Liquidity At The Fed

4/30/08 Liquidity At The Fed

The story for today was not that the FOMC decided to cut the Fed Funds Rate 0.25% to 2% and the Discount Rate by 0.25% to 2.25% or the fact that no signal was given about this being the last rate cut. The story is the worsening liquidity at the Fed. Why is this not front page news?

Paul Kasriel: "The non-partisan Congressional Budget Office is projecting that the fiscal year 2008 federal budget deficit will increase to $396 billion from $162 billion in fiscal year 2007. So, federal borrowing in this fiscal year is projected to be 2.4 times as much as last year. And on top of this increased federal borrowing, we now have the Federal Reserve providing $601 billion less support to the Treasury securities market at an annual rate. Is it any wonder why the yields on Treasury securities are rising now? You might want to put your IRS tax-rebate manna into some sort of saving account for your children so that they can pay the higher taxes needed to service the public debt that is being incurred to bailout imprudent borrowers and lenders in the recent housing bubble."

In addition, to meet growing financing needs, the Treasury announced that it is bringing back the 52-week T-bill. The first of the monthly auctions will take place on June 3. In a report to the government, a panel of experts said that the department must take more steps to meet the projected deficit. "The majority of members believe that the addition of the year bill combined with increases to the size and frequency of existing coupon debt over coming quarters will still not be sufficient to satisfy the increased financing needs of the Treasury over the intermediate and longer term," the panel said. Analysts believe the next option will be to bring back the 3-year note.
The Treasury Department said it is discussing with the Federal Reserve what options might be available if the central bank strains its balance sheet in its efforts to provide liquidity to the financial markets, said Anthony Ryan, the Treasury assistant secretary for financial markets. "We are in close contact...and will continue to work with them" to review all scenarios, Ryan told reporters at a briefing Wednesday in connection with the quarterly refunding auction of notes and bonds.

Struggling with mounting debt and rising prices, faced with the toughest economic times since the early 1990s, Americans are selling prized possessions online and at flea markets at alarming rates. At Craigslist, the number of for-sale listings has soared 70 percent since last July. In March, the number of listings more than doubled to almost 15 million from the year-ago period.

At AuctionPal.com, which helps novices sell things online, for-sale listings rose 66 percent from February to March, much faster than the 25 percent to 30 percent average monthly pace since the company was formed in September, CEO Maureen Ellenberger said. She said she was surprised to see that most of her clients desperately needed to sell items to raise cash.

Donations to the Salvation Army were down 20 percent in the January-to-March period. George Hood, the charity's national community relations and development secretary, said that was probably partly because people were selling their belongings instead.

Rob Hanna: "Don’t get too caught up in the reaction to the Fed tomorrow. The move likely won’t last longer than a day or two before reversing itself."

The ADP employment report showed that companies in the U.S. private sector added 10,000 jobs in April.

Growth in real gross domestic product in the first quarter was estimated at 0.6% for the second straight quarter, ahead of the 0.2% expected by economists. Final sales of domestic product fell 0.2%, while final domestic sales dropped 0.4%, the first decline since the recession of 1991. Rising inventories, likely an unintended buildup that could come back to haunt the economy, helped prevent a slump.

Overall employment costs rose by 0.7% in the first quarter, falling back from a 0.8% gain in the prior three-month period. In the first quarter, wage and salary costs rose by 0.8%. Benefit costs increased by 0.6% compared to 0.8% in the fourth quarter of 2007.

Microsoft Corp's board met on Wednesday to discuss its stand-off with Yahoo Inc over its $41.8 billion takeover bid, but failed to reach a decision on what to do next, according to a Wall Street Journal report. Microsoft Corp has considered earmarking $1.5 billion to retain Yahoo Inc employees if it acquires the company.

Starbucks Corp.will introduce two healthier drinks -- one a fresh-fruit-and-whey smoothie-like drink, the other an icy and sweet beverage developed with an Italian company. The company warned Wednesday its total operating margin by 2011 will remain below 2007's level of 11.2%, "driven by erosion in the U.S. business." That said, Starbucks is forecasting its earnings to pick up over the next three years. It pegged fiscal 2009 earnings to be as much as $1 a share, growing as high as a $1.50 a share in fiscal 2011. Starbucks posted fiscal second-quarter net income of $108.7 million, or 15 cents a share, compared with net income of $150.8 million, or 19 cents a share, in the year-earlier quarter. Sales rose 12% to $2.5 billion.

National Oilwell Varco Inc. said first-quarter net income rose 44% to $397.6 million, or $1.11 a share from $275.9 million, or 78 cents a share in the year-ago period. Revenue rose 245 to $2.69 billion.

GfK NOP's British Consumer Confidence Barometer fell in April to its lowest level in more than 15 years, the consulting firm said Wednesday. The barometer's main index fell five points to -24, the lowest reading since November 1992, with all five component indexes posting declines.

U.K. house prices fell by 1.1% in April, or 1% year-on-year, according to the Nationwide building society. The April decline was the sixth successive month-on-month fall and reflects weakening sentiment in the market brought about by poor affordability and tighter financial market conditions, the lender said. This is the first year-on-year fall in prices since March 1996 and brings the price of a typical house to 178,555 pounds.

Japan's jobless rate averaged 3.8% in the fiscal year ending March 31, its lowest level in 10 years, according to government released Wednesday. The declines mark the fifth straight fiscal year Japan's jobless rate has fallen since peaking at 5.4% in fiscal 2002.

Japan's central bank, facing sharply weakening growth in the economy as soaring raw materials costs bite, gave up its long-standing bias to raising rates on Wednesday and governor Masaaki Shirakawa warned that downside risks were likely to dominate over the next year.

Panera Bread lowered its second half per-share earnings target to a range of $1.17 to $1.28 from a range of $1.22 to $1.32. The company backed its 2008 earnings of $2 to $2.11

Earnings prospects for China's 1,500-plus listed companies have brightened after they posted better-than-forecast profits in the first quarter, bolstered by unexpectedly brisk economic growth. Six fund managers and securities analysts surveyed by Reuters on Wednesday predicted median profit growth for listed Chinese firms of 25 percent in 2008, up from a forecast of 20 percent about a month ago..

Oil fell to $115 a barrel on Wednesday as a Nigerian oil union agreed to return to work, raising hopes that production shut down in the OPEC oil exporter will come back on line.

According to the WSJ, Iraqi oil revenue will top a record $70 billion this year, a new forecast said.

Charles Plosser, the president of the Federal Reserve Bank of Philadelphia, is one of two central bankers who are part of the Fed's "hawkish" wing, warning that inflation is a big threat as the nation teeters close to recession. The other is Richard Fisher, president of the Federal Reserve Bank of Dallas. The two men fear that the Fed is cutting interest rates too fast, potentially fueling a run-up in consumer prices. Lower interest rates fuel economic activity by making borrowing cheaper, but that can lead to shortages and higher prices.

"We're at a watershed moment," said Jay P. Feldman, an economist with Credit Suisse in New York. "The era of consumers living beyond their incomes is at an end."

"This is going to usher in a period when consumption is going to be as weak as we've seen it in two decades," predicted Edward F. McKelvey, senior economist with Goldman, Sachs & Co. in New York.

If gas and milk price hikes seem steep, check out health insurance premiums. They have increased 10 times faster than incomes in recent years, a study shows. Workers with job-based coverage for their families saw earnings rise 3% from 2001 to 2005, while their health insurance premium contribution increased 30%, according to the study by researchers at the State Health Access Data Assistance Center at the University of Minnesota. The average cost nationally of family coverage during the period increased nearly $2,500, to $10,728 from $8,281. The average cost for job-based family coverage in California increased more than $2,650, to $10,551 from $7,898.

Iranian president Mahmoud Ahmadi-Nejad arrived in India in an effort to seal a $7.6bn gas pipeline deal. The trip has sparked tension between New Delhi and Washington, which fears the pipeline will fund Iran's nuclear ambitions.

Agriculture and development experts say the world has few alternatives to its growing dependence on fertilizer. As population increases and a rising global middle class demands more food, fertilizer is among the most effective strategies to increase crop yields. “Putting fertilizer on the ground on a one-acre plot can, in typical cases, raise an extra ton of output,” said Jeffrey D. Sachs, the Columbia University economist who has focused on eradicating poverty. “That’s the difference between life and death.” Overall global consumption of fertilizer increased by an estimated 31 percent from 1996 to 2008, driven by a 56 percent increase in developing countries, according to the International Fertilizer Industry Association.

This year, about a quarter of U.S. corn will go to feeding ethanol plants instead of poultry or livestock. "The price of grain is now directly tied to the price of oil," says Lester Brown, president of Earth Policy Institute, a Washington research group. "We used to have a grain economy and a fuel economy. But now they're beginning to fuse." The price of corn is up 23% this year.

Gov. Arnold Schwarzenegger said this week that the state's budget deficit could grow to as much as $20 billion as he prepared to unveil a revised spending plan for the coming year that is likely to include deep cuts in education, health services and prisons.

The Bank of England needs to take ``aggressive action'' and cut interest rates soon to avert a recession, policy maker David Blanchflower said.

A monthly Energy Department report said demand for finished petroleum products dropped 8.5% in February from January, and demand for gasoline fell 6.2%. Though some of that drop can be attributed to February's being a shorter month, it still suggests high prices are cutting American's appetite for fuel.m "That's a dramatic drop," said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill.

Dubai has told the EU that it will not sign any pacts which restrict how and where it will invest in the region. It considers the request a form a discrimination.

Euro assets have gone from a little over 18% of world reserves to nearly 26% in 2007. The British Pound has also gained, to 4.7% of total reserves in 2007.

General Motors Corp.reported a first-quarter loss of $3.25 billion after a year-earlier profit because of mortgage losses at a finance unit and plant shutdowns caused by a supplier strike. GM revised its outlook for US car sales in 2008 down to 15 million.

P&G reported earnings of $2.71 billion, or 82 cents a share, in the January-March quarter, compared with $2.51 billion, or 74 cents per share, a year earlier.

