Friday, January 16, 2009

A Depression

1/16/08 A Depression

Circuit City Stores, Inc. announced today that it will seek Bankruptcy Court approval to begin the process to liquidate the assets of the company.

"We are extremely disappointed by this outcome. The company had been in continuous negotiations regarding a going concern transaction. Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders to structure a going-concern transaction in the limited timeframe available, and so this is the only possible path for our company," said James A. Marcum, vice chairman and acting president and chief executive officer for Circuit City Stores, Inc.

WellPoint Inc. said Friday it will eliminate approximately 1,500 jobs.

Terra Industries Inc. said Friday that it had received an unsolicited proposal from CF Industries Holdings Inc.to acquire Terra for a fixed exchange ratio of 0.4235 CF Industries shares for each Terra common share. Terra's board has advised shareholders to take no action at this time pending review of the offer. CF shares closed at $47.23 on Thursday.

Honda Motor Co. said Friday it will not renew contracts with all 3,100 of its temporary workers and will trim production for the current fiscal year, reports said. Japan's second-largest automaker said it will cut production in Japan by 56,000 vehicles, and will halt work at its U.K. plant for two months to trim that facility's output by 17,000 vehicles. Smaller rival Mitsubishi Motors Corp. also said Friday it would eliminate an additional 1,800 jobs by the end of February to cope with reduced output.

Quarterly losses: $1.8 bln for B. of A., $15 bln for Merrill. Citigroup posts $8.3 billion loss and will split into 2 companies.

The International Energy Agency forecast that 2009 global oil demand will fall by 0.6% to 85.3 million barrels of oil equivalent a day, a drop of 1 million barrels from last month's forecast. It also revised lower its 2008 estimate to 85.8 million barrels, which implies a 0.3% drop from 2007 levels. The new forecasts, if accurate, would be the first two-year contraction in oil demand since 1982 and 1983.

Toyota Motors Corp.said late Thursday it is adding more "non-production" days to its manufacturing schedule this year, idling several North American plants to cut costs and trim inventory in the face of falling auto sales. The company said the number of days individual plants would be idled varies, with some plants now looking at up to 30 days of downtime between Jan. 1 and April 3. At least 10 of the models Toyota makes in North America will be affected. Toyota sales fell nearly 38% in December from a year earlier, a trend hurting all car makers as tight credit markets, rising unemployment and a deepening recession sideline buyers.

Auto parts maker Johnson Controls Inc posted a wider-than-expected quarterly loss on Friday and forecast a similar operating loss in the current quarter, sending its shares down 8.5 percent in premarket trading.

Johnson Controls said it is taking additional cost-cutting actions in response to a deep downturn in North America, where 2009 auto production volumes could fall to their lowest levels since 1983.

Johnson Controls, which makes car interiors, seating and batteries, also said "uncertainty and volatility" makes it difficult to provide guidance this year.

Brett Steenbarger: "In my looks at other suburban communities, from Washington to Florida, I have seen similar lumpiness in inventory. The high-ends of the market, which was where the money was, generated the greatest overbuilding. In an environment in which aging baby boomers are downsizing, consumers are retrenching, and home values are falling, it is not at all clear that there is the demand to meet such supply, leaving builders and local banks at serious risk."

Barry Ritholtz: The United States of Wall Street just added another major holding to its portfolio of financial garbage: Bank of America.
Like Citi, BA has now received more MORE IN BAILOUT MONEY than its actually worth. (BAC = $53B; C = $21B) How this can ever be a profitable investment, as some mathematically challenged Congress-critters have suggested, is all but impossible to imagine.
Blaming “previously undisclosed losses from its Merrill Lynch,” B of A threatened to kill their purchase of Mother Merrill. Treasury made an emergency capital injection of $20 billion, on top of the $15B and $10B already received by BA and MER respectively. The taxpayers will also backstop $118 billion of assets, setting up what is likely to be a jumbo money losing trade.
What should have happened in both instances was an orderly liquidation, selling off the pieces to competent managers who understand risk, and can manage smaller portions of the firm. Instead, the same idiots who helped destroy all of companies involved are still running the show."

ARG Enterprises Inc., the operator of 69 Black Angus Steakhouse restaurants in seven states in the western U.S., sought bankruptcy protection and said it is seeking a buyer.
Closely held ARG, with headquarters in Los Altos, California, said in today’s Chapter 11 filing in U.S. Bankruptcy Court in Wilmington, Delaware, that it has between $100 million and $500 million in both assets and debts.

Americans paid 0.1 percent more for goods and services in 2008, the Labor Department said today in Washington. Consumer prices fell 0.7 percent in December after dropping 1.7 percent the prior month. Excluding food and energy, costs were unchanged.
The biggest decrease was in energy - down to the tune of a -21.3% annual rate, which carried over into transportation down annualized at the rate of -13.3%.
Food, on the other hand is up 5.8% on an annualized basis.

George Ure: "America is getting painfully close to replaying the Depression as I've been writing for 16-years that we would. Although it's playing out much slower than I expected, it's nevertheless here in form. A reverse migration out of cities is underway, illegal immigrants are finding more opportunity back in Mexico, there's a lack of groundbreaking product innovation in the 'gotta have it' category, and banks - despite all the government dough - are not lending for the simple reason that consumer confidence has cratered.
A national malaise is upon us, yet the mainstream media is loathe to call it what it is. This state we're now in has been touched, felt, and labeled in the past with a single word:
Depression."

Gold mine production in South Africa plummeted by an estimated 14% in 2008, the sharpest percentage fall since 1901 when the country was still embroiled in the Second Boer War, London-based precious metals consultancy GFMS said in its Gold Survey 2008. South Africa's output hit its lowest point for a century, relegating the country to the world's number three producer, behind the United States, according to the survey, which was published on Thursday. China extended its lead as the world's biggest producer of mined gold, with an estimated 3% increase in production.

March crude oil, which registered more volume, gained 25 cents to $43.81 a barrel on Globex.Meanwhile, spot Brent crude is $48.54. USO, the ETF for oil, is worth a look.

Mexico's central bank slashed its benchmark lending rate 50 basis points to 7.75 percent.

The output of the nation's factories, mines and utilities plunged 2.0% in December, the Federal Reserve said Friday. Output has fallen in four of the last five months

Minneapolis Star Tribune files for bankruptcy protection.

Container cargo shipments at the Port of Long Beach declined 11 percent last year -- the port's biggest decline in more than 20 years.
Port officials said Thursday that the port handled 6.5 million containers in 2008, with an especially weak December, which reflects the global economic recession.

Rigzone: "Petroleos de Venezuela SA has fallen several months behind on payments to oil service companies and other suppliers that keep its oil business running, a source of concern for many in the industry."

According to AMG Data Services: "Including ETF activity, Equity funds report net cash outflows totaling -$3.653 billion in the week ended 1/14/09 with Domestic funds reporting net outflows of -$4.530 billion and Non-domestic funds reporting net inflows of $877 million; Excluding ETF activity, Equity funds report net cash inflows for the second consecutive week totaling $536 million with Domestic funds reporting net inflows of $362 million and Non-domestic funds reporting net inflows totaling $175 million; Excluding ETF activity, Equity funds have not reported net inflows for two consecutive weeks since 5/21/200."

Ten-year Treasuries fell the most in almost two months as stocks gained on government efforts to bail out banks, reducing the haven appeal of U.S. debt.

John Mauldin: "This recession is going to be the longest in anyone's memory," he writes. "It is going to seem like it is never going to end."

Severe economic problems have slashed the confidence of chief executives, and their confidence reached an all-time low in the fourth quarter, according to survey results released Friday. "The erosion in CEO confidence is a reflection of the rapid and severe deterioration in economic conditions experienced in the final months of 2008," said Lynn Franco, director of the Conference Board's Consumer Research Center. "Looking ahead, CEOs remain extremely pessimistic about overall economic prospects in the first half of 2009." Not one of the business leaders said conditions have improved, and only about 11% of respondents expect conditions to improve in the next six months, according to the survey. The Conference Board's measure of CEO confidence goes back to 1976 and includes about 100 business leaders.

