6/21/07 The Summer Season
MGM Mirage said that its majority stockholder, Tracinda Corp., advised the board at yesterday's regular meeting that it had determined not to pursue negotiations to acquire the company's Bellagio and CityCenter properties.
Wal-Mart Stores Inc. said it will open 1,000 Wal-Mart MoneyCenters -- covering a quarter of its stores -- by the end of 2008. The company will also expand its menu of financial products and services, beginning with the launch of the Wal-Mart MoneyCard, a reloadable prepaid Visa rolling out nationally with GE Money and Green Dot.
Nassim Nicholas Taleb: "The best description of my lifelong business in the market is "skewed bets," that is, I try to benefit from rare events, events that do not tend to repeat themselves frequently, but, accordingly, present a large payoff when they occur. I try to make money infrequently, as infrequently as possible, simply because I believe that rare events are not fairly valued, and that the rarer the event, the more undervalued it will be in price. In addition to my own empiricism, I think that the counterintuitive aspect of the trade (and the fact that our emotional wiring does not accommodate it) gives me some form of advantage."
India's Kingfisher Airlines has signed a memorandum of understanding to order 50 planes from Airbus. The agreement is for 15 A350-800 XWBs in addition to the five converted from their original order for the A350, 10 A330-200s, five A340-500s and 20 A320 family aircraft.
The Bank of England's Monetary Policy Committee came within a single vote of hiking rates again in June, with the decision to hold its key rate at 5.5% passing on a five-to-four majority, the central bank revealed Wednesday.
If the Bank of China should raise rates by either 0.27% or 0.52%, what impact might that have on our markets?
PetroChina said it plans to sell up 4 billion shares in Shanghai, raising up to $5.6 billion.
Microsoft has agreed to make changes to its Windows Vista operating system in response to a complaint by Google that a feature of Vista is anticompetitive, lawyers involved in the case said on Tuesday.
Sweden's central bank lifted its benchmark interest rate for the eighth time in 18 months and said it will raise it twice more this year as rising employment and slowing productivity growth threaten to fuel inflation. The krona surged the most in almost five years. The repurchase rate was raised a quarter-point to 3.5 percent, the highest in more than four years, the Stockholm-based bank said in an e-mail today. The rate may be raised to ``around'' 4 percent by year-end, up from an earlier forecast of 3.5 percent, and to 4.4 percent in two years, the bank said.
China’s annual inflation rate may climb to about 3.3% in 2007 from a year earlier, citing a government agency.
Iraq will ask China to invest in the Middle East nation’s oil fields in a visit by Iraqi President Jalal Talabani to Beijing.
Senate tax writers Tuesday proposed slamming the oil and gas industry with nearly $29 billion in new taxes to pay for alternative energy and "clean coal" pro- jects.
Nuveen Investments Inc., the largest U.S. manager of closed-end funds, agreed to be bought by Madison Dearborn Partners LLC for $5.75 billion in the latest example of leveraged-buyout firms pushing further into financial services. Madison Dearborn, which manages more than $14 billion in private-equity funds, will pay $65 a share in cash for Chicago- based Nuveen, 20 percent more than the stock's closing price yesterday, according to a Business Wire statement.
Bank of America Corp. Chief Executive Officer Kenneth Lewis said private-equity firms will enjoy ``unprecedented'' access to financing for at least a few more years before a deal ``goes bad.''
Circuit City CEO said "Combined with an uncertain macroeconomic environment, for the time being, it is difficult to project sales and earnings performance for the balance of the fiscal year. As a result, we are withdrawing financial guidance at this time.
Barron's reports that investment bank Cowen has cut back its Q2 earnings forecasts for Motorola.
Iran is ready to help the US stabilize Iraq and Afghanistan – for a price, writes Selig Harrison, of the Center for International Policy, in the Financial Times.
Brad Setser: "I strongly suspect that central bank funds that previously were flowing into long-dated Treasuries and Agencies are now flowing into the T-bill market. At the right rate, I also suspect central banks will once again be willing to snap up longer-term bonds once again." I mentioned recently that, with the T-bill returning close to 5%, it is truly foolish to go long at 10 years or at 30-years for a pick up in yield that is not commensurate with the risk.
U.K. natural gas for delivery a day ahead rebounded from a six-week low after demand forecasts increased and a pipe connecting England with Belgium prepared to reverse flow direction.
YouTube will make sites available in Brazil, France, Ireland, Italy, Japan, Netherlands, Poland, Spain, and the UK.
According to research firm IDC, only 10% of those surveyed said they may buy an iPhone at full price when it goes on sale June 29.
The American Petroleum Institute reported a climb of 465,000 barrels in crude supplies for the week ended June 15. The Energy Department had reported a jump of 6.9 million barrels for the latest week. Motor gasoline supplies were up 933,000 barrels, the API said. The government reported that supplies of the fuel were up 1.8 million barrels. Distillate supplies climbed 1 million barrels, the API said. The government posted a 100,000-barrel rise.
The jump in 30-year mortgage rates by more than a half a percentage point to 6.74 percent in the past five weeks is putting a crimp on borrowers with the best credit just as a crackdown in subprime lending standards limits the pool of qualified buyers. The national median home price is poised for its first annual decline since the Great Depression, and the supply of unsold homes is at a record 4.2 million, according to the National Association of Realtors.``It's a blood bath,'' said Mark Kiesel, executive vice president of Newport Beach, California-based Pacific Investment Management Co., the manager of $668 billion in bond funds. ``We're talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit.''
The German DAX 30 ended Wednesday up 0.8% at 8,096.62, to reach at all-time closing high.
"Between now and 12 midnight, we will withdraw our members from all DPR locations, including oil export terminals," Mohammed Saidu, branch chairman of the PENGASSAN union in the DPR, told Reuters.The unions have pressed on with the strike despite a series of concessions offered by President Umaru Yar'Adua, who faces the first major test of his government three weeks after taking office.
PACCAR traded at a new 52-week high.
On Tuesday it was GE powering the Dow. On Wednesday it was Home Depot. There always seems to be at least one Dow stock saving the day.
The current U.S. storage surplus for natural gas versus the five-year average is 19 percent, while the deficit against a year earlier stands at 5 percent.
UBS analyst Glyn Lawcock thinks Billiton and and Rio are more likely to bid for Alcan than for Alcoa. That may be but right now only Alcoa has a bid on the table.
Jim Rogers: "I don't buy options. Buying options is another way to go to the poorhouse. Someone did a study for the SEC and discovered that 90 percent of all options expire as losses. Well, I figured out that if 90 percent of all long option positions lost money, that meant that 90 percent of all short option positions make money. If I want to use options to be bearish, I sell calls."
Richard Daughty: "You and your money, and the money of your little goon squad storm troopers here, is what is dying, and is going to die! And you will follow it into the grave as inflation kills you all!"
August gold fell $4.70, or 0.7%, to end the session at $660 an ounce Wednesday. July silver declined by 7.5 cents to close at $13.25 an ounce, but July copper gained 1.4%, or 4.8 cents, to finish at $3.4425 a pound.
Refineries operated at 87.6 percent of capacity last week, the lowest since the week ended March 30, according to the energy department. It was the lowest utilization rate for the period in 16 years. If refinery utilization remains anywhere near that level, gasoline supplies will tighten and prices will rise.
In March 2006, speaking before the Senate armed services committee, General James Jones, the then head of Eucom, said: "Africa currently provides over 15 per cent of US oil imports, and recent explorations in the Gulf of Guinea region indicate potential reserves that could account for 25-35 per cent of US imports within the next decade."
These high-quality reserves - West African oil is typically low in sulphur and thus ideal for refining - are easily accessible by sea to western Europe and the US. In 2005, the US imported more oil from the Gulf of Guinea than it did from Saudi Arabia and Kuwait combined. Within the next ten years it will import more oil from Africa than from the entire Middle East. Western oil giants such as ExxonMobil, Chevron, France's Total and Britain's BP and Shell plan to invest tens of billions of dollars in sub-Saharan Africa (far in excess of "aid" inflows to the region). At present, the US has 1,500 troops stationed in Africa, principally at its military base in Djibouti, in the eastern horn.
Angola is now China's main supplier of crude oil, supplanting Saudi Arabia last year. Africa supplies one-third of China's oil, with Angola, Sudan and Nigeria being major suppliers. China also gets bauxite from Guinea, copper from Zambia, uranium from Namibia and rare metals from Congo. Looking at the options Uganda has to fast track investment in exploitation including pipelines, refineries etc, the only one that comes to mind is China. The People's Republic of China (PRC) is heavily invested in nearby Sudan and the opportunity to develop exploitation in Uganda will allow it to consolidate its regional influence for oil resources.
PRC investments in Sudan are valued at 3-4 billion dollars (out of a 10 billion dollar commitment). In Angola, PRC offered credit of US$ 2 billion through the Import-Export Bank of China.
African Oil: the Numbers
22% of US crude oil imports came from Nigeria in the first quarter of 2007
25% of US crude imports came from Saudi Arabia in the same period
75% of the Nigerian government's income is oil-related
800,000 Nigerian estimate for barrels of oil lost each day through leaks, stoppages or theft by rebels
$2.3bn cost of building Chevron's Benguela Belize platform off the coast of Angola.
Maybe the next conflict will occur over oil in Africa. That will pit the U.S. against China.
What inflation? Indium, for example, was sold at prices 8.5 times as high this March as in March 2002. Indium is used in such products as LCD (liquid crystal display) televisions. Prices for platinum, which is used as a catalyst in fuel cells and catalytic converters for automobiles, also increased 2.4-fold during the same five-year period. Prices for tungsten, which is used to make light-bulb filaments and increase the hardness and strength of steel, rose 4.7-fold during the same period. Among other rare metals, prices for nickel, cobalt, vanadium, molybdenum and manganese also surged 7.1-fold, 4.4-fold, 6.2-fold, 6.0-fold and 2.1-fold, respectively.
China produces about 90% of tungsten and rare earth. China is also the world’s largest producer of indium, accounting for more than 30% of global total. South Africa produces about 80% of platinum.
Japan is a major consumer of rare metals. The world's second-biggest economy accounts for about 60% of global indium consumption. Japan's share of global consumption is high for other rare metals as well, at 20% for platinum, 14% for nickel and tungsten, 25% for cobalt, 17% for molybdenum, 11% for vanadium and 24% for rare earth.
According to Nielsen/Netratings, MSN/Windows Live had an 8.4% share of all May searches, with a total of 605 million queries. As they continue to lose share to Google and Yahoo, Microsoft becomes a non-event in the search market.
Canadian wholesale sales unexpectedly fell 3.1% in April, the biggest decline in almost four years, as car shipments plunged.
Eurex AG, Europe's biggest futures exchange, plans to offer commodity derivatives this year after record prices for energy, metals and agriculture spurred trading of the contracts.
July crude fell 91 cents to close at $68.19 a barrel Wednesday. August crude became the front-month contract at the session close. It closed at $68.86, down 68 cents. July reformulated gasoline fell 0.65 cent to close at $2.2281 a gallon. Natural gas continued its downward slide and was down .14 to $7.38.
Andersons now sees full-year earnings of $2.80 to $3.05, up from $2.35 to $2.60.
The Dow Jones Industrial Average was down 147.38 points at 13,488.04 at its unofficial close. The S&P 500 dropped 21.02 points to 1,512.68 and the Nasdaq Composite gave up almost 27 points to 2,599.
The former chief executive of the parent company of social-networking site MySpace says he will seek a non-controlling stake in Dow Jones & Co. through a $60-per-share "Dutch auction." An investment group led by Internet entrepreneur Brad Greenspan sent a letter to the board of directors at Dow Jones stating that it would buy about 25% of Dow Jones common stock at $60 per share.
Henry Ford: "It is not the employer who pays the wages. Employers only handle the money. It is the customer who pays the wages. "
Wednesday, June 20, 2007
Tuesday, June 19, 2007
Newsworthy
6/20/07 Newsworthy
Starts of new homes in the United States fell by 2.1% to a seasonally adjusted annual pace of 1.47 million in May. However, building permits for new construction rose 3% to 1.50 million. Completions of housing units fell 0.5% to a seasonally adjusted annual rate of 1.534 million, the lowest total in six years. Construction of single-family homes weakened further in May, while building of multifamily buildings strengthened.
Chain store sales for the week ended June 16 rose 1.9% from the year-ago period, according to a survey released Tuesday by the International Council of Shopping Centers and UBS Securities. On a week-over-week basis, sales slipped 0.1%.
Expedia said it would buy back $3.5 billion of its shares in a tender offer, representing 42% of the number of shares of common stock currently outstanding and approximately 38% of the total number of shares of common stock and Class B common stock currently outstanding. Expedia will buy the stock at not less than $27.50 and no more than $30 a share.
For 2007, UCLA forecasters say payrolls will increase by 1.4 percent -- a notch above their earlier 1.3 percent prediction -- but decline to 0.9 percent in 2008 before bouncing up to 1.6 percent in 2009. One of the biggest hits will come in construction jobs, which accounted for 27 percent of all job creation in California from 2003 through 2005. Sector payrolls will drop by 1.9 percent this year and 5 percent next year (46,000 jobs), before returning to 1 percent growth in 2009.
The average US pump price for regular gasoline fell 6.7 cents to $3.00 a gallon in the week ended Monday, the government said.
Best Buy Co. on Tuesday said first-quarter earnings fell 18 percent, hurt by weak profits in China and increased sales of lower-margin products such as notebook computers. Profit for the quarter ended June 2 dropped to $192 million, or 39 cents per share, from $234 million, or 47 cents per share, in the same period a year ago. Looking ahead, the company said it expects consumer spending to be difficult to predict this year, with flat-panel televisions and portable computers staying strong. But it sees sales in lower-margin categories accelerating. Best Buy said it sees earnings per share for the year at $2.95 to $3.15, short of analysts average view of $3.16, according to Reuters Estimates.
Kansas Agricultural Statistics Service reported Monday that 37 percent of the wheat crop was in poor to very poor condition. About 29 percent was rated in fair condition, 25 percent was in good condition and only 9 percent rated as excellent.
Cadbury Schweppes PLC said Tuesday it plans to close 15 percent of its confectionary factories by 2011, cutting about 7,500 jobs, and will likely sell the U.S. unit that makes 7-Up, Dr Pepper and Snapple as it focuses on its candy and gum businesses.
Home Depot has agreed to sell its supply division for more than $10 billion, sources close to the deal said on Tuesday. Bain Capital, Carlyle Group and Clayton, Dubilier & Rice won the auction and were finalizing the deal early on Tuesday sources said. The company plans to buy back up to $22.5 billion in stock "as soon as practicable." The company said it will fund the buyback with the proceeds from the sale of HD Supply, existing cash on hand and the proceeds from an expected $12 billion issuance of senior unsecured notes.
Yahoo's Semel was replaced by co-founder Jerry Yang, effective immediately. Susan Decker, Yahoo's head of advertising and former chief financial officer, was also named president. In my view, the company should get its house in order before exploring alternatives at this time. "I'm ready to dig in and make sure we can take Yahoo to the next level,'' Yang, 38, said in an interview. "I'm absolutely not interim. We want someone for the long haul.''
Barron's writes that Yahoo! sees revenue for Q2 at the mid to low end of its projections.
BHP Billiton Ltd., the world's largest mining group, is considering a bid to rival a $28.7 billion offer for aluminum producer Alcan Inc. , and has hired investment bank Merrill Lynch & Co. , sources familiar with the matter said.
China announced Tuesday it will cut tax rebates on exports of clothes, shoes and other goods in an effort to slow the growth of its huge trade surplus amid rising threats of punitive action by U.S. lawmakers. The move also is meant to slow exports of cement and other goods deemed too energy-intensive or polluting, the Finance Ministry said on its Web site. Rebates of value-added taxes will be eliminated on July 1 on 553 categories of goods including salt, cement and fertilizers, the ministry said. It said rebates will be cut on 2,268 types of products including shoes, clothing and plastic goods.
Chevron Corp. has cut oil output from Nigeria by 42,000 barrels a day following an invasion of its Abiteye flow station, Reuters news agency said Monday. Eni SpA declared force majeure after one of its flow stations in Nigeria was attacked by militants on June 17. Meanwhile, Nigerian oil-worker unions rejected a government offer aimed at avoiding a strike, according to Dow Jones Newswires
Rio Tinto traded at a new 52-week high of $312 per share and its market value has now reached $114 billion. They certainly have the currency to make a move on either Alcoa or Alcan.
Molex expects fourth-quarter revenue to come in below the lower end of past guidance.
The $60-a-share purchase of student lender SLM Corp., commonly known as Sallie Mae, proceeded a step further Tuesday after the company said the deal has cleared an antitrust hurdle.
Microchip shares fell $2.50, or 6%, to $39.13 after the chip maker lowered its first-quarter earnings forecast to 36 cents a share.
Actuant Corp., a maker of industrial tools and supplies, lifted its 2007 earnings per share guidance on Tuesday, partly due to expected acquisition-fueled growth. The company lifted its 2007 earnings growth forecast to a range of 17 percent to 18 percent, up from previous guidance for earnings growth of 9 percent to 14 percent. The guidance calls for earnings of $3.38 to $3.43 per share.
The Chandler Trusts' sale of their last 20.3 million shares, representing a 17.2 percent stake in Chicago-based Tribune, took place June 7 and was disclosed in a regulatory filing Monday. The stock sale, underwritten by Goldman Sachs & Co., netted the Chandler Trusts $31.19 per share.
IRAQ now ranks as the second most unstable country in the world, marginally behind Sudan but ahead of war-ravaged or poverty-stricken countries such as Somalia, Zimbabwe, Ivory Coast, Congo, Afghanistan, Haiti and North Korea, according to the 2007 failed state index.
Presidential candidate Bill Richardson on Tuesday accused his Democratic rivals of creating too many escape clauses for President Bush to leave U.S. troops in Iraq indefinitely."We need to bring them all home," the New Mexico governor said. Richardson would leave a small Marine contingent behind in Iraq to protect the U.S. Embassy. But, he said, "if the embassy is not safe, then they're all coming home too."
Iran Tuesday refused to rule out using oil supplies as a weapon in the standoff over its nuclear program, saying Washington had never excluded attacking the Islamic republic. ‘When the Americans say that using the military option against Iran regarding its nuclear issue is not off the table then Iran can say that it will not put aside the instrument of oil,’ Iran’s representative to OPEC, Hossein Kazempour Ardebili, said in an interview with the Shargh newspaper.
Ghana's President John Kufuor says the discovery of the country's first major oil deposit could turn the West African country into an "African tiger". "Even without oil, we are doing so well... With oil as a shot in the arm, we're going to fly," he told the BBC. "My joy is that I'll go down in history as the president under whose watch oil was found to turn the economy of Ghana around for the better," he said. The discovery of 600m barrels of light oil offshore was announced on Monday.
General Electric's Energy Financial Services unit said Tuesday it would pay $603 million to buy interests in Regency Energy Partners.
The CBOT is raising the margin requirements on wheat, treasury bonds, 10-year treasuries, and treasury swaps.
Bloomberg: "The United Arab Emirates may be the next Middle Eastern country to stop pegging its exchange rate to the U.S. dollar."
Rob Portman is set to leave his post as White House budget director and will be replaced by former Iowa congressman Jim Nussle, news reports said Tuesday.
Bear Stearns Cos., the biggest broker for U.S. hedge funds, offered to provide $1.5 billion in loans to help rescue a money-losing fund run by its asset- management unit, a person familiar with the situation said.
The Oil Drum: "Demand for thermal coal in Russia, the world's fifth-largest coal miner, could more than triple by 2020 as the country invests billions of dollars to expand its power network, industry officials said on Monday. Thermal coal supply would rise by more than 50 percent and the proportion of exports in overall output from the world's third-biggest coal exporter would fall, said Vladimir Shchadov, deputy director of Rosenergo, an agency within the Energy Ministry."
