Friday, January 30, 2009

The Worst January

1/30/09 The Worst January

Procter & Gamble Co.'s sales fell 3% to $20.4 billion. "We expect the environment will remain difficult and highly volatile - at least in the near term," the company said. Procter & Gamble expects earnings of 78 to 86 cents for its third quarter, compared to the Wall Street target of 85 cents a share.

Honeywell still expects to report 2009 earnings of $3.20 to $3.55 a share. Honeywell International Inc.forecast first-quarter earnings in the range of 50 cents to 60 cents a share, with sales falling 10% to 17% to a range of $7.4 billion to $8 billion. "Our expectation is for a much weaker first half for both earnings and cash while the second half will benefit from much easier comps," said Honeywell Chairman and Chief Executive Dave Cote on a post-earnings call.

Euro-area unemployment hit 8% in December, up from 7.9% in November and 7.2% in Dec. 2007, the Eurostat statistics agency said. Unemployment was last at those levels in late 2006.

Roche Holdings cut its offer for Genentech and took it directly to shareholders after the South San Francisco biotech refused previous buyout approaches from its majority owner. The Swiss firm is now offering $86.50 a share, down from $89, for the 44% of Genentech it doesn't previously own. The new all-cash bid is worth roughly $42.5 billion.

Honda reduced its profit outlook for the full fiscal year ending March 31 to 80 billion yen, which would mark an 87% drop from the previous year's results.

Japan's NEC Corp said on Friday it would cut its groupwide workforce by 20,000 people, and look for ways to exit its industrial liquid-crystal display-related business.

Nippon Steel, the world’s second-largest steelmaker, slashed its full-year profit forecast by a third on Thursday to reflect plunging demand from the hard-hit Japanese motor industry.

The steelmaker’s revised outlook implies a Y50bn operating loss in its fourth quarter to March and marks a reversal for the company after a run of record profits.

Charles Schwab Corp. said Thursday it will eliminate 500 to 600 jobs to prepare for a possible decline in revenue of as much as 20 percent in 2009, due to the continuing market downturn.

The Fed on Thursday said commercial banks averaged nearly $65 billion in daily borrowing over the week ending Wednesday. That was up from $61.6 billion in average daily borrowing logged over the week that ended Jan. 21.
Investment firms drew $32 billion over the past week.

Hitachi forecasts loss of $7.7 billion and will cut 7,000 jobs.

The U.S. economy contracted at a 3.8% seasonally adjusted annual rate in the fourth quarter, the Commerce Department estimated Friday. This is the largest contraction since the first quarter of 1982. Economists surveyed by MarketWatch were expecting a negative 5.5% growth rate in the fourth quarter. The weakness in the fourth quarter was masked by a buildup in inventories, which adds to output even if they are unwanted. Real final sales for domestic product, which excludes inventories, decreased 5.1% in the fourth quarter. This is the biggest drop since 1980. Inflation moderated in the fourth quarter. The core consumer prices increased as a 0.6% rate in the quarter, and rose 2.2% for the year. Headline PCE declined at a record 5.5% in the fourth quarter. For all of 2008, the economy grew at a 1.3% rate, the weakest since 2001.

George Ure: "Port or Tacoma (Washington) container cargo was down 12.3% compared with December a year ago. TEU container load was down 8.5% YTD in December at Portland, Oregon. Inbound container traffic at Long Beach was down 16.2% while outbound was down 22.1%. Across the viaduct, Los Angeles was down 12.83% inbound while outbound was down a shad under 26% Port of Seattle was down 13.6% for the year while December crashed down 27.6%." That sounds a good deal worse than the GDP drop.

Gold for February delivery was last up $15.80, or 1.8%, at $920.90 an ounce. Crude oil for March delivery rose 69 cents, or 1.6%, to $42.12 a barrel in electronic trading on Globex.

U.S. employment costs rose at the slowest pace in at least 26 years in 2008, the Labor Department reported Friday, a sign that rising unemployment was keeping a lid on wages and benefits. Employment costs increased 0.5% in the final three months of the year, down from 0.7% in the third quarter. For the entire year, employment costs increased 2.6%, the lowest since the government began tracking the data in 1982. In the third quarter, wages and salaries for civilian workers increased 0.5%, the slowest in four years. Benefit costs increased 0.4%. For the entire year, wages and salaries for civilian workers increased 2.7% and benefit costs rose 2.2%.

Chevron Corp.said fourth-quarter net income edged up to $4.90 billion, or $2.44 a share, from $4.88 billion, or $2.32 a share in the year-ago period. The latest period included a $600 million gain on an asset exchange transaction as well as a $478 million boost from currency exchange.

Exxon Mobil Corp's fourth-quarter net income fell 33 percent as a steep drop in crude oil prices hurt results.Net profit in the quarter was $7.8 billion, or $1.55 per share, compared with $11.7 billion, or $2.13 per share, in the same period a year earlier.

According to AMG Data Services, including ETF activity, Equity funds report net cash outflows totaling -$334 million in the week ended 1/28/09 with Domestic funds reporting net inflows of $1.433 billion and Non-domestic funds reporting net outflows of -$1.768 billion;
Excluding ETF activity, Equity funds report net cash outflows totaling -$847 million with Domestic funds reporting net outflows of -$880 million and Non-domestic funds reporting net inflows totaling $34 million;
Exchange Traded (Equity) funds report net inflows of $512 million with the largest flows:
$2.107 Bil to the SPDR Tr Series I fund;
-$1.169 Bil from the iShares MSCI EAFE Index fund;
$774 Mil to the SPDR Gold Shr fund;
-$655 Mil from the iShares MSCI Emerg Mkt Index fund;
Excluding ETF activity International Equity funds report net inflows of $181 million as Emerging Markets funds report net inflows of $49 Mil;
Excluding ETF activity Taxable Bond funds report net inflows totaling $613 million.

Morgan Stanley and Goldman Sachs are considering further cuts in staff, the Wall Street Journal reported on Friday, citing people familiar with the matter.

Morgan Stanley is considering laying off up to 5 percent of its 47,000 employees, while Goldman Sachs is also contemplating further cuts in staff after letting go about 10 percent of its employees late last year, the paper said.

Treasuries are moving into a “full- blown” bear market as global stimulus packages increase demand for capital, according to Citigroup Inc.

“This may sound a bit ridiculous, but we think we have begun a full-blown bear market in fixed income,” wrote
Tom Fitzpatrick, Citigroup’s New York-based chief technical analyst, and London-based strategist Shyam Devani. “The commodity that is going to be the most in demand as far as the eye can see is capital. As a consequence, the cost of capital can only go one way -- up.”

Arch Coal: "It is extremely difficult to forecast 2009 with any precision at this time due to the current state of flux in the economy and in global steam and metallurgical coal markets."

In NYC there will be a reduction of 23,000 jobs through layoffs and attrition. That's more than 7 percent of the city's employees.
Sources say expect fewer cops, firefighters and sanitation workers.

Caterpillar Inc. will cut about 2,110 production jobs at three of its manufacturing facilities in Illinois. The layoffs are in addition to those announced by the company on Jan. 26. At the $30 level, the shares are trading near a 5-year low.

Paccar Inc.said Friday that fourth-quarter earnings fell to $113 million, or 31 cents a share, from $261 million, or 71 cents a share, in the same period a year ago.

Gannett said publishing revenue fell 19% to $1.4 billion, reflecting among other factors a 37% plunge in classified advertising sales.

Allstate Corp.said it would cut 1,000 jobs in its financial services unit over the next two years.

Shelters across the country report that more people are seeking emergency shelter and more are being turned away. In a report published in December, 330 school districts identified the same number or more homeless students in the first few months of the school year than they identified in the entire previous year. Meantime, demand is sharply up at soup kitchens, an indication of deepening hardship and potential homelessness.

“Everything we are seeing is indicating an increase,” says Laurel Weir, policy director at the National Law Center on Homelessness and Poverty. “And homelessness tends to lag the economy. So we’re probably seeing the tip of the iceberg here.”

In the foreclosure crisis, the people being displaced from homes won’t likely be on the street immediately, explains Michael Stoops, director of National Coalition for the Homeless.

The Institute for Supply Management-Chicago said today its business barometer decreased to 33.3, lower than forecast, from 35.1 the prior month.

Brent crude is $47 a barrel versus WTI crude at $43.

Finance ministers from Japan, China, South Korea and 10 Southeast Asian nations plan an unscheduled meeting next month to forge a pact to pool $120 billion of foreign exchange reserves to help defend their currencies.

India, the world’s biggest consumer of sugar, permitted duty free imports of the sweetener for sale domestically to prevent an increase in prices as output slumps.

Abdalla el-Badri, OPEC secretary- general, said $70 to $90 a barrel is a “reasonable” oil price to support investment in new production.

Ford plans to access its entire $10.1-billion line of credit. Ford expects to receive that money Tuesday.

Meanwhile, Ford said it would continue to examine restructuring opportunities and that it wouldn't rule out additional job cuts.

The Reuters/University of Michigan Surveys of Consumers said its final index reading of confidence for January rose to 61.2 from December's 60.1.

At the $14+ level, Pfizer is trading at a 12-year low.

Freddie Mac, the second-largest provider of funding for U.S. home mortgages, on Friday said it would offer leases to borrowers who lose their homes under foreclosure.

Tenants of borrowers will also be offered leases, a feature of a new plan implemented this month by Fannie Mae, according to statements from the two government-controlled companies.

Both extended their suspensions of evictions of borrowers or renters due to foreclosure through Feb. 28.

James “Jes” Staley, head of JPMorgan Chase & Co.’s investment unit, said the $4 trillion money-market fund industry is the “greatest systemic risk” to the financial system that hasn’t been adequately addressed.

“What keeps me up at night most of anything we do at JPMorgan Asset Management is the money-market fund space,” Staley said at a lunch discussion hosted today by Credit Suisse Group AG in Davos, Switzerland. “One of the things that has to come out and get a lot more attention and discussion is how do we take the systemic risk posed by money funds out of the system?”

JPMorgan Asset Management oversees about $500 billion of money-market funds, Staley said. The funds aren’t allowed to set aside capital to protect for investment losses, leaving no “margin for error” against a potential collapse, he said.

“If you’re running a money-fund and all of a sudden you think there may be a slight run or a problem in the credit markets you have to liquefy your portfolio as fast as you possibly can,” he said. “Your margin of error is zero because there’s no shock absorber or capital insurance protecting that.”