Looking ahead, Estee Lauder expects weakness in the economy to hurt the company for the rest of the fiscal year.

Arpitha Bykere: "RGE Monitor sees a meaningful chance for price over-correction which would bring down prices 44% from peak to trough. This might push over 25 million homeowners into negative home equity creating a vicious circle of foreclosures and downward spiral in home prices, bank losses and consumer-led recession."

The Dow reversed an early morning gain of 128 points and went 70 in the minus column.
The decline was paced by Bank of America, Citigroup, Wells Fargo, JP Morgan Chase, U.S. Bank, GE, American Express, Goldman Sachs, Morgan Stanley, and Barclays. Many of these names made new 52-week lows and several that did appear as some of Berkshire Hathaway's largest holdings, such as, Wells Fargo.

Pfizer will layoff 2400 sales reps, Advanced Micro will layoff 1100, and GE Capital possibly 7500 to 11,000.

Are these financial companies being nationalized? What does that mean for free enterprise? Since when did buying toxic assets create jobs.

Gold for February delivery ended up $32.60 at $839.90 an ounce on the Comex division of the New York Mercantile Exchange. Light, sweet crude for March delivery fell 97 cents Friday to settle at $42.57 on the New York Mercantile Exchange. The February contract, which expires Tuesday, rose $1.11 to settle at $36.51 a barrel in very light trading.

The Dow Jones industrial average rose 68.73 points, or 0.84 percent, to 8,281.22. The Standard & Poor's 500 Index gained 6.38 points, or 0.76 percent, to 850.12. The Nasdaq Composite Index was up 17.49 points, or 1.16 percent, at 1,529.33.
For the week the Dow was down 5.6 percent, the S&P 500, lost 5.9 percent, while Nasdaq gave up 3.02 percent.

ConocoPhillips will trim its work force by about 4%, and will reduce the number of contractors it uses. ConocoPhillips has just over 32,000 employees.

Berkeley, Ill.-based National Bank of Commerce was closed by regulators Friday, marking the first bank failure of 2009, the Federal Deposit Insurance Corporation said in a statement

The U.S. government is considering new ways to steady the financial system, including the possible creation of a state-run "bad bank" that would buy troubled assets from struggling lenders, the Wall Street Journal reported late Friday. The government already has a "bad bank"--- it's the Federal Reserve.

Gannett Co. is seeking a buyer for certain assets of the Arizona-based Tucson Citizen. The newspaper company said that if a sale is not completed by March 21, it will have to close the paper.
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Thursday, January 15, 2009

Significant Slowdown

1/15/08 Significant Slowdown

Yahoo CEO Carol Bartz reportedly said Wednesday that her "gut" feeling was to not sell the search business.

U.S. foreclosure filings in 2008 rose 81% from 2007 and tripled from 2006, RealtyTrac reported on Wednesday. A total of nearly 3.16 million foreclosure filings -- measured by default notices, auction-sale notices, and bank repossessions -- were reported in 2008.

The European Central Bank cut its benchmark interest rate by 50 basis points to 2.0 percent on Thursday, matching its lowest ever rate, and its president said inflation risks continued to diminish as the economy weakened.

Intel Corp. reported a fourth-quarter net income of $234 million, or 4 cents a share, compared with a net profit of $2.27 billion, or 38 cents a share for the year-earlier period. Revenue was $8.2 billion, down 23% from $10.7 billion last year.

Societe Generale said on Thursday that the United States' economy looks likely to enter a depression and China's could implode.

Saks Inc. will reduce 1,100 corporate support and store positions, about 9% of total workforce, as part of its effort to weather the deteriorating economic environment.

At the close, the Dow Jones industrials were up 12 points to 8,212, ending their recent losing streak at six. The blue chips had been down as much as 205 points and briefly dropped below 8,000 for the first time since Nov. 21. Then they recovered and were up as much as 86 points shortly after 3 p.m. ET.

The Standard & Poor's 500 Index was up 1 point to 844. The Nasdaq Composite Index was up 22 points to 1,512.


Genentech Inc on Thursday reported sales of its most closely watched drug, Avastin, that came in shy of expectations and disappointed investors with its 2009 earnings forecast, sending its shares lower.

U.S. sales of the cancer drug Avastin, widely considered the most important barometer of Genentech's fortunes, rose 21 percent to $731 million, falling short of analyst estimates of about $740 million.

Avastin, originally a colon cancer treatment, is now being used against breast and lung cancer as well. Sales could expand further should the company gain approvals in the United States and Europe for Avastin in brain cancer later this year.

Genentech forecast 2009 earnings of $3.55 to $3.90 per share, excluding items, while analysts are looking for $3.92 per share for the year.


Light, sweet crude for February delivery fell 5 percent, or $1.88, to settle at $35.40 a barrel Thursday on the New York Mercantile Exchange. Brent crude closed at $47.68 and I believe that spread will narrow significantly.


Gold futures for February delivery fell $1.50, or 0.2 percent, to $807.30 an ounce on the Comex division of the New York Mercantile Exchange.

Silver futures for March delivery dropped 3.5 cents, or 0.3 percent, to $10.44 an ounce. The metal slumped 24 percent in 2008.

This week, gold has dropped 5.6 percent, and silver is down 7.8 percent.


Turkey's central bank slashed its benchmark interest rate by 200 basis points to 13% on Thursday, saying that the domestic economic slowdown has intensified.


U.S. natural-gas inventories fell 94 billion cubic feet in the week ended Jan. 9, the Energy Information Administration reported Thursday. Analysts surveyed by Platts had expected a decline between 101 billion cubic feet and 106 billion cubic feet. The ETF for natural gas, UNG, traded at a new 52-week low.


Global oil consumption is expected to fall 200,000 barrels a day this year, the Organization of the Petroleum Exporting Countries said in its monthly report, released Thursday. Consumption declined 100,000 last year, the first year of negative growth since 1983.


The euro-zone economy is experiencing a "significant slowdown" and risks to growth remain weighted to the downside, European Central Bank President Jean-Claude Trichet said in an opening statement at his monthly news conference in Frankfurt. Domestic demand is likely to remain sluggish as financial turmoil increasingly weighs on real economic activity, he said. Meanwhile, inflation pressures have diminished and will likely remain in line with the bank's price-stability goals in the medium term, he said.

First-time applications for state unemployment benefits rose 54,000 to a seasonally adjusted 524,000 in the week ending Jan. 10, the Labor Department said Thursday. The four-week average of new claims fell 8,000 to 518,500 - a level that is 55% higher than the average during the same period in the prior year. Meanwhile, the number of people collecting benefits in the week ending Jan. 3 fell 115,000 to 4.5 million, a level that is 64% higher than the prior year. The four-week average of continuing claims rose 27,500 to 4.5 million - the highest level since December 1982. The insured unemployment rate remained at 3.4%.

MeadWestvaco Corp.said Thursday it would slash about 2,000 jobs, or 10% of its global workforce by year end as it addresses "current economic challenges."

Wednesday, January 14, 2009

The Economy Is Running On Fumes

1/14/08 The Economy Is Running On Fumes

The Energy Information Administration released a report this week indicating that natural gas production will drop by one percent in 2009 and then rebound 0.7 percent in 2010, when the economy is widely expected to recover.
The EIA noted that there had been a slight increase expected in residential use in 2009, but warned that this would be more than offset by expected declines in commercial and industrial use. For example, the report found that industrial natural gas use would decline three percent in the same period, with slight declines also expected in 2010 aside from the electric power industry.
In the short term, the agency noted that energy producers have reacted to the lower prices in many cases by scaling back their drilling activity.

Apple CEO Steve Jobs announced he will be taking a medical leave of absence until at least June.

