Friday, July 24, 2009

Mass Layoffs

7/24/09 Mass Layoffs

Schlumberger said that second-quarter net income fell to $613 million, or 51 cents a share, from $1.4 billion, or $1.16 a share, at the same point a year ago. Revenue declined to $5.5 billion, from $6.7 billion last year. Net income from continuing operations excluding charges totaled 68 cents a share. "Our outlook for the remainder of 2009 assumes some stability but no major increase in the North American natural gas rig count and as a result service pricing will remain depressed," the firm said.

British gross domestic product shrank by 0.8% on a quarterly basis in the second quarter, for a 5.6% year-on-year decline, the Office for National Statistics reported Friday.

The BLS: "Employers took 2,763 mass layoff actions in June that resulted in the separation of 279,231 workers, seasonally adjusted, as measured by new filings for unemployment insurance benefits during the month, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Each action involved at least 50 persons from a single employer. The number of mass layoff events decreased by 170 and associated initial claims decreased by 33,649. Both measures had been at record high levels in May. Over the year, the number of mass layoff events increased by 1,046, and associated initial claims increased by 104,483. In June, 1,235 mass layoff events were reported in the manufacturing sector, seasonally adjusted, resulting in 159,310 initial claims. Over the year, the number of manufacturing events increased by 680, and associated initial claims increased by 79,566. "

For First Time, Obama's Approval Rating Falls Below 50%
Overall, 49% of voters say they at least somewhat approve of the President's performance.
This marks the first time his overall approval rating has ever fallen below 50% among Likely Voters nationwide. Fifty-one percent (51%) disapprove.

BusinessWeek lost around $20 million on revenues of $147 million in 2008, and that slightly smaller losses are projected in 2009 on revenue of around $135 million. These losses do not, however, include key corporate overhead items, such as rent and certain infrastructure-related costs. When all those items are factored in, the total loss figure essentially doubles, said two executives who saw the data. (Costs for rent or other overhead can be taken out of an operation should a buyer or partner have, say, spare office space and a sizable enough infrastructure.)

Lenders would have to give new disclosures for mortgages and home-equity loans and would not be able to pay loan originators more for expensive loans, under a proposal the Federal Reserve released Thursday.

Spain's unemployment rate continued to rise in the second quarter, hitting 17.9 percent as companies slashed payrolls to cope with recession, government figures showed Friday.

Pilgrim's Pride Corp. plans to idle a chicken-processing plant in Athens, Ala., and a plant in Athens, Ga., within 60 to 75 days. The meat producer said the moves are part of the company's ongoing effort to improve capacity utilization and cut costs. About 970 workers will be affected by the closures, although many will be offered jobs at other facilities, the company said, noting that the plans will not result in lower overall production.

De Beers, the world’s largest diamond company, posted the biggest drop in sales of unpolished and uncut gems since at least 1974 after demand crumbled as the U.S., Europe and Japan slid into recession.
First-half sales of rough diamonds slid 57 percent to $1.4 billion, De Beers said today in a statement. They were $3.7 billion a year earlier. Output fell 73 percent to 6.6 million carats after the Johannesburg-based company shut mines in Botswana and Namibia. It had a so-called underlying loss of $164 million, compared with prior-year earnings of $350 million.
This year’s output will drop by about half from 2008, said De Beers, which mined 48.1 million carats last year. Rough- diamond prices slid about 50 percent on average between October and mid-March, said RBC Capital Markets analyst Des Kilalea. Second-quarter confidence among wealthy Americans rose by a record, signaling the worst of the recession is over for sellers of luxury goods, researcher Unity Marketing said on July 23.
“The second half will be better,” Gareth Penny, managing director at De Beers, the world’s largest diamond company, said today on a conference call.

According to AMG Data, for the week ended July 22, Equity Fund Inflows $193 Mil; Taxable Bond Fund Inflows $5.3 Bil
xETFs - Equity Fund Inflows $1.5 Bil; Taxable Bond Fund Inflows $2.1 Bil

The market reality is crude at $67 and natural gas at $3.50. History suggests this reality
will prove short-lived basis in fact.

U.S. consumer sentiment rose in late July, according to a survey released Friday by the University of Michigan and Reuters. Sentiment rose to 66.0 from a reading of 64.6 in early July, but was still down from the June reading of 70.8.

WTO: The collapse in global demand will drive trade volumes down by 10% in 2009, the biggest contraction since World War II. Trade finance remains under pressure. Trade recovery will be led by Asia. This is the first negative annual decline since 1982. Since trade recovery lags global recovery and global demand will remain sluggish, world trade is expected to remain subdued in 2010.(RGE Monitor)

Nouriel Roubini said a “weak” job market will contribute to another 13 percent to 18 percent drop in house prices, bringing total declines nationally to as much as 45 percent from their peak.

For clues as to the viability of this V shaped market keep an eye on the Transportation Index. All eyes have been on the Nasdaq. Maybe you should turn your attention elsewhere.

Check the availability of jobs that offer a wage that enables food and shelter etc to be accomplished. You think these layoffs are temporary? Think again. Depressions are devastating.

Former Fannie Mae economist, Thomas Lawler: “The distress in the housing market was not caused by unemployment, but now we are seeing a wave of delinquencies and foreclosures by people who, if they had kept their jobs, would be unlikely to default.”

Verizon Wireless Chief Executive Officer Lowell McAdam said mobile-phone business customers probably won’t recover from the economic slump until at least the fourth quarter.
Economic trends, which have led to job losses and stalled expansion plans, haven’t shown any signs of reversal, McAdam said in an interview this week. Banks and other financial services, where Verizon has a lot of customers, are a prime example, he said, without identifying specific clients.
“The third quarter is going to be tough -- I don’t think it’s going to get a lot worse -- but I don’t see the third quarter being some big pickup,” said McAdam, 55. “I have not seen trends that would indicate we’ve left the bottom.”

According to Bloomberg, Guaranty Financial Group, one of the largest banks based in Texas, is close to collapse after suffering nearly $1.5 billion in mortgage write-downs, according to a regulatory filing.

