exciting to people who have a lot riding on silver gaining so much in price (me), or even just keep up with this kind of thing, like, for instance, Israel Friedman, writing at, who notes that there are 5 billion ounces of gold sitting around someplace in the world, but that there are only 2.5 billion ounces of silver, even though 5 times as much silver is mined every year than gold.

Therefore, silver is being consumed at prodigious rates, which is why Mr. Friedman says, "Silver is needed to maintain and improve future standards of living. Gold is needed for luxury and emotional reasons. Silver is for the optimist, gold for the pessimist."

Paul Kasriel: " From 1952 through 1998, household net financial investment had consistently been positive. Even with the generous tax treatment on capital gains and dividends instituted by the current Bush administration, household net financial investment as a percent of disposable personal income plumbed new lows. The standard measure of the household saving rate plumbed post-World War II lows in the past seven years."

Venezuela plans to maintain its stance not to increase oil output at the upcoming meeting of the Organization of Petroleum Exporting Countries, the oil minister said Tuesday.
"We maintain our position that we see no need for OPEC to increase oil output," Oil Minister Rafael Ramirez told reporters. "It would be a mistake to increase output and flood the market with oil since this would lead to a price collapse."

Hess Corp.said second-quarter net income rose to $900 million, or $2.76 a share, from $557 million, or $1.75 a share in the year-ago period. Oil and gas production rose 4% to 393,000 barrels a day from 378,000 barrels a day.

U.S. private-sector employment rose by 9,000 in July, according to the ADP employment index released Wednesday. Adding in some 20,000 government workers typically hired in a given month, the ADP index suggests U.S. nonfarm payrolls rose by about 30,000 in July.

Nouriel Roubini: "Super-Senior Tranches of CDOs are Worth Much Less than 22 Cents on the Dollar: Another Ponzi Scheme of “Selling” Toxic Garbage with More Leverage

Merrill Lynch decision to “sell” a good chunk of its remaining CDOs at 22 cents to the dollar has been widely praised as the firm finally recognizing the full extent of its losses on these toxic instruments. This batch of $30.6 billion of CDOs was already marked down to $11.1 billion. Now with the “sale” of it to Lone Star at a price of 6.7 billion Merrill Lynch is taking another $4.4 billion writedown and “selling” it at 22% of the original face value.

But is this a market-based “sale”? No way as calling this transaction a “sale” is a joke."

Gov. David A. Paterson announced on Tuesday afternoon that he would call the Legislature into an emergency session on Aug. 19 to address what he called an economic and budget crisis confronting New York State as a result of plummeting revenues and rising costs.

On the 27th of June tens of citizens of the Russian city of Kaliningrad witnessed an UFO. For nearly an hour the unknown silver object hung over the local Blue Lakes. According to the witnesses, the discus-shaped UFO attracted attention of the locals who had a rest at the lakes and they started waving their hands as a sign of greeting to the object. Some people started making shots of the object and shooting video with their mobile phones.
Despite the fact that tens of people witnessed the phenomenon, neither Baltic Navy nor the Ministry of Emergency Situations have officially commented the incident saying that they have not registered any unknown flying objects on that day.

UK's DailyMail: "A new drug halts the devastating progress of Alzheimer’s disease, say British scientists.It is said to be more than twice as effective as current treatments.

A daily capsule of rember, as the drug is known, stops Alzheimer’s disease progressing by as much as 81 per cent, according to trial results.

Patients with the brain disorder had no significant decline in their mental function over a 19-month period.

‘We appear to be bringing the worst affected parts of the brain functionally back to life,’ said Dr Claude Wischik, who led the research.

It is the first time medication has been developed to target the ‘tangles’ in the brain that destroy nerve cells, leading to deteriorating memory."

The Treasury Department will auction $27 billion in notes and bonds next week in its quarterly refunding auctions, the government said Wednesday. The department will auction $17 billion in 10-year notes and $10 billion in a 29-year, 9-month bonds to refund $43.5 billion in maturing securities and pay down approximately $16.5 billion. Treasury said it was considering a second reopening of the 10-year note in the month following the first reopening and moving to quarterly new issue 30-year bond auctions.

The Federal Reserve announced Wednesday several steps, including longer-term credit, in its efforts to provide cash to unfreeze financial markets. The Fed said it will now offer 84-day credits in addition to 28-day loans. The central bank also announced that it has extended its loans to broker-dealers, who are also primary dealers of Treasury debt, to the end of January from mid-September. The Fed will also auction options for primary dealers to borrow Treasury securities. These options are designed to help firms navigate periods of elevated stress in markets, such as quarter-ends. The Fed said the European Central Bank and the Swiss National Bank were also adding lengthier maturities. The Fed will increase its swap line with the ECB to $55 billion to help this shift to lengthier maturities.

"Now that Centex has $1.24 billion in cash on its balance sheet, the urgency to harvest assets through land sales, divestitures and aggressive pricing has diminished," said Deutsche Bank analysts in response to Centex's earnings report released after Tuesday's closing bell. "Impairments of $80 million were also down dramatically and at their lowest level in two years."