Microsoft Corp. is considering cutting a significant number of jobs as early as next week, according to a media report late Wednesday.

Google Inc. disclosed Wednesday that it is cutting roughly 100 jobs.

December's same-railroad traffic was down 11.2%, representing 6,953 carloads, Genesee & Wymoning said.

"Global economic conditions are now substantially weaker and more perilous than they were in the two previous credit cycles of 1990-91 and 2001-02," said Moody's Director of Corporate Default Research Kenneth Emery.

Oracle Corp.cut 500 North American sales and consulting positions on Friday, people familiar with the matter told the The Wall Street Journal.

Deutsche Bank expects to report a net loss of around 4.8 billion euros ($6.4 billion) for the fourth quarter of 2008 due to a weak performance in credit trading, higher provisions on its exposure to bond insurers and measures to reduce its exposure to risky assets. For the year as a whole, Deutsche Bank said it expects to report a loss of around 3.9 billion euros.

Industrial output fell 1.6% in the 15 nations that made up the euro in November, the statistical agency Eurostat reported Wednesday. On an annual basis, production fell 7.7%.

The Bank of Thailand cut its key lending rate Wednesday by a larger-than-expected 0.75-percentage point, lowering its key rate to 2%.

Treasuries will fall over the next six months and the dollar will weaken as the U.S. sells a record amount of debt to finance a budget deficit poised to exceed $1 trillion, a monthly survey of Bloomberg users showed.

Participants turned the most bearish on 10-year U.S.
notes since September, while continuing to forecast declining yields on government debt from Germany, U.K. and Japan, according to the Bloomberg Professional Global Confidence Index. The survey, which questioned 2,991 Bloomberg users last week, showed the outlook for the dollar is the lowest since July.

U.S. mortgage applications jumped in the first full week of 2009 as record low interest rates spurred the greatest demand for home refinancing loans in over 5-1/2 years, data from an industry group showed on Wednesday.

Barclays is cutting about 2,100 jobs worldwide in investment banking and money management as it slashes costs to cope with the fall-out from the credit crisis.

Jaguar Land Rover said Wednesday it plans to cut 450 jobs in an effort to trim costs amid a slumping market for luxury cars, according to reports.

U.S. seasonally adjusted retail sales plunged 2.7% in December, the Commerce Department estimated Wednesday. Excluding the 0.7% decline in auto sales, retail sales recorded their biggest drop since record-keeping began in the early 1990s, falling 3.1%. Excluding gasoline and autos, sales fell 1.5%, the largest drop since September 2001.

Prices of goods and services imported into the United States fell 4.2% in December, as the price for imported petroleum fell 21.4%, and non-petroleum imports fell 1.1%, the Labor Department reported Wednesday.

Gottschalks to reorganize under Chapter 11.

Nortel files for bankruptcy protection.

Rigzone: "Output at Mexico's main oil field Cantarell will continue sliding this year despite new investments in drilling and well maintenance, putting Petroleos Mexicanos' 2009 production target at risk.

A combination of old age and poor long-term planning have frustrated state-run Pemex's efforts to stem the collapse at Cantarell. Production is down by more than half since peaking in 2004.

The woes at Cantarell and delays in getting new projects off the ground elsewhere threaten Mexico's overall target of 2.75 million barrels a day for this year. In November, Mexican output was the lowest since 1995 at 2.71 million barrels a day, partly due to port closures that forced Pemex to shut in some production.

Pemex officials expect rising production at other fields to compensate for Cantarell this year, but outside observers are skeptical. The International Energy Agency expects Mexican production to fall by 245,000 barrels a day in 2009.

Pemex expects Cantarell's average production to fall roughly 18% to 800,000 barrels a day this year. Industry executives blame the faster-than-expected decline on a lack of infrastructure, such as water-separation facilities and gas-injection units.

Mexico, traditionally one of the U.S.'s top three crude suppliers, will be unable to provide relief to the world's biggest oil consumer during the next global demand boom unless it reverses the trend. Mexican production has dropped by 18%, or 600,000 barrels a day, since 2004, which contributed to the crude-price rally that peaked near $150 a barrel in July.

Mexican exports will dry up in less than seven years if current decline rates continue."


FormFactor will cut its staff by 22% as part of a reorganization and cost reduction plan. FormFactor, which is based in Livermore, California, has just over 1,100 employees.


Germany’s economy may have contracted the most in more than two decades in the final quarter of 2008 as the global financial crisis hurt exports and damped spending, the Federal Statistics Office said.


Shares in biotech company Dendreon have spiked, along with options trading — amid rumors involving some kind of deal with Eli Lilly.


The ruble fell to lowest in six years against the dollar after the central bank devalued the currency for the third time in four days and the government’s dispute with Ukraine over gas shipments remained unresolved.


Norfolk and Southern RR, CSX, Burlington Northern and Union Pacific traded at new 52-week lows.


Seagate will cut its global staff by 2,950 people, or about 6% of its total headcount.


In early Wednesday morning trading, the VIX rose 8+ points to 51+.


The Energy Information Administration reported Wednesday that distillate inventories, including heating oil and diesel, rose 6.4 million barrels in the week ended Jan. 9, much higher than the 1.7 million gain expected by analysts surveyed by energy information provider Platts. Meanwhile, gasoline inventories rose 2.1 million barrels and crude-oil stockpiles gained 1.2 million barrels. Analysts had expected gains of 3 million and 1.8 million, respectively. After the data, crude for February delivery lost 3.7% to $36.35 a barrel on the New York Mercantile Exchange.


"We see the four horsemen of the apocalypse riding through the economy," says retail consultant Burt Flickinger III of December's retail sales numbers. And "we expect the January numbers to drop off a little more dramatically." Flickinger says retail recession will stretch into 2010, as consumers retrench and try to save more money, but that same behavior will contribute to retail's rebirth next year, too.


Qatar, the world’s biggest producer of liquefied natural gas, halted production of the fuel at its Qatargas-1 plant on Jan. 8, idling about a third of the country’s total output. “There is a mechanical problem,” a spokesman for Qatargas said today in a telephone interview, declining to be identified because of company policy. “Qatargas-1 is currently shut down.


Walgreens to cut about 1,000 positions in 2009.

J.P. Morgan Chase Wednesday slashed its outlook for U.S. economic growth in the first quarter to a decline of 5% from 3%, increasing the likelihood that the U.S. will experience a deep recession.

A 100-year-old Denver printing company says it will close its doors by the end of the month and lay off all 250 of its employees.

National Hirschfeld, run by three generations of the Hirschfeld family, cited the economic downturn and a lack of financing in announcing its decision.


Motorola Inc. said late Wednesday that it will cut 4,000 jobs in addition to previously-announced staff reductions, as it issued gloomy, preliminary fourth-quarter results.


Lumber prices declined to the levels seen in 1986.


Barnes & Noble Inc. said late Wednesday that it will cut 100 positions at its corporate headquarters because of reduced store openings and consolidations of its retail and online operations.


Crude for February delivery fell 50 cents, or 1.3%, to end at $37.28 a barrel on the New York Mercantile Exchange. Gold for February delivery ended down $11.90, or 1.4%, at $808.80 an ounce on the Comex division of the New York Mercantile Exchange.


The U.S. economy continued to weaken across the country, according to the Federal Reserve's latest beige book report released on Wednesday. Labor market conditions were poor, with layoffs and hiring freezes common in many regions. Both commercial and residential real estate continued to suffer - hurt by tight credit standards and a drop in lending activity. Reports from the Christmas sales season seemed to confirm reports that consumers did not splurge. There was little sign of life in the manufacturing sector. Even the energy sector, which had been booming, was subdued.

Gannett Co., the publisher of USA Today, will make workers take about a week off without pay, including its top executives, Thomson Reuters reported Wednesday.

