Saturday, August 28, 2010


8/28/10 Propaganda

"By the skillful and sustained use of propaganda, one can make a people see even heaven as hell or an extremely wretched life as paradise."
Adolf Hitler
It is wise to remember the above when considering the pronounced recovery our country is enjoying.

Grupo Mexicana said late Friday it will indefinitely suspend operations for Mexicana de AviaciĆ³n, Mexico's largest air carrier by passenger traffic, as well as those for its low-cost carriers MexicanaClick and MexicanaLink, as of noon local time Saturday. The airline in a statement on its Web site cited deteriorating financial conditions as reason why it will halt operations. Mexicana is Mexico's oldest airline, with operations stretching back 89 years.

Large institutional investors liquidated more of their long positions, or bets prices will go up, than short positions in the natural gas market, data from the Commodity Futures Trading Commission Friday showed. Natural-gas futures tanked 4.4% on Friday, ending at a fresh 11-month low and posting losses of 11% on the week. Sales of options and futures combined took cumulative net long positions down to 75,243, "a new low for the year," Tim Evans, an analyst with Citigroup's Citi Futures Perspective, said in a note.

The Dow posted a weekly loss of 0.6% and the S&P 500 fell 0.7%, with each marking its third straight week of declines. The Nasdaq dropped 1.2% for the week, its second weekly loss in three.

Abercrombie & Fitch shutters 110 stores.

Treasuries dropped, pushing two-year note yields up the most since April.

Tom Petruno: "Despite the still-rich basket of tax breaks for residential property owners, and the lowest mortgage rates in a generation, the pool of willing or able buyers is dwindling.
The housing market's new woes expose the limits of government's ability to end the real estate bust, while also raising the odds that policymakers could resort to more dramatic moves to try to support the market."

Steven Bauer: "Why most Investors lose money has a great deal to do with the human mind itself. Your mindset is pretty much fixed and as hard as you may try, you are likely stuck with it as it is. I remember being told by some wise mentors, that Investors must have the three "T's" - time, temperament and training. Temperament is the bug-a-boo (maybe I should use a more professional term, such as: tricky part, challenging part, a key factor??) that I want to share a few thoughts about. The psychology doctors say that you either have it or you don’t at least to a large degree! It’s the same when taking classes, some courses you get A's in and in others you struggle just to pass. It is also the same in athletics – for some people it comes naturally and others, well it's best to avoid embarrassment. The problem for many investors is that they hold on to a particular mindset from previous years. For example, they consider themselves to be buy and hold investors, (married to certain stocks and mutual funds) through both good times and bad. This is also true for mutual fund investors who tend to listen to Wall Street and their salesperson (and that’s just plain dumb). We all have strengths and weaknesses. It is important to know what they are and get help from seasoned professionals, medically, financially and most other areas, when there are clearly a weakness. You know when to go to a medical doctor, but do you know when to go to a financial doctor. I said “doctor” not a salesperson."

ZeroHedge: "According to Mike Mullen, the Chairman of the Joint Chiefs of Staff, the "single biggest threat" to American national security is the US national debt, which is either $8.85 trillion (public debt), $13.4 trillion (total national debt), $20 trillion (total debt including GSE debt), or $124 trillion (total debt including unfunded obligations), depending on one's definition of the word "debt." And as Zero Hedge has long been warning, the imminent increase in interest rates (sooner or later), will eventually put the country in an untenable funding position. "Tax payers will be paying around $600 billion in interest on the national debt by 2012, the chairman told students and local leaders in Detroit." The Chairman (the real one, not his pale imitation over at Marriner Eccles) politely forgot to add that the successful rolling of nearly $600 billion in debt per month is likely an even greater threat to national security."

