Friday, January 23, 2009

Worsening Times

1/23/08 Worsening Times

Venezuela ships about 1.1 million barrels of oil a day to the United States, its No. 1 client.
Oil prices hit highs of around $147 over the summer. Prices settled at $43.67 a barrel on the New York Mercantile Exchange on Thursday.

J PMorgan Chase and the Seattle Art Museum announced today the bank will not be assuming Washington Mutual's lease for about 240,000 square feet of office space it rents from the museum in downtown Seattle.
That means the museum will have to find a new tenant to help it pay for the $5.8 million a year that it owes on the space. WaMu had been paying that amount in rent to SAM.

Randall Forsyth: "Thursday, CDS on U.S. Treasuries were quoted at 73 basis points, according to Tim Backshall, chief strategist at Credit Derivatives Research. (Note that means paying 73,000 euros to insure 10 million euros' worth of U.S. debt. Obviously, Uncle Sam can reel off all the greenbacks he needs to pay off his debt. So the CDS on U.S. Treasuries are quoted in euros, a currency the U.S. can't print.).
That's up sharply from 60 basis points a week ago and 40 basis points on Nov. 20, when the Standard & Poor's hit its recent low. The stock market's gain apparently has come at a cost to the U.S. government.
James F. Keegan, chief investment officer of Seix Investment Managers and a portfolio manager of the Ridgeworth Intermediate Bond Fund, is blunter: The massive efforts to bail out the banks "are putting the sovereign credit of the U.S. at risk."

As of November, Microsoft counted 95,664 employees globally. Chief Financial Officer Chris Liddell told Wall Street analysts he expects spending on contractors to decrease about 15 percent.
"External contractors, we think about more in terms of the dollars that we spend overall. That's on top of the numbers we're talking about, and that could be down up to 15 percent," he said.

Schlumberger said Friday its fourth-quarter earnings fell nearly 17 percent as the energy industry pulled back on spending, and the company warned of a rough year ahead.
Schlumberger Ltd., the world's largest oilfield services provider, said its net profit for the October-December period was $1.15 billion, or 95 cents a share, compared with a year-earlier profit of $1.38 billion, or $1.12 per share. Revenue rose to $6.87 billion from $6.25 billion a year earlier. Schlumberger said it expects activity to weaken across the board in 2009 with the most significant declines occurring in North American gas drilling, Russian oil production enhancement and in mature offshore basins.

Natural-gas supplies fell by 176 billion cubic feet to stand at 2,560 Bcf for the week ended Jan. 16, the Energy Information Administration reported Friday. Analysts at IHS Global Insight had expected a storage withdrawal of 149 billion cubic feet. After the data, February natural gas futures fell 13 cents, or 3%, at $4.56 per million British thermal units.

Fox-Pitt Kelton analyst Robert Stevenson on Friday said Centex Corp.'s preliminary quarterly results were much worse than he had expected after the home builder projected write-downs as high as $600 million and said its net new orders declined 80% year-over year. "The large hit to book value likely resulted in Centex bumping up against the tangible net worth covenant on its credit facility," Stevenson wrote in a note to clients. "While Centex's improving balance sheet and declining land position will eventually benefit the company, we expect the stock to underperform in the near term, as operating fundamentals continue to deteriorate." The analyst cut his target price on Centex shares to $9. The stock was down about 7% to $9.15 in recent trading.

GE warned of an extremely difficult year ahead, fueling worries.
It said it remains committed to its planned $1.24 dividend for the year.

Motorcylce manufacturer Harley-Davidson Inc. said Friday that it will cut around 1,100 jobs in 2009 and 2010 as it cuts production volumes and restructures.

Suntech Power Holdings Co. Ltd.said it would book an inventory provision in the range of $46 million to $58 million as a result of the rapid decline in silicon prices in the fourth quarter. Suntech sees fourth-quarter gross margin of -1% to +2%. The company said it reduced its workforce by approximately 800 employees and suspended hiring a further 2,000 new staff as part of its decision to maintain its current production capacity.

GE Capital is expected to earn about $5 billion in 2009, compared to $8.6 billion last year.

Gold for February delivery gained $14.40, or 1.7%, to $873.10 an ounce in electronic trading on Globex. Gold gained "on heavy safe-haven demand as sentiment deteriorated across global equity markets," said analysts at Action Economics.

Crude oil for March delivery dropped $1.06, or 2.4%, to $42.63 a barrel in electronic trading on Globex.

Pfizer Inc. is negotiating to acquire rival drug maker Wyeth in a blockbuster deal potentially worth more than $60 billion, the Wall Street Journal reported Friday. The Journal, citing unnamed sources, reported that the two companies have been in talks for months and a deal is not imminent, while the state of the economy makes the negotiations especially fragile. Pfizer, the world's largest drug maker by revenue, would likely use a combination of cash and stock for the acquisition, according to the report.