At the close, the Dow was down 248 points, or 2.9%, at 8,200. The Standard & Poor's 500 Index was down 29 points, or 3.4%, to 843, and the Nasdaq Composite Index fell 57 points, or 3.7%, to 1,490.

Plantronics, maker of wired and wireless headphones, said it will cut its worldwide staff by about 18% as part of a cost reduction plan.

Tuesday, January 13, 2009

An Economic Dead-End

1/13/08 An Economic Dead-End

Rep. Ron Paul: "I am left with these questions - who is going to be left standing, to tax in the private sector, to pay for all these public sector make-work jobs? Is Washington really to be considered some sort of savior for creating unproductive jobs in place of the productive jobs they eliminated?
We are at an economic dead-end and those in power are in denial. The truth is our economic problems are due to loose monetary policy, central economic planning, and the parasitic expenses of government. Unless we assess these problems honestly, we unfortunately have a long way to go until, like the junkie, we hit rock bottom."

Rob Hanna: "In all cases Tuesday shows by far the best potential for a turnaround. The results are even better recently than if you look back 58 years. It appears Turnaround Tuesdays are real…and they’re not just for old folks."

Global business and government spending on computer, software and communications products and consulting services is expected to decline 3 percent this year,
Forrester Research said in a report due out Tuesday.
This would mark the first decline since 2002, when information-technology spending dropped 6 percent after falling the same amount in 2001.

Cliff W. Draughn: "The Boomers are now becoming retirees. The latest census data counted 303,824,640 US citizens. We are experiencing an annual birth rate of 14.18 births per 1,000; it is estimated we need at least 24.50 births per thousand to sustain our population (can you say immigration?). More importantly, we are only experiencing 8.27 deaths per 1,000, and the average life expectancy of an American male is 75.29 years, while the average expectancy for a female is 81.13 years ... and growing. (CIA.gov library). America is aging, and as a result we are experiencing a decline in the number of workers that provide tax revenues and, more importantly, consumption."

A nearly yearlong effort by Landry's CEO Tilman Fertitta to buy the chain unraveled Monday after Landry's Restaurants and Fertitta called off the deal.
The company cited ``unusual circumstances'' involving the lenders, Jefferies & Co. and Wells Fargo Foothill, and the Securities and Exchange Commission.
The SEC asked Landry's and the lenders to disclose to shareholders certain information considered by both sides to be confidential, the company said.
Had that information been released, the lenders would have backed out and would have killed the refinancing of $400 million in debt the company needed if the going-private deal fell through, Landry's said in a filing with regulators.

Options traders are betting stock swings in the
Standard & Poor’s 500 Index will decrease at the fastest rate since the aftermath of the market crash in 1987, a sign that equities may keep rallying.
The difference between the benchmark index’s
historic volatility and a gauge of so-called implied volatility based on expected swings rose to the highest in 21 years, according to data compiled by Credit Suisse Group AG and Bloomberg. The gap widened as investors paid less to insure against price declines, sending the Chicago Board Options Exchange’s Three-Month Volatility Index lower.
Historical volatility must fall 25 percent to bring the measures into accord. The last time the difference was this wide, stocks climbed for two quarters, according to data compiled by Bloomberg. Declining volatility is
usually bullish for equities because it shows growing investor confidence.
“We know a lot more than we knew four months ago,” said
Michael McCarty, chief equity and options strategist at Meridian Equity Partners Inc., a New York-based brokerage. “Any time you have less uncertainty you have less risk, which is positive for equities.”
The VIX’s accuracy as a forecasting toll for stocks faltered last year. A calculation derived by traders from the VIX to predict the lowest level stocks were likely to reach was wrong from Sept. 29 to Oct. 30, the longest stretch ever.
The VIX’s predictive value may be restored as volatility
recedes. Last year’s record price swings aren’t likely to be duplicated, options traders said.

U.S. crude is $38.38 a barrel and Brent crude is $44.75 in early Tuesday trading. Gold for February delivery was last up modestly at $824.70 an ounce in North America electronic trading.

Thomas Jefferson: "When the people fear their government, there is tyranny; when the government fears the people, there is liberty."

The trade deficit plunged to the lowest level in five years in November as a deepening recession slashed demand for oil by a record amount. Imports from China also fell by the largest amount on record.
The Commerce Department says the trade deficit narrowed to $40.4 billion in November, a 28.7 percent decline from October's deficit of $56.7 billion. Exports fell 5.8% to $142.8 billion, led by weakening foreign demand for industrial supplies and capital goods. The bigger-than-expected decrease left the deficit at its lowest level since November 2003.
The trade deficit through November is running at an annual rate of $688.2 billion, down from the 2007 imbalance of $700.3 billion. The 2007 deficit had represented the first decline after five years of record highs.

Beazer Homes USA Inc.said preliminary net new home orders totaled 551 in its fiscal first quarter, down 56% from the year-earlier period. The Atlanta-based home builder said home closings for the quarter ended Dec. 31 fell 53% to 938 units.

Cummins Engine Company Inc. plans to cut 800 jobs by the end of February.

Colorado-based jewelry store retailer Shane Co., has filed for Chapter 11 bankruptcy protection, saying the business suffered a disappointing holiday season.
The company filed paperwork Monday in U.S. Bankruptcy Court in Denver and asked to be able to continue paying its 542 employees in stores in 14 states, including two stores in Colorado. The court filings show the company has between $100 million to $500 million in estimated assets and liabilities.
"The severity of this past holiday season dramatically impacted existing liquidity requiring the Company to seek this bankruptcy protection," CEO Tom Shane said in a written statement. "I am confident that this action will guarantee that our customers will continue to enjoy the top-notch service, expansive selection, and unbeatable prices that they have enjoyed since the days of my grandfather."

China's crude oil imports grew 9.6% in 2008, easing from a 12.4% rise in the preceding year. Analysts said the slowing growth rate may be related in part to shutdowns linked to the hosting of the Olympic Games in Beijing in August last year.
Still, its expected growth in imports this year will ease further from 2008 levels as the economy cools. The government is forecasting the economy will grow 8% this year. In the first three quarters of 2008, the economy grew 9.9%.

Nvidia Corp. warned that its fourth-quarter revenue will come in lower than it previously expected. The Santa Clara, Calif.-based chip maker now sees revenue declining 40% to 50% sequentially, blaming weak end-user demand and inventory reductions by its channel partners.

Rob Kirby: "The Bank of England will be able to print extra money without having legally to declare it under new plans which will heighten fears that the Government will secretly pump extra cash into the economy.

By Edmund Conway, Economics Editor
Last Updated: 7:01AM GMT 12 Jan 2009

The Government is set to throw out the 165-year old law that obliges the Bank to publish a weekly account of its balance sheet – a move that will allow it theoretically to embark covertly on so-called quantitative easing. The Banking Bill, which is currently passing through Parliament, abolishes a key section of the law laid down by Robert Peel's Government in 1844 which originally granted the Bank the sole right to print UK money.

The ostensible reason for the reform, which means the Bank will not have to print details of its own accounts and the amount of notes and coins flowing through the UK economy, is to allow the Bank more power to overhaul troubled financial institutions in the future, under its Special Resolution Authority.

However, some have warned that it means: "there is nothing to stop an unreported and unmonitored flooding of the money market by the undisciplined use of the printing presses."...


Bill Bonner: "But the new super drug at the Fed is its policy of "quantitative easing." What is 'quantitative easing,' you may want to know? It describes the Fed's latest ploy, in which it buys toxic assets from banks. The banks thus increase their reserves. If they were to maintain the same loan-to-reserve ratio, they would have to lend out more money. But when the Fed buys assets from the banks, it does not borrow the money; it creates it 'out of thin air.' In other words, between 'quantitative easing' and 'printing money' there is not enough space to wedge a subway ticket."

Sunoco Inc.will close a polypropylene manufacturing facility in Bayport, Texas, by April 30.

