Friday, April 10, 2009

Good Friday

4/10/09 Good Friday

China's imports of crude oil in March fell 5.5% from the year-earlier period, but were up 33% from the prior month, according to a Friday report by the Xinhua News Agency, which cited data released by the General Administration of Customs. Imports totaled 16.34 million metric tons in March, compared to 17.3 million metric tons in the year-earlier period 11.73 million metric tons in February.

China's trade surplus widened to $18.6 billion in March, up from $4.8 billion in the prior month, as imports contracted at a faster pace than exports, according to a Friday report by Xinhua News Agency, which cited figures by the General Administration of Customs. Exports contracted 17.1% from a year earlier after falling 25.7% in February. Imports slumped 25.1% on year, after falling 24.1% in February. The March figures mark the fifth straight month of declines for both import and exports.

The South Korean economy is expected to contract 2.4% this year, due to falling exports and weak domestic demand, according to Bank of Korea projections cited by media reports Thursday.

Fertilizer producer CF Industries Inc. told shareholders Thursday that it has rejected a takeover bid from larger rival Agrium Inc., calling it "grossly inadequate." Last month, Agrium had raised its buyout offer for Deerfield, Ill.-based CF Industries to $74.90 a share, 90 cents higher than its closing share price at that time and equivalent to some $3.63 billion. But in a letter to shareholders, CF Industries Chief Executive Stephen Wilson wrote that the buyout offer represented "a very low premium," noting that half of it is in cash and that "recent premiums for cash transactions are nearly 90% and premiums for stock transactions are close to 35%."

Boeing spokesman Jim Proulx said the company anticipates the work slowdown will bring "employment reductions beyond those already announced." Earlier this year, Boeing said it would reduce its commercial-airplane work force by 4,500 by the end of 2009, but said it planned no slowdown in output.
In the most significant production change, Boeing will slow monthly output of its large 777s in June 2010 from seven planes a month to five — a 28 percent cut.
The plane maker also said it will delay previous plans to modestly increase production of its 747-8 and 767, each currently at about one per month. An executive at a Boeing supplier said the 787 program is no longer planning for a furious buildup, as many customers are likely to defer their Dreamliner deliveries, too.
"Rather than ramping up, the (787 suppliers) are really slowing things down," the executive said.
If the global economic crisis continues and air travel doesn't recover, further cuts are likely at other local Boeing plants.

According to the NY Times, the Manhattan real estate market has just begun a steep slide. It parallels the decline in New York’s financial services industry, and housing analysts say it may continue long after other markets heal.

"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. "California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You'd have further depreciation and carnage."
In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity - only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as "shadow inventory."

The Oil Drum: "The IEA cut its estimate for world demand growth this year because it no longer believed economic activity might pick up in the second half.
"For the fourth time since last October, we have slashed the economic assumptions that underpin our oil demand forecasts," the IEA said, noting also an unexpectedly sharp fall of demand in China."

The IEA said it's cutting its demand projection by 1 million barrels a day, down to daily consumption of 83.4 million barrels. This would be 2.4 million barrels a day less than demand at 2008 levels -- and put the pace of contraction near levels not seen since the early 1980s, the IEA said. Demand for the first three months of the year was "much lower than expected," the IEA added. Moreover, the IEA sees lower global crude-oil runs persisting into the third quarter, suggesting weak margins for refiners.

Brett Steenbarger: "I went back to the start of 2009 and found that when one-minute volume in the ES contract was less than 3000 contracts, the average trading range over the *next* three minutes was 1.88 points. When one-minute volume exceeded 8000 contracts, the next three minutes averaged a range of 2.67 points. In other words, price movement was almost 50% greater when volume was relatively high than when it was relatively low.
We can look at this another way. Again going back to January, we find that the average three-minute ES trading range from 8:30 AM CT to 9:59 AM CT has been 2.46 points. From 10 AM CT through 11:59 AM CT, we average 1.8 points, and from 12 Noon through 1:29 PM CT, we average 2.06 points. From 1:30 PM CT through 3 PM CT, the average three-minute price range jumps to 2.72 points.
Once again, we see about 50% more movement in the busier market periods than in the slow ones."

According to AMG Data, for the week ended April 8, Equity Fund Inflows $811 Mil; Taxable Bond Fund Inflows $6.3 Bil
xETFs - Equity Fund Inflows $440 Mil; Taxable Bond Fund Inflows $2.5 Bil.

ABC News: "A survey by the research company Mintel projects a 2.3 percent drop in men's underwear sales this year. It's a statistic that may evoke giggles, but some, including former Federal Reserve Chairman Alan Greenspan, take it quite seriously: Greenspan reportedly once told a National Public Radio correspondent that because men's underwear sales are usually flat, when they dip, that's a sign of trouble.
Then there's cardboard box shipping -- cardboard boxes are used to hold food, computers and much more. In February, corrugated cardboard box shipments fell more than 8 percent in comparison to last year, The Associated Press reported. Because the number of boxes being shipped depends on demand from retailers who, in turn, make decisions based on demand from consumers, a decrease in shipments is another bad sign for the economy. "

Richard Daughty: "The average work week in March dropped to 33.2 hours" which is down 17% from the standard 40-hour workweek, which is, in case you were wondering, "a new record low". Yikes!

The White House says 17,600 vehicles from General Motors, Chrysler and Ford will be bought by June 1.

The rate of prescription abandonment has increased by 34% in the past two years, according to the health information company Wolters Kluwer Health.