North Carolina’s unemployment rate in December hit 8.7 percent, nearly a full percentage point over the November rate, as the state economy continues its slide. This is a 25-year high.

Gold for February delivery rose $37 to end at $895.80 an ounce on the New York Mercantile Exchange. Earlier, gold soared to an intraday high of $903.80 an ounce on Globex, which is the metal's highest level since Oct. 8, 2008. For the week, gold posted a gain of $55.90, or 7%, from last Friday's closing level of $839.90 an ounce.

Crude oil for March delivery rose $2.44, or 5.6%, to $46.10 a barrel on Globex.

Goldman Sachs estimates the Treasury's cash borrowing needs may reach $2.5 trillion this year.

Compass Bank says it is cutting 1,200 workers, or about 10 percent of its staff, as part of an overall reorganization.

Capital One, one of the largest card issuers, reported a $1.4 billion fourth-quarter net loss late Thursday as it set aside another $1 billion to cover higher charge-offs this year.
The fourth-quarter charge-off rate in the U.S. card business was 7.08%, up from 6.13% during the third quarter. That's expected to jump to roughly 8.1% in the first quarter of 2009, up from the mid-7% range Capital One previously forecast.

The Dow Jones Industrial Average fell 45.24 points, or 0.6%, to 8,077.56, leaving the blue chips 2.5% down on the week. The S&P 500 gained 4.45 points, or 0.5%, to 831.95, translating into a 2.1% decline from last Friday's close. The technology-laden Nasdaq Composite gained 11.80 points, or 0.8%, to 1,477.29, off 3.4% on the week.

At $12, GE is back to where it was a dozen years ago.

Buffett now owns 74.5 million shares of Burlington Northern, or 22% of its shares outstanding.

Wednesday, January 21, 2009

The Day After

1/21/08 The Day After

Single-family-housing starts, which fell 40% to 617,000 in 2007, are expected to drop to about 441,000 this year -- the lowest since records have been kept -- according to the economic outlook of the National Association of Home Builders released Tuesday at the International Builders Show here. That would be a nearly 75% drop from the industry's highwater mark of 1.7 million single-family starts in 2005.

March crude up 78 cents, or 2%, to $41.62 a barrel on Globex. Gold for February delivery dropped $5.70 to $849.50 an ounce in electronic trading on Globex.

Abbott affirmed its forecast of 2009 earnings per share of $3.65 to $3.70. "2008 was another highly productive and successful year for Abbott," said Chief Executive Miles D. White.

Coach Inc. said Wednesday that its second-quarter profit fell to $216.9 million, or 67 cents a share, from $252.3 million, or 69 cents a share, in the year-earlier period.

United Technologies Corp. confirmed its prior expectation for 2009 earnings per share of $4.65 to $5.15, a range of plus or minus 5%.

CC Media Holdings, the parent firm of Clear Channel Communications and Clear Channel Outdoor Holdings, said it's cutting 1,850 jobs, or 9% of its workforce.

Jobless claims in the U.K. rose 77,900 in December, and the unemployment rate in the three months to November rose by 0.4 percentage points to 6.1%, the National Statistics Office said Wednesday.

The ruble strengthened for a second straight day on Wednesday, signaling a reprieve in the Russian currency's steady devaluation against the dollar and the euro.
As of late afternoon, the ruble had recovered slightly to 36.95 against a currency basket made up of dollars and euros. The Central Bank has pursued in recent months a gradual devaluation policy, which has seen the ruble lose around a fifth of its value since November. The ruble has tumbled nearly 30 percent against the dollar since August.
The ruble gained to 32.69 against the dollar, and 42.14 to the euro on Wednesday.

Yields on 10- and 30-year Treasuries rose for a third straight day as the Obama administration pushed to complete a bank-rescue plan that can be joined with an $825 billion stimulus package to ease the deepening recession. The gap between rates on 10-year notes and Treasury Inflation Protected Securities, reflecting expectations for the inflation rate, touched 0.67 percentage point, the widest in two months.
Hopefully this trend continues as my best trade for 2009 is to be short 10-year and 30-year Treasuries.

Ericsson. to cut 5,000 jobs.

Bloomberg: "U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis."

Samsung, the world's largest manufacturer of flat screen televisions, will likely announce a net loss of 92.93 billion won ($67.7 million) for the three months ended Dec. 31, according to the average forecast of 10 analysts surveyed by The Associated Press. Samsung earned 2.21 trillion won in the same period the year before.
Samsung is scheduled to announce results for the fourth quarter of 2008 on Friday.

General Motors Corp.said Wednesday its fourth-quarter unit sales fell 26% to 1.7 million. "Most of that decline was reflected in 379,000 fewer vehicles sold in North America as the market yielded to a crushing lack of consumer confidence, and tightened credit requirements, in the United States," the Detroit auto maker said. For all of 2008, GM sold 8.35 million vehicles, down 11% from 9.37 million in 2007. GM's nearly 3% growth in both Asia Pacific and Latin America, Africa and Middle East partially offset a 21% drop in North America sales and a dip of 7% in European sales.