March crude ends up 24 cents, or 0.6%, at $41.68 a barrel. Gold for February delivery closed up $22.20, or 2.4%, at $927.30 an ounce on the Comex division of the New York Mercantile Exchange, the loftiest closing level for a front-month contract since July. Natural gas dipped to $4.40 and is having a difficult time finding traction.

Last year China overtook Japan as the largest foreign holder of U.S. government debt and held $681.9 billion in U.S. Treasuries as of November.

Russia's economic growth would be close to zero in 2009 due to the global financial crisis, Russian Deputy Prime Minister and Finance Minister Alexei Kudrin said Friday.

"Our economic growth will most likely be close to zero, and the situation to a great extent will depend on our own measures," Kudrin was quoted by the Itar-Tass news agency as saying in the State Duma, the lower house of parliament.

Russia's budgetary revenues in 2009 could decline from 10.9 trillion rubles (321 billion U.S. dollars) to 6.5 trillion (191.5 billion U.S. dollars) amid the financial meltdown, Kudrin said.

Igor Shuvalov, Russia's first deputy prime minister, said Friday in the State Duma that the country's economic situation will be "fairly harsh" in 2009.

U.S. bank regulators closed small banks in Utah, Florida and Maryland on Friday, bringing the total of U.S. bank failures this year to six.

The Dow Jones Industrial Average finished down 148 points, or 1.8%, at 8,000. For January, the blue-chip index fell 8.8%. The S&P 500 index fell 19 points, or 2.3%, to 825. For the month, the broad index fell 8.6%, its worst performance on record. The Nasdaq Composite lost 31 points, or 2%, to 1,476. The technology heavy index fell 6.4% during the month.

Sears Holdings , which operates Kmart and Sears department stores, laid off 300 corporate workers on Friday.

Dow Chemical shares are trading at $11+ and that's back to where they were in March 1986. Meanwhile, in October and November there was inside buying at twice the present price. One might take a look at this on a risk/reward basis.

Wal-Mart traded at a new 52-week low on Friday. Costco is about 1 1/2 points from the 52-week low. The best retailers are in the dog house.

Thursday, January 29, 2009

The Market Economy

1/29/08 The Market Economy

Vaclav Havel, the First President of the Czech Republic: "I have always known that the only economic system that works is a market economy. This is the only natural economy, the only kind that makes sense, the only one that leads to prosperity, because it is the only one that reflects the nature of life itself. The essence of life is infinitely and mysteriously multiform, and therefore it cannot be contained or planned for, in its fullness and variability, by any central intelligence."

Continuing jobless claims rose by 159,000 in the week ending Jan. 17 to a seasonally adjusted 4.78 million, the most since the government's records begin in 1967. Meanwhile, the number of new claims for state unemployment benefits rose by 3,000 to a seasonally adjusted 588,000 in the week ending Jan. 24, just 1,000 below a 26-year high for initial claims set a month ago. The four-week average of new claims - which smooth out distortions caused by bad weather, strikes or the timing of holidays - rose by 24,250 to 542,500.

Orders for U.S.-made durable goods sank in December, falling 2.6% on weaker demand for a wide range of products, the Commerce Department reported Thursday. Excluding the 0.6% gain in transportation goods, orders fell 3.6%. Inventories of manufactured durable goods in December, up seventeen of the last eighteen months, increased $1.3 billion or 0.4 percent to $343.5 billion. This was at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 0.3 percent November increase.

U.S. natural gas inventories fell 186 billion cubic feet in the week ended Jan. 23, the Energy Information Administration reported Thursday. Stocks were 34 billion cubic feet higher than last year at this time and 29 billion cubic feet above the five-year average. Analysts at IHS Global Insight had expected a storage withdrawal of 192 billion cubic feet. After the data, March natural gas rose 7 cents, or 1.6%, to $4.49 per million British thermal units.

Wal-Mart has not participated in the latest rally and is only one point above its 52-week low.
When the best retailer can't generate investor enthusiasm, it's time to sell the group.

Ford Motor Co., insisting it can survive without federal loans, said it burned $5.5 billion in cash in the fourth quarter and will tap a revolving credit line after the worst annual performance in its 105-year history.

The second-biggest U.S. automaker posted a full-year loss of $14.6 billion, eclipsing 2006’s record of $12.6 billion.
Cash in Ford’s automotive business fell to $13.4 billion, the company said today in a statement.

“These losses are not sustainable,”
Sean Egan, president of bond ratings firm Egan-Jones Ratings Co., said in a Bloomberg Television interview. “Even if they draw down their lines and the money from the government, it begs the question of whether or not the overall situation is going to improve.”

3M forecast 2009 earnings of $4.30 to $4.70 per share, down from a previous range of $4.50 to $4.95, based on an assumption that organic sales volume would fall 5 percent to 9 percent. This is still quite optimistic in my view.

Two days after Pfizer said it would buy Wyeth for $68 billion, Pfizer shares have fallen to nearly a 12-year low and some shareholders are questioning the wisdom of the planned union.

U.S. housing prices are likely to decline another 6 to 7 percent in 2009, with no signs yet of bottoming out, a leading economist said Thursday.

Ken Rosen, a University of California at Berkeley professor of real estate economics, said housing prices are about three-quarters through their slide, and should reach a cumulative decline of 23 percent to 24 percent this year.

"I think the sign of the bottom will be when housing price decline slows down, instead of 1 to 2 percent decline a month, to half a percent," Rosen said on the sidelines of the World Economic Forum in Davos.

Rob Hanna: "Days that gap higher, don’t fill their gap and close above their open have a tendency to pull back over the next several days."

Brett Steenbarger: "
One pattern that I've seen play out on multiple timeframes is that price breakouts that lead to a surge in the number of stocks making new highs tend to be followed by consolidation/reversal in the short run, but continuation thereafter. This sets up useful trades in which initial pullbacks following these surges can make nice entry points for subsequent upside moves.
Going back to late 2002, when I first began collecting these data (N = 1572), I looked at what happened in the S&P 500 Index (SPY) following days in which the number of stocks making new 20-day highs across the NYSE, NASDAQ, and ASE exceeded 1500 (N = 213). Interestingly, ten days after the surge in new highs, SPY averaged a gain of only .05% (122 up, 91 down), compared with an average gain of .08% (787 up, 572 down) for the remainder of the sample.
When we go out 30 days, however, we find that the surge in new highs leads to an average gain of .85% (143 up, 70 down), compared with an average rise of only .13% for the rest of the sample (801 up, 598 down). The surge in strength does not necessarily result in significant near-term gains, but it is common to see momentum carry the market higher in the longer run. In a future post, I will illustrate this pattern at intraday time frames. The links below illustrate the importance of understanding momentum dynamics in markets."

Robert McHugh: "Use any rallies to raise cash, and prepare for the coming Depression and cataclysmic market collapse."

Even with a recent rally, the VIX hovers around the 42 level.

Robert W. Baird analyst Kenneth Muth today repeated his Neutral rating on Cisco, but cut his FY ‘09 estimate to $1.28 from $1.33; for FY 2010 he goes to $1.32, from $1.37.

Eric Savitz: " Drive down U.S. highway 101 in Santa Clara, and you can’t miss a pair of twin eight-story towers on the east side of the road, one festooned with a big purple Yahoo logo. Want to rent them?

According to
the Silicon Valley/San Jose Business Journal, Yahoo is exiting almost 400,000 square feet of space in the buildings, which are owned by the Sobrato Organization, and offering to sublet the Class A space for $1 a square foot. Yahoo plans to vacate the space in May; the lease on the buildings expires in July 2010.

Yahoo plans to consolidate its offices on its main campus in Sunnyvale.

Nintendo cut its forecast on Wii unit sales for the year by 1 million consoles to 26.5 million.

Jabil will cut its workforce by about 3,000 in response to the global economic slowdown. The company has about 85,000 employees worldwide.

Global air traffic for cargo plunged nearly 23% in December from the same month last year, according to data released Thursday by the International Air Transport Association. "The 22.6% free fall in global cargo is unprecedented and shocking," said Giovanni Bisignani, IATA's director general and chief executive. "There is no clearer description of the slowdown in world trade." Air cargo carries 35% of the value of goods traded internationally, the trade group said. For the full year, cargo traffic fell 4% while passenger traffic rose 1.6%. For December, international passenger traffic fell 4.6% compared to a year ago.

Some 30,000 refinery workers that operate half of the U.S. fuel-making capacity could go on strike if they fail to renew a union contract that expires early Sunday, union officials said on Thursday.

Talks between the United Steelworkers union and the lead refiner negotiator, Shell Oil Co , continued on Thursday, Shell and USW representatives said, though both declined to disclose details of the talks.

The union rejected a third contract offer from Shell, according to a memo from USW International Vice President Gary Beevers posted on a local union website.

More than a million public sector workers in France staged a massive strike on Thursday to protest President Nicolas Sarkozy's handling of the economic crisis, the AFP news agency reported. Twenty-three percent of France's five million public sector workers participated in the strike, which caused some disruption to the Paris transport network, according to the report. More than a third of teachers, a quarter of postal, telecoms and state electricity workers and 15% of air traffic controllers were on strike, according to the AFP.

the Dow Jones Industrial Average declined 227.64 points, or 2.7%, to 8,147.81. Snapping a four-day advance, the S&P 500 dropped 28.99 points, or 3.3%, to 845.1, while the Nasdaq Composite shed 50.5 points, or 3.2%, to 1,507.84.

Crude for March delivery fell 72 cents, or 1.7%, to end at $41.44 a barrel on the New York Mercantile Exchange. Gold for February delivery ended up $16.90, or 1.9%, at $905.10 an ounce on the Comex division of the New York Mercantile Exchange. Inc on Thursday posted a higher-than-expected quarterly profit and an 18 percent revenue rise, helped by market share gains during the holiday season, and shares of the online retailer rose 8 percent.

Black & Decker Corp.said it was laying off 1,200 workers amid slumping profits and offered a grim outlook for its 2009 performance. The shares dropped $8 to the $31 level. The company said it expected first-quarter sales to drop about 20 percent on weakening demand, retail inventory adjustments and the stronger U.S. dollar.

Cessna plans on 2,000 more job cuts.

Textron's report: "Looking to 2009, the company expects the economy will continue to impact results at TFC and result in lower volumes at Cessna and Industrial. On this basis, the company estimates 2009 revenues will be approximately $12.5 billion, free cash flow from continuing operations of the manufacturing group will be about $450 million and earnings per share from continuing operations will be in the range of $1.00 to $1.50, excluding expected pre-tax restructuring charges of about $40 million.

