Saturday, January 23, 2010

More Bank Failures

1/23/10 More Bank Failures

Regulators shut down banks Friday in Florida, Missouri, New Mexico, Oregon and Washington, bringing to nine the number of bank failures so far in 2010, following 140 closures last year in the toughest economic environment since the Great Depression.

The Federal Deposit Insurance Corp. took over the five banks: Charter Bank, based in Santa Fe, N.M., with $1.2 billion in assets and $851.5 million in deposits; Miami-based Premier American Bank, with $350.9 million in assets and $326.3 million in deposits; Bank of Leeton in Leeton, Mo., with $20.1 million in assets and $20.4 million in deposits; Columbia River Bank, based in The Dalles, Ore., with $1.1 billion in assets and $1 billion in deposits; and Seattle-based Evergreen Bank, with $488.5 million in assets and $439.4 million in deposits.

Beal Financial Corp., based in Plano, Texas, agreed to assume the deposits and assets of Charter Bank. In addition, the FDIC and Beal Financial agreed to share losses on $805.5 million of the failed bank's loans and other assets.

Columbia State Bank, based in Tacoma, Wash., agreed to buy the deposits and assets of Columbia River Bank. The FDIC and Columbia State Bank agreed to share losses on $697.4 million of its loans and other assets.

Umpqua Bank, based in Roseburg, Ore., is assuming the deposits and assets of Evergreen Bank. The FDIC and Umpqua Bank agreed to share losses on $379.5 million of its loans and other assets.

Larry Page and Sergey Brin, co-founders of Google Inc, will each sell about 5 million shares under pre-arranged stock trading plans, the Internet giant said late Friday in a filing. The sale of the shares is likely to be spread over an extended period of time to minimize market impact. Page and Brin together hold about 57.7 million of Class B common shares, which represent around 18% of Google's capital stock. Page currently serves as Google's president, products, while Brin's title is president, technology.

California will need to raise $2.7 billion to avoid a cash shortage in the current fiscal year, according to State Controller John Chiang on Friday.

Bloomberg (Daniel Taub): “Apartment rents and occupancies declined throughout the U.S. West and South in the fourth quarter… The average asking rent fell to $933 from $965 in the third quarter and $994 a year earlier, according to… RealFacts, which surveyed owners of more than 12,600 apartment complexes. The average occupancy rate dropped to 91.3% from 91.7% in the third quarter and 92.2% in the prior-year period.”

Doug Noland: "The markets have been much too complacent when it comes to the vulnerability of this Credit recovery. I wish we could simply go back to simpler financial times – back to when the bank loan was king; back to when the economy wasn’t so dependent on massive ongoing Credit creation; back to when financial speculation wasn’t such a commanding force for global markets and economies. In the past two decades the entire financial apparatus was transformed.
One of the big problems today is that there are tens of Trillions of marketable securities out there – and their value depends greatly on the ongoing creation of Trillions more. Our system needs major financial reform – no doubt about it. From today’s Wall Street Journal: “The White House’s relationship with Wall Street is close to the breaking point.” A war on Wall Street would put Credit growth, asset markets and economic recovery all at risk."

John Mauldin: "This year is a waiting game. There are so many choices we must make, and the paths we will take from those choices vary wildly. But make no mistake, we are coming close to the end game. Some countries and economies are closer to that point than others, but the entire developed world is lurching, in almost drunken fashion, towards our economic denouement.

Over the next several months, we are going to start to explore various aspects of the end game. Whither Japan? Are they actually, as I think, a bug in search of a windshield? What does that mean for the world? How safe is the euro? Everyone over here seems to think Germany will bail out Greece. A breakup seems unthinkable to the people I've been talking to (so far). But what about Spain? Italy? Can you spell moral hazard?

The Fed has said it will exit quantitative easing (QE) at the end of March. But what if mortgage rates rise? Where do we find $1 trillion (plus!!!) in US savings to fund the deficit, assuming foreigners buy about $400 billion? By definition, savings and foreign investment and the federal deficit must add up to zero. (We will go into that later - just take it as gospel for now.) How can we run 10% of GDP deficits if the Fed does not print money (as they did by buying Fannie and Freddie paper, which became treasuries, as I outlined last week)? That would require almost a 10% savings rate - with it all ending up in treasuries. How can that happen? Really?"

The DJ is reporting that the UK raised its terror threat level to ‘Severe’ from ‘Substantial.’ They define ‘Substantial’ as an ‘attack is a strong possibility’ whereas ‘Severe’ is defined as ‘an attack is highly likely.’