Let us have a dagger between our teeth, a bomb in our hands, and an infinite scorn in our hearts.
Benito Mussolini

ZeroHedge: "for every dollar of individual tax revenue, the government has issued just over one dollar of incremental debt. In other words, in the past two years, tax revenues alone would have proven insufficient by over half to fill the budget gap. In yet other words, the US Treasury is now the functional equivalent of the entire US population and then some, when it comes to keeping the US economy afloat. From another perspective, with an average take down of roughly 50% of each recent auction by Indirect bidders, nearly a quarter (half of half) of US budget deficit needs is funded directly by foreigners."

Friday, August 27, 2010


8/27/10 Bonds

ZeroHedge: "For the first time since July 2009, the houses costing $399,999 or under as a percentage of total has crossed 90%."
There are now 18.9 million homes unoccupied in the US. There are also 3.5 million homeless. lenders initiated 279,685 foreclosures. in July, up sharply from 225,700 in June (and the highest in six months

The Commerce Department on Friday slashed its estimate of second-quarter growth in the U.S. economy to 1.6% from 2.4%, showing a sharp deceleration in the April-to-June period from the 3.7% growth of the first quarter. Economists polled by MarketWatch had anticipated an even sharper downward revision in the second quarter to 1.3% growth. The revision came as imports were revised higher to show 32.4% growth, the biggest jump since the first quarter of 1984. Inventories and exports were also downwardly revised, while consumer spending was upwardly revised on electricity and natural gas usage. The Commerce Department also released its first set of data on profitability in the second quarter, showing after-tax profits up 25.5%, or a 39.2% rise before tax.
There will be a further revision--- down to 1% or less!

Dell Inc. said Friday it increased its offer for 3PAR Inc. for a second time to match a competing bid from Hewlett-Packard Co. Round Rock, Texas-based Dell is now offering $27 a share in cash for the data storage company, valuing the acquisition deal at $1.8 billion. Late Thursday, Hewlett-Packardraised its offer to $27 a share from $24 a share, or $1.6 billion, after Dell had lifted its initial offer to $24.30 a share from $18 a share, or $1.15 billion. In a separate release, 3Par accepted Dell's buyout offer of $27 a share---only to be quickly topped by H-P which lifted its unsolicited offer for the data-storage company to $30 a share, or about $2 billion.

U.S. economic data are “alarming,” signaling the recovery is losing momentum, Mohamed A. El-Erian, Pacific Investment Management Co.’s chief executive officer, wrote in an opinion piece in the Washington Post.
Unemployment is high, consumer credit is shrinking and small companies are having trouble obtaining bank lines of credit, wrote El-Erian, who is also co-chief investment officer at Pimco, which runs the world’s largest bond fund. Increased government spending and additional debt purchases from the Federal Reserve are unlikely to spur a rebound, he wrote.

The Automatic Earth: "Imagine what another 20%, 30% or 50% drop in home prices would do. To you yourself, to your neighbors, to your community, your town. And, in the end, guess what, it's coming. You can't have sales drop by 27.2%, and expect prices to remain the same, not even close."

Bloomberg: short-term business borrowing is falling the most in three months in a sign credit markets are increasingly concerned that the economic recovery is stumbling.

Security software maker ArcSight Inc. put itself on the auction block and potential bidders, including Oracle Corp. and Hewlett-Packard Co., could pay up to $1.5 billion for the company, people familiar with the matter said.
The Cupertino, Calif., company has been quietly shopping itself to a handful of big technology suppliers interested in its software, these people said. In addition to Oracle and H-P, EMC Corp, International Business Machines Corp. and CA Inc., are prospective bidders, they said.

US law enforcement agencies are among the customers of a Massachusetts-based company that is selling full-body scanners to be mounted inside vans and used on streets, says a report from Forbes.

Paul Krugman: "this isn’t a recovery, in any sense that matters. And policy makers should be doing everything they can to change that fact."

Charles Hugh Smith: "In today's Corporate Empire, the Elite individuals running the corporations can despoil, bribe, embezzle, cheat and collude and they completely evade accountability."