Campbell continued, “Our priorities this year are clear – maximize cash flow and operating performance in our manufacturing businesses and aggressively convert finance receivables at TFC to cash. We’re aligning production to match expected lower commercial demand, reducing non-essential capital spending, freezing salaries, curtailing most discretionary spending, including reductions in non-critical product development, and reducing working capital.”The stock dropped $4+ to the $9 level.

Japan's Nikkei was down 3.1%, while Australia's S&P/ASX 200 fell 1.1%, South Korea's Composite was off 0.8%, and New Zealand's NZX-50 fell 0.4%.

Japan said Friday its industrial production fell by a record margin, with exporters showing a hit to demand. The government reported production fell a seasonally adjusted 9.6% in December from November, breaking the previous month's record decline of 8.5%

Walt Disney Co plans to lay off 200 people at its ABC division, a Disney executive familiar with the situation said, underscoring the media industry's struggle with sliding ad sales.

The media giant intends to also freeze 200 vacant jobs, resulting in an overall, 5-percent reduction of ABC's workforce of about 6,500 to 7,000, said the Disney source, who declined to be identified because the company had not announced the cuts publicly.



1/28/08 Insolvent

Nouriel Roubini: "The US Banking System is Insolvent"

Karl Marx: “Owners of capital will stimulate the working class to buy more and more expensive goods, houses and technology, pushing them to take on more and more expensive debt, until their debt becomes unbearable. The unpaid debt will lead to the bankruptcy of all banks, which will have to be nationalised, and the State will have to take the road which will eventually lead to communism.”

Bank losses worldwide from toxic U.S.-originated assets may reach $2.2 trillion, the IMF said in a
report released today, more than the $1.4 trillion that the fund predicted in October. World growth will be 0.5 percent this year, the weakest postwar pace, the fund said in a separate report.

U.S. gross domestic product will contract 1.6 percent, Japan’s will shrink 2.6 percent and the euro area will decline 2 percent in 2009, the IMF said. The fund in November foresaw a 0.7 percent U.S. contraction, with declines of 0.2 percent in Japan and 0.5 percent in the euro zone.

Leading the Group of Seven nations in contraction this year will be the U.K. economy, which the IMF predicted would slide 2.8 percent, compared with the fund’s forecast in November for a 1.3 percent drop.

The Oil Drum: "Our imports from non-OPEC countries have dropped from over 8 million barrels a day to less than 7 million barrels a day. Given what we know about decline rates, this situation is likely to get worse."

Boeing, which lost out to rival Airbus in the race for plane orders last year, reported a quarterly loss of $56 million, or 8 cents per share, compared with a profit of $1.03 billion, or $1.36 per share, a year earlier.

The loss was caused by the 58-day strike by Boeing's machinists union, which straddled the third and fourth quarters, cutting plane deliveries in both. Extra costs on the new 747, which has been set back by design changes and lack of engineering resources, also hurt results.

For 2009, Boeing forecast earnings of $5.05 to $5.35 per share. Analysts were expecting $5.74, on average.

Gold for February delivery was last down $10.30, or 1.2%, at $889.20 an ounce in early North America electronic trading.

Wells Fargo & Co.said it swung to a fourth-quarter loss of $2.55 billion, or 79 cents a share, compared with net income of $1.36 billion, or 41 cents a share, in the year-ago period.

Excluding one-time costs, AT&T said it would have earned 64 cents a share, compared with 71 cents a share, a year earlier. AT&T was forecast to earn an adjusted 65 cents a share on revenue of $31.4 billion, according to the average projection of analysts surveyed by FactSet Research. For the current fiscal year, AT&T said revenue would continue to expand despite a U.S. recession, but the company plans to cut annual capital expenditures by 10% to 15%.

Becton, Dickinson and Co raised its guidance for fiscal 2009, saying it expects earnings from continuing operations in the year to increase between 9% and 11% from from $4.46 in 2008.

Baker Hughes Inc., Chairman, President and Chief Executive Chad C. Deaton, in a statement on Wednesday said "The global economic recession, lower oil prices, and reduced access to credit will negatively impact customer spending globally."

The Federal Deposit Insurance Corp. may manage the so-called bad bank that the Obama administration is likely to set up, Bloomberg News reported, citing two people familiar with the matter. The news helped lift U.S. stock futures and European stock markets.

About 6.9% of prime “jumbo” loans were at least 90 days delinquent in December, according to LPS Applied Analytics, a mortgage-data research firm. The rate was up sharply from 2.6% a year earlier. In comparison, delinquencies of non-jumbo prime loans that qualify for backing by government agencies climbed to 2.1% from 0.8% in December 2007. Jumbo mortgages average about $750,000 and can run as high as $5 million or more.

Richard Daughty: "The national debt right now, in January 2009, is $10,635 billion, whereas last year at this exact time it was only $9,210 billion, a difference of a sizzling $1,435 billion! A trillion and a half dollars more debt in twelve months, yet these guys say that it is only $454.8 billion!"

ConocoPhillips revenue fell 18 percent to $44.5 billion from $52.7 billion a year ago.

Adjusted earnings for the fourth quarter were $1.9 billion, or $1.28 a share, versus $4.1 billion, or $2.55 a share, a year ago.

Global oil prices need to stay above $40 a barrel to keep deep offshore oil production and exploration economically viable in Nigeria, the head of the country's state-run oil firm said on Tuesday. "Deepwater developments in the region, particularly in the ultra-deep, require a sustainable crude price in excess of $40/bbl to support continued production, exploration and development," Mohammed Sanusi Barkindo, head of the NNPC, said at an offshore oil and gas conference.

Credit Suisse cut their estimates for Coca-Cola for 2009 to $3.11 for 2009.

Terra Industries Inc.said Wednesday that its board unanimously rejected an unsolicited acquisition bid from CF Industries Holdings Inc., a deal that would have joined two major producers of nitrogen and phosphate. Earlier this month, CF Industries made an all-stock offer for Terra valued at about $2 billion. In Wednesday's statement, Terra said that the bid "substantially undervalues" the company.

Trends Journal forecasts 2009 economic depression.

Projections by the International Labour Organization, a UN agency, on global employment trends predict that on a worst-case scenario, recorded unemployment could rise by more than 50m from baseline 2007 levels to 230m or 7.1 per cent of the world’s labour force by the end of 2009.

Alan Reynolds: "House Democrats propose to spend $550 billion of their two-year, $825 billion "stimulus bill" (the rest of it being tax cuts). Most of the spending is unlikely to be timely or temporary. Strangely, most of it is targeted toward sectors of the economy where unemployment is the lowest.

The December unemployment rate was only 2.3% for government workers and 3.8% in education and health. Unemployment rates in manufacturing and construction, by contrast, were 8.3% and 15.2% respectively. Yet 39% of the $550 billion in the bill would go to state and local governments. Another 17.3% would go to health and education -- sectors where relatively secure government jobs are also prevalent.
If the intent of the plan is to alleviate unemployment, why spend over half of the money on sectors where unemployment is lowest? Another 22.5% of the $550 billion would go to social programs, such as expanding food stamps and extending benefits for the unemployed and subsidizing their health insurance.

After subtracting what House Democrats hope to spend on government payrolls, health, education and welfare, only a fifth of the original $550 billion is left for notoriously slow infrastructure projects, such as rebuilding highways and the electricity grid....Spending $214.5 billion to create or save 330,400 government jobs implies that taxpayers are being asked to spend $646,214 per job."

Net private capital flows to emerging markets will likely decline sharply this year, slowing to $165 billion compared with an estimated $466 billion in 2008, according to the Institute of International Finance.

Forty-eight states lost nonfarm payroll jobs last month, according the Labor Department. The exceptions were Louisiana, which is benefiting from the recovery from Hurricane Katrina, and the District of Columbia, which is cushioned by federal spending. Employment was unchanged in Oklahoma.

The recession has gone "from a housing-led downturn to an everything-led downturn," said Christopher Thornberg, a principal at Beacon Economics, a research firm in Los Angeles.

The Energy Information Administration reported Wednesday that crude stockpiles rose 6.2 million barrels in the week ended Jan. 23, much higher than the 3.4 million gain expected by analysts surveyed by Platts. Gasoline inventories, however, showed a surprise decline, and distillate fuel inventories fell less than expected. After the data, crude for March delivery was almost flat at $41.52 a barrel on the New York Mercantile Exchange. It was down less than 1% before the data.

Chinese Premier Wen Jiabao said Wednesday the pervasive global financial meltdown has had a "big impact" on his country, adding that growth would slow this year.

In a speech to business leaders, politicians and experts at the annual World Economic Forum, he said the crisis was posing challenges including "rising unemployment in urban areas."

Wen said the robustness of China's economy, which grew at 9 percent last year, could help restore confidence in global markets and stem the financial crisis.

"China remains on the track of steady and fast development," he said, adding that in the fourth quarter, growth slowed to 6.8 percent.

For 2009, he said China set a target of 8 percent economic growth for 2009.

"We think that is obtainable," he said, but it called it "a tall order."

Boeing Co. said Wednesday it plans to slash about 10,000 jobs across its businesses, compared to a prior announcement of 4,500 job cuts from its commercial airplane unit. "The global economy continues to weaken and is adversely affecting air traffic growth and financing," said Chairman and Chief Executive Jim McNerney in a post-earnings call with analysts. "We are also expecting pressure on defense budgets in light of the economic recovery and financial rescue packages." Job reductions will primarily occur in areas that support productivity and infrastructure, driven through a combination of attrition, retirements, cuts in some contracted labor, and layoffs.

With foreclosures spiking, the Federal Reserve is taking steps to try to keep some distressed borrowers in their homes.

Under the program, the Fed has a number of options to provide relief, including lowering the amount the homeowner owes on the mortgage, reducing the interest rate or lengthening the term of the loan. It's unclear how many homeowners would benefit.

George Soros: ""The storm that started in the financial system has now spread, in a very big way, to the real economy," he said. "It has fallen off the cliff following the Lehman thing."

He believes still more must be done to turn the slowing of decline into real economic growth, including the reorganization of the mortgage system, and skillful handling of the international repercussions."

Faced with dwindling mail volume and rising costs, the post office was $2.8 billion in the red last year. "If current trends continue, we could experience a net loss of $6 billion or more this fiscal year," Potter said in testimony for a Senate Homeland Security and Governmental Affairs subcommittee.

Total mail volume was 202 billion items last year, over 9 billion less than the year before, the largest single volume drop in history.

Ryland's new orders fell 65.3% to 554 units and its inventory of unsold homes stood at 639 units at the end of December, down 22.4% from Dec. 31, 2007.