The Federal Reserve extended two emergency lending programs to Wall Street firms until Jan. 30, 2009, ``in light of continued fragile circumstances in financial markets,'' the central bank said today.

Hess Corp.said on a conference call with analysts that it has increased its acreage position in the Bakken Play in North Dakota to about 500,000 acres. Hess currently has seven rigs operating in the Bakken and will add one additional rig in the fourth quarter.

U.S. crude inventories fell less than expected, down 100,000 barrels to 295.2 million barrels in the week ending July 25, the U.S. Energy Information Administration reported on Wednesday. Analysts surveyed by energy information provider Platts expected a drop of 1.3 million barrels. After the data, crude-oil futures for September delivery pared losses, falling 10 cents, or 0.1%, to $122.09 a barrel on the New York Mercantile Exchange. Crude was down nearly 1% before the data. Gasoline supplies fell by 3.5 million barrels in the latest week, and distillate stocks gained by 2.4 million barrels, the EIA reported.

U.S. crude inventories fell by 2.1 million barrels to 302.7 million barrels in the week ending July 25, the American Petroleum Institute reported on Wednesday. Distillate stocks fell by 587,000 barrels to 126 million barrels in the same period, while gasoline stocks dropped 3.8 million barrels to 210 million barrels. In a separate report, the U.S. Energy Information Administration said crude inventories fell 100,000 barrels to 295.1 million barrels. The API, an association of the U.S. oil and natural gas industry, calculates inventories based on different criteria.

A House panel Wednesday voted to cite former top White House aide Karl Rove for contempt of Congress for defying a subpoena to answer questions about the dismissals of several federal prosecutors as its Senate counterpart explored punishments for an array of alleged Bush administration misdeeds.

The U.S. economy next year will be weaker than this year, the International Monetary Fund said Wednesday. Past history shows that the recovery from housing busts is often slow, the IMF said. The Fed should hold interest rates steady at 2%, but get ready to tighten if inflation risks mount.

Visa Inc.said late Wednesday that fiscal third-quarter net income came in at $422 million, or 51 cents per class A share, up 41% from a year earlier when the payment processing giant made $299 million. Visa was a private company a year ago, so it didn't have publicly-traded shares. Adjusting for certain costs from litigation and other issues, net income was $457 million, or 59 cents per class A common share, in the latest quarter, the company said.

Walt Disney Co. reported a fiscal third-quarter profit of $1.28 billion, or 66 cents a share, up from $1.18 billion, or 57 cents a share, a year ago. The most recent quarter included a one-time, per-share gain of 4 cents.

Express Scripts sees 2008 adjusted earnings of $3.03 to $3.10 a share. Analysts expect $3 a share.

The Dow Jones Industrial Average gained 186 points to end at 11,583. The Dow has now rallied more than 451 points over the past two sessions. The S&P 500 index gained 21 points to end at 1,284, while the Nasdaq Composite rose 10 points to 2,329.

The railroad stocks had a particularly strong day, and the last week has been good for that sector. The refining stocks also put in a strong performance, and that was led by Sunoco which rose $5.38 to $42.53. Harbinger Capital filed a 13D with 6.6% ownership. That's the same fund that owns 16% of Cleveland Cliffs. It was one year ago that I suggested purchase of Cleveland Cliffs at $35. It closed at $116. Just recently I suggested purchase of Sunoco at $35.

September crude closed at $126.77 per barrel in New York Wednesday, up $4.58, or 3.8%, for the trading session. August gold closed at $902.90 an ounce in New York Wednesday.

General Motors Corp. plans to cut 15% of its salaried workforce in the United States by November, The Wall Street Journal reported Wednesday on its Web site.

Tuesday, July 29, 2008

Home Prices

7/30/08 Home Prices

Home prices tumbled by the steepest rate ever in May, according to a closely watched housing index released Tuesday, as the housing slump deepened nationwide.
The Standard & Poor's/Case-Shiller 20-city index dropped by 15.8 percent in May compared with a year ago, a record decline since its inception in 2000. The 10-city index plunged 16.9 percent, its biggest decline in its 21-year history.
No city in the Case-Shiller 20-city index saw price gains in May, the second straight month that's happened. The monthly indices have not recorded an overall home price increase in any month since August 2006.
Home values have fallen 18.4 percent since the 20-city index's peak in July 2006.

Robert McHugh: "The Industrials moved into the range where we expect a bottom for wave {b} down, which started July 24th. Once this wave bottoms, next will be a final wave {c} rally into early to mid-August to complete wave 2 up, a last chance to raise cash before a "takes your breath away" decline unfolds from mid-August into the autumn. The Industrials could approach the 11,800ish area +/- at the completion of wave 2 up in August."

Coach said it will plan cautiously as it expects consumer malaise in the U.S. will remain well into 2009, significantly impacting its business. The company forecast first-quarter profit of 44 cents a share. Analysts, on average, estimated profit of 47 cents for the first quarter, according to FactSet.

Looking ahead, Colgate sees solid double-digit earnings per share growth in 2009 with gross profit margin up versus 2008.