Russian Energy Minister Sergei Schmatko said in comments carried by the ITAR-Tass news agency that the Iraqi government had promised that Russian companies would not be discriminated against in bidding for oil and gas-development licenses.
Putin vociferously opposed the U.S.-led invasion of Iraq in 2003 when he was president, but Russia is now eager to ensure it is not shut out of development activity.
In the past year, Iraq has given Russian oil companies including Lukoil, state-owned Rosneft and Tatneft the green light to bid against others worldwide for contracts to develop several promising fields.

The U.S. federal budget deficit rose to a record $956.8 billion in the first six months of the fiscal year after the government stepped up spending to cope with the recession that has depressed tax receipts, the Treasury Department reported Friday. The deficit through the first six months is more than three times higher than it was this time last year. The government has borrowed $1 trillion from the public so far this fiscal year. In March, the deficit widened to $192.3 billion from $48.2 billion in March 2008. Outlays rose 41% to $321.2 billion from $227 billion, while receipts dropped 28% to $129 billion from $178.8 billion.

Obama :"The economy is still under severe stress."

A suicide bomber rammed his explosives-laden truck into a sandbagged wall Friday in northern Iraq, killing five American soldiers and two Iraqi policemen in the single deadliest attack against U.S. forces in more than a year.
A sixth American soldier and 17 Iraqi policemen were wounded in the blast that took place near the national police headquarters in southwestern Mosul — Iraq's third-largest city and al-Qaida's last urban stronghold.

Cape Fear Bank of Wilmington, N.C., became the 22nd bank failure of 2009 and the 47th of the recession, according to the Federal Deposit Insurance Corp. on Friday.

Thursday, April 09, 2009

Retail Sales

4/9/09 Retail Sales

Lloyds Banking Group is drawing up plans to cut as many as 25,000 jobs following its acquisition last year of HBOS, according to a report in The Daily Mail newspaper.

Wal-Mart Stores Inc. said Thursday March same-store sales in the U.S. rose 1.4%, excluding fuel. Analysts expected an increase of 3.2%, according to a survey of analysts by Thomson Reuters. Same-store sales rose 0.6 percent at the company's U.S. namesake stores and 6.2 percent at its Sam's Club warehouses during the five weeks ended April 3. Including fuel, same-store sales rose 0.7 percent.

Costco Wholesale Corp. said Thursday that its March sales at stores open at least one year fell 5%, including a 2% drop in U.S. stores.

Wells Fargo & Co.expects to report record profits for the first quarter of roughly $3 billion, or 55 cents a share. The projected numbers are after preferred dividends, including $372 million in dividends paid to the U.S. government, are taken into account. Analysts surveyed by FactSet Research are expecting, on average, profits of 31 cents a share. Wells Fargo said it expects total revenue for the quarter to be $20 billion. The firm will report its first-quarter results on April 22.

China's auto sales hit a monthly record of 1.11 million vehicles in March, exceeding U.S. sales for the third month in a row, as tax cuts and rebates for small car purchases lured buyers back into showrooms, according to industry figures.
The China Association of Automobile Manufacturers said sales rose 5 percent in March from a year earlier, when they totaled 1.06 million, the official Xinhua News Agency reported Thursday.

First-time claims for state unemployment benefits dipped a seasonally adjusted 20,000 to 654,000 in the week ended April 4, reaching a level that is 83% higher than the same period in the prior year, the Labor Department reported Thursday. The four-week average of these initial claims fell 750 to 657,250. For the week ended March 28, the number of people collecting state unemployment benefits reached yet another new record, gaining 95,000 to 5.84 million - double the level in the prior year. These continuing claims have gained for 12 consecutive weeks, and have reached new weekly records since late January. The four-week average of continuing claims rose 146,750 to a record 5.65 million. The insured unemployment rate - the proportion of covered workers who are receiving benefits - rose to 4.4% from 4.3%, reaching the highest level since April 1983.

Nordstrom Inc. said March at stories open at least one year fell 13.5%. Target Corp.said Thursday that its March sales at stores open at least one year fell 6.3%. Abercrombie & Fitch Thursday reported its March sales at stores open at least one year fell 34% from a year ago. Gap Inc. said Thursday that its March sales at stores open at least one year fell 8%. Macy's March sales at stores open at least one year fell 9.2%. J.C. Penney Co. said Thursday same-store sales slid 7.2 percent in March. Neiman Marcus Inc. said Thursday that same-store sales fell 30 percent in March reflecting poor sales in all divisions.

Imports into the United States fell sharply again in February and the U.S. trade deficit narrowed to $26 billion, the smallest since 1999, the Commerce Department reported Thursday. Imports of goods and services fell 5.1% to $152.7 billion, the lowest in more than four years. Exports of goods and services rose 1.6% to $126.8 billion, the first increase since July.

"Overall consumer confidence advanced 30.1 points, bringing the RBC CASH Index to 38.3 in April, compared to 8.2 in March. Consumer sentiment was bolstered by a 58.3 point increase in Americans' expectations for the future. Americans' attitudes about current conditions and investing also increased in the past month, but they continue to worry about jobs."

Platinum rose to a six-month high in London on speculation that improving auto sales and a potential new exchange-traded fund will increase demand for the metal.

Inflation watch: If you think inflation is muted, just look at corn, soybeans, wheat, and copper. Paychecks down, hours worked down, food costs up.

U.S. natural gas inventories rise 20 bcf last week: EIA. Analysts surveyed by Platts had expected an increase of 11 billion cubic feet to 16 billion cubic feet. After the data, May natural-gas futures fell 1% to $3.595 per million British thermal units. Futures were up 1% before the data.

