Friday, November 07, 2008


11/8/08 Kristallnacht

Rob Hanna: "I looked back at all prior 5% drops in the S&P 500 since 1960. From 1960 until 1987 there weren’t any. Since 1987 there have now been 14 of them. The November 5, 2008 drop was the 6th 5% drop since early September. Generally these large drops have been followed by a bounce at some point over the next few days. Of the 13 instances, 10 closed higher the following day. If you give the trade 4 days to work then 12 of 13 closed higher than the entry at some point. The lone loser was October 16, 1987. That date is notable because it was the Friday prior to Black Monday."

Ford said it used up $7.7 billion in cash in the latest quarter! Trading was halted in GM shares as they announced Q3 net loss of $4.45 per share. General Motors Corp.warned Friday that it risks running out of cash in the first half of next year without government intervention or a reversal of weakening market conditions.

According to the WSJ, demands for cash from investors and lenders are prompting hedge funds to sell billions of dollars of securities, contributing to the stock market's recent drop.

Iraq warned on Thursday that an effort to reach a so-called status-of-forces agreement that would sanction the US military presence in Iraq beyond 2008 would collapse if no deal were reached by the end of this month.

Two days after Barack Obama’s election as president, Iraqi officials were insisting on a withdrawal date for US troops regardless of conditions on the ground, and maintaining their demand that US forces be subject to Iraqi legal jurisdiction in some instances.

"People are hedging their bets, hoping that through some miracle the jobs report might not be bad as expected," said Andre Bakhos, president of Princeton Financial Group in Princeton, New Jersey. "If the data should fail to please, you will see gains disappear."
S&P 500 futures rose 8.8 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures climbed 73 points, and Nasdaq 100 gained 20.75 points.

The U.S. unemployment rate jumped to a 14-year high of 6.5% in October as nearly a quarter million jobs were lost, the Labor Department reported Friday. U.S. nonfarm payrolls fell by 240,000 in October following a revised decline of 284,000 in September, which was the largest job loss in seven years. So far in 2008, a total of 1.18 million jobs have been lost, with 651,000 coming in just the past three months. The October employment report was much worse than expected. August was revised down by 54,000 jobs and September was revised down by 124,000. I expect October to be revised to at least 350,000.
State unemployment insurance trust funds are rapidly running out of money amid soaring job losses.This is prompting state officials to consider raising employer taxes or curtailing benefits, while forcing them to borrow from the federal government to cover claims.

The trust funds of five states are insolvent - meaning they have reserves of three months or less - while another eight state funds are nearly insolvent with reserves of four to six months, according to the National Employment Law Project. Six other states don't have enough money to cover a year of payments. Some of the states with the biggest difficulties are Michigan, Ohio, and New York. Not surprisingly, they all went for Obama. It's all about the economy and jobs.

Fats Domino: "A lot of fellows nowadays have a B.A., M.D., or Ph.D. Unfortunately, they don't have a J.O.B."

George Ure: "Alternative measures of labor underutilization, shows total unemployed, plus others jumped from 10.6 to 11.1% of the workforce....Looking at the CES Birth/.Death Model - which is where the statisticians try to guesstimate where jobs were created or lost showed a gain of 23-thousand in trade, transportation, and utilities which flies in the face of a Boeing Strike and layoffs in the automakers, but who am I to question such genius?"

Gold for December delivery rose $5, or 0.7%, to $737.20 an ounce in early electronic trading. Crude for December delivery were up one cent at $60.77 a barrel in early Friday trade on the New York Mercantile Exchange.

At least 20 percent of the vessels most commonly hired to haul coal and ore are sitting empty as steelmakers cut output and dwindling trade credit halts deliveries, Lorentzen & Stemoco A/S shipbroker Kjetil Sjuve said.

Fifty to 100 so-called capesizes, each bigger than The Trump Building in New York, have been unable to find cargoes or their owners won't accept rental rates that have plunged 98 percent in five months, Sjuve said by phone today. Normally about 250 such carriers compete for spot bookings, he said.

``There are simply no cargoes,'' Sjuve said from Oslo. ``It's primarily the steel market but it's even more difficult due to financial markets and letters of credit in particular.''

Lending interest rates between banks in Europe fell Friday but not as steeply as the benchmark rates that were cut the day before by the European Central Bank and the Bank of England.

The rate for three-month loans in euros — known as the European Interbank Offered Rate, or Euribor — fell around 0.12 percentage points to 4.47 percent, its lowest level since March 6. And the rate in British pounds declined around 1.07 percentage points to 4.49 percent, its lowest level since May 2004.

The drops recorded are smaller than the 0.50 and 1.50 percentage point rate reductions announced by the European Central Bank and Bank of England respectively, and provide further evidence that credit market conditions remain abnormally tight.

The Torah survived the Holocaust by being cut into pieces, hidden during the war and reassembled afterward.
Nearing the somber 70th anniversary of Kristallnacht, Los Angeles Jews celebrate the story of a Torah that was pieced together from scattered texts smuggled into a Nazi labor camp.
To observe their ritual, the Jews had cut religious scrolls into sections, bound the parchment pieces around their bodies and walked them through Yanov's front gate. They hid the fragments wherever they could: beneath the floorboards of their barracks, inside hollow bedposts, even in a camp cemetery. After the camp's liberation in 1945, one survivor collected the scattered pieces. He assembled them into a single ragged scroll, the Yanov Torah.Three decades later, the Torah -- its parchment warped and water-stained, its patchwork sheets held together by fraying threads -- found its way to Los Angeles and into the hands of a leader of the city's Reform Jewish community, Rabbi Erwin Herman, who devoted the final years of his life to telling its remarkable story.
On Thursday, Herman's dying wish was fulfilled when a new generation of Jews celebrated the rebirth of the Yanov Torah.

The dollar index fell to 85.680 from 86.280 in late North American trading on Thursday.

The full moon on Nov 13th is a new or full moon which occurs when the Moon is 90% or greater of its closest approach to Earth. The 2 super moons coming up are November 13th and December 12th.

Andrew Hughes: ""Reported estimates of the size of the credit default swap market have so far been based on surveys. These surveys tend to overstate the size of the market due to each party to a trade separately reporting its own side. Thus, when two parties to a single $10 million dollar trade each report their "side" of the trade, the amount reported is $20 million, which overstates the actual size by a factor of two since both reports relate to a single $10 million contract. When examining the outstanding amount of actual contracts registered in the Warehouse (not separately reported "sides") as of October 9, 2008, credit default swap contracts registered in the Warehouse totaled approximately $34.8 trillion (in US Dollar equivalents). This is down significantly from the approximately $44 trillion that were registered in the Warehouse at the end of April this year."
Well some good news at least it's not the widely reported $54 Trillion, it's just $34.8 Trillion. Now.

Microsoft Corp. is in talks to get its search function placed on Verizon Wireless phones, potentially displacing Google Inc., The Wall Street Journal reported Friday.

According to Reuters, Chrysler LLC is rapidly burning through cash and being driven to prepare for a possible break-up if it can't clinch a merger with General Motors Corp or get government funding needed to ride out the economic crisis, people with knowledge of the situation said.

Gary Dorsch: "At its lowest point in October 2008, the meltdown in equities around the world erased $12 trillion of market value for the month and $31 trillion from a year earlier. Lehman's bankruptcy left sellers of credit default swaps with liabilities of $270 billion, and hedge-funds scrambled to raise cash by selling anything they could get their hands on, including commodities and stocks. The Reuters/Jefferies Commodity Index plunged -23% in October, its steepest monthly decline since 1956. Investment grade corporate bonds lost -7.4% in October, their worst month since 1976.

At the same time, US-home prices continued their unrelenting slide for a 20th straight month, to stand -222% below their peak in July 2006. Falling US-home prices have reduced homeowner wealth by about $3 trillion, and stock market losses add-up to an additional $8-trillion. This reduced household wealth could force US-households to cut aggregate spending by $300-billion a year or more.... With credit drying up and new-vehicle sales slumping, 700 car dealerships will close this year, and taking with them an estimated 37,100 jobs. That's a heavy blow to the US economy. The country's 20,700 dealerships accounted for $693 billion in sales last year, or 18% of all retail sales. Dealership wages and salaries make up 13% of the nation's retail payroll."

Nouriel Roubini: "Obama will inherit and economic and financial mess worse than anything the U.S. has faced in decades: the most severe recession in 50 years; the worst financial and banking crisis since the Great Depression; a ballooning fiscal deficit that may be as high as a trillion dollar in 2009 and 2010; a huge current account deficit; a financial system that is in a severe crisis and where deleveraging is still occurring at a very rapid pace, thus causing a worsening of the credit crunch; a household sector where millions of households are insolvent, into negative equity territory and on the verge of losing their homes; a serious risk of deflation as the slack in goods, labor and commodity markets becomes deeper; the risk that we will end in a deflationary liquidity trap as the Fed is fast approaching the zero-bound constraint for the Fed Funds rate; the risk of a severe debt deflation as the real value of nominal liabilities will rise given price deflation while the value of financial assets is still plunging. This is the bitter gift that the Bush administration has bequeathed to Obama and the Democrats."