China's foreign exchange reserve rose 27% last year to $1.95 trillion, slightly slower than the growth in reserves marked last year, state-run Xinhua new agency reported Tuesday. The increase from the end of 2007 to end of 2008 totaled $417.8 billion, down from $461.9 growth the year before and marking the first slowdown in foreign exchange growth in a decade. The report said the slowdown was a result of a shrinking trade surplus and a possible slowdown in speculative "hot-money" flows.

Chain store sales fell 2.3 percent for the week ended Jan. 10, as lower post-holiday traffic, fewer gift-cards and bad weather brought the largest weekly sales drop in two years, according to the International Council of Shopping Centers-Goldman Sachs chain store index.
The shopping centers council, a trade group, said it expects sales in January to decline from 2 to 3 percent as consumer demand remains weak.

The VIX is approaching the 46 level.

New Zealand’s AA+ foreign-currency credit rating may be cut if the nation’s current account deficit and overseas debt begin to curb growth and investment, Standard & Poor’s said.

Infosys Technologies, India's No.2 software services exporter, beat expectations with a one-third rise in quarterly profit on Tuesday, but cut its annual forecast as a global downturn squeezes outsourcing and prices.

Profit warnings for publicly traded companies were 17% higher in 2008 from the previous year, according to a report from Ernst & Young. Keith McGregor from Ernst & Young discusses the report's findings.

Michigan is facing a $1.6 billion deficit next year, and state economists calculate the state will take in nearly a billion dollars less this year than last.

A further collapse in the price of assets, such as stocks and houses, is the largest risk facing world economies in 2009 and could cost as much as $1 trillion, according to a World Economic Forum study published Tuesday.

China will reportedly raise natural gas prices within the year in an effort to ensure healthier profits for the sector, the Shanghai Securities News reported, citing unnamed sources.
The country's largest oil and gas producer, China National Petroleum Corp, has suggested that the central government take that route, said the report.

At $66+ Burlington Northern is trading at a new 52-week low. As of December 11, 2008,
GuruFocus reported that Warren Buffett held a little over 70 million shares of BNI, or 20.47% of all the shares outstanding and spending more than $5.5 billion dollars and two years to accumulate this position. Berkshire's average cost is close to $80 per share. The shares are trading back down to the level reached in August 2006 and down from their all-time high of $114. In 2004, the stock changed hands at $30.

According to the WSJ, Pfizer plans to lay off up to 800 researchers in 2009.

European aerospace group EADS said on Tuesday it had abandoned a "significant" defense acquisition in the United States to conserve cash and prop up Airbus plane sales to crisis-hit airlines.

The Airbus parent company is under pressure to offer financing to buyers to ensure they honor contracts and also faces a raft of possible new provisions for delays to its A400M military airlifter.

ING cutting 750 U.S. jobs, or 8% of U.S. workforce.

Genzyme said it expects annual adjusted earnings to rise to about $7 a share by 2011.

Crude oil for February delivery closed up 19 cents, or 0.5%, at $37.78 a barrel on the New York Mercantile Exchange. Gold for February delivery ended down 30 cents at $820.70 an ounce on the Comex division of the New York Mercantile Exchange. It closed Monday at $821.

The U.S. federal government spent $83.6 billion more in December than it took in, in part because of $51.1 billion spent shoring up banks through the government's Troubled Asset Relief Program, the Treasury Department reported Tuesday. The deficit compares with a surplus of $48.3 billion last December. Receipts fell 14% to $237.8 billion, while outlays rose 41% to $321.4 billion. For the fiscal year to date, the deficit widened to $485.2 billion as tax receipts fell 10% and outlays rose 45%.

State governments from Rhode Island to California have run up estimated pension-fund losses of $865.1 billion, forcing some to cut benefits for new hires.

Assets for 109 state funds declined 37 percent to $1.46 trillion over the 14 months ended Dec. 16, according to the Center for Retirement Research at Boston College. The Standard & Poor’s 500 Index of stocks fell 41 percent in the period.


Hedge fund industry assets slumped by more than $1 trillion in 2008 as managers suffered record losses and many investors asked for their money back, according to HedgeFund.net.
Outflows of $512 billion last year were driven by investor redemptions and hedge fund liquidations, while losses suffered by managers accounted for another $535 billion drop in assets. That left industry assets down $1.047 trillion, or 36%, to $1.84 trillion, for the whole year, HedgeFund.net said.

Bunge Ltd. said late Tuesday it lowered its 2008 earnings estimate to $7.70 a share on soft soybean commodity markets. The fertilizer and agricultural products company also forecast 2009 earnings of $6.90 to $7.60 a share. Analysts surveyed by FactSet Research estimate earnings of $10.50 a share for 2008, and $8.03 a share for 2009. Shares of Bunge fell 4.5% to $46 in after-hours activity.

Extending its losing streak to a fifth consecutive session, the Dow Jones Industrial Average fell 25.41 points, or 0.3%, to end at 8,448.56. The S&P 500 gained 1.52 points, or 0.2%, to 871.78, while the Nasdaq Composite climbed 7.67 points, or 0.5%, to 1,546.46.

Global News

1/12/08 Global News

Swedish engineering company Alfa Laval AB said Monday it will cut 1,000 jobs because of declining demand amid the global economic downturn.

Kennametal Corp. to cut about 1,200 employees.

For the first time in a long time, retailers are reporting a surge in piggy bank sales.

Merisant Worldwide Inc., a global leader in tabletop sweeteners said Monday that the company and its U.S. affiliates have filed for protection under Chapter 11 of the U.S. Bankruptcy Code in Delaware. The maker of Equal and tabletop sweeteners said it will continue its normal operations. Chief Executive Paul Block said, "... recent turmoil in the financial and credit markets has made it impossible for us to refinance our debt, without which we cannot complete the restructuring of our business."

Gold for February delivery was last down $23.50, or 2.8%, at $831.50 an ounce in early North America electronic trading.

Abbott Laboratories Inc said on Monday it would buy Advanced Medical Optics for nearly $1.4 billion to dive into the market for eye-care products and laser vision.

At $22 per share, the deal amounts to a nearly 150 percent premium for AMO shares, which closed on Friday at $8.85. However, AMO stock traded at $24.90 in June.

Including $1.4 billion in debt, Abbott values the transaction at about $2.8 billion.

Abbott also forecast 2009 earnings of $3.65 to $3.70 per share, reflecting growth of at least 10 percent.


Henry To: "The 45% decline in total margin debt outstanding within the last 16 months is a record move no matter how you look at it - and suggests that the deleveraging within the U.S. stock market may be close to being over for now, assuming policymakers are committed to more easing in the near future."


Mick P: "The public see massive and rapid increases in unemployment and housing foreclosures and rapid and powerful decreases in the returns on investments and savings and the loss of the ability to borrow. Business sees an environment where investment is impossible due to the restriction of credit, falling revenues and the destruction of profits. A cash rich company will not risk using its own cash to invest in such an environment, the returns from holding cash are greater than the risks of using cash to invest.

As this crisis of confidence takes an ever firmer grip on the public's economic outlook they no longer worry about whether policies are inflationary or not. They worry about the survival of the system and more importantly their place in that system."


Bank of America Corp., the largest U.S. lender by assets, may post a $3.6 billion fourth-quarter loss and again slash its quarterly dividend, Citigroup Inc. analyst
Keith Horowitz said. Bank of America is likely to report a loss of 75 cents a share, compared with an earlier estimate of a 2 cents-a-share profit, Horowitz said in a note to clients today. The Charlotte, North Carolina-based bank may also reduce its dividend to 5 cents-a-share from 32 cents, he added.

Saudi Arabia plans to cut oil output by up to 300,000 barrels per day below its agreed OPEC target -- a proactive step to prop up a collapsing market, industry sources said on Sunday.

The global economy will slow significantly this year with contractions in major countries but should recover in 2010, top central bankers said on Monday.