Meritage Homes Corp. home closing revenue decreased to $386.6 million from $615.6 million a year ago. Number of homes closed fell 30% to 1,488 units while sales orders were down 52% to 500 units.

Starbucks, battered by slower store traffic and restructuring charges, reported Wednesday its quarterly net profit dropped 69% and announced plans to shut down 300 more coffee shops and lay off 6,700 workers.

The Dow Jones Industrial Average climbed 201.72 points, or 2.5%, to 8,375.45. Up for a fourth consecutive session, the S&P 500 advanced 28.37 points, or 3.4%, to 874.08. The Nasdaq Composite added 53.44 points, or 3.6%, to finish at 1,558.34.

The Reserve Bank of New Zealand Thursday cut its benchmark rate to 3.5% from 5%, a deeper cut than the 100 basis points expected by many economists.

Gold for February delivery was down $1.90, or 0.2%, at $886.60 an ounce. Crude for March delivery was last up $1.91, or 4.6%, at $43.49 a barrel on the New York Mercantile Exchange.

The Federal Reserve said Wednesday that it would keep intact its current policy of record-low interest rates. In a statement following its meeting, the central bank also said it's prepared to buy U.S. Treasurys if warranted. The Fed said the economy was weakening, but that it still expected a recovery in the second half. The Fed said it was worried about deflation. The Fed said it would continue to pump money into the various credit channels. Richmond Fed president Jeffrey Lacker dissented. He wanted the central bank to buy Treasurys instead of other assets.

Qualcomm, the biggest maker of chips for cell phones, cut its outlook for full-year 2009 revenue to a range of $9.3 billion to $9.8 billion from its previous estimate of $10.2 billion to $10.8 billion, an estimate that was already well below earlier analysts expectations.

Time Warner online unit AOL is cutting 700 employees due to the weak economy and the ensuing falloff in advertising revenue, but also because of recent structural changes made to refocus the once-mighty service

Michael Pento: "The problem with inflation is real. The Fed Funds rate is currently at an historic low of 0-.25%. Meanwhile, the increase in the monetary base (high powered money) is unprecedented in history and now stands at nearly $2 trillion dollars, up from just $850 billion in September of 2008. The rate of increase is now over 300% annually. The monetary aggregates (M1, M2, M3 and MZM) have increased by double digit rates on a year-over- year basis and the fiscal 2009 deficit should eclipse $2 trillion for the first time in U.S. history.

This level of debt should lead to an even further expansion of the money supply and cause the rate of inflation to increase significantly. Yet, as the free market demands rates to rise, they must be kept under wrap by an intervening Central Bank that is forced into printing money to keep them low.

But creating inflation in order to keep interest rates low is a diametrically opposing force that cannot coexist for any extended period of time. On the losing side will be government, as free market forces will ultimately prevail in the long run.

So not only can gold appreciate in a rising rate environment, it now seems clear that any increase in rates is a long way off (if the Fed has its way). Thus, the only two bull markets that exist at this juncture are gold and U.S. debt, a condition that cannot last for long either. Investors who believe in the free market have to believe that one of those assets is in a bubble and that one is undervalued, perhaps dramatically so.

Figuring out which one is which seems simple enough to this observer."

3M's fourth-quarter profit fell 37% to $536 million, or 77 cents a share, from $851 million, or $1.17 a share in the fourth quarter of 2007.

AutoNation Chairman and Chief Executive Mike Jackson said in a statement that "Automotive retail sales collapsed from one day to the next as credit for our customers was withdrawn from the market. This panic continued to erode consumer confidence and accelerated the decline in the U.S. economy and the auto retail market."

For the fourth quarter, Ford said it lost $5.9 billion, or $2.46 a share amid a sharp decline in vehicle demand, compared to a loss of $2.8 billion, or $1.33 a share in the year-ago period. Revenue fell sharply to $29.2 billion from $44.1 billion. Ford said it finished 2008 with $24 billion in available automotive liquidity, including $13.4 billion in gross cash.

Eastman Kodak Co.will reduce its worldwide employment by 3,500 to 4,500 positions during 2009, or approximately 14% to 18% of its total workforce.

The National Credit Union Administration will guarantee tens of billions of dollars in uninsured deposits at corporate credit unions in a move to protect the industry from mortgage-related losses, The Wall Street Journal reported late Wednesday on its Web site.

Cabot to cut 500 jobs.

Ford Motor Credit to shed1200 employees.


Tuesday, January 27, 2009

Home Prices Take A Dive

1/27/08 Home Prices Take A Dive

Home values in 20 major U.S. cities fell at a record 18.2% in the 12 months ending in November, Standard & Poor's reported Tuesday. The Case-Shiller 20-city home price index fell 2.2% in November, with home values in all 20 cities falling at least 1%. Prices fell 3.4% in Phoenix and 3.3% in Las Vegas in November. In the past year, prices were down 33% in Phoenix, 32% in Las Vegas, and 31% in San Francisco. The best performance over the past year came in Dallas, where prices fell just 3.3%. Falling home values have helped to plunge the global financial system into chaos because of mortgage-backed securities. Home owners have lost trillions of dollars of wealth.

George Ure: "One of my better insights into how life really works has been the realization that most of the time, people won't pay for what you know - they will pay you for what you can do for them."

The state of California has run out of money.Facing a $42 billion budget deficit, State Controller John Chiang told the Sacramento Bee he has already borrowed $21.5 billion to try to cover the state's checks, but by Feb. 1, there will be no more options left but to simply stop paying some of the bills – including tax refunds, welfare checks, student grants and other payments owned to California citizens.
"It pains me to pull this trigger," Chiang said at a news conference held in his office. "But it is an action that is critically necessary."
Federal law requires that many school and healthcare programs – a total of about $6.6 billion in California – must be paid, the Los Angeles Times reports, so Chiang has announced an expected payment freeze on $3.7 billion worth of the state's bills, most of it refunds owed to taxpayers.

Economies and stocks markets worldwide are becoming increasingly correlated and a global recession is likely, said Nouriel Roubini, the New York University professor who predicted the financial crisis.
Roubini said economic growth in China will slow to less than 5 percent in 2009. The U.S. will lose 6 million jobs this year and grow 1 percent at most in 2010 as private spending falls and unemployment reaches 9 percent, Roubini said.
“There is nowhere to hide right now,” Roubini, an economics professor at NYU’s Stern School of Business, said in an interview with Bloomberg Television. “Markets have become perfectly correlated and economies are also becoming perfectly correlated. This is not your kind of traditional minor recession.”

United States Steel Corp Chief Executive John Surma said, "We expect an operating loss in the first quarter as results continue to reflect the extremely difficult global economic environment. We do not know when conditions may improve, but we are well positioned to fully participate in a market recovery when it occurs."

DuPont lowered its view to 2009 to earnings per share between $2 and $2.50 a share, against earlier views between $2.25 and $2.75 a share.

Nucor Corp.said that fourth-quarter earnings were $106 million, or 34 cents a share, compared to $365 million, or $1.26 a share, in the same period last year. Sales fell 6% in the quarter to $4.15 billion.

Crude oil for March delivery fell $1.01, or 2.2%, to $44.73 a barrel in electronic trading on Globex. Gold for February delivery was last down $9.50, or 1.1%, at $899.30 an ounce in early North America electronic trading.

Peabody Energy said fourth-quarter net income rose eightfold to $293.3 million, or $1.10 a share, from $35.8 million, or 13 cents a share in the year-ago period. The year-ago period included a loss of $108 million related to income tax. Operating profit more than doubled to $386 million from $151 million. Revenue increased to $1.88 billion from $1.17 billion.

Valero cut its 2009 capital spending target to $2.7 billion from its previous estimate of $3.5 billion.

EMC said it is not giving a forecast for revenue or earnings at this time, citing "current macro-economic conditions and limited visibility."

On an adjusted basis, Verizon earned 61 cents a share compared to 62 cents a share a year ago. Sales were $24.6 billion compared to $23.8 billion a year ago.

Looking ahead, BJ Services said it'll reduce capital spending by 20% to 25% lower than fiscal year 2008.

Specialty glass maker Corning Inc said its quarterly profit fell sharply due to a significant decline in demand for glass for televisions and computer monitors, and said it would cut about 3,500 jobs.

Astellas Pharma Inc. submitted a $16.00 buyout offer to CV Therapeutics, Inc's board of directors. The buyout offer is an all cash transaction offer for all of the outstanding shares of common stock.

Congress has proposed setting aside $43 billion to assist the states and to provide for new and current recipients of unemployment checks. That money is intended to increase the weekly benefit amounts; to extend how long people can collect payments; to cover more types of workers, like part-timers; and to help states distribute benefits more quickly.
It is based largely on an estimate that the unemployment rate will rise to 8 to 9 percent this year even with a stimulus package, according to the proposal summary from the House Appropriations Committee.
“The economy is deteriorating at a faster clip than even the most dreary forecasts had expected,” said Joseph Brusuelas, an economist who, bucking the current job market trend, will soon start a new job at Moody’s “At the current trend, $43 billion will not be sufficient should we breach 9 percent unemployment and maybe reach into the double digits.”

Rep. Ron Paul: "This bill (stimulus) delivers an additional debt burden of $6,700 to every American man, woman and child.
There is a lot of stimulus and growth in this bill - that is, of government. Nothing in this bill stimulates the freedom and prosperity of the American people. Politician-directed spending is never as successful as market-driven investment. Instead of passing this bill, Congress should get out of the way by cutting taxes, cutting spending, and reining in the reckless monetary policy of the Federal Reserve."

Nouriel Roubini and Elisa Parisi-Capone:"We now expect that total loan losses for loans originated by U.S. financial institutions will peak at up to $1.6 trillion out of $12.37 trillion loans . Our estimates assume that national house prices will fall another 20% before they bottom out some time in 2010 and that the unemployment rate will peak at 9%. If we include then around $2 trillion mark-to-market losses of securitized assets based on market prices as of December 2008 (out of $10.84 trillion in securities), total losses on the loans and securities originated by the U.S. financial system amount to a figure close to $3.6 trillion."

The January consumer confidence index fell to 37.7 from an upwardly revised 38.6 in December, the Conference Board said. In January a year ago, consumer confidence was at 87.3. That is a huge drop.

Fluor and Jacobs Engineering, the infrastructure plays, both made a double bottom slightly below 30 and now trade around 40. Their near-term growth potential may be overstated and long-term investors may get a third opportunity to add to positions.