A $12-billion joint venture between Shell and Brazilian ethanol producer Cosan (CZZ) moved closer to reality as the two companies signed binding agreements on the a deal first proposed in February. If completed, the deal will create the third largest ethanol producer in the world with 4,500 retail stations and annual production of 440 million gallons.
The proposed joint venture between Europe’s largest oil company and Brazil’s largest sugar cane processor will produce and commercialize ethanol and power from sugar cane and distribute a variety of industrial and transportation fuels through a combined distribution and retail network in Brazil.

Intel Corp. on Friday lowered its third-quarter revenue forecast, citing weaker than expected demand for consumer PCs "in mature markets." Intel said it now expects sales of $11 billion, plus or minus $200 million, compared to a previous range of between $11.2 billion and $12 billion. Intel reduced its gross margin forecast.

U.S. consumer sentiment rose to 68.9 in August from 67.8 in July, according to a survey released Friday by Reuters and the University of Michigan. The preliminary sentiment reading for August was 69.6. Economists polled by MarketWatch had expected a final August level of 69.0.

Fed's Bernanke deflation not a big risk for US but Fed will resist downward pressures on price stability.
Bernanke said the Fed had not agreed on specific stimulus measures although it would not sit idly and let the economy sink into deflation. He said the recovery has softened more than expected and the Fed is ready to take further steps if needed to spur the stumbling economy. The Fed members can go
rafting down the Snake River and/or go fly fishing on the Snake River and/or play on any of the three golf courses in Jackson Hole. Those are the further steps!

Banks aren’t prepared for a double-dip in housing, which “it looks like we are having,” Meredith Whitney says, and they'll need more capital to withstand it. The economy is reacting from “chronic structural problems” including high unemployment that are unlikely to be addressed through monetary policy, she adds.

As of 2:42 p.m. EDT, the benchmark 10-year Treasury note was 1 17/32 lower, and the yield was up by 17 basis points, the most since May, to 2.621%. The 30-year bond was 3 11/32 lower, and its yield was up by 17 basis points to 3.695%. Bond prices move inversely to yields.
The 10-year note posted its first weekly price loss since the week ended July 23.
Friday's selling scuttled the recent rally in the bond market as anxiety about the economy has risen. The benchmark 10-year note's yield touched a 19-month low of 2.418% Wednesday. The 2-year rose 8bps in yield to .56%. As I mentioned, this is my best idea. I have a significant short position at an average price of .487%.

Natural-gas futures tanked 4.3% to end at $3.65 per million British thermal units, its lowest since September 2009. Gasoline for September delivery added 2.1% to $1.95 a gallon, the highest finish in more than a week.

The Dow gained 165, the S&P was up 17, and the Nasdaq plus 35.

Wednesday, August 25, 2010

Data Points

8/25/10 Data Points

The US economy is in a 1930s-style Depression, Gluskin Sheff economist David Rosenberg said Tuesday.

Orders for U.S.-made durable goods rose 0.3% in July, the first increase in three months, on stronger demand for airplanes, the Commerce Department reported Wednesday. The increase was not as strong as expected as many sectors outside aircraft were weak. Economists surveyed by MarketWatch had expected a 2.7% gain. However, orders in June fell an upwardly revised 0.1%, much less than the prior estimate of a 1.2% drop. Aircraft orders, primarily from Boeing Co. rose 75% in July. Outside of aircraft was much weaker. Shipments rose 2.2% in July, but were up 0.6% excluding transportation.
Unfilled orders for manufactured durable goods in July, down following three consecutive monthly increases, decreased $1.1 billion or 0.1 percent to $802.8 billion. This followed a 0.1 percent June increase. Computers and electronic products, down following four consecutive monthly increases, had the largest decrease, $0.5 billion or 0.4 percent to $121.1 billion.

Investors should be prepared to face financial oppression, a credible threat against which current yields provide little protection. - Arnaud Mares, Morgan Stanley (via ZeroHedge)

The 10 Year has hit 2.44% and the 2 year .48%. First time under 200 bps since April 2009.