European Central Bank President Jean-Claude Trichet, who chaired talks on the global economy at a Bank for International Settlements meeting, said restoring confidence was crucial as emerging markets join the industrialized world in feeling the impact of the financial crisis.

"The global economy will slow down significantly in 2009 with the industrialized economies having negative figures," he said in summing up the talks.

"It is also noted that 2010 should be the year of the recovery. That was really one of the conclusions we can draw from this."

This morning oil heads down to $38 a barrel while gasoline heads up to $1.80 per gallon.
Do you really believe this relationship will continue?

Tarragon Corp. said Monday that it and certain of its subsidiaries have filed for Chapter 11 in New Jersey. The residential real estate developer said it intends to reorganize and seek new financing. It is not expected that there will be any distribution to Tarragon equity holders in conjunction with the bankruptcy cases. Tarragon's operations are concentrated in the Northeast, Florida, Texas and Tennessee.

Boeing Co. could lose approximately 56 cents per share from a California jury's recent decision to award $631 million to a former customer of the aircraft maker, an analyst said Monday.

The
Libor-OIS spread, the difference between the three- month London interbank offered rate, or Libor, for dollars and the overnight indexed swap rate, dropped to 98 basis points today. The last time it closed below 100 basis points was Sept. 12, the final working day before Lehman filed for bankruptcy, causing credit markets to freeze worldwide.

“Central banks have done a fantastic job in the last six months at keeping liquidity in the marketplace at cheaper levels and this has helped take Libor down,” said
David Buik, an analyst at BGC Partners Inc. in London. “Libor still isn’t doing what it was designed to do.”

Policy makers are providing cash to banks and cutting interest rates to spur lending. The Libor for three-month dollars declined 10 basis points to 1.16 percent today, according to data from the British Bankers’ Association.

The Libor-OIS spread, which peaked at 364 basis points on Oct. 10, averaged nine basis points in the year before the credit freeze started in August 2007. Greenspan said in June that the spread should serve as a measure for determining when markets have returned to normal.


RWE AG agreed to buy Dutch utility Essent NV, minus its distribution networks and waste-management unit, for 9.3 billion euros ($12.5 billion) including debt, making it the largest announced deal in Europe this year.

RWE, Germany’s second-largest utility, reached an agreement on a binding all-cash offer for the Arnhem-based power company, according to a statement distributed today. Essent’s shareholders are provincial and municipal authorities.


"The reality is there's plenty of money out there. There's no demand to borrow it yet," said Kevin Ferry of Cronus Futures Management. Ferry said another issue for markets is the continued volatility in currencies and there needs to be more stability there in order for other markets to heal. "Currency moves are on an order of magnitude that we would call insane," he said. The dollar gained 3.1 percent against the euro in the past week, taking it to $1.3431 per euro. The dollar also fell 2.2 percent against the yen.


The International Monetary Fund may need another $150 billion to help counter the hit to emerging markets and poorer countries from a worsening global economic downturn, Managing Director Dominique Strauss-Kahn said.


China’s economic growth may fall short of the government’s 8 percent target for creating jobs and preventing social unrest in the world’s most populous nation, two top officials said.


An index of corporate debt compiled by Merrill Lynch shows companies are paying 5.62 percentage points more than Treasurys, down from as high as 6.56 points in early December.


Inflation-linked debt from the U.S. to Japan returned 5.77 percent since November, including price gains and reinvested interest, compared with 1.55 percent for the government-bond market, according to indexes compiled by New York-based Merrill Lynch & Co. Last year, inflation-linked securities lagged behind the rest of the government bond market through November, losing 5 percent, as the U.S., Europe and Japan entered simultaneous recessions for the first time since World War II and commodities prices as measured by the
Standard & Poor’s/Goldman Sachs Commodities Index tumbled 60 percent from their peak July 11. Treasuries returned 14 percent in 2008, the most since 1995, according to Merrill indexes.

At $38.50 crude in the U.S. is selling about $4.50 a barrel below Brent crude.

The recession and economic turmoil is creating a new class of casualties: married couples who can't afford to get divorced. In these tough times, many people are finding it's cheaper to stay together, even when they can't stand each other.

"The reason that the economy has such an enormous impact on divorce is that most people in the middle-income brackets are getting by on whatever income they have. They're just getting by," said Bonnie Booden, a family-law and divorce attorney in Phoenix.


Precious metals miner Apex Silver Mines Ltd. said Monday it has reached an agreement with the company's short-term debt holders on its plan of reorganization under Chapter 11.

The Cayman Islands-based company said it could file for Chapter 11 bankruptcy protection as early as Monday.

These holders of 43 percent of the company's $290 million convertible subordinated notes have the option to reject or accept the reorganization plan.


In early Monday trading the rail stocks were especially weak.


CSX Corp. late Monday said it expects fourth-quarter earnings to be about 63 cents a share, including a noncash impairment charge of around 27 cents a share related to the write-down of its investment in The Greenbrier resort in West Virginia. Excluding one time items, earnings are likely to be about 90 cents a share. Revenue is projected to total $2.7 billion on the back of higher yields and fuel recovery, the transportation company said. Analysts surveyed by FactSet Research are forecasting the company to earn $1 a share on revenue of $2.76 billion in the fourth quarter.


Corn fell the exchange limit in Chicago and soybeans and wheat also plummeted after the U.S. Department of Agriculture projected bigger supplies than forecast in December.

Global corn supplies may jump to 136 million metric tons by the end of the marketing year on Sept. 30, the USDA said today in a report, up 9.9 percent from a December forecast. U.S. soybean stockpiles before the next harvest will reach 6.1 million tons, up from 5.6 million projected a month ago, the USDA said. World wheat inventories may rise 0.7 percent.


Feb. crude ends down $3.24, or 7.9%, at $37.59 a barrel. Gold for February delivery finished down $34 at $821 an ounce on the Comex division of the New York Mercantile Exchange.

Sony Corp. is expected to report its first operating loss in 14 years as demand for flat-screen televisions and other electronics sags and profit margins are pared by a strong yen, The Nikkei said on its Web site in a report dated Tuesday.

Bristol-Myers Squibb will pay ZymoGenetics an upfront cash payment of $85 million for the development and commercialization rights to PEG-Interferon lambda, and an additional license fee of $20 million in 2009. ZymoGenetics may receive additional payments of around $1 billion from development and various milestones, the companies said.

Alcoa said it lost $1.2 billion, or $1.49 a share. In the year-earlier period, the aluminum giant earned $632 million, or 75 cents a share. Sales fell to $5.7 billion from $7 billion. Alcoa is in the midst of cutting 15,000 jobs, curbing more production, and slashing its capital budget to make it through the downtrodden economy.

Down for a fourth consecutive session, the Dow Jones Industrial Average fell 125.13 points, or 1.5%, to 8,474.05. The S&P 500 shed 20.09 points, or 2.3%, to end at 870.26, while the Nasdaq Composite declined 32.8 points, or 2.1%, to 1,538.79. The French CAC-40 index declined 0.7% to 3,224.30, the German DAX 30 index lost 0.8% to 4,681.28 and the U.K. FTSE 100 index fell 0.9% to 4,385.78.

Lexmark expects to cut 375 jobs.

China's export growth likely contracted 2.8% in December from a year earlier, its sharpest pace of contraction since 1999. The figures were cited in a J.P. Morgan research note Tuesday which attributed the data to mainland China media reports.

Japan's current account surplus shrank as much as 65.9% in November from the year-ago period because of a sharp fall in the country's exports, official data showed Tuesday.

Monday, January 12, 2009

Demand

1/11/08 Demand

Michael Pettis: "Given that the US economy is about 3.3 times the size of China’s, and China’s trade surplus is roughly equal to one-half to two-thirds of the US trade deficit, the increase in Chinese demand needed to equilibrate the increase in US household savings is equal to roughly 10-15 per cent of China’s GDP. With consumption accounting for less than 50 per cent of China’s income, Chinese consumption will have to rise, in other words, by more than one-quarter. This is clearly unlikely.