Paul Kasriel: "As mortgage defaults continue to rise and regulators issue new more restrictive mortgage lending "guidelines," bank credit growth is likely to slow still more. And goodness knows what will happen if a few of the private equity loan deals sour."
August gold climbed $4.80 to close at $664.70 an ounce Tuesday. July silver added 9 cents to close at $13.325 an ounce, but July copper continued lower losing 2.35 cents to close at $3.3945 a pound.
July crude closed at $69.10 a barrel Tuesday, up 1 cent for the session. July reformulated gas fell 1.3% to end at $2.2346 a gallon. July natural gas fell 2.2% to close at $7.519 per million British thermal units -- its lowest level since late March.
Starts of new homes in the United States fell by 2.1% to a seasonally adjusted annual pace of 1.47 million in May. However, building permits for new construction rose 3% to 1.50 million. Completions of housing units fell 0.5% to a seasonally adjusted annual rate of 1.534 million, the lowest total in six years. Construction of single-family homes weakened further in May, while building of multifamily buildings strengthened.
Chain store sales for the week ended June 16 rose 1.9% from the year-ago period, according to a survey released Tuesday by the International Council of Shopping Centers and UBS Securities. On a week-over-week basis, sales slipped 0.1%.
Expedia said it would buy back $3.5 billion of its shares in a tender offer, representing 42% of the number of shares of common stock currently outstanding and approximately 38% of the total number of shares of common stock and Class B common stock currently outstanding. Expedia will buy the stock at not less than $27.50 and no more than $30 a share.
For 2007, UCLA forecasters say payrolls will increase by 1.4 percent -- a notch above their earlier 1.3 percent prediction -- but decline to 0.9 percent in 2008 before bouncing up to 1.6 percent in 2009. One of the biggest hits will come in construction jobs, which accounted for 27 percent of all job creation in California from 2003 through 2005. Sector payrolls will drop by 1.9 percent this year and 5 percent next year (46,000 jobs), before returning to 1 percent growth in 2009.
The average US pump price for regular gasoline fell 6.7 cents to $3.00 a gallon in the week ended Monday, the government said.
Best Buy Co. on Tuesday said first-quarter earnings fell 18 percent, hurt by weak profits in China and increased sales of lower-margin products such as notebook computers. Profit for the quarter ended June 2 dropped to $192 million, or 39 cents per share, from $234 million, or 47 cents per share, in the same period a year ago. Looking ahead, the company said it expects consumer spending to be difficult to predict this year, with flat-panel televisions and portable computers staying strong. But it sees sales in lower-margin categories accelerating. Best Buy said it sees earnings per share for the year at $2.95 to $3.15, short of analysts average view of $3.16, according to Reuters Estimates.
Kansas Agricultural Statistics Service reported Monday that 37 percent of the wheat crop was in poor to very poor condition. About 29 percent was rated in fair condition, 25 percent was in good condition and only 9 percent rated as excellent.
Cadbury Schweppes PLC said Tuesday it plans to close 15 percent of its confectionary factories by 2011, cutting about 7,500 jobs, and will likely sell the U.S. unit that makes 7-Up, Dr Pepper and Snapple as it focuses on its candy and gum businesses.
Home Depot has agreed to sell its supply division for more than $10 billion, sources close to the deal said on Tuesday. Bain Capital, Carlyle Group and Clayton, Dubilier & Rice won the auction and were finalizing the deal early on Tuesday sources said. The company plans to buy back up to $22.5 billion in stock "as soon as practicable." The company said it will fund the buyback with the proceeds from the sale of HD Supply, existing cash on hand and the proceeds from an expected $12 billion issuance of senior unsecured notes.
Yahoo's Semel was replaced by co-founder Jerry Yang, effective immediately. Susan Decker, Yahoo's head of advertising and former chief financial officer, was also named president. In my view, the company should get its house in order before exploring alternatives at this time. "I'm ready to dig in and make sure we can take Yahoo to the next level,'' Yang, 38, said in an interview. "I'm absolutely not interim. We want someone for the long haul.''
Barron's writes that Yahoo! sees revenue for Q2 at the mid to low end of its projections.
BHP Billiton Ltd., the world's largest mining group, is considering a bid to rival a $28.7 billion offer for aluminum producer Alcan Inc. , and has hired investment bank Merrill Lynch & Co. , sources familiar with the matter said.
China announced Tuesday it will cut tax rebates on exports of clothes, shoes and other goods in an effort to slow the growth of its huge trade surplus amid rising threats of punitive action by U.S. lawmakers. The move also is meant to slow exports of cement and other goods deemed too energy-intensive or polluting, the Finance Ministry said on its Web site. Rebates of value-added taxes will be eliminated on July 1 on 553 categories of goods including salt, cement and fertilizers, the ministry said. It said rebates will be cut on 2,268 types of products including shoes, clothing and plastic goods.
Chevron Corp. has cut oil output from Nigeria by 42,000 barrels a day following an invasion of its Abiteye flow station, Reuters news agency said Monday. Eni SpA declared force majeure after one of its flow stations in Nigeria was attacked by militants on June 17. Meanwhile, Nigerian oil-worker unions rejected a government offer aimed at avoiding a strike, according to Dow Jones Newswires
Rio Tinto traded at a new 52-week high of $312 per share and its market value has now reached $114 billion. They certainly have the currency to make a move on either Alcoa or Alcan.
Molex expects fourth-quarter revenue to come in below the lower end of past guidance.
The $60-a-share purchase of student lender SLM Corp., commonly known as Sallie Mae, proceeded a step further Tuesday after the company said the deal has cleared an antitrust hurdle.
Microchip shares fell $2.50, or 6%, to $39.13 after the chip maker lowered its first-quarter earnings forecast to 36 cents a share.
Actuant Corp., a maker of industrial tools and supplies, lifted its 2007 earnings per share guidance on Tuesday, partly due to expected acquisition-fueled growth. The company lifted its 2007 earnings growth forecast to a range of 17 percent to 18 percent, up from previous guidance for earnings growth of 9 percent to 14 percent. The guidance calls for earnings of $3.38 to $3.43 per share.
The Chandler Trusts' sale of their last 20.3 million shares, representing a 17.2 percent stake in Chicago-based Tribune, took place June 7 and was disclosed in a regulatory filing Monday. The stock sale, underwritten by Goldman Sachs & Co., netted the Chandler Trusts $31.19 per share.
IRAQ now ranks as the second most unstable country in the world, marginally behind Sudan but ahead of war-ravaged or poverty-stricken countries such as Somalia, Zimbabwe, Ivory Coast, Congo, Afghanistan, Haiti and North Korea, according to the 2007 failed state index.
Presidential candidate Bill Richardson on Tuesday accused his Democratic rivals of creating too many escape clauses for President Bush to leave U.S. troops in Iraq indefinitely."We need to bring them all home," the New Mexico governor said. Richardson would leave a small Marine contingent behind in Iraq to protect the U.S. Embassy. But, he said, "if the embassy is not safe, then they're all coming home too."
Iran Tuesday refused to rule out using oil supplies as a weapon in the standoff over its nuclear program, saying Washington had never excluded attacking the Islamic republic. ‘When the Americans say that using the military option against Iran regarding its nuclear issue is not off the table then Iran can say that it will not put aside the instrument of oil,’ Iran’s representative to OPEC, Hossein Kazempour Ardebili, said in an interview with the Shargh newspaper.
Ghana's President John Kufuor says the discovery of the country's first major oil deposit could turn the West African country into an "African tiger". "Even without oil, we are doing so well... With oil as a shot in the arm, we're going to fly," he told the BBC. "My joy is that I'll go down in history as the president under whose watch oil was found to turn the economy of Ghana around for the better," he said. The discovery of 600m barrels of light oil offshore was announced on Monday.
General Electric's Energy Financial Services unit said Tuesday it would pay $603 million to buy interests in Regency Energy Partners.
The CBOT is raising the margin requirements on wheat, treasury bonds, 10-year treasuries, and treasury swaps.
Bloomberg: "The United Arab Emirates may be the next Middle Eastern country to stop pegging its exchange rate to the U.S. dollar."
Rob Portman is set to leave his post as White House budget director and will be replaced by former Iowa congressman Jim Nussle, news reports said Tuesday.
Bear Stearns Cos., the biggest broker for U.S. hedge funds, offered to provide $1.5 billion in loans to help rescue a money-losing fund run by its asset- management unit, a person familiar with the situation said.
The Oil Drum: "Demand for thermal coal in Russia, the world's fifth-largest coal miner, could more than triple by 2020 as the country invests billions of dollars to expand its power network, industry officials said on Monday. Thermal coal supply would rise by more than 50 percent and the proportion of exports in overall output from the world's third-biggest coal exporter would fall, said Vladimir Shchadov, deputy director of Rosenergo, an agency within the Energy Ministry."
Paul Kasriel: "As mortgage defaults continue to rise and regulators issue new more restrictive mortgage lending "guidelines," bank credit growth is likely to slow still more. And goodness knows what will happen if a few of the private equity loan deals sour."
August gold climbed $4.80 to close at $664.70 an ounce Tuesday. July silver added 9 cents to close at $13.325 an ounce, but July copper continued lower losing 2.35 cents to close at $3.3945 a pound.
July crude closed at $69.10 a barrel Tuesday, up 1 cent for the session. July reformulated gas fell 1.3% to end at $2.2346 a gallon. July natural gas fell 2.2% to close at $7.519 per million British thermal units -- its lowest level since late March.
Monday, June 18, 2007
Another Variety Of The Yen Carry Trade
6/19/07 Another Variety Of The Yen Carry Trade
Ticker Sense: "This week's Poll is a new Ticker Sense record! The Blogger Sentiment Poll has never been this bullish." There are more than 2 bulls for 1 bear.
According to the WSJ, General Electric and Pearson PLC, publisher of the Financial Times, may offer a joint bid for Dow Jones that would allow the controlling family to retain a minority interest.
According to the London Times, BHP Billiton may consider a $40 billion takeover of US aluminum producer Alcoa Inc. As an aside, Alcan has signed a new long-term agreement to supply Airbus with a variety of high-performance aluminum products, including plate, sheet, stringer, and small extrusions and tubes, for the full range of Airbus' aircraft programs, including the A380 and the new A350 XWB. Specific terms of the contract were not disclosed.
Iggys House, Inc. announced that in less than three months since its launch, sellers have posted more than $1.5 billion of homes for sale on IggysHouse.com and have used its free service to list more than one half a billion dollars of homes on the MLS. Over 70% of homes sold in the United States are sold through the MLS, so a free MLS listing is highly valued by home sellers, especially in a slowing real estate market.
Food and beverage costs rose 3.9% in May from a year earlier, outpacing the overall inflation rate by more than a full percentage point and is the biggest increase in three years, the Labor Department said Friday. Costs for a variety of goods, including meat, milk, soft drinks and fresh fruit all rose from April. Higher prices are being seen not only at grocery stores, but also at restaurants. The cost of dining out has risen 3.3% in the last year.
Airbus booked orders from US Airways, Qatar Airlines, Emirates and Jazeera Airways for a raft of planes, including its problem-plagued A350 and superjumbo A380 models.
US Airways Group Inc. ordered 60 A320 single-aisle aircraft and 32 widebody aircraft. It also increased its previously announced order of 20 A350s by two to 22 A350 XWBs in both the 800 and larger 900 series configuration.
The A320s will replace Boeing 737-300/400s, which will be eliminated from the fleet, the carrier said. It added that it expects to take delivery of the first A350-800 in 2014, becoming the North American launch customer for the fleet type.
Qatar ordered 80 A350 XWBs, three A380s and three A320 family aircraft. The A350 order was a confirmation of Qatar's' earlier commitments to buy the 80 jets. Qatar Airways Chief Executive Akbar Al Baker said the order for the A350s is worth $16 billion.
Two of the orders for the A380, Airbus's flagship double-decker plane, are conversions of earlier options into firm orders, he said, and the airline is taking one new order, bringing its total order for A380s to five. The three firm orders together are worth about $750 million, he said.
Emirates is by far the biggest single customer for the A380. It initially ordered 43 A380s and took another four in May. Emirates is believed to have obtained significantly improved financial terms for these aircraft and the latest batch of eight.
Jazeera Airways signed an order for 30 single-aisle A320 jets worth between $2.1 billion and $2.4 billion at list prices.
Emirates ordered an additional A380, boosting to 55 the number of A380s ordered by the Dubai-based airline.
Finish Line said it agreed to acquire larger rival Genesco for $54.50 per share, or about $1.5 billion, to enhance its footwear and apparel portfolio.
Imperial Chemical Industries Plc, the U.K. maker of Dulux and Glidden paints, rejected a 7.2 billion-pound ($14.2 billion) bid from Akzo Nobel NV of the Netherlands as too low.
Friendly Ice Cream is being acquired for $15.50.
Wendy's International Inc. said the special committee of its board, which is reviewing the company's strategic options, has decided to explore a potential sale of the company. The company's revised range for EBITDA is $295 million to $315 million, compared to previous guidance of $330 million to $340 million. The company said it now expects to earn $1.09 to 1.23 per share, compared to the company's previous guidance of $1.26 to $1.32 a share issued on March 20. Wendy's cited lower-than-planned same-store sales and higher-than-expected commodity costs for the new view.
John Hussman: "Suffice it to say that the only reason to buy stocks here is a) the belief that one can sell them to a greater fool at higher prices despite already overvalued, overbought, overbullish and rising yield conditions, or b) the belief that the stock market will soar 30-50% from these levels, without experiencing even a minimal bear market in the next 4-5 years."
Nouriel Roubini: "In my recent paper with Menegatti (The Direct Link Between Housing and Consumption: Wealth Effect and Home Equity Withdrawal) we estimated that such wealth effect could be quite significant: with home equity withdrawal (HEW) now down below $200 billion from its peak of $700 billion in 2005 even a 25% of HEW on consumption (half the estimated of Greenspan and Kennedy) gives a reduction in consumption of $125 billion or about 1.5% of disposable income. If this effect is even larger - as Bernanke now seems to suggest - because of a credit crunch the impact on consumption would be even larger. Note also that, while home equity is on the aggregate a large fraction of home values (55% based on Census data) average figure are distorted by a very skewed distribution of housing equity. Indeed for many households home equity is 100% of house values as they paid their mortgages or do not have one; while for many other households with little mortgages left home equity is a very large percent of home values. But, conversely, a third of households have very little equity in their homes.Thus, even a 10 to 15% fall in the value of their home could completely wipe out such equity (also considering that selling a home implies selling costs close to 10% of the value of the home). These households with little equity in their homes are highy vulnerable to end up in negative equity conditions even if home values fall only moderately. Thus the 55% aggregate equity figure is misleading: many households have very little equity in their homes."
On Friday, Moody's downgraded 131 bonds backed by pools of subprime loans. The reporters were careful to point out that the downgrade affects only $3 billion worth of bonds out of the roughly $400 billion in subprime mortgage-backed bonds issued in 2006.
China's key stock index rose to a record, having taken less than two weeks to rebound from a rout that erased more than $400 billion of market value.
Soybeans are close to $9 a bushel. Combine that with $6.15 a bushel wheat and $4.30 corn, and you have the makings for some heated food pricing.
European power prices may jump this summer because of limits on how much hot water utilities can return to rivers and seas when the weather is warm, Merrill Lynch & Co. said. Utilities in Germany, including E.ON AG and Vattenfall AB, have been forced to reduce capacity in at least one nuclear plant in Europe's biggest power market because of environmental restrictions on the water used to cool facilities. How many nuclear plant operators factored this is in their usage calculations?
Once again, there is a threatened strike by Nigerian labor unions. Nigeria's two main oil unions plan to participate, said Lumumba Okugbawa, deputy general secretary of the Petroleum & Natural Gas Senior Staff Association of Nigeria, or Pengassan. Nigeria produces low-sulfur, or sweet, crude oil, prized by U.S. refiners because of the high proportion of gasoline it yields.
The yen has slumped 4.6 percent to a 4 1/2-year low against the dollar this quarter. In my view, the yen is significantly undervalued against the dollar; however, the slide continues. In addition, fhe yen fell to a fresh record low against the euro and dipped to multi-year troughs against sterling and the New Zealand dollar as investors ramped up carry trades that involve borrowing yen to buy higher-yield, higher-risk assets such as equities.
Brazil's real rose to near the strongest since October 2000 on speculation benign inflation and faster growth will lure more foreign investment to local stock and bond markets.
The PHLX Oil Service Index hit another all time high on Monday, and stocks like Baker Hughes also hit another all-time high while BJ Services is 14 points below an all-time high or close to 50%. At some point, the disparity will be noticed by value investors. Just to put things in further perspective, from Monday June 11 to Monday June 18, Schlumberger's market cap rose by $9 billion and that exceeds the entire market cap of $8.5 billion for BJ Services.
S&P Equity Research: "We believe foreign investors have been withdrawing funds from intermediate-term Treasuries in search of better yields outside the U.S." Is this simply another variety of the yen carry trade?
"The industry has changed: you're not anathematized if you come out with a negative opinion,'' said Robert Stovall, whose work on Wall Street the past five decades included stints as a strategist at the securities unit of Newark, New Jersey-based Prudential Financial Inc. and research director at Nuveen Corp. in New York. "It used to be that sell recommendations were frowned upon. I even worked at firms where the CEO said, `I never want to see a bearish word on my stationery.'''
The outlook for U.S. home building is the worst in 16 years, the National Association of Home Builders reported Monday. The builders' housing market index fell by two points to 28 in June, the lowest since February 1991. The market probably won't turn around until next year, said David Seiders, chief economist for the builders. "We expect housing to exert a drag on economic growth during the balance of 2007." The index for single-family home sales dropped from 31 to 29, also the lowest since 1991. The index for expected sales fell by two points to 39, the lowest since September. The index for buyers' traffic dropped by one point to 21, the lowest since January 1991.
August gold rose $1.20 to close at $659.90 an ounce. July silver fell by 2.5 cents to close at $13.235 an ounce, while July copper retreated from a more than one-month high of $3.515 a pound to finish the session down 0.4 cent at $3.418.
Apple announced on Monday improvements to the battery life and the the top surface of the iPhone's display.
With a few minutes left in the trading day for energy, July crude hit $69.15, the highest level since Sept. 18, 2006. Yet, the U.S. Oil Fund ETF is $22 from the high or roughly 40%.
Crude closed up $1.09 at $69.09 and natural gas closed down 2.9% at $7.69 per million BTUs.
Ticker Sense: "This week's Poll is a new Ticker Sense record! The Blogger Sentiment Poll has never been this bullish." There are more than 2 bulls for 1 bear.
According to the WSJ, General Electric and Pearson PLC, publisher of the Financial Times, may offer a joint bid for Dow Jones that would allow the controlling family to retain a minority interest.
According to the London Times, BHP Billiton may consider a $40 billion takeover of US aluminum producer Alcoa Inc. As an aside, Alcan has signed a new long-term agreement to supply Airbus with a variety of high-performance aluminum products, including plate, sheet, stringer, and small extrusions and tubes, for the full range of Airbus' aircraft programs, including the A380 and the new A350 XWB. Specific terms of the contract were not disclosed.
Iggys House, Inc. announced that in less than three months since its launch, sellers have posted more than $1.5 billion of homes for sale on IggysHouse.com and have used its free service to list more than one half a billion dollars of homes on the MLS. Over 70% of homes sold in the United States are sold through the MLS, so a free MLS listing is highly valued by home sellers, especially in a slowing real estate market.
Food and beverage costs rose 3.9% in May from a year earlier, outpacing the overall inflation rate by more than a full percentage point and is the biggest increase in three years, the Labor Department said Friday. Costs for a variety of goods, including meat, milk, soft drinks and fresh fruit all rose from April. Higher prices are being seen not only at grocery stores, but also at restaurants. The cost of dining out has risen 3.3% in the last year.