Early Friday, Indian officials faced a scare about a possible airline hijacking. This should jog memories to directly after the “underwear” bomber when British officials warned the United States that there were 25 trained al-Qaeda operatives ready to blow themselves up on U.S. airliners.

It will not end.

The threat in India may even be more nefarious than a simple hijacking. Officials are pointing to the Pakistan-based terror group Lashkar-e-Taiba—the group responsible for the Mumbai hotel attacks. Both countries have nuclear weapons, and the Hindus and Muslims historically do not play well in the sandbox.

Six people on the No-Fly list attempted to board planes worldwide Friday, two at Heathrow Airport in London. Brian Ross of ABC NEWS reports there is now an "elevated" terrorism threat issued for the United States and "all eyes are on Yemen." Ross reports that Al Qaida may have trained "American-looking" women in Yemen for attacks in this country. The women may have U.S. passports. Adding to the anxiety, 6 people on the "no-fly" list reportedly tried to board flights to the United States last weekend.

Taco Del Mar Franchising, a Seattle-based chain of Mexican fast-food restaurants, filed for Chapter 11 bankruptcy protection on Friday.

The owner of The Denver Post, San Jose Mercury News and 52 other daily newspapers filed for bankruptcy protection Friday, joining the procession of publishers choking on too much debt.
The filing by Affiliated Media Inc., the holding company of MediaNews Group, was expected. The privately held company had said Jan. 15 that it would seek to reorganize its finances in bankruptcy court.

Friday, January 22, 2010

Another Big Down Day

1/22/10 Another Big Down Day

McDonald's Corp said Friday that its fourth-quarter net income rose to $1.22 billion, or $1.11 a share, from $985.3 million, or 87 cents a share, in the year-earlier period. The fourth-quarter results included a 7-cent benefit from foreign currency translations and an 8-cent benefit tied to resolution of certain liabilities, the company said. Revenue rose to $5.97 billion from $5.57 billion. Analysts, on average, estimated the fast-food giant to earn $1.01 a share with revenue of $5.92 billion, according to FactSet. Comparable sales rose 2.3% with all segments reporting positive results, McDonald's said.

Trader Mark:"While everyone focuses on flagrantly inaccurate government reports or how companies such as IBM are doing (with 70% of revenues overseas) as some sort of tell on the US economy, I like looking at the railroads. With Burlington Northern (BNI), CSX (CSX), and Union Pacific (UNP) all reporting their fourth quarters we can now pass judgement on the morphine filled US economy. Despite (literally) trillions of injections - it's limp as a dish rag. Don't even bother to ask what it would look like without the morphine - you'd be depressed. Don't think how the economy would work with a 3-5% interest rate, or the lack of now annual stimulus.

For those few who wish to leave the Matrix, let us look at what we are seeing from the railroad sector (keep in mind, these are partially "international" tells as well, as American exports also are loaded on these rail cars)

* The nation's railroad operators expect a tepid recovery for the U.S. economy in 2010, as both businesses and consumers continue to wrestle with the effects of the recession. The severe economic slump cut shipping demand for the railroads because American consumers and industries have been buying fewer of the cars, chemicals, crops, lumber and containers of imported goods the railroads carry.
* Union Pacific Corp., Burlington Northern Santa Fe Corp. and CSX Corp. -- the nation's top three railroad companies -- all say demand for coal, once a lucrative segment, is slumping as U.S. factories and homeowners use less electricity. (as much as I am a coal bull in the long run, the performance of the coal stocks smack of people going to the investing playbook and saying "these stocks should move up ahead of a recovery, therefore I will buy them anticipating such" rather than actually observing what is happening in the US economy) And as people continue to spend sparingly, shipments of consumer goods will show a slight increase at best.
* The companies reported lower fourth-quarter profits this week and said results won't improve until they see a firm turnaround in the economy. (I've been told we've had genetically alterered green shoots everywhere? I believe they cost about $18 million a shoot. Is that not a firm turnaround?)
* "Until employment shows some signs of improvement, you're going to have consumers stay on the sideline, and I think it's going to be pretty tough to see any kind of a strong recovery," Union Pacific Chairman and CEO Jim Young said in an interview with The Associated Press on Thursday.

Rob Hanna: "The VIX provided some notable action Thursday. It closed up over 19% and is now stretched over 20% above its 10ma. Below is a test of other times we saw the VIX stretched this much while the SPX was trading above its 200ma.