The market capitalization of the financial stocks in the Standard & Poor's 500 Index has fallen 77% from a June 2007 high of $2.92 trillion, to a current $671 billion, according to economist and market strategist Ed Yardeni.

Intel gave a hint that 2009 would be difficult when it said last week that it wasn't sure when demand would pick back up. The company estimated that 2009 sales would likely be around $7 billion, which translates to a decline of more than 25 percent from the first quarter of 2008. Gross profit margin should also sink sharply, falling from more than 50 percent of sales to the low-40 percent range, according to Intel.

After jumping 10 points on Tuesday, the VIX in early Wednesday trading has plunged 6 points to 50+.

Sony Corp. plans to close one of its two television factories in Japan and cut more than 2,000 full-time jobs.

The home builders' index fell to a record low 8 in January from 9 in December, the National Association of Home Builders said. At its current level, the index shows that approximately one of every twelve builders believes the market is good. Two of the three components in the home builders' index rose in January: The index measuring expected sales rose from a record-low 16 to 17, and the index measuring buyers' traffic improved to 8 from a record-low 7. The index for current sales fell to a record-low 6 from 8.

Gold for February delivery fell $5.10 to end at $850.10 an ounce on Nymex.
March crude up $2.65, or 6%, to $43.55 a barrel on Globex.

Burlington Northern Santa Fe Corp. reported a fourth-quarter profit of $615 million, or $1.79 a share, up from $517 million, or $1.46 a share, a year ago. Revenue for the Ft. Worth, Tex.-based railroad operator rose to $4.37 billion from $4.25 billion a year earlier. Analysts polled by FactSet Research were looking for a profit, on average, of $1.77 a share on sales of $4.45 billion. Burlington stock finished up 7.1% at $65.59 but is still down almost 15% in the past year.

The Dow Jones Industrial Average climbed 279.01 points, or 3.5%, to end at 8,228.1. The S&P 500 gained 35.02 points, or 4.4%, to 840.24, while the Nasdaq Composite added 66.21 points, or 4.6%, to 1,507.06.

Credit Suisse analyst Michael Exstein said in a note to investors that the December results show momentum slowing for Wal-Mart.

"The incremental benefit it realized from consumer trade-down in 2008 might not repeat itself in 2009," Exstein said. "Target is focusing on reducing prices to gain market share, which we believe presents an added competitive threat to Wal-Mart."

Bentonville, Ark.-based Wal-Mart's slowing store-footage growth and aging stores may also challenge sales-growth expectations, Exstein predicted.

He lowered his rating to "neutral" from "outperform" and cut his target price to $53 from $60.

EBay late-traded shares drop 6.9% to $12.39 after results.The online auctioneer reported a profit of 41 cents a share on sales of $2.04 billion in the fourth quarter, against earnings of 45 cents a share on revenue of $2.181 billion in the final quarter of 2007.

Williams-Sonoma Inc.said late Wednesday that it will trim about 1,400 jobs, or 18% of its work force worldwide, as a cost-cutting measure.

Apple targets Q2 rev of $7.6 bln-$8 bln.

GE hit a new 52-week low and managed to barely finish 10 cents in a market that had a strong day.

Intel Corp said on Wednesday it would close manufacturing plants in Malaysia and the Philippines and scale back U.S. operations as part of a restructuring that affects as many as 6,000 employees.

New York City home prices fell 10 percent in the fourth quarter as Wall Street cut jobs and the recession reduced demand.

The average price of all properties, including condominiums and one-to-three family houses, fell to $669,000 from a year earlier, the Real Estate Board of New York said in a report today. Apartment prices citywide fell 4 percent to an average $796,000.

Tuesday, January 20, 2009

44th American President

1/20/08 44th American President

U.S. financial stocks fell sharply and matched their biggest percentage decline ever Tuesday as investors panicked at the likelihood that there is no end in sight for the sector's need for capital, and no easy way to raise it. For investors who might have thought the worst was over after the nation's big three banks aired some dirty laundry last week, Tuesday provided clear evidence that the horror show continues, as well over half of the financial stocks in the bellwether S&P 500 Index lost more than 10% of their value. Most of nation's top banks were trading at levels last seen in the mid-1990's, including Citigroup, Wells Fargo, and J.P. Morgan Chase. Bank of America shares traded at their lowest level since 1986.

Ending below 8,000 for the first time since Nov. 20, the Dow Jones Industrial Average shed 332.13 points, or 4%, to finish at 7,949.09. The S&P 500 dropped 44.9 points, 5.3%, to 805.22. The Nasdaq Composite shed 88.47 points, or 5.8%, to 1,440.86.

Italian carmaker Fiat SpA on Tuesday struck a deal to get an initial 35% stake in struggling US carmaker Chrysler in exchange for its technological expertise, distribution network and management.