The way Chinese production adjusts to the adjustment in US consumption will be the most important story of 2009. This is not the first time the world has required such a massive balance of payments adjustment. In the 1920s the US played the role that China plays today."

Russia's Central Bank allowed the ruble to drop sharply against the dollar Sunday, resuming a controlled devaluation of the currency that began Nov. 11 as the country's economy continued to weaken.

The ruble dropped by nearly 1.5 rubles on the MICEX foreign currency exchange, to 30.5 to the dollar, down almost 1.7 percent against the dollar-euro basket by 1 p.m. Moscow time (1000 GMT).

The currency rose slightly Sunday against the euro, from 41.4 on Dec. 30, before the start of Russia's 10-day winter holiday, to 41.1.

It is the 13th sharp drop in the national currency since Nov. 11, when the supervised slide began. The ruble's fall has been triggered in part by declining energy prices, which have hit Russia's resource-dependent economy hard.

Russia's Central Bank normally does not allow the currency to lose more than 1 percent of its value in one day. The ruble has shed more than 20 percent of its value against the dollar since its high of 23.4 in early August.


Mike Burk: "Last weeks sell off relieved the overbought condition while NASDAQ new highs increased and new lows on both exchanges fell to the lowest levels in years. Seasonally next week has a strong upward bias.

I expect the major indices to be higher on Friday January 16 than they were on Friday January 9."


Brian Kelly: "According to the FDIC, 18% or $2.1 trillion of the $11.4 trillion residential mortgage loans outstanding are held by commercial banks. The commercial real estate market is smaller, but the banks hold a larger portion. The CMSA reports that 43% or $1.49 trillion of the $3.4 trillion commercial mortgage market is held by banks.

Given that the current economic environment is much worse than during the S&L crisis, it is not hard to understand why the CMBS market is pricing for a 30% default rate. Since the banks own a higher percentage of commercial mortgages, the resulting losses could be larger than the so-called “sub-prime” losses. So while Congress debates whether or not the TARP was put to good use, the $400 billion commercial mortgage time bomb is ticking."


Rakesh Saxena: "In 1994, for the cited reason of statistical integrity, the Clinton Administration decided to exclude individuals who had given up looking for a job, after one year of trying, from government unemployment measurements. Today, if those individuals are added to (a) officially unemployed persons, (b) those who had unsuccessfully attempted to get a job in the last 12 months and (c) those that only have part-time employment status, the true measure of unemployment is closer to 18%, not 7.20% as reported on Friday."


Sri Nisargadatta Maharaj: "You cannot transcend what you do not know. To go beyond yourself, you must know yourself."


Honda Motor Co will begin selling the Insight, the first of its next generation low-cost hybrid cars, in Japan in February, followed by launches in Europe and the United States in March and April.

The dedicated hybrid model, a production version of which made its debut at the North American International Auto Show in Detroit on Sunday, has listed mileage of 40 miles per gallon in city driving and 43 mpg on the highway in the United States.


Toyota Motor Corp. announced that it plans to launch an electric vehicle by 2012 and offer 10 new gas-electric hybrid models in the early 2010s.


OAO Gazprom said it’s ready to resume supplies of natural gas to Europe from Russia once an EU-brokered accord on monitoring transit via Ukraine is enacted, potentially ending days of disruption amid freezing temperatures.

Marc Faber: "In the very long run, each citizen must become his own central bank. Every responsible citizen must hold some physical gold, platinum and silver -- physically, not through derivatives."

Bill Gross: "We were all children of the bull market, but the bull market is over. Deleveraging will become the context for the next five to 10 years. It will lead to lower profit margins and higher interest rates."

Richmond Federal Reserve Bank President Jeffrey Lacker warned that the central bank should avoid using its balance sheet to finance a fiscal stimulus plan, saying such a strategy is “fraught with risks.”

Tamiflu, the Roche Holding AG drug for influenza, can’t fight most infections that have been diagnosed in the U.S. flu season so far, health experts said.

Oil futures fell below $40 a barrel in electronic trade on Monday, slipping $2.29 to $38.54 a barrel as investors continue to react to news of the worst year for U.S. jobs since 1945.

John Hussman: "My general sense is that stock valuations are reasonable, though not deeply undervalued, and risk premiums are abating given that the economy appears to have pulled back from the brink of large-scale bank failures. Still, the transition to an economy that is less dependent on leverage will be a difficult one. John Mauldin has frequently used the term “muddle through” to describe the behavior of the economy since 2000. That's probably a reasonable expectation for 2009 as well."

Sunday, January 11, 2009

Payroll Jobs

1/10/08 Payroll Jobs

“New York City may lose 243,000 jobs, and declining tax revenue because of Wall Street retrenchment will produce a $7 billion budget gap by the start of the 2011 fiscal year, the city’s Independent Budget Office said.”

Luxury home values in central London fell in 2008 by the most in more than three decades as the worst banking crisis since World War I decimated demand from the city's financial professionals.

The average value of a house or apartment in London's nine most expensive neighborhoods fell almost 17 percent last year, according to
Knight Frank LLP, which tracks prices dating back to 1976. Values declined 2.2 percent in December, the ninth consecutive monthly drop in an index that mostly covers homes costing at least 1 million pounds ($1.5 million).

Genentech shares rose more than 2 percent Friday after a published report said Swiss drugmaker Roche was preparing to sweeten its offer to buy the portion of the U.S. biotechnology giant it does not already own. The Financial Times' Alphaville web site said Roche was preparing to offer about $95 per share, likely ahead of its release of its year-end financial report in early February.

China's exports and imports both fell for the second consecutive month in December, with an accelerated contraction in trade offering a bleak outlook for the world's third-largest economy and highlighting the need for Beijing to rely more on potent fiscal stimuli.

The weak trade data, especially that of imports, showed China isn't just suffering from a global economic slowdown but also from a deterioration in local demand, an engine that the authorities have hoped would keep the economy going and unemployment in check.


David Rosenberg via Alan Abelson: "And we would be remiss if we failed to pass along the intelligence that the boys and girls at the BLS are still valiantly "creating" jobs, even while real live, flesh-and-blood employers are busily handing out pink slips. Thus, through the magic of the infamous birth/death model that purports to capture employment trends at the new and deceased companies that its regular surveys miss, no fewer than 70,000 jobs were confected out of thin air in December.

Those revisions and mythical contributions, David points out, suggest the real number of lost payroll slots in December was closer to 750,000 than the "headline" figure of 524,000.

Further depressing evidence of the sorry condition of the job market is offered by the so-called diffusion index, which plummeted to a new low of 25.4. That means, he explains, that for every industry still hiring, four are cutting back (in manufacturing, he adds, the ratio of hiring to firing is even more lopsided, at roughly one to 10)."


Most California state offices will be shut down on the first and third Fridays of each month, beginning in February, as a money-saving measure to help ease the state's growing budget deficit, Gov. Arnold Schwarzenegger told state agencies Friday.


Typically, alcoholic beverages are recession-resistant, if not immune to economic downturns. This current recession, however, is hurting alcohol sales more than previous slumps have.
People are trading down from premium vodka brands to whatever is good enough to still make the martini work. Others are giving up expensive Napa Valley Cabernet Sauvignons for budget reds. Some are ordering a soft drink or just consuming water when they dine out.
"This is far worse than anything we have seen," said Eric Schmidt, an analyst at research firm Adams Beverage Group.


Nouriel Roubini: "We are looking at the most severe U.S. recession in the last 50 or 60 years, both in terms of length and depth. Every piece of economic news that's come out in the last few weeks and months has been much worse than expected, from employment, holiday sales, capital spending by the corporate sector, the continued collapse of residential real estate, and a weakening even of the trade balance, so the rest of the world is also contracting."