According to the Oil Drum, the risk of electricity blackouts in Southern California during the hottest days this summer is more than triple that of previous years because power plant additions have failed to keep up with demand, the state's grid manager said. The likelihood of a Stage 3 emergency, when reserves dip below 3% and power is cut to some customers to prevent a system collapse, rose to 10% for Southern California from 3% in last year's forecast, the California Independent System Operator said in a report Monday.

First Solar Inc.said first-quarter net income rose to $46.6 million, or 57 cents a share from $5 million, or 7 cents a share in the year-ago period. In the fourth quarter of 2007, First Solar earned $62.9 million, or 77 cents a share. First-quarter revenue rose to $197 million from $67 million in the year-ago period. Analysts had forecast earnings of 48 cents a share and revenue of $187 million for the thin film solar module maker, according to a survey by FactSet.

Garmin Ltd said Wednesday that its first quarter profit rose 6% to $147.8 million, or 69 cents a share, from $139.9 million, or 64 cents a share. Net sales during the period were $663.8 million, compared to $492.2 million.

SPX raised its earnings guidance for 2008 to a range of $6.20 to $6.40 a share from a range of $6.00 to $6.20.

Kraft Foods Inc posted a lower quarterly profit, hit by rising ingredient and commodity costs and spending on new products and marketing, although sales jumped. Profit was $608 million, or 40 cents a share, compared with $702 million, or 43 cents a share, a year earlier. Excluding one-time items, earnings were 44 cents a share, unchanged from a year earlier.

Shares in British fashion brand Burberry Group gained almost 4 percent on Wednesday as traders cited market talk of a possible bid from U.S. handbag maker Coach.

The killings of three U.S. soldiers in separate attacks in Baghdad pushed the American death toll for April up to 47, making it the deadliest month since September.

Kellogg Co. reported Wednesday that its first-quarter profit dipped 2 percent, despite recent price increases intended to offset higher costs.

U.S. crude inventories rose more than expected, up 3.8 million barrels to 319.9 million barrels in the week ending April 25, U.S. Energy Information Administration reported on Wednesday. Analysts surveyed by energy information provider Platts expected an increase of 1.6 million barrels. After the data, crude-oil futures for June delivery fell 23 cents to $115.40 a barrel on the New York Mercantile Exchange. Futures were trading higher before the report. Gasoline supplies fell by 1.5 million barrels in the latest week, while distillate stocks rose by 1.1 million barrels, EIA reported.

Time Warner Inc.Chief Executive Jeff Bewkes told analysts Wednesday that the company was "not satisfied" with a decline in sales of display advertising at AOL during the first quarter, which led to another quarter of slowing ad growth at the entire unit. AOL's display ad sales are expected to decline again in the second quarter, Chief Financial Offficer John Martin said.

Crude closed down $2.17, or 1.9%, at $113.46 a barrel on the New York Mercantile Exchange. Gold for June delivery was last up $6.40 at $871.50 an ounce on the New York Mercantile Exchange.

Centex saw a quarterly loss of $910.5 million, or $7.36 a share, compared to net income of $198.9 million, or $1.65 a share, a year ago. The loss from continuing operations for the fourth quarter was $7.34 a share. Revenue slid to $2.31 billion from $3.64 billion in the year-ago period.
Analysts polled by FactSet Research had expected a loss of $2.14 a share on revenue of $2.09 billion. Home closings during the period decreased 33% to 7,100 homes and average sales price slid 15% to $267,953.

Home Prices

4/29/08 Home Prices

A closely watched index shows that U.S. home prices fell by 12.7 percent in February versus last year, with 17 of the 20 metro areas reporting record annual declines.The Standard & Poor's/Case-Shiller home price index of 20 cities also showed Tuesday that home values in 10 cities plunged by double digits led by Las Vegas and Miami. Only Charlotte, N.C., posted a positive return year-over-year. All 20 metro areas have declined for six straight months.The narrower 10-city index set a record monthly decline of 13.6 percent.

U.K. retail sales volume in April was at its weakest level since November 2005, according to the Confederation of British Industry's monthly distributive trades survey released Tuesday. The survey found 52% of retailers said sales volumes declined compared to a year ago, while 25% said they were up, for a rounded balance of -26. That's down from +1 in March and weaker than the market consensus forecast for a reading of -4.

Shares of Indian software firms soared Tuesday after Finance Minister Palaniappan Chidambaram proposed extension of a tax-holiday plan for software exporters by an year, according to media reports. The tax-holiday, available to firms with software-development units in designated technology parks in the country, will now expire in March 2010, instead of March 2009.

Mining company Anglo American said Tuesday that its first-quarter production of platinum fell 24.2% to 428,600 ounces and that production of palladium, rhodium and nickel had fallen by a similar percentage. Gold production fell 11.6% to 23,700 ounces, while production of copper, iron ore and manganese ore rose.

Oil producer Royal Dutch Shell said first-quarter profit rose 25% to $9.08 billion as oil prices climbed.

Japanese banks and brokerages are expected to post a combined loss of more than 1 trillion yen ($9.6 billion) in investments tied to the U.S. mortgage market in the recently-ended fiscal year, according to a Japanese media report Tuesday. Japanese banks, which are due to release their fiscal 2007 earnings in the first half of next month, will push the tally for subprime-related losses above the 673 billion yen reported by Japan's top brokerages so far, according to a Nikkei newspaper report. Brokerages Mizuho Securities Co. and Nomura Holdings Inc.

According to the WSJ, among elected officials, Sen. Obama leads in endorsements from governors and senators. He is behind among House members by one, but both camps expect him to pull ahead unless he does badly in next Tuesday's Indiana and North Carolina primaries. If he doesn't stumble, enough elected Democrats are expected to back Sen. Obama after the last primaries June 3 to give him the delegate majority needed for nomination. Many of them see Sen. Obama as more electable than Sen. Clinton. But even those who don't have been impressed by his grass-roots organizing and fund raising and the legions of new voters he has attracted, particularly younger and African-American voters.

``The Fed will be indicating that if we aren't at the bottom, we're very close to the bottom of the rate cycle,'' said Simon Derrick, London-based head of currency strategy at Bank of New York Mellon Corp. ``The dollar is on the turn.''

China may revalue the yuan by 10 to 15 percent in the coming months as policy makers seek to temper inflation close to an 11-year high, according to Frank Gong, head of China research at JPMorgan Chase & Co.

India's central bank on Tuesday hiked the amount of cash banks must hold in reserve for the second time in two weeks, as it struggles to tame inflation in Asia's third-largest economy. In an unexpected move, The Reserve Bank of India raised the cash reserve ratio (CRR) by 25 basis points to 8.25 percent to reduce cash available for loans and try to check inflation now around three-year highs at 7.33 percent.

Royal Bank of Scotland Group Plc may cut about 7,000 jobs at its global securities and corporate lending unit, or almost 25 percent of the workforce, following the purchase of ABN Amro Holding NV's investment bank and credit market losses, two people with knowledge of the plan said.

Deutsche Bank on Tuesday reported its first quarterly loss in five years and revealed the drastic impact of the credit crisis on its profitable investment banking activities.

BP Plc's Forties pipeline prepared to start after a two-day shutdown.

Yahoo Inc. is outsourcing the Internet telephone functions of its instant messaging program to the startup Jajah. Jajah will connect the calls to and from users of Yahoo Messenger and handle billing and customer care, the startup said Tuesday. Terms of the deal where not announced. No employees are moving over to Jajah. Jajah's main product is a service that allows users to make cheap international calls by entering two phone numbers on the Jajah Web site — their own and the number they want to call. The company calls both numbers. If the calls are answered, Jajah connects them to each other, making it a high-tech version of the long-distance calling card.

According to Bloomberg, Eli Broad, a philanthropist and co- founder of KB Home, the fifth-largest U.S. homebuilder by revenue, said he expects home prices to drop another 20 percent. "I don't think we're anywhere near a bottom in housing,'' Broad told Bloomberg TV at the Milken Institute Conference in Beverly Hills, California. "We're going to have a big inventory of unsold, unoccupied homes that's going to take three or four years to clear out.'' Homebuilders, hurt by banks' stricter requirements for granting home loans and concern over the rising number of homeowners failing to pay their mortgages, have begun work on the fewest number of houses since 1991, according to the U.S. Department of Commerce."

Former World Bank chief James Wolfensohn thinks the credit crisis will take $1 trillion in losses out of the market.

Reuters reports that Lewis Ranieri who helped create the current mortgage market says that house prices are off more than most analysts think.

Reuters writes that the Fed is thinking about paying interest on bank reserves.

100-pound bags of North Dakota flour now above $50 -- more than double what they were a few months ago.

Standard & Poor's on Monday said chances have increased that it will downgrade credit ratings on some large U.S. banks, noting that current high ratings have little cushion for volatile earnings.

U.S. foreclosure filings more than doubled in the first quarter as payments rose for subprime adjustable mortgages and falling home prices left property owners unable to sell or refinance without losing money. Almost 650,000 properties were in some stage of foreclosure during the quarter, or 1 in every 194 U.S. households, Irvine, California-based RealtyTrac Inc., a seller of foreclosure data, said today in a statement. The number was 112 percent above a year ago. Nevada, California and Arizona had the highest rates.

"A continued housing deflation of several trillion more dollars now threatens to impact the real economy which in turn might produce a reversal of financial market fortunes,", wrote Bill Gross, chief investment officer of PIMCO or Pacific Investment Management Co. in a May Investment Outlook letter on the firm's Web site. Gross added that from this point on, lowering the fed funds target rate, the benchmark lending rate which the Federal Reserve sets, might do more damage than good.

Valero said benchmark Gulf Coast gasoline margins narrowed by $6 per barrel, or 59%, in the first quarter versus the first quarter of 2007. Partially offsetting these weaker margins were substantially higher margins on diesel and jet fuel as global demand for these products remained high.

