Friday, January 09, 2009

The Unemployment Fiasco

1/9/08 The Unemployment Fiasco

The Bank of Korea slashed interest rates by half a percentage point Friday, bringing its key rate to 2.5%.

Schlumberger Ltd.plans to lay off about 1,000 workers in North America, or about 5% of its workforce in the region, according to media reports Thursday.

Rob Hanna: "One bit of action I did find notable today was that the Nasdaq 100 gained over 1%, but the SOX closed lower on the day. It’s quite unusual for the NDX to put in such a strong performance without some help from the SOX. Historically this has had slightly bearish short-term implications for the NDX."

An earthquake centered about a mile south of San Bernardino jolted Southern California briefly about 7:50 p.m. Thursday evening, according to the U.S. Geological Survey and the Southern California Earthquake Center. It was estimated to be about magnitude 4.5.

The U.S. economy lost 524,000 jobs in December, closing out the worst year for job losses since World War II, the Labor Department said Friday. Nearly 2.6 million jobs were lost in 2008, with 1.9 million destroyed in just the past four months, according to a survey of work places. It's the biggest job loss in any calendar year since 1945. The unemployment rate rose to 7.2%, the highest in 16 years. Unemployment increased by 632,000 to 11.1 million, according to the survey of households. November's job losses were revised to show a cut of 584,000, previously reported as a 533,000 loss, while October's losses were revised to 423,000 from a decline of 320,000. With those revisions, the total reduction in U.S. nonfarm payrolls in the four months through December was 1.9 million.

The largest number of job losses in December was in services-providing businesses, which shed 273,000 jobs. Even temporary jobs fell by over 80,000. Today’s report showed factory payrolls shrank 149,000, the biggest drop since August 2001, after decreasing 104,000 in November. Payrolls at builders dropped by 101,000 after decreasing 85,000. Financial firms reduced payrolls by 14,000, after a 28,000 loss the prior month. The government added 7,000 jobs and healthcare and education rose 45,000. The average work week also fell 0.2 hours down to 33.3 hours and hourly
earnings rose a nickel to $18.36.
One might focus on the workweek hours. Let's take an example of 100 million hourly workers losing 0.2 of an hour of work in the week. That's 20 million hours times $18.36 per hour or over $360 million of lost wages in the week or about $2 billion on an annual basis. That's quite a hole in the pocketbook. How meaningful is a $300 tax credit as a stimulus?

Labor force shrank -173k given the hiring freeze. Long-term unemployment rate (marginally attached, discouraged, part-time for economic reasons workers) rose to 13.5%.
“This was the most rapid deterioration in the labor market over a six-month period since 1975,” said Michael Darda, chief economist at MKM Partners LP in Greenwich, Connecticut. “Policy makers will go full throttle” until “the labor market starts to turn,” he said.

Average weekly hours worked by production workers dropped to 39.9 hours from 40.3 hours, while overtime decreased to 3 hours from 3.3 hours. That brought the average weekly earnings down by $2 to $611.39.

At Friday's close, the Dow Jones industrials were down 143 points, or 1.6%, to 8,599. The Standard & Poor's 500 Index was off 19 points, or 2.1%, to 890, and the Nasdaq Composite Index was down 45 points, or 2.8%, to 1,572.

For the week, the Dow was down 4.8%, with the S&P off 4.5% and the Nasdaq down 3.7%. After the first six days of trading in 2009, the Dow is down 2%, the S&P 500 has slipped 1.4% and the Nasdaq has dropped 0.3%.

China's Business Climate Index fell for the second straight quarter as economic conditions deteriorated sharply during the final three months of 2008, state-run Xinhua news agency said, citing the National Bureau of Statistics. The index was at 107, compared to 128.6 in the previous quarter.

"Housing market and general economic conditions in 2009 are expected to remain difficult or possibly worsen as the timing of any meaningful recovery for the home-building industry remains uncertain," said Jeffrey Mezger, KB Home's chief executive.

Retailer Best Buy said it sees sales at stores open at least one year falling between 2 percent and 3 percent for its current fiscal year and said its market share continued to gain. Earnings per share, excluding items, will be in the range of $2.50 and $2.70 for fiscal 2009, which ends February.

"It appears the economy contracted quite significantly in the final quarter of 2008 and may continue contracting over at least the first half of 2009. We are seeing businesses retrenching and unemployment rising," Boston Federal Reserve Bank President Eric Rosengren told the Massachusetts Mortgage Bankers Association's Annual Meeting."As a result, this recession looks to be longer and more severe than originally forecast. Still, there are indications that the second half of the year will show improvement," he said.

Average U.S. retail gasoline prices rose to $1.78 a gallon, up from $1.68 a gallon a month ago, according to the AAA Daily Fuel Gauge Report. A year ago, gasoline sold for $3.10 a gallon.

Stryker expects adjusted 2009 earnings of $3.12 to $3.22 a share, compared to the analyst target of $3.15 a share. "Despite great uncertainty in the global economy and continued pressure on hospital capital expenditure budgets, we believe the strength of our global franchises combined with our focus on cost controls will allow us to deliver solid top line growth and double-digit EPS gains in 2009," Stryker said. The stock's range is roughly $73 to $35. At the present $38+, the risk appears limited.

Sales at stores open at least a year dropped 2.2 percent in the last two month months of 2008, the biggest holiday-season decline since the International Council of Shopping Centers started keeping records in 1970, the group said yesterday.

Now is the best time for a partnership between Microsoft and Yahoo in the search business, as both companies are undergoing a management transition, Steve Ballmer, Microsoft's chief executive officer, told the Financial Times in an interview published on the paper's Web site.

"People ... are going to economize and as they save money on food they will be eating more empty calories or foods high in sugar, saturated fats and refined grains, which are cheaper," said Adam Drewnowski, the director of the Nutrition Sciences Program at the University of Washington in Seattle.

"Things are going to get worse," he told Reuters in a telephone interview. "Obesity is a toxic result of a failing economic environment."

Corn, wheat, and soybeans continue to rise in price.

Macy's may write down its goodwill by as much as $3 billion after-tax as early as this month, said Dan Poole, who researches stocks for National City Private Client Group, a Cleveland-based firm that manages $26 billion, including Macy’s shares.

The charge, to reduce the value on its 2005 acquisition of May Department Stores Co., would be the biggest hit to financial results in 18 years and wipe out one-third of equity. It may also make shareholders more negative about a stock that lost 60 percent last year, and bondholders more skeptical about debt whose ratings are hovering just above non-investment grade.

For 2009, CVS said it will earn $2.53 to $2.61 a share, before certain charges, compared to current analysts' estimate of $2.68 a share, according to FactSet Research.

Newly unemployed Americans will have to spend about 30 percent of their jobless benefits on average to pay for health insurance through their former employer, according to a new report.

And if they want coverage for their families, the report by Families USA says it will take more than 80 percent of their unemployment check.

Crude for February delivery closed down 87 cents, or 2.1%, at $40.83 a barrel on the New York Mercantile Exchange.

Boeing said Friday it plans job reductions of about 4,500 at its commercial airplanes business unit in 2009 in an effort to control costs due to the weakening global economy.

The number of publicly traded companies that filed for Chapter 11 or Chapter 7 last year rose to 136, three-quarters higher than the year earlier but still short of 2001's record total of 263, said Friday. Assets of the publicly traded companies that filed for bankruptcy jumped 15% to $1.159 trillion.