Michael Kahn: "Whether the March low turns out to be the ultimate low or not, it is a fairly safe bet that a new bull market has not yet begun. There must be at least one more selloff coming....Jason Goepfert, proprietor of, says yes. He points out that the AAII survey of individual investors and other sentiment-related indicators -- specifically put/call ratios and Rydex mutual-fund asset flows -- are indeed showing a quick acceptance of the rally.
This is why I think that the next decline that takes place will be psychologically devastating for investors. And devastated investors will stop looking for a bottom. They will turn off the financial media, resign themselves to their losses and work on their hobbies instead....

The widely followed relative strength index has barely been able to escape a merely neutral level, and that suggests that there has not been a lot of force behind the move. In fact, over the past three weeks, the market has been able to rally three consecutive days only one time. That is not how a rally should work.

When we examine volume, we see that the number of shares changing hands each day has been declining, too. This leads to the conclusion that it was a lack of selling, rather than a surge in buying, that is behind the gains. Again, that is not how a rally should work.

Put together the mediocre momentum, falling volume and sentiment that shows the rapid loss of fear and we get a recipe for a selloff."

President Mahmoud Ahmadinejad inaugurated Iran’s first nuclear fuel plant, the state-run Islamic Republic News Agency said, a day after he insisted that the Persian Gulf country doesn’t aim to develop atomic weapons.

The Obama administration said yesterday it plans to join China, Russia and European allies in talks with Iran on the country’s nuclear program, marking a shift in U.S. policy. Former President George W. Bush made U.S. participation in such talks conditional on Iran suspending its nuclear work.

Boeing Co. said late Thursday it is curbing produciton of twin-aisle commercial jets, a move that will result in a sizable hit to first-quarter earnings. Boeing said it will cut production of 777s to five airplanes a month from seven beginning in June 2010, and will delay plans to modestly increase 747-8 and 767 production. The aircraft maker also said that the sour economy "has contributed to significant declines in the escalation indices that affect forecasted pricing for commercial airplanes already ordered." As a result, the production decisions and the unfavorable price escalation will lower first-quarter earnings by 38 cents a share.

The Dow Jones Industrial Average rose 246.27 points, or 3.1%, to finish at 8,083.38, up 0.8% for the week. The S&P 500 added 31.40 points, or 3.8%, to end at 856.56, a 1.7% rise from last Friday's close. The Nasdaq Composite climbed 61.88 points, or 3.9%, to 1,652.54, a weekly rise of 1.9%.

President Barack Obama will seek $83.4 billion more for combat operations in Iraq and Afghanistan and other foreign aid, a congressional aide said.
The request for the remainder of the current fiscal year includes $75.8 billion for combat operations and $7 billion for various State Department and other initiatives, the aide said.
Obama’s request is expected to be submitted later today.
The extra war funding for fiscal 2009, which ends Sept. 30, includes money for adding 17,000 personnel to the U.S. force of 38,000 in Afghanistan.

Commodity prices, after slumping the most in at least a half century, have probably reached the bottom and should rebound over the next several years as demand outpaces supply, Credit Suisse said.
The Reuters/Jefferies CRB Index of 19 commodities fell 4 percent in the first quarter, extending last year’s 36 percent decline. Demand for everything from copper to oil shrank, with global growth likely to contract for the first time since World War II and trade decline the most in 80 years, the World Bank said last month.
“There are some signs of stabilization and we are becoming more optimistic that we have seen the lows for the cycle,” Adam Knight, head of the Credit Suisse Glencore Commodities Alliance, said in April 3 interview in London.

Crude rose $2.76 a barrel to end the week at $52.14. Oil dropped $5.90 to close at $880.
Aluminum rose 3% and copper rose just shy of 4%.

"The fundamentals of the (Canadian) economy are robust, but when the U.S. sneezes the rest of the world catches a cold," said Nouriel Roubini. "This time around the U.S. is not just sneezing, it's a severe case of pneumonia and the biggest trading partner next door is Canada."

Chevron Corp. expects its first-quarter 2009 earnings to be "sharply lower" than in the fourth quarter of 2008. The company said in its interim quarterly update that weak energy demand and falling oil and gas prices worldwide had cut into its results, offsetting production gains. At the same time, the San Ramon, Calif.-based company said that with the exception of the U.S. West Coast region, its refining margins fell worldwide in the first months of the year.

Wednesday, April 08, 2009

Change For The Worst

4/8/09 Change For The Worst

Salon: "In other words, beyond even the outrageously broad "state secrets" privilege invented by the Bush administration and now embraced fully by the Obama administration, the Obama DOJ has now invented a brand new claim of government immunity, one which literally asserts that the U.S. Government is free to intercept all of your communications (calls, emails and the like) and -- even if what they're doing is blatantly illegal and they know it's illegal -- you are barred from suing them unless they "willfully disclose" to the public what they have learned." This is the first time [the DOJ] claimed sovereign immunity against Wiretap Act and Stored Communications Act claims. In other words, the administration is arguing that the U.S. can never be sued for spying that violates federal surveillance statutes, whether FISA, the Wiretap Act or the SCA.

Pulte Homes Inc. on Wednesday said it is buying Centex Corp. in an all-stock transaction that will create the largest U.S. home builder as the beleaguered industry tries to ride out the housing slump.
The companies have agreed to merge in a $3.1 billion deal, including $1.8 billion of debt. Centex shareholders will receive 0.975 share of Pulte common stock for each Centex share they own. The deal has a value of $10.50 per Centex share, based on the $10.77 closing price of Pulte shares on Tuesday.

Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.
"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. "California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You'd have further depreciation and carnage."

The Central Bank of Iceland's Monetary Policy Committee on Wednesday cut its policy rate to 15.5% from 17%.

Deere & Co. said Wednesday it would indefinitely lay off 160 workers at its Des Moines Works facility due to reduced demand for its tillage, planting and cotton-harvesting equipment. The layoffs are effective April 27.