Guaranty Financial said in the filing that it wrote down the value of some of its mortgage-backed security holdings by $1.45 billion, while taking a goodwill charge of $107 million. That left it with negative capital at the end of March, according to the filing late Thursday.

The Dow Jones Industrial Average ended up 23.95 points, or 0.3%, to 9,093.20 points. The Dow industrials were up 4% for the week. The tech-heavy Nasdaq Composite fell 7.64 points, or 0.4%, to 1,965 points, but gained 4.2% on the week. The S&P 500 stock index gained 2.97 points, or 0.3%, to 979.26 points, posting a 4.1% gain for the week.

Waterford Village Bank of Clarence, N.Y. became the 58th bank to fail in 2009, and the first in New York this year, according to the Federal Deposit Insurance Corp. Friday.

Thursday, July 23, 2009

Spending Less

7/23/09 Spending Less

Joe Biden: "We have to spend money to keep from going broke."

Mike Shedlock: "Two-thirds of the economy is consumer spending and 50% of consumers claim they will be spending less while only 20% (concentrated at the low economic wage scales), think they will be spending more. Furthermore, most of those claiming to be spending more think it will be temporary, while most of those who think they will be spending less think it will be the "New Normal".
If it plays out that way, think corporate profits and the GDP are going to bounce strongly and stay up with those kind of numbers? If so, think again.
Target must be thinking again given they just canceled construction on a 185,000-square-foot SuperTarget store unless the developer agrees to rework the terms of the deal. See
Moody's Commercial Real Estate Scorecard Accelerates To Downside for more details including grim hotels and industrial stats.
Consumer demand is not there and more importantly, it is not coming back. The implications are ominous for commercial real estate and the much hoped for recovery in jobs."

Existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 3.6 percent to a seasonally adjusted annual rate1 of 4.89 million units in June from a downwardly revised pace of 4.72 million in May, but are 0.2 percent lower than the 4.90 million-unit level in June 2008. Total housing inventory at the end of June fell 0.7 percent to 3.82 million existing homes available for sale, which represents a 9.4-month supply at the current sales pace, down from a 9.8-month supply in May. At $1 million and over, homes stay on the market for 20 months!

UPS's profit slid 49% to $445 million as sales slipped nearly 17% amid the economic downturn. The company warned that conditions have yet to improve substantially and forecast disappointing third-quarter results.It said it expects average daily domestic package volumes to be down about 4.6% in the third quarter, equal to the second quarter slide. Average daily international export volumes likely will be down 4% to 6%, after falling 7.3% in the second quarter, the company said. The CEO stated “Our trends so far in July show no material uptick in growth, We don’t have any confidence that either demand or activity is going to pick up substantially.”

First-time claims for state unemployment benefits bounced back in the latest week, rising by 30,000 to 554,000, the Labor Department reported Thursday. The four-week moving average of initial claims fell by 19,000, meanwhile, to 566,000. Continuing claims for unemployment benefits fell during the week ending July 11, by 88,000 to 6.22 million. A Labor Department spokesman said claims are still volatile due to issues related to automobile plant layoffs.

MMM now expects organic sales for the year to drop by 10 percent to 13 percent, a more modest decline than its prior forecast for a fall of 11 percent to 15 percent. It now looks for 2009 profit of $4.10 to $4.30 per share, raising the low end of its forecast from $3.90.

Seattle-area home prices continued to show a relatively weak spring bounce in May, while setting another record annual decline, according to a national index.
The price of a typical home in King and Snohomish counties was up a minute 0.02 percent from April and down 14.1 percent from a year earlier, according to First American CoreLogic's LoanPerformance Home Price Index.
May's annual drop was larger than the decline of just under 14 percent in April and a new record for the young index, which goes back to the start of 2005.
The monthly increase comes after April's 0.14-percent monthly rise. Last year, prices posted monthly increases of 0.2 percent, 0.5 percent and 0.3 percent, respectively, in March, April and May, despite a generally declining market.

AT&T reported a 15% drop in profit on weakness in the landline business despite robust growth in wireless data revenue and subscriber totals.

McDonald's second-quarter earnings fell 8% as a prior-year gain and unfavorable exchange rates masked sales gains.

PBGC agreed to take on $6.2 billion in pension liabilities from bankrupt auto supplier Delphi, the second largest pension rescue ever.

The advisers to the bondholders that provided lender CIT Group Inc with a $3 billion loan facility this week are recommending it be restructured through a bankruptcy following a debt tender in August, Bloomberg reported on Wednesday, citing a person familiar with the matter.
CIT has started a cash tender offer for its outstanding floating rate senior notes due August 17, exchanging $825 for each $1000 principal amount.

Bristol-Myers Squibb Co. said it plans to buy Medarex for $2.4 billion, or $16 a share.

General Motors posted Wednesday a 22 percent global sales drop from a year earlier for the first six months of 2009 amid the economic slowdown and the automaker's slide into bankruptcy.
GM said its global first-half sales, which include brands the automaker is trimming from its lineup, fell 21.8 percent to 3.55 million vehicles. The automaker's sales in the second quarter fell 15.4 percent to 1.94 million vehicles.

Ford reports a quarterly profit and burns through $1 billion in cash. The profit came because of a $3.4 billion gain due to debt reduction. In March Ford swapped stock and cash to reduce its loan and bond debt by $7.7 billion. The company has cut its debt by $10.1 billion for 2009, and is likely to take further steps this year to lower debt and raise cash.
But excluding special items, including the debt reduction, Ford would have lost $424 million, or 21 cents a share.

Beginning today and running through Aug. 31, Chrysler is offering $3,500 or $4,500 rebates, or zero-percent, 72-month financing, on most 2009 models. Beginning next week, the federal government is to begin offering vouchers of $3,500 or $4,500 to anyone replacing a car or truck that averages less than 18 m.p.g. in combined city and highway driving and is less than 25 years old.