The unemployment rate is expected to rise to 8.5% by the end of next year and inch even higher in early 2010, economists for Goldman Sachs wrote Friday. The cumulative trough-to-peak increase of more than 4 percentage points in the jobless rate would be the most since World War II, they said. Goldman analysts lowered growth forecasts for the next three quarters, and said they now expect the Federal Reserve to cut its interest rate target to 0.50% by December. "The main reason for these changes is the accumulation of evidence that U.S. domestic demand and production are dropping sharply," they wrote. "We do not see a resumption of anything close to trend growth before 2010."

South Carolina's Comptroller General Richard Eckstrom says state sales tax revenues were $195 million in October, down 31 percent from the more than $282 million collected in October 2007. Since July, the state has collected 21 percent less money from sales taxes than the same period last year.The money collected from sales tax makes up nearly 40 percent of the state's general revenue.

Bill Bonner: "Foreign central banks alone hold about $2.4 trillion worth of U.S. government debt. About $10 trillion is said to be the total of all US-based securities in foreign hands. That is a burden that could be easily lightened…if, for example, the dollar weren't worth quite so much."

Amgen affirmed its earnings outlook of $4.45 to $4.55 a share for 2008.

Gold for December delivery rose $2, or 0.3%, to end at $734.20 an ounce on the Comex division of the New York Mercantile Exchange. Crude for December delivery ended up 27 cents at $61.04 a barrel on the New York Mercantile Exchange. The contract posted a weekly loss of $6.77, or 10%, from last Friday's closing level of $67.81 a barrel.

The National Association of Realtors Pending Home Sales Index, based on contracts signed in September, fell 4.6 percent in September to 89.2 from an upwardly revised reading of 93.5 in August. But the September reading was 1.6 percent higher than a year earlier.

Berkshire Hathaway's third-quarter net income came in at $1.06 billion, or $682 per class A share, down 77% from a year earlier when the insurance-focused conglomerate made $4.55 billion, or $2,942 per class A share. Operating earnings, which exclude net realized investment gains and losses, were $2.07 billion, or $1,335 per class A share, in the latest period. The net result included net investment and derivative losses of $1.01 billion, Berkshire said.

The Dow Jones Industrial Average gained 248.1 points to 8,943.89, giving it a weekly loss of 4.1%. The S&P 500 climbed 25.87 points to 930.75, off 3.9% from the week-ago level. The Nasdaq Composite gained 38.7 points to 1,647.4, with the technology-laden index sustaining a weekly drop of 4.3%.
Interestingly, Apple, Google, and Goldman Sachs were all down on the day.

Total seasonally adjusted consumer debt increased by $6.86 billion, or a 3.2% annual rate, in September to $2.59 trillion. Consumer credit fell at a 3.9% pace in the previous month. It was the first decline since January 1998. Credit-card debt rose by $900 million, or 1.2%, in September to $971.4 billion, faster than the 0.4% gain in August. Non-revolving credit - such as auto loans, personal loans and student loans - increased by $5.91 billion, or 4.4%, to $1.62 trillion, almost completely reversing the 4.9% drop in August.


11/7/08 Unemployment

The number of U.S. residents collecting state unemployment benefits reached the highest level in 25 years, rising by 122,000 to a seasonally adjusted 3.84 million in the week ending Oct. 25, the Labor Department reported Thursday.

Slappy White: "The trouble with unemployment is that the minute you wake up in the morning you're on the job. "

The Center for Automotive Research stated that, should the automotive industry collapse, about 3 million jobs would be lost.

JFK: "We believe that if men have the talent to invent new machines that put men out of work, they have the talent to put those men back to work."

Steve Forbes says Paul Volcker should be the next Treasury Secretary. That's a fantastic choice. On the other hand, at age 81 would he want the job?

"Banks are cutting back, the economy is in a deepening recession and in that environment, I don't think banks are going to become a lot more willing to extend credit soon," said Jan Hatzius, chief U.S. economist in New York at Goldman Sachs Group Inc., the world's biggest securities firm.

"No one wants to lend because they are still wary of values of bank balance sheets, and no one wants to borrow from the money market because they can borrow directly from the central banks," said Alessandro Tentori, a fixed-income strategist at BNP Paribas SA in London.

Cato the Elder: "Cessation of work is not accompanied by cessation of expenses."

Rob Hanna: "I looked back at all prior 5% drops in the S&P 500 since 1960. From 1960 until 1987 there weren’t any. Since 1987 there have now been 14 of them. The November 5, 2008 drop was the 6th 5% drop since early September. Generally these large drops have been followed by a bounce at some point over the next few days....Of the 13 instances, 10 closed higher the following day. If you give the trade 4 days to work then 12 of 13 closed higher than the entry at some point. The lone loser was October 16, 1987. That date is notable because it was the Friday prior to Black Monday."

The Oil Drum: "Oil prices will rebound to more than $100 a barrel as soon as the world economy recovers, and will exceed $200 by 2030, the International Energy Agency will say in its flagship report to be published next week.

“While market imbalances could temporarily cause prices to fall back, it is becoming increasingly apparent that the era of cheap oil is over,” the report states.

The developed world’s energy watchdog has doubled its long-term price expectation from last year’s $108 a barrel for 2030 and assumes oil prices will rebound from today’s $60-$70 a barrel to trade, in real terms adjusted by inflation, at an average of more than $100 a barrel from 2008 to 2015."

"We have one country, one Constitution and one future that binds us. And when we come together and work together, there is no limit to the greatness of America." Who said these words? Would you believe George W. Bush in his acceptance speech in 2004. You didn't know his comic side.

The ECB on Thursday announced it was cutting its main policy rate by half a percentage point to 3.25 per cent - the lowest level since October 2006. Despite some speculation that a deeper cut might be announced, the ECB seems to have decided that a larger cut might have appeared a panic reaction.

Target says weaker consumer spending caused its October same-store sales results to fall 4.8 percent. That is a larger drop than analysts expected.

Analysts surveyed by Thomson Reuters, on average, expected the discount retailer's same-store sales to fall a smaller 2.8 percent.

Limited Brands Inc. reported a 9 percent same-store sales drop in October, a bigger decline than the 7.2 percent analysts were expecting.

Nonfarm Productivity was up 1.1% in Q3, more than the 0.7% economists expected, but down from Q2's 3.6% jump. Unit labor costs were up a more than expected 3.6% (+3% consensus), after falling 0.1% last quarter.

Initial Jobless Claims of 481K are a drop worse than the 477K economists expected, and down 4K from last week's revised 485K. 4-week average of 477K is unchanged.

Belgium's InBev, the brewer of Stella Artois and Beck's, said it was on course to close the purchase by the end of the year in the face of market turmoil that forced the postponement of a $9.8 billion rights issue last month.

Chief Financial Officer Felipe Dutra told a conference call the deal to buy the maker of Budweiser, agreed in July before the financial crisis deepened, was simply awaiting approval by Anheuser shareholders on Nov. 12 and by regulators.

Goldman Sachs Group Inc notified roughly 3,200 employees this week that they have been laid off, part of previously reported plans to slash 10 percent of the firm's global work force amid slumping markets, people familiar with the situation said Wednesday.

Trichet: Disinflation process taking place.

In the meantime, what happens with our printing press working overtime at a 16% annualized rate? Inflation ignores this?

Nordstrom said its October sales at stores open at least one year fell 15.7%. Analysts, on average, had expected same-store sales at the department-store chain to be down 13.1%, according to Thomson Reuters. The company said "the economic and competitive retail environment remained challenging" last month and that it now expects third-quarter earnings to come in slightly below a previously announced target of 32 cents to 37 cents a share.

Saks Inc.said Thursday its October sales at stores open at least one year fell 16.6%. Analysts, on average, had expected the same-store sales to fall 11.8%, according to Thomson Reuters.

J.C. Penney Co.said Thursday that its October sales at stores open at least one year fell 13%, citing declining mall traffic and slower consumer spending.

Gold for December delivery rose $10.10, or 1.4%, to $752.50 an ounce on the Comex division of the New York Mercantile Exchange. Oil futures traded lower early Thursday, extending their decline from the previous session. Crude oil for December delivery dropped $1.43 to $63.83 a barrel in electronic trading on Globex.

Dana Holding Corp. said Thursday it will close up to 10 plants and cut 2,000 more employees than originally planned as the auto parts maker's net loss widened in the third quarter.

Moody's projects that New York City and its suburbs will lose 65,000 finance jobs by the middle of 2010, or 11% of the total.