For 2008, Teleflex has revised higher its forecast for earnings from continuing operations, now pegged at $3.90 to $4 a share, excluding special charges expected in a range of 55 cents to 62 cents a share. The FactSet-derived consensus stands at $3.80 a share.

The Confederation of British Industry's July distributive trades survey saw its July retail balance fall to -36, the weakest reading since the survey began in 1983. The balance reflects the survey's finding that 61% of respondents saw sales in the first half of July below year-ago levels, while 25% said sales increased. "It is turning out to be a very grim summer for many retailers," said Andy Clarke, chairman of the CBI distributive trades panel. "Pressure from higher fuel and food prices is prompting many people to rein in their spending, proving that value retailing has never been more important."

British lenders approved just 36,000 mortgage applications for house purchases in June, the Bank of England reported Tuesday, the lowest total since the statistical series began in 1999. The figure fell from 41,000 in May and echoes data from housing surveys that show housing transactions have dropped sharply as credit conditions have tightened.

The Reserve Bank of India Tuesday raised its benchmark lending rate by a higher-than-expected 0.5 percentage points to 9% to clamp down on inflation.

Sony slashed its net income forecast for the year ending March 31, 2009, to 240 billion yen, 17% lower than the company's May forecast of 290 billion yen. The company expects full-year sales of 9.2 trillion yen, 2% higher than it projected in May.

Oil producer BP reported a 28% rise in second-quarter net profit to $9.47 billion, as surging oil prices offset flat production. Excluding the impact of price changes on unsold inventory and $1.43 billion in charges, and it would have earned $8.28 billion during the quarter.

A refinery safety expert says BP has failed to comply with measures for its Texas City plant imposed by federal regulators, perpetuating safety lapses that led to a deadly 2005 explosion.

"The continuing violations of federal law are critical to plant safety. They are life-threatening," Apex Safety Consultants engineer Mike Sawyer said in a report filed in federal court on Monday.

"They could result in another major explosion comparable to that of March 2005," the report said. That disaster killed 15 workers and hurt many more.

Starbucks will close more than two-thirds of its 84 stores in Australia by the end of the week under a restructuring plan announced Tuesday that will put almost 700 people out of work.

According to the FT, the US financial crisis is spreading from subprime borrowers to wealthier consumers, with evidence mounting that more affluent people are failing to pay their mortgages and credit card balances. Growing concerns over the financial health of richer borrowers are prompting banks and card issuers to tighten lending practices in moves that could futher dampen consumer confidence and spending more.

Royal Dutch Shell PLC said today it may not be able to fulfill some oil export contracts after Nigerian militants sabotaged a pipeline.

Shell's announcement today means less oil will likely be shipped from Africa's biggest oil industry to global markets, which can send crude prices higher.

Nigerian media reported that the pipeline normally carried about 130,000 barrels per day of crude oil from wells to export terminals.

Why No Military Response to Radar Unknown
Headed to Bush Crawford Ranch on January 8, 2008?

© 2008 by Linda Moulton Howe

“I think the January 8, 2008, Carswell log book was blacked out
on the ten F-16s because the military wanted as little known as possible
about what their F-16s were doing that day.”
- Glen Schulze, Electrical Engineer and Radar Specialist
"An “Unknown Aircraft” without transponder beacon, but reflecting nearly
200 skin-paint returns, moved in a straight line from Dublin toward the Bush Crawford
ranch between 6:51 PM and 8 PM, on January 8, 2008. The unknown object disappeared from
radar between 7:03 PM and 7:10 PM. Then at 7:32 PM, the unknown object accelerated
rapidly in 30 seconds to 532 mph and then ten seconds later, it decelerated to 49 mph."

U.S. gross domestic product will grow 1.6% this year and expand 2.2% in 2009, the White House's Council of Economic Advisers said in a mid-year review today. The forecasts were slashed from an outlook in February for 2.7% growth this year and 3% for 2009.

The Massachusetts Educational Financing Authority yesterday said it will not be able to provide student loans this fall for the first time in its 26-year history, leaving more than 40,000 families without an important source of tuition funds just weeks before college classes begin.

Japan's economy showed more signs of deterioration as government data revealed Tuesday that the unemployment rate inched up and consumers tightened their purse strings amid rising food and oil prices.
Japan's jobless rate in June climbed to 4.1 percent from 4.0 percent in May, the highest level since last September, the Ministry of Internal Affairs and Communications said.
In another sign, the ministry said Japan's household spending in June dropped 1.8 percent from a year earlier, marking the fourth consecutive monthly decline.

Consumer confidence in France fell to a record low in July as inflation accelerated to the fastest pace in 12 years, eroding households' purchasing power.

A gauge of consumer sentiment dropped to minus 48, the lowest since the index was introduced in 1987, from minus 46 in June, the Paris-based national statistics office, Insee, said in a statement today. Economists expected a decline to minus 47, according to the median of 20 forecasts in a Bloomberg News survey.

There was more bleak news for the European economy Monday, as a survey found that German consumer confidence was worse than at any time since recession last struck and reports showed more declines in house prices in Spain and Britain.