The Bank of Thailand reduced its benchmark interest rate by a quarter-point to 1.25% Wednesday.

Barry Ritholtz: "
You may have heard the phrase “second derivative” bandied about; most users of the term fail to define it in plain English. Here’s my attempt: Imagine you jump from a airplane — for a while, you are free falling — accelerating downwards at increasing speeds*. After a few thousand feet, you pull the rip cord and your parachute opens up. In terms of direction, you are still heading down; In terms of speed, however, even though you are falling, you are falling at a much slower rate. As the parachute deploys, you are decelerating — the rate of your fall is slowing.
That pretty much sums up the economy lately — still contracting, but at a slower rate than the panic period from September to February. But this does not mean we are yet on the ground. That lack of change could be called stability. And the economy is certainly not expanding. That is likely several quarters (or longer) away.
And those investors who made recent bets that Green Shoots are a great entry for investing — well, they may be somewhat disappointed."

Cyberspies have penetrated the U.S. electrical grid and left behind software programs that could be used to disrupt the system, according to current and former national-security officials.
The spies came from China, Russia and other countries, these officials said, and were believed to be on a mission to navigate the U.S. electrical system and its controls. The intruders haven't sought to damage the power grid or other key infrastructure, but officials warned they could try during a crisis or war.
"The Chinese have attempted to map our infrastructure, such as the electrical grid," said a senior intelligence official. "So have the Russians."

Ryder System slashed its first-quarter estimate, citing the effect of the economic downturn on demand for its truck rentals and fleet-management services.

A congressional panel overseeing the U.S. financial rescue suggested that getting rid of top executives and liquidating problem banks may be a better way to solve the economic crisis.
The Congressional Oversight Panel, in a
report released yesterday, also said the Treasury may be relying on too rosy an economic scenario to guide its $700 billion bailout, and declared that the success of the program after six months is “mixed.” Three of the group’s members disagreed with at least some of the findings.
“All successful efforts to address bank crises have involved the combination of moving aside failed management and getting control of the process of valuing bank balance sheets,” the panel, headed by Harvard Law School Professor Elizabeth Warren, said in its report.

Now TARP funds are expected to be offered to the life insurance industry, and is just one more government takeover of our financial system.

The Federal Reserve may offer investors longer-term loans at higher interest rates to buy commercial mortgage-backed securities, aiming to protect the central bank’s balance sheet while acceding to an industry plea.

Peter Morici: "Increasingly, the economic slowdown looks more like a depression than a recession. Federal Reserve interest rate cuts and stimulus spending and tax rebates shorten recessions and ease their impact. However, those policies will not end the current slump, because it is grounded in fundamental structural dysfunctions in U.S. banking, energy and trade policies.
Employers in high tech, retailing, manufacturing, publishing and elsewhere are not temporarily furloughing workers. They are restructuring employment downward, permanently, for what they expect to be smaller markets for their products for several years.
Without systemic reforms, the more than 6 million jobs lost in 2008 and 2009 will not be regained for many years. The crisis requires quick and bold action, and it requires more than a politically conceived stimulus package. It also compels radical changes in how Washington regulates banks and fosters international competition and wealth creation. "

Richard Russell: "This bear market will be deeper and longer than most people think," said the legendary market watcher. "People got optimistic too quick" about the recent rally, which he says is doomed to fail. "None of the characteristics of a major bottom" are evident, most notably dirt cheap valuations.
Russell's recommendation: "Stay on the sidelines," in cash or gold, the multi-year rally in which won't end until there's a "speculative explosion" in the metal, he says.

Federal Reserve policymakers lowered their economic outlook for the rest of the year at its meeting last month, suggesting that they may not be done taking unprecedented steps to try and jumpstart a recovery.

According to the minutes of the Fed's latest policy meeting, which were released Wednesday, the central bank said that gross domestic product, the broadest measure of economic activity, is likely to flatten out in the second half of 2009 and expand only slowly next year.

The Fed also said that it now expected the unemployment rate to rise more steeply into early next year before "flattening out at a high level over the rest of the year."

Crude for May delivery rose $1.75, or 3.6%, to $50.90 a barrel on the New York Mercantile Exchange. Crude inventories rose 1.7 million barrels in the week ended April 3, the EIA said. Analysts at energy information provider Platts had expected an increase of 2.3 million barrels. The EIA also reported gasoline inventories rose 600,000 barrels while distillate stockpiles, which include heating oil and diesel, fell 3.4 million barrels.

The Dow rose 47 points, the S&P 9, and the Nasdaq 29 while the VIX broke below the 40-50 trading range and closed at 38+.

Google's share of the U.S. search market expanded in March to 72.39%, up from 72.11% in February and 67.28% a year ago, according to new data from research firm
Hitwise. Yahoo’s position was 16.36% share in the month, down from 17.04% in February and 20.30% a year ago.
Microsoft’s share slipped to 5.5%, from 5.56% in February, and 6.65% a year ago.

At least 10 states are considering some kind of major increase in sales or income taxes: Arizona, Connecticut, Delaware, Illinois, Massachusetts, Minnesota, New Jersey, Oregon, Washington and Wisconsin. California and New York lawmakers already have agreed on multibillion-dollar tax increases that went into effect earlier this year.

LyondellBasell will cut 17 percent of its employees, let go a third of its contract workers and close dozens of facilities under an expanded cost cutting program the bankrupt chemical giant said will save $1.3 billion.
The plan means 3,000 employees and 2,000 contractors will be terminated, and 20 offices and research and development sites and 10 or more manufacturing plants will be shuttered.