Companies in the Standard & Poor's 500 Index may see fourth-quarter earnings advance 15 percent, down from 42 percent projected at the end of August, according to a Bloomberg survey of analysts' estimates. Profits in 2009 may grow 13 percent, analysts say now, compared with the 24 percent predicted two months ago.

I continue to believe these numbers are too optimistic.

President and Chief Executive Kay Krill said that "third-quarter financial results are tracking well below our previous expectations" and that Ann Taylor "will be significantly scaling back capital spending in 2009."

Equities in Moscow fell sharply Thursday, tracking a broad-based retreat in stock markets around the world. The dollar-denominated RTS stock index fell 6% in intraday trading, causing the stock exchange to halt trading for one hour starting at 1:35 p.m. Moscow time. At the Micex stock exchange, the benchmark index fell 5.9%, also leading to a temporary trading suspension, according to the website of the exchange.

Charles River Breeding stock plunged to $25+ as late Wednesday it now sees 2008 sales growing by only 9% to 10%, down from its previous outlook of 12% to 14%. Earnings per share for the year are now seen at $2.48 to $2.52, down from $2.59 to $2.65, the company added. For my money, as a long-term investor, scale down buy orders from $25+ to $22 makes a lot of sense. Patience will be rewarded I believe. This is one of the better growth values available.

Neiman Marcus Group Inc. said sales sank 27 percent. The company said it was increasing promotions and reducing capital spending during its current year.

``We expect retail demand will remain weak for an extended period of time as our affluent customer reacts to the continuing volatility of the financial markets,'' Chief Executive Officer Burton Tansky said.

Macy's posted a 6.3 percent decline, greater than the 5.8 percent drop analysts estimated.

Ogden Nash: “They take the paper and they read the headlines, so they've heard of unemployment and they've heard of bread lines, and they philanthropically cure them all by getting up a costume charity ball”

Gap, the largest U.S. apparel retailer, said October same- store sales decreased 16 percent, more than analysts estimated, and reiterated its full-year profit forecast of as much as $1.35 a share. Abercrombie & Fitch Co. said October sales plunged 20 percent.

Copper prices fell for the second straight day as an increase in inventories signaled less demand for the metal used in pipes and wires.

Stockpiles monitored by the London Metal Exchange jumped 2.1 percent today to 252,550 metric tons, the highest since March 10, 2004. Supplies have more than doubled in the second half of this year. Copper futures tumbled 7.1 percent yesterday on concern that consumption is waning.

Toyota Motor Corp., the world's second-largest automaker, forecast the biggest drop in profit in at least 18 years as a global slump cripples auto demand and gains in the yen erode the value of overseas sales.

According to Bloomberg, the most comprehensive report on unregulated credit-default swaps didn't disclose bets in the section of the more than $47 trillion market that helped destroy American International Group Inc., once the world's biggest insurer.

A report by the Depository Trust and Clearing Corp. doesn't include privately negotiated credit-default swaps that insurers such as AIG, MBIA Inc. and Ambac Financial Group Inc. sold to guarantee securities known as collateralized debt obligations. It includes only a ``small fraction'' of contracts linked to mortgage securities, according to Andrea Cicione at BNP Paribas SA in London.

New York-based DTCC's data, released on its Web site Nov. 4, showed a total $33.6 trillion of transactions on governments, companies and asset-backed securities worldwide, based on gross numbers. While designed to ease concerns about the amount of risk banks and investors amassed on borrowers from companies to homeowners, the report may have missed as much as 40 percent of the trades outstanding in the market, Cicione said.

The data are ``likely to underestimate the amount of net CDS exposure,'' Cicione, who correctly forecast in January that the cost of protecting European companies from default would rise, said in an interview. ``A broadening of the coverage to the entire market is what investors really need.''

Whole Foods Market's comparable store sales increased 0.4% versus an 8.2% increase in theprior year. Identical store sales, excluding eight relocated stores and two major expansions, decreased 0.5% versus a 6.0% increase in the prior year.

Three years of record-high freight rates on the back of booming world trade, thanks in part to China's double-digit growth, has led to giddy overinvestment in new ships.

Over the next four years, some 6,000 new vessels - equal to 60% of the world's current oceangoing fleet of tankers, bulk carriers and container ships - are due to enter service.

But now, because of the financial crisis, it looks though half of those ships now on order at shipyards around the world may never be financed, much less built.

"Finance for ships will not be easily available for the next one to two years and so there will be cancelations of shipbuilding orders," said Theodore Petropoulos, managing director at consultancy Petrofin Research."I can't say that the order book will shrink to such a point that it no longer poses a threat (of overcapacity)," Petropoulos said. "But overall, the supply side now looks like it will be, let's say, less unfriendly than it has been."

Greek shipowners, directly or indirectly, control roughly a quarter of the world's fleet and half the European Union's tonnage.

Time charter rates for Capesize bulkers, the supertankers of the dry bulk industry with a displacement of more than 160,000 deadweight tons, have fallen from more than $200,000 a day in August to less than $10,000 a day now. You have to ask yourself. Do you think the rates are going to zero? If you bid $5,000, you might get a tanker for the day! That's better than day trading and losing your ass. Hell. You could throw an unemployment party or a stimulus party on the tanker. Does it get any better than that?

Natural-gas inventories rose by 12 billion cubic feet for the week ended Oct. 31, the U.S. Energy Department said Thursday. Analysts at IHS Global Insight expected the report to show a climb of 50 billion cubic feet.

Fidelity Investments is cutting nearly 1,300 jobs this month and the mutual fund company says more layoffs are coming early next year. Boston-based Fidelity said Thursday it will lay off about 2.9 percent of its more than 44,000-employee work force later this month.

Dec. gold ends down $10.20, or 1.4%, at $732.20 an ounce. Crude for December delivery dropped $4.53, or 7%, at $60.77 a barrel on the New York Mercantile Exchange.

Weyerhaeuser is indefinitely closing its iLevel Veneer Technologies facility in Colbert, Ga. immediately. The closure will affect about 105 workers at the site.

North Carolina's 15 electoral votes brings Obama's tally to 364 electoral votes. The only outstanding state is Missouri with its 11 electoral votes. Sen. John McCain was leading Missouri, according to recent tallies.

Do you know at least one person who is unemployed? How long has that individual been unemployed? Do you think the government still counts that individual on the unemployment rolls? Tomorrow's unemployment number will be large, maybe 250,000 or so in October; however, that does not tell the whole story and Americans know that. There is no question in my mind that the unemployment rate is approaching 10%, and possibly higher.

Lieberman promises to support Obama. Who gives a crap?

Fluor Corp. narrowed its full-year 2008 earnings outlook to a range of $3.70 to $3.80 a share and estimated 2009 earnings at $3.90 to $4.20 a share.

The Dow Jones Industrial Average shed 443.48 points, or 4.9%, to 8,695.79. The S&P 500 declined 47.88 points, or 5%, to 904.89, while the Nasdaq Composite dropped 72.94 points, or 4.3%, to end at 1,608.70.

U.S. toymaker Mattel Inc announced on Thursday it was cutting about 1,000 jobs, saying the global economy had entered "one of its most challenging and difficult periods in the last 100 years."

Walt Disney Co.Chief Executive Bob Iger told analysts that the company is seeing the lowest consumer confidence it has seen in more than three decades due to the dismal state of the economy, which could curtail consumer spending during the holiday season in 2008, "and almost certainly during calendar year 2009." Bookings at the company's theme parks and resorts during the last month "have fallen off considerably," Iger said during a conference call.

The Bank of Korea reduced interest rates by a quarter point Friday, marking its third cut within a month, lowering its key lending rate to 4%.

The Nikkei 225 Average plunged 5.6% to 8,399.49 and the broader Topix index lost 5.3% to 861.21. Australia's S&P/ASX 200 gave up 3.7% to 3,997.10, South Korea's Kospi lost 4.5% to 1,043.07 and New Zealand's NZX 50 index slid 1.9% to 2,785.08.

Microsoft Corp dismissed speculation it might still be interested in a takeover of Internet firm Yahoo Inc."We made an offer, we made another offer ... We moved on," Microsoft Chief Executive Steve Ballmer told a business luncheon in Sydney on Friday when asked for the firm's plans after a partnership between Yahoo and Google Inc fell through this week.

"We tried at one point to do a partnership around search ... and that didn't work either, and we moved on and they moved on. We are not interested in going back and re-looking at an acquisition. I don't know why they would be either, frankly," Ballmer said.

Ford Motor Co. says it lost $129 million in the third quarter as the struggling automaker burned up $7.7 billion in cash. Ford said it plans to cut North American salaried personnel-related costs by an additional 10 percent by the end of January 2009, and to reduce U.S. hourly employees by approximately 2,600. It said it will also eliminate merit pay increases and performance bonuses for salaried employees.

According to a survey released Thursday by Consumer Reports, the vast majority (84 percent) said they plan to cut back spending on themselves. In all, 59 percent of shoppers said they plan to cut back on gift giving.