U.S. new home sales plunged to a new all-time low in July, the Commerce Department estimated Wednesday. The decrease in new-home sales to a seasonally adjusted annual rate of 276,000 was well below the 339,000 pace expected by economists surveyed by MarketWatch. New-home sales in June rose a revised 12.1% to a 315,000 level compared with the previous estimate of a 23.6% rise to 330,000. New-home sales are down 32.4% compared with a year ago. The months' supply of homes on the market rose to 9.1 months in July from 8.0 months in June. Median sales prices have fallen 4.8% in the past year to $204,000. The average sales price has fallen 13.2% over the same period to $235,300.

The Energy Information Administration reported an increase of 4.1 million barrels to the nation's oil stockpiles for the week ended Aug. 20. Gasoline inventories rose 2.3 million barrels, while distillates inventories rose 1.8 million. Analysts surveyed by Platts expected an increase of around 1.1 million barrels for oil, and gasoline stocks were seen down 875,000 barrels. Stocks of distillates, which include heating oil and diesel, were forecast to go up by 950,000 barrels.

In recent weeks, Tehran has begun to feel "a lot of pressure" on the gasoline front, said Houchang Hassan-Yari, a professor of international relations at the Royal Military College of Canada in Kingston, Ontario. The government is now curbing from 100 liters to 60 liters (roughly 26.4 gallons to 15.9 gallons) the amount of subsidized gas consumers can buy each month, Hassan-Yari told
Iranian motorists must pay 100 tomans per liter of gas (less than 10 cents), "but if you purchase more than 60 liters, you have to pay 400 tomans per liter," he noted. "And there is no clarity about the situation in the next two or three weeks to two months in terms of volume but also [in] the price."

Yields on AAA-rated 30-year US municipal bonds fall 3 BPS to 3.67%, a new record low, says municipal data.

Crude oil for October delivery rose 89 cents, or 1.2%, to settle at $72.52 a barrel. Gasoline for September delivery also turned, adding a penny, or 0.8%, to end at $1.86 a gallon. Natural gas futures, however, ended 4.2% lower at $3.87 per million British thermal units.

Natural gas January futures are trading at their smallest premium to September futures in seven years, in another predictor of slowing growth. Industrial natgas use may be 1.4% lower this year than in 2008, the Energy Department reports.

Sanofi-Aventis' top shareholders L'Oreal and Total have reservations about the drugmaker's plans to buy Genzyme and are concerned that it does not overpay, bankers said.
Both the cosmetics group and the oil major "will have a view on not spending too much money," one banker close to L'Oreal said, adding L'Oreal was not opposed in principle to a deal, but was not sure Genzyme was the best buy.
Concerns from Sanofi's top shareholders, who together own about 15 percent of the 58 billion-euro ($73.40 billion) company, suggest Sanofi Chief Executive Chris Viehbacher has limited room to raise his offer for Genzyme and keep investors on side.

A record number of folks are strapped for cash and dipping into their 401K retirement accounts.

According to analysis by the Financial Times, BHP would be forced to put its plans to a vote if the offer price rose beyond about $150 a share, based on PotashCorp’s outstanding shares. On a fully diluted basis, the threshold would be closer to $145 a share. BHP’s $130 a share cash offer does not currently require shareholder approval.
“A shareholder vote adds another risk element to the deal,” said one investor who specialises in risk arbitrage.

Gold for December delivery added $7.90, or 0.6%, to $1,241.30 an ounce on the Comex division of the New York Mercantile Exchange. Silver for September delivery added 65 cents, or 3.5%, to $19.03 an ounce, the highest settlement since June 25 and the biggest one-day increase for silver since June 7.

Currently about $1.3 trillion of consumer debt is delinquent and $986 billion is seriously delinquent (at least 90 days late or “severely derogatory”).
Changes to the US bankruptcy code, enacted in 2005, are coming back to haunt banks, according to Yra Harris, a veteran trader at Praxis Trading.
Harris told CNBC that banks lobbied hard for changes to the bankruptcy code, but the legislation is now having the effect of encouraging consumers to do all they can to pay down their credit cards, while leaving their mortgage payments on the backburner.