Tim Wood:"We are looking at the most severe U.S. recession in the last 50 or 60 years, both in terms of length and depth. Every piece of economic news that's come out in the last few weeks and months has been much worse than expected, from employment, holiday sales, capital spending by the corporate sector, the continued collapse of residential real estate, and a weakening even of the trade balance, so the rest of the world is also contracting. As I see it, this advance could easily last a while longer. This would in turn allow optimism to grow even further. As a result, more and more people will reenter the market. But, I believe that this advance is a bull trap and that once it turns down, the carnage will likely continue. Remember, the Dow theory primary bearish trend is still bearish and in accordance with Dow theory, until sufficient evidence develops to reverse the established primary trend, that trend must still be considered to be in force. Also, it is important to remember that bear markets have historically run one-third the duration of the preceding bull market. And, unless you think the new administration can somehow revive the markets to new highs once again, then the 13 month slide we have seen is likely only the first phase. The old-time Dow theorists say that the second phase is when the reckoning takes place. So, my point here is that it would be prudent not to get too caught up in the hype as this intermediate-term rally runs its course."


Daily Reckoning: "
First, we don't believe that a generation's worth of errors can be corrected in 6 months. Investors and consumers have had a shock. But they are still hopeful. After the worst crash in stock market history they are nevertheless holding onto their stocks. They see a recession…but they don't quite believe it. Just wait. First, there's the financial shock. Then, the economic shock. And then, another financial shock as investors realize how bad the situation really is. Shock after shock…knock after knock…investors, consumers and businessmen get the boom year reflexes beaten out of them."

Buffalo Business Journal: " Fredonia State College professor Gary Lash rocked the geology world with his findings in February. He and Terry Engelder of Pennsylvania State University reported more than 500 trillion cubic feet of natural gas lies within the Marcellus Black Shale that stretches from New York through West Virginia.

But new research suggests that amount is a drop in the bucket compared to what may exist. Shortly after the announcement, oil and gas companies from all over the United States began drilling the Marcellus, part of the Devonian Black Shale Succession that stretches throughout Western New York, down to Pennsylvania and into West Virginia and Ohio.

“It would appear the reserves might be a fair amount greater,” said Lash, Ph.D., a professor of structural geology.

He pegs new estimates at 1,300 trillion cubic feet of natural gas, nearly triple his findings from last year. To put that into perspective, approximately 20 trillion cubic feet of natural gas is produced in the United States every year."

1/10/08 Payroll Jobs

“New York City may lose 243,000 jobs, and declining tax revenue because of Wall Street retrenchment will produce a $7 billion budget gap by the start of the 2011 fiscal year, the city’s Independent Budget Office said.”

Luxury home values in central London fell in 2008 by the most in more than three decades as the worst banking crisis since World War I decimated demand from the city's financial professionals.

The average value of a house or apartment in London's nine most expensive neighborhoods fell almost 17 percent last year, according to
Knight Frank LLP, which tracks prices dating back to 1976. Values declined 2.2 percent in December, the ninth consecutive monthly drop in an index that mostly covers homes costing at least 1 million pounds ($1.5 million).

Genentech shares rose more than 2 percent Friday after a published report said Swiss drugmaker Roche was preparing to sweeten its offer to buy the portion of the U.S. biotechnology giant it does not already own. The Financial Times' Alphaville web site said Roche was preparing to offer about $95 per share, likely ahead of its release of its year-end financial report in early February.

China's exports and imports both fell for the second consecutive month in December, with an accelerated contraction in trade offering a bleak outlook for the world's third-largest economy and highlighting the need for Beijing to rely more on potent fiscal stimuli.

The weak trade data, especially that of imports, showed China isn't just suffering from a global economic slowdown but also from a deterioration in local demand, an engine that the authorities have hoped would keep the economy going and unemployment in check.


David Rosenberg via Alan Abelson: "And we would be remiss if we failed to pass along the intelligence that the boys and girls at the BLS are still valiantly "creating" jobs, even while real live, flesh-and-blood employers are busily handing out pink slips. Thus, through the magic of the infamous birth/death model that purports to capture employment trends at the new and deceased companies that its regular surveys miss, no fewer than 70,000 jobs were confected out of thin air in December.

Those revisions and mythical contributions, David points out, suggest the real number of lost payroll slots in December was closer to 750,000 than the "headline" figure of 524,000.

Further depressing evidence of the sorry condition of the job market is offered by the so-called diffusion index, which plummeted to a new low of 25.4. That means, he explains, that for every industry still hiring, four are cutting back (in manufacturing, he adds, the ratio of hiring to firing is even more lopsided, at roughly one to 10)."


Most California state offices will be shut down on the first and third Fridays of each month, beginning in February, as a money-saving measure to help ease the state's growing budget deficit, Gov. Arnold Schwarzenegger told state agencies Friday.


Typically, alcoholic beverages are recession-resistant, if not immune to economic downturns. This current recession, however, is hurting alcohol sales more than previous slumps have.
People are trading down from premium vodka brands to whatever is good enough to still make the martini work. Others are giving up expensive Napa Valley Cabernet Sauvignons for budget reds. Some are ordering a soft drink or just consuming water when they dine out.
"This is far worse than anything we have seen," said Eric Schmidt, an analyst at research firm Adams Beverage Group.


Nouriel Roubini: "We are looking at the most severe U.S. recession in the last 50 or 60 years, both in terms of length and depth. Every piece of economic news that's come out in the last few weeks and months has been much worse than expected, from employment, holiday sales, capital spending by the corporate sector, the continued collapse of residential real estate, and a weakening even of the trade balance, so the rest of the world is also contracting."


Tim Wood:"We are looking at the most severe U.S. recession in the last 50 or 60 years, both in terms of length and depth. Every piece of economic news that's come out in the last few weeks and months has been much worse than expected, from employment, holiday sales, capital spending by the corporate sector, the continued collapse of residential real estate, and a weakening even of the trade balance, so the rest of the world is also contracting. As I see it, this advance could easily last a while longer. This would in turn allow optimism to grow even further. As a result, more and more people will reenter the market. But, I believe that this advance is a bull trap and that once it turns down, the carnage will likely continue. Remember, the Dow theory primary bearish trend is still bearish and in accordance with Dow theory, until sufficient evidence develops to reverse the established primary trend, that trend must still be considered to be in force. Also, it is important to remember that bear markets have historically run one-third the duration of the preceding bull market. And, unless you think the new administration can somehow revive the markets to new highs once again, then the 13 month slide we have seen is likely only the first phase. The old-time Dow theorists say that the second phase is when the reckoning takes place. So, my point here is that it would be prudent not to get too caught up in the hype as this intermediate-term rally runs its course."


Daily Reckoning: "
First, we don't believe that a generation's worth of errors can be corrected in 6 months. Investors and consumers have had a shock. But they are still hopeful. After the worst crash in stock market history they are nevertheless holding onto their stocks. They see a recession…but they don't quite believe it. Just wait. First, there's the financial shock. Then, the economic shock. And then, another financial shock as investors realize how bad the situation really is. Shock after shock…knock after knock…investors, consumers and businessmen get the boom year reflexes beaten out of them."

Buffalo Business Journal: " Fredonia State College professor Gary Lash rocked the geology world with his findings in February. He and Terry Engelder of Pennsylvania State University reported more than 500 trillion cubic feet of natural gas lies within the Marcellus Black Shale that stretches from New York through West Virginia.

But new research suggests that amount is a drop in the bucket compared to what may exist. Shortly after the announcement, oil and gas companies from all over the United States began drilling the Marcellus, part of the Devonian Black Shale Succession that stretches throughout Western New York, down to Pennsylvania and into West Virginia and Ohio.

“It would appear the reserves might be a fair amount greater,” said Lash, Ph.D., a professor of structural geology.

He pegs new estimates at 1,300 trillion cubic feet of natural gas, nearly triple his findings from last year. To put that into perspective, approximately 20 trillion cubic feet of natural gas is produced in the United States every year."