Tuesday, April 07, 2009

White Witch's Narnia

4/7/09 White Witch's Narnia

Martin Hutchinson: "At current levels, U.S. stocks are only marginally above their equilibrium value, based on U.S. economic performance in the decades to 2007, but there is now no certainty that we are in the economy of 2007, or anything like it. With higher taxes and a large "output gap" such as is appearing between actual and potential GDP, which will remain with us for many years, the profitability and growth of U.S. industry will be permanently damaged, so stock prices should in equilibrium be correspondingly lower.
There is thus likely to be another downward "leg" in the U.S. stock market's long decline from its bubble-induced euphoria of 1995-2007, taking it to around the historical low valuations of periods such as 1949 when the cult of the equity was dead and buried. Taking "normalized" post-recession earnings on the Standard and Poor's 500 as being around $60, and applying a 1949 multiple of about 7 times earnings, would give a bottom for the S&P500 of about 420, equivalent to below 4,000 on the Dow. In other words, the likely market bottom is at about half its current level.
The global economic climate, far from bursting into bloom, is likely to endure a prolonged winter, extending over several years, as if nuclear war or a volcano larger than Tambora had struck the world in 2008. For the global economy, it will be the White Witch's Narnia – always winter and never Christmas."

The balances on American consumers' credit cards fell at a 9.7% annual rate in February, the fastest rate of decline since 1976, the Federal Reserve reported Tuesday. Total outstanding consumer credit, including both revolving and nonrevolving credit, fell at a 3.5% annual rate, or $7.5 billion to a seasonally adjusted $2.56 trillion, the Fed said. Credit expanded by a revised $8.1 billion, or 3.8%, in January. Credit has grown 1.1% in the past year, the slowest growth since 1992. Revolving credit (mostly credit cards) fell by $7.8 billion, or 9.7% annually, in February to $955.8 billion. Nonrevolving credit, including auto loans and personal loans, rose by $313 million, or 0.2%, to $1.61 trillion.

It was reported the International Monetary Fund was set to forecast toxic assets on the balance sheets of financial sheets could reach $4 trillion.

"As the fiscal month wrapped up, sales continued uneven by type of retail segment with some pullback at discounters, but dollar stores appeared stronger," said Michael Niemira, ICSC chief economist. "Overall sales continued to contract on a year-over-year basis, but showed some modest improvement on a week-over-week basis." For March, he forecast sales will be flat to down 1%.

A quarter of the world's companies, and 40 percent in the United States, plan to freeze salaries this year, but employees in South America and India can look forward to robust rises, a global survey shows on Tuesday.

Hedge fund assets may fall by more than 20% in 2009, according to International Financial Services London. In the first two months of 2009 hedge fund assets fell by 9%, largely due to redemptions, IFSL said.

Baker Hughes said the number of drilling rigs actively exploring for or developing oil or natural gas dropped by 440 to 2,313 in March from 2,753 in February. In the U.S., the rig count fell by 215 to 1,105.

The Reserve Bank of Australia Tuesday cut its policy rate by a less-than-expected quarter-point, saying there was room for a further adjustment in the rates in a weakening economy. The reduction to 3% is the sixth since the RBA began its rate-cutting cycle in September, and comes after the central bank left interest rates unchanged last month.

Shares of Rio Tinto tumbled 9% in Sydney Tuesday, after the mining giant said it will slow the construction of an alumina refinery and cut down bauxite production in response to a slump in demand and prices of aluminum. The Anglo-Australian company said it will cut annual bauxite production at its Weipa mine to 15 million tons from 19.4 million tons in 2008 and will slow down the construction of its Yarwun alumina refinery expansion at Gladstone in Australia. Rio Tinto Alcan bauxite and alumina President Steve Hodgson said despite alumina industry capacity cuts of 21 million tons a year since the beginning of the economic crisis, there was little improvement in alumina prices. "At current prices around 70% of the industry is currently operating at a financial loss," he added.

John Tamny of RealClearMarkets: "U.S. oversight of the dollar since 1971 has been nothing short of irresponsible, and as the dollar remains the world’s currency, poor dollar policy has invariably impacted the world in very negative ways."

In the federal government's fiscal first half of the year, receipts to the Treasury fell $160 billion from the same period a year ago. Receipts from individuals were off by $76 billion and income from corporations was down $73 billion. Miscellaneous fees made up the balance.

According to Bloomberg, U.K. manufacturing dropped the most in at least four decades as the global economic slump throttled demand for goods from cars to ceramics.

Thirty-five companies defaulted in March, the highest number in a single month since the Great Depression, according to
Moody’s Investors Service.
The rate at which speculative-grade corporate borrowers worldwide failed to meet their obligations rose to 7 percent from 4.1 percent at the end of last year, Moody’s said in a report today. So far this year, 79 companies rated by Moody’s have defaulted, the New York-based ratings firm said.
Almost $1.3 trillion of losses and writedowns at financial institutions worldwide, combined with the deepest economic slowdown since World War II, have weakened companies’ finances, reducing their ability to pay debt. The global default rate will peak at 14.6 percent in the final quarter of the year, Moody’s predicted, lower than last month’s 15.3 percent forecast.

Rep. Ron Paul: "Tragically, it is those who save their dollars, the most prudent and responsible among us, that will be hurt most by this irresponsibility in Washington."

U.S. chief executives' confidence in the economy fell further in the first quarter, setting a second consecutive all-time low, according to a Business Roundtable survey released on Tuesday.
In a sign that businesses and workers have more worries ahead of them, more than two-thirds of CEOs surveyed said they planned more layoffs and cuts to capital spending in the next six months, as they brace for lower sales.
The quarterly CEO Economic Outlook Index fell to negative 5 -- the first negative reading in the survey's six-year history -- and down from a fourth-quarter reading of 16.5.
T he CEOs expect the economy to contract 1.9% in 2009.