Sean Hannon: "With a strong rally on Friday, oil prices have violated the first of three major downtrends. Further, the shares are trading above the 10-day and 50-day moving averages [MA]. With the 10-day MA turning higher, I expect it to serve as support for a rally that should move toward the two remaining downtrends ($53 and $67). By using the 10-day MA as a stop loss order, a long position in oil offers tremendous upside with minimum downward risk.
For individual investors, the U.S. Oil Fund offers an excellent option for owning oil. Using oil’s 10-day MA as a stop loss (currently $39.41), I recommend USO as this week’s technical trade."

Faced with one of the worst droughts in decades, Argentina has declared an agricultural emergency, the BBC reported Tuesday. President Cristina Fernandez said the decree would defer tax payments for thousands of farmers for a year, according to the report. The drought, the worst since 1971, is estimated to have caused losses of at least $4 billion in Argentina, which is one of the world's largest producers of soya, grains and beef, according to the BBC.

Retailers are expected to record a 0.5 percent drop in revenue in 2009, the first annual decline in three decades and perhaps much longer, according to a National Retail Federation forecast released Tuesday.
That's well below the modest 1.4 percent gain they recorded for 2008.
Massive layoffs, slumping home prices and tight credit are keeping shoppers tightfisted.
The NRF estimated that retail sales for the first half of 2009 will fall 2.5 percent. Then, they'll show a 1.1 percent decline in the third quarter and rebound to a 3.6 percent increase in the fourth quarter, aided by an anticipated government economic stimulus.

Copper prices plunged, heading for the largest drop in almost eight weeks, as the slumping global economy slashed metal demand and led to surging warehouse inventories.
Copper stockpiles in storage facilities monitored by the London Metal Exchange jumped 2.8 percent today to 451,800 metric tons, the most in five years. Since June 30, supplies have more than tripled, helping to drive prices down by 61 percent.

Avery Dennison Corp., the world’s largest label maker, said it will eliminate about 10 percent of its workforce, or about 3,600 jobs, after reporting its first sales decline in 12 quarters.

As many as 2.4 million Latin Americans could lose their jobs this year because of the global economic crisis, the International Labor Organization warned on Tuesday.

Gold for February delivery ended down $9.30, or 1%, at $899.50 an ounce on the Comex division of the New York Mercantile Exchange. Crude oil for March delivery closed down $4.15, or 9.1%, at $41.58 a barrel on the New York Mercantile Exchange.

The cost of shipping a crude oil supertanker west across the Atlantic has climbed about 20 percent since the beginning of December to $2.25 a barrel today, according to Bloomberg data.

Wheat fell for the first time in three sessions as Japan, Asia’s largest importer of the grain, canceled its weekly tender after stockpiling enough for March.

The US has not had any diplomatic mission in Iran since the seizure of the American Embassy and hostage crisis during Iran's 1979 Islamic Revolution, and during the Bush administration, the two countries had an increasingly tense relationship. Teheran and Washington have been deeply at odds over Iran's nuclear program and what the US says is Iranian support for Shi'ite Muslim militiamen in neighboring Iraq - a charge Iran denies.

The VIX dropped 3 points to 42+.

Merrill Lynch analyst Kash Rangan cut his rating on VMware to Underperform from Neutral, slashing his price target to $15 from $31. Rangan writes that his new forecast is equal to about 7x enterprise/value to Q4 maintenance revenue run rate, a comparable multiple to Oracle. The new target is also 15x his new $1 a share EPS target for 2009, which actually would give the stock a 25% P/E premium over both Oracle and SAP. Rangan says economic headwinds could make it tougher for the company to win new enterprise business in 2009. Other analysts cut their 2009 forecasts to 98 cents or slightly lower.

Target said late Tuesday it will reduce workforce at its headquarters locations by about 9%, including about 600 employees and 400 open positions. The majority of the cuts are concentrated in the Twin Cities area and were effective Tuesday. The retailer will also close its distribution center in Little Rock, Ark. which employs 500 people later this year.

Moody's Investors Service on Tuesday placed General Electric Co.and General Electric Capital Corp.'s Aaa ratings on review for possible downgrade.

Medical products maker Stryker Corp.stuck by its previous full-year earnings outlook of $3.12 to $3.22 a share for 2009.

Gilead Sciences Inc.said late Tuesday that its fourth-quarter profit rose to $568.2 million, or 60 cents a share, from $401.6 million, or 41 cents a share, in the year-ago period.

The Dow Jones Industrial Average gained 58.7 points, or 0.7%, to finish at 8,174.73, with 25 of its 30 components rising. The S&P 500 added 9.13 points, or 1.1%, to 845.7, while the Nasdaq Composite rose 15.44 points, or 1%, to 1,504.9.

The Treasury Department announced distribution of $386 million to 23 troubled banks, the first awards from the federal bailout fund since Obama took office a week ago.

Crude for March delivery was up 66 cents to $42.24 a barrel in electronic trade, climbing back from its over 9% slide in New York that saw the energy contract close $4.15 lower at $41.58 on the New York Mercantile Exchange.

U.S. Steel and AK Steel said they expect operating losses in the first three months of 2009, while a third steel company, Nucor Corp., forecast "only marginally better" earnings compared with its fourth quarter.

India’s central bank lowered its growth forecast and signaled further cuts in interest rates from record lows to encourage lending and spur economic expansion.
Asia’s third-largest economy may expand 7 percent in the year to March 31, compared with a previous estimate of between 7.5 percent and 8 percent, the Reserve Bank of India said today. The growth forecast has a “downward bias,” said the bank, which maintained its reverse repurchase rate at 4 percent and the repurchase rate at 5.5 percent.

Worldwide, just 21 percent of CEOs said they were very confident of growing revenue in the next 12 months, down from 50 percent a year ago.
And hopes for a short "V"-shaped recession appear to have evaporated with most business leaders expecting no more than a slow and gradual recovery over the next three years.
"The three-year view is a bit better but the bad news is it is not that much better. Compared to the 21 percent confidence over the next 12 months, it's only 34 percent over three years," said Tony Poulter, global head of consulting at PwC.
"The message is: there is a long term but we are not going to see it dawning immediately."

Valero Energy Corp. says it is shutting down its entire Texas City refinery, rather than keep parts of it open while some units undergo maintenance, because refining margins are weak and demand for gasoline is down.
Bill Klesse, San Antonio-based Valero's chairman and CEO, says refiners "must continue to use discipline in matching production with demand" and the company is doing that in part by temporarily closing while parts of the plant undergo seasonal maintenance.
Spokesman Bill Day said workers would continue to be paid.

The Hershey Co. said today it plans to close Scharffen Berger's West Berkeley manufacturing plant as well as the San Francisco factory that makes Joseph Schmidt chocolates and consolidate production at other facilities. The plant closures will affect a total of about 150 employees from both facilities.

Monday, January 26, 2009

Job Cuts

1/26/08 Job Cuts

An "intense recession" is likely through the spring, the Conference Board said Monday. The index of leading economic indicators rose 0.3% in December, mainly due to the "continued and very large" contribution from the real money supply, while weakness in building permits and elsewhere persisted, according to the Conference Board. "Expect declines in output and employment over the next several quarters, with unemployment possibly rising to 9%," said Ken Goldstein, economist at the Conference Board. In November, the index fell 0.4%.

Sales of existing homes rose 6.5% in December to a seasonally adjusted annualized rate of 4.74 million as prices continued to plunge at a record pace, the National Association of Realtors reported Monday. Sales in December were down 3.5% from the previous December. For 2008 as a whole, sales fell 13.1% to 4.91 million, the industry trade group said. The median sales price fell to $175,400 in December, down a record 15.3% compared with a year earlier. For all of 2008, median prices dropped 9.3% to the lowest level since 2004. The inventory now sits at 9.3 months vs. 11.2 months of supply in November.

Dow Chemical Co. said Monday it will not close on its $15.4 billion acquisition of specialty chemicals maker Rohm & Haas Co. by a Tuesday deadline due to the economic malaise and recent collapse of a joint venture.
The Federal Trade Commission signed off on the deal last Friday, setting in motion a two-business day timetable for the close. The European Union had blessed the deal earlier this month.
Rohm & Haas has said both parties must agree to an extension of the deadline.
The Philadelphia-based company said Monday it "intends to pursue all available alternatives to protect its shareholders' interests," but did not indicate if it had agreed to an extension.

Pfizer said it's struck a deal to buy rival drugmaker Wyeth for $68 billion in cash and stock. The deal, valuing Wyeth at $50.19 a share, offers each holder of Wyeth $33 in cash and 0.985 of a Pfizer share. Pfizer will close 5 plants and the companies will cut 19,000 jobs.
Pfizer said it sees 2009 earnings per share, excluding one- time items, of $1.85 to $1.95, missing analysts’ estimates of $2.50. It expects to report revenue of between $44 billion and $46 billion, before the Wyeth acquisition, compared with analysts’ estimates of $48.8 billion.

CATERPILLAR LOWERS 2009 OUTLOOK; 20,000 WORKERS TARGETED FOR CUTS. Profit per share for the quarter was $1.08, down 28% from the fourth quarter of 2007.

Bret Swanson: "Treasury Secretary-designate Tim Geithner's charge that China "manipulates" its currency proves only one thing. Three decades after Deng Xiaoping's capitalist rise, America's misunderstanding of China remains a key source of our own crisis and socialist tilt.
The new consensus is that America failed to react to the building trade deficit with China and the global "savings glut," which fueled our housing boom. A "passive" America allowed China to steal jobs from the U.S. while Americans binged with undervalued Chinese funny money. This diagnosis is backwards. America did not underreact to the supposed Chinese threat. It overreacted. The problem wasn't "global imbalances" but a purposeful dollar imbalance. Our weak-dollar policy, intended to pump up U.S. manufacturing and close the trade gap, backfired. Currency chaos led to a $30 trillion global crash, an energy shock, bank and auto failures, and possibly a new big government era. For globalization and American innovation to survive, we must first understand the Chinese story and our own monetary mistakes." Mr. Swanson is a senior fellow and director of the Center for Global Innovation at the Progress & Freedom Foundation.

Gold futures were trading up $10.20 to $906 an ounce at 5:20 a.m. Eastern. Crude oil for March delivery fell 38 cents to $46.09 a barrel in electronic trading on Globex.

Kimberly-Clark reports 4th qtr net income fells 8.1%.The company said it expects adjusted earnings per share in 2009 will be similar to 2008, in a range of $4.00 to $4.20, "despite significant headwinds from pension expense and currency effects."The company said it expects adjusted earnings per share in 2009 will be similar to 2008, in a range of $4.00 to $4.20, "despite significant headwinds from pension expense and currency effects."