Google Inc. said it was adding voice calling into its Gmail email service, enabling users to place low-priced calls to phones around the world.

The Dow Jones Industrial Average rose 19.61 points, or 0.2%, to end at 10,060.06. The S&P 500 index gained 3.46 points, or 0.3%, to 1,055.33. The Nasdaq Composite rose 17.78 points, or 0.8%, to end at 2,141.54.

WSJ: Companies such as Macerich Co., Vornado Realty Trust and Simon Property Group Inc. have recently stopped making mortgage payments to put pressure on lenders to restructure debts. In many cases they have walked away, sending keys to properties whose values had fallen far below the mortgage amounts, a process known as "jingle mail." These companies all have piles of cash to make the payments. They are simply opting to default because they believe it makes good business sense.

Tuesday, August 24, 2010

Home Sales

8/24/10 Home Sales

The sale of existing U.S. homes sank 27.2% in July - the biggest one-month drop ever - largely because of the phase-out of a federal tax credit, according to an industry trade group. The National Association of Realtors said existing-home sales fell to a seasonally adjusted annual rate of 3.83 million in July from a revised 5.26 million the month before. Sales of single-family homes fell to the lowest rate in 15 years. Inventories of unsold homes rose 2.5% to 3.98 million in July, representing a 12.5-month supply, the highest level since at least 1999. The median sales price edged up 0.7% in the past year to $182,600 in July, the NAR said.

Shares of Medtronic Inc. slid 8% to $32.16 in premarket trading Tuesday after the medical device maker issued a quarterly sales report that fell short of Wall Street expectations. Medtronic said that its fiscal first-quarter revenue fell 4% to $3.77 billion. According to a poll by Thomson Reuters, analysts had been expecting $3.96 billion. Medtronic also lowered its financial forecast. The company now sees its full-year earnings coming in between $3.40 to $3.48 a share, down from its previous forecast of $3.45 to $3.55.

The yen hit a new 9-year high against the euro of ¥106.35 on the EBS trading platform, and a new 15-year high against the dollar of ¥84.24.

A double-dip recession is unlikely but the risks of one have risen in the last six months, Chicago Federal Reserve Bank President Charles Evans said on Tuesday.
"A double dip is not the most likely outcome but I am concerned about how strong the recovery will be," Evans said in response to questions after a speech.

Aug. Richmond Fed Mfg. Survey: 11 vs. 16 last month (above 0 = growth). Among the index's components, shipments -11 to 11, new orders -3 to 10, jobs -3 to 12.

BP employees say they had found 390 problems related to overdue maintenance on the Deepwater Horizon rig, according to a U.S. investigation, including "problems with the alarms and an emergency shutdown panel." The report also says that part of Transocean's bonus structure was tied to “rig uptime” as opposed to being shut down for maintenance.

U.S. heating oil and diesel inventories probably climbed to a 27-year high as the slowing economic recovery curbed demand, a Bloomberg News survey showed.

According to the authors of a new UCLA study that gives a county-by-county account of the state's swelling numbers of uninsured, now estimated at 8 million.

The Dow Jones Industrial Average lost 133.96 points, or 1.3%, to 10,040.45, the lowest close since July 7. The S&P 500 fell 15.49 points, or 1.5%, to 1,051.87, led by medical device and steel stocks. The Nasdaq Composite lost 35.87 points, or 1.7%, to 2,123.76.

Crude oil for October delivery was off $1.47 to settle at $71.63, an eleven-week low for oil. Gasoline for September delivery settled at $1.85 a gallon, gasoline's lowest price since December 2009.