Average U.S. gasoline prices rang up at $1.84 a gallon on Tuesday, up from $1.67 a gallon a month ago, according to the AAA Daily Fuel Gauge Report. A year ago, gasoline sold for $3.01 a gallon.

Light sweet crude oil futures fell $2.77 to $39.80 a barrel in electronic trading on Tuesday.

Toyota Motor Corp. said Tuesday worldwide sales were down about 5% in 2008 from a year earlier, marking the first decline in annual vehicle sales in a decade, with overall sales falling just shy of 8 million units.

New York Times Co. reached an agreement under which entities controlled by Carlos Slim will invest in the New York media company through issues of debt and equity. The companies controlled by the Mexican telecommunications investor agreed to buy $250 million of senior unsecured notes due 2015 with detachable warrants. "The notes will rank equally and ratably on a senior unsecured basis with all senior unsecured obligations of New York Times Co.," the company said in a statement late on Monday. The notes have a coupon of 14.053%, of which New York Times Co. may pay 3% in the same notes. The warrants reflect 15.9 million Class A shares of New York Times Co. at a strike price of $6.3572. The warrants expire in January 2015. Slim's companies currently control 6.9% of New York Times, and The Wall Street Journal reported that if the investor exercises the warrants, he'll control about 18% of the Class A shares.

Brent Steenbarger: "
In sum, the move to price highs early in January has been reversed, and we are back to seeing 20-day lows exceeding new highs. As long as the new highs/lows remain weak, I expect continued price weakness and tests of the bear market lows. A move above the January highs, particularly on strong breadth and with solid expansion of new highs, would be decidedly bullish. The first order of business for bulls is to sustain prices above the weekly pivot of 85.19 in SPY. Failure to do so targets the weekly S1 level a bit below 80. (Daily, weekly, and monthly price targets are sent out via Twitter, along with daily updates of indicators; subscription via RSS is free)."

Southern California home sales rose 51 percent in December as a surge in foreclosures pushed prices of single-family houses and condominiums down from a year earlier, MDA DataQuick said.
A total of 19,926 new and existing houses and condos sold last month in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties, up from 13,240 a year earlier, the San Diego-based research company said today in a statement. The median home price in the region fell 35 percent to $278,000…Foreclosed homes accounted for 56 percent of Southern California’s December sales, more than double the amount a year earlier, MDA DataQuick said. Such transactions made up almost 70 percent of sales in Riverside County, where the median price plummeted 41 percent to $209,000. Sales jumped 77 percent to 4,435, MDA DataQuick said.

Russia will likely become a member of OPEC soon, billionaire investor and alternative-energy advocate T. Boone Pickens said Monday.

That membership "will not be favourable to the United States," Mr. Pickens told a gathering of mayors.

Bl "By invitation, I recently visited a remote facility in northern Virginia to see a demonstration of NOX – a new Intelligent Perimeter Defense system deployed by the FBI that uses covert Radio-Frequency Identification (RFID) technology to track people and assets without their knowledge.

That’s right, using RFID to track people without their knowledge. This system is exactly what the privacy advocates have long feared: Big Brother tracking us with spy chips. As Orwellian as this sounds, the undisputed fact is that this system catches thieves and does so at a fraction of the cost of traditional security solutions.

NOX combines high-resolution video pictures and RFID for identification, tracking and tracing, overlaid in real time on a facility map to show the movement of people and assets. The system allows security officers to see theft as it happens, even if the stolen object is inside a briefcase, under a jacket, or stuffed inside a sock.

What makes the NOX system I saw different from traditional security systems is that it uses RFID for clandestine surveillance: RFID readers are hidden inside walls, floors, and ceilings; RFID tags are discretely placed; and only the security personnel know that the system is in place – until the thief gets caught. Then, all the thief knows is that he or she was caught in the act, on video."

Bank of America is expected to make several thousand employees in its capital markets businesses redundant, starting this week, according to executives familiar with the matter. The cuts could total 4,000.

The British pound is trading at a seven-year low versus the dollar.

A Santa Monica real estate company has purchased the Larkspur Landing shopping center for $65 million and plans to reposition the aging Marin County property as an open-air market with independent stores and public areas.

"We want to create wonderful public space, outdoors, unanchored, with independent boutique shops rather than a collection of the usual suspects, which is what I call the chain stores," said James Rosenfield, president of J.S. Rosenfield & Co., which purchased the 173,000-square-foot mall from Inland Western Retail Real Estate Trust Inc.