Thursday, January 08, 2009


1/8/08 Turkeys

The U.S. recession will last two full years, with gross domestic product falling a cumulative 5%, said Nouriel Roubini, chairman of RGE Monitor. Roubini was one of the first economists to predict the recession and the credit crunch stemming from the housing bubble. For 2009, Roubini predicts GDP will fall 3.4%, with declines in every quarter of the year. The unemployment rate should peak at about 9% in early 2010, he said. Consumer prices will fall about 2% in 2009. Housing prices will probably overshoot, dropping 44% from the peak through mid-2010. "The U.S. economy cannot avoid a severe contraction that has already started and the policy response will have only a limited and delayed effect that will be felt more in 2010 than 2009," he said.

U.S. households paid down a record $7.9 billion in consumer debt in November, the third month in the past four in which they paid off more debt than they took on, the Federal Reserve reported Thursday. Consumer debt fell $7.9 billion to a seasonally adjusted $2.57 trillion in November, a 3.7% annualized decline. It's the largest percentage decline in nearly 11 years and is the largest decline ever in dollar terms. U.S. residents paid down $2.8 billion, or 3.4% annualized, on their revolving credit accounts, the largest decline in credit-card balances in nearly five years.

Wal-Mart Stores Inc.said Thursday that December same-store sales rose 1.7% excluding fuel, falling short of the estimate for an increase of 2.8% in a survey of analysts by Thomson Reuters. In the year-ago period, Wal-Mart said same-store sales rose 2.4%. "Due to the difficult economy and severe winter weather in some regions, the holiday season was more challenging for retailers than expected," said Eduardo Castro-Wright, vice chairman, Wal-Mart Stores Inc. The retailing giant also cut its forecast for fourth-quarter earnings from continuing operations to a range of 91 cents to 94 cents a share, compared to its prior view of $1.03 to $1.07 a share. The company cited higher expenses and lower-than-expected sales at Sam's Club and Wal-Mart International.

Costco Wholesale Corp.reported that for December, same-store sales fell 4%, and total sales fell 2% to $7.4 billion from $7.55 billion in the year-earlier month. Comparable sales fell 2% in the U.S. and 11% internationally, Costco reported.

The Bank of England's rate-setting Monetary Policy Committee on Thursday dropped the central bank's key lending rate to 1.5% from 2% -- the lowest level for the benchmark since the institution was founded in 1694.

The European Commission on Thursday said its economic sentiment indicator for the euro zone fell 7.8 points to 67.1 in December, the lowest reading since the index was launched in 1985.

New claims for unemployment benefits dropped unexpectedly last week while the number of people continuing to seek aid rose sharply, the government said today.
The Labor Department reported that initial applications for unemployment insurance dropped by 24,000 to a seasonally adjusted 467,000 for the week ending Jan. 3. Wall Street economists expected initial claims to increase to 540,000. The figure partly reflects seasonal volatility that occurs around the New Year's holiday.
The four-week average of initial claims, which smooths out fluctuations, fell by 27,000 to 525,750.
But the number of people continuing to claim jobless benefits jumped unexpectedly by 101,000 to 4.61 million. That was above analysts' expectations of 4.5 million and the highest level since November 1982.
The high level of ongoing claims indicates that laid off workers are having a harder time finding new jobs.

The Nikkei 225 Average fell 2.6% to 9,001.64 after climbing for seven straight sessions, while the broader Topix Index lost 2.2% to 868.84. South Korea's Kospi slipped 0.8% to 1,218.32, Australia's S&P/ASX 200 gave up 1.7% to 3,715.80 and New Zealand's NZX 50 Index lost 0.7% to 2,745.85.

Lenovo Group , the world's No. 4 PC seller, announced a broad restructuring on Thursday, including a lay-off of 2,500 workers, as the global downturn pushed it to a loss for the December quarter.
Shares in the company, which were suspended on Wednesday, opened nearly 17 percent lower in Hong Kong following the announcement.

Rents for office space dropped 1.2% in the fourth quarter nationwide when such landlord concessions as free rent were taken into account, according to Reis Inc., a New York real-estate research firm. It was the largest one-quarter decline since 2003, and came after rents rose 10.6% in 2007. Effective rents fell in 65 out of the 79 markets tracked by Reis.

Mortgage rates tumbled this week, with the average 30-year fixed mortgage rate declining to 5.33% from 5.64% a week ago, according to's weekly national survey released Thursday. The average 15-year fixed-rate mortgage dropped to 4.85% from 5.16%, while the average jumbo 30-year fixed rate fell to 6.91%. Adjustable mortgage rates were mixed in the latest week, with the average one-year ARM rising to 5.98% and the average 5/1 ARM decreasing to 5.72%.

Chevron Corp. warned late Thursday that its fourth-quarter earnings will likely be "significantly lower" than in the third quarter. In its interim quarterly update, the nation's second-largest oil company blamed most of the drop on falling crude-oil and natural gas prices, which have carved deeply into earnings from the production end of its business.

Coach Inc.said late Thursday that it will fall short of its forecast fiscal second-quarter guidance because of poor holiday sales. The handbag and accessories maker said it expects a second-quarter profit of about 67 cents a share, well under its previously forecast 77 cents a share, or last year's profit of 69 cents a share.

Wolverine World Wide Inc.said Thursday it will cut about 450 staff as part of a restructuring plan.

Cardinal Health said Thursday it was lowering its fiscal 2009 adjusted continuing-operations earnings outlook to $3.50-$3.60 a share, down from the previous forecast of $3.80-$3.95.

Specialty retailer Williams-Sonoma Inc.said that comparable sales in the 8 weeks to Dec. 28 fell 24.2%.

Sears Holdings said December domestic same-store sales fell 7.3%, with Kmart sales down 1.1% and Sears domestic sales falling 12.8%.

The Oil Drum: "Shell Oil has filed for the first major water right on the Yampa River in northwest Colorado for its oil shale development plans.
Shell applied Dec. 30 in state Water Court to use about 8 percent of the Yampa's peak spring flow.
Shell spokesman Tracy Boyd says the water would be shipped to a reservoir for later use in oil shale production.
Critics say extracting oil from shale will use too much of the West's scarce water. Some estimates say it could take up to three barrels of water to produce a single barrel of oil."

Asian News: "But it is logical that a substantial accumulation of foreign exchange reserves in China, Japan and throughout Asia corresponds to an unprecedented supply of dollars, the global reserve currency.
But Asia now understands that the increase of money supply decreases the intrinsic value of a currency. That is why China is seeking a possible and rational attempt to decouple Asian currencies from the dollar, as recent news stories report [1].
In practice, China is trying to make its currency convertible and give it a role as a reserve currency. The first experiment is limited to transactions between Hong Kong and the neighboring provinces. It is also proposed that the yuan renminbi be used in 8 neighboring countries, including Russia. With these countries, agreements have already been signed for the settlement of contracts in the Chinese currency. Perhaps it is no coincidence that the news was released on Christmas Day, when Western markets are closed, reducing the impact on the dollar. In addition, the first weeks of January are usually fairly quiet. This means that although for now the trial is limited, China is preparing to establish full convertibility of its currency to all other currencies."