According to AMG Data Services, October Equity Fund Outflows -$31.9 Bil; Taxable Bond Fund Outflows -$41.3 Bil.
xETFs Equity Fund Outflows -$40.5 Bil; Taxable Bond Fund Outflows -$33.5 Bil.
Including ETF activity, Equity funds report net cash Outlows totaling -$31.888 billion in October (-$40.475 Bil xETF activity) as Domestic funds report net outflows of -$17.885 billion (-$26.168 Bil xETFs) and Non-domestic funds report net outflows of -$14.003 billion (-$14.307 Bil xETFs).

Thursday, November 06, 2008


11/6/08 Non-Employment

U.S. employers announced plans to drop 112,884 workers from payrolls in October, the highest figure in nearly five years, according to outplacement consultant Challenger, Gray & Christmas. Heavy downsizing in the financial and automotive sectors contributed to the 19% rise in job cuts from September's total of 95,094, the firm said. October cuts were 79% above the same month last year. The October figure is the largest since January 2004. Employers have cut 875,974 jobs in 2008. That's up 14% from the 768,264 lost in all of 2007, Challenger said, and is the largest 10-month total since 2003.

KB Home cut its quarterly dividend 75% to 6.25 cents a share from 25 cents, payable Nov. 25 to holders of record Nov. 14. KB said it wants to stay financially strong and prepare for opportunities as the housing market recovers.

With the dollar rising and stock futures pointing to a weaker start, oil futures fell $2.48 to $68.05 a barrel and gold futures slipped $4.90 to $752.40 an ounce. One exception was platinum, which rose $3.40 to $861.10 an ounce.

European stock futures pointed lower Wednesday after six consecutive gains for Continental equities. German DAX futures slipped 0.4%, French CAC 40 futures slipped 0.6% and Euro Stoxx 50 futures eased 0.5%. Also lower were U.S. stock futures, with the S&P 500 contract down 6.8 points. Tokyo jumped 4.5% and Hong Kong gained 3.2%.

Japanese auto sales fell 13.1% in October from a year earlier, marking the third consecutive monthly decline, according to a Nikkei newspaper report Wednesday, which cited data from the Japan Automobile Dealers Association. Japanese car makers sold 233,922 vehicles with engine capacities of more than 660 cubic centimeters, the lowest number since 1968. The decline follows a 5.3% slide in September and a 14.9% fall in August. Sales of mini cars, those with engines of 660cc or smaller, were up 6.2% in October from a year earlier, the report said, citing data from the Japan Mini Vehicles Association.

Robert McHugh: "Stocks had the large price move Tuesday, that the small change in Monday's McClellan Oscillator suggested was coming. The move was up, which doesn't surprise us as we wrote in last night's newsletter, "If you want to press us to the wall, we would not be surprised by a rally of 3 to 5 percent over the next week or two." Tuesday's rally was 3.27 percent. Our studies of post presidential elections shows the odds are high that we will see at least another 5 percent rise above Tuesday night's 9,625.28 close some time over the next four months."

According to the WSJ, an indicator of economic health, the yield curve, is signaling that the recovery in the developed world is going to take a long time.

The benchmark curve measures the gap between the yields on two- and 10-year government securities. When the economy is weak, the gap tends to widen as interest rates are cut to aid growth. Short-dated yields, the most sensitive to policy changes, fall more than their longer-dated counterparts. As the economy recovers and rates begin to rise again, the gap narrows.

In a setback likely to cause more delays to ripple through its troubled 787 Dreamliner program, Boeing Co. said Tuesday that it needs to replace thousands of improperly installed fasteners on the first Dreamliner jets before they can be flown.

Boeing said the fastener woes were discovered during a routine quality-control inspection. The time it will take to correct the problem -- along with delays caused by a recently resolved 57-day strike by the company's union machinists -- will make it impossible to meet the goal of flying the first Dreamliner this year, Boeing said.

Dmitri Medvedev said Moscow might deploy a missile system to counter a perceived threat from a proposed U.S. defense shield.

On Wednesday Cisco and Whole Foods report quarterly results. I expect Whole Foods to disappoint again and Cisco may lower guidance going forward but the stock reflects that in my view.

Swiss financial guru Marc Faber tells swissinfo he sees hard times ahead for the world's stock exchanges and even state bankruptcy for the United States.
He also believes that stock exchanges will stay at low levels for a long time..." With the best of wills, I do not see a single catalyst that could lead to a new bull market in the world."

XTO Energy's cash flow for 2009 is targeted to grow by more than 25%.

Finance company GMAC LLC lost $2.52 billion in the third quarter, hurt by the housing slump and vehicle lease writedowns, and said its mortgage unit, one of the nation's largest home loan providers, may not survive.

The fifth straight quarterly loss brought GMAC's losses since the middle of 2007 to $7.9 billion.

"After assessing the latest data for October, we have lowered our payrolls forecast to a decline of 220,000 from a preliminary forecast of [a drop of] 190,000," the economic team at BNP Paribas said in a note to clients. Action Economics, which in the past has been relatively optimistic about the economy, said it also now sees job losses approaching 220,000, with the risk of an even larger decline. "It i clear that financial dislocation is now inflicting a sizable shock on the U.S. labor market, following nearly a year of notable resilience that seemingly ended abruptly in August or early September," the Action team wrote in a research note. ADP stated that unemployment rose by 157,000 in October.

Hercules Inc.said Wednesday that its shareholders approved an acquisition by Ashland, Inc. Under the agreement, Hercules shareholders will receive $18.60 in cash and 0.093 of a share of Ashland common stock. The companies expect the transaction to close Nov. 13.

- The American Petroleum Institute reported Wednesday a rise of 1.8 million barrels in crude supplies for the week ended Oct. 31. The Energy Department had said that supplies were unchanged for the week. Motor gasoline supplies were up 1.6 million barrels, the API said. The government had reported that they were up 1.1 million barrels. Distillate inventories fell by 1.9 million barrels, the API said. They were up 1.2 million, according to the Energy Department.

The ISM nonmanufacturing index fell to 44.4% from 50.2% in September. The decline was worse than expected. Economists were looking the index to fall to 47.5%. Twelve industries reported decreased activity in October while only four reported gains. Indexes for business activity, new orders and employment fell sharply in the month. The price index also fell sharply.

Whole Foods said it earned $1.5 million, or 1 cent a share, for the quarter ended Sept. 28. A year-earlier, it made $34 million, or 24 cents a share. Sales rose 13% to $1.8 billion. Whole Foods said its identical-store sales -- a key barometer of its health -- worsened throughout October as consumer spending has faltered. Sales decreased 3.3% versus a 6.7% increase in the prior year.

Cadence Design Systems Inc. plans to cut at least 625 jobs, or 12% of its workforce.

Cisco Systems Inc.reported fiscal first-quarter net income of $2.2 billion, compared with a net profit of $2.2 billion for the year-earlier period. On a per share basis, the company reported earnings per share of 37 cents a share, compared to 35 cents a share last year. Adjusted income was 42 cents a share. Revenue was $10.3 billion, up from $9.6 billion last year. Cisco Systems Inc Chief Executive John Chambers warned that revenue could fall as much as 10 percent in the current quarter as an economic downturn spreads from the United States to Europe and Asia.

After falling over 500 points, the Dow Jones Industrial Average closed at 9,139.27, down 486.01 points, or nearly 5.1%. The S&P 500 shed 52.98 points, or 5.3%, to 952.77. The Nasdaq Composite dumped 98.48 points, or 5.5%, to end at 1,681.64.

December crude fell $5.23, or 7.4%, to close at $65.30 per barrel Wednesday on the New York Mercantile Exchange. December gold closed at $742.40 an ounce Wednesday on the New York Mercantile Exchange, down $14.90, or 2%.


Japan's Nikkei ends morning session down 5.7% at 8,980.18.

Advanced Micro Devices Inc. cut 500 jobs immediately, according to Reuters on Wednesday.

After nearly a year spent seeking alternatives to Microsoft Corp's buyout offer, Yahoo Inc's Chief Executive Jerry Yang said he believes a deal between the two is still the best option for the beleaguered Internet company.

Wal-Mart Stores, Inc.said Thursday that its U.S. October sales at stores open at least one year rose 2.4% excluding fuel and 2.5% including fuel. The company said it expects U.S. comparable sales for the four-week November period to rise between 1% and 3%. It said its business in the U.S. and around the world remains strong.

The Bank of England stunned markets by a far bigger rate cut than expected. The central bank cut rates to 3% from 4.5%, which pared losses for Dow Jones Industrial Average futures to 46 points and added about two percentage points to the U.K. FTSE 100, which still traded 2% lower on the day.

Costco Wholesale Corp reported that October same-store sales fell 1%. The comparable sales, reflecting revenue from stores open at least a year to eliminate the effects of newly opened and closed outlets, rose 2% in the U.S. and fell 10% internationally. Excluding currency fluctuations, international same-store sales rose 9% in local currency and total company comparable sales would have risen 3% for the month.