The VIX is one of several indicators I am seeing that is suggesting a bounce is near."

The average sector yield of utilities is 4.2%, topped only be telecommunication that yields about 5.2%.

Air America, a politically liberal talk-radio network, said on Thursday it would cease operations and file for Chapter 7 bankruptcy protection to begin an orderly wind down of its business.

The radio network was launched in 2004 by comedian Al Franken, now a U.S. Senator and has helped launch other careers such as that of liberal television personality Rachel Maddow.

The network, which had about 100 radio outlets nationwide, has suffered a decline in advertising amid the U.S. recession and a search for new investors failed, Air America Media chairman Charlie Kireker said in a memo to staff on Thursday.

Air America, which has struggled under a succession of management changes since its inception, had previously been forced into bankruptcy in 2006 when efforts to resolve an outstanding debt with a creditor from the network's earliest days broke down.

Tim Iacono: "To this day, it striking to me that perhaps the greatest lessons of the Great Depression have still not yet been learned."

According to AMG Data, for the week ended 1/20, Equity Fund Outflows -$4.2 Bil; Taxable Bond Fund Inflows $4 Bil
xETFs - Equity Fund Inflows $1.4 Bil; Taxable Bond Fund Inflows $3.5 Bil

T. Boone Pickens, founder and chairman of Dallas-based BP Capital, said a U.S. bill with new incentives for natural-gas vehicles will pass by late May.

"We've got a bill that's set to go," Pickens told Bloomberg Television. "It will pass by Memorial Day."

Joblessness in four states—South Carolina (12.6 percent), Delaware (9.0 percent), Florida (11.8 percent) and North Carolina (11.2 percent)—and the District of Columbia (12.1 percent) reached record highs.

In all, 43 states and the District of Columbia saw their rates increase last month, while four states reported a decrease and three states had no change in their unemployment, according to the Labor Department.

The December data is a reversal from the previous month, when 36 states reported lower unemployment.

March crude ends down 2% at $74.54 a barrel.

U.S. Rig Count is up 34 from last week at 1282; down 233 year over year.

Dr. Marc Faber
Axel Griesch | ASFM | Getty Images
Dr. Marc Faber

President Barack Obama on Thursday proposed new limits on the size and trading practices of big banks, to prevent excessive risk-taking.

"I don't have a very high opinion of Mr. Obama," Marc Faber told "Squawk Box Europe." "I was negative of Mr. Bush but I think Mr. Obama makes him look like a genius."

"Basically I think everybody will agree that in an economic system the market solves problems best."

U.K. raises terrorism threat level to "severe".

Dow industrials off 217 pts at 10,172 at close. S&P 500 index down 24 points, or 2.2%, at 1,091. Nasdaq Composite down 60 points, or 2.7%, at 2,205.

Thursday, January 21, 2010


1/21/10 EUC

EUC, or Emergency Unemployment Compensation, shot up by a stunning 652,364 to 5,654,544. The Emergency Unemployment Compensation (EUC) program provides benefits for an additional 34 weeks in all states. First-time claims for state unemployment benefits jumped unexpectedly by the largest amount in eight months, the Labor Department reported Thursday. The number of initial claims in the week ending Jan. 16 rose 36,000 to 482,000. The consensus forecast of Wall Street economists was for claims to inch lower to 438,000. This is the highest level of claims since November. The four-week average rose 7,000 to 448,250. This is the first increase after 19 straight declines. Claims in the previous week were revised to an increase of 13,000 to 446,000 compared with the initial estimate of an increase of 11,000 to 444,000. A Labor Department official said that there were more estimates this week because of the holiday on Monday. In addition, some of the increase may be due to administrative delays in reporting claims since the Christmas and New Year holidays. Overall, a record 12 million Americans received federal and state unemployment benefits on an unadjusted basis in the week ended Jan. 2, the latest period for which the data is available. This is up from 10.9 million in the prior week.

Senate Democrats on Wednesday proposed allowing the federal government to borrow an additional $1.9 trillion to pay its bills, a record increase that would permit the national debt to reach $14.3 trillion.

The Mayan calendar actually ends on October 28, 2011.

China’s growth accelerated to the fastest pace since 2007 in the fourth quarter, capping Premier Wen Jiabao’s success in shielding the nation from the global recession and adding pressure to rein in a surge in credit.