Weatherford International Ltd.said Monday that fourth-quarter income rose to $348.1 million, or 50 cents a share, from $331 million, or 47 cents a share, in the year-ago period. The Houston-based oil-services firm said its income from continuing operations rose to 53 cents a share, excluding an after-tax loss of 3 cents a share. Revenue increased to $2.63 billion from $2.19 billion.

Ross Perot: “War has rules, mud wrestling has rules -- politics has no rules.”

For 2009 as a whole Eaton is forecasting operating earnings of $4.20 to $5.20 a share.

Jim Rogers said on Monday the pound could fall near parity with the dollar in coming years given Britain's increasing debt and lack of economic growth drivers.

Jeremy Grantham: "This time in the U.S.,however, we must write down perceived wealth or capital by almost precisely one and a half times GDP, worse than the Depression but happily much less than Japan."

The Oil Drum: "Russian oil production decreased for the first time in 10 years according to Vedomosti, a Russian newspaper. The decrease was only 0.7%, while exports were reduced more dramatically year over year, down 6.2%.
The fall in Russian production may be a major turning point in worldwide crude oil production. While OPEC nations such as top producer Saudi Arabia get the attention of most speculators, it is important to note that Russia is the second largest crude oil producer and exporter in the world. In fact, by itself, Russia almost matches the total exports of the third, fourth and fifth top exporting nations combined (Norway, Iran and the United Arab Emirates).
If Russian oil production has indeed peaked, it leaves the world with only three major exporters that are still supposedly able to continue to increase production: Saudi Arabia, Kuwait and Iraq. Given the massive oil consumption needs of the United States, that leaves America in a particularly vulnerable position at a time when the United States is facing a financial crisis."

John Hussman: "Generally speaking, American consumers aren't slowing consumption because of falling labor income. Rather, they are slowing consumption because they are protecting themselves from uncertainty and attempting to offset the impact of investment losses. Adding to this is the difficulty of obtaining credit, because of risk aversion among lenders. To try to “stimulate” people to spend and consume more is to miss the point. What the economy needs most is to mitigate the impact of foreclosures and the credit stress in the financial system that triggered this risk aversion in the first place.
The key problems here are bank capital and mortgage foreclosures. Foreclosed mortgages are approaching about 10% of total mortgages, with an average recovery rate of only about 50% of the mortgage value when the foreclosed home is sold. The resulting loss of value, approaching 5% of the U.S. mortgage market, has thrown the economy into disarray, because the losses have been borne by highly leveraged institutions. For many institutions, each $1 of their own capital (equity contributed by the company's own shareholders) has often supported $10, $20, or even $40 of loans, security investments and other assets. As a result, wiping out a few percent of their assets completely wipes out their own capital, leaving customers and depositors without a “capital cushion” and triggering withdrawals. This process started with the most egregiously leveraged companies like Bear Stearns and Lehman, and continues to put stress on enormous but capital-thin institutions like Citibank."

In the latest wave of retrenchment by global banks, ING Group, the Dutch financial services company, said Monday that it would cut 7,000 jobs this year and that its chief executive would step down as it seeks government guarantees for toxic mortgage debt.

Halliburton Co., the world’s second- largest oilfield-services provider, said fourth-quarter profit fell 32 percent on a plunge in crude prices and costs to end U.S. investigations of alleged bribery by a former subsidiary.

Satyajit Das: "2008 was the year of “shock and awe.” 2009 may well prove to be a year of grim and brutal trench warfare as the world adjusts to a new economic order and reduced expectations.
A lower growth future has political and social implications. China and India are deeply concerned about failing to provide jobs for the millions coming into the workforce each year..
We are, of course, in a “new paradigm.” Investors will need to adjust their expectations. The new investment mantras may well be:

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

As in Genesis, the “years of plenty” have ended. The improvident wasted the bounty of the years of prosperity and now find themselves in want in the “years of dearth.”

Sprint Nextel to cut 8,000 jobs.

McDonald's Corp.said fourth-quarter net income fell 23% to $985.3 million, or 87 cents a share, from $1.27 billion, or $1.06 a share in the year-ago period. Sales at the fast food giant dipped 3% to $5.67 billion.

Smurfit-Stone Container Corp., the largest producer of cardboard box materials in North America, said Monday that it has filed for Chapter 11 bankruptcy protection as it looks to restructure a heavy debt.

According to Business Week, a move by AT&T to eliminate 4% of its workforce may only be the beginning of a torrent of staff reductions and spending cutbacks in the $1 trillion telecom industry.

Qu Hongbing, China economist at HSBC, says China could see growth dip as low as 6%, dangerously short of the 8% widely regarded as the level needed to generate enough jobs to absorb new entrants into the labor force. "Export contraction will only be deeper when global demand continues to shrink, so we'll see more job losses. Consumers will become more cautious. And if this continues, there is a real risk of a downward spiral."

Seattle, home of Boeing and Microsoft, has seen its apartment rents fall as the economy falters. The unemployment rate climbed to 5.6% in November 2008 compared to 3.7% in November 2007. The apartment vacancy rate jumped to 6% in the fourth quarter last year from 5.1% in the same period in 2007. Landlords on average are giving rent concessions of 1.8 weeks.

California currently spends more than $10 billion a year on cash aid to the disabled and poor, on child care and other services related to the state welfare-to-work program, and on home care for low-income seniors and residents with disabilities.
» CalWORKs: The governor proposes reducing the amount of welfare assistance families receive each month and limiting the amount of child-care assistance available. The administration also would limit to five years the amount of time children can receive welfare payments if their parents don't meet work requirements. Currently, children continue receiving welfare benefits even if their parents lose them as part of a "safety-net" program. The Analyst's Office supports reduced welfare payments, suggesting that families' lost state aid would be partially offset by the federal food stamp program. But instead of halting all children's benefits after five years, the office suggests modifying the safety-net program so that parents who aren't working would be required to complete at least 20 hours of community service per week in their counties in order for their children to continue getting aid.
Supplemental Security Income/State Supplemental Program: The state and federal programs provide monthly cash payments to low-income seniors and people with disabilities. The governor proposes reducing those payments and eliminating altogether a similar program that offers cash aid to legal immigrants. The LAO suggests smaller reductions and lower payments to couples who are above the federal poverty line. With regard to immigrants, the LAO said many refugees may be able for a federally funded program that would provide similar help.

Philips Electronics plans to cut about 6,000 jobs in 2009, chief executive Gerard Kleisterlee told journalists on a conference call, and will accelerate restructuring measures to save about 400 million euros annually from the second half of 2009.

Home Depot Inc said it will cut 7,000 jobs, or about 2 percent of its workforce, as it shuts its Expo home design centers business and cuts down on corporate support staff.

Credit ratings agency Standard & Poor's said General Electric's top-notch investment grade ratings were not immediately affected by the company's fourth quarter results.

Crude for February delivery was last up 64 cents, or 1.4%, at $47.11 a barrel on the New York Mercantile Exchange. It fell to as low as $45.25 earlier.

"Job losses accelerated in the fourth quarter, and the employment outlook for the next six months has weakened further," said Sara Johnson, NABE's lead analyst on the survey and an economist at IHS Global Insight.
“The experience of previous deep recessions suggests (jobless) claims are nowhere near their peak, and we doubt that peak will be reached before the fall of this year,” said Ian Shepherdson, chief U.S. economist for consulting firm High Frequency Economics.

United Airlines will further reduce the number of salaried and management employees by about 1,000 positions by the end of 2009. This is in addition to the 1,500 positions the company announced in the second quarter. When completed, its salaried and management staff will be cut by about 2,500, or nearly 30%, since the beginning of 2008.

Deere says it will lay off almost 700 workers at factories in Brazil and Iowa.

GM to lay off 2,000 workers, cut production. About 800 workers will be laid off in Ohio and 1,200 in Michigan, according to the Journal. GM also plans to idle 14 of its 24 North American plants for a week or more in the second and third quarter, the newspaper reported.

Longer-dated U.S. Treasury debt prices fell Monday, weighed by persistent concerns about government issuance flooding the market this year and by a report that seemingly offered some hope for the sliding U.S. housing market.
Auctions this week will add about $135 billion of supply to the government bond market. That is just part of the $2 trillion of issuance analysts expect will flow into the $5.8 trillion Treasury market this year.

Gold for February delivery ended up $13, or 1.5%, at $908.80 an ounce on the Comex division of the New York Mercantile Exchange, the highest closing price for a front-month contract since Sept. 22. Crude for February delivery was last down 18 cents, or 0.4%, at $46.29 a barrel on the New York Mercantile Exchange. It rose to $48.59 earlier, the highest in nearly three weeks.

Texas Instruments Inc.reported a fourth-quarter net income of $107 million, or 8 cents a share, compared with a net income of $756 million, or 54 cents a share, for the year-earlier period. Revenue was $2.49 billion, down from $3.56 billion last year. The chip maker also announced a plan to cut 3,400 jobs, or 12% of its workforce.

American Express said late Monday that fourth-quarter net income came in at $172 million, or 15 cents a share, down 79% from a year earlier when the credit card company made $831 million, or 72 cents a share. Revenue, net of interest expenses, declined 11% to $6.51 billion, the company added. "We remain cautious about the economic outlook through 2009, and expect cardmember spending to remain soft with past-due loans and write-offs rising from current levels," Chief Executive Kenneth Chenault said in a statement.

Amgen reported earnings of $961 million, or 91 cents a share, compared to earnings of $835 million, or 76 cents a share, for the same period the previous year. Excluding charges related to stock options, the company said it would have earned $1.1 billion, or $1.06 a share, for the recent period.

The Dow Jones Industrial Average gained 38.47 points, or 0.5%, to 8,116.03. The S&P 500 climbed 4.62 points, or 0.6%, to 836.57. The Nasdaq Composite added 12.17 points, or 0.8%, to finish at 1,489.46.

IBM sent layoff notices to 2,800 workers.

Honda Motor Co. said Tuesday it is cutting production in Japan and North America by an additional 50,000 vehicles amid a severe slump in global sales.
Japan's No. 2 automaker said output in North America will fall by 29,000 units, affecting Honda's three plants in the region — Ontario, Canada; Marysville/East Liberty, Ohio; and Lincoln, Alabama. Due to the production cuts, Honda's overall output in North America will drop by 12 percent to 1.26 million units in the current fiscal year ending March 31.

So much for the infrastructure play. Jacobs Engineering cuts 2009 EPS forecast to $3.55 to $3.90.