Countrywide Financial Corp posted a surprisingly large $893 million first-quarter loss, as it took more than $3 billion of charges for write-downs and bad loans

MasterCard's profit more than doubled in the first quarter, the card processor said Tuesday, as more customers outside the United States used their credit and debit cards for purchases.

Goldman Sachs on Tuesday added Chevron to its buy list as part of its upgrade of integrated oils to attractive from neutral. Goldman also spotlighted ConocoPhillips as a top pick. Better-than-expected first-quarter earnings from Conoco and Occidental Petroleum, "indicate that the Street may have become too cautious on the combination of price realizations, costs, and taxes for the integrated oils," Goldman said in a note to clients.

The April consumer confidence index declined to 62.3 from a March reading that was revised up to 65.9 from a prior estimate of 64.5. Consumer confidence is at its lowest since March 2003.
"This continued weakening suggests that not only has the feeble level of growth in the first quarter spilled over into the second quarter, but that economic conditions may have slowed even further," said Lynn Franco, director of consumer research at the private Conference Board.
The April expectations index rose to 50.1 from 49.4 in March. The expectations index has been lower only five times since 1967 - when they survey started.
The present situation index fell to 80.7 in April from 90.6 in March. That's the lowest since December 2003.
Consumers expect prices to rise 6.8% in the next 12 months, the highest inflation expectations since late 2005. In March, consumers' inflation expectations were 6.1%.

Masco slashed its 2008 profit target to 50 cents to 65 cents a share, down from 85 cents to $1.15 a share. In its earnings report, Masco said that it expects market conditions for the industry over the next several quarters "to be very challenging," although it insisted "the long-term fundamentals for the new home construction and home improvement products markets are positive."
It added that "business conditions remain difficult" in many markets and estimates that 2008 housing starts will decline an additional 25% to 33%, to a level of 900,000 to 1 million units. In the first quarter of 2008 alone, housing starts were off 30%, it said.

GMAC LLC, the auto and home lender that General Motors Corp. sold to a private equity group, posted a $589 million loss in the first quarter and said it may not make a profit until next year.

United Rentals forecast a 2008 profit of $2.65 to $2.85 a share on revenue of $3.4 billion to $3.5 billion.

Citigroup Inc.said late Tuesday it commenced an offering of about $3 billion in common stock and will include an over-allotment option to purchase additional shares.

Express Scripts sees a 2008 earnings from continuing operations of $2.95 to $3.03 a share.

Crude oil for June delivery dropped $3.12, or 2.6%, to close at $115.63 a barrel on the New York Mercantile Exchange. Gold for June delivery dropped $18.70 to end at $876.80 an ounce on the New York Mercantile Exchange.

Daniel Mudd, the chief executive of Fannie Mae, said he does not expect a real recovery in the U.S. housing market before 2010, Reuters reported Tuesday.

Medicare is lurching toward disaster and it is too late for the Bush Administration and Congress to do anything about it, U.S. Health and Human Services Secretary Michael Leavitt said on Tuesday. "There is serious danger here," he added. "Medicare is drifting towards disaster."

BG Group Plc, the U.K.'s third- largest natural gas producer, made an unsolicited offer to buy Origin Energy Ltd., Australia's second-biggest electricity and gas retailer, for A$12.91 billion ($12 billion) in cash. BG offered A$14.70 a share for Origin, the Sydney-based company said in a statement to the Australian Stock Exchange today. The proposal from BG is at a 40 percent premium to Origin's last traded share price of A$10.47 yesterday.

People close to Microsoft told CNBC yesterday that the software company is likely this week to wage a fight to replace Yahoo's board with directors of its own choosing.

Kathy Lien: "Although a pause from the Fed would be perceived as dollar positive, I continue to believe that the US economy will deteriorate further. Job losses will extend not only for another month, but for at least the next 3 or 4 months."

Oil

4/28/08 Oil

Oil prices hit an all-time high near $120 a barrel Monday after a weekend refinery strike closed a pipeline system that delivers a third of Britain's North Sea oil to refineries in the U.K.

OPEC President Chakib Khelil does not rule out oil prices reaching $200 a barrel, even though supply is adequate, because the market is driven by the dollar's slide, Algerian government newspaper El Moudjahid reported on Monday.

Continental Airlines Inc. said Sunday it would not pursue a combination with another carrier right away, a surprising move after weeks of growing speculation that it would join with United Airlines to create the world's biggest airline.

Maguire Properties Inc., the Los Angeles real-estate-investment trust, said its chairman and chief executive proposed a series of transactions through which he would acquire 75% of a slimmed-down version of the company. The deal values the company at $21 a share, a 23% premium to its closing price of $17.07 on Friday, Maguire said in a statement on Monday

Humana raised its earnings guidance for the year to a range of $4.10 to $4.35 a share..

Royal Bank of Scotland may cut 7,000 jobs in its global markets division, or about 25% of its workforce in that area, the Financial Times reported without attribution.

Mars Inc. announced an agreement to acquire Wm. Wrigley Jr. Co. for about $23 billion with financial backing from Warren Buffett's Berkshire Hathaway Inc.
The deal comes to $80 a share.
Mars said Wrigley will become a separate, stand-alone subsidiary, with Berkshire holding a minority stake. A Wrigley press statement said Berkshire Hathaway had committed to purchase an equity interest in the business for $2.1 billion at a "discount to the share price being paid to the stockholders of Wrigley." Funding for the roughly $23 billion Wrigley transaction includes about $11 billion from Mars, a $5.7 billion committed senior debt facility from Goldman Sachs Group Inc. (GS), and $4.4 billion of subordinated debt from Berkshire Hathaway. At closing, Berkshire will also buy a $2.1 billion stake in Wrigley at a discount to the price being paid to Wrigley shareholders.

Tracinda has amassed a 4.7% position in Ford and plans an offer to buy more shares at a 13% premium as Kerkorian endorses the auto makers turnaround efforts. Kerkorian announced a bid of $8.50 a share for up to 20 million shares.

The Russian central bank raised its main interest rates by a quarter of a percentage point, effective tomorrow, to curb inflation. The minimum rate for taking out one-day loans from the central bank in repurchase auctions will increase to 6.5 percent, the Moscow-based Bank Rossii said in an e-mailed statement today.

According to Bloomberg, Brazil's plan to become one of the world's biggest oil exporters hinges on exploiting crude six miles below the ocean surface in deposits so hot they can melt the metal used to carry uranium to nuclear plants. Tapping what may be the biggest oil finds in the Western Hemisphere in three decades will require equipment that can withstand 18,000 pounds per square inch of pressure, enough to crush a pickup truck, pipes that can carry oil at temperatures above 500 degrees Fahrenheit (260 Celsius) and drill bits that can penetrate layers of salt more than one mile thick.

Verizon Wireless had 1.5 million net additions taking it to 67.2 million total customers.

According to Bloomberg, the Japanese, who own $586.6 billion, or 12 percent of U.S. government debt, had their worst quarter in Treasuries this decade, losing 7 percent in the first three months of the year as the dollar fell to the lowest since 1995 versus the yen, Merrill Lynch & Co. indexes show. Dai-ichi Mutual Life Insurance Co., Meiji Yasuda Life Insurance Co. and Sumitomo Life Insurance Co., three of the nation's four-biggest insurers, would rather accept the world's lowest bond yields in Japan than buy U.S. debt.``It's too early to say the dollar will stop falling,'' said Masataka Horii, head of the investment team in Tokyo for the $53.1 billion Kokusai Global Sovereign Open, Asia's biggest bond fund. ``The U.S. economy will be slow for a while.''

PetroChina Co., the nation's biggest oil producer, said first-quarter profit fell 32 percent as losses at its refineries and a tax on oil sales eroded earnings from record crude prices.

John Hussman: "As a rule, once a market becomes overvalued and speculation becomes overextended, it becomes wise to panic before everyone else does, even at the risk of being early...We've now observed a dot-com bubble, a techology bubble, a general bubble in equities ending in 2000 but "echoing" to rich valuations in recent years (especially on the basis of normalized profit margins), a bubble in housing, a bubble in private equity and low-grade debt, a mini-bubble in Shanghai (which has lost about half its value in recent months), and now a bubble in commodities that is well underway. When, when will we learn to recognize these for what they are?...But presently, market conditions are strenuously overbought in an unfavorable Market Climate – a condition followed often enough by spectacular vertical losses to be taken as a serious risk, if not a forecast. We continue to be out of financials, in the belief that delinquencies and foreclosures are only presently entering the heavy season, that losses have not been taken, and that lending and liquidity will enter a second phase of crisis as capital ratios are compressed...Meanwhile, with 10-year Treasury yields no longer significantly negative in real terms, and increasing divergences in market action within the commodity space, we are rapidly cutting our exposure to commodities and oil."

Two- thirds of Microsoft's sales come from users outside the U.S. The company expects its tax rate to decline to 28% in the new fiscal year beginning July 1.

Loews Corp said on Monday first-quarter profit fell 14 percent as declining results from its insurance and tobacco units offset improved results from drilling operations.

Dozens of minor earthquakes shook Reno on Sunday as a series of temblors entered its third month and prompted some frazzled residents to leave their homes. More than 150 aftershocks have been recorded on the western edge of northern Nevada's largest city after a magnitude-4.7 quake hit Friday night, the strongest quake in a sequence that began Feb. 28. There were no reports of injuries or widespread damage.

Shareholders of Bear Stearns Cos. will be asked to vote on the proposed deal to sell the company to JPMorgan Chase & Co. at a special meeting on May 29, the investment bank said Monday. JPMorgan Chase is offering stock worth roughly $10 per share for Bear Stearns.

There is one element not discussed in the Microsoft-Yahoo battle. Bill Gates and Susan Decker of Yahoo both sit on the board of Berkshire Hathaway. Could Warren Buffett play a role in this saga?