Gross domestic product rose 10.7 percent from a year before, more than the median forecast of 10.5 percent in a Bloomberg News survey, a statistics bureau report showed in Beijing today. Asset-price gains, particularly in property, are creating problems for the government to guide the economy, Ma Jiantang, who heads the bureau, told reporters after the release.

Lenders have seized the assets of Intrawest ULC, including the Whistler ski resort that will be home to the Olympic downhill races next month.

The EU approved Oracle's takeover of Sun.

A global rally in stocks may end in the second half of the year amid a muted recovery in the world’s largest economies and as deflationary pressures limit gains in corporate earnings, Nouriel Roubini said.

Failure to restrain asset-price bubbles in emerging markets, fueled by loose monetary policies in the U.S. and around the world, may also cause an “unraveling and a significant correction of asset prices which will be damaging to global and regional economic growth,” Roubini, the Harvard- schooled New York University professor who in 2006 foresaw the financial crisis, said in Hong Kong today.

“The recession isn’t over,” Martin Feldstein, former president of the Cambridge, Massachusetts-based NBER and a member of its Business Cycle Dating Committee, said in an interview with Bloomberg Radio today. “2010 is going to be a very weak year,” Feldstein also said, as American consumers limit spending and home prices may resume their slide.

Bank of England Governor Mervyn King said, "Families face years of pain...The patience of UK households is likely to be sorely tried over the next couple of years" as inflation cuts into their meager wages in order to pay for this. Families Face Years of Pain - UK Telegraph.

Japanese demand for bank loans dropped the most in more than 5 years on lower spending.

In my view, Scott Brown's election to the Senate qualifies as a Black Swan event. It will be felt

for years to come. Fortunately, it arrived just in the nick of time.

The U.S. dollar hit a five-month high versus the euro and gained on other currencies amid continuing sovereign-debt worries in the periphery of the euro zone and further signs that the region's recovery is losing momentum.

The dollar received a general boost as strong economic data from China raised concern that Beijing may tighten policy.

Since the downturn began two years ago, 7.5 million jobs have been lost.

The Philly Fed diffusion index fell to 15.2 in January from 22.5 in December. The decline was sharper than expected Economists polled by MarketWatch were expecting the index to fall to 17.0. Indexes for new orders and shipments fell back from December readings. The employment index remained in negative territory but rose to its highest level since February 2008.

U.S. Inventories of natural gas stood at 2,607 billion cubic feet in the week ended January 15, a drop of 245 billion cubic feet from the prior week. The average forecast of analysts surveyed by Platts was for a drop ranging from 223 billion to 227 billion cubic feet. The inventory level was 0.2 percent below the five-year average of about 2.61 trillion cubic feet, and 0.9 percent above last year's storage level of about 2.59 trillion cubic feet, according to the government data.

Xerox to cut 2,500 jobs in restructuring.

Gold futures ended floor trading on the New York Mercantile Exchange Thursday with a $9.4, or 0.8% loss, at $1,103.2 an ounce, for the second straight daily loss. March crude ends down $1.66 at $76.08 a barrel.

The Industrials are seeing their worst 2 day drop since August 2009, and have dropped below their 50 day moving average Thursday for the first time since July 2009.

The Dow Jones Industrial Average fell 213.27 points, or 2%, to 10,389.88. The S&P 500 Index shed 21.56 points, or 1.9%, to 1,116.48. The Nasdaq Composite Index declined 25.55 points, or 1.1%, to end at 2,265.7.

Google Inc. said Thursday its fourth-quarter net income rose to $1.97 billion, or $6.13 a share, from $382 million, or $1.21 a share in the same period a year earlier. Net revenue rose to $4.95 billion, Google said. Excluding special items, Google said earnings for the quarter were $6.79 a share. Wall Street analysts have been expecting Mountain View, Calif.-based Google to post earnings excluding items of $6.48 a share, and $4.92 billion in net revenue, according to Thomson Reuters data.