In the first hour of Tuesday trading, the Dow dropped over 150 points and yet the VIX only
rose a fraction of a point. After 4 hours of trading, the Dow dropped about 185 points and yet the VIX only rose a fraction of a point. By the end of the day the Dow was down 186 points and yet the VIX had declined 1/2 a point.The S&P 500 Index dropped 19.93 points, or 2.4%, to stand at 815.55, while the Nasdaq Composite sank 45.1 points, or 2.8%, to 1,561.61.

Emerson Electric Co, citing declining sales, revised downward its 2009 earnings outlook Tuesday to a range of $2.40 to $2.60 a share from its Feb. 3 forecast of $2.70 to $2.95. Emerson said it is facing a 9% to 11% drop in full-year sales from 2008 levels.

Crude for May delivery fell $1.90, or 3.7%, to end at $49.15 a barrel on the New York Mercantile Exchange.

Grocery sales "could drop further and remain negative longer than they did during the last downturn" due to the severity and depth of the current economic downturn, Pali Research said on Tuesday.
"The industry is at the beginning (of) its sales challenges rather than toward the end," Pali Research analyst Robert Summers said in a client note.

Juniper Networks lowered its first-quarter revenue outlook, citing "lower than expected sales to service providers." The Sunnyvale, Calif.-based maker of networking gear said it expects sales in the range of $760 million to $765 million, down from a previous guidance of $800 million to $830 million.

Alcoa Inc.reported a first-quarter loss $497 million, or 61 cents a share, vs. a profit of $303 million, or 37 cents a share a year ago. Excluding discontinued operations, Alcoa would have posted a loss of 59 cents a share.

Natural gas hit a 6-year low.

Nouriel Roubini, a professor at New York University's Stern School of Business and chairman of economic research firm RGE Monitor, said on Tuesday that he expected more dour macroeconomic data and problems in the banking and housing sectors, as well as pressures on consumers.

Meredith Whitney, chief executive of Meredith Whitney Advisory Group:"It's not just the banks that have to stabilize their own lending it's that they have to make up for the void of the shadow banking industry that has been shut down since the summer of 2007. We've got a ways to go."

Monday, April 06, 2009

Jobless Workers

4/6/09 Jobless Workers

John Hussman: "Last week saw a continuation of the impenetrably misguided policy response to this financial crisis, which seeks to address the downturn by encouraging more of what got us into this mess in the first place.... You can play hot potato with the toxic assets all day long, and only outcome will be that the public will suffer the losses that would otherwise have been properly taken by the banks' own bondholders. You can tinker with the accounting rules all you want, and it won't make the banks solvent. It may improve “reported” earnings for a spell, but as investors who care about the stream of future cash flows that will actually be delivered to us over time, it is clear that modifying the accounting rules doesn't create value. It simply increases the likelihood that financial institutions will quietly go insolvent. I recognize that the accounting changes may reduce the immediate need for regulatory action, since banks will be able to pad their Tier 1 capital with false hope. But we have done nothing to abate foreclosures, and we are just about to begin a huge reset cycle for Alt-A's and option-ARMs. As the underlying mortgages go into foreclosure, it will ultimately become impossible to argue that the toxic assets would be worth much even in an “orderly transaction.”

HSBC says Asian economies are poised to 'spring back' from their biggest slowdown in over a decade as lower interest rates, stimulus plans and falling commodity prices boost domestic demand.

Mike Mayo, who left Deutsche Bank AG to join Calyon Securities, assigned an “underweight” rating to banks on expectations that loan losses will exceed levels from the Great Depression.
“While certain mortgage problems are farther along, other areas are likely to accelerate, reflecting a rolling recession by asset class,” Mayo wrote in a report today. “New government actions might not help as much as expected, especially given that loans have been marked down to only 98 cents on the dollar, on average.”

Rathbone Brothers Plc, MFS Investment Management and TD Ameritrade Holding Corp. say the reliance on banks is making them increasingly concerned that the 25 percent gain by the Standard & Poor’s 500 Index since March 9, the steepest rally since 1938, will dissipate. While rising home sales and durable- goods orders show the economy may be bottoming, unemployment and consumer debt as well as prospects that banks will be forced to write down more loans may halt the gain in equities.
“People should not get carried away,” said Julian Chillingworth, the London-based chief investment officer at Rathbone Brothers, which had more than $14.6 billion in assets under management at the end of last year. “We first need to see genuine signs of economic recovery.”

Copper and zinc rose to the highest in five months as industrial metals rallied on speculation demand will rebound and as equities recovered worldwide.

The Oil Drum: "BP Plc, Total SA and Royal Dutch Shell Plc are asking oilfield service companies to cut project costs by up to 40 percent as the industry battles its worst slump since the mid-1970s.
Executives at contractors including Technip SA, CGGVeritas and Saipem SpA said Europe’s biggest oil companies are pressing for discounts. In response, they say they reduced the number of drilling rigs in operation by more than 25 percent and next will take oilfield vessels out of service, threatening jobs."

According to Business Week, "in March 2009, 24.2% of the jobless—3.2 million workers—were out of work for more than six months, surpassing the previous recession peak of 19.8% in November 1982. On average, the unemployed have been jobless for 20.1 weeks as of March, a 24.8% increase from a year ago. The long-term unemployed may approach or exceed 30% of all jobless workers by 2010, according to a forthcoming study by NELP and the Institute for Research on Labor & Employment at the University of California at Berkeley.
Other economists say that some of the lost jobs are disappearing forever, symptomatic of a structural shift in the economy.
"Employers in high tech, retailing, manufacturing, publishing, and elsewhere are not temporarily furloughing workers; rather they are restructuring employment downward, permanently, for what they expect to be smaller markets for their products for several years," says Peter Morici, professor at the
Robert H. Smith School of Business at the University of Maryland. "The more-than-6-million jobs lost in 2008 and 2009 [may] not be regained for many years."