Economists said high food and fuel costs were hurting German morale despite recent pay increases, compounding the risk that domestic demand would fail to compensate for slackening foreign demand as the downturn hit Germany's trading partners.

According to Bloomberg, wheat from Australia, forecast to be the world's third-largest shipper of the grain, is expected to return to the global market in 2008 after two years of drought, helping to ease prices, Malayan Flour Mills Bhd. said.

``Australian wheat is important to us,'' Teh Wee Chye, managing director of Malaysia's second-biggest miller, said today at a conference in Melbourne. ``We expect Australian wheat to come back into the global market in 2008.''

Wheat output in Australia is forecast to rebound to 23.7 million metric tons this harvest, from last year's drought-reduced crop of about 13 million tons, the government forecaster has said. Wheat, corn, rice and soybeans all rose to records this year, driving food prices around the world higher and stoking inflation.

United States Steel says its profit more than doubled in the second quarter, surpassing Wall Street's expectations, on increased demand and pricing.

The Pittsburgh-based steel company says it earned $668 million, or $5.65 per share, compared with $302 million, or $2.54 per share, in the year-ago period.

"Persistently strong demand for metallurgical coal from steel producers worldwide is having a profound impact on our financial performance," Michael Quillen, Alpha Resources' chairman and chief executive, said in a statement.

Alpha operates coal mines in West Virginia, Virginia, Kentucky and Pennsylvania.

For the full year, Northrop forecast earnings in the range of $4.90 to $5.15 a share, while analysts, on average, are expecting $5.15 a share.

National Oilwell Varco said second-quarter net income for the three months ended June 30 rose 32% to $421.7 million, or $1.04 a share, from $318.5 million, or 89 cents a share in the year-ago period. The latest period includes $62.5 million, or 10 cents a share, of pre-tax charges related to its merger with Grant Prideco, and other items.

Valero's second-quarter net income for the three months ended June 30 fell to $734 million, or $1.37 a share, from $2.25 billion, or $3.89 a share in the year-ago period. Revenue rose 51% to $36.6 billion from $24.2 billion. Analysts surveyed by FactSet forecast earnings of $1.57 a share and revenue of $34.9 billion for the petroleum refining and marketing giant. "Margins for refined products declined as the cost of crude oil and other feedstocks increased more rapidly than the prices of gasoline and other products, such as asphalt, fuel oils, petroleum coke, and petrochemical feedstocks," Valero said. Valero also increased its use of discounted feedstocks.

"There is a very long-term relationship between gold and oil," said Will Bartleet, a fund manager at HSBC's Absolute Returns Service.

One aspect of the relationship is that the price of a barrel of oil is seen by some to be in equilibrium with gold when it is at a ratio of 10 barrels to one ounce.

This was roughly the case in mid-March when gold hit a record above $1,030 an ounce and oil was trading at around $105 a barrel. It was at a slightly tighter 8.7 to 1 ratio at the end of 2007 with oil at $96 and gold at $833 before gold took off.
Since March, however, gold has come down and traded in a relatively narrow range while oil has soared. The result: The ratio was just 5.9 to 1 earlier this month. Hedge funds sold crude oil in the week to July 22 to take a small overall short position for the first time since February 2007, according to the Commodity Futures Trading Commission. A week later the relationship has risen to 7.4. This trade is not for the faint of heart.

BBC News: "Faced with seemingly never-ending falls in the value of their properties, some American home-owners are taking radical action; they are choosing to walk away from homes and their mortgages.

In May 2006, at the height of the housing boom, Karen Trainer bought a $500,000 apartment in California - with money borrowed from her bank.

By this year, Karen still owed $500,000 on her mortgage, but her apartment was worth $200,000 less.

So she was deep in negative equity and, to make matters worse, the interest rate on her loan was about to increase.

"I thought 'this is crazy'," Ms Trainer says. "It just does not make financial sense."

Consequently, by walking away from her apartment, Ms Trainer has also walked away from the $200,000 loss on her property. Her bank gets stuck with that."

The Conference Board on Tuesday said its July consumer confidence index rose to 51.9 from a June reading that was revised to 51.0 from a prior estimate of 50.4. The percentage of consumers saying jobs are "hard to get" rose to 30.3% in July from 29.7% in June.

The Federal Reserve said Tuesday it received 70 bidders for its Monday auction of $75 billion in 28-day credit. The Fed is using these auctions to provide cash to stressed financial firms who have been forced to write down assets by over $400 billion in the wake of the collape of the market for complex derivatives tied to mortgages. Demand for the Fed's credit remains strong. Total propositions submitted reached $90.6billion, or a bid/cover ratio of 1.21. The awarded loans will settle on Thursday.

Teck Cominco Ltd., the world's second-largest zinc producer, agreed to pay about $14.1 billion in cash and stock for Fording Canadian Coal Trust to become the largest North American exporter of coal used in steelmaking.

Fording Canadian investors will receive $82 in cash and 0.245 of a class B Teck share for each unit they hold, Vancouver- based Teck Cominco said today in a statement. The offer is about 12 percent higher than Fording Canadian's closing price yesterday.