Rio Tinto Alcan curtails production and cuts costs in response to global economic conditions
Key measures

• A further six per cent reduction in aluminium production, bringing the total reduction to approximately 11 per cent, and close to six per cent reduction in alumina production
• Reduction in global workforce by approximately 1100 roles (300 contractors and 800 employee roles)
• Substantial cost reduction programmes in Rio Tinto Alcan facilities worldwide
• Permanent closure of Beauharnois smelter in Quebec, Canada
• Production at Vaudreuil alumina refinery in Canada to be temporarily curtailed by 400,000 tonnes
• Expected sale of interest in Alcan Ningxia joint venture in China
• As previously announced, the anticipated ending of smelting operations at Anglesey Aluminum joint venture in the United Kingdom in September 2009 when the current power contract expires. The impact on production and headcount is included in these figures.

Crude for February delivery, which registered low volume and expired at the end of trading Tuesday, finished up $2.23 at $38.74 a barrel on the New York Mercantile Exchange. March crude, the new front-month contract, fell $1.73 to end at $40.84 a barrel on Nymex.

CBOE's volatility index, VIX, is up 12.5% from Friday to 51.88.

Rohm and Haas said Tuesday it plans to cut 900 jobs, or 5.5 percent of its workforce, in a bid to tackle the slump in demand and widespread market weakness.

Canada's central bank cut its trendsetting interest rate by one-half point to 1 percent on Tuesday, the lowest in history.

ConocoPhillips could lay off about 1,300 people this year under a planned 4 percent reduction in its worldwide work force that was announced Friday.

John Hussman: "In recent sessions, we have observed a troublesome deterioration in credit default swap spreads among a number of major financials, which has prompted us to tighten our hedges in response. From a statistical perspective, what I've referred to as “early improvement” in our measures of market action has now been lost. The Strategic Growth Fund is fully hedged here, about half with pure long-put / short-call option combinations, and about half with what amounts to in-the-money put options (allowing the Fund to obtain a moderate positive exposure to market fluctuations in the event that the market recovers more than a few percent). Overall, I expect the Fund to experience only modest sensitivity to market fluctuations here, and the main driver of our returns is likely to be the difference in performance between the stocks that we hold in the Fund, and the indices we use to hedge (primarily the S&P 500 and Russell 2000).

On the hopeful side, the market appears generally oversold, and is near what could be considered reasonable support. Given the loss of favorable market action, we wouldn't invest on the expectation that this support will necessarily hold, but as noted above, about half the Fund's exposure is hedged with option combinations that amount to in-the-money put coverage. So a recovery in the market will put us in a more constructive position somewhat automatically, without having to rely on that outcome."

Movie studio Warner Brothers, a unit of media giant Time Warner Inc., will cut 800 jobs, or 10% of its work force, according to media reports Tuesday.

IBM Corp.reported a fiscal fourth-quarter profit of $4.4 billion, or $3.28 share, on revenue of $27 billion. During the same period a year ago, IBM earned $2.80 billion, or $2.80 a share, on $28.9 billion in sales. Analysts surveyed by FactSet Research had forecast IBM to earn $3.03 a share on revenue of $27.9 billion for the quarter ended in December. For 2009, IBM said it expects to earn at least $9.20 a share. How much of the increase will come from the repurchase of shares for their treasury?

Gold for February delivery rose $15.30, or 1.8%, to close at $855.20 an ounce on the Comex division of the New York Mercantile Exchange, ending above $850 for the first time since Jan. 9.

Wells Fargo & Co. will have to cut its dividend soon to rebuild capital, Friedman, Billings, Ramsay analyst Paul Miller wrote in a note to investors Tuesday. Including recently acquired Wachovia, Wells Fargo's tangible common equity represents 3.6% of tangible assets, while other measures of capital strength likely lagged those of rivals at the end of 2008, Miller estimated. Meanwhile, the bank pays out $5.65 billion in dividends each year and it probably won't earn that much in 2009, the analyst added. "Wells Fargo will have to cut its dividend (if not this quarter, then sometime in 1H09)," he wrote. "The current dividend reduces tangible common equity $5.65 billion annually, and Wells Fargo needs to rebuild its capital ratios." The stock closed down $4.50 at $14+.

Eaton Corp said on Tuesday it planned to cut 5,200 jobs in an effort to further slash costs in the face of a struggling economy.

Mining giant BHP Billiton announced plans Wednesday to slash its global work force by 6 percent — about 6,000 jobs — as it rushes to cope with plummeting demand because of the global financial crisis.

Warren Buffett's company has bought more than 4.3 million shares of Burlington Northern Santa Fe Corp. stock, increasing its stake to more than 74 million shares. The shares closed at $2.40 at $61.25.

Monday, January 19, 2009

Country Rescue

1/19/08 Country Rescue

The ruble fell below the weakest level seen in the 1998 Russian crisis after the central bank devalued for the sixth time in seven days to protect reserves.

The currency slid to as little as 33.0455 per dollar today, the lowest since early 1998, before the government defaulted on $40 billion of debt. The ruble has lost 7.3 percent since official trading resumed this year, extending the decline to 29 percent since August.