According to Mayor Mike Bloomberg, 46,000 New York City finance jobs will disappear by 2010.

Morgan Stanley strategists in Europe are selling equities down to underweight from neutral, saying they they continue to prefer cash over equities. "After the recent strength in equities, with European equities up 17% and the S&P 500 up 25% from their troughs, we now move 5% out of equities into bonds," they added. They are now 5% overweight cash, neutral bonds, and 5% underweight equities. "Our three signposts to identify the end of the bear market do not flash green. We wish to wait for fundamentals to be close to trough before turning more bullish," they added.

Bill Fleckenstein: "It must be remembered that some of the best rallies occur in bear markets. For instance, in the first half of 1930, the market jumped 40% -- twice what Bubblevisiondefines as a bull market -- and it certainly didn't end very well. (Part of the reason for that big rally was a belief that the recession, which became the Great Depression, was already over.)"

Even as indicators suggest a recovery in consumer spending, retailers may have to make additional job cuts to boost profits, said Strategic Resource Group’s Flickinger. Earnings at U.S. retailers dropped 38 percent last quarter and will fall 31 percent this period, according to analysts’ estimates.
“We’re in a 1,000-day retail recession and we’re not even halfway through it,” he said. “It’s going to be a much more severe brand and consumer-products recession as we get into the second and third quarters.”
Liz Claiborne, Jones Apparel Group and Tiffany & Co. are “really having a tough time,” Flickinger said. Sales at U.S. retailers may fall 0.5 percent this year, the first drop in at least 14 years, the National Retail Federation said in January.

In the first 30 minutes of trading on Monday, the Dow dropped 100 points and quickly recovered about 50% of the loss. Volatility is alive and well. Before you could blink, the Dow was down 100 points again.

Peter Boockvar: "As the S&P’s have rallied 26%, the CRB is up 15%. It’s like a Cubs hitter that smacks a lot of home runs in Wrigley Field b/c the wind is always blowing out but can’t hit one on the road without the help of the wind. The stats look good but it’s not real."

In a short statement the Frankfurt-based ECB said it, the Bank of England, the Federal Reserve, the Bank of Japan and the Swiss National Bank were joining in the expanded swap arrangements.
"Should the need arise, euro, yen, sterling and Swiss francs would be provided to the Federal Reserve via these additional swap agreements with the relevant central banks," the statement said.
"Central banks continue to work together and are taking steps as appropriate to foster stability in global financial markets."
The ECB went on to say that its governing council has decided to establish a temporary reciprocal currency arrangement, or a swap line, with the Federal Reserve.

During the first three months of 2009 the high-tech sector in the U.S. suffered its deepest layoffs in seven years, according to a firm that tracks the jobs market.
Challenger, Gray & Christmas Inc. on Monday said high-tech companies announced job cuts totaling 84,217 in the first quarter - the steepest reduction since 133,511 layoffs were disclosed in last three months of 2002.
The latest decline follows 66,312 reported layoffs in the 2008 fourth quarter, according to Challenger Gray. Job cuts have risen five straight quarters, the firm said.

The bank stress tests currently underway are “a complete sham,” says William Black, a former senior bank regulator and S&L prosecutor, and currently an Associate Professor of Economics and Law at the University of Missouri - Kansas City. “It’s a Potemkin model. Built to fool people.” Like many others, Black believes the “worst case scenario” used in the stress test don’t go far enough.

The Dow Jones Industrial Average fell 41.74 points, or 0.5%, to 7,975.85. The S&P 500 shed 7.02 points, or 0.8%, to 835.48, while the Nasdaq Composite dropped 15.16 points to 1,606.71.

According to Bloomberg, “About 53 percent of U.S. companies that issued high-risk, high-yield bonds will default over the next five years, according to Jim Reid at Deutsche Bank AG.”

Gold for June delivery dropped $24.50 to settle at $872.80 an ounce on the New York Mercantile Exchange. It was the yellow metal's lowest close since Jan. 22.
May silver tumbled 62.5 cents to $12.11 an ounce, while May copper futures fell 4.15 cents to $1.9590 a pound.
Light, sweet crude for May delivery fell nearly 3 percent, or $1.46 to settle at $51.05 a barrel.
In other Nymex trading, gasoline for May delivery fell about 1.69 cents to $1.4755 a gallon and heating oil dropped 2.69 cents to $1.4191 a gallon.
Grain prices were relatively unchanged on the Chicago Board of Trade.

The Poverty Line

4/5/09 The Poverty Line

Douglas A. McIntyre: "If the government does not extent assistance beyond 59 weeks, at the cost to taxpayers, there could be a lot of Americans living below the poverty line, and many will not have the money to keep a roof over their heads."

According to Reuters, “U.S. congressional budget analysts have raised their estimate of the net cost to taxpayers for the government’s financial rescue program to $356 billion, an increase of $167 billion from earlier estimates.”

Bruce Steinberg: “Temporary Help Services Employment was 1,816,800, or down 3.8%, from the previous month. Year-to-year loss was nearly 27%. Since December 2006, Temporary Help Services has lost more than 850,000 jobs, or 32 percent. And Temporary Help Services continued to lose market share (percent of all jobs) — it was 1.37% of all jobs in March; the last time it was so low was February 1994. It was 1.8% a year ago.”