Wednesday, January 20, 2010


1/20/10 China

U.S. housing starts fell 4% to a seasonally adjusted annual rate of 557,000 in December, the Commerce Department estimated Wednesday. For all of 2009, an estimated 554,000 homes were started, down 39% from 2008's total and the lowest on record. Starts of single-family homes dropped 29% to a record-low 444,000 in 2009. The number of building permits rose 10.9% in December to a seasonally adjusted annual rate of 653,000, the highest in 14 months. In December, building permits for single-family homes rose 8.3% to a seasonally adjusted annual rate of 508,000, the highest in 15 months.
Separately, the government's producer price-index rose 0.2% in December. Core prices, excluding food and energy, were flat last month. The euro fell to a five-month low versus the U.S. dollar, at $1.4141, as fears that Chinese efforts to rein in lending led investors to shun risky assets and ongoing worries about Greece's budget problems kept pressure on the single currency.
On an unadjusted basis, prices for finished goods advanced 4.4 percent in 2009, after falling 0.9 percent in 2008. "

The Independent Director Committee of Alcon Inc.said Wednesday that the terms of Novartis' offer to acquire the minority publicly traded shares of Alcon are "grossly inadequate." It also said that the financial analysis upon which Novartis' proposal is based is "fundamentally flawed." The Independent Director Committee also said that "coercive tactics" deployed by Novartis are "offensive" and demonstrate a "profound disrespect" for Alcon's minority shareholders. Novartis offered 2.8 shares of Novartis for each share of Alcon, valued at $151.43 a share on Jan. 19, the Committee said. It noted that's below the $180 in cash that will be paid by Novartis to acquire its majority position.

The downtown Seattle office vacancy rate topped 20 percent during the fourth quarter, according to one brokerage.

China has told some banks to limit lending and will restrict overall credit growth in the nation to 7.5 trillion yuan ($1.1 trillion) this year, banking regulator Liu Mingkang said. Some lenders were asked to rein in credit because they failed to meet regulatory requirements including those for capital, Liu, chairman of the China Banking said.

After every financial crisis there's a sovereign debt crisis, Marc Faber says. Countries that borrowed too much during the boom times start struggling to pay their competitors back, and eventually some of them default.

The countries most likely to blow up this time around are the "PIIGS": Portugal, Ireland, Italy, Greece, and Spain. One ore more of them, Faber says, will likely default in the next couple of years. And, that could result in the death of the Euro currency.

Longer-term, Faber says, Japan and the US are in line for the same fate.

A January survey of 209 fund managers responsible for $539 billion of assets has found them more excited about equities than they've been in four years.

New Zealand should cut its corporate and personal tax rates, the Tax Working Group said in a report on Wednesday.
The group set up to recommend options for tax reform said that the structure of the tax system needs to be improved significantly by making changes that involve a combination of changes to the tax bases and tax mix, to tax rates, and by improving some of the supporting tax rules.
The group recommended the government to align company, top personal and trust tax rates. Further, New Zealand's company tax rate needs to be competitive with other countries' company tax rates, particularly that in Australia. The government also needs to reduce the top personal tax rates of 38% and 33% as part of an alignment strategy and to better position the tax system for growth.

The "The trend is clearly in place, and you just can't have enough exposure to natural gas this year. I believe it is the energy opportunity of the year, if not the decade."

Wheat fell to a three-month low on signs of slack demand for supplies from the U.S., the world’s biggest shipper of the grain, and rising global stockpiles.

About 9.4 million metric tons of wheat for export were inspected in the week through Jan. 14, down 24 percent from the previous week, the U.S. Department of Agriculture said yesterday in a report. That was the lowest amount since June 1, when the current marketing year began, the USDA indicated. The department has said world inventories may jump 19 percent by May 31.

Zero Hedge: "As expected, the ES channel hit resistance yesterday... and went straight down. And the fear for bulls may materialize as the resistance is on the edge of getting taken out, just as the dollar is poised for a break out. Look for a major fight between bulls and bears at the 1,126 ES level....The DXY is about to break the 78.449 high last achieved on December 22: at 78.320 we are very close. Greece is helping. When that resistance is breached, look for Europe to start panicking and also all those who still have the dollar short trade on to start rushing through the exits."

[BRIEFING.COM] The S&P 500 recently made its way off of its session low, which coincided with the July to January trendline that runs just above the 1130 mark. A pullback and close below the trendline would mark a significant technical event for traders. Even if the line isn't violated this session, it will remain a point of focus in sessions to come.

In the event that the trendline is violated, some traders believe that the event could cause at least a short-term change in sentiment among broader market participants. Bullish sentiment in recent months has made pullbacks short and shallow as participants look for entry points to the stock market's rally from the multiyear lows that it hit this past year.