It is one thing to bailout a bank, a brokerage company, a re-insurance outfit, or a mortgage company, it is quite something else to rescue a country, such as, Iceland or Russia or possibly dozens of others on the horizon. This could be the year of the country rescue.

This year alone, more than $700 billion in corporate loans will come due, according to
Standard & Poor’s. That is the size of the federal bailout of the financial sector. Many companies were counting on being able to borrow more money to meet those obligations and kick their debt farther down the road.

But with the credit markets still tight, corporations are being forced to pay much higher interest rates than they did a few years ago, putting more strain on balance sheets already hammered by falling profits and a grinding recession.
Can countries be far behind corporations?

Francis Bussiere: "Last week I expected to close the week lower with the worst late in the week and the low was Thursday. This week I expect a negative week as well with a possible deep sell-off to the November lows by Friday January 23rd for the Cardinal New Moon of January 26th. The less likely alternative is for the SPX to hold above 800 on Tuesday's expected low and rally Wednesday and Friday into SPX 880 to 900 for a New Moon high near January 26th."

Goldman Sachs Group Inc. commodity analyst Jeffrey Currie said he expects a “swift and violent rebound” in energy prices in the second half of the year.

Oil prices may have reached their lowest point already, after falling to $32.40 in mid-December, and are expected to rise to $65 by the end of this year, the analyst said. There is scope for a “new bull market” in oil, Currie said.

In several steps, 10 OPEC members have pledged to reduce production to 24.845 million barrels a day, a cut of 4.2 million barrels a day from September’s level.

The new bank bailouts are not likely to work because they are run by the same people who prolonged the economic agony by throwing money at weak companies rather than allowing them to fail and encouraging the strong ones, Marc Faber, the publisher of the Gloom, Doom and Boom Report, told CNBC Monday.

According to Business Week, after two years of delays caused in part by a far-flung supply chain, Boeing plans to do more work on its new 787 in-house

OPEC has said there is a possibility of more cuts in crude oil production to stabilize oil price in the world market, Angola's official news agency ANGOP reported.

Google maintained a 63.5% share of the U.S. search market in December, unchanged from November,
according to ComScore. Yahoo’s market share inched up to 20.5%, from 20.4%, while slipped to 3.9% from 4%. Microsoft’s share was unchanged at 8.3%, and AOL stayed at 3.8%.

Overall, Americans conducted 12.7 billion searches in December, up 3% from November.

February crude oil futures were down as much as $1.92 at $34.59 a barrel in electronic trading.

Toyota Motor Corp. is slashing its temporary workers in Japan to zero later this year to cut costs and production amid a global slump, the Yomiuri newspaper reported Tuesday.

Oil Storage

1/18/08 Oil Storage

Morgan Stanley hired a supertanker to store crude oil in the Gulf of Mexico, joining Citigroup Inc. and Royal Dutch Shell Plc in trying to profit from higher prices later in the year, two shipbrokers said.
The ship is the Argenta, capable of carrying more than 2 million barrels, Paris-based Barry Rogliano Salles and Athens- based Optima Shipbrokers said in reports today. Morgan Stanley officials in London didn’t immediately reply to three phone messages seeking comment.

Danish pharmaceutical firm Lundbeck is understood to be interested in acquiring €4bn Irish drug group Elan. Last week, Elan revealed that it had appointed Citigroup to advise it on "strategic review" of the company's options. These include the sale of the company, a merger or the sale of a stake in the business. Pfizer had been strongly linked with an approach for Elan, although last week the Sunday Independent revealed that the existence of a "poison pill" arrangement could deter Pfizer from making a bid. Both companies subsequently denied that they were in talks.

Cullen Hightower: "There's always somebody who is paid too much, and taxed too little - and it's always somebody else. "

In yet another sign of Japanese automakers' deepening distress, Toyota Motor Corp. between February and April plans to make just half the number of vehicles it produced the previous year, a major newspaper reported Saturday.
Japan's top carmaker will slash production during the period to about 9,000 vehicles a day and may need to trim its full-time work force as a result, the Asahi Shimbun said without citing sources.

Dan Castellaneta: “All right, let's not panic. I'll make the money by selling one of my livers. I can get by with one.”

On Friday, the VIX tumbled close to 5 points to close just above 46.

Eric Savitz:" As CEO Intel's Paul Otellini noted in a conference call Thursday, this was just the second time in 20 years that Intel's Q4 revenue was below Q3's. The first time, in 2000, it fell by less than 1%. This time, it plunged 19%."

Apple Inc. Chief Executive Officer Steve Jobs could be facing surgery to remove his pancreas, doctors say.

American builders probably broke ground in December on the fewest houses on record as sales and credit dried up, economists said before reports this week.

Haynes International Inc. will cut 12 percent of is global work force and freeze the salaries of remaining employees, the Kokomo-based manufacturer said today.Haynes, which makes high-performance alloys, employs about 1,085, including 825 in Indiana.