Schaeffler Group, the German family owned ball-bearing maker, may need to borrow as much as 22 billion euros ($34.5 billion) to buy Continental AG, almost twice the tiremaker's stock market value.

Schaeffler will either have to refinance 12 billion euros in loans that Continental obtained last year, or pay a penalty to lenders and assume the debt, according to Christophe Boulanger, a debt analyst at Calyon in London. The Herzogenaurach, Germany- based company also needs cash to buy Continental's equity, now valued at 11.7 billion euros.

For the first time, more hedge funds will fail this year than are originated, according to Philip Duff, of Duff Capital Advisors.

Deutsche Bank analyst Mike Mayo said that Citigroup may post third-quarter write-downs of about $8 billion from its exposure to collateralized debt obligations (CDOs), a day after Merrill Lynch agreed to sell its CDOs for just 22 cents on the dollar.

"The big powers are going down," Ahmadinejad told foreign ministers of the Nonaligned Movement meeting in Tehran. "They have come to the end of their power, and the world is on the verge of entering a new, promising era."

August gold dropped $11.20, or 1.2%, Tuesday to close at $916.50 an ounce. September crude fell $2.54, or 2%, to close at $122.19 per barrel in New York Tuesday after touching a low of $120.75.

The Dow Jones Industrial Average gained 266.48 points to 11,397.56. The S&P 500 added 28.83 points to finish at 1,263.20, and the Nasdaq Composite rose 55.40 points to 2,319.62.

Mervyn's LLC filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware to restructure its debt and realign its business operations, the department store chain said.

An earthquake registering an estimated 5.4 on the Richter scale struck east of Los Angeles Tuesday. The U.S. Geological Survey on its web site said the quake struck roughly 2 miles southwest of Chino Hills, a suburb roughly 30 miles east of downtown Los Angeles.

Elan Corp.and Wyeth said late Tuesday a Phase II clinical study appears to show their experimental drug bapineuzumab safely treats the symptoms of Alzheimer's disease, but results were not statistically significant, putting pressure on shares. The 234-person Phase II study must be broadened to a much larger Phase III study to be considered for Food and Drug Administration approval. Shares of Elan fell 17.4% to $27.89 and Wyeth shares fell 9.8% to $40.70 in after-hours activity.

"The housing market worsened in the June quarter, and I don't expect to see it improve this fiscal year," Tim Eller, chairman and CEO of Centex said in a press release.

Warren Buffett's Berkshire Hathaway hit a new milestone today (Monday) in a descent that had already put the stock into a 'bear market.'

The class A shares closed exactly 25 percent below the all-time high set last December.

Today's closing price of $111,900 each is the lowest for the stock since August 15, almost one year ago.

GMAC and Ford Motor Credit disclosed steps on Tuesday to cut back on auto leases in a move that leaves automakers facing the risk of even more pressure on auto sales already at decade lows.

The steps by GMAC and Ford Motor Credit stopped short of Chrysler Financial's wholesale abandonment of lease financing that shocked the struggling carmaker's dealers on Friday.

Monday, July 28, 2008

The Bush Deficit

7/29/08 The Bush Deficit

Rob Hanna: "From 8/6/1996 through 7/25/2008 the S&P 500 has gained 595.44 points. When the 10-day MA of the Total Put/Call Ratio has been above the 200-day MA the S&P 500 has gained 710.31 points. When the 10-day MA has been below the 200-day MA the S&P 500 has LOST 114.87 points. Based on this I’d consider the recent cross of the 10-day put/call below the 200 day put/call to be a negative."

Bush had predicted the 2009 would be $407 billion. On Monday that was upped to $490 billion. Of course, this is government accounting. In real cash counting it would exceed $750 billion. Rather than decrease spending and decrease the size of government, the Congress will increase the debt limit---again--to exceed $10 trillion and the Fed will keep printing money and devalue the dollar. In other words, it's business as usual and the taxpayers fail to march and demonstrate.

Business Week: "Anna Patterson's last Internet search engine was so impressive that industry leader Google Inc. bought the technology in 2004 to upgrade its own system.

She believes her latest invention is even more valuable -- only this time it's not for sale.

Patterson instead intends to upstage Google, which she quit in 2006 to develop a more comprehensive and efficient way to scour the Internet.

The end result is Cuil, pronounced "cool." Backed by $33 million in venture capital, the search engine plans to begin processing requests for the first time Monday.

Cuil had kept a low profile while Patterson, her husband, Tom Costello, and two other former Google engineers -- Russell Power and Louis Monier -- searched for better ways to search.Now, it's boasting time.

For starters, Cuil's search index spans 120 billion Web pages.

Patterson believes that's at least three times the size of Google's index, although there is no way to know for certain. Google stopped publicly quantifying its index's breadth nearly three years ago when the catalog spanned 8.2 billion Web pages.

Cuil won't divulge the formula it has developed to cover a wider swath of the Web with far fewer computers than Google. And Google isn't ceding the point: Spokeswoman Katie Watson said her company still believes its index is the largest.

Sempra Energy said Monday it would pay $61.50 a share to buy EnergySouth Inc. The $510 million cash deal values the Mobile, Ala. natural gas service and pipeline firm at a premium of $11.34, or 23% over its closing price of $50.16 a share on Friday.