Weyerhaeuser closing two mills in Washington state immediately, due to weak market conditions. The closure of the Aberdeen sawmill and Pacific Veneer mill will affect approximately 196 hourly and 25 salaried positions, the Federal Way, Wash.-based forest products company said.

Baker Hughes, the world’s third-largest oil field services company, began cutting nearly 4 percent of its global work force today as lower oil and gas prices dampen demand for drilling and other services it provides.
The Houston-based company started laying off 1,500 of its 40,000 employees in a process that will likely stretch over a couple of weeks, said Gary Flaharty, the company’s director of investor relations.

Rachel Beck: "Already this year, seven companies in the Standard & Poor's 500 index have decreased their dividends, removing some $12 billion from shareholders' pockets in the coming months. On Monday, Pfizer became the latest blue-chip company to do so.
These cuts serve up another hit to shareholders who have already been battered by the steep declines in the stock market. That is especially true of retirees, who tend to be attracted to so-called "widows and orphans" stocks that provide them with a steady cash flow.
If the trend continues, this will be the worst year for dividend cuts since 1958, when annual payments fell by 8.4 percent, according to new research from S&P.
"It is easy to say this is going to be the worst in 50 years, but the bigger question is whether it is going to be much worse than that," said Howard Silverblatt, senior index analyst at S&P."

Sunday, January 25, 2009

Falling Off The Cliff

1/25/08 Falling Off The Cliff

Corus, Europe's second-largest steel producer, is to cut 3,500 jobs at its British operations, a newspaper reported Sunday.
The company would not comment on the report in the Sunday Times.

According to AMG Data Services, "Including ETF activity, Equity funds report net cash outflows totaling -$4.711 billion in the week ended 1/21/09 with Domestic funds reporting net outflows of -$4.079 billion and Non-domestic funds reporting net outflows of -$631 million;
Excluding ETF activity, Equity funds report net cash inflows totaling $422 million with Domestic funds reporting net inflows of $140 million and Non-domestic funds reporting net inflows totaling $282 million;
Exchange Traded (Equity) funds report net outflows of -$5.133 billion with the largest flows:
-$3.751 Bil from the SPDR Tr Series I fund;
-$520 Mil from the DIAMONDS fund;
Excluding ETF activity International funds report net inflows ($343 Mil); for the 3rd consecutive week for the first time since 5/21/08;
Excluding ETF activity Taxable Bond funds report net outflows totaling -$74 million, as High Yield funds report net inflows ($95 Mil), the first time the sector has reported 5 consecutive weeks of inflows since 5/21/08;
Money Market funds report net cash outflows totaling -$19.185 billion;
Municipal Bond funds report net cash inflows of $471 million."

The Oil Drum: "Gone with the wind. When I first wrote about the Pickens Plan, as it is now known, he was putting his money where his mouth was, declaring that he was going to build a giant 2,700-turbine wind farm in West Texas costing upward of $10 billion. Nope, not anymore. The nation’s credit crunch has gutted the wind project’s financing, putting the whole project on hold. He’s also delayed work on a state permit to build 170 miles of transmission lines from West Texas that would carry enough wind energy to power 300,000 homes. “For now,” Boone told one reporter, “the wind stuff is deader than hell.”
In fact, the whole Pickens Plan seems to be going, well, nowhere. In November, California voters resoundingly defeated a ballot measure he supported to put $5 billion in bond money into promoting natural-gas vehicles in the Golden State. (Pickens’s own company, Clean Energy Fuels Corp., the country’s largest owner of natural-gas filling stations, sponsored the plan and put up $19 million to back it.) What’s more, automakers have simply refused to embrace the idea of natural gas-powered cars. They are focused on building cars that run on electric power. Meanwhile, more skeptics have emerged to blast away at Pickens’ wind energy proposal. They insist, for instance, that the cost of transmitting electricity from Boone’s proposed windmill farms in the Midwest to the current power grid would be ridiculously prohibitive."

The head of the Italian oil company Eni SpA said Sunday that the turbulence in oil prices is unprecedented and is "extremely bad news" for the industry.
Paolo Scaroni, CEO of Eni, told a panel at the Global Competitiveness Forum the time is ripe for the oil industry to look for ways to increase certainty and stability.
"Our sector is no stranger to cycles," said Scaroni. "But the turbulence we are currently experiencing — with oil doubling in the nine months to July 2008 and then losing two-thirds of its value in the following six months — is unprecedented."
"It is also extremely bad news for an industry like ours, where a five-year view counts as short term," he added.
Scaroni said that increasing stability requires several issues to be addressed. He said there should be a rapid, precise and transparent global reporting system for production, consumption and inventories.
"That will form the basis for authoritative forecasting and help prevent groundless alarmism from spooking the market," Scaroni said.
"We also need to cooperate, in the interest of a price stability, which will benefit producers and consumers alike," he added.

"Our economy could fall $1 trillion short of its full capacity, which translates into more than $12,000 in lost income for a family of four," Obama said yesterday. "And we could lose a generation of potential, as more young Americans are forced to forgo college dreams or the chance to train for the jobs of the future.
"In short, if we do not act boldly and swiftly, a bad situation could become dramatically worse."

Mike Burk: "After 3 consecutive down weeks the market is oversold...New lows increased again last week. Although the number of new lows at the November low was less than the October low there were still enough to imply a high likelihood of a retest of the November lows....I expect the major indices to be higher on Friday January 30 than they were on Friday January 23."

France’s AAA rating may be at risk as the deepening economic slump erodes tax revenue and forces the country to raise borrowing, according to ING Groep NV. Public debt will rise to as high as 70% of GDP this year, from 67% in 2008, Budget Minister Eric Woerth said.

Business Week: "India imports 75% of its oil to meet demand, which have grown exponentially as its economy expands. The government also subsidizes 60% of the price of such fuels as diesel. In 2007, when inflation was a low 3%, economists such as Standard & Poor's Subir Gokarn urged New Delhi to start cutting subsidies. Instead, the populist ruling Congress government spent $25 billion on waiving loans made to farmers and hiking bureaucrats' salaries.Now those expenditures, plus an additional $25 billion on upcoming fertilizer subsidies, is adding $100 billion a year—or 10% of India's gross domestic product, or equivalent to the country's entire collection of income taxes—to the national bill. This at a time when India needs urgently to spend $500 billion on new infrastructure and more on upgrading education and health-care facilities. The government's official debt, which dropped below 6% of gross domestic product last year, will now be closer to 10% this year. "Starting last year, the government missed key opportunities" to fix the economy, says Gokarn. In fact, he adds, "there has been no significant reform done at all in the past four years"—the time the Congress coalition has been in power."

"Real economic activity fell off a cliff during the fourth quarter, producing a sharp drop in employment, output and spending," wrote economists at Wachovia.
And the worst part is that it's not over. Economists expect another huge decline in the first quarter, with a smaller contraction in the second quarter.
GDP is expected to have fallen at a 5.5% annualized rate in the final three months of last year, according to the median forecast of economists surveyed by MarketWatch. That would be the biggest decline since the 6.4% drop in early 1982 and one of the worst quarters in the post-World War II era.

About 1000 General Motors Corp., Ford Motor Co. and Chrysler LLC auto dealers went out of business last year, a loss deeper than anticipated amid a crippling decline in auto sales.

California’s unemployment rate climbed to 9.3 percent in December from 8.4 percent in November and 5.9 percent in December 2007, the state Employment Development Department said Friday.

Paul Craig Roberts: "The 1,120,000 lost US retail jobs in 2008 are a signal that the second stage of the real estate bust is about to hit the economy. This time it will be commercial real estate—shopping malls, strip malls, warehouses, and office buildings. As businesses close and rents decline, the ability to service the mortgages on the over-built commercial real estate disappears....The unexamined question is: Who is going to finance the next wave of debt? The US budget deficit for fiscal year 2009 already appears to be on a path to $2 trillion, and that is before Obama’s stimulus program. What we are looking at is a $3 trillion budget deficit if Obama’s program is enacted in time to impact the economy this year. Foreign countries can finance a $500 billion US budget deficit out of their trade surpluses with the US. But foreigners do not have the funds to finance a US budget deficit in the trillions of dollars, and they would not finance such a deficit even if they had the funds. Foreigners are over-weighted in dollar holdings and prefer to lighten their holding than to add to them. America’s economic prospects are dim as are the dollar’s prospects as reserve currency. An annual budget deficit in the trillions of dollars makes the dollar’s prospects appear even dimmer.
The federal government’s likely solution to the debt problem will be to monetize the debt, that is, the government will finance its deficit by printing money. Debt will be inflated away. But for those Americans without jobs or whose incomes do not rise with inflation, life will be cruel."

HJ Heinz could become an acquisition target once credit markets come unstuck, financial newspaper Barron's said on Sunday.
Heinz shares, which currently trade at around $36, could ultimately fetch up to $60 or $70 each if the likes of Nestle , Kraft or Unilever are interested in the company, which has a market value of $11 billion, Barron's said in its January 26 edition.
Even without an acquisition bid, the paper said Pittsburgh-based Heinz's shares have the potential to rise around 30 percent to $45 this year as the stock has fallen about 27 percent in the last six months, compared with a 10 percent drop at other food companies.

Twitter Inc. has reportedly raised about $20 million in new investments based on a valuation of the company at up to $250 million.
The TechCrunch and the Wall Street Journal's All Things Digital blogs over the weekend both cited unnamed sources saying that the San Francisco-based micro-blogging company has followed up on its previous $20 million in funding with a similar sized round that has yet to be announced.

Alan Hess, a University of Washington finance professor, offered another scenario: Many of the supposedly healthy banks that got federal money may be holding onto it because they fear they'll need it to plug fresh holes in their existing loan portfolios. In a sense, the government may be shoveling cash into an ever-deepening hole.

This is Sarah Palin country. Residents in Tuluksak are paying $6.99 a gallon for heating fuel, up more than $2 from last year, and $6.58 for gasoline. In some villages, prices have climbed past $8 a gallon.
A typical home here is a small, primitive cabin without running water that may shelter more than a dozen people. Even a family with a modern, efficient stove will spend $185 a week for heating.
"The oil is drilled right here in Alaska, and yet we're paying $8 a gallon? Something is amiss here. The oil companies are making billions of dollars, and people here can't afford to eat," said Pat Samson, social services director for the Assn. of Village Council Presidents in Bethel, about 35 miles southwest of Tuluksak.
The price for heating fuel and gas is only the beginning of the story. Groceries must be flown in at ever-higher freight prices. A pound of hot dogs in the village store costs $7.39, and a two-pound loaf of domestic cheese runs $17.49. A loaf of Wonder Bread is $5.85.
You betcha!