Airbus booked orders from US Airways, Qatar Airlines, Emirates and Jazeera Airways for a raft of planes, including its problem-plagued A350 and superjumbo A380 models.
US Airways Group Inc. ordered 60 A320 single-aisle aircraft and 32 widebody aircraft. It also increased its previously announced order of 20 A350s by two to 22 A350 XWBs in both the 800 and larger 900 series configuration.
The A320s will replace Boeing 737-300/400s, which will be eliminated from the fleet, the carrier said. It added that it expects to take delivery of the first A350-800 in 2014, becoming the North American launch customer for the fleet type.
Qatar ordered 80 A350 XWBs, three A380s and three A320 family aircraft. The A350 order was a confirmation of Qatar's' earlier commitments to buy the 80 jets. Qatar Airways Chief Executive Akbar Al Baker said the order for the A350s is worth $16 billion.
Two of the orders for the A380, Airbus's flagship double-decker plane, are conversions of earlier options into firm orders, he said, and the airline is taking one new order, bringing its total order for A380s to five. The three firm orders together are worth about $750 million, he said.
Emirates is by far the biggest single customer for the A380. It initially ordered 43 A380s and took another four in May. Emirates is believed to have obtained significantly improved financial terms for these aircraft and the latest batch of eight.
Jazeera Airways signed an order for 30 single-aisle A320 jets worth between $2.1 billion and $2.4 billion at list prices.
Emirates ordered an additional A380, boosting to 55 the number of A380s ordered by the Dubai-based airline.
Finish Line said it agreed to acquire larger rival Genesco for $54.50 per share, or about $1.5 billion, to enhance its footwear and apparel portfolio.
Imperial Chemical Industries Plc, the U.K. maker of Dulux and Glidden paints, rejected a 7.2 billion-pound ($14.2 billion) bid from Akzo Nobel NV of the Netherlands as too low.
Friendly Ice Cream is being acquired for $15.50.
Wendy's International Inc. said the special committee of its board, which is reviewing the company's strategic options, has decided to explore a potential sale of the company. The company's revised range for EBITDA is $295 million to $315 million, compared to previous guidance of $330 million to $340 million. The company said it now expects to earn $1.09 to 1.23 per share, compared to the company's previous guidance of $1.26 to $1.32 a share issued on March 20. Wendy's cited lower-than-planned same-store sales and higher-than-expected commodity costs for the new view.
John Hussman: "Suffice it to say that the only reason to buy stocks here is a) the belief that one can sell them to a greater fool at higher prices despite already overvalued, overbought, overbullish and rising yield conditions, or b) the belief that the stock market will soar 30-50% from these levels, without experiencing even a minimal bear market in the next 4-5 years."
Nouriel Roubini: "In my recent paper with Menegatti (The Direct Link Between Housing and Consumption: Wealth Effect and Home Equity Withdrawal) we estimated that such wealth effect could be quite significant: with home equity withdrawal (HEW) now down below $200 billion from its peak of $700 billion in 2005 even a 25% of HEW on consumption (half the estimated of Greenspan and Kennedy) gives a reduction in consumption of $125 billion or about 1.5% of disposable income. If this effect is even larger - as Bernanke now seems to suggest - because of a credit crunch the impact on consumption would be even larger. Note also that, while home equity is on the aggregate a large fraction of home values (55% based on Census data) average figure are distorted by a very skewed distribution of housing equity. Indeed for many households home equity is 100% of house values as they paid their mortgages or do not have one; while for many other households with little mortgages left home equity is a very large percent of home values. But, conversely, a third of households have very little equity in their homes.Thus, even a 10 to 15% fall in the value of their home could completely wipe out such equity (also considering that selling a home implies selling costs close to 10% of the value of the home). These households with little equity in their homes are highy vulnerable to end up in negative equity conditions even if home values fall only moderately. Thus the 55% aggregate equity figure is misleading: many households have very little equity in their homes."
On Friday, Moody's downgraded 131 bonds backed by pools of subprime loans. The reporters were careful to point out that the downgrade affects only $3 billion worth of bonds out of the roughly $400 billion in subprime mortgage-backed bonds issued in 2006.
China's key stock index rose to a record, having taken less than two weeks to rebound from a rout that erased more than $400 billion of market value.
Soybeans are close to $9 a bushel. Combine that with $6.15 a bushel wheat and $4.30 corn, and you have the makings for some heated food pricing.
European power prices may jump this summer because of limits on how much hot water utilities can return to rivers and seas when the weather is warm, Merrill Lynch & Co. said. Utilities in Germany, including E.ON AG and Vattenfall AB, have been forced to reduce capacity in at least one nuclear plant in Europe's biggest power market because of environmental restrictions on the water used to cool facilities. How many nuclear plant operators factored this is in their usage calculations?
Once again, there is a threatened strike by Nigerian labor unions. Nigeria's two main oil unions plan to participate, said Lumumba Okugbawa, deputy general secretary of the Petroleum & Natural Gas Senior Staff Association of Nigeria, or Pengassan. Nigeria produces low-sulfur, or sweet, crude oil, prized by U.S. refiners because of the high proportion of gasoline it yields.
The yen has slumped 4.6 percent to a 4 1/2-year low against the dollar this quarter. In my view, the yen is significantly undervalued against the dollar; however, the slide continues. In addition, fhe yen fell to a fresh record low against the euro and dipped to multi-year troughs against sterling and the New Zealand dollar as investors ramped up carry trades that involve borrowing yen to buy higher-yield, higher-risk assets such as equities.
Brazil's real rose to near the strongest since October 2000 on speculation benign inflation and faster growth will lure more foreign investment to local stock and bond markets.
The PHLX Oil Service Index hit another all time high on Monday, and stocks like Baker Hughes also hit another all-time high while BJ Services is 14 points below an all-time high or close to 50%. At some point, the disparity will be noticed by value investors. Just to put things in further perspective, from Monday June 11 to Monday June 18, Schlumberger's market cap rose by $9 billion and that exceeds the entire market cap of $8.5 billion for BJ Services.
S&P Equity Research: "We believe foreign investors have been withdrawing funds from intermediate-term Treasuries in search of better yields outside the U.S." Is this simply another variety of the yen carry trade?
"The industry has changed: you're not anathematized if you come out with a negative opinion,'' said Robert Stovall, whose work on Wall Street the past five decades included stints as a strategist at the securities unit of Newark, New Jersey-based Prudential Financial Inc. and research director at Nuveen Corp. in New York. "It used to be that sell recommendations were frowned upon. I even worked at firms where the CEO said, `I never want to see a bearish word on my stationery.'''
The outlook for U.S. home building is the worst in 16 years, the National Association of Home Builders reported Monday. The builders' housing market index fell by two points to 28 in June, the lowest since February 1991. The market probably won't turn around until next year, said David Seiders, chief economist for the builders. "We expect housing to exert a drag on economic growth during the balance of 2007." The index for single-family home sales dropped from 31 to 29, also the lowest since 1991. The index for expected sales fell by two points to 39, the lowest since September. The index for buyers' traffic dropped by one point to 21, the lowest since January 1991.
August gold rose $1.20 to close at $659.90 an ounce. July silver fell by 2.5 cents to close at $13.235 an ounce, while July copper retreated from a more than one-month high of $3.515 a pound to finish the session down 0.4 cent at $3.418.
Apple announced on Monday improvements to the battery life and the the top surface of the iPhone's display.
With a few minutes left in the trading day for energy, July crude hit $69.15, the highest level since Sept. 18, 2006. Yet, the U.S. Oil Fund ETF is $22 from the high or roughly 40%.
Crude closed up $1.09 at $69.09 and natural gas closed down 2.9% at $7.69 per million BTUs.
Sunday, June 17, 2007
Careful As You Go
6/18/07 Careful As You Go
ECI Telecom Ltd., the Israeli producer of telecommunications-network solutions, said it was in talks under which it could be acquired for $10 a share with an investor group led by a firm controlled by Shaul Shani.
Washington Mutual Inc. is closing its fulfillment office in Dublin, Calif., in the San Francisco Bay Area. The move will affect 120 workers, who were notified of the layoffs on June 1, according to WaMu spokesman Tim McGarry. The layoffs do not affect WaMu's larger operations in Pleasanton, Calif. "We are reducing overall staff in response to overall demand," McGarry said. The work will be transferred to a similar facility in Anaheim, Calif.
Randall W. Forsyth: "Before the breakdown of the Bretton Woods exchange-rate system, it took 360 yen to buy a dollar. Now, it takes a bit more than 120 yen to buy a dollar. For Japanese consumers, the yen buys three times as much; conversely, Americans' purchasing power in yen is one-third as much as when President Nixon severed the dollar's value from gold in 1971. And what's happened with the U.S. trade deficit with Japan? It's only gotten bigger. Then, we bought $2,000 Toyotas; now we buy $20,000 Toyotas. No nation ever devalued itself to prosperity, and a strengthening currency increases the wealth of a nation. As Asian currencies rise, as Sens. Baucus, Grassley, Graham and Schumer want, those countries will get richer. Asia remembers how they suffered when their currencies plunged after the crisis of a decade ago. America, be careful what you wish for."
Robert Zoellick, the U.S. choice to head the World Bank, warned Saturday that Venezuela's economic and political troubles were growing under President Hugo Chavez's leftist government. "It's a country where economic problems are mounting and we are seeing (that) on the political and press side it's not moving in a healthy direction," Zoellick told a news conference in Mexico City. Zoellick could have been just easily been describing conditions in the U.S. with mounting government spending accompanied by rising government deficits. Stay long WD 40 as the Fed cranks up the printing presses to ever excessive levels.
Merrill Lynch seized $400 million in assets of a Bear Stearns hedge fund to which it had lent money and is preparing to auction them off, a move that could end the fund. As the Great One would say, it's a mere bag of shells.
Gillian Tett: "The important point to grasp about bond yields is that they have been so extraordinarily low in recent years that this week's swing has merely brought them back to more "normal" levels. But while this may be reassuring news, in one sense, there is another crucial aspect that may have more unsettling implications: volatility has blown back into the picture. This is significant because, in recent years, bond yields have not only been unusually low but also relatively stable. That has helped to promote low volatility across many other asset classes. Indeed, the climate has been so calm that some central bankers have dubbed this decade the era of the "Great Moderation."...Nevertheless, it would be naive to expect the dust to settle too easily from this squall. For it is a fair bet that behind the scenes thousands of investors around the world are now furtively reassessing their strategies- not merely in relation to structured finance, but numerous other asset classes as well. Some of these may even be nursing significant losses from Treasuries. That, in turn, could potentially create all manner of subtle changes in investment flows in the coming weeks. For one thing, investors may start to scale back their use of ultra-risky instruments. AsMr Batcharov says, the financial weather is indeed changing; better hang on to your investment umbrella."
One might revisit the yield spread in lower quality bonds and U.S. treasuries. It's not that I believe the latter are without risk. Just the contrary; however, the lesser quality should, in my view, yield had a larger yield differential than is presently the case. By contrast, Andrew Feltus, who runs the fund at Pioneer Investment Management in Boston, said policymakers will hold their target interest rate at 5.25 percent for the next 12 months, encouraging economic growth and keeping risk premiums on speculative-grade debt close to record lows.
From the N.Y. Times: "Sales on the Internet are expected to reach $116 billion this year, or 5 percent of all retail sales, making it harder to maintain the same high growth rates. At the same time, consumers seem to be experiencing Internet fatigue and are changing their buying habits."
Kazakhstan plans to extend its Chinese oil pipeline all the way to the Caspian Sea to give China direct access to fast-growing energy supplies, President Nursultan Nazarbayev said. The Atasu-Alashankou pipeline, built in 2005, can send China five million tonnes of Kazakh oil a year (100,000 barrels per day) and could be expanded to supply four times as much. "We have laid the pipeline to China and there remains 700km to build to link it to the Caspian Sea, and we plan to do that," Nazarbayev told foreign investors at a twice-yearly forum. Planned links to China might include more than pipelines. "We and the Chinese are seriously considering the possibility of building a direct railway from Western China to the Caspian Sea," he said. Reflect on this development and the chilly reception Cheney received in Kazakhstan.
Boris Sobolev :"The world's currency reserves of around $5 trillion are being slowly reallocated away from the dollar. We know that China, Russia, and a score of oil exporters have expressed their intentions to reduce U.S. dollar exposure, and some have already done so. Although bond prices have thus far moved substantially lower, they are still heftily priced. A persistent but orderly downtrend would be reasonable and far from cataclysmic."
Two Katyusha rockets fired from Lebanon landed near the northern Israeli town of Kiryat Shmona on Sunday, Israeli police said.
International Monetary Fund Governor Rodrigo Rato said that interest rates have reached levels that can undermine the business mergers and acquisitions that have been leveraged to an extended degree.
China is considering allocating 30 pct of its strategic oil reserves for the use of private companies, with government institutions taking up the rest, the Economic Observer reported.
"The US dollar is akin to the promissory note of a defunct finance company", says M.R. Venkatesh, a charted accountant from Chennai, India.
In mid May the US national debt stood at about US$8.85 trillion, or US$28,000 for every man, woman and child. The current account deficit -- that which is financed by foreign rather than domestic reserves -- stood at $850 billion or 7% of GDP at the end of 2006.
India's government Sunday issued a second security advisory asking Indians to leave the oil-rich Southern Niger Delta in Nigeria after a fresh kidnapping incident was reported, news reports said Sunday. The latest Ministry of External Affairs advisory was released after the Indian High Commission in Nigeria learned that two Indians were kidnapped Saturday in separate incidents, even as 10 other Indians who were kidnapped on June 1 were released late Friday, reported The Times of India.
Leonardo da Vinci: "Many have made a trade of delusions and false miracles, deceiving the stupid multitude."
ECI Telecom Ltd., the Israeli producer of telecommunications-network solutions, said it was in talks under which it could be acquired for $10 a share with an investor group led by a firm controlled by Shaul Shani.
Washington Mutual Inc. is closing its fulfillment office in Dublin, Calif., in the San Francisco Bay Area. The move will affect 120 workers, who were notified of the layoffs on June 1, according to WaMu spokesman Tim McGarry. The layoffs do not affect WaMu's larger operations in Pleasanton, Calif. "We are reducing overall staff in response to overall demand," McGarry said. The work will be transferred to a similar facility in Anaheim, Calif.
Randall W. Forsyth: "Before the breakdown of the Bretton Woods exchange-rate system, it took 360 yen to buy a dollar. Now, it takes a bit more than 120 yen to buy a dollar. For Japanese consumers, the yen buys three times as much; conversely, Americans' purchasing power in yen is one-third as much as when President Nixon severed the dollar's value from gold in 1971. And what's happened with the U.S. trade deficit with Japan? It's only gotten bigger. Then, we bought $2,000 Toyotas; now we buy $20,000 Toyotas. No nation ever devalued itself to prosperity, and a strengthening currency increases the wealth of a nation. As Asian currencies rise, as Sens. Baucus, Grassley, Graham and Schumer want, those countries will get richer. Asia remembers how they suffered when their currencies plunged after the crisis of a decade ago. America, be careful what you wish for."
Robert Zoellick, the U.S. choice to head the World Bank, warned Saturday that Venezuela's economic and political troubles were growing under President Hugo Chavez's leftist government. "It's a country where economic problems are mounting and we are seeing (that) on the political and press side it's not moving in a healthy direction," Zoellick told a news conference in Mexico City. Zoellick could have been just easily been describing conditions in the U.S. with mounting government spending accompanied by rising government deficits. Stay long WD 40 as the Fed cranks up the printing presses to ever excessive levels.
Merrill Lynch seized $400 million in assets of a Bear Stearns hedge fund to which it had lent money and is preparing to auction them off, a move that could end the fund. As the Great One would say, it's a mere bag of shells.
Gillian Tett: "The important point to grasp about bond yields is that they have been so extraordinarily low in recent years that this week's swing has merely brought them back to more "normal" levels. But while this may be reassuring news, in one sense, there is another crucial aspect that may have more unsettling implications: volatility has blown back into the picture. This is significant because, in recent years, bond yields have not only been unusually low but also relatively stable. That has helped to promote low volatility across many other asset classes. Indeed, the climate has been so calm that some central bankers have dubbed this decade the era of the "Great Moderation."...Nevertheless, it would be naive to expect the dust to settle too easily from this squall. For it is a fair bet that behind the scenes thousands of investors around the world are now furtively reassessing their strategies- not merely in relation to structured finance, but numerous other asset classes as well. Some of these may even be nursing significant losses from Treasuries. That, in turn, could potentially create all manner of subtle changes in investment flows in the coming weeks. For one thing, investors may start to scale back their use of ultra-risky instruments. AsMr Batcharov says, the financial weather is indeed changing; better hang on to your investment umbrella."
One might revisit the yield spread in lower quality bonds and U.S. treasuries. It's not that I believe the latter are without risk. Just the contrary; however, the lesser quality should, in my view, yield had a larger yield differential than is presently the case. By contrast, Andrew Feltus, who runs the fund at Pioneer Investment Management in Boston, said policymakers will hold their target interest rate at 5.25 percent for the next 12 months, encouraging economic growth and keeping risk premiums on speculative-grade debt close to record lows.
From the N.Y. Times: "Sales on the Internet are expected to reach $116 billion this year, or 5 percent of all retail sales, making it harder to maintain the same high growth rates. At the same time, consumers seem to be experiencing Internet fatigue and are changing their buying habits."
Kazakhstan plans to extend its Chinese oil pipeline all the way to the Caspian Sea to give China direct access to fast-growing energy supplies, President Nursultan Nazarbayev said. The Atasu-Alashankou pipeline, built in 2005, can send China five million tonnes of Kazakh oil a year (100,000 barrels per day) and could be expanded to supply four times as much. "We have laid the pipeline to China and there remains 700km to build to link it to the Caspian Sea, and we plan to do that," Nazarbayev told foreign investors at a twice-yearly forum. Planned links to China might include more than pipelines. "We and the Chinese are seriously considering the possibility of building a direct railway from Western China to the Caspian Sea," he said. Reflect on this development and the chilly reception Cheney received in Kazakhstan.
Boris Sobolev :"The world's currency reserves of around $5 trillion are being slowly reallocated away from the dollar. We know that China, Russia, and a score of oil exporters have expressed their intentions to reduce U.S. dollar exposure, and some have already done so. Although bond prices have thus far moved substantially lower, they are still heftily priced. A persistent but orderly downtrend would be reasonable and far from cataclysmic."
Two Katyusha rockets fired from Lebanon landed near the northern Israeli town of Kiryat Shmona on Sunday, Israeli police said.
International Monetary Fund Governor Rodrigo Rato said that interest rates have reached levels that can undermine the business mergers and acquisitions that have been leveraged to an extended degree.
China is considering allocating 30 pct of its strategic oil reserves for the use of private companies, with government institutions taking up the rest, the Economic Observer reported.
"The US dollar is akin to the promissory note of a defunct finance company", says M.R. Venkatesh, a charted accountant from Chennai, India.
In mid May the US national debt stood at about US$8.85 trillion, or US$28,000 for every man, woman and child. The current account deficit -- that which is financed by foreign rather than domestic reserves -- stood at $850 billion or 7% of GDP at the end of 2006.
India's government Sunday issued a second security advisory asking Indians to leave the oil-rich Southern Niger Delta in Nigeria after a fresh kidnapping incident was reported, news reports said Sunday. The latest Ministry of External Affairs advisory was released after the Indian High Commission in Nigeria learned that two Indians were kidnapped Saturday in separate incidents, even as 10 other Indians who were kidnapped on June 1 were released late Friday, reported The Times of India.
Leonardo da Vinci: "Many have made a trade of delusions and false miracles, deceiving the stupid multitude."
Saturday, June 16, 2007
Happy Father's Day
6/17/07 Happy Father's Day
The global demand for oil contributed to the lowest unemployment rate for May that the Houston area has seen since 1990. That's according to data released Friday by the Texas Workforce Commission, which showed last month's unemployment rate was 3.8 percent, better than the state's 4.1 percent.