Colm Kelleher, Morgan Stanley’s chief financial officer, said he did not see the light “at the end of the commercial real estate tunnel yet”, after the bank reported a $700m writedown on its $17bn commercial property portfolio in the second quarter. “Peak to trough, you have already had a pretty nasty correction in the market but it is still not looking very good at the moment,” he said after Morgan Stanley reported its third straight quarterly loss.
Wells Fargo saw non-performing loans in commercial real estate jump 69 per cent, from $4.5bn to $7.6bn in the second quarter as the economic downturn caused developers and office owners to fall behind in their mortgage payments.

A key indicator of mortgage trouble hit an all-time high for the Bay Area in the second quarter, according to a real estate report released Wednesday.
Notices of default, sent to people who are delinquent on their home loans, totaled nearly 20,000 for the nine-county region in April, May and June, said MDA DataQuick, a San Diego real estate data company.
"This is one of the clearest signs of distress in a market and it's at a record level," said Andrew LePage, a DataQuick analyst.
A ZIP code analysis of Bay Area default notices showed that many of the biggest increases were in higher-cost areas. Foreclosure-ridden towns such as Antioch still had high concentrations of defaults but they decreased slightly from last year. Meanwhile, such affluent Contra Costa County towns as Walnut Creek, Lafayette and Danville saw significant rises in default notices, though the numbers still were relatively low.
"Distress is creeping into and intensifying in the more expensive neighborhoods," LePage said.
The Bay Area's 19,983 notices of default reflected a 7.3 percent increase from the same quarter last year. Such notices are the first formal step in the foreclosure process. DataQuick said about 62 percent of default notices result in bank repossessions of homes.

Occidental Petroleum Corp. says it has discovered oil and natural gas in a Kern County field that may represent the biggest find in California in more than 35 years.

The nation's fourth-biggest oil company said Wednesday that it had found the equivalent of 150 million to 250 million barrels of oil, adding that two-thirds of the new source is believed to be natural gas.

The Los Angeles company owns 80 percent of the Central California field.

The New York Times Co. says its second-quarter profit climbed nearly 85 percent, bucking predictions of another loss even as ad revenue dove.

The publisher of The New York Times, The Boston Globe, The International Herald-Tribune and 15 other daily newspapers said Thursday that it earned $39.1 million, or 27 cents per share, from April through June. That compares with a profit of $21.1 million, or 15 cents per share, in the same quarter a year ago.
Excluding one-time items, the company said it would have earned 8 cents per share. On that basis analysts polled by Thomson Reuters expected a loss of 4 cents per share.
Times Co. revenue fell 20 percent to $561 million. Analysts were expecting $603 million.

Although the first Atlantic named storm typically forms by July 10, the real activity doesn't usually begin until August, and a lull in early season activity doesn't necessarily presage a weak overall season.

The 2004 season, for example, didn't see its first storm until Hurricane Alex began developing on July 31.

Yet after Alex the season rapidly ramped up, finishing with 15 storms and 6 major hurricanes, including Hurricane Ivan. A storm the size of Texas, Ivan was one of the 10 most intense hurricanes ever in the Atlantic basin before striking Gulf Shores, Ala., and causing $19 billion in damage.

The Four Seasons Private Residences, Seattle's priciest condo development ever, plans to cut prices. Apparently the richest of the rich aren't buying, either.
"Market pressures are creating an environment in which even the most premium brands are having to make price adjustments to meet the market realities and buyers' expectations," Deborah Buchta of RMA Consultants, the firm marketing the condos, said in an e-mail.
"Even [the Four Seasons] is not immune to these conditions."
It's been nearly six months since a sale closed at the Four Seasons, which opened late last year. Buchta said she couldn't say how big the price reductions will be, or when they will take effect.
The project's 36 ultraluxury view condos, which fill 11 stories, sit atop a 10-story Four Seasons Hotel at First Avenue and Union Street downtown. Sales have closed on 22 of the units, according to county records, with prices ranging from $1.26 million to $11.4 million.
Word of the Four Seasons' coming price cuts comes just a week after another new, high-end project, Bellevue Towers in downtown Bellevue, announced it was reducing prices an average of 20 percent, dropping the average asking price to $927,000.
Just 45 of the project's 539 condos have sold, county records show.

Distillate inventories 25% above year ago levels and 29% above 5 year average.

A July 17 study by the Lewin Group that was commissioned by the Heritage Foundation projects that if the House bill becomes law, 83.4 million people—nearly half of those with private coverage—will lose private insurance as employers drop their plans. Mr. Obama’s promise that you can keep your plan is being left on the cutting.

A recent Gartner analysis said worldwide PC shipments decreased 5 percent year-over-year in the second quarter of 2009.

The course of nationwide home prices will probably look like a frying pan in coming years, according to a prominent economist.
The analysis comes from David Stiff, chief economist at Fiserv (which powers the Standard & Poor's/Case-Shiller Home Price Indexes), by way of Times's Curious Capitalist blog.
The idea is that prices are sliding down, or have slid down, the non-handle side of the pan and will cruise along the bottom of the pan for a while before bumping up as markets work through supplies of foreclosed homes. But the bump will be short-term, as the mix of homes realigns, with prices flattening out again along the pan handle until a real recovery comes along.

Hershey began 2009 projecting sales to grow 2 percent to 3 percent and profits to fall short of its long-term objective of 6 percent to 8 percent in annual growth.
With two strong quarters under its belt, Hershey said Thursday that it now expects annual sales to grow 3 percent to 5 percent and profits to rise above the 6 percent to 8 percent range.

U.S. natural gas inventories rose 66 billion cubic feet in the week ended July 17, the Energy Information Administration reported Thursday. Analysts surveyed by Platts had expected an increase of 65 to 69 billion cubic feet. After the data, August natural gas futures fell 2.1 cents, or 0.6%, to $3.772 per million British thermal units. At 2,952 billion cubic feet, stocks were 568 billion cubic feet higher than last year at this time and 458 billion cubic feet above the five-year average.

September futures gained 93 cents, or 1.4%, to $66.33 a barrel. It fell as low as $64.40 earlier.

Ten-year note yields, which move inversely to prices, were up 5 basis points to 3.601%.

President Obama backed off the August deadline he had set for Congress to pass a bill and tried to change the narrative.