Blue Cross Blue Shield of Michigan announced plans to eliminate up to 1,000 jobs this year and request rate increases for some of its health insurance customers.
The Detroit-based nonprofit said the moves are necessary to preserve its financial health.

New measures to help Britain's ailing banks weather the global financial storm will be announced Monday, British Prime Minister Gordon Brown was quoted as saying Sunday.

The New York area is expected to lose 181,000 jobs in 2009, the report said. Consulting company IHS Global Insight produced the report for the group.
The Los Angeles area is expected to see 164,000 lost jobs, in part because of the huge drop in home prices that has punctured the California economy.
After New York and Los Angeles, the Miami area is expected to see the greatest loss, with a decline of 85,000 jobs. Chicago and the surrounding area are next, with losses projected at 80,000.

Unemployment is expected to top 10 percent in 70 areas, from already hard-hit cities like Detroit and Cleveland to places that had until recently been prosperous like the Riverside-San Bernardino area in California. Other big cities like Denver and St. Louis are expected to see unemployment rise above 9 percent.

Nearly 9.5 million households, or nearly one out of every five of the nearly 52 million homeowners with a mortgage, spend 38 percent or more of their pretax income on their mortgage payment, property taxes and insurance, the AP's analysis found. That's the new threshold to qualify for the
loan assistance program launched last month by Fannie Mae and Freddie Mac, the mortgage finance companies now under government control.

The U.K. FTSE 100 index fell 0.2% to 4,137.44, the German DAX 30 index lost 0.3% to 4,351.05 and the French CAC-40 index declined 0.3% to 3,008.08.

“The point is to get credit flowing again to businesses and families across the country -- that hasn’t happened with the expenditure of the first $350 billion,” Axelrod said.

House Speaker Nancy Pelosi is receptive to the idea of prosecuting some Bush administration officials, while letting others who are accused of misdeeds leave office without prosecution, she told Chris Wallace in an interview on "FOX News Sunday."

Sunday, January 18, 2009


1/17/08 IOUs

Eighty-three of the nation's 100 largest corporations, including Citigroup, Bank of America and News Corp., had subsidiaries in offshore tax havens in 2007, and some of the companies received federal bailout funding, a government watchdog said Friday.
The Government Accountability Office released a report that said Bank of America Inc., Citigroup Inc. and Morgan Stanley all had more than 100 units in countries that maintain low or no taxes. The three financial institutions were included in the $700 billion financial bailout approved by Congress.
Insurance giant American International Group Inc., which has received about $150 billion in bailout money, had 18 subsidiaries. JPMorgan Chase & Co. had 50 units and Wells Fargo & Co. had 18; both financial institutions received government bailout money.
Sens.Carl Levin, D-Mich., and Byron Dorgan, D-N.D., who requested the report, have pushed for tougher laws to fight offshore tax havens around the globe. Levin, who leads the Senate Permanent Subcommittee on Investigations, has estimated abusive tax havens and offshore accounts cost the U.S. government at least $100 billion a year in lost taxes.

New York state raised its forecast for next year’s deficit by $128 million to $13.8 billion.

Doug Noland: "It remains my view that our maladjusted economy is in the earliest stage of what will prove a grueling and protracted adjustment period. And with Wall Street finance incapacitated, there will be no alternative than for the banking system to aggressively expand Credit. In rough terms, Bank Credit will need to expand in the Trillion dollar range (10% growth) this year if there is any hope of stemming depressionary forces and stabilizing the system. The way I see it, system-wide Credit expansion of $2.0 TN or so will likely be required, of which about half will be forthcoming from federal borrowings....Candidly, the current environment presents the most difficult macro analysis of my career. The collapse of Lehman was a seminal event in U.S. and global finance. Overnight, Trillions of Wall Street’s financial claims lost their “moneyness.” Trust in history’s most powerful mechanism of Credit expansion was shattered – and for years to come will remain shuttered. Near- and long-term ramifications are momentous, especially when it comes to the performance of asset markets. But, at the same time, the collapse of the historic Credit Bubble has also granted global policymakers an unprecedented mandate to inflate governmental debt and obligations. The promise of basically unlimited deficits and Credit guarantees is required to shore up the “moneyness” of the core of monetary systems both at home and abroad....In short, it is not so easy to discern an area of acute systemic crisis commensurate with the pounding taken this past week or so by the banks and financials. I’ll this evening label this dynamic “A Divergence.” It is possible that there is acute stress out there not visible to the naked eye. Perhaps the major banks are in worse shape than they appear. And housing and the economy could be taking additional legs down, although this would be a surprising development considering the current financing environment. The international backdrop remains problematic. And one should assume there are more hedge fund shoes to drop. Reasonable analysis would see speculator de-leveraging and liquidation overhanging the markets for some time to come. So, it’s an especially tough call - and A Divergence that beckons for analytical focus."