Analysts surveyed by Platts expect U.S. natural gas inventories to have fallen in the week ended Jan. 15, with forecasts for a drop ranging from 223 billion to 227 billion cubic feet. The U.S. Energy Information Administration is expected to report its estimate on Thursday at 10.30 a.m. Eastern. Last week, the EIA reported a 266 billion cubic feet draw from storage, one of the largest on record, as cold temperatures boosted heating demand. On Wednesday, natural gas for February delivery fell 5.7 cents to $5.50 per million British thermal units.

Crude-oil futures rose briefly and then tipped lower late Wednesday after weekly inventories data showed oil supplies dropped last week, in contrast to a gain forecast by some analysts. For the week ended Jan. 15, oil inventories fell 1.8 million barrels, compared to a 2.8 million-barrel increase expected by analysts polled by Platts. Gasoline stocks rose 667,000 barrels compared to forecasts for a rise of 2.1 million barrels. Distillate supplies tumbled 3.385 million barrels versus an anticipated rise of 1.1 million barrels. Oil for March delivery, the new front-month contract, recently traded at $77.67 a barrel compared to a floor settlement of $77.74 a barrel.

The Dow Jones Industrial Average fell 122.28 points to 10,603.15. The S&P 500 Index shed 12.19 points to 1,138.04. The Nasdaq Composite declined 29.15 points to 2,291.25.

Gold for February delivery finished the session down $27.40, or 2.4%, at $1,112.60 an ounce. Copper for March delivery fell 8.7 cents, or 2.5%, to $3.36 a pound.

Tuesday, January 19, 2010


1/19/10 Cadbury

Venezuela's socialist President Hugo Chavez on Sunday nationalized a chain of supermarkets controlled by France's Casino on charges of price gauging after the government devalued the bolivar currency.

Kraft's CEO Irene Rosenfeld had to inject more cash into her bid and drop the number of new Kraft shares in the offer to win over Roger Carr, chairman of the 186-year-old Cadbury and mollify her top shareholder, billionaire investor Warren Buffett.

Kraft's cash-and-share acquisition, which dealmakers said was struck after all-night negotiations at the London headquarters of investment bank Lazard, values each Cadbury share at 840 pence, with shareholders also set to get a 10p special dividend, bringing it to a total of 850p.

The enlarged group will pip privately owned Mars-Wrigley to the title of the world's top sweet maker, bringing under one roof Cadbury's Dairy Milk chocolate and Trident gum and Kraft's Milka, Toblerone and Terry's chocolate brands.

On January 19, 2010 there were 1093 potentially hazardous asteroids but no sunspots. The weather

will get colder and natural gas usage will continue to increase and this is not reflected in its price.

Japan Airlines Corp filed for bankruptcy protection on Tuesday, owing more than $25 billion, and vowed to slash 15,700 jobs and unprofitable routes as it tries to survive volatile fuel costs and fickle flyers.

The Oil Drum: "It seems to me that the current recession is very much energy-related, and is likely to continue. The recession is occurring because the current US “system” (individual homes, private cars, many imports) was built for cheap ($20 barrel) oil and gas, and cannot function well using expensive oil and gas.

I expect that the recession will experience some ups and downs, but will generally be worse by the end of 2010. Government revenues will continue to decline, making it increasingly difficult to support subsidies for renewables and to provide funding guarantees for nuclear and wind."

Florida farmers will sustain at least a 30% crop loss due to freezing temperatures.

Williams Cos. says it will create one of the largest natural gas partnerships in the nation by combining pipeline and processing units.

The new company will have a presence from the Rocky Mountains and the Gulf Coast to the Northeast.

Williams, based in Tulsa, Okla., will get about $3.5 billion in cash from Williams Partners to help pay down debt and will contribute its substantial assets to the new, larger Williams Partners.

The parent company gets about 203 million in shares and its ownership share increases from 24 percent to 80 percent.

One key asset that Williams will contribute to the partnership is the Texas Transcontinental Gas pipeline, which runs to the bountiful Marcellus Shale of Pennsylvania.

President Barack Obama will deliver his first State of the Union address on Jan. 27 and his budget plan on Feb. 1.

The Bank of Canada did the expected Tuesday morning, leaving its key interest rate unchanged at 1/4 percent while backing up its conditional commitment to hold the current rate steady until the end of the second quarter of 2010. Policy makers noted a global economic recovery is under way, supported by continued improvements in financial conditions and stronger domestic demand growth in many emerging-market economies. However, the BOC acknowledged that the recovery is fragile, and continues to depend on exceptional monetary and fiscal stimulus, as well as extraordinary measures taken to support financial systems.