After three hours of trading, the Nasdaq Composite Index rose for a 12th straight session, marking its longest winning streak since early 1992, when the index was trading at around 600. The index had a record 19-session winning streak in August 1979. On Thursday, the index stood at 1,965.89, up 2.1%. The Dow Jones Industrial Average rose 2% to 9,054.44, topping 9,000 for the first time since January. The S&P 500 index rose 21 points, or 2.2%, to 975.

The Dow Jones Industrial Average closed up 188 points, or 2.1%, to 9,069. It is now up 3.3% on the year and had its highest close since Nov. 5, 2008.
The Standard & Poor's 500 Index was up 22 points, or 2.3%, to 976. And the Nasdaq Composite Index added 47 points, or 2.5%, to 1,974.
The S&P 500's close was its best since Nov. 4, 2008. The Nasdaq's level was its best since Oct. 2, 2008. said its second-quarter profit fell by 10% as foreign currency fluctuations and a legal settlement hit earnings at the world's largest online retailer.
Shares fell nearly 7.1% after hours to $87.21 from a regular close of $93.87.
Operating margins were 3.4% in the quarter, well below the 5% seen in the first quarter. At least two analysts had been expecting margins of 4.1% or 4.2%.
Looking ahead, Amazon forecast third-quarter revenue of $4.75 billion to $5.25 billion -- compared with the $4.92 billion expected by analysts -- with operating profit between $120 million and $210 million.

Crude oil rose $1.80 to $67.20 a barrel this afternoon.

American Express said second-quarter net income came in at $337 million, down 48% from a year earlier when the credit card giant made $653 million. Net income attributable to common shareholders was nine cents a share, versus 56 cents a share a year earlier, the company added. The results include the money American Express paid to buy back preferred shares from the Treasury Department's Troubled Asset Relief Program. Excluding this payment, adjusted earnings from continuing operations were 27 cents a share.

Microsoft Corp. said its fiscal fourth quarter net income fell to $3.05 billion, or 34 cents a share, from $4.3 billion, or 46 cents a share in the same period a year earlier. Revenue in the period ended in June fell 17% to $13.1 billion, Microsoft said. Wall Street analysts had expected Microsoft to post fourth-quarter earnings of 36 cents a share on $14.37 billion in revenue, according to data compiled by Thomson Reuters.
"We still see conditions being challenging for the balance of this calendar year," Chief Financial Officer Christopher Liddell said in a telephone interview.
"At least sequentially, we are seeing a little bit of growth. While things are not necessarily getting better, they may have bottomed out," said Liddell.

Wednesday, July 22, 2009

Watch Out Below!

7/22/09 Watch Out Below!

Ron Paul's bill to audit the Federal Reserve (HR 1207) now has 275 co-sponsors, and the numbers keep growing! At the same time, HR 1207's companion bill in the Senate, S 604, has already attracted 17 co-sponsors.

Industrial new orders in the 16-nation euro zone saw a 0.2% monthly fall in May, down 30.1% from the same month last year, the statistics agency Eurostat reported Wednesday.

Boeing's 787 may not fly this year. Sources say the structural flaw that delayed the 787 Dreamliner's first flight is more complex than originally thought, delaying its inaugural takeoff for up to six months. Boeing on track to shrink workforce by 10,000 -CEO.

Illinois Tool Works Inc. earned $177 million, or 35 cents a share, in the second quarter. In the same period a year ago it earned $528 million, or $1.01 a share. Revenue fell to $3.4 billion from $4.6 billion.

Pfizer raised its 2009 adjusted earnings forecast to $1.90 to $2.00 a share, up from $1.85 to $1.95 a share. Reported earnings per share should come in between $1.30 and $1.45, up from $1.20 and $1.35, due largely to lower than anticipated restructuring costs.

Altria raised its 2009 full-year guidance for earnings per share from continuing operations from a range of $1.47 to $1.52 to a range of $1.51 to $1.56 and raised its adjusted forecast for 2009 earnings per share from continuing operations from a range of $1.70 to $1.75 to a range of $1.72 to $1.77.

Pepsi stood by its full-year 2009 target for both net revenue and core earnings per share of mid- to high-single-digit constant currency growth over its 2008 core earnings per share of $3.68 a share.

Rob Hanna: "Despite the rise in the S&P 500 on Tuesday the banks (BKX) fell over 3%. Historically when the banks have fallen sharply while the S&P has risen, it has often been followed by weakness in the S&P."

Brett Steenbarger: "I noticed that we made a 20-day high in the S&P 500 Index (SPY), while 20-day median daily volatility in SPY (median daily range over the past 20 days) made a 20-day low.
Going back to 2000, we have had 130 such instances of 20-day highs in stocks and 20-day lows in volatility. Five days later, SPY averaged a loss of -.32% (52 up, 78 down). By comparison, for the remainder of the sample, SPY averaged a loss of -.03% (1158 up, 1065 down)."

U.S. stockpiles rose last week for the first time since April, the American Petroleum Institute reported late yesterday. Oil imports by China, the world’s second-largest consumer, fell 2.8 percent in June from May, customs data showed.
“Inventories should be going down because this is the demand season for the U.S.,” said Tetsu Emori, a commodity fund manager at Astmax Ltd. in Tokyo. “Instead, the inventories are up. This implies that the demand isn’t as strong as expected.”
Crude oil for September delivery dropped as much as 86 cents, or 1.3 percent, to $64.75 a barrel on the New York Mercantile Exchange, and was at $64.99 at 3:24 p.m. Singapore time. Yesterday, it rose 32 cents to end the session at $65.61. The August contract expired at $64.72 a barrel yesterday.

Carol Bartz, Yahoo chief executive, also warned that it was “too early to call” whether the online advertising markets had stopped shrinking, though she added: “Overall, we’re seeing less fear in the marketplace.”

Avon Products says that it will eliminate about 1,200 positions by 2013 as part of its restructuring efforts. The revamp will affect about 2,300 positions worldwide.

About 250 hotels are in default or foreclosure in California, according to the Irvine consulting firm Atlas Hospitality Group.

"The primary negatives right now are the high rate of unemployment and general uncertainty about the future path of the economy, which make people reluctant to buy," said David Stiff, chief economist at Fiserv in Cambridge, Massachusetts, which produces the S&P/Case-Shiller and other price indexes.