The glut of homes on the U.S. housing market worsened in the first quarter, according to government data released Monday. The number of vacant homes in the United States rose by 1 million in the past year to a record 18.6 million, the Commerce Department said. Of those 18.6 million vacant homes, a record 2.3 million were for sale at the end of the first quarter, pushing the vacancy rate for owner-occupied units to a record 2.9%. Meanwhile, a record 4.1 million vacant homes are for rent, with the rental vacancy rate rising to 10.1%. The percentage of homes occupied by owners was steady at 67.8% in the first quarter, matching the lowest percentage in five years.

About 4 percent of the U.S. corn crop was planted as of April 20, compared with 9 percent a year earlier and the five- year average of 17 percent, the U.S. Department of Agriculture said April 21 in a report.

Visa's operating income fell during the quarter, to $349 million from a pro forma $394 million in the same quarter in 2007, hurt by higher advertising and marketing expenses and more money being set aside for litigation.

The Treasury Department expects to paydown $35 billion in the third fiscal quarter, down about $87 billion from the projection given in January, the government said Monday. The decrease is primarily due to lower receipts, redemptions of portfolio holdings by the Federal Reserve and less net issuance of state and local government series securities. For the fourth fiscal quarter, which begins in July, the government expects to borrow $112 billion. This assumes quarter-end cash balances of $45 billion on June 30 and $45 billion on September 30.

The average price of gasoline in the United States rose by 9 cents last week to a record $3.65 a gallon, the Energy Department reported Monday.

Crude closed up 23 cents, or 0.2%, at $118.75 a barrel on the New York Mercantile Exchange. Gold for June delivery gained $5.80, or 0.7%, to end at $895.50 an ounce on the New York Mercantile Exchange.

Exxon Mobil spokeswoman Margaret Ross said in an e-mail to MarketWatch that all of the oil giant's Nigeria production of about 800,000 barrels a day remained shut down Monday as the result of a labor dispute.

The Fed's intervention to stave off bankruptcy at Bear Stearns will come to be seen as "the worst policy mistake in a generation," said Vincent Reinhart, the former head of monetary affairs at the Fed.

Bombardments by suspected militants killed four U.S. soldiers Monday as troops tried to push Shiite fighters farther from the U.S.-protected Green Zone and out of range of their rockets and mortars. At least 44 American soldiers have been killed in Iraq in April, making it the deadliest month for U.S. forces since September.

Sagging pickup truck and sport utility vehicle sales have forced General Motors Corp. to shut down one shift each at four North American factories and lay off about 3,500 workers.

The Audit Bureau of Circulations reported Monday that average weekday circulation at 534 daily newspapers fell 3.6% for the six months ended March 31, compared with the year-earlier period.

Charles "Tremendous" Jones:"Loyalty is something you give regardless of what you get back, and in giving loyalty, you're getting more loyalty; and out of loyalty flow other great qualities."

Caution

4/26/08 Caution

Reuters reports the U.S. Midwest has enjoyed nearly 20 years without a major drought but forecasters worry the corn belt's luck could dry up this year, further squeezing tight global supplies amid soaring food prices. With its last major drought in 1988, the Midwest has reached its average span of 18.6 years between droughts. Considering that statistic and current weather conditions, Iowa State University extension climatologist Elwynn Taylor said the corn belt has a one in three chance of drought this year. "We do have to be prepared," Taylor said. "A 33 percent chance is high, that's a risk."

In a country with 20 percent of the world’s population, China accounts for only 2 percent of world consumption.

Houston-based regional carrier ExpressJet said Friday it is willing to listen to merger offers but rejected a buyout offer from competitor SkyWest because its bid of $3.50 per share was too low.

Hundreds of workers at Scotland's only oil refinery on Sunday began a 48-hour strike that has forced BP PLC to shut a pipeline system that delivers almost a third of Britain's North Sea oil. 1,200 workers at the Grangemouth refinery in central Scotland walked off the job. The pipeline brings in 700,000 barrels of oil a day from the North Sea to BP's Kinneil plant, which is powered from the Grangemouth site.

Losses at Redmond, Washington-based Microsoft's Internet business widened to $228 million last quarter and sales rose to $843 million, at the low end of company forecasts.

Eos Airlines, a premium-class airline operating flights between New York and London, said on Saturday that it filed for protection from its creditors under Chapter 11 of federal bankruptcy law and would wind down its operations. The all-business-class carrier had needed, and was unable to secure, additional capital in "today's extremely challenging economic and credit environment," the carrier's chief executive officer, Jack Williams, said in a statement.

Mike Burk: "The market has been in a pattern of higher highs and higher lows for over a month now...On average the OTC has been up 56% of the time in May with an average gain of 0.4%. During the 4th year of the Presidential Cycle it has been up 64% of the time with an average loss of 0.1% attributable to the 14.1% loss in 2000. The best May ever for the OTC was 1997 when it was up 10.2%...On average the SPX has also been up 56% of the time in May (since 1928) with an average loss of 0.2% (helped by a 22.1% loss in 1932 and a 22.9% loss in 1940). During the 4th year of the Presidential Cycle it has been up 70% of the time with an average loss of 1.4% (both 1932 and 1940 were 4th years in the Presidential Cycle). The best May ever for the SPX was 1990 when it rose 8.7%...The market is a bit overbought and there is little strength in the breadth indicators, but there could be some seasonal strength showing up near the end of the week.I expect the major indices to be higher on Friday May 2 than they were on Friday April 25."

The Oil Drum: "As easily accessible global stocks of oil dwindle, the world supply of oil and gas has been concentrated in a smaller and smaller number of hands over just the past decade. Some 80 percent of all reserves now are concentrated in fewer than 10 nations. The biggest consumers desperately want to protect their secure flows of oil and gas from this handful of key suppliers, while simultaneously preventing their rivals from inking deals with resource-rich nations."

According to Bloomberg, Microsoft Corp. Chief Executive Officer Steve Ballmer may start a fight to oust Yahoo! Inc.'s board and pave the way for a takeover, after the Internet company let his deadline pass without agreeing to a deal.

OPEC won't consider increasing crude output before September, even amid investor concern that record oil prices may cause a global economic recession, according to the group's president, Chakib Khelil.``OPEC will not increase crude oil output,'' Khelil, who is also the oil minister of Algeria, said in an interview today in Algiers. ``Supply is more than sufficient in the international market. Prices are not the consequence of demand and supply, they are the consequence of speculation.''

``What we're seeing now is a big shift in market sentiment regarding the Fed,'' said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG's Private Wealth Management unit in New York. ``The feeling is the Fed may pause after it meets next week.'' The two-year Treasury yield rose 29 basis points this week, or 0.29 percentage point, to 2.41 percent, according to BGCantor Market Data. The two-year note yield reached 2.50 percent yesterday, or 0.25 percentage point above the Fed's target for overnight loans between banks, the most since June 2006. The new two-year note auctioned April 23, with a 2 1/8 percent coupon, ended the week at 99 14/32.

Two-Year U.S. Treasury Bonds

4/25/08 Two-Year Government Bonds

Yields on two-year U.S. securities, among the most sensitive to changes in borrowing costs, rose 72 basis points over the two weeks. Futures traders pared odds the central bank will lower rates after a quarter-point reduction on April 30, sending two- year yields above the Fed's rate for the first time since 2006. Japan's five-year notes were set for the biggest drop in nine years as consumer prices rose at the fastest pace in a decade.

Hundreds of thousands of utility customers are at risk of disconnections as the sagging economy drives up the number of past-due home heating bills and the amounts owed, utility companies in cold-weather states say.

American Express Co.'s first-quarter profit slipped 6 percent as the credit card lender saw more U.S. cardholders fail to make their payments.

John M. Berry: "The prospect of elevated inflation and the risk to Fed credibility make it likely that if the Federal Open Market Committee chooses to reduce its 2.25 percent target for the overnight lending rate at its meeting April 29-30, the cut will be only a quarter-percentage point after a series of larger ones. Fed funds futures contracts indicate investors yesterday put about an 80 percent probability on such a 25-basis-point cut next week. The contracts also put a 20 percent probability on the FOMC's leaving the target unchanged, which would be the better policy choice at this point because of the threat to the Fed's credibility...A gesture by the Fed, such as leaving the lending-rate target unchanged next week, might help hold down inflation expectations and discourage passing on higher costs. With all the rest of the Fed's efforts to add to market liquidity solidly in place, why not make the gesture?"

Mike Shedlock: "Interest-rate derivatives are signaling that the rate banks charge for loans in dollars in London may rise further as financial institutions remain reluctant to lend...Hoping to ease credit woes, Fed to auction another $75 billion in Treasuries. The Federal Reserve announced Wednesday it will auction an additional $75 billion in super-safe Treasury securities to big investment firms, part of an ongoing effort to help strained credit markets. The auction -- the fifth of its kind -- will be held Thursday. In exchange for the 28-day loan of Treasury securities, bidding firms can put up more risky investments, including certain shunned mortgage-backed securities, as collateral. In the four auctions held so far, the Fed has provided close to $158.95 billion worth of the Treasury securities to investment firms...Today, another $75 billion will be added to the swap-o-rama total. That will make the Fed's balance sheet look something like this: $394 Billion Garbage to $473 Billion Treasuries. One additional swap will make the Fed's balance sheet more than 50% garbage."

For its 2009 fiscal year beginning 7/1, Microsoft is projecting revenues in the range of $66.9bn-$68bn, with earnings per share of $2.13 to $2.19. At $30+, the risk appears small.

Yahoo Inc. plans to make its Web site a social hub by hosting applications from other online services, part of the Internet pioneer's effort to spawn more advertising opportunities. "We are going to rewire the entire experience at Yahoo to make it social in every dimension," Ari Balogh, Yahoo's chief technology officer, said Thursday at a "Web 2.0" conference that drew a crowd of more than 1,000.

Mazda Motor Corp., based in Hiroshima, was an exception in reporting a 48 percent jump in profit for the January-March period on strong overseas sales, especially in Europe, on way to a record annual profit for the one bright spot in the Ford family of automakers. The Japanese affiliate of Ford Motor Co. of the U.S. reported a 46.8 billion yen ($450 million) profit for the quarter through March, and a rise in quarterly sales of 1.2 percent to 969.5 billion yen ($9.3 billion), partly on strong demand for the Mazda 6 in Europe.