Int'l Herald Tribune: "Normally, China would be the most avid taker of the debt required to pay for those deficits, mainly short-term Treasury securities. In the past five years, China has spent as much as one-seventh of its entire economic output on the purchase of foreign debt - largely U.S. Treasury bonds and American mortgage-backed securities.
But now, Beijing is seeking to pay for its own $600 billion economic stimulus - just as tax revenue falls sharply as the Chinese economy slows. Regulators have ordered banks to lend more money to small and midsize enterprises, many of which are struggling with slower exports, and Chinese bankers say they are being instructed to lend more to local governments to allow them to build new roads and other projects as part of the stimulus program.
"All the key drivers of China's Treasury purchases are disappearing," said Ben Simpfendorfer, an economist in the Hong Kong office of the Royal Bank of Scotland. "There's a waning appetite for dollars and a waning appetite for Treasuries. And that complicates the outlook for interest rates. Fitch Ratings, the credit rating agency, forecasts that China's foreign reserves will increase by $177 billion this year - a large number, but down sharply from an estimated $415 billion last year."

The collapse of the stock market last year left corporate pension plans at the largest companies underfunded by $409 billion, reversing a $60 billion pension surplus at the end of 2007, according to a study released yesterday.

John Mauldin:"

* Shouldn't the consumer, after decades of over-consumption, be allowed to digest the over-indebtedness and save, rather than be encouraged to take risk?
* Shouldn't companies, no matter what state they reside in from a political point of view, if run poorly, be allowed to fail or forced to restructure?
* Should taxpayer money be used to make up for the mishaps at financial institutions or should we allow them to wallow in their own mistakes?
* Shouldn't free markets be free?
* When did Socialism make its way to our shores?
* How do we choose who is bailed out and who loses?
* Shouldn't we place blame on the politicians, bureaucrats and other "decision makers" and put skilled people in place that know how to run the businesses?
* Shouldn't investors, led blindly down the primrose path of "buy and hold, diversify and don't open your brokerage statement except once every 10 years" be allowed to follow the Prudent Man Rule?"

Sales at Gap, the largest U.S. clothing retailer, fell 14 percent. December revenue at department-store chain Macy’s slipped 4 percent.
“That does not bode well going into January-February, where we go into a lull period and there’s really no reason to buy until spring,” Adrienne Tennant, an analyst at Friedman, Billings, Ramsey & Co. in Arlington, Virginia, told Bloomberg Television.

Macy’s cut its fourth-quarter profit forecast to as little as 90 cents a share from a previous minimum of $1.10. It also announced the closing of 11 of its 859 stores. Same-store sales at luxury retailer Neiman Marcus Group Inc. sank 28 percent in December.

Walgreen Co. says it will cut 1,000 jobs this year, or about 9 percent of corporate management, through a combination of voluntary buyouts and layoffs.

Oil service giant Schlumberger plans to cut 10%( possibly 8,000 employees) of its head count, Pritchard Capital Partners analysts said in a note to clients on Thursday. Analysts attributed the job cut estimate to sources at the company. Pritchard also expects the company's fourth-quarter results to be "choppy."

Cytec Industries Inc. lowered its 2008 adjusted-earnings forecast to $3.45 to $3.50 a share, compared to a prior range of $3.75 to $3.85 a share. The West Patterson, N.J., specialty chemicals and materials company said it would also lay off about 10% of its workforce, or 600 employees, due to the downturn in the global economy.

Saks Inc.said Thursday its December sales at stores open at least one year fell 19.8%.

Nordstrom Inc.said Thursday that its December sales at stores open at least one year fell 10.6%. Analysts, on average, had expected same-store sales to fall 13%, according to Thomson Reuters. The retailer said it does not expect to meet its previous fourth-quarter earnings forecast of 35 cents to 45 cents a share, blaming higher-than-expected competitive markdown pressure.

U.S. natural-gas stockpiles declined 47 billion cubic feet in the week ended Jan. 2, the Energy Information Administration reported Thursday. Analysts at IHS Global Insight had expected a withdrawal of 116 billion cubic feet. After the data, natural-gas futures for February delivery fell 3.7% to $5.662 per million British thermal units.

Bill Bonner: "We recall Nassim Taleb's turkeys. Until Thanksgiving, he says, the turkey lives well. Everyday, the food arrives. Everyday, he gets bigger and fatter. Then, one day, just before the third Thursday in November, when Americans celebrate their traditional Thanksgiving dinner…with no warning, comes the knife…the crash…the collapse…the discontinuity…the 7 sigma event in the turkey's life that changes everything.
"That's why we need to study history," says Elizabeth, who is working on a master's degree in 18th century French history at the Sorbonne. "If the turkeys had studied history, they might been warned. In early November, they might have started whispering to each other in the yard: 'it's a set-up…we're all going to be sent to the ovens…break-out planned for tomorrow at dinner…pass it on.' Then, while a few birds got into a squawk to provide a diversion, the others might have rushed the gate. Instead, they didn't know what was coming and took it in the neck."

Brad DeLong: "Scratching on the back of my envelope, I find that at current exchange rates, China's GDP per worker--and there are 800 million workers--is $3,000 per year... the top 0.1% of China's workers get an average of $30,000 per year at current exchange rates."
There are plenty of histories of finance - oral and written. But investors pay no attention. One generation of turkeys learns. The next forgets. One makes money; the next loses it. Every generation has to get its own neck chopped in its own way."

Raghuram Rajan:“As the US deficit continues to be financed easily, the optimists who think there is nothing to worry about are gaining ground over the pessimists who think an abrupt and costly adjustment is likely. But the optimists have to be right every day while the pessimists need to be right only once.”

Boeing said Thursday it delivered 50 commercial jets in the fourth quarter, down from 84 in the third quarter. In 2008, the aerospace giant delivered 375 planes.

AK Steel Holding Corp. said late Thursday it will begin laying off salaried employees as orders decline because of the poor economy. In December, AK Steel said it would cut pay for salaried employees by 5% and freeze benefits. The company said all plants and offices will be affected by the layoffs, but did not specify how many of its 1,500 salaried employees would be affected.

Funds that invest mainly in U.S. stocks saw $5.8 billion in new investment, building on inflow of $1.7 billion in the previous week. Funds that own mostly international stocks realized inflows of $613 million, versus an outflow of $2.9 billion a week earlier. Bond funds, meanwhile, saw inflow of $5.5 billion, versus an outflow of $2.8 billion in the previous week, and hybrid funds that invest in both stocks and bonds had an inflow of $1.7 billion, versus an outflow of $877 million a week earlier.

The Dow Jones Industrial Average fell 27.24 points, or 0.3%, to 8,742.46. The S&P 500 gained 3.08 points, or 0.3%, to 909.73. The Nasdaq Composite gained 17.95 points to end at 1,617.01.

Crude for February delivery ended down 93 cents, or 2.2%, at $41.70 a barrel on the New York Mercantile Exchange. Gold for February delivery ended up $12.80, or 1.5%, at $854.50 an ounce on the Comex division of the New York Mercantile Exchange.

Wednesday, January 07, 2009

No Place To Hide

1/7/08 No Place To Hide

U.S. private-sector firms shed 693,000 jobs in December, far worse than expected, according to the ADP employment index released Wednesday. Employment in the services sector fell by 473,000, while employment in the goods-producing sectors fell by 220,000.

New Year optimism is likely to be shaken by shocking numbers in the monthly employment report, with a loss of one million jobs coming "sooner than you might think," ING Bank analyst Rob Carnell wrote in a research note. "At the risk of sounding like 'Dr. Evil', there is a very real possibility of seeing monthly payrolls falling by a million in the next few months," Carnell wrote. Payroll losses could reach seven figures as soon as January or February, he added. For December, ING's forecast is for payrolls to drop by 750,000.