Peter Schiff: "The unpleasant reality is that years of bad monetary and fiscal policy have over encumbered our economy with debt and undermined our industrial capacity. The sooner we can begin to repair the damages, the sooner we can right the ship. If instead we merely administer more of the same, the ship will sink in a sea of inflation."

Hertz to cut 4,000 jobs, Delta Airlines to cut 2,000 jobs, Marshall and Ilsley cut 830 jobs, and Ecolab cut 1,000 jobs. In December, Dow Chemical said it would cut 11 percent of its global work force, or about 5,000 employees, and a third of its 6,000 contractors, as well as slash output at 180 plants and close another 20 plants worldwide.

Brett Steenbarger: "Until we see some moderation in the decline in margin debt numbers, as occurred late in 2002 and early in 2003, it is probably premature to assume that bear market bounces are fresh bull markets."

San Jose Mercury News: "Poverty experts say one in three California children on the state's welfare rolls could be cut under Gov. Arnold Schwarzenegger's budget plan, which calls for restricting eligibility in the program designed to serve working-poor families.
And those who continue to receive grants would be hit as well: despite soaring food prices and burgeoning unemployment, maximum payments for a family of three would equal $43 less than what a similar-sized family received in 1989.
As budget battles continue raging in Sacramento, parent protesters took to the capitol steps last week, demanding resolutions for the state's $40 billion deficit that will not pummel the poor. But so far, deep cuts to the welfare-to-work program known as CalWORKS appear inevitable, even Democratic leaders agree."

The Oil Drum: "Iran's Oil Ministry anticipates a crude oil price of about $40 a barrel in 2009, Oil Minister Gholamhossein Nozari was quoted as saying on Saturday, suggesting Tehran does not expect the market to rebound soon.
Nozari also said crude producers outside the Organization of the Petroleum Exporting Countries (OPEC) were not cooperating with the group in reducing output to restore stability, the official IRNA news agency reported."

Estimates for tax revenues, released Friday by the Nelson A. Rockefeller Institute of Government at the State University of New York system, cover the 36 states that have released fourth-quarter tax data.
The states suffered declines in most sources of revenue. Personal-income taxes eked out a 0.1% gain, based largely on income earned before the recession deepened. Sales taxes were down 6.5% in the quarter compared with a year earlier as consumers cut back. Corporate income taxes fell 22.1%, reflecting falling profits.
"It's just astoundingly bad," said Don Boyd, senior fellow at the Rockefeller Institute. "I suspect [revenue] is going to be worse than many states were thinking."
Budget problems have become the chief priority for governors and legislatures in many states. California Gov. Arnold Schwarzenegger discussed the state's $42 billion budget gap for much of his annual address to legislators Thursday, calling budget woes a "rock upon our chests."

Regulators on Friday shut down two small banks, National Bank of Commerce in Illinois and Bank of Clark County in Washington state.

The U.S. Interior Department, acting in President Bush's final days in office, proposed on Friday opening up 130 million acres off of California's coast to drilling for oil and natural gas, including areas off Humboldt and Mendocino counties and from San Luis Obispo south to San Diego.

State Controller John Chiang warned Friday that he will delay nearly $3.7 billion in state payments in February - including income tax refunds and help for low-income and disabled residents - unless Gov. Arnold Schwarzenegger and lawmakers strike a budget deal for the cash-strapped state by end of this month. The 30-day delay will likely keep the state from running out of money next month, avoiding the use of IOUs in February and likely in March, Chiang said. But his office, which manages the state's cash flow, would resort to IOUs if the state can't meet its financial obligations, he said.

Seattle's University of Washington has taken the drastic measure of closing its doors to new students who want to start in the spring. The move is in response to budget cuts and overenrollment.

The European economy is sliding deeper into recession and the fourth quarter of last year was "catastrophic," European Union Industry Commissioner Guenter Verheugen said on Sunday.
"The figures the European Commission will present next week will, unfortunately, show that we have slipped deeper into recession," Verheugen told German radio DeutschlandFunk.
"The last quarter of 2008 was catastrophic in every respect."

The New York Times Co. is in discussions with Mexican billionaire Carlos Slim about investing in the newspaper publisher to help ease its financial problems, according to people familiar with the matter.

General Motors has signalled it might be unable to meet a key condition of the $13.4bn lifeline extended by the US Treasury requiring a two-thirds reduction in the carmaker’s unsecured debt.
Ray Young, GM’s chief financial officer, said the company might not be able to secure the agreement of all bondholders for the proposed debt-for-equity swap, which aims to reduce public unsecured debt from $27.5bn to $9.2bn.

The number of business bankruptcy filings rose sharply in 2008, with 31 percent more companies looking to liquidate -- instead of just restructure their debt -- in the third quarter than in the first.

Mike Burk: "The two consecutive up days Thursday and Friday relieved some of the oversold condition of the market without moving the indicators upward very much.
I expect the major indices to be lower on Friday January 23 than they were on Friday January 16."