For the next 12 months, would you rather own the dollar or gold and we'll use the Friday closing price for comparative purposes? Even though interest rates are rising, the U.S. dollar index rests at 82.60, and that's not much of a rally from the most recent low.
In April, Industrial & Commercial Bank of China, the country's largest commercial bank, by assets, applied with U.S. regulators to set up a branch in New York. China Merchants Bank, China's largest credit-card issuer based in Shenzhen city near Hong Kong, submitted a similar application a month earlier. If approved, China Merchants could begin offering services in the city as soon as the second half of the year. When approved, do you think fees will be lower than those currently offered by big U.S. banks? From the Financial Times comes “China’s banks are laden with cash and ready to take on the world - just as the Japanese banks were half a generation ago."
How would muted inflation be explained by the following? “U.S. consumers are paying 8% to 10% more for breakfast foods than a year ago because of rising prices for corn, wheat, milk and other commodities, a Department of Agriculture economist said. Commodity inflation ‘is starting to work its way through the system," Ephraim Leibtag of the USDA’s Economic Research Service said.
Doug Noland: " We delude ourselves with fanciful notions of our newfound “ability to share and diversity risks,” when the issue is actually the postponement of the day of reckoning through ever greater risk-taking." As long as the world is viewed as half full, the notion of risk takes a back seat.
I read in Barron's where Goldman Sachs is recommending selling puts. I know something about this arena and have successfully been selling hundreds of deep naked puts for the last several years. It has been a great way to pocket the premium with little risk. In the last four years, only one security has been put to me and that too was profitable the next week. This isn't about my strategy. I've mentioned it time and again in my daily thoughts. In my view, Goldman is coming late to the party. I would be very selective about following their advice. I would like to add something from astute Doug Noland who writes "In reality, Credit booms inherently inflate asset prices, incomes and business “cash flows”, in the process creating a steady flow of so-called “healthy borrowers” willing to perpetuate an increasingly unwieldy Bubble – surreptitiously increasing lender risk throughout the life of the boom. Moreover, it is the nature of Credit “blow-offs” that lender risk grows exponentially as collateral values inflate most spectacularly. Only careful analysis of the underlying Credit process will provide an informed view of the true health of most borrowers. And, as far as the alignment of incentives, the further into Bubble excess the greater the incentive for the financing community to loosen lending standards sufficiently in order to perpetuate the boom (think telecom ’99 or subprime ’06). Seemingly robust “borrowers’ cash flows and liquidity” abruptly turn suspect with the arrival of the inevitable bust."
Adam Hamilton: " It amazes me that gold stocks are held in contempt at their lowest valuations, and hence best fundamental buy points, of this entire bull."
Mary Anne and Pamela Alden: "Note that the yield has been declining since 1981 and in recent years it's been building a base. The long-term moving average identifies the mega trend and it doesn't change direction often. In fact, it's only changed three times in 77 years, but when it did, it then set in motion a new era and mega trend that lasted for decades. The last time that happened was 22 years ago. After long-term interest rates peaked near 15% at the end of the inflationary 1970s and gold had soared to $850. the mega trend has been down since then. Currently, however, another one of these big changes is taking place. This mega moving average is at 5.03% and the 30 year yield has soared above it. It's now at 5.25%. if the yuield stays above 5.03%, the mega trend is up, which is a huge new development. It means long-term interest rates are going much higher and htat big inflation is coming for years to come, which is similar to what happened in the 1970s.This would also coincide with the mega uptrend in commodities and it would loudly signal that a totally different era is in store, contrary to what's been happening for over 25 years, and it'll be extremely bullish for gold."
The U.S. is imposing new export controls on high-tech goods ranging from aircraft to space communication systems that could be used by China's rapidly expanding military. The new regulations, which take effect on Tuesday, also creates a "trusted customer" program that will allow approved companies in China to import certain high-tech goods without having to get an individual license, the US Commerce Department said.
China imported almost one-tenth more crude year-on-year in the first five months of 2007, on higher demand for refined oil, customs said.
"The growth in crude imports is a result of soaring demand for refined oil - and reserves enlargement as well," Gong Jinshuang, a senior analyst at the economic and technology research institute under China National Petroleum Corp (CNPC), said on Friday.
Qatar Petroleum Corp. will invest or is negotiating investments abroad worth $20 billion, including a $7 billion oil refinery in Panama with Occidental Petroleum Corp., Qatar's energy minister said. Qatar Petroleum International, the state-owned company's foreign investment arm, has ``teamed up'' with Occidental to build a 350,000 barrel-a-day oil refinery in the Central American country, Abdullah Bin Hamad al-Attiyah said in comments published today by state-run Qatar News Agency.
Expedia spokeswoman Audrey Lincoff: "Expedia is not going private, we are not spinning off TripAdvisor and we are not eliminating jobs."
Mike Burk: "Measured by the ratio of upside to downside volume the market is as overbought as it has been in the past several months. It makes sense that new highs should expand in a rising market. Lately that has not been the case...The persistently shrinking number of new highs indicate we are nearing the top of this cycle...The market is a little overbought, breadth indicators have been deteriorating and seasonality offers little support. I expect the major indices to be lower on Friday June 22 than they were on Friday June 15."
Floyd Norris mentioned that, recently, China was a net seller ($941 million) of Treasury bonds. That leaves about $800 billion to go. Of course, with most in short-term maturities, they can let them come do and hedge the dollars they will receive in return. With their interest rates about to be increased, and the yuan adjusting upward again, it makes no sense to hold the dollars in an unhedged position. Of course, other than Ron Paul, no one in our Congress probably understands the aforementioned dynamics.
John F. Kennedy: "When we got into office, the thing that surprised me the most was that things were as bad as we'd been saying they were."
The global demand for oil contributed to the lowest unemployment rate for May that the Houston area has seen since 1990. That's according to data released Friday by the Texas Workforce Commission, which showed last month's unemployment rate was 3.8 percent, better than the state's 4.1 percent.
For the next 12 months, would you rather own the dollar or gold and we'll use the Friday closing price for comparative purposes? Even though interest rates are rising, the U.S. dollar index rests at 82.60, and that's not much of a rally from the most recent low.
In April, Industrial & Commercial Bank of China, the country's largest commercial bank, by assets, applied with U.S. regulators to set up a branch in New York. China Merchants Bank, China's largest credit-card issuer based in Shenzhen city near Hong Kong, submitted a similar application a month earlier. If approved, China Merchants could begin offering services in the city as soon as the second half of the year. When approved, do you think fees will be lower than those currently offered by big U.S. banks? From the Financial Times comes “China’s banks are laden with cash and ready to take on the world - just as the Japanese banks were half a generation ago."
How would muted inflation be explained by the following? “U.S. consumers are paying 8% to 10% more for breakfast foods than a year ago because of rising prices for corn, wheat, milk and other commodities, a Department of Agriculture economist said. Commodity inflation ‘is starting to work its way through the system," Ephraim Leibtag of the USDA’s Economic Research Service said.
Doug Noland: " We delude ourselves with fanciful notions of our newfound “ability to share and diversity risks,” when the issue is actually the postponement of the day of reckoning through ever greater risk-taking." As long as the world is viewed as half full, the notion of risk takes a back seat.
I read in Barron's where Goldman Sachs is recommending selling puts. I know something about this arena and have successfully been selling hundreds of deep naked puts for the last several years. It has been a great way to pocket the premium with little risk. In the last four years, only one security has been put to me and that too was profitable the next week. This isn't about my strategy. I've mentioned it time and again in my daily thoughts. In my view, Goldman is coming late to the party. I would be very selective about following their advice. I would like to add something from astute Doug Noland who writes "In reality, Credit booms inherently inflate asset prices, incomes and business “cash flows”, in the process creating a steady flow of so-called “healthy borrowers” willing to perpetuate an increasingly unwieldy Bubble – surreptitiously increasing lender risk throughout the life of the boom. Moreover, it is the nature of Credit “blow-offs” that lender risk grows exponentially as collateral values inflate most spectacularly. Only careful analysis of the underlying Credit process will provide an informed view of the true health of most borrowers. And, as far as the alignment of incentives, the further into Bubble excess the greater the incentive for the financing community to loosen lending standards sufficiently in order to perpetuate the boom (think telecom ’99 or subprime ’06). Seemingly robust “borrowers’ cash flows and liquidity” abruptly turn suspect with the arrival of the inevitable bust."
Adam Hamilton: " It amazes me that gold stocks are held in contempt at their lowest valuations, and hence best fundamental buy points, of this entire bull."
Mary Anne and Pamela Alden: "Note that the yield has been declining since 1981 and in recent years it's been building a base. The long-term moving average identifies the mega trend and it doesn't change direction often. In fact, it's only changed three times in 77 years, but when it did, it then set in motion a new era and mega trend that lasted for decades. The last time that happened was 22 years ago. After long-term interest rates peaked near 15% at the end of the inflationary 1970s and gold had soared to $850. the mega trend has been down since then. Currently, however, another one of these big changes is taking place. This mega moving average is at 5.03% and the 30 year yield has soared above it. It's now at 5.25%. if the yuield stays above 5.03%, the mega trend is up, which is a huge new development. It means long-term interest rates are going much higher and htat big inflation is coming for years to come, which is similar to what happened in the 1970s.This would also coincide with the mega uptrend in commodities and it would loudly signal that a totally different era is in store, contrary to what's been happening for over 25 years, and it'll be extremely bullish for gold."
The U.S. is imposing new export controls on high-tech goods ranging from aircraft to space communication systems that could be used by China's rapidly expanding military. The new regulations, which take effect on Tuesday, also creates a "trusted customer" program that will allow approved companies in China to import certain high-tech goods without having to get an individual license, the US Commerce Department said.
China imported almost one-tenth more crude year-on-year in the first five months of 2007, on higher demand for refined oil, customs said.
"The growth in crude imports is a result of soaring demand for refined oil - and reserves enlargement as well," Gong Jinshuang, a senior analyst at the economic and technology research institute under China National Petroleum Corp (CNPC), said on Friday.
Qatar Petroleum Corp. will invest or is negotiating investments abroad worth $20 billion, including a $7 billion oil refinery in Panama with Occidental Petroleum Corp., Qatar's energy minister said. Qatar Petroleum International, the state-owned company's foreign investment arm, has ``teamed up'' with Occidental to build a 350,000 barrel-a-day oil refinery in the Central American country, Abdullah Bin Hamad al-Attiyah said in comments published today by state-run Qatar News Agency.
Expedia spokeswoman Audrey Lincoff: "Expedia is not going private, we are not spinning off TripAdvisor and we are not eliminating jobs."
Mike Burk: "Measured by the ratio of upside to downside volume the market is as overbought as it has been in the past several months. It makes sense that new highs should expand in a rising market. Lately that has not been the case...The persistently shrinking number of new highs indicate we are nearing the top of this cycle...The market is a little overbought, breadth indicators have been deteriorating and seasonality offers little support. I expect the major indices to be lower on Friday June 22 than they were on Friday June 15."
Floyd Norris mentioned that, recently, China was a net seller ($941 million) of Treasury bonds. That leaves about $800 billion to go. Of course, with most in short-term maturities, they can let them come do and hedge the dollars they will receive in return. With their interest rates about to be increased, and the yuan adjusting upward again, it makes no sense to hold the dollars in an unhedged position. Of course, other than Ron Paul, no one in our Congress probably understands the aforementioned dynamics.
John F. Kennedy: "When we got into office, the thing that surprised me the most was that things were as bad as we'd been saying they were."
Friday, June 15, 2007
Muted Inflation?
6/16/07 Muted Inflation?
The Commerce Department said the U.S. current account gap rose to $192.6 billion in the first quarter from a revised $187.9 billion in the fourth quarter of 2006. Also, the New York Federal Reserve Bank said its Empire State Manufacturing index jumped to 25.8 in June from 8.0 in May.
Monthly capital flows to the U.S. rose to $111.8 billion in April, up sharply from $30.1 billion in March, the Treasury Department reported Friday. The monthly number includes short-term securities like Treasury bills. Foreign private flows of $93.6 billion made up most of the monthly increase. Meanwhile, net foreign purchases of long-term U.S. securities fell back slightly in April, to $97.4 billion from $98.6 billion in March.
A steady rise in food and energy costs pushed overall U.S. consumer prices up 0.7 percent in May, the sharpest gain in more than 1-1/2 years, but prices But more closely watched core prices increased only 0.1 percent, lower than a forecast 0.2 percent rise and down from 0.2 percent in April. Since no one buys food or gas, core prices seem to have meaning to Fed members. For example, milk, already hovering around $4 a gallon in the Chicago area, could cost as much as $4.25 a gallon to $4.50 a gallon by September.
In Florida, milk is likely to rise to more than $5 a gallon, Bill Brooks, a dairy economist with Downes-O'Neill, one of the nation's largest dairy product brokerage firms, said Thursday. Fortunately, no one has "got milk".
The Bank of Japan decided Friday to keep a benchmark interest rate unchanged at 0.5 percent and the central bank's governor hinted that a rate hike may come later than July, quashing speculation for an imminent move. The yen carry trade is alive and well.
The choking drought that's killing crops and turning streams into dusty trails across the Southeast is expanding. Previously limited to the northern half of Alabama, the drought classified as exceptional has grown like an ink blot to extend from eastern Mississippi across Alabama into southeastern Tennessee and northwestern Georgia, government meteorologists said Thursday. They classify conditions in the region as being worse than even those in southern Florida, where Lake Okeechobee is drying up, and the perennially dry West. Overall, the entire Southeast is in at least a moderate drought, except for the southern tips of Florida and Louisiana, the northern reaches of North Carolina and Virginia and parts of Arkansas and West Virginia, according to the U.S. Drought Monitor.
China's factory and property investment surged, fueling speculation that an interest-rate increase is imminent after exports, industrial production and inflation accelerated. Fixed-asset investment in urban areas rose 25.9 percent in the first five months from a year earlier to 3.2 trillion yuan ($420 billion), the statistics bureau said in Beijing today. The increase was 25.5 percent in the first four months.
French trade newsletter, La Lettre de l'Expansion, reported that Total hired Merrill Lynch & Co. as an adviser on a possible bid for the owner of a stake in Royal Dutch Shell Plc's Athabasca oil-sands project, without saying where it got the information. Others interested in Western Oil Sands include Royal Dutch and Texaco, the publication said. Western Oil in February hired bankers to advise it on a possible merger or acquisition or sale of assets. A Total spokeswoman in Paris declined to comment.
Taiwan's stocks rose to a six-year high. China's stocks had their biggest weekly rise in 2 months.
Industrial production in the U.S stalled last month as mild weather reduced electricity demand and manufacturers of cars and machinery scaled back.
Production at factories, mines and utilities was unchanged in May following a 0.4 percent gain in April that was smaller than originally reported, Federal Reserve figures showed today. Capacity utilization, which measures the proportion of plants in use, fell to 81.3 percent from 81.5 percent the prior month.
Europe's trade deficit with China swelled by a third in the first quarter, an increase that may fuel new calls for the government in Beijing to do more to strengthen its currency and reduce the imbalance. In my view, when interest rates rise again in China, and they will, then their currency will strengthen. However, that will not be enough to reduce these expanding trade deficits. Countries want China's goods and services.
Five American soldiers died in Iraq, the U.S. military announced Friday, a day after extremists fired shells into Baghdad's Green Zone during a visit by the State Department's No. 2 official. The prime minister imposed an indefinite curfew on Basra, Iraq's second largest city and gateway to the Persian Gulf, after bombers leveled a Sunni shrine just outside the city. How about that surge?
North Korea on Friday warned it may strengthen its ''self-defense deterrent,'' a term it usually uses to refer to its nuclear program, despite news that millions in frozen funds the country had sought as a condition to disarm was en route to its accounts. The comments came in a statement from the communist regime criticizing U.S. efforts to build a missile defense system.
In 2004, the Bombay Stock Exchange’s Sensex Index passed what was seen as the psychologically crucial 4,000 mark. It closed Thursday at 14,203.73, and many traders expect it to hit 15,000 this year. In the 12 months ended June 8, India’s market indexes have risen 45.6 percent, HSBC said. In addition, the amount of household savings invested in the equities and mutual funds has risen to about 5 percent from about 1 percent four years ago. In May, the market cap of companies on the Bombay Stock Exchange crossed $1 trillion, putting India second only to China among emerging markets.
Univ. Mich Consumer Sentiment Drops to 83.7 (June Preliminary) -- Below Estimates, Lowest Since August. The current conditions index dropped to 100.2 from 105.1. The expectations index fell to 73.0 from 77.6. Inflation expectations over the next five years fell to 3% from 3.1%, while inflation expectations for the next year rose to 3.5% from 3.3%.
Casino operator Penn National Gaming said Friday that it agreed to be acquired for about $8.9 billion, including $2.8 billion in outstanding debt or $67 a share. Penn National, which operates race tracks and casinos, will be purchased by a group of funds affiliated with Fortress Investment Group and Centerbridge Partners in an all-cash transaction.
Venezuela is close to striking a deal with Russia on the procurement of several diesel submarines for its Navy, a source in the Russian shipbuilding industry said Thursday. The South American country has been vigorously pursuing modernization of its naval fleet to counter a possible U.S. blockade of its oil fields and prepare for direct military confrontation with Washington.
Henry To: "The Dow Industrials is still sitting at 2.4% above its 50-day and 8.3% above its 200-day moving average. The 8.3% reading, in particular, tells us that the market is actually closer to an overbought rather than an oversold level. Moreover, this compares unfavorably with the late February to mid March decline earlier this year, when the Dow Industrials corrected to a level that was approximately 4% below its 50-day and 2% above its 200-day moving averages before continuing its rally...Given the lack of aversion we are witnessing in today's market, the chances of us having a tradeable bottom at current levels remain low." Over the past year I have been following Henry's work, and I find his thought processes and results quite compelling.
The U.K.'s Power-Trading Forum, whose members include utilities such as RWE AG and banks Merrill Lynch & Co. and Barclays Capital, called for the development of exchange-based clearing and auctions for electricity.
Record numbers of Minnesotans are delinquent in paying their natural gas bills. CenterPoint Energy, the state's largest provider of natural gas, reports that about a third of its customers -- about 208,000 businesses and households -- owe money after the heating season. More than half of the delinquent customers are at least two months behind on their payments, and owe an average of $1,500, according to CenterPoint. I feel certain the Fed would not be concerned. The core rate was only .0149 per cent higher in the latest reading. Does that mean delinquency should be ignored?
Areva SA, the world's largest manufacturer of nuclear plants, offered to pay more than $2.5 billion in cash for UraMin Inc. to gain uranium-mining assets amid a revival in global demand for the nuclear fuel. Areva agreed to pay $7.75 a share for the company, Johannesburg-based UraMin said today in a statement. That's 4.6 percent more than UraMin's closing price in the U.S. yesterday and 7.6 percent more than the price on June 11, the day before UraMin first said it was in takeover talks.
Bay Area home sales continued their downward slide in May, with fewer properties changing hands and the mix of sales tilting toward higher-priced houses. In the nine-county area, 5,487 existing single-family homes were sold in May, down 17.4 percent from May 2006, according to DataQuick Information Systems. The median price rose 5.9 percent to $720,000.
Looking at both new and resale homes and condos, sales volume was down 18.7 percent to 8,080 transactions, while the median price was up 3.4 percent to $660,000. "Sales are really low; you'd have to set the clock back 12 years to find another May with lower sales," said Andrew LePage, an analyst with DataQuick.
Median prices for existing homes were up in seven of the nine counties, ranging from a 1.6 percent increase to $640,000 in Alameda to a 9.1 percent increase to a $900,000 median in San Francisco. (That's what happens when 8 homes sell for at least $8-$9 million). The median price slid in Solano and Sonoma counties.