Meredith Whitney warns banks may have to raise fresh capital in 2009, and will be hit hard by a sharp increase in rating downgrades on mortgage-related securities. "From July 2007 to date, over $5 trillion worth of securities have been downgraded, but our concern here is that the pace of downgrades has only accelerated through 2008," the Oppenheimer analyst wrote.

Russia completely halted all natural gas supplies to Europe via Ukraine Wednesday, after accusing the country of stealing gas supplies, according to a BBC report. The European Union relies on Russia for around a quarter of its natural gas supplies, of which roughly 80% are pumped through Ukraine.

Taiwan's central bank cut the island's key lending rate by half a percentage point Wednesday, its sixth rate cut in three and half months, to support the export-dependent economy.
The bank reduced the rate from 2.375 percent to 1.875 percent.
The move came in the wake of a stunning 41.9 percent drop in exports in December from a year earlier.

U.K. specialist lender Cattles said Wednesday that it intends to reduce its workforce by around 1,000 and will adopt more cost saving measures in the coming months.

Department store owner Marks & Spencer said Wednesday that total group sales fell 1.2% in the 13 weeks to Dec. 27, with U.K. comparable sales down 7.1%, and that it intends to cut up to 1,230 jobs to reduce costs.

Dow Chemical Co is prepared to miss next week's deadline to clinch the $15 billion takeover of Rohm & Haas in an effort to raise enough cash to complete the deal without taking on too much debt, the Financial Times reported on its website late on Tuesday.

Planned layoffs at U.S. firms eased in December from the previous month's seven-year high but they were up an astounding 275 percent annually as the year-old recession cut a huge swathe of destruction through job market.
The economic slump, which is likely to be the longest since the Great Depression of the 1930s, also produced the worst year of layoffs since 2003, outplacement company Challenger, Gray & Christmas said on Wednesday in its monthly report on U.S. job cuts.

Brett Steenbarger: "Tuesday was notable in that we had 3289 new 20-day highs across the NYSE, ASE, and NASDAQ, as opposed to 119 new lows. New 65-day highs were less elevated: 632 vs. 55 lows. That is the highest level of new 20-day highs that we've seen since I began collecting these data in September, 2002. Interestingly, since that time, we've had 42 occasions in which new 20-day highs have exceeded 2000. Twenty days later, the S&P 500 Index (SPY) was up 30 times, down 12 for an average gain of only .01%. Across all other occasions, the average 20-day gain was .19% (936 up, 590 down). Interestingly, when we conduct a median split of the occasions when 20-day highs were strong based upon whether 65-day highs were elevated or not, we see a difference. When 20-day highs *and* 65 day highs have been elevated (N = 21), the next 20 days in SPY have averaged a gain of 1.65% (18 up, 3 down). When 20-day highs have been elevated but 65-day highs have not (as was the case yesterday), the next 20 days in SPY averaged a loss of -1.62% (12 up, 9 down). This reflects worse outcomes when 20-day highs spike during longer-term bear market conditions."

The Oil Drum: "Canada, in large part because of the production capacity of its oil sands, is now the largest oil supplier to the United States. But environmental groups in both countries are pushing for a slowdown or even a halt to further oil sands development, which is concentrated in northern Alberta.
Not all oil is alike when it comes to environmental impact, and many environmentalists single out production from the oil sands as the epitome of “dirty oil.” In a recent study, the RAND Corporation estimated that oil from the oil sands generates about 10 to 30 percent more greenhouse gases than conventional crude.
That may place oil sands exports in a precarious position when Barack Obama becomes president this month and moves forward with a climate change program."

For the full fiscal year ending Nov. 30, Monsanto raised its forecast to a range of $4.40 to $4.50 a share from $4.20 to $4.40 a share.

Japan's top steel maker, Nippon Steel & Sumikin Stainless Steel Corp., said Wednesday it would suspend some thin-sheet production lines for at least six months, as demand from homebuilders and electronics makers drops, the Nikkei newspaper reported.

Time Warner Inc. said 2008 results will be below its prior forecast and said it will take a pretax impairment charge of about $25 billion.

Superintendent Ramon Cortines said Tuesday the Los Angeles Unified School District faces bankruptcy if it can't cut staff amid a $250 million budget deficit. Cortines says at least 2,000 untenured teachers who have taught for less than two years and are still on probation could lose their jobs if the state Legislature can't find funds to close the gap.

Intel Corporation today announced preliminary fourth-quarter financial information with revenue of approximately $8.2 billion, down 20 percent sequentially and down 23 percent year over year. Revenue will be lower than the company’s previous expectation, provided on Nov. 12, 2008, as a result of further weakness in end demand and inventory reductions by its customers in the global PC supply chain.
The preliminary estimate of gross margin for the fourth quarter is at the bottom of the previous expectation of 55 percent, plus or minus a couple of points.

Stockpiles at Cushing, Oklahoma, the delivery point for New York futures, last week were 541,000 barrels below a record 28.7 million barrels set the week of Dec. 19. Production averaged 30.64 million barrels a day last month, down 475,000 barrels a day from a revised November figure of 31.11 million, according to the survey of oil companies, producers and analysts. Saudi Arabia made most of the cuts.

LyondellBasell Industries on Tuesday became the first major casualty of a recent downturn in the chemical industry, filing for bankruptcy protection amid plunging sales and massive debts.

British bank Barclays PLC said Wednesday it was cutting more than 400 technology jobs after a review of its operations.

Nouriel Roubini: "Last year’s worst-case scenarios came true. The global financial pandemic that I and others had warned about is now upon us. But we are still only in the early stages of this crisis. My predictions for the coming year, unfortunately, are even more dire: The bubbles, and there were many, have only begun to burst."

Standard & Poor's has downgraded its rating of Detroit's bonds to junk status, giving creditors the right to claim $400 million.
S&P says it acted because Detroit wasn't able to balance its spending and revenue. The recession and Detroit's shrinking tax base have reduced tax revenues. Detroit's 15,000-member work force is down 5,500 from 2002.
The city faces a deficit that could reach $300 million.

The U.S. budget deficit will swell to a record $1.186 trillion in fiscal 2009, congressional forecasters plan to announce on Wednesday, presenting a daunting challenge to President-elect Barack Obama who has said tough choices will be necessary.

Family Dollar Stores Inc reported a 14 percent jump in quarterly profit and raised its fiscal-year forecast on Wednesday as shoppers headed to its discount stores, sending its shares up more than 10 percent.
Family Dollar caters to lower-income shoppers, many of whom make less than $30,000 a year and have been hit hard by the yearlong U.S. recession. The company said more customers were coming into its stores for food and other necessities, and spending more when they visited.

The VIX rallied close to 5 points to the 43+ level.

Satyam Computer Services shares opened down more than 90% this morning, following the revelation that the company’s founder and now-resigned chairman, B. Ramalinga Raju, has confessed to cooking the company’s books. That’s shaken investor faith in other Indian IT outsourcing stocks.

Platinum rose above $1,000 an ounce for the first time since October on speculation that demand for metals will pick up on government plans to bolster the economy.

Copper futures fell the most in two weeks after a report showed U.S. companies eliminated more jobs than forecast in December, renewing concern that slower economic growth will stifle demand for metals.

According to the charts, U.S. stocks won't return to "bull conditions" till 2013 to 2015, says Ray Barros, CEO of Ray Barros Trading Group.