ZeroHedge: "The market is now down 3.4% from the August 12 open, when the first Hindenburg Omen was sighted, on route to validating the prediction of a 5% drop. However, in the process it continues getting worse and worse - today we just got a third H.O. confirmation, and a 4th standalone HO event, as the market seems to be getting ever more schizophrenic, with increasing new highs and new lows, while the undercurrent is one of ever increasing implied correlation as noted earlier, as ever more asset managers simply rely on levered beta "strategies" to redeem their year. Unlike 2009, however, this time the trick won't fly, as it appears the market's downside potential is finally starting to be appreciated."

Monday, August 23, 2010

High Probability

8/23/10 High Probability

Forbes: "And he’s out. The blind mathematician behind the Hindenburg Omen (you remember, that’s the technical indicator that tells us a stock market crash is nigh) tells the Wall Street Journal he’s gotten out of stocks a little more than a week before September, when this crash is supposed to happen.
Jim Miekka, who developed the indicator more than a decade ago, says its “sort of like a funnel cloud. It doesn’t mean it’s going to crash, but it’s a high probability. You don’t get a tornado without a funnel cloud.”

Hewlett-Packard Co. outbid Dell Inc. on Monday for a data storage company that would help the technology giants expand beyond their core PC business. HP said it would pay $24 a share for Freemont, Calif.-based 3PAR Inc, a 33.3% premium above the $18-a-share offer from Dell. Once approved, HP said it hoped to close the $1.6 billion deal by the year's end. Prior to Dell's $1.15 billion offer, shares of 3PAR were trading at $9.65 a share. Shares of 3PAR jumped 37% premarket to $24.70 while shares of HP fell 1% to $39.40.

Potash Corp. urged its shareholders to reject BHP Billiton Plc.'s near $40 billion unsollicited bid and said it's in talks with third parties about a possible alternative. Potash said that since the BHP's approach on Aug. 12, it's been working to evaluate a range of strategic alternatives. As part of this effort it's been contacted and has also reached out to a "number of third parties who have expressed an interest in considering alternative transactions." Potash did not say which companies had approached it, but media reports have mentioned China's Sinochem Group, Brazil's Vale and Chinese private equity fund Hopu Investment Management. Citing a person with knowledge of the matter, Bloomberg said that Sinochem and Vale had made inquiries with the board of Potash late last week about the possibility of talks.
Other companies had also contacted the board, but the approaches may not lead to talks, the person added.

HSBC is poised to win the auction for a controlling stake in Nedbank, South Africa’s fourth-largest bank, after fending off fierce competition from its UK-based rival Standard Chartered.
HSBC confirmed on Monday it was in talks to buy the 52 per cent stake in Nedbank which is owned by Old Mutual, the insurer, as it seeks to gain a 70 per cent stake in the South African bank.

John Hussman: "A week ago, the Federal Reserve initiated a new program of "quantitative easing" (QE), with the Fed purchasing U.S. Treasury securities and paying for those securities by creating billions of dollars in new monetary base. Treasury bond prices surged on the action. With the U.S. economy predictably weakening, this second round of quantitative easing appears likely to continue. Unfortunately, the unintended side effect of this policy shift is likely to be an abrupt collapse in the foreign exchange value of the U.S. dollar....As of last week, the Market Climate for stocks was characterized by unfavorable valuations, unfavorable market action, and unfavorable economic pressures. I've noted for weeks that the damage to market action was not quite to the level that would create urgent downside concerns. However, the deterioration we observed last week suggests a more urgent shift to defensive positioning. For our part, the Strategic Growth Fund remains fully hedged at present.
In bonds, the Market Climate was characterized last week by unfavorable yield levels but favorable yield pressures."