The militant group behind a string of recent attacks in Nigeria's southern oil region said today it had sabotaged another pipeline. The Movement for the Emancipation of the Niger Delta, or MEND, said its fighters hit a pipeline late Thursday in the southern Rivers State — bringing to four the number of pipelines the group has reportedly blown up in the past week.The group said in a statement that the pipeline belongs to a Royal Dutch Shell PLC joint venture.

AMGEN guided for GAAP EPS for the year to be in a range of $3.66 to $4.01.

Rachel Ziemba: " Like oil, the natural gas market is undergoing a geographic shift in its center of gravity in terms of consumption growth (increasingly in Asia) and its producers. Yet also like oil there are The countries with the largest proven gas reserves are Russia, Iran and Qatar. Russia is the current largest gas exporter but Qatar exports the most LNG - and hopes to double output within the next few years. Asian countries used to have little opportunity to use natural gas. LNG is changing this, and natural gas is gaining a place in the energy mix, with many countries have been locking in contracts - even if it is at a higher price...Yet for now, the Federal Reserve Bank of Dallas suggests, inventories are high enough to keep prices relatively moderate and far below the normal link with oil.
OPEC estimates that natural gas demand will almost double by 2030 - or almost 2.4% annual growth, outpacing demand for oil or coal."

Brazil's Agriculture Ministry said it has temporarily banned exports of government-owned stocks of rice to guarantee domestic supply amid rising world prices, but other shipments will still be allowed.

The Reuters/University of Michigan consumer sentiment index came in at 62.6 for April, down from 69.5 a month earlier as Americans contended with rising energy and food prices.

U.S. average retail prices for a gallon of unleaded gasoline rose 2 cents to $3.58 from $3.56 in the last day, according to the Fuel Gauge Report published by AAA.

Crude-oil futures jumped more than $3 in mid-morning trading Friday after news reports that U.S. military force fired at an Iranian boat. A ship contracted by the U.S Military Sealift Command fired at least one shot toward an Iranian boat, Reuters reported, citing an unnamed U.S. defense official.

Jake Tapper: "House Majority Whip Jim Clyburn, D-SC, the highest-ranking African-American in the Congress, has some tough assessments of la famille Clinton today. To Reuters, Clyburn -- who is officially neutral in the Democratic presidential race -- repeated the speculation that Sen. Hillary Clinton, D-NY, is looking to destroy Sen. Barack Obama, D-Illinois, so that Sen. John McCain, R-Ariz., wins the White House in November and Clinton can make another run in 2012. "I heard something, the first time yesterday (in South Carolina), and I heard it on the (House) floor today, which is telling me there are African Americans who have reached the decision that the Clintons know that she can’t win this," Clyburn said. "But they're hell-bound to make it impossible for Obama to win." Clyburn did not call for Clinton to bow out, just to take the rhetoric down a notch. "There's a difference between dropping out and raising all this extraneous scurrilous stuff about the guy (Obama). Just run your campaign … you don’t have to drop out to be respectful of other people."

Crude oil for June delivery gained $2.46, or 2.1%, to close at $118.52 a barrel on the New York Mercantile Exchange. Gold for June delivery ended up 30 cents at $889.70 an ounce on the New York Mercantile Exchange.

According to the WSJ, a large California land partnership involving one of the largest U.S. pension funds has received a notice of default on a $1 billion loan after failing to meet certain terms of its lenders. LandSource Communities Development LLC, a partnership that involves the California Public Employees' Retirement System, received the default notice Tuesday, amid talks to restructure $1.24 billion of debt. The partnership, which owns 15,000 acres in Southern California, had received an extension to meet its current loan terms, including a required payment, but the deadline expired on April 16. The default notice applies to about $1 billion of the total debt.

Doug Noland: "Today, post-crash, no amount of policymaker intervention can repair broken confidence in all facets of Wall Street finance, including subprime and “exotic” mortgages, the “monoline” financial guarantee business, CDOs, “private label” MBS, auction-rate securities, and so forth. Indeed, their problems are poised to only worsen as the economy falters. It is one thing to stem implosion and something altogether different when it comes to restoring the Wall Street Credit mechanism to the point of fostering new Bubbles. Wall Street “alchemy” is a spent force unless it melds in some type of government obligation. The best policymakers can do today is place a federal government guarantee on 90% of new mortgage debt and hope this somewhat stabilizes U.S. housing...Most conspicuously, powerful price pressures throughout global energy, food, and commodities markets are stoking growth in various sectors of our economy. Our export sector continues to boom. Less obvious, I would argue that rampant global financial excess is a contributing factor in our financial institutions’ capacity to raise new “capital” from the global markets – and more generally in bolstering marketplace liquidity in the face of the collapse of Wall Street-backed finance. Foreign demand for our assets is a not insignificant issue. Moreover, the global leveraged speculating community - and international liquidity flows more generally - are a major Stage II wildcard...t is my argument that Stage II Means another year of massive U.S. Current Account Deficits. This would Mean, for one, a prolonging of the massive flow of liquidity into international central bank reserves (creating domestic Credit in the process), sovereign wealth funds, and (to a lesser extent) the hedge fund community. The consequences from a further ballooning of this Unwieldy Global Pool of Speculative Finance are not at all clear. Secondly, another year of U.S. Deficits would Mean another year of excessive liquidity flows into the already overheated economies throughout Asia, the Middle East and elsewhere. These flows are hitting economies with already acute inflation pressures and related problems. Importantly, these Monetary Processes and Inflationary Dynamics are by now well entrenched and extraordinarily powerful after years of unrelenting excess. Resulting Monetary Disorder should be expected to go to increasingly destabilizing extremes (think NASDAQ 1999 and subprime 2006!) – and indeed we’re seeing evidence of as much in near $120 crude, the global food price spike and related hoarding, and wildly unstable and speculative global financial markets.
It is in this context that I believe U.S. policymakers are today unknowingly risking global financial and economic catastrophe...Stage II Means great risk to the heart of contemporary “money.” The problem rests on the reality that “pre-adjustment” Credit (borrowings associated with many businesses and enterprises that will be uneconomic come the arrival of the post-Bubble backdrop) is inherently weak and vulnerable... today’s U.S. Credit is extraordinarily destabilizing in its effects upon the Global Credit Bubble and Resulting Monetary Disorder....One is then left with the disconcerting view that Stage II will lead our authorities to exhaust all policy measures in a futile attempt to sustain the unsustainable. The obvious question: how long does the lead up to Crisis Stage II last? I would today guess a number of months, although I wouldn’t at all be surprised if it was rather short. What will be the impetus for Crisis Stage II? A spike in interest rates, a run from U.S. Treasury and agency debt, a disorderly drop in the dollar, another bout of derivative and Credit market implosion, or acute global financial tumult should be considered leading candidates based upon Stage II ramifications. Or it could easily be something completely unexpected, perhaps even war. "

New Home Sales

4/24/08 New Home Sales

Wendy's shareholders will receive 4.25 shares of Triarc Class A stock for each share of Wendy's stock they own.

Looking forward, Potash expects continued food-supply pressures, resulting in moves to increase supplies and further boost the need for fertilizers. In that light, the company sharply raised its full-year earnings forecast to a range of $9.50 to $10.50 a share from $6.25 to $7.25.

Whirlpool cut its earnings outlook for the year after reporting a 20% profit fall for the first quarter. Net income fell to $94 million, or $1.22 a share, while sales rose 5% to $4.61 billion. It now sees 2008 earnings per diluted share from continuing operations to be in the $7.00 to $7.50 range and to generate $500 million to $550 million in free cash flow. The refrigerator and washing machine maker said macroeconomic challenges, primarily material and oil-related costs, have intensified.

Mining giant Rio Tinto said Thursday that it won't start talks with parties whose proposals do not fully value the firm. It noted that the 12% stake recently taken by the Aluminium Corporation of China, or Chinalco, in the company at a premium to market price, gives directional support to its view on value. Momentum in the business continues to develop strongly, the firm said, and non-core asset sales are progressing well. Strong demand for metals and minerals is continuing and the firm estimates that volumes will grow at a compound annual rate at more than 8% from 2008 to 2015.

Ford Motor Co posted an unexpected quarterly profit on Thursday, led by strong results in Europe and South America and a narrowing loss in North America and sending its shares up 5 percent in premarket trade. Ford said it expects the rest of 2008 to be challenging, cutting its full-year North American outlook for sales, but said it remains committed to its goal of returning North America and its whole auto business to profitability in 2009. Ford reported net income of $100 million, or 5 cents per share, compared with a net loss of $282 million, or 15 cents per share, a year earlier. Ford reported a revenue decline of 8 percent to $39.4 billion, which excludes its Jaguar Land Rover unit that it is selling to Tata Motors Ltd .

MMM reported lower first-quarter profit on Thursday but beat analysts' estimates as strong international sales offset economic challenges in the United States. Net income fell to $988 million, or $1.38 per share, from $1.4 billion, or $1.85 per share, a year earlier. Analysts' average earnings forecast was $1.35 per share, according to Reuters Estimates.

According to the Financial Times, mortgage approvals by UK banks slumped to the lowest level in a decade last month, the British Bankers' Association reported on Wednesday, illustrating the extent to which tighter lending practices are curbing activity in the housing market. The BBA said its members approved 35,417 mortgages for house purchase in March, the lowest since the series began in 1997. The level of approvals had dropped 18 per cent since February and was 46 per cent lower than a year earlier.

According to the Washington Post, a letter that President Bush personally delivered to then-Israeli Prime Minister Ariel Sharon four years ago has emerged as a significant obstacle to the president's efforts to forge a peace deal between the Israelis and Palestinians during his last year in office. Ehud Olmert, the current Israeli prime minister, said this week that Bush's letter gave the Jewish state permission to expand the West Bank settlements that it hopes to retain in a final peace deal, even though Bush's peace plan officially calls for a freeze of Israeli settlements across Palestinian territories on the West Bank. In an interview this week, Sharon's chief of staff, Dov Weissglas, said Secretary of State Condoleezza Rice reaffirmed this understanding in a secret agreement reached between Israel and the United States in the spring of 2005, just before Israel withdrew from Gaza.