Tyson Foods Inc., the world's largest meat company, saw its profit drop 90 percent for its third quarter because of the rising cost of grain with which to feed chicken.

Robert Reich: "If you look at the earnings of non-government workers, especially the hourly workers who comprise 80 percent of the workforce, you'll find they are barely higher than they were in the mid-1970s, adjusted for inflation. The income of a man in his 30s is now 12 percent below that of a man his age three decades ago. Per-person productivity has grown considerably since then, but most Americans have not reaped the benefits of those productivity gains. They've gone largely to the top."

Barack Obama now leads John McCain among national registered voters by a 49% to 40% margin in Gallup Poll Daily tracking conducted July 24-26.

For the first time since 1836 it has snowed in Sydney - at least that's what the locals are saying. Meteorologists say technically it was soft hail, but that didn't stop the locals making snowmen.

August gold closed at $927.70 an ounce in New York Monday, up 90 cents for the trading session. September crude closed at $124.73 per barrel Monday.

Recent adverse shocks to the economy -- including the financial market turmoil and the sharp increase in the price of oil may affect the economy for longer than the next three years, Federal Reserve Board Governor Frederic Mishkin said Monday.

Top experts at the International Monetary Fund said Monday that they are comfortable with their previous estimate that the financial market turmoil will cost about one trillion dollars.

That's wishful thinking in my opinion.

The International Monetary Fund said there is no end in sight to the housing slump.

Nickel continues to get hammered.

General Motors Corp. said Monday it will cut production by another 117,000 vehicles, citing continued weak in consumer demand for pickup trucks and sport utility vehicles.

GM spokesman Tony Sapienza said the Detroit-based automaker will achieve the cuts by eliminating one shift each at its Moraine, Ohio, and Shreveport, La., plants. Most of the cuts will affect production of trucks and sport utility vehicles.

The Dow Jones Industrial Average fell 239.61 points to 11,131.08. The S&P 500 declined 23.38 points to 1,234.38, while the Nasdaq Composite shed 46.31 points to 2,264.22.

Mervyn's LLC is telling creditors the department store chain will file for bankruptcy protection in the "next few days" unless it sees a last-minute cash infusion, according to a report late Monday in the online edition of The Wall Street Journal.

Mosaic Co., citing strong agricultural demand that is driving up phosphate and potash prices, reported late Monday fiscal fourth-quarter net income rose to $862.5 million, or $1.93 a share, from $202.6 million, or 46 cents, a year ago. Revenue for the three months ended May 31 rose to $3.5 billion from $1.6 billion.

Amgen raised its 2008 adjusted earnings forecast range from a prior range of $4.00 to $4.30 a share to $4.25 to $4.45 a share.

Electricite de France SA, the world's largest operator of nuclear reactors, is near an agreement to buy British Energy Group Plc for about 12.5 billion pounds ($24.9 billion), three people with knowledge of the talks said. The proposed price is about 775 pence a share, two of the people said.

Merrill Lynch & Co Inc said on Monday it will take a $5.7 billion third- quarter write-down as it sells risky debt, and raise $8.5 billion by selling new stock.

Richard Lamm: “Christmas is the time when kids tell Santa what they want and adults pay for it. Deficits are when adults tell government what they want and their kids pay for it.”

The Short-Covering Rally Is Coming To A Halt

7/28/08 The Short-Covering Rally Is Coming To A Halt

China National Petroleum Corp., mainland China's largest oil producer, is considering bidding for a minority stake in the shale gas assets owned by Chesapeake Energy Corp., the South China Morning Post reported Monday, citing market sources.

Barack Obama plans to meet a panel of advisers on Monday to examine his campaign’s ­economic policies. The gathering will include Warren Buffett, the billionaire ­investor, Eric Schmidt, Google’s chairman, Paul ­Volcker, the former Federal Reserve chairman, and ­both Lawrence Summers and Robert Rubin, the former Treasury secretaries.

Nigeria's main militant group sabotaged two more oil pipelines Monday during its two-year campaign of attacks on the country's oil industry, a leader of the group told The Associated Press. The overnight attack in southern Rivers State was against two pipelines believed to be owned by a unit of Royal Dutch Shell PLC, The Movement for the Emancipation of the Niger Delta leader said on condition of anonymity to avoid capture by authorities.

Emirates Airline signed a letter of intent to buy 30 Airbus A350XWB and 30 A330-300s, the companies said Monday. Emirates last year signed an agreement for 70 A350XWBs and an option for 50 more, and the agreement on Monday firms up to 30 of those options.

Kraft sees 2008 earnings per share of at least $1.54 a share, and $1.92 a share excluding items with organic growth of at least 6%.

Transocean will sell two North Sea oil rigs for $750 million to Norway's Northern Offshore, Ltd., the companies said Monday. The semisubmersible drilling rigs are currently operating in the U.K. North Sea.

Ryanair warned of an annual loss of up to 60 million euros.