The rising median does not mean that home values are on the upswing. Instead, it shows that the proportion of high-end sales is increasing, while comparatively fewer lower-cost houses are selling.
The word ``bubble'' has appeared in 94 Bloomberg News headlines this year, up from 40 in the year-earlier period and from 85 in all of 2005.You know there's a bubble when there's a bubble in usage of the word ``bubble.''
Lead, zinc, and nickel had a big up bounce on Friday and the S&P Goldman Sachs Commodity Index is closing in on the 500 level. To blame overall inflation on energy is stupid. Commodities as a group have been on a run, and the run is not abating. Profit margins for U.S. companies have peaked and pressure on the consumer can only mount. The problem in Minnesota regarding delinquencies for natural gas bills is the real world and not the Fed's bullshit core inflation.
Briefing.com: " There is little indication that the increase in commodity prices the past four years has significant impact on total inflation. The year-over-year increase in total CPI is a fairly tame 2.7%." That's the consensus on Wall Street.
Too bad they have never been further than Broad and Wall St.
"World oil reserves declined by more than 1 billion barrels between 2006-2007," BP claims.
Baker Hughes: Weekly North American rig count up 38 at 2,024.
Colombia's central bank will probably raise its benchmark lending rate to its highest since October 2001 as the fastest economic growth in three decades keeps inflation above the bank's target rate. Policy makers in Bogota could raise the overnight interbank rate today a quarter percentage point to 9 percent.
Valero Energy Corp. shut a unit at its Corpus Christi, Texas, refinery yesterday.
August gold closed at $658.70 an ounce Friday, up $2.80 for the session, and up $8.40, or 1.3%, higher for the week. July silver gained 9.5 cents to close at $13.26 an ounce, up 1.7% for the week. July copper closed at $3.422 an ounce, up 2.95 cents for the day and up 5% for the week.
July crude climbed 35 cents to close at $68 a barrel Friday. The contract scored a gain of $3.24 for the week. July reformulated gasoline rose 1.6% to end at a three-week high of $2.2601 a gallon, up 6.3% for the week. July natural gas closed at $7.918 per million British thermal units, up 1.4% for the day, and up 3.3% for the week.
Pearson Plc, publisher of the Financial Times newspaper, is seeking partners to bid for Dow Jones & Co., the Wall Street Journal reported on its Web site on Friday.
The Commerce Department said the U.S. current account gap rose to $192.6 billion in the first quarter from a revised $187.9 billion in the fourth quarter of 2006. Also, the New York Federal Reserve Bank said its Empire State Manufacturing index jumped to 25.8 in June from 8.0 in May.
Monthly capital flows to the U.S. rose to $111.8 billion in April, up sharply from $30.1 billion in March, the Treasury Department reported Friday. The monthly number includes short-term securities like Treasury bills. Foreign private flows of $93.6 billion made up most of the monthly increase. Meanwhile, net foreign purchases of long-term U.S. securities fell back slightly in April, to $97.4 billion from $98.6 billion in March.
A steady rise in food and energy costs pushed overall U.S. consumer prices up 0.7 percent in May, the sharpest gain in more than 1-1/2 years, but prices But more closely watched core prices increased only 0.1 percent, lower than a forecast 0.2 percent rise and down from 0.2 percent in April. Since no one buys food or gas, core prices seem to have meaning to Fed members. For example, milk, already hovering around $4 a gallon in the Chicago area, could cost as much as $4.25 a gallon to $4.50 a gallon by September.
In Florida, milk is likely to rise to more than $5 a gallon, Bill Brooks, a dairy economist with Downes-O'Neill, one of the nation's largest dairy product brokerage firms, said Thursday. Fortunately, no one has "got milk".
The Bank of Japan decided Friday to keep a benchmark interest rate unchanged at 0.5 percent and the central bank's governor hinted that a rate hike may come later than July, quashing speculation for an imminent move. The yen carry trade is alive and well.
The choking drought that's killing crops and turning streams into dusty trails across the Southeast is expanding. Previously limited to the northern half of Alabama, the drought classified as exceptional has grown like an ink blot to extend from eastern Mississippi across Alabama into southeastern Tennessee and northwestern Georgia, government meteorologists said Thursday. They classify conditions in the region as being worse than even those in southern Florida, where Lake Okeechobee is drying up, and the perennially dry West. Overall, the entire Southeast is in at least a moderate drought, except for the southern tips of Florida and Louisiana, the northern reaches of North Carolina and Virginia and parts of Arkansas and West Virginia, according to the U.S. Drought Monitor.
China's factory and property investment surged, fueling speculation that an interest-rate increase is imminent after exports, industrial production and inflation accelerated. Fixed-asset investment in urban areas rose 25.9 percent in the first five months from a year earlier to 3.2 trillion yuan ($420 billion), the statistics bureau said in Beijing today. The increase was 25.5 percent in the first four months.
French trade newsletter, La Lettre de l'Expansion, reported that Total hired Merrill Lynch & Co. as an adviser on a possible bid for the owner of a stake in Royal Dutch Shell Plc's Athabasca oil-sands project, without saying where it got the information. Others interested in Western Oil Sands include Royal Dutch and Texaco, the publication said. Western Oil in February hired bankers to advise it on a possible merger or acquisition or sale of assets. A Total spokeswoman in Paris declined to comment.
Taiwan's stocks rose to a six-year high. China's stocks had their biggest weekly rise in 2 months.
Industrial production in the U.S stalled last month as mild weather reduced electricity demand and manufacturers of cars and machinery scaled back.
Production at factories, mines and utilities was unchanged in May following a 0.4 percent gain in April that was smaller than originally reported, Federal Reserve figures showed today. Capacity utilization, which measures the proportion of plants in use, fell to 81.3 percent from 81.5 percent the prior month.
Europe's trade deficit with China swelled by a third in the first quarter, an increase that may fuel new calls for the government in Beijing to do more to strengthen its currency and reduce the imbalance. In my view, when interest rates rise again in China, and they will, then their currency will strengthen. However, that will not be enough to reduce these expanding trade deficits. Countries want China's goods and services.
Five American soldiers died in Iraq, the U.S. military announced Friday, a day after extremists fired shells into Baghdad's Green Zone during a visit by the State Department's No. 2 official. The prime minister imposed an indefinite curfew on Basra, Iraq's second largest city and gateway to the Persian Gulf, after bombers leveled a Sunni shrine just outside the city. How about that surge?
North Korea on Friday warned it may strengthen its ''self-defense deterrent,'' a term it usually uses to refer to its nuclear program, despite news that millions in frozen funds the country had sought as a condition to disarm was en route to its accounts. The comments came in a statement from the communist regime criticizing U.S. efforts to build a missile defense system.
In 2004, the Bombay Stock Exchange’s Sensex Index passed what was seen as the psychologically crucial 4,000 mark. It closed Thursday at 14,203.73, and many traders expect it to hit 15,000 this year. In the 12 months ended June 8, India’s market indexes have risen 45.6 percent, HSBC said. In addition, the amount of household savings invested in the equities and mutual funds has risen to about 5 percent from about 1 percent four years ago. In May, the market cap of companies on the Bombay Stock Exchange crossed $1 trillion, putting India second only to China among emerging markets.
Univ. Mich Consumer Sentiment Drops to 83.7 (June Preliminary) -- Below Estimates, Lowest Since August. The current conditions index dropped to 100.2 from 105.1. The expectations index fell to 73.0 from 77.6. Inflation expectations over the next five years fell to 3% from 3.1%, while inflation expectations for the next year rose to 3.5% from 3.3%.
Casino operator Penn National Gaming said Friday that it agreed to be acquired for about $8.9 billion, including $2.8 billion in outstanding debt or $67 a share. Penn National, which operates race tracks and casinos, will be purchased by a group of funds affiliated with Fortress Investment Group and Centerbridge Partners in an all-cash transaction.
Venezuela is close to striking a deal with Russia on the procurement of several diesel submarines for its Navy, a source in the Russian shipbuilding industry said Thursday. The South American country has been vigorously pursuing modernization of its naval fleet to counter a possible U.S. blockade of its oil fields and prepare for direct military confrontation with Washington.
Henry To: "The Dow Industrials is still sitting at 2.4% above its 50-day and 8.3% above its 200-day moving average. The 8.3% reading, in particular, tells us that the market is actually closer to an overbought rather than an oversold level. Moreover, this compares unfavorably with the late February to mid March decline earlier this year, when the Dow Industrials corrected to a level that was approximately 4% below its 50-day and 2% above its 200-day moving averages before continuing its rally...Given the lack of aversion we are witnessing in today's market, the chances of us having a tradeable bottom at current levels remain low." Over the past year I have been following Henry's work, and I find his thought processes and results quite compelling.
The U.K.'s Power-Trading Forum, whose members include utilities such as RWE AG and banks Merrill Lynch & Co. and Barclays Capital, called for the development of exchange-based clearing and auctions for electricity.
Record numbers of Minnesotans are delinquent in paying their natural gas bills. CenterPoint Energy, the state's largest provider of natural gas, reports that about a third of its customers -- about 208,000 businesses and households -- owe money after the heating season. More than half of the delinquent customers are at least two months behind on their payments, and owe an average of $1,500, according to CenterPoint. I feel certain the Fed would not be concerned. The core rate was only .0149 per cent higher in the latest reading. Does that mean delinquency should be ignored?
Areva SA, the world's largest manufacturer of nuclear plants, offered to pay more than $2.5 billion in cash for UraMin Inc. to gain uranium-mining assets amid a revival in global demand for the nuclear fuel. Areva agreed to pay $7.75 a share for the company, Johannesburg-based UraMin said today in a statement. That's 4.6 percent more than UraMin's closing price in the U.S. yesterday and 7.6 percent more than the price on June 11, the day before UraMin first said it was in takeover talks.
Bay Area home sales continued their downward slide in May, with fewer properties changing hands and the mix of sales tilting toward higher-priced houses. In the nine-county area, 5,487 existing single-family homes were sold in May, down 17.4 percent from May 2006, according to DataQuick Information Systems. The median price rose 5.9 percent to $720,000.
Looking at both new and resale homes and condos, sales volume was down 18.7 percent to 8,080 transactions, while the median price was up 3.4 percent to $660,000. "Sales are really low; you'd have to set the clock back 12 years to find another May with lower sales," said Andrew LePage, an analyst with DataQuick.
Median prices for existing homes were up in seven of the nine counties, ranging from a 1.6 percent increase to $640,000 in Alameda to a 9.1 percent increase to a $900,000 median in San Francisco. (That's what happens when 8 homes sell for at least $8-$9 million). The median price slid in Solano and Sonoma counties.
The rising median does not mean that home values are on the upswing. Instead, it shows that the proportion of high-end sales is increasing, while comparatively fewer lower-cost houses are selling.
The word ``bubble'' has appeared in 94 Bloomberg News headlines this year, up from 40 in the year-earlier period and from 85 in all of 2005.You know there's a bubble when there's a bubble in usage of the word ``bubble.''
Lead, zinc, and nickel had a big up bounce on Friday and the S&P Goldman Sachs Commodity Index is closing in on the 500 level. To blame overall inflation on energy is stupid. Commodities as a group have been on a run, and the run is not abating. Profit margins for U.S. companies have peaked and pressure on the consumer can only mount. The problem in Minnesota regarding delinquencies for natural gas bills is the real world and not the Fed's bullshit core inflation.
Briefing.com: " There is little indication that the increase in commodity prices the past four years has significant impact on total inflation. The year-over-year increase in total CPI is a fairly tame 2.7%." That's the consensus on Wall Street.
Too bad they have never been further than Broad and Wall St.
"World oil reserves declined by more than 1 billion barrels between 2006-2007," BP claims.
Baker Hughes: Weekly North American rig count up 38 at 2,024.
Colombia's central bank will probably raise its benchmark lending rate to its highest since October 2001 as the fastest economic growth in three decades keeps inflation above the bank's target rate. Policy makers in Bogota could raise the overnight interbank rate today a quarter percentage point to 9 percent.
Valero Energy Corp. shut a unit at its Corpus Christi, Texas, refinery yesterday.
August gold closed at $658.70 an ounce Friday, up $2.80 for the session, and up $8.40, or 1.3%, higher for the week. July silver gained 9.5 cents to close at $13.26 an ounce, up 1.7% for the week. July copper closed at $3.422 an ounce, up 2.95 cents for the day and up 5% for the week.
July crude climbed 35 cents to close at $68 a barrel Friday. The contract scored a gain of $3.24 for the week. July reformulated gasoline rose 1.6% to end at a three-week high of $2.2601 a gallon, up 6.3% for the week. July natural gas closed at $7.918 per million British thermal units, up 1.4% for the day, and up 3.3% for the week.
Pearson Plc, publisher of the Financial Times newspaper, is seeking partners to bid for Dow Jones & Co., the Wall Street Journal reported on its Web site on Friday.
Thursday, June 14, 2007
Inflation
6/15/07 Inflation
Higher energy costs boosted producer prices 0.9 percent in May, but excluding volatile food and energy costs, prices paid at the factory gate were up a more moderate 0.2 percent, the Labor Department reported on Thursday. Overall producer prices rose 4.1 percent from a year ago, the biggest year-over-year increase since June 2006. However, core producer prices were up just 1.6 percent from a year ago.
Unfortunately, I believe the true inflation numbers are significantly higher than the bogus core producer prices.
The OPEC oil cartel in its June monthly report kept its view of 2007 world oil demand growth unchanged at 1.5%, or 1.3 million barrels of oil a day. World demand in 2006 was estimated to have grown 1.1%, an upward revision of around 150,000 barrels a day due to historical data revisions from developing countries.
China's industrial output of value-added goods and services jumped by 18.1% in May from a year earlier, its fastest growth in three months, beating expectations and increasing chances of further monetary tightening.
Results from a new poll by the Wall Street Journal and NBC News show President Bush with his lowest approval rating ever. According to the poll, which was conducted between June 8 and June 11, Bush has a 29% approval rating, with 66% of respondents disapproving of his handling of the presidency. Results of the poll were published late Wednesday by the Wall Street Journal. In addition, only 19% of Americans say the U.S. is now "headed in the right direction," and 68% say things in the U.S. are "off on the wrong track," the Wall Street Journal report said.
German electricity for delivery next year climbed to its highest in more than a year. Next-year power prices in Germany, Europe's biggest electricity market, gained for a second day. The contract rose as much as 40 cents, or 0.7 percent, to 57.60 euros ($76.57) a megawatt hour, data from broker GFI Group Inc. showed. It traded at 57.45 euros at 9:08 a.m. in Berlin. That's the highest since May last year.
Much is reported on commodity prices, such as, oil and gold, but the price of electricity floats under the radar screen. It is worth noting the price trend in the U.S. It's getting hotter with summer days away and usage is beginning to rise and so is the price. With global warming and a rising world population, going long electricity makes sense to me.
The Swiss National Bank said Thursday it will sell 276 US tons of gold reserves over the next two years. The proceeds will be used to increase Switzerland's foreign currency reserves, national bank directorate member Thomas Jordan told reporters.
Labor costs in the 13 nations that use the euro rose 2.2 percent in the first three months of 2007 compared with a year ago, the European Union's statistics agency said Thursday.
Federal Reserve Bank of Chicago President Michael Moskow said while inflation has slowed, the central bank hasn't reached its goal of price stability.``We still have a ways to go before we get to the level of inflation that I'm comfortable with on a longer-term basis,'' Moskow said in an interview today on CNBC television. ``Inflation is the predominant risk that I see in the economy.'' How about slowing the printing presses?
Greater fluctuations in the prices of stocks, bonds and currencies probably will erode profits from the carry trade, one of the most popular investment strategies in the foreign exchange market, according to Goldman Sachs Group Inc. A Goldman index that tracks three-month implied volatility on options on eight major currency pairs is at 6.03 percent, after reaching 5.78 percent last week. The record low, set in November, was 5.54 percent. Implied volatility, which traders quote as part of setting options prices, indicates expectations for future price swings. ``There is a good chance that we might be forming a bottom in foreign exchange volatility,'' said Jens Nordvig, a senior currency strategist at Goldman in New York. ``It might be difficult for the carry trade to sustain the type of performance it has had if the trend lower in volatility doesn't persist.'' In sum, make the VIX your friend.
Bear Stearns prepares to liquidate a hedge fund that lost big in the subprime mortgage meltdown.
Brad Setser: "The IMF's total lending capacity is about $200b. China will add at least twice that to its reserves (or to the state investment company) this year. That truly is a profound change in the world's financial architecture. And it may auger future changes on the world's political architecture."
The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Thursday, reported that the percentage of payments that were 30 or more days past due for ''subprime'' adjustable-rate home mortgages jumped to 15.75 percent in the January-to-March quarter. That was a sizable increase from the prior quarter's delinquency rate of 14.44 percent and was the highest on record, the association's chief economist Doug Duncan said in an interview with The Associated Press.
West Texas Intermediate may maintain or widen its discount to Brent oil until 2009 because of pipeline bottlenecks in Cushing, Oklahoma, where the crude is delivered, Sanford C. Bernstein & Co. said. WTI, the grade for futures trading in New York, has been at a discount to Brent since February and the spread reached a record $6.54 a barrel on May 24. WTI has lagged behind because U.S. refinery outages cut demand and there aren't the pipeline links to export the crude to other regions, Bernstein said.
A Defense Department report released Wednesday acknowledges that violence in Iraq has not diminished, despite the arrival of thousands of additional U.S. and Iraqi troops in Baghdad. The report, which measured Iraq's progress from February to May, gives a less optimistic assessment of the impact of the elevated troop presence than commanders on the ground offered during that same period.
According to rigzone, the Organization of Petroleum Exporting Countries Thursday said it withdrew 83,000 barrels a day from global markets in May versus April and said the world's demand for its crude was expected to rise later in the year at a brisk pace.
Freddie Mac in its weekly survey Thursday said the national average on the 30-year fixed-rate mortgage hit 6.74%, up from 6.53% a week ago and the highest level since July 2006.
Natural-gas inventories rose by 92 billion cubic feet for the week ended June 8, the Energy Department said Thursday. Total stocks now stand at 2.255 trillion cubic feet, down 131 billion cubic feet from the year-ago level, but 365 billion cubic feet above the five-year average, the government data said. With the weather getting hotter, I expect usage to rise and with it the price for natural gas.
Europe's major central banks are continuing down the path toward higher interest rates amid signs of strong economic growth and persistent inflation. Switzerland's central bank Thursday raised the band for three-month Swiss franc Libor, its key rate, to 2%-3%. The move increased the middle of the new range to 2.5%, up from 2.25% previously.
Andrew Crowder: " Since the low established in July 2006, the S&P (SPY) has been higher during expiration week 10 out of 11 times. If the market lives up to its recent historical precedent, I would expect to see the historically weak period of post options expiration kick in."
Bill Bonner: "People on the lower rungs of society don't own shares in financial companies, they don't go to Harvard Business School, and they don't have million-dollar stamp collections. What they do have is debt - and they have a lot of it."
Rio Tinto is raging up again, and now tops $300 a share. The June 310 calls, which expire tomorrow, are going for 90 cents. That's optimism for you or is something more behind the move?
An internal FBI audit has found the agency violated rules more than 1,000 times while collecting data on domestic phone calls, e-mails and financial transactions in recent years, The Washington Post reported on Thursday. Are you surprised?
Mohamed ElBaradei, director general of the International Atomic Energy Agency (IAEA), described the military option against Iran, urged by some U.S. politicians, as an act of madness, which will not solve the core problem.
But he also called on the IAEA Board of Governors to keep a closer eye on Iran, which, he said, would have up to 3,000 enrichment centrifuges by the end of next month, building up enrichment capacity but failing to guarantee its peaceful intent.