Dow Chemical Co. on Thursday reported a 3 percent drop in first-quarter profit because of higher feedstock and energy costs, but still managed to top Wall Street's expectations.

PepsiCo says its first quarter profit rose 5 percent on a big revenue boost in its international division that helped offset higher commodity costs. The world's second-largest soft drink maker says net income jumped to $1.15 billion, or 70 cents per share, from $1.10 billion, or 65 cents per share.

Inventories of durable goods at the factory jumped 1.1% in March, a troublesome sign that could lead to further layoffs and production cutbacks if demand doesn't rebound. Shipments of durable goods fell 0.4% in March after sinking 2.6% in February. Orders for core capital equipment goods were flat in March after declining in January and February. Bookings rose 1.5 percent for goods meant to last several years, outside of cars and planes, following a 2.1 percent decline for February, the Commerce Department said. Total orders unexpectedly fell 0.3 percent, restrained by a decrease in defense-related hardware.

The number of initial claims in the week ending April 19 fell 33,000 to 342,000. It's the lowest level since the week ended February 16. The consensus forecast of Wall Street economists was for claims to rise 3,000 to 375,000. Claims in the previous week were revised to an increase of 20,000 to 375,000 compared with the initial estimate of a rise of 17,000 to 373,000. The four-week average of initial claims fell 7,250 to 369,500. Meanwhile, the number of Americans receiving state jobless benefits fell 65,000 to 2.93 million in the week ending April 12. The four-week moving average of continuing claims rose 20,500 to 2.96 million.

Japan, self-sufficient in rice, will delay seeking imports of the grain required under a World Trade Organization agreement until international prices that have soared to a record stabilize.

ConocoPhillips said net income rose to $4.14 billion, or $2.62 a share, for the January-March period, from $3.55 billion, or $2.12 a share, in the year-ago quarter. On average, Wall Street analysts surveyed by Thomson Financial expected earnings per share of $2.42.

The Oil Drum: "Brazil's discoveries of what may be two of the world's three biggest oil finds in the past 30 years could help end the Western Hemisphere's reliance on Middle East crude, Strategic Forecasting Inc. said. Saudi Arabia's influence as the biggest oil exporter would wane if the fields are as big as advertised, and China and India would become dominant buyers of Persian Gulf oil, said Peter Zeihan, vice president of analysis at Strategic Forecasting in Austin, Texas."

U.S. MARCH NEW-HOME SALES SINK 8.5% TO 17-YEAR LOW. The decline in new-home sales to a seasonally adjusted annual rate of 526,000 was much weaker than the 577,000 pace expected by economists surveyed by MarketWatch. New-home sales are down 36.6% compared with a year ago. The months' supply of homes on the market rose to 11 months, the most in 27 years. Median sales prices have fallen 13.3% in the past year to $227,600, the biggest year-over-year price decline since a 14.6 percent plunge in July 1970.

Alliance Data Systems Corp. is "very comfortable" with its 2008 profit target. ADS expects cash earnings per share of at least $4.30.

Yiddish Proverb: "“If you want your dreams to come true, don't sleep”

With Steve Ballmer's deadline for going hostile rapidly approaching, Microsoft has named a slate of directors to potentially supplant Yahoo's current board.
The list has 10 nominees and three alternates, says The Wall Street Journal, and includes:

* John Chapple, former Nextel Partners CEO
* Edward Meyer, former Grey Global Group CEO
* Jaynie Studenmund, former chief operating officer of Overture Services (acquired by Yahoo in 2003)
* Vanessa Wittman, former Adelphia Communications Corp. CFO

Microsoft Chief Financial Officer Chris Liddell:"Unless we make progress with Yahoo towards an agreement by this weekend, we will reconsider our alternatives," he said. "These alternatives clearly include taking an offer to Yahoo shareholders or to withdraw our proposal and focus on other opportunities." Microsoft's net profit for the three months ended March 31 fell to $4.39 billion, or 47 cents per share, from $4.93 billion, or 50 cents per share, in the same period last year, the company reported. Revenue edged up to $14.45 billion from $14.4 billion in the year-ago quarter.The results came in ahead of Wall Street's expectations on both measures. Analysts surveyed by Thomson Financial forecast a profit of 44 cents per share on $14.4 billion in sales. "Despite a difficult economic environment, it was a very good performance," Liddell said in an interview. Liddell said a rash of unlicensed software in China kept Microsoft from meeting its targets.

Crude for June delivery lost $2.24, or 1.9%, to settle at $116.06 a barrel on the New York Mercantile Exchange. Gold for June delivery dropped $19.60 to end at $889.40 an ounce on the New York Mercantile Exchange.

An unexpected tax bill sent Honda Motor Co's quarterly profit tumbling 86 percent, and Japan's No.2 carmaker warned of a weak year ahead due to a stronger yen, rising materials costs and a soft U.S. car market.

Ten-year bond futures plunged as much as 1.8 percent, forcing the Tokyo Stock Exchange to order a 15-minute halt in trading for the first time since September 2002. The statistics bureau said consumer prices climbed 1.2 percent from a year earlier in March, adding to speculation the Bank of Japan will increase its overnight interest rate this year.

Foreclosures

4/23/08 Foreclosures

Tens of thousands of Californians lost their homes during the first three months of the year as foreclosures soared more than 300 percent across the Bay Area and the state. Many experts expect those numbers to climb higher this year and beyond. "The problem isn't going away anytime soon," said Andrew LePage, an analyst with DataQuick Information Systems. "We're still looking for some sign of a peak in foreclosure activity." Lenders took back 6,579 homes in the nine-county Bay Area during the first quarter, up from 1,493 a year ago and 4,573 in the fourth quarter, according to a report released by DataQuick on Tuesday. Throughout California, 47,171 homes were foreclosed on, up from 11,032 a year ago. The regional and state figures are now at their highest level in more than 15 years.

Rice climbed to a record after World Bank officials said Thailand, the largest exporter, may restrict shipments, worsening a global food crisis. ``If a key exporter like this limits foreign sales, it would be very much like Saudi Arabia reducing oil exports,'' said James Adams, vice president of the bank's East Asia and Pacific department. China, Vietnam, India and Egypt have curbed sales abroad to safeguard domestic supplies and cool inflation.

Yale University economist Robert Shiller, pioneer of the widely watched Standard & Poor's/Case-Shiller home price index, said there's a good chance housing prices will fall further than the 30 percent drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15 percent since their peak in 2006, he said.

The Architecture Billings Index dropped to 39.7 last month from 41.8 in February, the Washington-based institute said today in a statement. The score was the lowest since the survey's inception in November 1995. Any score below 50 indicates a decrease in billings from the previous month.

The biggest threat to the future security of oil supplies is the lack of spare production capacity worldwide, Saudi Arabia warned on Tuesday. In unusually frank remarks, Ali Naimi, the kingdom's oil minister, said: "Limited capacity along the entire supply chain is the real source of current global supply tightness and represents the greatest threat to ensuring adequate energy to fuel future economic growth."

The federal deficit hit an all-time high of $311 billion for the first half of this budget year, reports the Treasury Department, up from $162 billion in the prior year!

More than 100 million people are being driven deeper into poverty by a "silent tsunami" of sharply rising food prices, which have sparked riots around the world and threaten U.N.-backed feeding programs for 20 million children, the top U.N. food official said Tuesday.

Apple has acquired PA Semi for what an unnamed source suggested was $278 million in cash. Apple’s move suggests that the company may be considering a move away from Intel, which provided the chips for successful offerings like the iPhone and the MacBook series of notebook computers.

The Bush administration is proposing that Congress authorize it to buy billions of dollars in federal student loans to make sure the nation’s credit crunch does not block borrowing for higher education.

EMC said it remains "on target" to achieve its 2008 financial targets. The company in January projected earnings of 78 cents a share and earnings excluding items of $1.04 a share for the year. EMC also projected revenue growth of 13% to $15 billion in 2008.

WellPoint Inc.'s first-quarter profit fell 25 percent, badly missing Wall Street expectations, as the health insurer cut its full-year outlook again. Indianapolis-based WellPoint said Wednesday its earnings dropped to $588.1 million, or $1.07 per share, from $783.1 million, or $1.26 per share, a year earlier. Investment losses of 6 cents per share hurt results. Revenue rose 3 percent to $15.55 billion from $15.09 billion, as medical enrollment climbed by 564,000 members. Analysts polled by Thomson Financial forecast earnings of $1.19 per share including the investment losses on $15.4 billion in revenue. The company's benefit expense — or medical loss — ratio rose to 85.1 percent, up from 83.1 percent the previous year. The company cut its 2008 earnings per share outlook to between $5.42 to $5.67, including 6 cents of investment losses, from a revised range of $5.76 to $6.01. Analysts currently forecast $5.73 per share.

Nouriel Roubini: "I expect a longer and deeper U-shaped recession, lasting at least 12 months and possibly as long as 18 months –- one of the most severe US recessions in decades – because today’s macroeconomic and financial conditions are far worse."

JP Morgan assumed coverage of Alliance Data Systems Corp with an "overweight" rating, compared with its prior "neutral" rating, saying the current price offered an attractive entry for value-conscious investors. "We think fiscal 2008 consensus estimates are safe (if not conservative)," analyst Reginald Smith said, while adding that the stock trades at about 12 times his 2008 estimates.

General Dynamics Corp. said Wednesday its first quarter earnings rose nearly 32 percent, led by big sales increases in the division that makes armored vehicles, tanks and combat tools.

Australia's inflation rate accelerated to more than 4 percent for the first time in seven years, driving the nation's currency to the highest against the dollar since 1984 on speculation the central bank may raise interest rates next month.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ended April 18 fell 14.2 percent to 637.6.