German consumer confidence is seen dropping to 2.1 points in August from a revised 3.6 points in July, its worst reading since June 2003, according to the polling group GfK.

Toyota Motor Corp on Monday cut its 2008 groupwide global sales forecast by 350,000 units to 9.5 million vehicles due to a pronounced downturn in the U.S. market, in a rare setback for the world's biggest automaker.

According to the WSJ, an unprecedented cutback in driving is slashing the funds available to rebuild the aging highway system and expand mass-transit options, underscoring the economic impact of high gasoline prices. The resulting strain is touching off a political battle over government priorities in a new era of expensive oil.

The NY Times reports struggling to recover from multibillion-dollar losses, banks are curtailing loans to U.S. businesses, depriving even healthy firms of money for expansion and hiring.

Blaze near Yosemite has scorched 26,000 acres. Hundreds of residents evacuated.

Brett Steenbarger: "Still, a waning of selling is different from an influx of buying. When the market bounced after the March low--and now during the market's recent bounce--we have not sustained days in which dollar inflows have exceeded outflows. The moving average's excursions above the blue zero line (the point at which inflows equal outflows) have been brief. This suggests to me that much of the bounce consists of short covering and asset reallocation, not necessarily fresh funds being put to work in equities. As much as I've been impressed with the resilience of many stock market sectors and styles, I will need to see more evidence of positive flows before concluding that we are out of bearish woods."

The predictions among Wall Street analysts that corporate earnings will be the catalyst for a bull market this year are losing credibility with the cascade of U.S. companies making bearish forecasts.

Black & Decker Corp., the largest maker of power tools, cut its 2008 estimate July 25, citing a slump in U.S. homebuilding that is lasting longer than analysts expected. Kimberly-Clark Corp. failed to anticipate pulp and oil costs that were twice its original projection. Of the 63 Standard & Poor's 500 Index companies that provided outlooks this quarter, 30 said profits will fall, data compiled by Bloomberg show.

Kurt Kasun: "The financial system will collapse before "zero-hour" actually occurs. I think we are seeing signs of it in the desperate measures being employed to nationalize companies which trade on market exchanges as private enterprises. There is simply no way to defend the SEC's decision to selectively enforce the prohibition of naked short selling for 17 ‘fragile' financial companies and to not enforce it for the over 5000 other companies which trade on US stock market exchanges. And plans to rescue Fannie Mae and Freddie Mac breathe of a sort of corporate nationalism. Over time this will deal a massive psychological blow to financial markets. They are currently rallying on the sense of relief that the efforts to prevent Fannie and Freddie from dragging US financial markets into the abyss have succeeded and the inevitable day of reckoning has been postponed once again.
But this time around market participants are beginning to smell blood and are beginning to consider that US dollar's status as the world's reserve currency is in jeopardy. It is now clear that the Bear Stearns bailout was not the bottom and that the bottom has not likely occurred. Many were betting that the market lows in March would hold and that the demise of Bear Stearns marked the nadir from which markets were sufficiently cleansed to begin their new ascent higher..We have expanded the money supply (and commensurate debt) more than 1000-fold in less than 40 years, yet no one really thinks that we have expanded economic growth and real wealth to anything near that level.

Rather, the excess money has resulted in a series of rotating inflationary bubbles. Bubbles in commodities, consumer prices, and wages are seen as bad, while inflation in stock and real estate assets are seen as good. But both are symptomatic of an unsustainable system doomed to failure, as Congressman Paul explains...The credit contraction and deleveraging process is going to at the very least serve as a torturous economic headwind as the effects of 35 years of irresponsible financial behavior are unwound...Other governments will reject our paper, painful as it might be for them initially, and the US dollar will lose its status as the world's reserve currency. Yields on US treasuries will soar. Other governments are inflating their currencies as well, so gold be the only real winner in this race to the bottom for fiat money.

Sadly, we will reject willfully accepting the consequences as paying the piper today in return for a road that will lead us down the path of unrecoverable ruin that will permanently harm our place in the world. The time to heed the warnings of Ron Paul is growing short...The course we have taken over the past century has threatened our liberties, security, and prosperity. In spite of these long held concerns, I have days - growing more frequent all the time - when I'm convinced that time is now upon that some Big Events are about to occur. These fast approaching events will not go unnoticed. They will affect all of us. They will not be limited to just some areas of our country. The world economy and political system will share in the chaos about to be unleashed."

John Hussman: "Interest rate trends turned sufficiently hostile last week, and the previously oversold condition of the market was sufficiently cleared, that we lost the evidence required to continue holding our 2% exposure to index call options. While we often see large and extended rallies even during bear markets (the 2000-2002 bear contained 3 separate advances of 20%), rising interest rates have historically tended to cut such rallies short. We liquidated our call position on Wednesday's strength, placing the Strategic Growth Fund back in a fully-hedged position. I have no particular views regarding short-term market direction, except that there is a small and growing “tail risk” to the downside. We'll certainly see short-term selloffs being cleared by short-term bounces, but investors should weigh that non-zero crash risk seriously against any inclination to “buy the dips,” at least until interest rate pressures become more constructive."