(Bloomberg) -- Housing led the U.S. out of seven of the last eight recessions. This time, it may kill the recovery.
Home sales collapsed after a federal tax credit for buyers expired in April. Since then, the manufacturing-led expansion, which began in the second half of 2009, has been waning, with jobless claims rising and factory orders falling.
“If foreclosures continue to mount and depress home prices, that could send the economy back into a recession,” said Celia Chen, an economist who tracks the industry for Moody’s Analytics Inc. “The housing market and the broader economy are closely intertwined.”
Spending on home construction and items such as furniture and stoves accounted for about 15 percent of gross domestic product in the second quarter, according to West Chester, Pennsylvania-based Moody’s Analytics. Real estate also can influence consumer spending indirectly. When values soared in the mid-2000s, people used the boost in equity to pay for cars and vacations. After prices fell, homeowners lost that cushion and curbed spending.
A report tomorrow by the Chicago-based National Association of Realtors will show July sales of existing homes plummeted 12.9 percent from June, the biggest monthly loss of 2010, according to the median estimate of economists surveyed by Bloomberg.
New-home sales, which account for less than a 10th of housing transactions, stayed at the second-lowest level on record last month, economists predict Commerce Department data will show on Aug. 25.

Raymond Learsy: "It makes no sense. Today's price of oil is $74 a barrel, having retreated these past days from over $80/bbl. This, a price more than 100 percent higher that the $33/bbl touched in February 2009. This, with land storage so filled to the brim that over 30 million barrels are kept in floating storage at sea. As one example, Kuwait's crude oil exports to Japan plunged by 47 percent to less than five million barrels a month. In spite of the summer driving season inventories of gasoline in the United States are rising. Supplies of oil at Cushing, Oklahoma, the delivery point for the New York Mercantile Exchange futures contract are less than 1 percent from their all time high reached in May of this year. Inventories in a 15 state region that includes Illinois rose to 97.7 million bbls/oil earlier this month, the highest ever since data was recorded, beginning in 1980 according to Energy Department Report. The price of crude taken together with the country's jobless rate of 9.6 percent makes no sense at all. Clearly the price of oil has lost all ballast to the dynamic of supply and demand."

An extract of the kudzu vine being developed to treat alcoholism may also help treat cocaine addiction, researchers at Gilead Sciences reported on Sunday.
Tests on rats showed the drug could stop them from giving themselves cocaine, the Gilead team reported in the journal Nature Medicine.

Reuters: "thousands of Barclays customers in Britain were unable to access their bank accounts or withdraw money from cash machines on Saturday after a system crash caused chaos nationwide."

Applied Materials will host a live Webcast to discuss a new breakthrough in chip manufacturing technology.

Norfolk Southern prepares to issue $100 Million in 100 Year bonds.

In 2008, OPEC generated net revenue of $964.7 billion, a stupendous number. The price of crude collapsed in 2009, and OPEC saw its revenue fall by 41%, to $570.5 billion. For 2010, the EIA is estimating that OPEC revenue will rise to $752.4 billion, a jump of 32%. For 2011, EIA estimates OPEC revenue at $821.1 billion, a mere 9% rise over 2010.
The EIA estimates are based on an OPEC average per barrel spot price of $77.52 as of August 13th. Higher priced WTI crude spot prices are expected to average $81/b by the end of 2010 and $84/b in 2011.
EIA expects OPEC crude production to rise by 1 million b/d in 2010 and 1.2 million b/d in 2011. Surplus capacity is expected remain right around 5 million b/d, with about 4.5 million b/d attributed to Saudi Arabia.

Crude oil for October delivery fell 72 cents, or 1%, to settle at $73.10 a barrel on the New York Mercantile Exchange. Oil has finished lower for nine of the past ten sessions.

The Fed should consider raising rates as much as 200 basis points, Raghuram Rajan says, because near-zero rates risk fanning asset bubbles or propping up inefficient companies. “Low rates are not a free lunch, but people are acting as though they are," the former IMF chief economist says. Krugman says it would be "an utter disaster."

Bond funds attracted more money than their equity counterparts in 30 straight months through June, according to the Investment Company Institute, a Washington-based trade group. Preliminary data show the trend continued in July, matching the streak posted by bonds from 1984 through 1987.