Security and industrial products manufacturer Tyco International Ltd. said Monday that it has agreed to buy security and protection services provider Brink's Home Security Holdings, Inc., now operating as Broadview Security, in a cash and stock deal valued at $42.50 per share or about $2.0 billion.
The purchase price represents a premium of more than 35% to Brink's Friday closing stock price of $31.42.

German economic confidence deteriorated for the fourth month in a row, suggesting a slow recovery in the largest Eurozone economy, results of a closely watched survey showed Tuesday. Economic sentiment dropped 3.2 points in January to 47.2 points, the Mannheim-based Centre for European Economic Research or ZEW revealed.

Layers of money managers that don't bear the brunt of losses but walk away with big payouts when things go well have turned the US economy to a type of "ersatz capitalism," Joseph Stiglitz, Columbia University professor and Nobel laureate, told CNBC Tuesday. "An awful lot of people are not managing their own money," Stiglitz said. "In old-style 19th Century capitalism, I owned my company, I made a mistake, I bore the consequences."

"Today, (at) most of the big companies you have managers who, when things go well, walk off with a lot of money. When things go bad the shareholders bear the costs," he said.

Even worse, those giving the money to the companies are entities like pension funds that are managing money on behalf of other people, so there are "layers and layers of agency costs," Stiglitz said."

“I think that first we’re going to err on the high side. We don’t want to do any damage,” Commissioner Bart Chilton said in a video interview with Reuters Insider. The limits will apply to futures and options contracts of light, sweet crude oil, RBOB gasoline, No. 2 heating oil and Henry Hub natural gas futures traded on both the NYMEX and the Intercontinental Exchange.

According to the CFTC, limits for the each commodity would be set annually at the sum of 10 percent of the first 25,000 contracts plus 2.5 percent of the remaining interest, allowing a regular annual adjustment to the limits rather than the fixed caps the CFTC applies to grain markets. Such limits would affect only the ten biggest position holders in the oil and gas markets. To put this in perspective, note that over the past two years, only the “unique owners” in the crude oil market and only one in the natural gas market would have been affected by the proposed caps, according to Steve Sherrod, Acting Director of Surveillance at the CFTC.

“It seems as though the CFTC has really pulled back,” said John Brodman, a former Energy Department official under the Bush administration. “A few months ago, they sounded rabid about going after speculators in energy markets. But it looks like their bark was worse than their bite.” Still, the CFTC maintains that the proposed limits will prevent out-sized trading firms from putting the stability of the entire market at risk. For example, the CFTC said that under the new limits, hedge fund Amaranth would not have been able to hold the large number of natural gas contracts it did in 2006, which had a harmful effect on the market in that year.

The exchanges themselves will continue to grant exemptions to bone fide end-users, companies who need to hedge their physical positions. In turn, the CFTC will provide “risk management” exemptions to swap dealers; but such firms as Goldman and Morgan Stanley would not be allowed to take on speculative positions that exceed the exemptions, preventing them from placing additional bets with their own money in addition to contracts purchased on behalf of their clients.

US home builder sentiment unexpectedly fell in January to the lowest level since June on concerns over the weak labor market and high foreclosure volume, according to a survey on Tuesday that pointed to a patchy recovery in the housing sector. The National Association of Home Builders/Wells Fargo Housing Market Index for January slipped to 15 from 16 in December, below market expectations for a reading of 17. The survey blamed the setback in sentiment on the weak labor market, which has produced the highest unemployment rate in 26 years.

Oil for February delivery closed the floor session at $79.02 a barrel, up $1.02 a barrel, or 1.3%. . Gold for February delivery gained $9.50, or 0.8%, to end at $1,140 an ounce on the New York Mercantile Exchange. Among other metals, palladium and platinum continued their recent rally, buoyed by investor demand following the recent launch of exchange-traded funds in the U.S. Palladium for March delivery gained $14.20, or 3.2%, to end at $461.95 an ounce. April platinum rose $43.30, or 2.7%, to $1,639.40 an ounce.

Chevron Corp. plans to cut an undetermined number of jobs in its global marketing and refining operations, according to a report Tuesday from Dow Jones Newswires. The move comes as refining margins remain under pressure.

Railroad operator CSX Corp. blamed lower coal and merchandise shipments for a drop in fourth-quarter profit. Earnings from continuing operations came in at $305 million, or 77 cents a share, down from $361 million, or 92 cents a share, a year earlier. Revenue fell 13% to $2.3 billion.