The Hang Seng Index plummeted 7.1% to 13,790.04 and the Hang Seng China Enterprises Index lost 8.7% to 6,599.50. The U.K.'s FTSE 100 index fell 3.1% at 4,390.47, the French CAC 40 lost 3.3% at 3,499.35 and the German DAX 30 index gave up 3.2% at 5,003.47.

Toyota Motor Corp. [jp:7203] reported Thursday net income fell 48% in the half year to Sept. 30, owing to the yen's appreciation and declines in vehicle sales in Europe and the U.S.

Tuesday, November 04, 2008


11/5/08 Change

Charles Darwin: "It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change."

U.S. and foreign businesses sharply cut back their demand for capital equipment for the second straight month in September, the Commerce Department reported Tuesday. Factory orders fell 2.5% in September, much weaker than the 0.2% fall expected by economists surveyed by MarketWatch. Factory orders had fallen 4.3% in August, the biggest drop in almost two years. Orders for durable goods increased a revised 0.9% in September, up slightly from 0.8% estimated a week ago. But this gain was swamped by a 5.5% drop in orders for nondurable goods. Core capital equipment orders fell 1.5% in September after falling 2.3% in August.

"Due to the worsening of the financial crisis, it is currently impossible to make stable forecasts for the rest of the year and beyond," BMW said in a statement. BMW AG said Tuesday net profit for the third quarter dropped 63 percent as the global economic turmoil made consumers more reluctant to shell out for its sports and luxury cars and credit costs made it difficult for consumers and the company to borrow.

Saudi Arabia, the world's biggest oil exporter, has reduced exports by around 900,000 barrels per day from a peak in August, one source said.

Nouriel Roubini: "The Rising Risk of a Hard Landing in China: The Two Engines of Global Growth – U.S. and China – are Now Stalling."

The Oil Drum: "Australia will become the third country, following Denmark and Israel, to implement the group's vision of electric vehicles powered by renewable energy. Better Place and Macquarie Capital Group will raise $1 billion to build a network of 250,000 charging stations and battery exchange stations in key locations along the east coast by 2012. The network will be powered by wind turbines owned by AGL Energy."

George Bernard Shaw: "The only man I know who behaves sensibly is my tailor; he takes my measurements anew each time he sees me. The rest go on with their old measurements and expect me to fit them. "

Blue Mountain Capital Management is suspending withdrawals from its $3.1bn Credit Alternatives Fund, becoming the latest hedge fund firm to do so.

Unlike other hedge funds that have seen redemptions soar due to poor performance, Blue Mountain has done relatively well.

For the year to the end of October, the credit fund is down 2.4 per cent.

“Several large fund of fund investors are themselves facing liquidity pressures from their own investors,” wrote Andrew Feldstein, the firm’s founder, in a letter to investors.

“[As] a consequence, investors have submitted significant redemption notices representing a meaningful percentage of (the fund’s) assets under management.”

Mr Feldstein said that if Blue Mountain were to sell into markets where valuations remain “exceptional and unprecedented”, investors would be left with “severe liquidation costs and a less liquid portfolio”.

BHP Billiton Ltd. said Tuesday that EU regulators had highlighted antitrust problems with its hostile bid for rival Rio Tinto Inc. that would create the world's largest iron ore miner.

The company said it had received a statement of objections from the European Commission — a formal charge sheet that lays out how a deal may damage competition.

World equity markets lost an estimated $5.79 trillion during October, the biggest monthly loss ever, Standard & Poor's Index Services said Monday.
The October loss eclipsed the previous record, which was set just one month earlier, when 52 global equity markets lost a combined $4 trillion.
Through the first 10 months of the year, world markets have lost about $16.22 trillion, according to S&P research.

Carl Bass, Autodesk CEO said in a press release. "Demand for our products fell dramatically in October in all geographies as the financial crisis worsened."

Oil futures rose early Tuesday, rebounding after falling nearly 6% in the previous session. Crude oil for December delivery rose $1.41 to $65.34 a barrel in electronic trading on Globex. Gold futures rose more than 2% early Tuesday, as weakness in the U.S. dollar boosted demand for the precious metal. Gold for December delivery gained $16.30 to $743.10 an ounce in electronic trading on Globex.

Boeing Co. said Tuesday world air cargo growth is set to expand at a 5.8 percent annual rate over the next two decades and worldwide air freight traffic will triple through 2027.

National chain store sales fell 1.2% in the four weeks of October vs. September, Redbook says, but gained 0.6% vs. a year ago.

With 1/2 hour to the open, markets are poised to open higher. Dow futures +1.76% to 9496. S&P +2% to 989. Nasdaq +1.9%.

Jim McTague: "PRESIDENT GEORGE W. BUSH CLAIMED during his first run for the presidency that he was a "Uniter, not a divider." He certainly got that one right: On the eve of the most significant election of the new century, the American electorate is steadfastly united in its disdain and dislike for all things Dubya.

Consequently, his Republican Party looks like it is going to get the PiƱata treatment Tuesday. This time, it's the elephant instead of the traditional donkey getting whacked, and how much of it will remain after the voters get finished with their broomsticks is anyone's guess."

Randall W. Forsyth: "The worldwide tightening of credit -- not just for dollar-based markets, but everywhere from Down Under to Eastern Europe -- has led to a stunningly sudden plunge in economic activity everywhere.

Data are beginning to confirm what the markets sussed out six weeks ago: The U.S. economy is near free-fall as the result of the credit crunch....

The Fed's survey of loan officers suggests, if anything, things are more stringent than 28 years ago. A record 69.1% of all loan officers said they were tightening some conditions for loans, far above the 54.4% peak reached in late 2000.

Moreover, the Fed's survey also noted a significant drawdown of existing credit lines by businesses. "This should help clarify to some observers that recent increases in some bank credit measures are hardly voluntary," writes Citigroup economist Steven Witing....The writer and originator of Up and Down Wall Street in the print Barron's, Alan Abelson, put it best: this election pits one candidate who should have been elected eight years ago against one who should be elected eight years hence."

New York City commercial real estate transactions plunged 61 percent in 2008 through October as the global credit crisis roiled lending and sidelined buyers.

About $17 billion of transactions have closed so far and the market is headed for its worst year since 2004, according to data from Real Capital Analytics Inc. of New York. Sellers have made 237 deals of $5 million or more, a four-year low in a market that posted a record $51 billion in sales in 2007. ``The banks are not lending, and most of them are saying we're done for the year,'' said Scott Latham, executive vice president for New York investment sales at Cushman & Wakefield Inc., the largest closely held commercial brokerage. ``In all likelihood, you will see next to no transactions between now and the end of the year.''

Coldwater Creek shares fell 9.1% after the women's clothing retailer withdrew its previously issued sales and profit forecast for the fourth quarter and estimated a third-quarter loss.

Kyrgyzstan's economy minister said Tuesday that the global economic crisis may drive the impoverished Central Asian nation to the verge of financial collapse.

Akylbek Japarov said a drop in the amount of money sent home from migrant laborers working abroad and falling investment rates could start to affect the country by early next year.

A third of Kyrgyzstan's trade turnover is reliant on exports to Russia and neighboring Kazakhstan, whose economies are expected to slow in coming months.

How is it that felons cannot vote in all but two states but convicted felon Ted Stevens can run for re-election for his Senate seat? There is something wrong with this picture. Stevens belongs in jail and not in the Senate.

UBS reported net outflows of 83.6 billion francs for its core wealth management and asset management divisions in the third quarter. UBS Chief Financial Officer John Cryan told Reuters the pace of withdrawals had slowed down in the fourth quarter.

China carmakers including Jianghuai Motor, Changan Ford Mazda and Dongfeng Peugeot Citroen are cutting staff because of a slowdown in the global economy.

Ashland announced in July that it would buy Hercules in a $2.6 billion cash-and-stock deal that also includes the assumption of $700 billion in debt.

Hercules shareholders are scheduled to vote on the deal Nov. 5. Ashland has said previously that it would like to close the deal by year-end. Meanwhile, since announcing the deal, Ashland's market cap has dropped to $1.46 billion. What are the chances that Ashland is overpaying for Hercules in this environment?

Rep. Ron Paul: "Regulation can actually benefit big business and corporate greed, while simultaneously killing small businesses that are the backbone of our now faltering economy. This is why I get so upset every time someone claims regulation can resolve the crisis that we are in. Rather, it will only exacerbate it."

Peter L. Bernstein: " The future direction of political leadership will aim to change the egregious imbalance between winners and losers.

Under these circumstances, and regardless of when the black clouds on the horizon finally begin to brighten, we would put low odds on a renewed bull market with ebullient price/earnings ratios and declining dividend yields. For a long time into the future, equity returns are likely to be muted."

Hartford Financial to cut 500 jobs.