Expect the dollar to weaken again this year, says Patrick Shum, chief strategist at Karl-Thomson Securities. As such, he sees gold prices rising over $1,000 a troy ounce.

Stockpiles gained 6.7 million barrels to 325.4 million in the week ended Jan. 2, the U.S. Energy Information Administration reported. After the data, crude-oil futures for February delivery were off 7.7% at $44.84 a barrel on the New York Mercantile Exchange. Gasoline supplies rose by 3.3 million barrels in the latest week, while distillate stocks rose by 1.8 million barrels, the EIA reported.

Intuitive Surgical has dropped from $357 to a low of $110 and closed at $117. That was prior to announcing preliminary results for 2008 and a forecast for 2009. Intuitive Surgical, Inc., the industry leader in surgical robotics,announced preliminary fourth quarter 2008 revenue of approximately $232 million, increasing 22% from $189 million for the fourth quarter of 2007. Preliminary annual revenue for 2008 is expected to be approximately $875 million, increasing 46% from $601 million for the year ended 2007.
The Company expects revenue to increase approximately 15% in 2009 reflecting increased instrument, accessory and service revenue, while systems revenue is expected to remain relatively flat.
Commenting on the announcement, Lonnie Smith, Chairman and CEO of Intuitive Surgical, said, ``Our system sales in the quarter reflect the challenging global economic and financial market environment. At this point, we believe that uncertainty in global economic markets will make forecasting system placements difficult into 2009. Procedure growth remained strong worldwide. We continue to believe that procedures are the leading indicator for the strength of our business.''
After the forecast for 2009 the shares dived to $97+, a 20 point drop from the closing price during regular trading hours.

Wegmans Food Markets are giving away free generic oral antibiotics to customers with prescriptions from their doctors.
The program began Wednesday at all 72 Wegmans supermarkets in the Northeast and runs through March 31.
It covers up to a 14-day supply of nine different generic oral antibiotics, including amoxicillin, penicillin and tetracycline.

EMC said it would cut 2,400 jobs, or about 6% of its information infrastructure workforce as part of an effort to cut its costs by $350 million in 2009. Additionally, EMC suspended salary increases and said Chief Executive Joe Tucci and other senior executives would take a pay cut this year.

Bed Bath & Beyond Inc.'s comparable store sales fell 5.6% in the quarter, compared with a rise of 0.8% a year ago. Bed Bath & Beyond expects fourth-quarter earnings of 40 cents to 46 cents a share and $1.50 to $1.56 a share in 2008.

The Dow Jones Industrial Average fell 245.4 points, or 2.7%, to 8,769.7. The S&P 500 declined 28.06 points, or 3%, to 906.65. The Nasdaq composite dropped 53.32 points, or 3.2%, to close at 1,599.06.

Wyeth is in talks to acquire Dutch vaccine maker Crucell NV for up to $1.35 billion, The Wall Street Journal reported Wednesday on its Web site. U.S. shares of Crucell jumped 28% to $20.50 before trading was halted.

Crude for February delivery lost $5.95, or 12.2%, to end at $42.63 a barrel on the New York Mercantile Exchange, the biggest daily percentage loss since Sept. 24, 2001. Wednesday's loss came after oil topped $50 on Tuesday, a level not seen in five weeks.

Gold for February delivery ended down $24.30, or 2.8%, at $841.70 an ounce on the Comex division of the New York Mercantile Exchange.

Tuesday, January 06, 2009

Trillion Dollar Deficits And Pink Slips

1/6/08 Trillion Dollar Deficits And Pink Slips

The employee group Alliance for IBM posted on the Alliance’s Web site that IBM may cut 16,000 jobs, which would top the 15,600 eliminated by Chief Executive Officer Sam Palmisano in 2002. The worldwide slump has tightened companies’ technology budgets and IBM may report a 1.6 percent drop in sales last quarter to $28.4 billion, based on the average analyst estimate. IBM had 386,558 employees at the end of 2007.

Toyota Motor Corp is to halt production at its Japanese plants for 11 days in February and March as a sharp slide in U.S. sales has left dealers' lots full of unsold cars.

A 37 percent slump in December sales in Toyota's biggest market was its sharpest fall in more than a quarter of a century and worse than declines at struggling U.S. rivals General Motors and Ford Motor ."I never expected the crisis to spread this fast and leave this deep a scar," Toyota President Katsuaki Watanabe told reporters

Chain-store sales for the week ended Jan. 3 fell 0.8% from the year-earlier period, according to a survey released Tuesday by the International Council of Shopping Centers and Goldman Sachs.

Logitech International, the Fremont, Calif., producer of computer peripherals, withdrew its earnings estimates for fiscal 2009 and will cut 15% of its salaried workforce.

Dow Chemical said Tuesday it would seek legal, operational and financial actions to enforce its rights under a failed joint-venture deal with Kuwait's Petrochemical Inc.

A sharp escalation of Russia's gas dispute with Ukraine cut supplies on Tuesday to the Balkans, Turkey and southeast Europe, and the EU urged Moscow and Kiev to find a solution by the end of the week.Bulgaria, Turkey, Macedonia, Greece and Croatia said flows of Russian gas via Ukraine had come to a halt, creating what Bulgaria called a "crisis situation" in the middle of winter.

The Realtors group estimates that 45 percent of existing home sales are now foreclosures and other distressed properties. Nevada leads all states with 48% of homes with negative equity. Florida and Arizona have 29% of homes with underwater mortgages, while 27% of mortgages in California exceed the home value.
An index of sales contracts on previously owned U.S. homes fell 4% in November from the prior month, the National Association of Realtors reported Tuesday. The index, which is considered a leading indicator of existing home sales, was down 5.3% from the prior year. Pending home sales in November fell in all four regions, with declines of 7.2% in the Northeast, 6.7% in the Midwest, 2.4% in the West and 2.2% in the South. The October pending home sales index was revised to a decline of 4.2% from a prior estimate of a 0.7% drop.

Carlton Meyer: "As a result, millions of Americans have lost their home and damaged their credit, so they can’t qualify for a new mortgage for several years even if they have a good job. This will push home prices further downward. The last of the subprime loans with the five-year teaser rates of interest were made in 2006, so three more years of subprime defaults are expected...According the U.S. government, 2.8% of homeowner houses and 10% of rental houses are now unoccupied, or a total of 17,890,000, which includes 4,558,000 seasonal vacation homes. This does not include occupied homes that are for sale. Another million houses may be abandoned in 2009 as prices continue to plummet and homeowners walk away to escape debt bondage. More empty homes for sale only drives prices down further, so it is difficult to see when this spiral will end."

Foreclosure sales in the 25 largest U.S. metropolitan areas almost tripled in the first 10 months of last year as rising unemployment and falling home values made it tougher for homeowners to sell or refinance their mortgages.

The McGraw-Hill Cos.said Tuesday it is cutting about 375 jobs.

Gold for February delivery was last down $14.40, or 1.7%, at $843.40 an ounce in early North America electronic trading. Crude oil for February delivery rose $1.40, or 2.9%, to $50.21 a barrel in electronic trading on Globex.

Ten-year Treasuries fell for a fourth day, pushing yields to the highest in three weeks, as the U.S. prepared to sell $54 billion of notes this week amid concern it will need to issue a record amount of debt to spur the economy.

Sanyo Electric Corp. is considering cutting up to 1,000 domestic workers in the next few months, as it scales back unprofitable businesses ahead of an expected buyout by Panasonic Corp., a press report said Tuesday.