Overall, the median price per square foot of a single-family home in Houston fell 2 percent in 2008 to $72.71, marking the first time it has dropped into negative territory in 14 years.

A year earlier, the median price rose 1.5 percent, according to the study, which evaluated 56,012 homes sold through the Multiple Listing Service in Harris, Fort Bend, Montgomery, Galveston and Brazoria counties. About 18 percent of those were new. High-end sales of at least $500,000 were down more than 40 percent both in January and February compared to the same months last year.

Mortgage Rates for 30-Year U.S. Loans Hit Record Low 4.78%, Freddie Says.

Since 1990, the number of restaurants and bars has grown to 537,000 from 361,000, a 49 percent increase, according to the National Restaurant Association. Population in the United States grew 23 percent in that period.

The association’s statistics show that 48 cents of every food dollar is now spent at restaurants, compared with 40.5 cents per dollar in 1985.

Tim Wood: "The primary bearish trend change that occurred on November 21, 2007 still remains intact in accordance with classical Dow theory. However, in accordance with my cycles work the March low was indeed expected and my model immediately triggered a short-term buy signal that quickly evolved to the point at which an intermediate-term buy signal was also triggered. Thus, we have a cyclical advance within the context of an ongoing primary bear market....all I can tell you is that based on the statistics, the bear market is not over and that this is a bear market rally."

Iraqi Oil Ministry figures show the country's oil revenues for the first three months of this year were down more than 50 percent compared with the same period in 2008.

Shares of Sun Microsystems Inc dropped on Monday after a source with knowledge of the matter told Reuters that IBM's talks to acquire its smaller rival broke down.

Retail sales volume across the euro zone fell 0.6% in February, for a 4% decline from the same month last year, the statistics agency Eurostat reported Monday.

Sunday, April 05, 2009


4/4/09 Inflating

Doug Noland: "Having accumulated Trillions of (chiefly dollar) reserves during the Bubble years, China, Russia, India, Brazil, OPEC and others today wield unprecedented power and influence when it comes to the course of international policymaking. U.S. influence has waned remarkably. And the days of the Washington-based IMF responding to global crisis by imposing monetary tightness, fiscal discipline and economic overhaul (i.e. SE Asia 1997) are over. From an analytical perspective, the (U.S.) “Core” and the (“developing”) “Periphery” of the world system are these days atypically like-minded when it comes to supporting the cause of unbridled global bailouts, stimulus, and reflationary measures more generally. It all provides ample fodder to fuel the ongoing inflation versus deflation debate. Yet when pondering the prospective global monetary structure perhaps the strongest case is to be made for Ongoing Monetary Disorder... I view the dynamic of an increasingly assertive China as integral to global reflationary efforts...Especially when one examines the horrendous numbers coming out of its export sector, it is reasonable to presume that China is intertwined in the U.S. bust. Yet it’s my view that China is in fact a historic Bubble – and that it may have commenced what may prove a powerful new phase of inflationary excess.... But until I see something to convince me otherwise, I will assume that today’s global backdrop provides China an opportunity to focus on - and move forward with - its long-term objectives. In the age of synchronized global stimulus, I don’t see why China wouldn’t “compete” fiercely in such endeavors as well. And I believe this dynamic could very well prove a powerful force in spurring global reflation. History may look back at this week’s G20 meeting in London as a key inflection point. The “Core” is in shambles, yet the surprising development may turn out to be the Periphery Rising (inflating). "

‘It’s the passing of an era,’ said Robert Hormats, vice chairman of Goldman Sachs International, who helped prepare summits for presidents Gerald R. Ford, Jimmy Carter and Ronald Reagan. ‘The U.S. is becoming less dominant while other nations are gaining influence.”

Dow Jones reported “Fannie Mae saw the largest increase in a month of its single-family delinquency rate among prime borrowers in January. The mortgage finance company said this rate shot up to a historic high of 2.77% in January from 2.42% in December, a record 35 bps increase… This compares to a delinquency rate of 1.06% in January 2008.”

Reuters: "No one seems sure how many condo buildings are in trouble but the number of calls to Florida's condo ombudsman could be an indicator. They are up tenfold in recent months.
At Miami-based condo management company CADISA, co-founder Jackie Diaz-Sampol estimated that delinquency rates are running at 30 percent to 35 percent in half her buildings.

As a result, associations are cutting back pool and hallway maintenance, trimming services and firing maintenance staff. "

The New York Times Co has threatened to shut The Boston Globe unless the newspaper's unions quickly agree to $20 million in concessions, the Globe reported on Friday, quoting union leaders.

Earthfiles: "Danish Chemists Discover Thermitic Red/Gray Chips
in 9/11 World Trade Center Destruction Dust.
“We have discovered distinctive red/gray chips in all the samples
we have studied of the dust produced by the destruction of the World Trade Center.
...The red portion of these chips is found to be an unreacted thermitic material
incorporating nanotechnology and highly energetic. ...The carbon content
of the red material indicates that an organic substance is present. This would
be expected for super-thermite formulations in order to produce high gas
pressures from ignition and thus make them explosive.”
- Dept. of Chemistry, University of Copenhagen, Denmark,
The Open Chemical Physics Journal.

International Business Machines has lowered its offer price for Sun Microsystems to $9.50 a share from $9.55 a share, although they are still in talks and the deal is not final, a source with knowledge of the matter said on Saturday.

Wayne Vroman, an economist at the Urban Institute, estimates that up to 700,000 people could exhaust their extended benefits by the second half of this year.
Some will find new jobs, but prospects will be grim: Layoffs are projected to go on, and many economists expect the jobless rate, already at 8.5 percent, to hit 10 percent by year's end.
"It's going to be a monstrous problem," Vroman said.