"The current economic situation is proving more challenging to Weyerhaeuser's businesses than anticipated which will now likely extend through 2009 and into some portion of 2010," said Fitch in a statement. It also noted that the decline in the demand for paper and corrugated boxes which have been in negative territory most of the year is also now affecting the pulp markets with prices falling and spilling over into the fluff pulp market. The outlook is negative.

I would give this bear market rally a bit more room to maneuver on the upside and then, in about a week to 10 days, I would begin to sell into the rally. Clouds on the horizon are darkening and getting more pervasive. I would rather be safe than sorry. This has been a good process to follow for quite some time. Even the smartest investors have been made to look stupid and poorer over the past year.

Los Angeles home foreclosures fell sharply in October from September as a new California law came into effect, while the number of foreclosures in Miami continued to grow at a slower rate, real estate research website said Tuesday.

The number of newly scheduled auctions on foreclosed properties in Los Angeles county fell 51 percent, the greatest monthly decline in two years.

The law, passed July 8, requires lenders to contact homeowners and explore options to avoid foreclosure before initiating the process. Some sections of the law became effective Sept 8.

Its implementation accounted for most of the decline, to 2,389, in the number of newly scheduled auctions foreclosures in Los Angeles County, said Chief Executive Bill Staniford.

By comparison, such auctions fell only about 1 percent to 4,863 between August and September.

The first priority of America's president-elect should be the appointment of a treasury secretary, and New York Federal Reserve President Timothy Geithner is a likely candidate, financier Wilbur Ross said Tuesday.

He also gives former Federal Reserve chairman Paul Volcker an outside shot.

"I think you need somebody who's been there, done that, so that you can really step in very, very quickly," Ross told CNBC. "I think time is our enemy in this thing."

Dell Inc. plans to implement further cost-cuting measures in addition to steps it had announced a year ago, the Wall Street Journal reported Tuesday in its online edition. The computer maker will lay out a series of actions to reduce spending, including a hiring freeze, offering employees voluntary severance packages, and time off without pay, Dell spokesman David Frink told the newspaper. Dell is also planning to scale back the use of contract employees, cutting travel expenses and "reprioritizing" some projects and capital spending, the newspaper said.

December crude closed at $70.53 per barrel, up 10.4%, or $6.62 for Tuesday's New York Mercantile Exchange session. December gold closed at $757.30 an ounce Tuesday on the Comex division of the New York Mercantile Exchange, up $30.50, or 4.2%.

The Federal Reserve's balance sheet could total $3 trillion - roughly 20% of GDP - by the end of the year, according to Richard Fisher, the president of the Dallas Fed district bank. At the beginning of the year, the assets on the books of the Fed totaled $890 billion. At present those assets exceed $1.9 trillion. "I would not be surprised to see them aggregate to $3 the time we get to the new year," Fisher said in a speech in Grapevine, Tex.

The CBOE Volatility Index (VIX) fell 9.8% to 48.74, its lowest since early October. Recently, it sold up to 90.

The Dow Jones Industrial Average rose 305.45 points, or 3.3%, to stand at 9,625.28. The S&P 500 gained 39.39 points, or 4.1%, to end at 1,005.69, while the Nasdaq Composite added 53.79 points, or 3.1%, to 1,780.12.

Nortel Networks Corp could shed between 3,000 and 5,000 jobs when it details its latest restructuring plan next week, analysts said on Tuesday.

The growing financial crisis is constraining world trade with a jumbled mess of frozen credit that could mean shortages of food and energy supplies for some countries.

Shippers of drybulk goods such as grain and coal worry that importers won't be able to pay for the goods they receive. And while some anxious exporters hold on to their goods, rates to ship those goods have plummeted to 10-year lows. Some ship owners are even laying up their ships rather than operate at such low rates. "31,268,357 voters have cast votes early in America, which represents 25.3% of the total of all ballots cast in 2004....22.5% of Americans cast their vote early in 2004, and if that number held true for this election, then 138,970,474 Americans will end up casting ballots."

Japan's gross domestic product adjusted for price changes fell 0.4% in September compared with the previous month, marking a second consecutive monthly decline, according to data released Wednesday by the Japan Center for Economic Research. The contraction was primarily due to a 1.3% drop in exports, which also fell in August.

JFK: "Change is the law of life. And those who look only to the past or present are certain to miss the future."

Finally The Big Obama Win

11/4/08 Finally The Big Obama Win

9th Circuit Court: "We conclude that the [Federal] Reserve Banks are not federal ... but are independent privately owned and locally controlled corporations... without day to day direction from the federal government."

Satyajit Das: "The drama and tumult of recent events are not symptoms of the disease but the cure. The "disease" is the excessive debt and leverage in the financial system, especially in the US, Great Britain, Spain and Australia. In the lyrics of the Bruce Springsteen song - many have "debts that no honest man could pay".

The "cure" is the reduction of the level of debt (the great "de-leveraging"). In 1931, Treasury... The initial phase of the cure is the reduction in debt within the financial system...The second phase of the cure is the higher cost and lower availability of debt to the real economy....Within the financial sector, de-leveraging is well advanced. In the real economy it is in the early stages....De-leveraging – There are No Fairy Tale Endings...The risk of a severe dislocation in global capital flows remains a real risk in the present environment...Ultimately, "all the king’s horses and king’s men" cannot prevent the de-leveraging of the financial system under way. The extent of de-leveraging is substantial and likely to take time. In recent years, money was cheap and other assets were expensive. As each of the global economy’s credit creation engines breaks down and systemic leverage reduces, money becomes scarce and more expensive triggering substantial adjustments in asset prices in a reversal of the process....The Arabian Nights had a happy ending. The King after 1,001 night of enchantment and three sons pardons the beautiful Princess Scheherazade who becomes his queen. Despite the fairy tales that investors are putting their faith in currently, the de-leveraging that is at the heart of the current financial crisis may not have such a happy ending."

The Institute for Supply Management said its factory index fell to 38.9% from 43.5% in September. This is the lowest level since September 1982. Economists surveyed by MarketWatch predicted the index would decline to 41.5%.

Fitch Ratings said Monday that U.S. credit-card portfolio losses will increase in the year ahead, with measures of credit continuing to deteriorate into 2009 and with some issuers surpassing historical loss peaks before 2009 is over.

Rob Hanna: "A few weeks ago I wrote about the propensity of upside gaps of 2% or more to pull back at some point in the following few days. There are currently 2 upside gaps of 2% or more that have yet to close below the opening gap price. They are the 10/28 and the 10/30 gaps. It appears unlikely that the 10/28 level of $87.34 will be threatened in the next day or so. Should the 10/30 opening gap also hold that could be viewed as a significant sign of strength for this early attempt at a rally.
Another possible sign of strength will also be challenged in the next few days. In my August 28th post I showed a system that took advantage of the choppy, downward trading that had existed over the last year plus up to that point. Below are updated statistics of this simple system:
Sell short if the S&P 500 closes higher 2 days in a row. Cover on close below entry price – up to 4 days later. If still not profitable on day 4, close anyway."

Gold for December delivery rose $14.30, or 2%, to $732.50 an ounce in early electronic trading. Gold slumped 18% in October, the biggest percentage loss since February 1983. In early Monday trading, crude oil for December delivery fell to a low of $65.15 per barrel in electronic trading on Globex. It was last down $1.81, or 2.7%, at $66.

Franklin P. Adams: "There are plenty of good five-cent cigars in the country. The trouble is they cost a quarter. What this country needs is a good five-cent nickel."

Latin America's exports will only grow by 2.8 percent this year, which is less than half the growth rate last year, according to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). Import growth, however, will continue to remain strong. Total Latin American imports will likely grow by 11.8 percent this year, ECLAC estimates. That compares with 13.2 percent last year.
“The financial crisis in the United States and the bleak outlook for the global economy will without doubt impact on Latin American and Caribbean international trade,” ECLAC says. “The expansion of the region’s exports is expected to slow because import growth has slipped, mostly in the United States and, to a lesser extent, in the European Union and Japan …. A prolonged slowdown in the United States will not only threaten the economies of Latin America and Caribbean economies directly through lower import demand and a decline in remittances, but also indirectly through its impact on Asian economies and trade.”

Spain will allow unemployed workers to put off paying half their monthly mortgage payments for two years, Prime Minister Jose Luis Rodriguez Zapatero said today, part of a series of measures aimed at softening the impact of a shrinking economy.

The postponed payments, up to a maximum of 500 euros ($640) a month, will be repaid from January 2011 in installments, Zapatero told a news conference in Madrid today. The measure, which applies to mortgages under 170,000 euros ($218,000), could be used by more than 500,000 people, he said.