Brunswick Corp.said Tuesday that it will idle its Tennessee-based Riverview plant, which makes Sea Ray boats, in the first quarter. The company said that it will try to transfer as many of the 300 affected workers as possible to other nearby plants. Brunswick also said it will cut as many as 275 more jobs at other manufacturing and product-development facilities and at Sea Ray's Knoxville headquarters by Friday. All Sea Ray manufacturing plants in Tennessee and Florida have scheduled at least a week of production furloughs each month through the end of June.

Non-manufacturing sectors contracted at a slower pace in December, according to a Tuesday report from the Institute for Supply Management. The ISM non-manufacturing index rose to 40.6% in December from a record low of 37.3% in November.

Pushed lower by weak demand and falling prices, shipments from U.S. factories plunged a record 5.3% in November, the Commerce Department estimated Tuesday. Orders for U.S. factory-made goods fell 4.6% in the month, more than twice as much as the expected 2.2% decline. Orders and shipments of nondurable goods dropped a record 7.4% in November, led by a 22% drop in shipments from petroleum refineries. Oil and gasoline prices fell about 20% during the month. Orders for durable goods fell 1.5%, revised from the 1% drop reported two weeks ago.

Paolo Pellegrini, the former Paulson & Co. hedge-fund manager who helped make more than $3 billion with bets on a U.S. housing crash, said his new fund will avoid equity markets after last year’s rout.
Pellegrini, 52, a manager of Paulson’s credit-opportunities funds, left on Dec. 31 in an “amicable” separation to start a new fund called PSQR LLC. The New York-based fund will use a strategy known as fundamental macro investing, which trades everything from commodities to currencies and seeks to profit from changes in the global economy.
“I’ll be investing in commodities and interest rates, taking advantage of the imbalances between different countries,” Pellegrini said in an interview with Bloomberg television today.
Pellegrini said his new venture will be financed with his own capital.

Feb. crude ends down 23 cents, or 0.5%, at $48.58 a barrel. Earlier in the trading session crude had topped $50. Gold futures reversed their earlier losses Tuesday, gaining after sliding below $840 an ounce for the first time in nearly two weeks, as the U.S. dollar fell against a basket of other major currencies. Gold for February delivery ended up $8.40, or 1%, at $866.20 an ounce on the Comex division of the New York Mercantile Exchange.

Members of the Federal Open Market Committee at their mid-December meeting saw mounting risks of depression and deflation as they grappled with employing new tools to stabilize an economy that was rapidly weakening, according to truncated minutes of the meeting released on Tuesday.

A “trillion dollar deficit will be here before we even start the next budget,” Obama said after meeting in Washington with his economic advisers, including Peter Orszag, who has been designated as director of the Office of Management and Budget. “Potentially we’ve got trillion-dollar deficits for years to come, even with the economic recovery we are working on.”

American millionaires have seen their assets shrink by 30 percent during the economic crisis, a report said Tuesday, with only 36 percent of them pleased with the performance of their financial advisers.
Of U.S. households worth $1 million or more, 55 percent are concerned they will not have enough assets to maintain their lifestyles, said Spectrem Group, a consulting firm specializing in the affluent and retirement markets.
Ninety percent fear a prolonged downturn, it said.
"While they blame the government and Wall Street directly for the situation, many millionaires are not happy with their advisors' performance and few say they will increase the work they give to advisors," said Catherine McBreen, managing director of Spectrem Group.

The U.S. Patent & Trademark Office on Tuesday issued a notice allowing drugmaker Pfizer Inc. to correct a technical defect in one of the patents involving Pfizer's cholesterol medicine Lipitor, the world's top-selling drug.
The decision will result in reissuance of the drug's key patent and maintain that patent's June 2011 expiration date, crucial to Pfizer because Lipitor brings the company nearly $13 billion in annual sales.

Alcoa Inc.said it plans to cut 15,200 employees comprising 13% of its global workforce, sell four business units, cut output, freeze salaries and hiring efforts.

The Dow Jones Industrial Average climbed 62.21 points to 9,015.1. The S&P 500 rose 7.25 points to 934.70, while the Nasdaq Composite added 24.35 points to finish at 1,652.38.

Bank of America Chief Executive and Chairman Kenneth Lewis expects the bank's results to be below expectations, the Wall Street Journal reported Tuesday on its Web site, citing an internal memo.

Monday, January 05, 2009

Overbought Market

1/5/08 Overbought Market

John Hussman: "While stock prices are now moderately undervalued, and are priced to deliver reasonably good returns over the coming decade (regardless of shorter-term prospects), Treasury bond prices are currently buoyed by such a “flight to safety” that they have ironically become speculative investments themselves.

It is doubtful that long-term investors have any real intent of accepting a 2.5% yield over the next 30 years on Treasury securities having, if not default risk, substantial risk of price volatility. Accordingly, investors must believe that they will have the ability to hold these securities for a rewarding short-term holding period, and then sell them to someone else before prices drop. This is a mentality that we periodically observe in stocks during bubble periods, prior to massive corrections, but is one that we rarely observe in bonds.

The long-term Treasury market now requires near-depression economic conditions to justify prevailing prices and yields-to-maturity."

Navistar sees 2009 EPS $5.10-$5.60. Analysts had expected earnings of $6.45 a share from the Warrenville, Ill. truck maker.

Crude oil for February delivery fell 56 cents to $45.78 a barrel in electronic trading on Globex. Gold for February delivery was last down $26.90, or 3.1%, at $852.60 an ounce in North America electronic trading.

Recreational vehicle manufacturer Monaco Coach Corp.said Monday that it's engaged Imperial Capital as a financial adviser to evaluate strategic alternatives including a possible joint venture or merger. The company said it will focus on improving liquidity and maintaining its balance sheet.

Pfizer is open to acquiring rivals in order to grow sales, the Financial Times newspaper reported.

China maker and retailer Waterford Wedgwood said Monday that some of its companies have now been placed into receivership or will shortly be placed into administration. "We remain optimistic that ongoing discussions will result in a buyer being found for the businesses," said David Scully, CEO.

Brett Steenbarger: "We are clearly overbought and some degree of short-term pullback is expected. If, indeed, we have put in an important market low and entered a bull phase, the rise should be a multi-month affair, not a brief rally. New 20-day highs should continue to outnumber lows, and pullbacks should stay well above last week's price lows. Particularly supportive of the bull move would be a relatively flat corrective period in which the former resistance around 900 in the S&P 500 Index becomes support. A move back into the trading range, particularly on high volume and weak NYSE TICK, would pose important questions for bulls."

Rob Hanna: "The number of new 52-week highs on NYSE came in lower on Friday than it did Wednesday. It’s fairly unusual for the S&P 500 to make a significantly higher high than the day before and see the total number of new 52-week highs contract. Friday’s high was over 3% above the previous day’s high."

In U.S. counties where Hispanics account for more than 25% of the population, banks have taken back 6.7 homes per 1,000 residents since Jan. 1, 2006, compared with 4.6 per 1,000 residents in all counties, according to a Journal analysis of U.S. Census and RealtyTrac data.

Phil Craig: "The pricing of derivatives linked to U.K. property prices suggests that investors will lose as much as 20% this year and that a recovery in the overall U.K. property market is still far off. If that scenario does materialize, it would make 2009 as wretched a year for U.K. property investors as 2008 was. For the 12 months through November, the value of U.K. property fell 21%, according to the Investment Property Databank."