Asia is leading a recovery in global trade, but world trade volumes are still expected to shrink 10 percent this year, the World Trade Organization said on Wednesday.
The WTO's forecast for 2009 world trade, issued in a press release on Wednesday, confirmed comments by its Director General Pascal Lamy to Reuters in an interview in June, a revision from a previous forecast of a 9 percent contraction.
The WTO said however the contraction appeared to be slowing.
World exports of merchandise goods grew 15 percent in nominal terms in 2008 to $15.78 trillion, while exports of services rose 11 percent to $3.73 trillion, the World Trade Organization said on Wednesday.

Genzyme lowered its 2009 profit forecast to a range of $1.74 - $2.29 a share from $3.02.

The federal minimum wage will climb 11%, to $7.25 an hour from $6.55, lifting the incomes of those who earn less than $15,000 a year.

The average workweek for June fell 0.1 hours, to 33 hours, the lowest ever recorded for data that go back to 1964. Average weekly earnings, meanwhile, actually fell to $611.49 in June, from $613.34 in May. Hourly earnings remained flat. Economists say the combination of reduced hours and pay, along with continued job losses, could significantly slow a recovery as even the employed lack the means to boost their spending.
"The amount of money taken home is not about the number of jobs but about hours worked," says Mike Englund, chief economist for Action Economics, an economic forecasting firm. "The contraction in underlying income [of those working] is pretty powerful. The job market is continuing to contract at a rapid clip."

Michelle Leder: "By now, the $2.7 billion in profits that JP Morgan reported last week are starting to fade into the ether. After all, during earnings season, it’s hard to keep track, even when it comes to the bigger names.
But we were far more interested in the second quarter slideshow that JPMorgan Chase filed with the SEC on Friday afternoon.
While most of the slides aren’t all that different from the earnings release, a few definitely stood out. We particularly liked slide #10, which showed a sharp (and scary) increase in 30-day delinquencies for so-called prime borrowers. At the end of June, that number was running around 9%, compared with around 5% at the end of 2008 — yet another indication that the rosy economic headlines lately may be a tad bit overstated.
We also liked slide #19, which had Chase’s card services losses approaching 10%. That sounds pretty awful until you look at the very next line which notes that WaMu’s card losses “to approach 24% by the end of 2009.” Let’s think about that for just a moment: does this really mean that nearly 1 out of every 4 people who had a WaMu card aren’t able to pay it back?"

RGE Monitor: "With the size and diversity of the Fed's balance sheet greatly increased, the Fed may find its independence threatened by political pressures to monetize the sharply higher public debt. The Fed has effectively taken on fiscal policy measures that may later conflict with the monetary policy goal of low inflation. Public debt monetization can have disastrous consequences - particularly inflation. Will the Fed stand up to political pressure and avoid permanently inflating away U.S. debt?"

"We may be out of a freefall for the financial system," said Roubini. "We have seen the worst in that sense. But in my view there is a sluggish U shaped recovery that might go into a W double dip if we don't fix the problems in the economy."

U.S. home prices rose 0.9% in May, the Federal Housing Finance Agency reported Wednesday, and fell 5.6% over the past year and 10.7% from the April 2007 peak. Prices rose in five out of nine regions and fell in four. April's decline of 0.1% was revised to a drop of 0.3%. If you believe these numbers, then you need help.

U.S. total petroleum inventories continued to rise last week, adding to what already is a 19-year high, weekly government petroleum data showed Wednesday. Crude inventories fell by 1.8 million barrels in the week ended July 17, the Energy Information Administration reported. Gasoline inventories, however, rose 800,000 barrels, and distillate stockpiles gained 2 million barrels. Total petroleum inventories increased by 1.9 million barrels and stayed above the upper limit of the average range for this time of year. So far this year, diesel inventories are up almost 20%.

Thomas & Betts warned that its full-year earnings will come in below Wall Street targets.

Jet engine maker Pratt & Whitney, seeking to cut costs, said it may shut some manufacturing operations in Connecticut, eliminating about 1,000 jobs.

Wells Fargo Chief Credit Officer Mike Loughlin said the bank expects credit losses and nonperforming assets to increase, despite "some moderation" in the rate of growth in some consumer portfolios.

Some 540,000 Americans are expected to fully exhaust their unemployment benefits by the end of September, and another 1.5 milllion by the end of the year, according to an analysis by the National Employment Law Project. Fully federally funded benefits extensions are covering 2.8 million workers, the NELP reports. Heathcare reform cannot be funded while unemployment benefits are extended.

August gold futures rose $6.40, or 0.7%, to end at $953.30 an ounce on the Comex division of the New York Mercantile Exchange, the highest settlement for a front-month contract since June 11.

The Dow Jones Industrial Average fell 34.68 points, or 0.4%, to 8,881.26. After hitting a new high for the year, the S&P 500 Index fell fractionally to end at 954.06.The Nasdaq added 10.18 points, or 0.5%, to 1,926.38.

Tuesday, July 21, 2009

Government Spending Cuts

7/21/09 Government Spending Cuts

On April 20, President Obama challenged his Cabinet to cut $100 million in spending over the next 90 days.

The deadline came -- and went -- without a report from the White House on whether or not that promise was fulfilled.
Asked about the spending cuts, White House spokesman Robert Gibbs said Monday that information still was being compiled.
"Those are being reviewed now, and we'll release something in the coming days," Gibbs told the daily White House briefing.
At time the challenge was announced, critics said $100 million in savings was a small amount on the context of the federal budget.
"Any amount of savings is obviously welcome," Senate Minority Leader Mitch McConnell, R-Kentucky, said in April. "But [$100 million is] about the average amount we'll spend every single day just covering the interest on the stimulus package that we passed earlier this year."