IBM Corp. reported a fiscal fourth-quater profit of $4.8 billion, or $3.59 a share, compared with earnings of $4.4 billion or $3.27 a share in the prior year's fourth quarter. Revenue rose slighty to $27.23 billion from last year's $27 billion. Analysts surveyed by Thomson Reuters had forecast IBM to earn $3.47 a share on $26.96 billion in revenue.

The Dow Jones Industrial Average was up 116 points, or 1.1%, to 10,725. The Nasdaq Composite Index had added 32 points, 1.4%, to 2,320, and the Standard & Poor's 500 Index had gained 1,150.

Monday, January 18, 2010


1/17/10 Change

Tim Wood: "Not much has changed of late, but I do see change on the horizon for 2010. From a Dow theory perspective, the bullish trend confirmation that occurred in 2009 remains intact. From a cyclical perspective, the higher degree low that began at the March low remains intact as well. Longer-term, my opinion has not changed in that based on my data, I continue to believe that in spite of the now 11 month rally this is nonetheless a counter-trend advance within the context of a much longer-term secular bear market. Once this rally is over, I think that most people will be very surprised to see the return of the bear as the Phase II decline takes root. History shows us that Phase II declines are the most destructive and this is because the masses think that the bear market has ended and then once the realization begins, so does the panic. Furthermore, I don't think the Fed and the politicians in Washington will be able to stop it and I hope that this time around the people will not allow the continued waste of stimulus packages."

Mike Burk: "The market is overdue for some kind of correction and the deterioration in new highs suggest that may have begun. The preponderance of recent breadth indicator confirmations suggest any correction will be shallow and brief. I expect the major averages to be lower on Friday January 22 than they were on Friday January 15."

John Mauldin: "There is just so much that is uncertain, and all we can do is wait to see how it unfolds. My best guess is that we see a solid GDP number posted for the 4th quarter (which will get revised down over time), due mostly to stimulus and inventory rebuilding. By the middle of the year the stimulus will be far less. And while inventories are rebuilding and that is good for the GDP numbers, the sales-to-inventories number has not risen. And final demand is what drives inventory rebuilding.

The latter half of the year looks to be weaker, and then we hit what right now looks like the largest tax increase in history, much of it on the small businesses that are the drivers of job creation. The National Federation of Independent Businesses just released their latest survey. It was brutal. There is little optimism in it.

The Fed is going to stop the music in March. There will be a scramble for the chairs. This is a huge experiment with no precedent. The entire developed world is the test subject. Risk assets will be subject to uncertainty. And markets hate uncertainty.

Hopefully, we can Muddle Through this year before a relapse into recession in 2011 (because of the tax increase). I wish I could see it like Larry Kudlow, but I don't. I would be very cautious about being long the stock market. It is now a trader's market. I would not be buying long-duration bonds. It is still an absolute-return world."

Kraft Foods Inc. must raise its hostile 11 billion-pound ($17.9 billion) bid for Cadbury Plc by at least 10 percent to stand a chance of capturing the U.K. maker of Dairy Milk chocolate, an investor survey shows.

Kraft, whose offer is worth about 771 pence a share, needs to raise that to at least 850 pence, the median price named by 9 Cadbury shareholders, who together account for about 11 percent of the shares. Responses ranged from 800 pence to 900 pence. A deadline to increase the bid passes on Jan. 19.

Cadbury closed at 793.5 pence on Jan. 15, 2.9 percent above the value of Kraft’s bid, reflecting the chance the offer will be raised or a rival suitor such as Hershey Co. will emerge. Hershey is stepping up efforts to prepare a bid and plans to make a decision after Kraft’s final offer, according to people with knowledge of the matter. Kraft Chief Executive Officer Irene Rosenfeld has vowed to stay “disciplined” on price.

A GOP win in Massachusetts on Tuesday would likely kill that plan, because Republicans could block Senate action on the reconciled bill.

The newly discussed fallback would require House Democrats to swallow hard and approve the Senate-passed bill without changes. President Barack Obama could sign it into law without another Senate vote needed.

House leaders would insist that the Senate make some changes later under a complex plan called "budget reconciliation." It requires only a simple majority, but it's unclear whether that could happen.
The plan is highly problematic.

Delhaize Group announced the closure of 15 Food Lion stores as part of its restructuring plan.

Continuing layoffs at hospitals and law firms and supermarkets.