Liberty Mutual to acquire Safeco for $68.25/share in cash.

Freeport-McMoRan Copper & Gold Inc.'s first-quarter net income more than doubled amid near-record prices for gold and other metals as year-earlier results were weighed down by costs associated with the company's Phelps Dodge purchase. Freeport also raised its 2008 cash-flow forecast. The mining giant reported net income of $1.1 billion, or $2.64 a share, up from $476 million, or $2.02 a share, a year earlier. Revenue rose to $5.67 billion from $2.25 billion. Analysts' mean estimates were for per-share earnings of $2.12 on revenue of $4.69 billion, according to a poll by Thomson Reuters.

Norfolk Southern earned 76 cents per share in the first quarter, 2 cents off Wall Street estimates, according to a poll of analysts by Thomson Financial.

China cut a tax on share trading to support the stock market after the benchmark index plunged 35 percent this year. Stamp duty will be lowered to 0.1 percent from 0.3 percent effective tomorrow, the government said in a statement on its official Web site after the close of trading today.

U.S. crude inventories rose by 2.4 million barrels to 316.1 million barrels in the week ending April 18, U.S. Energy Information Administration reported on Wednesday. Analysts surveyed by energy information provider Platts expected an increase of 2 million barrels. After the data, crude-oil futures for June delivery fell 47 cents to $117.60 a barrel on the New York Mercantile Exchange. Gasoline supplies fell by 3.2 million barrels in the latest week, while distillate stocks fell by 1.4 million barrels, EIA reported. U.S. refineries operated at 85.6% of their operable capacity in the week ending April 18, up more than 4% from previous week's 81.4%, the Energy Information Administration reported.

Gold for June delivery dropped $16.20 to end at $909 an ounce on the New York Mercantile Exchange.

AK Steel Holding Corp. increased spot market prices for its carbon steel products by $50 a ton for all new orders. The move follows a $150-a-ton increase earlier in the month.

Microsoft Corp is prepared to walk away from its $43.6 billion bid for Yahoo Inc if the two sides can't agree on a price, Chief Executive Steve Ballmer said on Wednesday.

Amazon posted a rise in 1Q earnings to $143 million, or 34 cents a share, up 29% from $111 million, or 26 cents a share a year ago. Revenue rose 37 percent to $4.14 billion from $3.02 billion. Profit margin concerns may weigh on the stock.

Apple reported fiscal 2Q earnings of $1.05 billion, or $1.16 per share, up 36% from $770 million, or 87 cents a share a year ago. Revenue jumped 43 percent in the period to $7.51 billion, beating expectations of $6.96 billion. Shares traded lower on a lower-than-expected profit forecast, though many will note Apple has traditionally been conservative with these.

Credit Suisse took additional writedowns of $5.26 billion yesterday related to credit.

Motorola reported a 1Q loss of $194 million, or 9 cents a share, wider than the loss a year ago of $181 million, or 8 cents a share. Net sales fell to $7.45 billion from $9.43 billion. Reuters reports that the company has seen weakness in its mobile devices business which sold 27.4 million phones in the quarter compared with 45.4 million in the year ago quarter.

Starbucks warned that its estimates for fiscal 2Q earnings, scheduled for April 30, were lower than expected. According to The Wall Street Journal, the company expects to report earnings of 15 cents a share, compared with 19 cents for the same period a year ago. Slow sales in the US, particularly in places hit hard by the subprime crisis like California and Florida, have hurt the company.

New Records

4/22/08 New Records

The U.S. housing market weakened slightly in March, as resales of U.S. homes fell, inventories climbed and prices continued to decline, the National Association of Realtors reported Tuesday. Resales of U.S. homes and condos dropped 2% to a seasonally adjusted annualized rate of 4.93 million from 5.03 million in February, matching economists' expectations. Resales have sunk 19.3% in the past year. Inventories of homes for sale rose 1% to 4.06 million, representing a 9.9-month supply at the March sales pace. The median sales price fell 7.7% in the past year to $207,000.

U.S. home prices rose 0.6% in February from the prior month, the Office of Federal Housing Enterprise Oversight reported Tuesday. For the 12 months ending in February, prices fell 2.4%. For February, prices rose a seasonally adjusted 2.2% in New England, and 0.3% in the Pacific region. In the Mountain region, prices fell 0.6%. The OFHEO index is based on repeat sales of homes mortgaged through Fannie Mae and Freddie Mac.

The central Bank of Canada cut its target for the overnight rate by 50 basis points to 3%, with the bank projecting a "deeper and more protracted slowdown in the U.S. economy."

The Federal Reserve has auctioned another $50 billion in short-term loans to squeezed banks. It is part of an ongoing effort to relieve stressed credit markets. Counting the latest results, the central bank now has provided a total of $360 billion in the short-term loans to commercial banks through 10 auctions conducted since December. The latest auction was held on Monday, with the results announced on Tuesday.

European Central Bank council members Christian Noyer and Yves Mersch signaled the bank may have to raise interest rates to contain inflation. The ECB will ``move rates'' if needed to push inflation below 2 percent in 2009, Noyer, who heads France's central bank, told RTL radio today. Luxembourg central banker Mersch said the question of whether the ECB should raise rates is a valid one, the Financial Times Deutschland reported, citing an interview.

Costco is now posting signs limiting how much rice you can buy based on your previous purchases. They are trying to combat hoarding. In addition, Costco is placing purchasing limits on flour and cooking oil.

Rice futures had their biggest weekly gain in at least seven years last week on concerns export curbs by China and Vietnam will spread as importing nations struggle to feed their people. The Philippines, the biggest rice importer, received offers for only two-thirds of the grain it sought to buy on April 17.

Rob Hanna: "It appears buying interest is drying up. In the past the market has not fared well under these conditions."

McDonald's had net income of $946.1 million, or 81 cents per share, in the first quarter, compared with its year-earlier net income of $762.4 million, or 62 cents per share.

The Oil Drum: "In March world production of total liquids decreased by 100,000 barrels per day from February according to the latest figures of the International Energy Agency (IEA). Resulting in total world liquids production of 87.34 million b/d, which is the all time maximum liquids production. Average global production in 2007 was 85.41 million b/d according to the IEA. In the first three months of 2008 an average of 87.34 million b/d was produced. The EIA in their International Petroleum Monthly puts the average global 2007 production at 84.60 million b/d and January 2008 production at 85.80 million b/d."

For the quarter ended March 31, 2008, AT&T’s revenues totaled $30.7 billion, up 6.1 percent versus reported results in the year-earlier quarter. The company reported first-quarter 2008 net income totaled $3.5 billion, up 21.5 percent from $2.8 billion in the year-earlier first quarter, and reported earnings per diluted share totaled $0.57, up 26.7 percent from $0.45 in the first quarter of 2007.

UPS reported increased revenue in all segments with double-digit gains in both international package and supply chain and freight operations. A sharp decline in U.S. economic activity, however, led to a 9.4% drop in diluted earnings per share to $0.87 compared to a prior-year adjusted $0.96. The slowing U.S. economy not only reduced average daily volume in the U.S. by 0.3% for the quarter but also contributed to a shift away from premium products. Volume declined 3.8% for Next Day Air® and 2.9% for Deferred, while increasing 0.3% for Ground. Revenue per piece remained stable for all service levels, with consolidated revenue per piece increasing 2.7%. The volume decrease, shift away from premium products and increased fuel costs during the quarter contributed to the declines in operating profit and margin. The company expects earnings for the quarter in a range of $0.97 to $1.04 per diluted share compared to $1.04 for the second quarter of 2007. Commenting on annual earnings guidance, Kuehn said, “Most forecasters are projecting that current anemic conditions will prevail for the remainder of the year. Therefore, we are reducing our 2008 earnings expectations to a range of $3.90 to $4.20 per diluted share.

BJ Services Company reported net income of $127.3 million for the fiscal 2008 second quarter ended March 31, 2008, or $0.43 per diluted share, a 26% decrease from the $0.58 per diluted share reported in the previous quarter and a 33% decrease compared to the $0.64 per diluted share reported in the fiscal 2007 second quarter. Revenue in the second quarter of fiscal 2008 was $1,283.2 million, slightly below the $1,285.1 million reported in the previous quarter and up 8% compared to $1,186.6 million reported in the prior year's March quarter. Operating income for the quarter was $186.5 million, a 26% decrease compared to $252.6 million for the previous quarter and a 36% decrease compared to $290.2 million reported in the second quarter of fiscal 2007. Commenting on the results, Chairman and CEO Bill Stewart said, "During the quarter, the Company experienced significant pricing pressure in North America. Most of the price loss occurred in January as we completed a number of pricing agreements with our customers. I am, however, encouraged that pricing was relatively stable in February and March. The fundamental outlook is quite positive in the U.S. with natural gas prices at levels that should lay the foundation for higher drilling levels. This is supported by a number of our customers announcing budget increases for the second half of the calendar year. "Looking at our third fiscal quarter, we expect drilling activity in the U.S. to be up modestly compared to the second fiscal quarter. Pricing is expected to continue to be under pressure; however, we are forecasting the rate of price declines experienced in previous quarters to moderate in the third fiscal quarter. Canada is in full Spring break-up and drilling activity for the quarter is not expected to be significantly different than the same quarter last year. In the International Pressure Pumping segment, we are anticipating modest revenue improvement with slightly improved margins in the third fiscal quarter. The largest sequential improvement is expected to be in the Asia Pacific region, as business is expected to improve after experiencing weather disruptions and project delays in the second fiscal quarter.
"We anticipate sequential revenue and margin improvement for our Oilfield Services group. We are projecting our Tubular Services business to recover from delays experienced during the second fiscal quarter. We are also expecting seasonal improvement from our Process & Pipeline Services business. Based on these assumptions, we are currently projecting diluted earnings for the third fiscal quarter to be in the range of $0.39 to $0.43 per share."