The State of California agreement involves cutting nearly $6bn from schools and community colleges and close to $3bn from the state’s university system, although Mr Schwarzenegger said education cuts would be fully “refunded”.
An additional $1.3bn will be cut from Medi-Cal, the health programme for low earners and the poor.
CalWorks, the state’s welfare-to-work program – and the target of much criticism from Mr Schwarzenegger – will have its funding cut by $528m, while Healthy Families, a programme that provides health insurance for 930,000 low-income children, will be cut by $124m.
The state’s in-home support services program for the frail and disabled will also have its funding slashed. Mr Schwarzenegger has maintained that the system is a hot-bed of fraud abuses and won approval to begin fingerprinting care-givers and recipients of aid.
Another contentious part of the agreement will clear the way for oil drilling to resume off the coast of Santa Barbara. The prospect of drilling in the area has attracted a lot of criticism and is likely to be fiercely contested by local residents and environmental campaigners.
Tens of thousands of seniors and children would lose access to healthcare, local governments would sacrifice several billion dollars in state assistance this year and thousands of convicted criminals could serve less time in state prison. Welfare checks would go to fewer residents, state workers would be forced to continue to take unpaid days off.

Asia-Pacific nations agreed on Tuesday to shun protectionist measures after some criticized the United States and other developed world "buy local" campaigns at a meeting pushing forward momentum toward a global trade pact.
Asia-Pacific Economic Cooperation (APEC) countries committed to a Doha deal by 2010, saying an agreement aimed at helping poor countries prosper through trade was the best way to fight off the biggest economic downturn since the Great Depression.
China, leading hopes for a tentative global recovery after multi-billion dollar government stimulus plans around the world, said its export recovery could not be guaranteed.

Caterpillar Inc.raised its profit outlook for 2009 to a range of 40 cents a share to $1.50 a share, including redundancy costs. Excluding redundancy costs, profit is forecast to be between $1.15 and $2.25 per share. The firm also narrowed the range of its internal sales and revenue expectations to $32 to $36 billion. "As tough as this year has been, the improved profit outlook is a tangible sign of what happens when the entire team is pulling in the same direction and deploying the trough strategy we put in place over the past four years," Chief Executive Officer Jim Owens, said in a press release.

UnitedHealth said it raised its full-year 2009 earnings outlook to $3 to $3.15 a share, up from a previous forecast of $2.90 to $3.15 a share, and continues to expect full-year cash flows from operations of around $5 billion.

A new study by The Wall Street Journal which looks at Social Security data found that “Highly paid employees received nearly $2.1 trillion of the $6.4 trillion in total U.S. pay in 2007.” The rich do not pay as much of their incomes out in social security taxes because the upper limit for deductions is capped at $106,800.

George Ure: "The Port of Seattle reports TEU's (twenty-foot equivalents) down 21.7% compared with year-ago YTD operations. Inbound foreign full TEU's which were already down more than 19% in 2008 compared with 2007, and on a YTD basis reports that in June '09 inbound full foreign TEU's are down a further 27% year-to-date.
The Port of Tacoma has released June figures showing that on a year-on-year basis their container traffic is down 14.9% and on a month-on=month basis, traffic is down 19.1% since a year ago."

Silla Brush: "Neil Barofsky, the special inspector general over the Troubled Asset Relief Program (TARP), will tell lawmakers on Tuesday that taxpayers are being left in the dark about what banks are doing with bailout money, don't know the value of the government's investments and will not know the full extent of how the money is invested....Barofsky's office noted that banks have used government money for purposes other than increased lending, whether to build up capital cushions, repay debt or help finance acquisitions of other banks. His office is in the process of posting online responses to a survey of 360 banks receiving government aid.
Meanwhile, Barofsky's office has opened 35 criminal and civil investigations into issues including suspected accounting fraud, securities fraud, insider trading, mortgage servicer misconduct, mortgage fraud, public corruption, false statements and taxes.
"Treasury’s continued unwillingness to provide basic transparency despite the many recommendations of SIGTARP and Congress and the repeated demonstration that meaningful data from TARP recipients can be gathered and easily disseminated is unacceptable," said a memo prepared by Republicans on the oversight committee."

No uriel Roubini: "The recovery is going to be subpar," Roubini said. "I see a one percent growth in the economy in the next few years. There will also be 11 percent unemployment next year and the recovery is going to be slow. It's going to feel like a recession even when it ends."

Industrial conglomerate and Dow 30 component United Technologies Corp said Tuesday it doesn't anticipate a significant economic recovery in 2010.

Howard Katz of “Over the past year, the amount of money in the U.S. has increased by almost exactly $1 trillion. This is a 70% increase from a year ago,” and “it will cause an approximately 70% increase in prices with a 1-2 year lag time."

The U.S. dollar index declined to 78.61. Remember equities in the U.S. are dollar denominated assets. The outside world is diversifying away from these same assets. American citizens will be left holding the bag.

Coca Cola earned $2.04 billion, or 88 cents per share, in the second quarter, ended July 3, compared with $1.42 billion, or 61 cents per share, a year earlier.

Mexican President Felipe Calderon said the economy probably contracted at an annual rate of at least 9% in the fist half of the year.

Many Chinese people were busy Tuesday getting preparing for the longest total solar eclipse visible in Asia in a century.
According to Li Jing, a research fellow with the National Astronomical Observatories (NAO), some astronomy fans even planned to watch the eclipse in their cars. If weather conditions are not favorable, they will change their observation venue.
This was unimaginable to the ancient Chinese people, who viewed the solar eclipse as an apocalyptic act of God.

Bernanke says he's opposed to expanded audits of the Fed, which could include its open market and discount window operations, because reviews (or the threat thereof) "could be seen as efforts to try to influence monetary policy decisions," resulting in a loss of monetary policy independence. Such a crock of shit!

Continental Airlines cutting 1,700 jobs.

Halliburton Co. said it will move up to 15 percent of its oil and gas equipment out of North America to places where business is stronger, predicting North America will not experience a significant rebound until next year.

Weatherford International, meanwhile, said it needs to make further, permanent cuts to its fixed costs in North America. The company said it has already cut 3,000 jobs and closed more than 20 facilities under a broader cost-cutting program.

“When you look at the size of our operation in the United States, you have to ask yourself, ‘Do I need this much infrastructure to serve the market as it was in 2008?'” said Weatherford CEO Bernard Duroc-Danner in a conference call Monday to discuss the company's second-quarter financial results. He said a leaner operation should be able to capture business whether the market is strong or weak.