Goldman Sachs Group Inc. puts the amount the U.S. government needs to raise at about $2 trillion, including new issuance and rolled-over securities. Goldman said it could be more, depending on the size of the incoming Obama administration's stimulus package.

Hong Kong's key stock index rose 3.5 percent Monday, lifted by Wall Street's strong finish and hopes for more government measures to boost China's economy.

The blue-chip Hang Seng Index gained 520.50 points to 15563.31.

Chinese Premier Wen Jiabao said over the weekend that Beijing would enact new measures to help the steel and auto industries.

According to Bloomberg, the so-called forward curve of futures contracts traded on the New York Mercantile Exchange suggests oil will rise 28 percent to $60.10 a barrel by December. The curve looks almost the same as 10 years ago, after Russia’s default and the collapse of the Long-Term Capital Management LP hedge fund raised concerns that a global economic slowdown would reduce energy demand. Crude prices fell 25 percent in the final quarter of 1998, the steepest drop in seven years.

Bets on a recovery paid off then as the Organization of Petroleum Exporting Countries cut production 6.9 percent, causing prices to more than double in 1999. Now, OPEC is pledging to reduce supply 9 percent, companies from Royal Dutch Shell Plc to Valero Corp. are postponing new energy projects and central banks are cutting interest rates to end the worst financial crisis since World War II.

China's gross domestic product growth is likely to slow to 8 to 9 percent in 2009, mainly due to slowing export growth, a senior government economist said in remarks published on Monday.

The export sector troubles will also contribute to a combined loss of about 25 million jobs in the two years 2008 and 2009, said Fan Jianping, chief economist of the State Information Centre, a top government think-tank.

Fan's expectation for 2009 compared with his organisation's forecast of 9.3 percent growth in China's GDP in 2008, made in late November, from 11.9 percent in 2007.

Borders holiday sales down 11.7% from year earlier.

Deutsche Bank analysts lowered their profit estimates for J.P. Morgan Chase & Co., citing higher loan losses in 2009 and lower revenue than expected previously. "Worsening economic trends should put additional pressure on J.P. Morgan Chase's loan portfolios (especially cards, home equity, and residential and commercial mortgage) as well as the banking industry in general," they wrote in a research note Sunday. Deutsche Bank cut its earnings forecasts for 2009 and 2010, and lowered its target price on J.P. Morgan shares to $34 from $37.

Walgreens said Monday that its December sales at stores open at least a year rose 4.9%. Comparable-store front-end sales increased 0.4%, while comparable pharmacy sales rose 8.5% in the month.

Satyajit Das: "Investors are now focused on cash flows (income or dividends) from the investment. Capital gains have joined the list of endangered species. Prices must equate to the cash flows discounted back at capitalisation rates factoring in much higher costs of capital. Valuation fundamentals, that Benjamin Graham would have recognised, are once again fashionable.

Some of this is already in the price. Nobody knows whether assumed earnings sufficiently factor in the low growth environment ahead or whether the higher costs of capital have been incorporated....Leveraged investment vehicles are out of fashion. Absolute rather than relative returns will be sought.

Management of the "liability" side of funds, specifically redemption risk, is increasingly important. Investors will be wary of the risk of value erosion in pooled investment structures (such as mutual funds and unit trusts). In 2008, unrelated redemption pressures drove down values of pooled investment and absorbed scarce liquidity. Closed end funds and self liquidating structures may become the new new thing....The new investment mantras may well be:

1. Flat is the new up.
2. Debt is the new equity.
3. Dividends are the only return.
4. If you’re looking for the bottom of the market there’s a special offer - buy one you get the next one free."

In the Miami area if you buy a new Chrysler, the dealer throws in a second one for free.

Global cotton consumption will fall more than forecast in December as textile mills in China, the biggest consumer, buy less fiber to weave into clothing and bedding, the International Cotton Advisory Committee said.

Worldwide use will drop 7.1 percent in the year ending July 31 to 24.5 million metric tons from a year earlier on lower use in China, India and Pakistan, the three largest consumers, the committee said today in a report. That was down from 24.9 million tons projected last month. Chinese consumption may fall 10 percent to 9.8 million tons this year, the group said.

“We hit the peak in earnings in 2007, and in 2009 we’re going to see continued deterioration,” said Diane Garnick, who helps oversee $500 billion as an investment strategist at Invesco Ltd. in New York. Analysts’ earnings estimates are “still way too optimistic.”

There is a serious risk of deflation in Asia in the next 3 to 6 months, says Rob Subbaraman, co-head of non-Japan Asia economics at Nomura International.

Bill Blass Ltd., which manufactured the Bill Blass Couture line, filed a Chapter 7 liquidation petition Dec. 31 with a Manhattan bankruptcy court. The couture business shut down operations on Dec. 19. Over 60 employees lost their jobs without any severance. Market sources said NexCen Brands Inc., the parent company, planned to sell the office furniture in Blass’ Seventh Avenue showroom. Court documents listed assets of $192,000 and debts of $829,000. NexCen inked a deal with Peacock International Group on Dec. 24 for the sale of the Blass trademarks for $10 million. The couture business was not part of the Peacock purchase.

Chile's central bank forecasts 2 to 3 percent growth for 2009, about half the 5.1 percent expansion seen in 2007. Chile's central bank says the global financial crisis stalled business loans and slashed prices for copper, its top export.

Deutsche Bank lowered 2009 estimates on Citi by 30 cents to a loss of $1.00 and 2010 estimates by 40 cents to EPS of $0.75.

Most leading Japanese companies expect the country's economy to worsen in 2009 amid uncertainty over the state of U.S. economy and deteriorating domestic demand, a survey by the Mainichi newspaper showed on Sunday.

Eighty-five percent of the companies surveyed said Japanese economic conditions will continue to deteriorate in 2009, while 13 percent said the economy would remain in bad shape but not worsen, the newspaper said.

No company surveyed expected the economy to improve this year.

Government policy will be the key influence in how the economy acts in 2009, Pimco co-CEO Mohamed El-Erian told CNBC. El-Erian said the new year promises to be a "bumpy journey" in which investors should shift their focus from the safety of government Treasury notes and into other vehicles. Among his recommendations are municipal bonds, Federal Deposit Insurance Corporation-backed paper, high-quality investment grade bonds, bank debt and Treasury Inflation-Protected Securities, or TIPS.

Outlays for construction projects in the United States fell by a seasonally adjusted annual rate of 0.6% in November after an upwardly revised drop of 0.4% in October, the Commerce Department reported Monday. Spending on residential projects fell 4.1%, while spending on private-sector nonresidential construction rose 0.7%. Total outlays are down 3.3% in the past year. Private residential construction, which fell 4.2%, reached the lowest level since August 1999.

The U.S. dollar index is trading with considerable strength, currently up 1.1%. It was up as much as 1.6% earlier.

"If all the money currently sitting in U.S. money-market funds left and went into buying shares of the Standard & Poor's 500 index, it would absorb 42%" of that benchmark's market value -- the highest in at least 25 years, says Jason Goepfert of

Since 1900, a winning January has spurred positive annual returns nearly 71% of the time, with the median change a 10.4% rise, says Bespoke Investment Group.

Potash Corp. dropped from $241 to $47 and is now back to $84. Quite a ride. First Solar dropped from $317 to $83 and is now back to $162. Not for the faint of heart.