In Thursday morning trading the S&P Goldman Sachs Commodity Index rose over 8 points to 492 with only coffee, zinc, lead, and nickel lower in price. You still think inflation is reported properly by our government? Forecasts for Friday's CPI report are for a 0.7% rise in CPI and 0.2% for core CPI -- which would be the second-biggest CPI acceleration in 16 years. With inflation moving higher, what direction would you predict for interest rates?
Premier Wen Jiabao said lending curbs should be stepped up to tame inflation in the world's fastest- growing major economy.
When was the last time you saw heating oil going for $2+ a gallon in the middle of June?
Gold for August delivery closed up $3.20 at $655.90 an ounce on the New York Mercantile Exchange. July silver rose 10.5 cents to close at $13.165 an ounce and July copper closed at $3.3925 a pound, up 7.95 cents, or 2.4%.
About 27,000 U.S. hourly workers have left Ford Motor Co. under buyout or early retirement offers, the automaker said Thursday.
Richard Daughty: "Enrico Orlandini of dowtheoryanalysis.com actually hears my brain exploding at this astounding revelation, and instead of calling 911 and maybe saving my life, the little bastard sticks a dagger in my heart by saying that it is even worse than that, as "Currently there is no major economic power whose money supply is increasing at less than 10% per year and the US's money supply is now increasing at a greater than 14%/year clip." Owwww!"
August gold climbed $3.20 to close at $655.90 an ounce Thursday. July silver rose 10.5 cents to close at $13.165 an ounce and July copper closed at $3.3925 a pound, up 7.95 cents, or 2.4%.
July crude climbed $1.39 to close at $67.65 a barrel Thursday, marking its strongest closing level since April 27. July reformulated gas led the percentage gains among the energy futures, rising 3.2%, or 6.94 cents, to close at $2.2247 a gallon. July natural gas rose 20 cents, or 2.6%, to finish at $7.808 per million British thermal units on a smaller-than-expected rise in the nation's supply.
Higher energy costs boosted producer prices 0.9 percent in May, but excluding volatile food and energy costs, prices paid at the factory gate were up a more moderate 0.2 percent, the Labor Department reported on Thursday. Overall producer prices rose 4.1 percent from a year ago, the biggest year-over-year increase since June 2006. However, core producer prices were up just 1.6 percent from a year ago.
Unfortunately, I believe the true inflation numbers are significantly higher than the bogus core producer prices.
The OPEC oil cartel in its June monthly report kept its view of 2007 world oil demand growth unchanged at 1.5%, or 1.3 million barrels of oil a day. World demand in 2006 was estimated to have grown 1.1%, an upward revision of around 150,000 barrels a day due to historical data revisions from developing countries.
China's industrial output of value-added goods and services jumped by 18.1% in May from a year earlier, its fastest growth in three months, beating expectations and increasing chances of further monetary tightening.
Results from a new poll by the Wall Street Journal and NBC News show President Bush with his lowest approval rating ever. According to the poll, which was conducted between June 8 and June 11, Bush has a 29% approval rating, with 66% of respondents disapproving of his handling of the presidency. Results of the poll were published late Wednesday by the Wall Street Journal. In addition, only 19% of Americans say the U.S. is now "headed in the right direction," and 68% say things in the U.S. are "off on the wrong track," the Wall Street Journal report said.
German electricity for delivery next year climbed to its highest in more than a year. Next-year power prices in Germany, Europe's biggest electricity market, gained for a second day. The contract rose as much as 40 cents, or 0.7 percent, to 57.60 euros ($76.57) a megawatt hour, data from broker GFI Group Inc. showed. It traded at 57.45 euros at 9:08 a.m. in Berlin. That's the highest since May last year.
Much is reported on commodity prices, such as, oil and gold, but the price of electricity floats under the radar screen. It is worth noting the price trend in the U.S. It's getting hotter with summer days away and usage is beginning to rise and so is the price. With global warming and a rising world population, going long electricity makes sense to me.
The Swiss National Bank said Thursday it will sell 276 US tons of gold reserves over the next two years. The proceeds will be used to increase Switzerland's foreign currency reserves, national bank directorate member Thomas Jordan told reporters.
Labor costs in the 13 nations that use the euro rose 2.2 percent in the first three months of 2007 compared with a year ago, the European Union's statistics agency said Thursday.
Federal Reserve Bank of Chicago President Michael Moskow said while inflation has slowed, the central bank hasn't reached its goal of price stability.``We still have a ways to go before we get to the level of inflation that I'm comfortable with on a longer-term basis,'' Moskow said in an interview today on CNBC television. ``Inflation is the predominant risk that I see in the economy.'' How about slowing the printing presses?
Greater fluctuations in the prices of stocks, bonds and currencies probably will erode profits from the carry trade, one of the most popular investment strategies in the foreign exchange market, according to Goldman Sachs Group Inc. A Goldman index that tracks three-month implied volatility on options on eight major currency pairs is at 6.03 percent, after reaching 5.78 percent last week. The record low, set in November, was 5.54 percent. Implied volatility, which traders quote as part of setting options prices, indicates expectations for future price swings. ``There is a good chance that we might be forming a bottom in foreign exchange volatility,'' said Jens Nordvig, a senior currency strategist at Goldman in New York. ``It might be difficult for the carry trade to sustain the type of performance it has had if the trend lower in volatility doesn't persist.'' In sum, make the VIX your friend.
Bear Stearns prepares to liquidate a hedge fund that lost big in the subprime mortgage meltdown.
Brad Setser: "The IMF's total lending capacity is about $200b. China will add at least twice that to its reserves (or to the state investment company) this year. That truly is a profound change in the world's financial architecture. And it may auger future changes on the world's political architecture."
The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Thursday, reported that the percentage of payments that were 30 or more days past due for ''subprime'' adjustable-rate home mortgages jumped to 15.75 percent in the January-to-March quarter. That was a sizable increase from the prior quarter's delinquency rate of 14.44 percent and was the highest on record, the association's chief economist Doug Duncan said in an interview with The Associated Press.
West Texas Intermediate may maintain or widen its discount to Brent oil until 2009 because of pipeline bottlenecks in Cushing, Oklahoma, where the crude is delivered, Sanford C. Bernstein & Co. said. WTI, the grade for futures trading in New York, has been at a discount to Brent since February and the spread reached a record $6.54 a barrel on May 24. WTI has lagged behind because U.S. refinery outages cut demand and there aren't the pipeline links to export the crude to other regions, Bernstein said.
A Defense Department report released Wednesday acknowledges that violence in Iraq has not diminished, despite the arrival of thousands of additional U.S. and Iraqi troops in Baghdad. The report, which measured Iraq's progress from February to May, gives a less optimistic assessment of the impact of the elevated troop presence than commanders on the ground offered during that same period.
According to rigzone, the Organization of Petroleum Exporting Countries Thursday said it withdrew 83,000 barrels a day from global markets in May versus April and said the world's demand for its crude was expected to rise later in the year at a brisk pace.
Freddie Mac in its weekly survey Thursday said the national average on the 30-year fixed-rate mortgage hit 6.74%, up from 6.53% a week ago and the highest level since July 2006.
Natural-gas inventories rose by 92 billion cubic feet for the week ended June 8, the Energy Department said Thursday. Total stocks now stand at 2.255 trillion cubic feet, down 131 billion cubic feet from the year-ago level, but 365 billion cubic feet above the five-year average, the government data said. With the weather getting hotter, I expect usage to rise and with it the price for natural gas.
Europe's major central banks are continuing down the path toward higher interest rates amid signs of strong economic growth and persistent inflation. Switzerland's central bank Thursday raised the band for three-month Swiss franc Libor, its key rate, to 2%-3%. The move increased the middle of the new range to 2.5%, up from 2.25% previously.
Andrew Crowder: " Since the low established in July 2006, the S&P (SPY) has been higher during expiration week 10 out of 11 times. If the market lives up to its recent historical precedent, I would expect to see the historically weak period of post options expiration kick in."
Bill Bonner: "People on the lower rungs of society don't own shares in financial companies, they don't go to Harvard Business School, and they don't have million-dollar stamp collections. What they do have is debt - and they have a lot of it."
Rio Tinto is raging up again, and now tops $300 a share. The June 310 calls, which expire tomorrow, are going for 90 cents. That's optimism for you or is something more behind the move?
An internal FBI audit has found the agency violated rules more than 1,000 times while collecting data on domestic phone calls, e-mails and financial transactions in recent years, The Washington Post reported on Thursday. Are you surprised?
Mohamed ElBaradei, director general of the International Atomic Energy Agency (IAEA), described the military option against Iran, urged by some U.S. politicians, as an act of madness, which will not solve the core problem.
But he also called on the IAEA Board of Governors to keep a closer eye on Iran, which, he said, would have up to 3,000 enrichment centrifuges by the end of next month, building up enrichment capacity but failing to guarantee its peaceful intent.
In Thursday morning trading the S&P Goldman Sachs Commodity Index rose over 8 points to 492 with only coffee, zinc, lead, and nickel lower in price. You still think inflation is reported properly by our government? Forecasts for Friday's CPI report are for a 0.7% rise in CPI and 0.2% for core CPI -- which would be the second-biggest CPI acceleration in 16 years. With inflation moving higher, what direction would you predict for interest rates?
Premier Wen Jiabao said lending curbs should be stepped up to tame inflation in the world's fastest- growing major economy.
When was the last time you saw heating oil going for $2+ a gallon in the middle of June?
Gold for August delivery closed up $3.20 at $655.90 an ounce on the New York Mercantile Exchange. July silver rose 10.5 cents to close at $13.165 an ounce and July copper closed at $3.3925 a pound, up 7.95 cents, or 2.4%.
About 27,000 U.S. hourly workers have left Ford Motor Co. under buyout or early retirement offers, the automaker said Thursday.
Richard Daughty: "Enrico Orlandini of dowtheoryanalysis.com actually hears my brain exploding at this astounding revelation, and instead of calling 911 and maybe saving my life, the little bastard sticks a dagger in my heart by saying that it is even worse than that, as "Currently there is no major economic power whose money supply is increasing at less than 10% per year and the US's money supply is now increasing at a greater than 14%/year clip." Owwww!"
August gold climbed $3.20 to close at $655.90 an ounce Thursday. July silver rose 10.5 cents to close at $13.165 an ounce and July copper closed at $3.3925 a pound, up 7.95 cents, or 2.4%.
July crude climbed $1.39 to close at $67.65 a barrel Thursday, marking its strongest closing level since April 27. July reformulated gas led the percentage gains among the energy futures, rising 3.2%, or 6.94 cents, to close at $2.2247 a gallon. July natural gas rose 20 cents, or 2.6%, to finish at $7.808 per million British thermal units on a smaller-than-expected rise in the nation's supply.
Wednesday, June 13, 2007
New Data
6/14/07 New Data
Bronco Drilling Co announced operational results for the month and as of May 31, 2007. Utilization for the Co's drilling fleet was 77% for the month of May compared to 71% for the previous month and 79% for Q1 of 2007. The Co had an average of 52 marketed rigs in May compared to 52 in the previous month and 51 for Q1 of 2007. The average dayrate on operating rigs as of May 31, 2007 was $17,448 compared to $18,749 for the first quarter of 2007. Utilization for the Co's work over fleet was 79% for the month of May compared to 86% for the previous month and 86% for Q1 of 2007. The Co had an average of 30 marketed work over rigs in May compared to 27 in the previous month and 24 for Q1 of 2007.
Horizon Offshore confirms it will be acquired by Cal Dive International for approximately $19.25 and confirms it has entered into a definitive merger agreement with Cal Dive International. Under the terms of the agreement, Horizon stockholders will receive in the merger, aggregate total consideration equal to 0.625 shares of Cal Dive common stock and $9.25 in cash for each share of Horizon common stock outstanding, or an estimated total of 20.4 mln Cal Dive shares and $302.5 mln in cash. Based on Cal Dive's closing stock price on Monday, June 11, 2007, this equates to a transaction value of approximately $19.25 per Horizon share, which represents premiums of approximately 14% to Horizon's closing price on Monday, June 11, 2007, and approximately 18% to Horizon's 30-day average trading price.
Prices of goods imported into the U.S. rose 0.9% in May, as imported petroleum prices climbed 2.7%, the Labor Department reported Thursday. Excluding petroleum, the gain in import prices was 0.5%, the largest increase since November 2006. Import prices have increased by 1.1% in the past 12 months. April's prices were revised slightly upward, to climb by 1.4%.
The Commerce Department reported that retail sales surged by 1.4 percent last month, compared to April, double the increase that analysts had been expecting. Retail sales had fallen by 0.1 percent in April.
William Ackman, the largest shareholder of Ceridian Corp., said in a proxy filing at the Securities and Exchange Commission that he's hired Lazard Freres to look for alternatives to Ceridian's agreed $5.3 billion, or $36 a share, sale to Thomas H. Lee Partners and Fidelity National Financial.
China's retail sales rose 15.9% in May from a year earlier, the fastest pace of growth in three years, boosted by the nation's surging stock market and higher food prices. Retail sales totaled 715.8 billion yuan ($94 billion) in May, the National Bureau of Statistics said Wednesday.
Unemployment in the U.K. fell by 9,300 in May for a jobless rate of 2.7%, compared with an expected drop of 10,000 and a jobless rate of 2.8%. That was the lowest level seen since a rate of 2.6% in April 2005, and matched the rate seen in September 2005.
Japanese government bond prices fell Wednesday, sending yields to their highest levels in nine months, in the wake of declines in U.S. Treasury prices. The yield on the 10-year Japanese government bond briefly rose to 1.980% in morning trading, its highest level since July 10. In a related development, Japan's Chief Cabinet Secretary Yasuhisa Shiozaki told a news conference that sharp moves in interest rates could hurt the economy, adding the government will monitor rates and take appropriate action, according to a Kyodo report.
Subprime mortgage lenders have tightened credit guidelines so much they're squeezing about 500,000 first-time buyers out of the market, according to the National Association of Home Builders. A decline of that magnitude would reduce sales of new homes by 4 percent and sales of existing homes by 7 percent, and deepen the worst housing slump since the Great Depression.
Foreign investment in China rose 9.9 percent in the first five months of this year to $25.3 billion from the same period a year ago, a state news agency reported Wednesday. Total investment rose despite a 3.75 percent drop in the number of new foreign-Chinese joint ventures approved by the government, the Xinhua News Agency said, citing Commerce Ministry spokesman Yao Shenhong.
Brad Setser: "If China insists on holding the value of the RMB down -- and if the RMB's pace of appreciation against the dollar is slow, so the RMB in practice is depreciating against a host of currencies that are appreciating faster than the RMB is against the dollar -- the only way China's real exchange rate can adjust is through a rise in inflation. Indeed, the biggest surprise coming out of China -- and there have been many -- is that rapid money growth hasn't, at least until now, generated much inflation. A DBS report shows that China has had Philippine style money growth over the past ten years without experiencing Philippine-style inflation. Indeed, the average inflation rate in China over the past ten years looks substantially lower than the average inflation rate in the US. Even with inflation above 3%, China isn't appreciating all that rapidly in real terms. US and European inflation isn't that much lower. " In my view, one of the reasons for inflation being in check in China is the high savings rate in that country. Compare that with the situation in the U.S.
U.S. advertising spending will rise less this year than forecast earlier by TNS Media Intelligence, climbing 1.7 percent, to $152.3 billion, as small businesses limit spending and bigger companies shift money to the Internet and away from traditional mass media.
The Oil Drum: "Three main conclusions have been found based on available data from January 2002 to February 2007:
1) Total world exports of all fuel liquids have been on a plateau since the end of 2004, and declined slightly in the last year, despite production increases.
2) Liquids exports from non-OPEC countries as a whole have declined since the beginning of 2004.
3) OPEC liquids exports have increased until the end of 2005, followed by a short plateau after which a slow decline set in, mainly due to declining production in Saudi Arabia."
Despite metals being under pressure Wednesday morning, Rio Tinto jumped 8 points at the opening to $288+.
David Merkel: "The wild card is the foreign investors; if more countries revalue their currencies upward versus the dollar, reducing exports to the US, and reducing the need to buy our debt, then interest rates could easily rise by another percent. I don’t think that will happen, but it is the major risk here."
Bill Bonner: "Our conclusion is that the financial industry makes money for itself by unloading investments to the retail public, after they've been stripped down as close to the bone as you'll see outside a video containing a certain "hotel heiress".The assets are squeezed, picked over, packaged, marked up, advertised, promoted, and then unloaded at retail prices. Often, the best parts are held off the market for themselves, until the insiders choose a time, place and method of dumping them on the public for the maximum profit. In other words, the financial industry doesn't create wealth; it redistributes it - from investors to itself. And now, in the midst of this Great Worldwide Bubble, business has never been better."
Authorities have evidence that Wednesday's bombing of Al-Askariya Mosque in Samarra was an inside job, and 15 members of the Iraqi security forces have been arrested, a U.S. military official said. Two minarets were destroyed at the revered Shiite shrine, the military said, in a repeat of the 2006 bombing that sparked Iraq's current wave of deadly sectarian violence. There was no immediate word on casualties in the city north of Baghdad.
A major Fatah post was leveled by a huge blast in southern Gaza today as Hamas pushed an offensive against its rival amid warnings the vicious battles could lead to a political collapse in the Palestinian territory.
A Texas man once named by President Bush to the International Boundary and Water Commission has been labeled a "bagman" in a corruption case.
Boeing projects plane makers will deliver about 28,600 jets in the period, compared with the 27,200 Boeing predicted last year. That represents sales of $2.8 trillion, up from the $2.6 trillion forecast in 2006, the company said.
Motor gasoline supplies were unchanged at 201.5 million barrels for the week ended June 8, according to the Energy Department. They had gained more than 8 million barrels in the past 5 weeks. Crude supplies rose 100,000 barrels to 342.4 million. Distillate stocks were also up 300,000 barrels at 122.6 million barrels. Following the news, July crude was up 10 cents at $65.45 a barrel. July reformulated gasoline was up 0.75 cent at $2.1425 a gallon, rebounding from a 7-week low, and July heating oil traded at $1.923 a gallon, up 0.91 cent.
By comparison, the American Petroleum Institute reported a climb of 1.7 million barrels in crude supplies for the week ended June 8. The Energy Department had reported a rise of 100,000 barrels for the latest week. Motor gasoline supplies were down 3.1 million barrels, the API said. The government reported that supplies of the fuel were unchanged. Distillate supplies declined 2.7 million barrels, the API said. The government posted a 300,000-barrel rise. Importantly, refinery utilization fell to 89.2% of capacity last week, from 89.6% a week earlier, according to the Energy Department report.
"What's the most troubling concern here is that refinery capacity declined 0.4% back to 89.2% -- that will hinder production increases in the week ahead," said John Person, president of NationalFutures.com.
The June survey of 201 fund managers, who control $689 billion in assets, showed that a net 47% of them expect higher global core inflation in a year, up from a net 34% last month.
"Worries about inflation stem from concern that global growth will stay stronger for longer," said the survey, noting that a net 3% of survey participants now see growth slowing, down from 18% in May.
US government bonds yields also jumped during afternoon trading in London, with the 10-year US Treasury yield hitting 5.333 per cent. The yield on the 10-year Bund was 6.3 basis points higher at 4.676 per cent while the 10-year gilt was yielding 5.514 per cent, up 8.4 basis points. The movements put US Treasury and euro zone government bond yields at five-year highs and UK gilt yields at nine-year highs.
Prolonged dry conditions have stunted the growth of hay and pastures, forcing Alabama cattlemen to sell off their herds because they can't afford the cost of feed. "We're seeing a record number of cattle coming through our yards," said Darrell Stokes of Parkman Cattle Co., along Troy Highway in Montgomery.The sell-off could cut the number of head statewide by 100,000 to about 1.2 million, according to industry expert Billy Powell. A healthy-sized herd would number 2 million. Farmers are saving hay and fuel costs but losing $100 to $150 a head by selling calves too early, Powell said. Herds here are ordinarily sold in the fall to be fattened up at feed lots in the Midwest, where rain has been plentiful.