Sunday, July 27, 2008

Genentech Part 3

7/27/08 Genentech Part 3

Neither Genentech nor the special committee has any obligation under the affiliation agreement to agree to a transaction, to a price set by investment banks, or to a process to deal with the Roche offer, Genentech's statement said. In addition, Genentech's board of directors resolved that the board would not approve any merger or combination with Roche without a favorable vote of the special committee.

The government has approved the long-delayed merger of the nation's only satellite radio companies, combining Sirius and XM into a single entity with 18 million subscribers.

Russian shares fell nearly 6% on Friday, as Prime Minister Vladimir Putin's call for an investigation of mining company Mechel escalated worries about political risk in the resource-rich emerging market and encouraged investors to sell local equities across sectors.

Standard & Poor's may downgrade the subordinated bonds of Fannie Mae and Freddie Mac, surprising investors who had anticipated the securities would be supported by any Treasury rescue plan. The potential cut would affect $19.2 billion of AA- rated subordinated debt at Fannie Mae and Freddie Mac, according to data compiled by Bloomberg.

Doug Noland: "Fannie’s and Freddie’s combined Total Assets ended 1991 at $194bn, only to about double in four years before ending the nineties at $962bn. After several years of aggressive growth, Fannie’s and Freddie’s combined Books of Business (retained holdings and MBS guarantees) began 1999 at about $1.60 TN. In May of this year they exceeded an incredible $5.20 TN and have so far this year expanded at near y-t-d double-digit rates. Over the past 12 months (through May), Fannie and Freddie’s combined Book of Business had expanded $627bn, or 13.7%.
Treasury and the Fed could today easily “cut” Fannie and Freddie (and the FHLB!) a $20bn check or, ok, $50bn. Yet the reality of the situation is that GSE “Books of Business” must expand at least $600bn this year and then as much next year and the year after that… or very serious problems will unfold throughout the conventional mortgage marketplace. There are Minskian “Ponzi Finance” dynamics at work here, as there were in subprime, “private-label” MBS, CDO, auction-rate and other markets. Only the stakes of a conventional mortgage bust are much greater.
Without the GSEs, there is no way Total U.S. Mortgage Debt would have doubled in the six years 2001-2006. Without the GSEs, it would have been impossible for broker/dealer assets to have ballooned from $455bn to begin 1995 to $3.10 TN to end 2007. And I believe very strongly that without the GSEs the leveraged speculating community would be but a fraction of its current unfathomable size..Enjoying unlimited access to borrowings during periods of systemic stress, the GSEs evolved into the powerful liquidity backstop for the leveraged speculating community and the securities markets generally. Like clockwork, the Greenspan Fed would aggressively cut rates and the GSEs would aggressively expand Credit. And without the GSEs as buyers eager to pay top dollar for mortgages and MBS – especially in the event of marketplace disruption – the hedge funds, Wall Street proprietary trading desks, and others would never have had the gumption to accumulate highly leveraged positions throughout the mortgage and debt securities marketplace. Speculator profits would not have been as spectacular and certainly not consistently so; the unrelenting fund flows feeding the speculator community Bubble would have been a trickle or perhaps a stream as opposed to what evolved into a historic flood. Today’s massive and destabilizing Global Pool of Speculative Finance owes its existence to the GSEs.
Many view the GSEs in an ideological context. To me, it’s always been at its core a financial, economic and political issue – one of the most important issues of our day that Washington and the Fed have left in complete shambles. With the GSEs’ quasi-governmental status, the markets have merrily assumed GSE obligations would be, if necessary, backed by the full faith and Credit of the U.S. government. It remains an irrepressible Bubble."

Robert McHugh: " We believe the plunge is not over, however a short reprieve for a few weeks has started. This plunge is officially a Bear Market, and is a stock market crash. The Industrials have declined 3,370 points, or 23.7 percent so far, from October 11th, 2007's intraday all-time high of 14,198 to this past Tuesday's 10,827, July 15th 2008. More decline is likely...We may have to see a "print money, reverse tax" event, where the Fed (or the U.S. Treasury) prints money, then mails a fat check to every household on the tax rolls, substantially more than the recent tax rebate, which accomplished nothing. The dollar will depreciate, however debts -- which are sinking this ship -- are priced in yesterday's pre-hyperinflation dollars, so the reverse-tax handout can be used by Main Street to payoff debt and get back on their feet. Our guess is the Fed and its partners will take at least a year before they consider this -- which is bad news for Main Street."

The first total solar eclipse in 2 years will blot out the sun on Aug. 1.

Mike Burk: "The market is overbought. A variety of short term indicators hit their highest levels in a while. This can be seen as relief in a down move or initiation of an up move.

The rapid decline in the number of new lows leads me to think it is the initiation of an up move...There were 1304 new lows on the NYSE Tuesday July 15. That number dropped to 51 last Wednesday. Intermediate term risk should be minimal until NY NL turns down again...I expect the major indices to be higher on Friday August 1 than they were on Friday July 25."

Senate lawmakers gave final passage to a broad package of housing legislation, hoping to send a calming message to markets and voters amid the deterioration of the housing market and a growing number of bank failures.