South Korean exporters filed a class action suit Monday against major banks, saying the currency options they hold should be nullified amid huge losses caused by the Korean won's steep decline, Agence France-Presse reported. Hundreds of small exporters took out the options contracts known as "knock-in knock-out" in recent years to hedge against currency movements, the report said. But the won's steep fall of around 30% against the dollar this year has hit them hard, with combined losses reaching 1.7 trillion won ($1.3 billion) as of August, the report said, citing Korea's Financial Services Commission. The suit involves 13 foreign and local banks, including U.S. Citibank, Britain's Standard Chartered Bank and South Korea's Shinhan Bank and Korea Exchange Bank.

According to a study published in Breast Cancer Research, regular activity such as running, heavy housework, demanding yard work, aerobics, was found to reduce a woman’s breast cancer risk by about 30 percent.

John Adams: "Liberty cannot be preserved without a general knowledge among the people, who have... a right, an indisputable, unalienable, indefeasible, divine right to that most dreaded and envied kind of knowledge, I mean the characters and conduct of their rulers."

Maryland has about 3.4 million registered voters - 260,000 more than in 2004. Maryland is not alone. Across this nation voter registration is way up, voter turn out will be way up, and the result will be a well-deserved landslide victory for Barack Obama.

Thomas Jefferson: "The boisterous sea of liberty is never without a wave."

Circuit City Stores Inc. said Monday that it's shutting 155 U.S. underperforming stores, reducing future store openings and aggressively renegotiating certain leases to help preserve cash after its liquidity deteriorated and its vendors tightened the company's payment terms. Some of the company's vendors, who also are facing tightened credit terms from their lenders, are asking the company for payment before they ship products and have limited the credit available to Circuit City for purchases, including not giving Circuit City the customary increases in credit line for holiday purchases. That tightening in terms and credit available is becoming "unmanageable" for the company, Circuit City said.

Goldman Sachs Group Inc will likely post a fourth-quarter loss, its first ever as a public company, due to the "stressed" equity environment over the past two months, which will also weigh on Morgan Stanley's quarterly results, Merrill Lynch analyst Guy Moszkowski said.

Outlays for construction projects in the United States fell 0.3% in September after an upwardly revised 0.3% gain in August, the Commerce Department reported Monday. Spending on residential projects fell 1.3%, while spending on private-sector nonresidential construction rose 1.2%.

Moodys: Dubai Inc.’s leverage (including the government and government-owned companies but not banks) has risen close to US$ 50 billion, exceeding the Emirate’s 2006 GDP (the latest official GDP figure available). Given the increase in Dubai's debt, its ability to provide a systemic bail-out now relies more heavily on support from the government of Abu Dhabi and/or the federal government.

Food distributor Sysco Corp posted first-quarter profit that trailed market estimates on higher expenses and food cost inflation.

The company reported net income of $276.8 million, or 46 cents a share, compared with $267.0 million, or 43 cents a share, a year earlier.

Revenue rose 5 percent to $9.88 billion.

October auto sales were the weakest in 25 years. GM sales plummeted 45% and Ford's dropped 30%.

"As we are not immune from the long-term effects of the current economic environment, we have significantly accelerated the focus on our cost structure," Mastercard Chief Executive Robert Selander said in a statement.

Marvell Technology lowered its third-quarter revenue outlook, saying the global economic slowdown has "significantly impacted" the company's business.

The Dow Jones Industrial Average fell 5.18 points to 9,319.83. The S&P 500 declined 2.45 points to 966.3, while the Nasdaq Composite added 5.38 points to 1,726.33.

The U.S. government is expected to borrow a record $550 billion in the current quarter, including $260 billion in special funding for the Federal Reserve's extraordinary liquidity programs, the Treasury Department said Monday. The borrowing estimate is $408 billion more than estimated three months ago. For the first three months of 2009, the government is expected to borrow $368 billion, the government said. In the three months ending September, the government borrowed $530 billion. The Treasury will announce on Wednesday the sizes and terms of its quarterly refunding auction.

December crude closed with a loss of 5.8%, or $3.90, at $63.91 per barrel Monday on the New York Mercantile Exchange. Gold for December delivery gained $8.60, or 1.2%, to end at $726.80 an ounce on the Comex division of the New York Mercantile Exchange.

Banks doing business in the United States have made it much tougher over the past three months for their customers to borrow money, the Federal Reserve reported Monday, strong evidence that the credit freeze is hitting Main Street hard. Most banks were clamping down on credit due to fears about a weaker economy, not because of frozen credit markets. A record 85% of banks said they had tightened standards for commercial and industrial loans to large or medium-sized companies, up from 60% in the previous survey.

Toyota Motor Corp.downgraded its U.S. sales outlook Tuesday for the fiscal year ending March 31 to 2.2 million to 2.3 million units from its July estimate of 2.4 million vehicles, according to a report in the evening edition of the Nikkei newspaper Tuesday.

The Nikkei ended 6.3% up at 9,114.60, after dropping 5% on Friday, as trading resumed after a holiday. The broader Topix index jumped 5% to 910.70.

Residents of Dixville Notch, the New Hampshire hamlet that traditionally is first in the nation to vote and report, gave Sen. Barack Obama, D-Ill., an early lead Tuesday over Sen. John McCain, R-Ariz., in the presidential election. Dixville Notch's 21 registered voters gave Obama a 15-6 win.

The Reserve Bank of Australia cut its cash rate by a larger-than-expected three-quarter percentage point Tuesday, citing the effects of the global slowdown, falling commodity prices and a likely downturn in domestic spending. The move lowers the cash rate to 5.25%. The central bank noted underlying CPI inflation is currently running at 4.5%, well above its target zone of 2% to 3%.

Monday, November 03, 2008

The Constitution And Freedom Will Win Tuesday

11/3/08 The Constitution And Freedom Will Win Tomorrow

U.K. Prime Minister Gordon Brown urged sovereign wealth funds from the Persian Gulf to invest in British companies needing more financing because of the credit crunch.
Brown arrived in Riyadh late yesterday with Business Secretary Peter Mandelson, Energy Secretary Ed Miliband and a delegation of business leaders to encourage funding from cash- rich oil producers.
``The Gulf states will have a vital role to play in agreeing the plans to get the world economy moving again,'' Brown told reporters before arriving in Riyadh. They ``are an increasingly important source of inward investment to the U.K. As long as they play by our rules and operate in a commercial manner, we welcome investment from sovereign wealth funds.''

Iran's oil minister said on Saturday France's Total, a buyer of Iranian crude, had been informed it would receive less oil in line with an OPEC decision to cut output, an Iranian news agency reported.

Oil Minister Gholamhossein Nozari, in comments carried by Mehr News Agency, said other customers had yet to be informed.

Under a deal reached last month, the Organization of the Petroleum Exporting Countries agreed to cut output by 1.5 million barrels per day (bpd) from Nov. 1. Iran, whose share of the cut is 199,000 bpd, had said it was committed to the move.

Steve Keen: "Hyman Minsky argues that there are two price levels in a market economy–one for commodities set largely by the costs of production and financed largely from income, and the other for assets, set largely by people’s expectations of future gain, and financed mainly by debt. The ratio of one price level to another thus gives an indication of whether the economy is in a bubble, or a bust."

The Dow Jones-AIG Commodity Index, a basket of 19 commodities, decreased 21.34% for the month of October and is down about 33% for the year.

In the Senate I am expecting the Democrats to pick up a minimum of 8 seats and in the House at least 28 seats.

If $70 billion fled equity funds in October, how realistic is it to expect even 20% of those funds to come plowing back into equities any time soon? Don't you think it takes time to heal wounds?

Steven M. Sears: "BONDS ARE PRICED for a depression, equities for a recession, and options are having a tough time deciding what sort of downturn to reflect.

Even though implied volatility -- essentially the options market's view of the risk in owning stocks -- is at historic highs, it arguably fails to mirror credit-market developments,,,Indeed, credit-market data indicate that speculative- grade defaults will reach 7.9%, up from 2%, in the next 12 months. To profit from this, Jefferies & Co. strategists advise clients to buy put options on the iShares Russell 2000. This is a controversial call, given small-caps' tendency to lead the stock market out of recession." "Contrary to popular belief, sea heights do not equate to surf height. You cannot look at the sea height for a point near your beach and determine what the surf height will be. That is because it's the interaction of swell and period that determine surf height."

Let's try and take a moment and relate the above to the equity market. Do you think volume (sea heights) and volatility (surf height) necessarily give a clear picture of the direction for equities?

Russia said it may cut production 300 to 400,000 bopd to support efforts made by OPEC to boost prices.

Investors withdrew about 30 billion euros from Germany-based property funds recently, sparking the funds to freeze redemptions and likely spelling big trouble for U.K. commercial real estate, a published report said Sunday.

DryShips Inc.reported third-quarter net income of $180 million, or $4.21 a share, up from $105.3 million, or $2.97 a share, earned in the same period during 2007. The latest quarter's profit included a capital gain of $65.8 million on the sale of two vessels as well as a non-cash loss of $36.8 million associated with the valuation of interest-rate swaps. Excluding these, the Athens-based drybulk carrier said it would have earned $151 million, or $3.53 a share. "The lack of financing of global trade has temporarily brought the spot market to a virtual standstill but we expect this situation to normalize as the credit crunch subsides," said George Economou, chairman and chief executive of DryShips.