China, where hundreds of millions lack regular access to drinking water due to drought and pollution, plans to build a huge sea water desalination plant south of Shanghai, state media said on Wednesday.
Now that we've reached 5.25% on the 10-year Treasury more and more money managers are jumping on board saying rates could go to 5.50% or 5.75%. These are the same folks who brought you projected interest rate cuts by the Fed. In other words, their projections are meaningless to me. They are followers and not leaders. Do you really think the folks running China were born yesterday? How about Russia, India, and various Middle East countries? Investing in U.S. treasuries is investing in our dollar. With gigantic deficits, there is nothing more to be said.
Southwest Airlines said on Wednesday that it was examining potential acquisitions and alliances with multiple carriers, a signal that industry consolidation could emerge among the fast-growing low-cost segment.
The Semiconductor Industry Association chopped its 2007 global sales forecast Wednesday, citing sharp declines in average selling prices for microprocessors, DRAM memory processors and NAND flash chips. SIA said revenue for microchips would grow 1.8% over 2006, down from its prior forecast of 10%. The trade group pegged annual sales at $252 billion. SIA said PC sales are on track to reach 10% unit growth this year, but average PC chip prices are eroding at a "more rapid pace than historical patterns."
Roger Ehrenberg: "The risk of long-tail ruin is real and it occurs far more frequently than normally-distributed models would predict. Tails in the financial markets are fat - very fat - and the best we can do is to make sure the system can withstand significant and unpredicted shocks, because they will happen. And we have history as our witness."
The Oil Drum: "In the past 10 years, refining capacity in the U.S. has increased by about 2 million barrels per day, which is equivalent to about 10 good-sized refineries. Capacity expansions equivalent to 8 more new refineries have been announced for the next 4 years (although some refiners have recently suggested that some expansions may be put on hold as a result of the stated goal of reducing gasoline consumption by 20% in 10 years - in order to avoid an oversupply situation). So while it is true that new refineries aren't being built, it is certainly not true that capacity is stagnant."
The chairmen of two congressional committees issued subpoenas Monday for testimony from former White House counsel Harriet Miers and former political director Sara Taylor on their roles in the firings of eight federal prosecutors.
Mchael Pento: "As I have stated before, I believe we have entered into a multi-decade bear market for fixed income that is only beginning. Not only are rates cheap in historical terms but longer term trends in the U.S. dollar, inflation and debt should lead to an upward trend in yields. Perhaps as early as the beginning of the next decade, these fiscal and monetary imbalances will engender inflationary levels exceeding those experienced by any other generation. The Fed will be forced to follow the yield curve higher using its only real method they have for fighting inflation: higher rates. There is little doubt how the economy will fare this time while the U.S. is saddled with record amounts of debt and rates are rising."
Business Inventories for April rose .4% versus estimates of a .3% gain and unch. in March.
August gold fell 40 cents to close at $652.70 an ounce Wednesday.
A Federal Reserve Beige Book survey of regional economies depicted an economy with tame inflation and moderate growth.
July crude climbed 91 cents to close at $66.26 a barrel Wednesday. July reformulated gasoline rose 2.03 cents to close at $2.1553 a gallon.
Bronco Drilling Co announced operational results for the month and as of May 31, 2007. Utilization for the Co's drilling fleet was 77% for the month of May compared to 71% for the previous month and 79% for Q1 of 2007. The Co had an average of 52 marketed rigs in May compared to 52 in the previous month and 51 for Q1 of 2007. The average dayrate on operating rigs as of May 31, 2007 was $17,448 compared to $18,749 for the first quarter of 2007. Utilization for the Co's work over fleet was 79% for the month of May compared to 86% for the previous month and 86% for Q1 of 2007. The Co had an average of 30 marketed work over rigs in May compared to 27 in the previous month and 24 for Q1 of 2007.
Horizon Offshore confirms it will be acquired by Cal Dive International for approximately $19.25 and confirms it has entered into a definitive merger agreement with Cal Dive International. Under the terms of the agreement, Horizon stockholders will receive in the merger, aggregate total consideration equal to 0.625 shares of Cal Dive common stock and $9.25 in cash for each share of Horizon common stock outstanding, or an estimated total of 20.4 mln Cal Dive shares and $302.5 mln in cash. Based on Cal Dive's closing stock price on Monday, June 11, 2007, this equates to a transaction value of approximately $19.25 per Horizon share, which represents premiums of approximately 14% to Horizon's closing price on Monday, June 11, 2007, and approximately 18% to Horizon's 30-day average trading price.
Prices of goods imported into the U.S. rose 0.9% in May, as imported petroleum prices climbed 2.7%, the Labor Department reported Thursday. Excluding petroleum, the gain in import prices was 0.5%, the largest increase since November 2006. Import prices have increased by 1.1% in the past 12 months. April's prices were revised slightly upward, to climb by 1.4%.
The Commerce Department reported that retail sales surged by 1.4 percent last month, compared to April, double the increase that analysts had been expecting. Retail sales had fallen by 0.1 percent in April.
William Ackman, the largest shareholder of Ceridian Corp., said in a proxy filing at the Securities and Exchange Commission that he's hired Lazard Freres to look for alternatives to Ceridian's agreed $5.3 billion, or $36 a share, sale to Thomas H. Lee Partners and Fidelity National Financial.
China's retail sales rose 15.9% in May from a year earlier, the fastest pace of growth in three years, boosted by the nation's surging stock market and higher food prices. Retail sales totaled 715.8 billion yuan ($94 billion) in May, the National Bureau of Statistics said Wednesday.
Unemployment in the U.K. fell by 9,300 in May for a jobless rate of 2.7%, compared with an expected drop of 10,000 and a jobless rate of 2.8%. That was the lowest level seen since a rate of 2.6% in April 2005, and matched the rate seen in September 2005.
Japanese government bond prices fell Wednesday, sending yields to their highest levels in nine months, in the wake of declines in U.S. Treasury prices. The yield on the 10-year Japanese government bond briefly rose to 1.980% in morning trading, its highest level since July 10. In a related development, Japan's Chief Cabinet Secretary Yasuhisa Shiozaki told a news conference that sharp moves in interest rates could hurt the economy, adding the government will monitor rates and take appropriate action, according to a Kyodo report.
Subprime mortgage lenders have tightened credit guidelines so much they're squeezing about 500,000 first-time buyers out of the market, according to the National Association of Home Builders. A decline of that magnitude would reduce sales of new homes by 4 percent and sales of existing homes by 7 percent, and deepen the worst housing slump since the Great Depression.
Foreign investment in China rose 9.9 percent in the first five months of this year to $25.3 billion from the same period a year ago, a state news agency reported Wednesday. Total investment rose despite a 3.75 percent drop in the number of new foreign-Chinese joint ventures approved by the government, the Xinhua News Agency said, citing Commerce Ministry spokesman Yao Shenhong.
Brad Setser: "If China insists on holding the value of the RMB down -- and if the RMB's pace of appreciation against the dollar is slow, so the RMB in practice is depreciating against a host of currencies that are appreciating faster than the RMB is against the dollar -- the only way China's real exchange rate can adjust is through a rise in inflation. Indeed, the biggest surprise coming out of China -- and there have been many -- is that rapid money growth hasn't, at least until now, generated much inflation. A DBS report shows that China has had Philippine style money growth over the past ten years without experiencing Philippine-style inflation. Indeed, the average inflation rate in China over the past ten years looks substantially lower than the average inflation rate in the US. Even with inflation above 3%, China isn't appreciating all that rapidly in real terms. US and European inflation isn't that much lower. " In my view, one of the reasons for inflation being in check in China is the high savings rate in that country. Compare that with the situation in the U.S.
U.S. advertising spending will rise less this year than forecast earlier by TNS Media Intelligence, climbing 1.7 percent, to $152.3 billion, as small businesses limit spending and bigger companies shift money to the Internet and away from traditional mass media.
The Oil Drum: "Three main conclusions have been found based on available data from January 2002 to February 2007:
1) Total world exports of all fuel liquids have been on a plateau since the end of 2004, and declined slightly in the last year, despite production increases.
2) Liquids exports from non-OPEC countries as a whole have declined since the beginning of 2004.
3) OPEC liquids exports have increased until the end of 2005, followed by a short plateau after which a slow decline set in, mainly due to declining production in Saudi Arabia."
Despite metals being under pressure Wednesday morning, Rio Tinto jumped 8 points at the opening to $288+.
David Merkel: "The wild card is the foreign investors; if more countries revalue their currencies upward versus the dollar, reducing exports to the US, and reducing the need to buy our debt, then interest rates could easily rise by another percent. I don’t think that will happen, but it is the major risk here."
Bill Bonner: "Our conclusion is that the financial industry makes money for itself by unloading investments to the retail public, after they've been stripped down as close to the bone as you'll see outside a video containing a certain "hotel heiress".The assets are squeezed, picked over, packaged, marked up, advertised, promoted, and then unloaded at retail prices. Often, the best parts are held off the market for themselves, until the insiders choose a time, place and method of dumping them on the public for the maximum profit. In other words, the financial industry doesn't create wealth; it redistributes it - from investors to itself. And now, in the midst of this Great Worldwide Bubble, business has never been better."
Authorities have evidence that Wednesday's bombing of Al-Askariya Mosque in Samarra was an inside job, and 15 members of the Iraqi security forces have been arrested, a U.S. military official said. Two minarets were destroyed at the revered Shiite shrine, the military said, in a repeat of the 2006 bombing that sparked Iraq's current wave of deadly sectarian violence. There was no immediate word on casualties in the city north of Baghdad.
A major Fatah post was leveled by a huge blast in southern Gaza today as Hamas pushed an offensive against its rival amid warnings the vicious battles could lead to a political collapse in the Palestinian territory.
A Texas man once named by President Bush to the International Boundary and Water Commission has been labeled a "bagman" in a corruption case.
Boeing projects plane makers will deliver about 28,600 jets in the period, compared with the 27,200 Boeing predicted last year. That represents sales of $2.8 trillion, up from the $2.6 trillion forecast in 2006, the company said.
Motor gasoline supplies were unchanged at 201.5 million barrels for the week ended June 8, according to the Energy Department. They had gained more than 8 million barrels in the past 5 weeks. Crude supplies rose 100,000 barrels to 342.4 million. Distillate stocks were also up 300,000 barrels at 122.6 million barrels. Following the news, July crude was up 10 cents at $65.45 a barrel. July reformulated gasoline was up 0.75 cent at $2.1425 a gallon, rebounding from a 7-week low, and July heating oil traded at $1.923 a gallon, up 0.91 cent.
By comparison, the American Petroleum Institute reported a climb of 1.7 million barrels in crude supplies for the week ended June 8. The Energy Department had reported a rise of 100,000 barrels for the latest week. Motor gasoline supplies were down 3.1 million barrels, the API said. The government reported that supplies of the fuel were unchanged. Distillate supplies declined 2.7 million barrels, the API said. The government posted a 300,000-barrel rise. Importantly, refinery utilization fell to 89.2% of capacity last week, from 89.6% a week earlier, according to the Energy Department report.
"What's the most troubling concern here is that refinery capacity declined 0.4% back to 89.2% -- that will hinder production increases in the week ahead," said John Person, president of NationalFutures.com.
The June survey of 201 fund managers, who control $689 billion in assets, showed that a net 47% of them expect higher global core inflation in a year, up from a net 34% last month.
"Worries about inflation stem from concern that global growth will stay stronger for longer," said the survey, noting that a net 3% of survey participants now see growth slowing, down from 18% in May.
US government bonds yields also jumped during afternoon trading in London, with the 10-year US Treasury yield hitting 5.333 per cent. The yield on the 10-year Bund was 6.3 basis points higher at 4.676 per cent while the 10-year gilt was yielding 5.514 per cent, up 8.4 basis points. The movements put US Treasury and euro zone government bond yields at five-year highs and UK gilt yields at nine-year highs.
Prolonged dry conditions have stunted the growth of hay and pastures, forcing Alabama cattlemen to sell off their herds because they can't afford the cost of feed. "We're seeing a record number of cattle coming through our yards," said Darrell Stokes of Parkman Cattle Co., along Troy Highway in Montgomery.The sell-off could cut the number of head statewide by 100,000 to about 1.2 million, according to industry expert Billy Powell. A healthy-sized herd would number 2 million. Farmers are saving hay and fuel costs but losing $100 to $150 a head by selling calves too early, Powell said. Herds here are ordinarily sold in the fall to be fattened up at feed lots in the Midwest, where rain has been plentiful.
China, where hundreds of millions lack regular access to drinking water due to drought and pollution, plans to build a huge sea water desalination plant south of Shanghai, state media said on Wednesday.
Now that we've reached 5.25% on the 10-year Treasury more and more money managers are jumping on board saying rates could go to 5.50% or 5.75%. These are the same folks who brought you projected interest rate cuts by the Fed. In other words, their projections are meaningless to me. They are followers and not leaders. Do you really think the folks running China were born yesterday? How about Russia, India, and various Middle East countries? Investing in U.S. treasuries is investing in our dollar. With gigantic deficits, there is nothing more to be said.
Southwest Airlines said on Wednesday that it was examining potential acquisitions and alliances with multiple carriers, a signal that industry consolidation could emerge among the fast-growing low-cost segment.
The Semiconductor Industry Association chopped its 2007 global sales forecast Wednesday, citing sharp declines in average selling prices for microprocessors, DRAM memory processors and NAND flash chips. SIA said revenue for microchips would grow 1.8% over 2006, down from its prior forecast of 10%. The trade group pegged annual sales at $252 billion. SIA said PC sales are on track to reach 10% unit growth this year, but average PC chip prices are eroding at a "more rapid pace than historical patterns."
Roger Ehrenberg: "The risk of long-tail ruin is real and it occurs far more frequently than normally-distributed models would predict. Tails in the financial markets are fat - very fat - and the best we can do is to make sure the system can withstand significant and unpredicted shocks, because they will happen. And we have history as our witness."
The Oil Drum: "In the past 10 years, refining capacity in the U.S. has increased by about 2 million barrels per day, which is equivalent to about 10 good-sized refineries. Capacity expansions equivalent to 8 more new refineries have been announced for the next 4 years (although some refiners have recently suggested that some expansions may be put on hold as a result of the stated goal of reducing gasoline consumption by 20% in 10 years - in order to avoid an oversupply situation). So while it is true that new refineries aren't being built, it is certainly not true that capacity is stagnant."
The chairmen of two congressional committees issued subpoenas Monday for testimony from former White House counsel Harriet Miers and former political director Sara Taylor on their roles in the firings of eight federal prosecutors.
Mchael Pento: "As I have stated before, I believe we have entered into a multi-decade bear market for fixed income that is only beginning. Not only are rates cheap in historical terms but longer term trends in the U.S. dollar, inflation and debt should lead to an upward trend in yields. Perhaps as early as the beginning of the next decade, these fiscal and monetary imbalances will engender inflationary levels exceeding those experienced by any other generation. The Fed will be forced to follow the yield curve higher using its only real method they have for fighting inflation: higher rates. There is little doubt how the economy will fare this time while the U.S. is saddled with record amounts of debt and rates are rising."
Business Inventories for April rose .4% versus estimates of a .3% gain and unch. in March.
August gold fell 40 cents to close at $652.70 an ounce Wednesday.
A Federal Reserve Beige Book survey of regional economies depicted an economy with tame inflation and moderate growth.
July crude climbed 91 cents to close at $66.26 a barrel Wednesday. July reformulated gasoline rose 2.03 cents to close at $2.1553 a gallon.
Tuesday, June 12, 2007
Interest Rates
6/13/07 Interest Rates
The Bush administration cannot legally detain a legal U.S. resident it believes is an al-Qaida sleeper agent without charging him, a divided federal appeals court ruled Monday.The case involves a Qatari national and suspected al-Qaida operative who is the only person being held in the United States as an "enemy combatant." In the 2-1 decision, the 4th U.S. Circuit Court of Appeals panel found that the federal Military Commissions Act does not strip Ali al-Marri of his constitutional rights to challenge his accusers in court. It ruled the government must allow him to be released from military detention.
You have a 1-in-3 chance of losing your house to foreclosure if you got an adjustable-rate mortgage, or ARM, in 2004 through 2006 that had an initial teaser rate of less than 4%. If you got a subprime ARM in that period, you started out with a higher rate, and that puts you at less risk. You have a 1-in-8 chance of losing your home. That's the takeaway message from a densely detailed report by Christopher Cagan, director of research and analytics for First American CoreLogic. Cagan's study focuses on 8.4 million ARMs that were originated in 2004, 2005 and 2006. About 1.1 million of those borrowers will lose their homes in the next six to seven years because of payment shock brought on by rate resets or loan recasting, Cagan estimates. Cagan assumes that property values will remain relatively flat from their December 2006 levels. If house prices fall -- and in many markets, they already have fallen since the start of the year -- foreclosures will be higher than his estimates. If house prices rise, there will be fewer foreclosures than forecast. Each 1% rise or drop in house prices will translate into a decrease or increase of roughly 70,000 in foreclosures.
U.S. foreclosure filings surged 90 percent in May from a year earlier as more homeowners fell behind on their monthly mortgage payments, RealtyTrac Inc. said.There were 176,137 notices of default, scheduled auctions and bank repossessions last month, led by California, Florida and Ohio, the Irvine, California-based seller of foreclosure data said in a report today. The median price for a U.S. home slid 1.8 percent the first three months of 2007 as the housing slump entered its second year, according to the National Association of Realtors. The filings rose 19 percent from April.
Lehman Brothers said its second-quarter net income rose to $1.27 billion, or $2.21 a share, from $1 billion, or $1.69 a share in the year-ago period. The company said net revenue rose to $5.51 billion from $4.41 billion a year earlier. "With non-U.S. net revenues representing nearly half of our total net revenues for the quarter, our global platform is stronger and more balanced than ever," said Chief Executive Richard S. Fuld, Jr., in a statement.
Dean Foods expects prices for conventional raw milk to reach records by the third quarter, while a current industry oversupply of organic milk is hurting its Horizon Organic brand.
Detroit-based weekly Automotive News, whose data center publishes a widely quoted ranking of the world's automakers around this time every year, said Japan's top carmaker, Toyota, outsold GM by about 128,000 units last year based on a technicality that excludes sales of vehicles at minority-held subsidiaries.
Brad Setser: " Fan Gang -- who is in a position to know -- is now predicting China's reserves could hit $1.6 trillion in 2007, and top $2 trillion in 2008." In other words, their reserves are anticipated to grow by roughly $1 billion a day, while the U.S. needs to import about $2 billion to cover our bulging deficits. You still believe the U.S. is the world's superpower? Not surprisingly, on Tuesday morning the yield on the 10-year Treasury note rose to 5.26 percent, exceeding the Fed Funds rate, and on the 30-year to 5.37 percent, the highest yield in 3 years. An auction of $8 billion in 10-year Treasury notes Tuesday afternoon attracted an exceptionally weak 10.9% indirect bid, the carefully watched category that includes foreign central banks. My short on Treasury bonds has finally made a big difference in this year's overall returns.
With 6-month Treasury bills closing in on a 5% yield, investors, who are looking for a temporary safe haven, now have a viable alternative.
"If interest rates are going up, especially Treasuries, that's really the most important thing for valuing virtually all financial assets and it's the reason the bump up in yields has had the effect that it's had,'' Bob Carey, who oversees $30 billion as chief investment officer at First Trust Advisors LP in Lisle, Illinois, said.
Steve Saville: "In any case, regardless of the paths taken by the markets over the coming months the most important thing to keep in mind is that an equity rally's days are numbered once bonds commence an intermediate-term decline. We can come up with potential scenarios until the cows come home, but all we really need to know is that stock market risk will increase exponentially if the bond market's decline extends much further -- either immediately, or following a counter-trend rebound."