The average national price of gasoline increased 7.6 cents in the past two weeks, according to a national survey released Sunday.
Oil industry analyst Trilby Lundberg says the average price of regular gasoline Friday was $1.85 a gallon. The price of mid-grade was $1.99 a gallon and the price of premium was $2.09 a gallon.
Of cities surveyed, the nation's lowest price was $1.44 in Billings, Mont. The highest price was $2.37 in Anchorage, Alaska.

According to Microsoft’s latest 10-Q, “Zune platform revenue decreased $100 million or 54 percent reflecting a decrease in device sales.”

Effexor was Wyeth’s top-selling drug in 2007 with $3.79 billion in sales. Prevnar generated $2.4 billion. Wyeth plans to seek U.S. approval this year for a new version of Prevnar that would cover six additional strains of pneumonia, continuing its dominance over competitors.

U.S. light crude for March delivery fell 74 cents to $45.73 a barrel by 0134 GMT (8:34 P.M. EST). The contract rose $2.80, or 6.41 percent, to $46.47 a barrel on Friday.
Cameron Hanover's Peter Beutel said we can expect to see a new oil squeeze, with emerging economies rebounding to compete with the U.S. for the same supplies.

The Economic Cycle Research Institute's Lakshman Achuthan said he cannot rule out a second-half recovery, but there is absolutely no sign pointing that way in the leading economic indicators.

"It's going to be an absolute economic disaster in Contra Costa County (CA) and surrounding areas," he said. "Everyone thinks this is like the last recession with values going down and that when they come back there will be a resurgence - but it's not going to be like that. It will be years before (the tax roll) recovers because all these people are selling (distressed) homes, banks are selling at deep discounts, values are going down from 50 percent to 75 percent. The people buying them will hold onto them for five, six, seven years. The tax base is not going to recover anytime soon."
Here's an example: A four-bedroom home in Antioch sold for $700,000 in 2005. Annual property taxes were $7,000, or 1 percent of the purchase price. If the home goes into foreclosure and sells for $400,000, a common scenario in a county where values have plummeted, the new tax would be $4,000 - or $3,000 less.
Consider that almost 250,000 homes in California were repossessed by lenders last year, according to, and you get a sense of the mega dollars lost to the cities, counties, K-12 schools, community colleges and special districts that rely on property tax revenue.

Michael Zielinski: "

* Production was halted for all of the US Mint’s fractional gold bullion and 24 karat gold bullion offerings several months ago. There has been no indication when production might resume.
* The only 2009 gold bullion coin available from the US Mint is the one ounce American Gold Eagle. Sales of this single bullion coin offering remain subject to rationing.
* The US Mint’s gold numismatic offerings for 2009 have been significantly reduced from the prior year. The remaining product offerings will be priced at prohibitively high premiums under a newly established pricing policy.

Whether or not it was the US Mint’s intention, every significant action they have taken since August has either limited gold availability, eliminated gold product options, or increased the cost of acquiring gold. Has it all just been a consequence of surging global demand for gold, supply chain mismanagement, and bad timing for policy decisions? Or is there something else going on here?"

Sean Hyman: "Africa’s production of gold sank 14% which was the lowest levels since 1899. That’s serious! But it’s not just a South Africa story. U.S. gold production fell 2% last year. While China (which has now become the world’s biggest producer of gold) had their production rise 3% last year, the “net” result collectively among all countries is a net slowdown in gold production.
Central bank selling in gold was down a full 42% last year. And you’d be an idiot of a central banker to sell a bunch of gold in 2009 with the U.S. and global economy still hobbling along. Therefore, you can count on these guys not adding to the selling."

National Bankruptcy

1/24/08 National Bankruptcy

Jim Jubak: "Anyone who has seen this crisis take down what were once assumed to be rock-solid financial institutions, capable of surviving any crisis, has to ask whether the Federal Reserve really is too big to fail."

Doug Noland: "The pound today traded at the lowest level against the dollar since 1985. This currency has depreciated 30% against the dollar over the past 12 months. Against the yen, the pound has collapsed 42% during the past a year. There is little room left for conventional monetary policy. At 1.50%, the Bank of England’s (BofE) base lending rate is today at the lowest level since 1694."

1st Centennial Bank of Redlands, Calif. was seized by the Federal Deposit Insurance Corp. and state regulators on Friday. It was the third bank failure this year, and brings to 28 the number of banks that have closed since the beginning of the current credit crisis.
First California Bank, based in Westlake Village, Calif., will assume the bank's insured deposits, the FDIC said in a statement.

Bloomberg (Lynn Thomasson and Adam Haigh): “The S&P 500 Index is off to its second-worst start, shattering the biggest rally since World War II, as analysts cut earnings estimates by a record 83 percentage points and companies signal worse to come.”

Bloomberg (Courtney Dentch and Jeff Kearns): “U.S. companies are reducing dividends at the fastest rate in half a century… Five companies in the Standard & Poor’s 500 Index slashed $7.5 billion in outlays this month, more than all the cuts from 2003 to 2007, S&P said. The worst financial crisis since the Great Depression is forcing companies to hoard cash after earnings before one-time costs dropped 38 percent last year, the most since 2001…”

Doug Noland: "I fully expect our Post-Bubble Financial and Economic Predicament to parallel that of Britain. At some point, our problems will likely be of much greater scope due to, among other things, our system’s larger size. So far, the U.K. has suffered a more acute crisis due to its inability to stabilize its troubled financial sector. For one, it is suffering through a more destabilizing outflow of speculative finance (unwind of carry trades). Also, the U.K. financial structure has traditionally been less government-influenced – leaving it today more vulnerable to a crisis of confidence. Outside of government debt instruments, confidence has faltered for large cross-sections of U.K.’s financial claims (“moneyness” has been lost).

Our system has to this point proved relatively more stable due primarily, I believe, to the instrumental role played by government and quasi-government institutions such as the FHA, Fannie, Freddie and the Federal Home Loan Banks. The market’s perception of “moneyness” is retained for multi-Trillions of U.S. claims – a dynamic that bolsters the view that the U.S. dollar retains its “reserve currency” and safe-haven status. And as long as this confidence holds, faith in the government’s capacity for system “reflation” endures. But it all has the look of a fragile confidence game, and I fully expect the invaluable attribute of “moneyness” to be tested at some point.
There is absolutely no doubt that a massive inflation of U.S. financial claims is in the offing. One would suspect it is only a matter of when market perceptions of “moneyness” adjust. This week’s jump in gilt yields could portend a troubling new phase in the U.K. financial crisis. It could also be a harbinger of a more general crisis of confidence for global currencies and debt markets. The long-bond suffered its worst week since 1987 (according to Bloomberg). Gold was up $43 today and $56 for the week."

Based on a preliminary evaluation of its fourth-quarter operations, Freddie Mac's management believes that it will need $30 billion to $35 billion to offset the impact of operating losses as well as other items that could affect the company's net worth. Freddie Mac has already drawn $13.8 billion under the $100 billion agreement.

A top official at China s central bank has dismissed U.S. Treasury Secretary-designate Timothy Geithner s comment that President Barack Obama believes Beijing is manipulating its currency, state media said Saturday.

A few lucky people in the Indian Ocean will be treated to a rare event on Monday when an annular solar eclipse will transform the Sun into a dark disc with a blazing ring-shaped corona around its rim.

According to veteran NASA eclipse-watcher Fred Espenak, the total eclipse track will run from west to east on Monday from 0606 GMT to 0952 GMT.

Business Week: "Even after the government's seizure of top banks, Iceland may face bankruptcy, with dire effects for huge Icelandic investments overseas. Home to just 304,000 people, tiny Iceland is emerging as the biggest casualty of the global financial crisis...In a televised address to the nation, Prime Minister Geir Haarde conceded: "There is a very real danger, fellow citizens, that the Icelandic economy in the worst case could be sucked into the whirlpool, and the result could be national bankruptcy."

Do you really believe Iceland could be the only country to go bankrupt? Some months back I suggested investors might consider focusing on countries going under rather than simply banks, other financial institutions, and companies in general.

Brian Pretti:"In fact, one of the really neat character points here is that at each peak and trough cycle interval with the rate of change in payroll employment, the NAHB survey led the way. No exceptions. We see virtually the same thing with the historical consumer confidence data.

You don’t need me to go on and on. We need to watch what the homebuilders have to say about life. Don’t forget these folks as their “calls” on the economy that is essentially the directional rhythm of their ongoing monthly surveys make many a headline Wall Street economist look like amateurs. Historical directional correlation here is far too high to be ignored. THE important issue to our investment decision-making ahead is to look for a true and sustainable turn up in builder sentiment. In fact, when it ultimately arrives, I expect most folks will dismiss it as wishful thinking. As for me, I promise I will not."

Pfizer Inc. is close to an agreement to acquire rival drug maker Wyeth for between $65 billion and $70 billion in a cash-and-stock deal that could be announced as early as next week, the Wall Street Journal reported at about $50 per share, almost 30% more than Wyeth's closing price Thursday.

Starbucks could be considering another big round of layoffs, according to a published report.
According to a story in the Seattle Times citing a local investment firm,
Starbucks Corp.could lay off as many as 1,000 employees, including headquarters workers, district managers and field employees.

Jason Zweig: "History shows that the vast majority of the time, the stock market does next to nothing. Then, when no one expects it, the market delivers a giant gain or loss -- and promptly lapses back into its usual stupor. Javier Estrada, a finance professor at IESE Business School in Barcelona, Spain, has studied the daily returns of the Dow Jones Industrial Average back to 1900. I asked him to extend his research through the end of 2008. Prof. Estrada found that if you took away the 10 best days, two-thirds of the cumulative gains produced by the Dow over the past 109 years would disappear. Conversely, had you sidestepped the market's 10 worst days, you would have tripled the actual return of the Dow.

"Although we could make a bundle of money if we could accurately predict those good and bad days," says Prof. Estrada, "the sad truth is that we're very, very unlikely to do that." The moments that made all the difference were just 0.03% of history: 10 days out of 29,694."

Hartmarx Corp., the Chicago parent of prominent apparel brands like Hart Schaffner Marx, Hickey-Freeman and many others, said late on Friday that it filed to reorganize under Chapter 11 of federal bankruptcy law.

First Centennial Bank of Redlands, Calif., was seized by the Federal Deposit Insurance Corp. and state regulators on Friday.
It was the third bank failure this year, and brings to 28 the number of banks that have closed since the current credit crisis began.