A federal judge has ruled that CIA officials committed fraud to protect a former covert agent against an eavesdropping lawsuit and is considering sanctioning as many as six who have worked at the agency, including former CIA Director George Tenet.
According to court documents unsealed Monday, U.S. District Judge Royce Lamberth referred a CIA attorney, Jeffrey Yeates, for disciplinary action. Lamberth also denied the CIA's renewed efforts under the Obama administration to keep the case secret because of what he calls the agency's "diminished credibility" and the "twisted history" in the case.
The judge also criticized CIA Director Leon Panetta, saying he's given conflicting accounts about what should be revealed in the case. The ruling led to the unsealing Monday of more than 200 unclassified versions of classified filings in the 13-year-old case.
"The court does not give the government a high degree of deference because of its prior misrepresentations regarding the state secrets privilege in this case," Lamberth ruled.

A U.S. bankruptcy judge in Delaware cleared the way Monday for a home builder to buy back, at a substantial discount, a chunk of the Newhall Ranch development north of Los Angeles that it sold for nearly $1 billion to the California state retirement system in 2007.
Lennar Corp. said in a news release that it paid $138 million for a 15% stake in a new company, to be called Newhall Land Development Co. Five lenders will own the other 85%.

Exelon terminates offer to buy NRG Energy.

State tax collections dropped 11.7 percent in the first three months of 2009, compared with the same period last year. After adjusting for inflation, new changes in tax rates and other anomalies, the report found that tax revenues had declined in 47 of the 50 states in the quarter.

The California Public Employees' Retirement System said Tuesday that its asset value for the year ending June 30 declined 23.4%, its largest annual loss. Calpers said that the market value of its assets fell to $180.9 billion from $237.1 billion a year ago. Even with the decline, the pension fund said that its 20-year investment return remained positive at 7.75%.

Apple Inc. reported a fiscal third-quarter profit of $1.23 billion, or $1.35 a share, on revenue of $8.34 billion. During the same period a year ago, Apple earned $1.07 billion, or $1.19 a share, on $7.46 billion in sales. Apple said its results were led by sales of 2.6 million Mac computers and 5.2 million iPhones. For its fourth quarter, Apple expects to earn $1.18 to $1.23 a share on revenue in a range of $8.7 billion to $8.9 billion.

Yahoo Inc's second-quarter net income rose to $143 million, or 10 cents a share, from $132.4 million, or 9 cents a share in the same period a year earlier. Net revenue in the period ended in June fell to $1.14 billion from $1.35 billion.

The Dow Jones Industrial Average added 67.79 points, or 0.8%, to 8,915.94. The S&P 500 rose 3.45 points, or 0.4%, to 954.58, while the Nasdaq Composite advanced 6.91 points, or 0.4%, to 1,916.20.

Monday, July 20, 2009

No Jobs No Benefits

7/20/09 No Jobs No Benefits

California officials hope to reach a deal Sunday on how to erase a $26.3 billion budget deficit that has forced the state to issue IOUs for the first time in nearly 20 years.
Legislative leaders said they made "huge progress" Friday night in talks in the governor's office and plan to meet again Sunday night in hopes of finalizing an agreement.
A deal would clear the way for votes later in the week in the state Legislature.

Mike Burk: "It is possible last week marked the resumption of the up trend, but it is overbought by any measure and, for the short term it is likely to decline.

A lack of new lows is the only condition missing for a major top.
I expect the major indices to be lower on Friday July 24 than they were on Friday July 17."

Rigs exploring for or producing gas fell by seven to 665, the lowest since the week ended May 3, 2002, Baker Hughes said today on its Web site. The rig count has dropped for 32 of the past 34 weeks. It’s down 59 percent from a peak of 1,606 on Sept. 12.

The British economy will shrink 4.4 percent in 2009 before recovering in 2010, Ernst & Young’s Item Club will say tomorrow.

China is likely to raise interest rates in 2010 as a recovery strengthens in the world’s third- biggest economy, a Bloomberg News survey shows.

The U.S. won’t see a return to “full” employment for another six years, helping to hold down inflation, according to former Federal Reserve Governor Laurence Meyer.

Gov. Ed Rendell said 17,800 Pennsylvanians exhausted their jobless benefits in the week that ended Saturday, the first big wave of Pennsylvanians to do so. He urged legislators to pass a bill to extend the benefits.
Around the country, the number of people exhausting their benefits is piling up. By the end of September, more than 500,000 people will exhaust their benefits checks, with the biggest groups in Pennsylvania, California and Texas, according to estimates by the National Employment Law Project, an advocacy group for low-wage workers based in New York City.
That number will nearly triple by the end of the year, the group said.

The Federal Home Loan Bank of Seattle, a behind-the scenes funder of mortgage loans that faces its second major financial crisis in five years.
The Seattle FHLB, a cooperative that lends money to its member banks at below-market rates, has accumulated $247 million in net losses over the past four quarters, mainly because of losses in its pile of mortgage-backed securities.
The bank's $16.2 million first-quarter loss would have been even deeper if not for a timely change in accounting rules.

Nearly 16% of office space in Los Angeles County is sitting vacant as tenants close up shop or move out of expensive properties. Nearly a third of the space around up-market Playa Vista sits empty; office buildings in the Inland Empire and parts of Orange County are completely vacant.

"Weak global demand and volatility in the commodity markets continue to weigh on the oilfield services industry," Halliburton said. "The worldwide average rig count decreased 25% sequentially, further weakening industry fundamentals during the second quarter."

CIT , the retail and small business lender, reached a deal late Sunday to receive $3 billion in rescue financing from a group of bondholders, in a plan that could allow it to avoid bankruptcy, a source close to the situation said.

August gold gained $13.70, or 1.5%, to $951.20 an ounce in early North American trading.

The latest outlook from a quarterly survey being released today by the National Association for Business Economics finds that companies are still looking at job cuts in the coming months, though they may be scaling back.

Twenty-eight percent of those surveyed expect their companies to cut jobs through attrition or layoffs in the coming six months, the survey found, compared with 33 percent in April and 39 percent in January.