The N.Y. Times reported a top U.S. commander told Iraq�s premier to make political progress by next month to counter the growing tide of opposition to the war in Congress.
Texas Instruments Inc. said earnings will be below its highest forecast due to lower demand for wireless-network equipment and calculators that could hurt second- quarter profits.
Intel plans to slash prices of its high-end Core 2 Quad processor by 50 percent on July 22 and reduce prices of its Core 2 Duo chips by 24 percent to 32 percent on Sept. 2 in order to regain market share.
Wheat prices surged to a record high for 2007 Monday as heavy rains threatened to damage an already diminished crop. While rain soaked Midwestern wheat fields on Monday, dry skies stifled the moisture-hungry eastern Corn Belt, sending corn prices above $4 a bushel. One should consider that the nation's farmers are expected to harvest a wheat crop 24 percent bigger than last year's drought-plagued crop, the government said. The National Agricultural Statistics Service released a revised estimate Monday that projected winter wheat production at 1.61 billion bushels nationwide, down only slightly from the agency's forecast a month ago. Its figure is based on a projected national average yield of 42.2 bushels per acre from 37.2 million acres. In sum, selling wheat above $4 a bushel has merit in my way of thinking. That provides a profit of 60% from the entry point suggested months back.
Surging food prices boosted China's annual consumer price inflation to a 27-month high of 3.4% in May from 3.0% in April, the National Bureau of Statistics said on Tuesday. Will China be forced to raise interest rates once again? What impact will that have on the yuan, our dollar, and purchasing power and inflation in the U.S.? Is the tail wagging the dog or maybe the tail is now the dog?
World oil demand will rise more quickly than previously thought this year, the International Energy Agency said on Tuesday, adding weight to consumer nations' calls for more OPEC oil. In its June monthly report, the adviser to 26 industrialized countries lifted its forecast for 2007 growth in world oil demand to 1.7 million barrels per day (bpd) or two percent, up 200,000 bpd from the previous forecast.
Former Treasury Secretary Lawrence Summers called for a ``comprehensive'' overhaul of U.S. corporate taxes to counter slowing revenue from business levies. ``If nothing else, policy makers should patch the existing business tax system by eliminating abusive tax shelters and closing other loopholes,'' Summers wrote in a policy paper with Jason Furman and Jason Bordoff. ``An even better approach would be comprehensive reform of business taxation.'' While the U.S. has the second-highest corporate tax rate of the 30 countries in the Organization for Economic Cooperation and Development, it has the fourth-lowest revenue from the levies as a share of the economy, the paper said. A ``large part'' of the disparity is that companies are increasingly reporting different incomes to their shareholders and to tax authorities, it said.
Iran is in discussions to store strategic oil in China and to build refineries around Asia, Oil Minister Kazem Vaziri-Hamaneh said on Monday, as it seeks secure outlets for its crude in the face of Western economic sanctions.
Zman: "NOAA is calling for development of La Nina conditions in the next one to three months with this event potentially falling into the strong category at its peak. That would likely mean more hurricanes."
Goldman Sachs said it was adding McDonald's as the replacement for Starbucks on the Conviction Buy List.
In theory, the giant plastic sections of Boeing's 787 Dreamliner that come in from across the globe all fit perfectly for a quick snap-together assembly in Everett. But in the real world, it turns out there can be gaps. Photos of the final-assembly process provided anonymously to The Seattle Times show the jet's first two forward sections did not fit properly when initially joined. On one side, there was a gap wide enough to stick a finger in.
Countrywide said pending foreclosures as a percentage of unpaid principal balances rose to 0.90 percent from 0.45 percent a year earlier, and 0.85 percent in April. Foreclosures based on the number of loans serviced rose to 0.71 percent from 0.47 percent a year earlier, and 0.69 percent in April, Countrywide said.
According to Dow Jones, China imported 12.97 million metric tons of crude oil in May, equivalent to an average of 3.07 million barrels per day, data from the General Administration of Customs showed Tuesday.
The crude oil imports total for May, which was 4.6% higher than the same month of 2006. China's oil exports last month totaled 520,000 tons, according to the data. In May, China imported 3.17 million tons of oil products, while it exported 1.22 million tons of oil products.
ExxonMobil and Saudi Aramco have formed a jv with Sinopec for an integrated refining, petrochemicals and fuels marketing firm to be named Fujian Refining & Petrochemical Co Ltd. The Fujian Refining and Ethylene project, worth around $5 bn, will be located in Quanzhou, Fujian Province.
It will involve the expansion of the existing oil refinery threefold to 240,000 bbls/day, construction of an 800,000 tonne/y ethylene steam cracker, an 800,000 tonne/y polyethylene unit, a 400,000 tonne/y polypropylene unit and an aromatics complex with an output of 700,000 tonnes/y of paraxylene. Commissioning is slated for early 2009.
Tony Allison: "For a country founded on rugged individualism, our current state of affairs is looking a lot less rugged and a lot more dependent. With a massively expanding debt to foreign creditors, and an insatiable appetite for energy, we as a nation become more dependent each and every day. Even if we eventually import fewer Chinese products, the trade deficit may march higher because the percentage of energy (crude, natural gas, and refined products) from overseas sources continues to grow. More ominously, if we are in fact nearing the front door of Peak Oil, the price of energy will be headed in one direction, higher. This will only exacerbate our trade deficit."
Bill Bonner: "According to classical economic theory, an expanding credit bubble takes more and more credit to expand and keep output increasing. That is what we have seen for the last few years - higher debt/GDP. Economists now warn that the housing slump may have a longer-lasting effect on GDP growth than previously thought and (according to the most recent reading), actual GDP growth has fallen below the rate of population growth. As a credit bubble goes on, it becomes less effective at producing wealth�and more effective at producing what was most lacking in the first place - humility."
Paul Kasriel: " Households don't need to be liquid today inasmuch as they can more easily borrow when those rainy days come than they could in yesteryear. My response to that is that households have already used their rainy-day borrowing during the sunny days."
A Goldman Sachs analyst cut his Dow Jones earnings forecast for 2007 to $1.49 a share from $1.53, for 2008 to $1.73 a share from $1.77, and for 2009 to $1.92 a share from $1.97.
According to the EIA, retail regular gas will average $3.05 a gallon this summer and supplies will remain tight. In addition, the EIA said U.S. petroleum demand was up 1.9% in the first quarter of 2007 compared to a year ago. The EIA also said it expects world oil consumption to grow by 1.4 million barrels per day in 2007 and by 1.6 million in 2008.
Natural gas in New York rose for the first time in three trading sessions as warmer weather, especially in the Midwest, may spark increased electricity demand from natural-gas-fired generators to run air conditioners. Temperatures in Chicago, the third-most populous city in the country, are forecast to advance from today's high of 84 degrees to 89 by June 15, according to AccuWeather.com. The typical high for this time of year is 81 degrees, the forecaster said.
May federal budget deficit $67.7 bln. vs. $42.9 bln. U.S. May receipts down 14.8%, outlays down 1.5%; however, U.S. federal receipts up 9.3% year-to-date.
Outlays are up 2.5% to $1.817 trillion.
August gold fell $5.90 to close at $653.10 an ounce Tuesday. July silver fell by 1.4%, or 18.5 cents, to close at $13.09 an ounce and July copper declined 2.1%, or 6.9 cents, to end at $3.287 a pound.
India's industrial output was up 13.6 percent in April over the like month of last year, thanks to a robust 15.1 percent expansion shown by the manufacturing sub-sector, according to official data released Tuesday.
July crude fell 62 cents to close at $65.35 a barrel Tuesday and July reformulated gasoline finished the session at $2.135 a gallon, down 1.63 cents. July natural gas was the lone gainer among the energy futures, with the contract up 7.4 cents to close at $7.682 per million British thermal units.
Congress should more than double tax rates for many hedge fund managers and private equity partners who classify their pay as capital gains, former Treasury secretaries Robert Rubin and Lawrence Summers said.
The Bush administration cannot legally detain a legal U.S. resident it believes is an al-Qaida sleeper agent without charging him, a divided federal appeals court ruled Monday.The case involves a Qatari national and suspected al-Qaida operative who is the only person being held in the United States as an "enemy combatant." In the 2-1 decision, the 4th U.S. Circuit Court of Appeals panel found that the federal Military Commissions Act does not strip Ali al-Marri of his constitutional rights to challenge his accusers in court. It ruled the government must allow him to be released from military detention.
You have a 1-in-3 chance of losing your house to foreclosure if you got an adjustable-rate mortgage, or ARM, in 2004 through 2006 that had an initial teaser rate of less than 4%. If you got a subprime ARM in that period, you started out with a higher rate, and that puts you at less risk. You have a 1-in-8 chance of losing your home. That's the takeaway message from a densely detailed report by Christopher Cagan, director of research and analytics for First American CoreLogic. Cagan's study focuses on 8.4 million ARMs that were originated in 2004, 2005 and 2006. About 1.1 million of those borrowers will lose their homes in the next six to seven years because of payment shock brought on by rate resets or loan recasting, Cagan estimates. Cagan assumes that property values will remain relatively flat from their December 2006 levels. If house prices fall -- and in many markets, they already have fallen since the start of the year -- foreclosures will be higher than his estimates. If house prices rise, there will be fewer foreclosures than forecast. Each 1% rise or drop in house prices will translate into a decrease or increase of roughly 70,000 in foreclosures.
U.S. foreclosure filings surged 90 percent in May from a year earlier as more homeowners fell behind on their monthly mortgage payments, RealtyTrac Inc. said.There were 176,137 notices of default, scheduled auctions and bank repossessions last month, led by California, Florida and Ohio, the Irvine, California-based seller of foreclosure data said in a report today. The median price for a U.S. home slid 1.8 percent the first three months of 2007 as the housing slump entered its second year, according to the National Association of Realtors. The filings rose 19 percent from April.
Lehman Brothers said its second-quarter net income rose to $1.27 billion, or $2.21 a share, from $1 billion, or $1.69 a share in the year-ago period. The company said net revenue rose to $5.51 billion from $4.41 billion a year earlier. "With non-U.S. net revenues representing nearly half of our total net revenues for the quarter, our global platform is stronger and more balanced than ever," said Chief Executive Richard S. Fuld, Jr., in a statement.
Dean Foods expects prices for conventional raw milk to reach records by the third quarter, while a current industry oversupply of organic milk is hurting its Horizon Organic brand.
Detroit-based weekly Automotive News, whose data center publishes a widely quoted ranking of the world's automakers around this time every year, said Japan's top carmaker, Toyota, outsold GM by about 128,000 units last year based on a technicality that excludes sales of vehicles at minority-held subsidiaries.
Brad Setser: " Fan Gang -- who is in a position to know -- is now predicting China's reserves could hit $1.6 trillion in 2007, and top $2 trillion in 2008." In other words, their reserves are anticipated to grow by roughly $1 billion a day, while the U.S. needs to import about $2 billion to cover our bulging deficits. You still believe the U.S. is the world's superpower? Not surprisingly, on Tuesday morning the yield on the 10-year Treasury note rose to 5.26 percent, exceeding the Fed Funds rate, and on the 30-year to 5.37 percent, the highest yield in 3 years. An auction of $8 billion in 10-year Treasury notes Tuesday afternoon attracted an exceptionally weak 10.9% indirect bid, the carefully watched category that includes foreign central banks. My short on Treasury bonds has finally made a big difference in this year's overall returns.
With 6-month Treasury bills closing in on a 5% yield, investors, who are looking for a temporary safe haven, now have a viable alternative.
"If interest rates are going up, especially Treasuries, that's really the most important thing for valuing virtually all financial assets and it's the reason the bump up in yields has had the effect that it's had,'' Bob Carey, who oversees $30 billion as chief investment officer at First Trust Advisors LP in Lisle, Illinois, said.
Steve Saville: "In any case, regardless of the paths taken by the markets over the coming months the most important thing to keep in mind is that an equity rally's days are numbered once bonds commence an intermediate-term decline. We can come up with potential scenarios until the cows come home, but all we really need to know is that stock market risk will increase exponentially if the bond market's decline extends much further -- either immediately, or following a counter-trend rebound."
The N.Y. Times reported a top U.S. commander told Iraq�s premier to make political progress by next month to counter the growing tide of opposition to the war in Congress.
Texas Instruments Inc. said earnings will be below its highest forecast due to lower demand for wireless-network equipment and calculators that could hurt second- quarter profits.
Intel plans to slash prices of its high-end Core 2 Quad processor by 50 percent on July 22 and reduce prices of its Core 2 Duo chips by 24 percent to 32 percent on Sept. 2 in order to regain market share.
Wheat prices surged to a record high for 2007 Monday as heavy rains threatened to damage an already diminished crop. While rain soaked Midwestern wheat fields on Monday, dry skies stifled the moisture-hungry eastern Corn Belt, sending corn prices above $4 a bushel. One should consider that the nation's farmers are expected to harvest a wheat crop 24 percent bigger than last year's drought-plagued crop, the government said. The National Agricultural Statistics Service released a revised estimate Monday that projected winter wheat production at 1.61 billion bushels nationwide, down only slightly from the agency's forecast a month ago. Its figure is based on a projected national average yield of 42.2 bushels per acre from 37.2 million acres. In sum, selling wheat above $4 a bushel has merit in my way of thinking. That provides a profit of 60% from the entry point suggested months back.
Surging food prices boosted China's annual consumer price inflation to a 27-month high of 3.4% in May from 3.0% in April, the National Bureau of Statistics said on Tuesday. Will China be forced to raise interest rates once again? What impact will that have on the yuan, our dollar, and purchasing power and inflation in the U.S.? Is the tail wagging the dog or maybe the tail is now the dog?
World oil demand will rise more quickly than previously thought this year, the International Energy Agency said on Tuesday, adding weight to consumer nations' calls for more OPEC oil. In its June monthly report, the adviser to 26 industrialized countries lifted its forecast for 2007 growth in world oil demand to 1.7 million barrels per day (bpd) or two percent, up 200,000 bpd from the previous forecast.
Former Treasury Secretary Lawrence Summers called for a ``comprehensive'' overhaul of U.S. corporate taxes to counter slowing revenue from business levies. ``If nothing else, policy makers should patch the existing business tax system by eliminating abusive tax shelters and closing other loopholes,'' Summers wrote in a policy paper with Jason Furman and Jason Bordoff. ``An even better approach would be comprehensive reform of business taxation.'' While the U.S. has the second-highest corporate tax rate of the 30 countries in the Organization for Economic Cooperation and Development, it has the fourth-lowest revenue from the levies as a share of the economy, the paper said. A ``large part'' of the disparity is that companies are increasingly reporting different incomes to their shareholders and to tax authorities, it said.
Iran is in discussions to store strategic oil in China and to build refineries around Asia, Oil Minister Kazem Vaziri-Hamaneh said on Monday, as it seeks secure outlets for its crude in the face of Western economic sanctions.
Zman: "NOAA is calling for development of La Nina conditions in the next one to three months with this event potentially falling into the strong category at its peak. That would likely mean more hurricanes."
Goldman Sachs said it was adding McDonald's as the replacement for Starbucks on the Conviction Buy List.
In theory, the giant plastic sections of Boeing's 787 Dreamliner that come in from across the globe all fit perfectly for a quick snap-together assembly in Everett. But in the real world, it turns out there can be gaps. Photos of the final-assembly process provided anonymously to The Seattle Times show the jet's first two forward sections did not fit properly when initially joined. On one side, there was a gap wide enough to stick a finger in.
Countrywide said pending foreclosures as a percentage of unpaid principal balances rose to 0.90 percent from 0.45 percent a year earlier, and 0.85 percent in April. Foreclosures based on the number of loans serviced rose to 0.71 percent from 0.47 percent a year earlier, and 0.69 percent in April, Countrywide said.
According to Dow Jones, China imported 12.97 million metric tons of crude oil in May, equivalent to an average of 3.07 million barrels per day, data from the General Administration of Customs showed Tuesday.
The crude oil imports total for May, which was 4.6% higher than the same month of 2006. China's oil exports last month totaled 520,000 tons, according to the data. In May, China imported 3.17 million tons of oil products, while it exported 1.22 million tons of oil products.
ExxonMobil and Saudi Aramco have formed a jv with Sinopec for an integrated refining, petrochemicals and fuels marketing firm to be named Fujian Refining & Petrochemical Co Ltd. The Fujian Refining and Ethylene project, worth around $5 bn, will be located in Quanzhou, Fujian Province.
It will involve the expansion of the existing oil refinery threefold to 240,000 bbls/day, construction of an 800,000 tonne/y ethylene steam cracker, an 800,000 tonne/y polyethylene unit, a 400,000 tonne/y polypropylene unit and an aromatics complex with an output of 700,000 tonnes/y of paraxylene. Commissioning is slated for early 2009.
Tony Allison: "For a country founded on rugged individualism, our current state of affairs is looking a lot less rugged and a lot more dependent. With a massively expanding debt to foreign creditors, and an insatiable appetite for energy, we as a nation become more dependent each and every day. Even if we eventually import fewer Chinese products, the trade deficit may march higher because the percentage of energy (crude, natural gas, and refined products) from overseas sources continues to grow. More ominously, if we are in fact nearing the front door of Peak Oil, the price of energy will be headed in one direction, higher. This will only exacerbate our trade deficit."
Bill Bonner: "According to classical economic theory, an expanding credit bubble takes more and more credit to expand and keep output increasing. That is what we have seen for the last few years - higher debt/GDP. Economists now warn that the housing slump may have a longer-lasting effect on GDP growth than previously thought and (according to the most recent reading), actual GDP growth has fallen below the rate of population growth. As a credit bubble goes on, it becomes less effective at producing wealth�and more effective at producing what was most lacking in the first place - humility."
Paul Kasriel: " Households don't need to be liquid today inasmuch as they can more easily borrow when those rainy days come than they could in yesteryear. My response to that is that households have already used their rainy-day borrowing during the sunny days."
A Goldman Sachs analyst cut his Dow Jones earnings forecast for 2007 to $1.49 a share from $1.53, for 2008 to $1.73 a share from $1.77, and for 2009 to $1.92 a share from $1.97.
According to the EIA, retail regular gas will average $3.05 a gallon this summer and supplies will remain tight. In addition, the EIA said U.S. petroleum demand was up 1.9% in the first quarter of 2007 compared to a year ago. The EIA also said it expects world oil consumption to grow by 1.4 million barrels per day in 2007 and by 1.6 million in 2008.
Natural gas in New York rose for the first time in three trading sessions as warmer weather, especially in the Midwest, may spark increased electricity demand from natural-gas-fired generators to run air conditioners. Temperatures in Chicago, the third-most populous city in the country, are forecast to advance from today's high of 84 degrees to 89 by June 15, according to AccuWeather.com. The typical high for this time of year is 81 degrees, the forecaster said.
May federal budget deficit $67.7 bln. vs. $42.9 bln. U.S. May receipts down 14.8%, outlays down 1.5%; however, U.S. federal receipts up 9.3% year-to-date.
Outlays are up 2.5% to $1.817 trillion.
August gold fell $5.90 to close at $653.10 an ounce Tuesday. July silver fell by 1.4%, or 18.5 cents, to close at $13.09 an ounce and July copper declined 2.1%, or 6.9 cents, to end at $3.287 a pound.
India's industrial output was up 13.6 percent in April over the like month of last year, thanks to a robust 15.1 percent expansion shown by the manufacturing sub-sector, according to official data released Tuesday.
July crude fell 62 cents to close at $65.35 a barrel Tuesday and July reformulated gasoline finished the session at $2.135 a gallon, down 1.63 cents. July natural gas was the lone gainer among the energy futures, with the contract up 7.4 cents to close at $7.682 per million British thermal units.
Congress should more than double tax rates for many hedge fund managers and private equity partners who classify their pay as capital gains, former Treasury secretaries Robert Rubin and Lawrence Summers said.
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