Australian retail sales fell 1.1% in September on month, its biggest contraction in more than three years, as consumers tightened spending during the global slowdown, according to the Australian Bureau of Statistics Monday. The dip was the biggest since April 2005, reports said.

The U.S. economy contracted in the third quarter as the financial crisis raged, while Japan and Germany said they would spend billions of dollars to provide a cushion against a deep global recession.

John Hussman: "Over the past few weeks, the improvement in market valuations has become so significant that we altered our hedges in the Strategic Growth Fund by covering our short position in index calls and lowering the strike prices of our put options. Presently, about 75% of the Fund's portfolio remains hedged with out-of-the-money put options. These puts are there to hedge against any abrupt and deep continuation of recent market losses, which I don't expect, but can't rule out if only because of recent volatility. We are not hedged against smaller, local movements of several percent, so the Fund will tend to fluctuate both higher and lower with the market for now, though in a slightly muted way.

I should emphasize that I don't believe the recession in the U.S., or its global counterparts are over, or even that they are coming to a close. Not by a long shot. I do believe that current valuations already discount a severe recession. I also believe that the eye of the storm is passing over us in terms of the mortgage crisis, in the sense that the foreclosure rate is most probably peaking in the current quarter. Fortunately, the Treasury finally came around to the correct, effective approach to handle the banking crisis, which was to provide capital directly by purchasing senior securities from the banks."

According to the WSJ, utilities are becoming more aggressive about collecting from delinquent customers, just as more fall behind on bills.

The European Commission forecast Monday that the economy in the 15 countries that use the euro will barely grow next year, expanding just 0.1 percent as the financial crisis hits hard.
The currency zone's largest economies will come to a standstill or shrink, it said in its latest economic outlook, with Germany, France and Italy not growing at all at 0.0 percent.
Ireland and Spain will see output fall and jobless lines and government deficits swell, the EU executive said.
Among EU members that don't use the euro, Britain's economy will slip into recession with minus 1 percent growth, while Baltic states Estonia and Latvia will also see negative growth.

A number of financial experts now fear that the federal government's $143 billion attempt to rescue troubled insurance giant American International Group may not work, and some argue that company shareholders and taxpayers would have been better served by a bankruptcy filing.

“Montana’s usually a reliably Republican state in presidential campaigns. It’s been won by the Democrats only twice in the past half century. If you’re a Republican and you’re fighting for Montana in the last few days of the campaign, you’re not in good shape,” said CNN Senior Political Researcher Alan Silverleib.

The Obama campaign has shipped 300 lawyers to the Big Sky state to assist with the election. What will they do? The Billings Gazette reports they will make sure that voters aren’t “turned away or discouraged from voting.”

Not only that but the Obama effort already “has 40 paid field directors, 14,000 volunteers and more than 60 ’staging locations’ statewide, where workers will coordinate a final get-out-the-vote push that began Friday and culminates Tuesday, Election Day.”

“We are mounting a massive field effort to turn out voters, in a way that this state really hasn’t seen before,” said Caleb Weaver, an Obama spokesman.

The Federal Reserve must not forget about inflation as it battles recession, or leave interest rates too low for too long next year, policy-maker Jeffrey Lacker said on Monday.

U.S. business conditions took a sharp downturn in the third quarter and the near-term outlook is even more gloomy, according to a quarterly survey conducted by the National Association for Business Economics.

For the first time since 2001, more respondents pointed to declines rather than growth in demand for their firms' goods and services. That measure has been a reliable indicator of a looming recession since 1982.

Sunday, November 02, 2008

Holiday Sales

11/2/08 Holiday Sales

China's manufacturing contracted as the worst financial crisis since the Great Depression eroded export demand. The Purchasing Managers' Index fell to a seasonally adjusted 44.6 last month from 51.2 in September, the China Federation of Logistics and Purchasing said today in an e-mailed statement. That was the lowest since the gauge was launched in July 2005.

India's central bank unexpectedly cut interest rates for the second time in two weeks and reduced the amount of money lenders must hold in reserve in a bid to protect the economy from the global slowdown.

The Reserve Bank of India lowered its repurchase rate to 7.5 percent from 8 percent, reduced the amount of deposits that lenders need to set aside as reserves to 5.5 percent from 6.5 percent, and cut the amount of money lenders are required to keep in government bonds to 24 percent from 25 percent.

Tim Wood: "The Discount rate has fallen from 6.25% in August 2007 to 1.25%. All the while the S&P 500 has declined by some 46%. Again, the rate cuts are not working and I reported in 2007 when this rate cutting cycle began that it wouldn't work. The fact of the matter is, we have entered into a bear market in equities and cutting rates has not mattered in the past and it has not and will not save the markets this time either.

Now, on another note I want to point out just how desperate the rate cut we saw on October 29, 2008 was. In looking back at my database I found that since 1943 the Fed has NEVER cut rates when the spread between the Discount rate and my blended end of week 3-month T-bill rate was less than 1.08%. With that being a weekly rate I obviously have no way to know what that blended rate was on Wednesday, but I can tell you that as of last Friday it was at 1.25% and with the Discount rate at 1.75% this put the spread at a mere .50%. As of Tuesday's close I showed the 3-month T-bill rate at .77% which puts the spread at .98%. So, I can tell you that it is a matter of record that in the past 65 years they have NEVER cut with this spread less than 1.08%. Therefore, I can also tell you that Wednesday's rate cut was an unprecedented event. I feel that the only reason the Fed made this cut was because the market was expecting that cut and they were scared of the consequences if they disappointed the market. That being said, if the market has already fallen well over 40% with the cut from 6.25% to 1.75%, do you really think that additional cuts at this point will matter?...The continued bailouts, stimulus packages and rate cuts are all just desperate attempts by the braniacs that got us into this mess in the first place. Don't buy the propaganda when and if a bounce begins. This bear market is not over. You have been warned!"

Mike Burk: "Over all years the OTC has been up 67% of the time in November with an average gain of 1.5% second only to January with an average gain of 3.2% and tied for 2nd with April and December. During the 4th year of the Presidential Cycle November ranks 6th with an average gain of 0.5%, but up 73% of the time making it the best month of the year by that measure. Average performance has been distorted by the 22.1% loss in November of 2000. Without the loss in 2000 November would rank as the best month of the year for the OTC....Over all years the SPX has been up 54% of the time with an average gain of 0.4% making it the 8th best month of the year putting it ahead of February, May, March and September. During the 4th year of the Presidential Cycle November ranks 6th with an average gain of 0.7%, up 53% of the time. November of 2000 was also a bad year for the SPX, down 7.5%, but not as bad as November 1948, down 11.7%....

Finally, we have a rally that has lasted more than 1 day, the secondaries are stronger than the blue chips, new lows have dried up and next week has been strong seasonally.

I expect the major indices to be higher on Friday November 7 than they were on Friday October 31."

Barron's reports global equities in October shed $9.5 trillion with the S&P 500 having the most volatile month since November 1929.

Machinists union members ratified a new contract with The Boeing Co. on Saturday, ending an eight-week strike that cut the airplane maker's profits and stalled jetliner deliveries.

Steelmaking is on hold at the ArcelorMittal plant in Cleveland due to a drop in business.

Both blast furnaces were idled this week, and the company plans to offer voluntary layoffs with partial pay starting next week. About 1,450 union members work at the plant.

Chrysler's U.S. sales are down 25 percent through September, the worst decline of any major automaker. Losses are mounting: well over $1 billion for the first half of the year. Things are so bad that Chrysler LLC wants to shed a quarter of its salaried work force, and its owner, Cerberus Capital Management LP, is talking with General Motors Corp. and others about a sale.

Of Chrysler's 26 models on sale in both 2007 and 2008, only four have sold more this year than last, and three of those are small-volume niche vehicles such as the Dodge Viper. The company's market share has dwindled from 16.2 percent in 1996 to 11 percent this year, according to Ward's AutoInfoBank.

According to Bloomberg, Home Depot Inc., Sears Holdings Corp. and other retailers may lose as much as 8 percent of their holiday sales this year because lenders and stores are clamping down on financing.

Almost a quarter of shoppers say banks cut the spending limits on their credit cards, according to a survey by America's Research Group, which also provided the sales-loss estimate. More people are being rejected for new cards, hurting sales for bigger purchases. Demand is being pinched just as retailers prepare to enter the holiday selling season, which accounts for as much as 35 percent of their annual revenue.

``Banks just don't have the money,'' said David Bassuk, a New York-based managing director at consulting firm AlixPartners LLP. The tightening credit is putting retailers ``at big risk to lose those sales or lose those customers,'' he said. ``There is a big concern there with the holiday spending.''