And some companies are even hiring. Eighteen percent of those surveyed expect their companies to start adding jobs in the coming months, the highest level in a year.

Only a third of the 5,600 road projects approved by Washington under Obama's Recovery Act have been given the go-ahead for construction. As of July 10, more than 3,600 of the 5,600 road projects approved by Washington -- including six of the 10 largest approved projects -- had not been given the green light to start construction.

The U.S. index of leading economic indicators rose 0.7% in June, the Conference Board said Monday. This is the third straight monthly increase. The index rose 1.0% in April and 1.3% in May. In the latest month, the coincident index fell 0.2%, while the lagging index fell 0.7%.

The dollar index dropped below 79.

The Dow Jones Industrial Average rose 104 points, or 1.2%, to end at 8,848.15. The S&P 500 Index added 10.73 points, or 1.1%, to 951.11, while the Nasdaq Composite advanced 22.68 points, or 1.2%, to 1,909.29.

"End demand is still low in relation to where it was six to 12 months ago. We need to be prepared for slow to no growth for a while," Texas Instruments Chief Financial Officer Kevin March told Reuters in an interview.

Sunday, July 19, 2009

Bank Failures

7/18/09 Bank Failures

George Ure: "As happens on Friday's, the FDIC posted the latest evidence of the Second Depression after the market closed...a total of five banks, but representing 32 offices in all were shotgun married off:

Temecula Valley Bank
Vineyard Bank
First Piedmont Bank
Bank of Wyoming

If you are counting bank offices closed since last July 11th's IndyMac Bank closing, that's 3001 offices that have been reorganized and 80-institutions, again counting from IndyMac which marketed best I can figure the beginning of Bank Roulette."

The dollar index declined 0.9% this week to 79.52. Gold ended the week up 2.7% to $937.40 (up 6.3% y-t-d). Silver rallied 5.7% to $13.37 (up 18.4% y-t-d). August Crude jumped $3.49 to $63.38 (up 42% y-t-d). August Gasoline rose 6.7% (up 66% y-t-d), and August Natural Gas surged 8.1% (down 35% y-t-d).

At the Port of Long Beach, 206,358 containers of imported goods arrived in June, a decrease from the 208,591 in May and a 28.4% drop from a year earlier. Los Angeles recorded 281,175 import containers in June, a decrease from the 304,110 in May and down more than 17% from June 2008. Exports at both local ports followed the same pattern.
Experts fear that the ports of Long Beach and Los Angeles, which receive more than 40% of U.S. container cargo, experienced weaker numbers in June because of less confidence among consumers and businesses in California, who may be buying and ordering less merchandise, respectively.The 12 largest North American ports received an estimated 1.06 million cargo containers carrying goods from overseas in June, according to IHS Global Insight, which tracks cargo on behalf of the National Retail Federation. That was a slight increase from the 1.04 million in import containers in May but an 18% drop from June 2008.

Doug Noland: "The maladjusted US Bubble economy is sustained by $2.0 to $2.5 Trillion of new Credit – Credit that must largely be issued or guaranteed in Washington. This reflation (a.k.a. Credit inflation/currency devaluation) drives massive flows to China, Asia and the emerging markets that have few takers other than the central banks. And as economies recover and inflationary distortions reemerge, these enormous dollar flows can be expected to foment increasing policymaker angst. Asian reflation is poised to take on a wild life of its own, forcing policymakers at some point to confront today’s reality that dollar flows are destabilizing and unmanageable. China, in particular, faces tough choices when it comes both to managing its Bubble and the massive accumulation of IOUs of deteriorating quality."

Porsche SE's controlling families will agree on Thursday to accept an offer by Volkswagen to buy its sports car business Porsche AG for roughly 8 billion euros ($11.28 billion), Der Spiegel reported on Saturday.

State tax collections dropped 11.7 percent in the first three months of 2009, compared with the same period last year. After adjusting for inflation, new changes in tax rates and other anomalies, the report found that tax revenues had declined in 47 of the 50 states in the quarter.

The Oil Drum: "Only 14 of the 54 oil producing nations in the world are still increasing their oil production. The era of cheap oil is definitively over."

As overall unemployment in Britain reaches 7.6%, the rate among adults ages 18 to 24 is 20% and set to grow.

David Rosenberg: "But we are sure that as the unemployment rate makes new highs and increasingly poses a political hurdle in a mid-term election year, that it would make perfect sense, for a country that always operates in its best interest -- even if it may not be in everyone's best interest -- to sanction a U.S. dollar devaluation as a means to stimulate the domestic economy.

Remember, this is a premise. We are just conjecturing."

Should the Dow rally to 9700, will the increase in value offset the drop in the dollar?

The recession continued to punish California as employers cut 66,500 jobs in June to put the state at an unemployment rate of 11.6 percent, the nation's sixth highest.

Philadelphia's city government has stopped paying its vendors and suppliers, citing a cash crisis.

Mayor Michael Nutter on Friday blamed the drastic move on the failure of the Pennsylvania legislature to act on his request for authorization to raise the city sales tax and change the formula for the city's contribution to its employee pension plan. Nutter says these items are necessary to help close a projected city budget deficit of $1.4 billion over the next five years.

The sixth-largest U.S. city by population will delay spending on anything other than payroll, debt service and emergencies, until passage.

3PAR CEO David Scott: "During the June quarter, we saw spending restrictions across many segments of our business as a result of the economic downturn, reflected as sluggishness to place new orders. This phenomenon increased in intensity toward the end of our first quarter, [in a way] similar to the turbulence we experienced at the end of our fiscal 2009 third quarter , as there was a renewed reluctance among prospective and existing customers to commit to major capital expenditure."

Tim W. Wood: "The optimism about this week is high and I understand that. Hey, depending on what happens with my intermediate-term Cycle Turn Indicator, we could see this rally still run further as the advance out of the March low could continue. But, when we back up and look at the big picture, nothing has changed. We are indeed still operating within the worst financial crises this country, if not the world, has ever seen and the Fed’s efforts over the past year or so have not solved the problem. You have been warned!"