Barclays Capital analyst Robert Drbul said in a research note that he expects Saks to
lose 50 cents a share for 2008.

The VIX remains at 38+.

Ford Motor Co.'s U.S. sales plummeted 32 percent in December and Toyota Motor Corp.'s fell 37 percent as car and truck buyers continued to steer clear of showrooms due to the dismal economy. General Motors Corp.reported a 31% drop in December U.S. light vehicle sales to 220,030 cars and trucks from 319,837 in December 2007. General Motors Corp.’s 2008 U.S. sales plunged to a 49-year low. Will their sales in 2009 be a 50-year low?
Chrysler LLC said Monday that U.S. December sales fell 53% to 89,813 vehicles from 191,423 a year ago.

Gold for February delivery closed down $21.70, or 2.5%, at $857.80 an ounce on the Comex division of the New York Mercantile Exchange, ending below $860 an ounce for the first time since Dec. 25. Crude for February delivery rallied $2.47, or 5.3%, to end at $48.81 a barrel on the New York Mercantile Exchange, the highest closing level for a front-month contract since Dec. 1.

Cigna Corp.said late Monday that it will cut 1,100 jobs, or about 4% of its workforce, by mid-year to lower costs.

Google Inc. continued to take a larger share of the U.S. Internet search market in November, according to data published Monday by Nielsen Online. Google'sshare of the market rose 21.7% compared to the period a year earlier to 64.1% in November, according the data. Yahoo Inc.'s share meanwhile fell 1.4% to 16.1%, while Microsoft Corp.'s share fell 16.7% to 9.1%, Nielsen Online said.

The Dow Jones Industrial Average fell 81.8 points, or 0.9%, to end at 8,952.89. The S&P 500 shed 4.35 points, or 0.5%, to 927.45, while the Nasdaq Composite lost 4.18 points, or 0.3%, to finish at 1,628.03.

Sunday, January 04, 2009


1/4/08 Unpredictable

Winston Churchill: "The human story does not always unfold like a mathematical calculation on the principle that two and two make four. Sometimes in life they make five or minus three; and sometimes the blackboard topples down in the middle of the sum and leaves the class in disorder and the pedagogue with a black eye. "

Iran's state television says Iran and Iraq will increase their economic cooperation to $10 billion in 2010.The report on Sunday quotes Iranian Vice President Parviz Davoudi. He says the cooperation will be in the energy and trade fields and will also include reconstruction projects in Iraq. Current economic cooperation between the two countries is about $4 billion.

The remarks come at the end of Iraqi Prime Minister Nouri al-Maliki's two-day visit to Iran.

This trip was al-Maliki's fourth to Iran since he was elected prime minister.

Mike Burk: " By current fashion, a bull or bear market is defined as a major index moving 20% off its low or high. By that definition, we are in a bull market with every major index except the Dow Jones Industrial average (DJIA) more that 20% off its November low. The Dow Jones Industrial Average (DJIA) was 19.6% off its low as of Friday's close, the S&P 500 (SPX) 23.8% off its low, the NASDAQ Composite (OTC) 24%, the Russell 2000 (R2K) 31.3% and leading the way, the Value Line Arithmetic up 39.4%....In a healthy market volume increases with prices. That has not been happening.....The market is overbought so the 1st few days of next week are likely to be down. I expect the major indices to be lower on Friday January 9 than they were on Friday January 2."

China’s manufacturing shrank for a third month as exports fell and companies ran down inventory, worsening the slowdown in the world’s fourth-largest economy. The Purchasing Managers’ Index rose to a seasonally adjusted 41.2 in December from 38.8 in November, the China Federation of Logistics and Purchasing said today in an e-mailed statement. According to Bloomberg, China’s growth may have slipped to 5.5 percent last quarter, the weakest pace in at least 15 years, as recessions in the U.S., Europe and Japan cut demand for exports, according to Shanghai- based Industrial Bank Co. The government has drawn up policies to support the steel and automobile industries through the slowdown, Premier Wen Jiabao said on Jan. 2.

“The December index shows China’s economy continues to decline, but there are some signs of bottoming out,” said Zhang Liqun, an economist at the State Council Development and Research Center. “As macroeconomic policies start to take effect, the pace of the slowdown will stabilize.”

A measure of export orders rose to 30.7 from 29 in November. The output index jumped to 39.4 from 35.5. The new-order index rose to 37.3 from 32.3. November’s levels were the lowest for each of those indexes since the survey began in 2005.

The Federal Reserve has embarked on a campaign of unsupervised industrial policy to end the country's financial crisis, a move that could undermine its independence, a former top U.S. official said on Saturday.

John Taylor, who was under secretary of treasury for international affairs from 2001 to 2005, said the explosive growth of the Fed's balance sheet since September was "unbelievable."

"This doesn't really seem like quantitative easing in the sense of finding a growth rate in the money supply," he told a panel discussion during the annual meeting of the American Economics Association.

"What you are looking at now is really being determined by other considerations. How much should we buy of mortgage-backed securities? How much should we loan to foreign central banks? This is really more like an industrial policy," he said.

OPEC's crude oil exports, excluding Angola and Ecuador, are forecast to fall by 250,000 barrels a day in the four weeks to Jan. 17.

Stanley J. Randall: "The closest to perfection a person ever comes is when he fills out a job application form. " There are millions of job applications being filled out in the U.S.

They swamp the number of truly available jobs.

Israel said its nine-day offensive in the Gaza Strip hasn’t yet done enough damage to the military wing of Hamas, as its soldiers clashed with gunmen from the Islamic group that controls the Palestinian territory.

“The political wing of Hamas has absorbed a serious blow, but the military wing has not been hit as hard as we would like,” Cabinet Secretary Oved Yehezkel told reporters today. “The goal is to deal a serious blow to the terrorist infrastructure of the Hamas.”

“We’re continuing to lose massive amounts of jobs,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. “The negative momentum carrying over into the first half of 2009 will hold down the economy regardless of policy.”

The jobless rate probably climbed to 7 percent in December from 6.7 percent the prior month, according to the survey median.

"The financial and economic firestorm we face today poses a serious risk of an extended period of stagnation -- a very grim outcome," said Janet Yellen, president of the San Francisco Federal Reserve Bank.

"If ever, in my professional career, there was a time for active, discretionary fiscal stimulus, it is now," Yellen said in remarks prepared for the American Economics Association's annual meeting in San Francisco.

Yellen said she was skeptical about suggestions for broad-based, permanent tax cuts and instead urged "spending on goods and services with higher rather than lower social value."

Already bogged down by a year-long recession, Yellen said the United States faces a rising risk of deflation, or a persistent decline in prices that could cause consumers to delay purchases, dragging down the economy further.

Nouriel Roubini: "The credit crunch will get worse; deleveraging will 2009 will be a painful year of global recession and further financial stresses, losses and bankruptcies."

The Nikkei 225 Average surged 3% to 9,120.50 as trading resumed for the first time in 2009, while the broader Topix Index gained 2.8% to 883.42. Japanese markets are open only for a half-day session on the first business day of the year. Australia's S&P/ASX 200 Index gained 0.8% to 3,741.60 and South Korea's Kospi rose 1.8% to 1,178.56, while New Zealand's NZX 50 Index climbed 1.2% to 2,746.90.

U.S. light, sweet crude for February delivery rose $1.47 a barrel to $47.81 by 2305 GMT, trading at the highest in over two weeks as more traders began to reckon that the over $110 slump in prices from their $147 record high had been overdone.