After being 91 points higher earlier, the Dow industrials fell 39.21 points, or 0.4%, to end at 10,174.41. The S&P 500 index dropped 4.33 points, or 0.4%, to end at 1,067.36. Both the Dow industrials and the S&P 500 are down for the third consecutive session and have fallen over the past two weeks. The Nasdaq Composite lost 20.13 points, or 0.9%, to end at 2,159.63.

Sunday, August 22, 2010

Hindenburg Omen

8/22/10 Hindenburg Omen

Robert McHugh: "We got a second official confirmed Hindenburg Omen observation Friday, August 20th, 2010 after getting a first observation Thursday, August 12th, 2010, meaning we are now on the clock watching for a stock market crash. There is a much higher than normal probability of a stock market crash starting sometime over the next four months. All criteria were met Friday. August 20th's observation saw 83 NYSE New 52 Week Highs, and 95 NYSE New 52 Week Lows according to the Wall Street Journal, the lower of the two coming in at 2.64 percent, above the 2.2 percent threshold required for a Hindenburg Omen observation. Total NYSE issues traded were 3,143. New Highs were not more than twice New Lows, the McClellan Oscillator was negative at negative -106.46, and the 10 Week Moving Average is rising. This second observation on August 20th has occurred within the required 36 day period necessary for a cluster (two or more observations) to occur.

The details for the August 12th, 2010 first observation are as follows: Both NYSE New 52 Week Highs (92) and New 52 Week Lows (81) exceeded 2.2 percent of NYSE traded issues (3,168). The McClellan Oscillator was negative -120.03, and the 50 Day Moving Average was Rising. New 52 Week Highs were not more than twice New 52 Week Lows. Now that we have a second observation, we have an official confirmed Hindenburg Omen. This is the first Hindenburg Omen since 2008, which of course led to the massive stock market crash in the autumn 2008, and the third since the Bear Market started in 2007 (we got one in 2007, one in 2008 and maybe we will get one here in 2010). We got crashes after both the October 2007 and June 2008 Hindenburg Omens.

We did get a "rounded" third Hindenburg Omen observation Thursday, August 19th, 2010, where the lower of New Highs and Lows came in at 2.18 percent, which is just shy of the required 2.2 percent level, but rounds up to 2.20. Rather than include this as an observation with an asterisk, we are just counting the two from August 12th andAugust 20th to avoid controversy. The point is, we have an official confirmed Hindenburg Omen with at least two observations at this time, and no asterisk."

John Mauldin: "The quarterly data show that Q2 stands at a +1.1% annual rate (so look for a steep downward revision for last quarter) and the 'build in' for Q3 is -1.5% at an annual rate. Depending on the data flow through the July-September period, it looks like we could see a -0.5% to -1% annualized pace for the current quarter. Most economists have cut their forecasts but are still in a +2.5% to +3.5% range. What is truly amazing is that despite all the fiscal, monetary, and bailout stimulus, the level of real economy activity, as per the M.A. monthly data, is still 2.5% below the prior peak. To put this fact into context, the entire peak-to-trough contraction in the 2001 recession was 1.3%! That is incredible.

"Interestingly, and dovetailing nicely with our deflation theme, nominal GDP fell 0.3% in May and by 0.4% in June. This is a key reason why Treasury yields are melting."

Mike Burk: "The market rallied early in the week, but, on the NASDAQ new highs never exceeded new lows. There is little to recommend the current market.

I expect the major averages to be lower on Friday August 27 than they were on Friday August 20."

SABMiller PLC, the world's No. 2 beer maker, reportedly is considering spending up to $10.9 billion to acquire the beer operations of Foster's Group Ltd., the largest brewer in Australia, according to a media report Sunday.

Campbell Soup Co., is reportedly looking into making a bid worth $2.3 billion to acquire the largest portion of British food company United Biscuits, according to a media report Sunday.Campbell is considering making a bid for United Biscuits' biscuit-making operations, which accounts for about 75% of United Biscuits total business, according to a report in the Sunday Times of London.
The Times said Campbell is not as interested in acquiring United Biscuits' snacks business as it is the company's biscuit-making operations.