Baker Hughes Inc, the Houston oil-services provider, reported that first-quarter net income rose 5.4% on 8% higher revenue. Earnings reached $395 million, or $1.27 a share, from $374.7 million, or $1.17, in the year-earlier period. The latest share figure reflects a gain of 6 cents a share from the sale of BHI's surface-safety-systems product line. Revenue reached $2.67 billion from $2.47 billion. A survey of analysts by FactSet Research produced a consensus estimate of $1.21 a share for the quarter.

Nabors Industries Ltd. reported first-quarter net income of $230.5 million, or 81 cents a share, down from $262.2 million, or 92 cents a share, a year earlier. Net income from continuing operations before taxes came in at $287.1 million, down from $341.8 million a year ago. Revenue at the oil drilling company rose to $1.32 billion from $1.28 billion. Analysts polled by FactSet Research were looking for a profit, on average, of 77 cents a share, with revenue of $1.29 billion. The company said its international business fell from the fourth-quarter due primarily to downtime on rigs operating in Mexico.

Oil field services company Weatherford International said its first-quarter profit fell 6.2 percent because of costs related to exiting some countries and a government investigation. Net income dropped to $264.2 million, or 76 cents a share, from $281.6 million, or 81 cents, a year earlier, the Houston-based company said Monday. Revenue increased 19 percent to a quarterly record of $2.2 billion. Half of that was from North America, where sales rose 8.3 percent to $1.09 billion.

Royal Bank of Scotland said Tuesday it had suffered $11.7 billion in additional losses and was forced to raise $23.9 billion in new capital to cover exposure to toxic U.S. loans.

Light, sweet crude for May delivery rose as high as $118.05 a barrel in electronic trading on the New York Mercantile Exchange, eclipsing Monday's all-time high of $117.83.

Lockheed Martin Corp said on Tuesday quarterly profit rose 6 percent, helped by higher sales of its electronic, information and space systems. Lockheed also raised its full-year earnings outlook to the range of $7.15 to $7.35 a share from a range of $7.05 to $7.25 a share.

UnitedHealth reduced its 2008 outlook by 40 cents per share to a range of $3.55 to $3.60 per share. Analysts expect $3.86 per share.

DuPont still sees adjusted 2008 earnings between $3.40 and $3.55 a share and first-half earnings per share growth of about 10%. For the remainder of 2008, the company expects that slowing demand in U.S. markets, including construction and motor vehicle, will offset growth in agriculture and other markets outside the United States.

Tribune Co. has reached an agreement in principle to sell Newsday to News Corp for $580 million, The Wall Street Journal and Reuters reported, citing unnamed sources.

The yield on the benchmark two-year Treasury rose 4 basis points to 2.21 percent by 7:06 a.m. in New York, according to bond broker BGCantor Market Data.
The yield on the benchmark two-year Treasury rose 4 basis points to 2.21 percent by 7:06 a.m. in New York, according to bond broker BGCantor Market Data. The price of the 1.75 percent security due in March 2010 fell 2/32, or 63 cents per $1,000 face amount, to 99 4/32. Ten-year yields rose 2 basis points to 3.75 percent. The yield on the two-year note, most sensitive to the outlook for interest rates, also climbed to within 5 basis points of the highest since Jan. 30 as traders raised bets the Federal Reserve will keep its benchmark rate on hold, or limit a reduction to a quarter-percentage point on April 30.

Global trade growth is expected to slow to a six-year low of 4.5 per cent this year but China has overtaken the US as the world's second-biggest exporter, the World Trade Organisation (WTO) said yesterday. Germany continues in first place.

Mike Burk: "As of Friday most of the blue chip indices had been up for 4 consecutive days, an event we have not seen since late December when it marked a short term high...The recent strength in the market was probably caused by the dramatic increase in money supply.The market is a bit overbought right now and volume on last weeks advance left a little to be desired, but, aside from volume, the breadth indicators look pretty good. I expect the major indices to be lower on Friday April 25 than they were on Friday April 18."

Mike Shedlock: "Office vacancies rose sharply in the first quarter, a trend that is expected to continue as a result of layoffs and new construction adding to supply. According to the real estate services firm Grubb & Ellis, first-quarter office vacancies rose to an average 13.6% nationally, up from 13% in the previous three quarters."With demand turning negative at the same time that the construction pipeline will deliver the 94 million square feet still underway, vacancy is expected to peak at 18% by the end of 2009," Grubb & Ellis economist Robert Bach wrote in a research note today."

Mortgage lender and real estate investment trust Thornburg Mortgage said Friday that a unit has defaulted on $300 million of short-term notes due under a commercial paper program.

According to the Washington Post, the freight railway industry is enjoying its biggest building boom in nearly a century, a turnaround as abrupt as it is ambitious. It is largely fueled by growing global trade and rising fuel costs for 18-wheelers. In 2002, the major railroads laid off 4,700 workers; in 2006, they hired more than 5,000. Profit has doubled industrywide since 2003, and stock prices have soared. This year alone, the railroads will spend nearly $10 billion to add track, build switchyards and terminals, and open tunnels to handle the coming flood of traffic. Freight rail tonnage will rise nearly 90 percent by 2035, according to the Transportation Department.

UAL Corp , parent of United Airlines, posted a wider quarterly loss on Tuesday as the carrier grappled with soaring fuel costs. UAL said it lost $537 million, or $4.45 per share in the first quarter, compared with $152 million, or $1.32 per share, a year earlier.

Coal producer Peabody Energy Corp. on Tuesday raised its 2008 profit guidance based on recent and pricing of contracts beginning April 1.The company now expects income from continuing operations to be between $2.20 and $3 per share. Previously, the company forecast full-year earnings between $1 and $1.85 per share.

Yahoo's results due later on Tuesday will not affect the company's value to Microsoft , which has offered to buy it for $44.6 billion, Microsoft Chief Executive Steve Ballmer said. "We think we can accelerate our strategy by buying Yahoo and will pay what makes sense for our shareholders," Ballmer said. "I wish Yahoo all the success with its results, but it doesn't affect the value of Yahoo to Microsoft."

Al-Maliki is looking for relief from Iraq's $67 billion debt-- most of it owed to Saudi Arabia, Kuwait, the United Arab Emirates, and Qatar.

Union Pacific's automotive volume fell 13 percent and lumber is down 27 percent for the first 14 weeks of this year.

Seadrill Ltd, the Oslo-based oil services group, has taken a 9.9 percent in Pride Int'l, and options traders are buying calls on speculation this could possibly be the start of a takeover bid.

On an adjusted basis, Yahoo earned 11 cents per share.Revenue rose to $1.82 billion from $1.67 billion. Excluding traffic acquisition costs, revenue rose to $1.35 billion from $1.18 billion. Analysts polled by Thomson Financial had expected adjusted earnings of 9 cents per share on $1.32 billion in revenue, excluding traffic acquisition costs.

Excluding one-time items, VMware, the virtualization software developer would have earned $88 million, or 22 cents a share, to meet the estimates of analysts surveyed by FactSet Research, who forecast a profit of 22 cents a share on revenue of $422.7 million. The company said it expects its second-quarter sales to rise about 55% over the $297 million it reported in the same period a year ago.

Crude closed up $1.89, or 1.6%, at $119.37, also a record closing price. Gold for June delivery rose $7.60 to end at $925.20 an ounce on the New York Mercantile Exchange.

The euro rose to a new record high against the dollar of $1.6007 Tuesday.

GlaxoSmithKline Plc agreed to buy biotechnology company Sirtris Pharmaceuticals Inc for $720 million in cash, in hopes its medicines that modulate an aging-related family of enzymes will be effective against a wide range of diseases. Glaxo said it will commence a cash tender offer for all outstanding shares of Sirtris, at $22.50 per share. That reflects a 84 percent premium to their closing price of $12.23 on Tuesday.

Foundation Coal said coal exports will increase 27% to 35% in 2008 to a range of 75 to 80 million tons. Foundation Coal touched a fresh 52-week high on of $66.42 on Tuesday.

Bond insurer Ambac Financial Group Inc. swung to a first-quarter loss of $1.66 billion, or $11.69 a share, from a profit of $213.3 million, or $2.02 a share, a year earlier. The group attributed the loss to a pretax $1.73 billion mark-to-market loss on its exposure to credit derivatives and a $1.04 billion loss provision on its financial guarantee direct exposure to mortgage-related securities. Ambac said its operating loss per share was $6.93.

Japan's merchandise trade surplus in March contracted 30.2% from the same month a year earlier, according to provisional data released by the Finance Ministry Wednesday. The trade surplus totaled 1.12 trillion yen ($10.87 billion) during the month, down from 1.60 trillion yen in the year-earlier period, the data showed. The decline in the size of the trade surplus exceeded consensus estimates among economists for a 15% contraction, according to poll by Dow Jones Newswire.

Boeing reported quarterly profit of $1.2 billion, or $1.62 per share, compared with $877 million, or $1.13 per share, in the year-ago quarter.

Risk Is In The Wind

4/20/08 Risk Is In The Wind

Win Without War, a coalition of 42 groups, is circulating a letter declaring that "it is past time to bring the Iraq war to an end" and that "the best course of action in the upcoming defense supplemental appropriations bill is to provide funding only for the safe and timely redeployment of U.S. troops out of Iraq." Antiwar Democrats are girding for a two-front battle. First, they want to beat back efforts to add popular domestic spending to any war funding, which would bolster support for the underlying bill. Then they want to stop any funding for the continuation of combat in Iraq. "We have two examples of what can happen when the caucus is unified enough to say no," said Rep. Barbara Lee (D-Calif.), a founder of the Out of Iraq Caucus.

R.W. McNeal, a market analyst writing in 1929: "Some pretty intelligent people are now buying stocks… Unless we are to have a panic - which no one seriously believes - stocks have hit bottom."


Venture capital investment fell nationally last quarter for the first time in nearly three years, but the Bay Area bucked the trend, according to numbers released today by Dow Jones. In the United States, venture investments fell 7 percent from the same period a year ago to $6.84 billion invested in 603 deals. Locally, however, investments rose 10 percent to $2.56 billion, which was invested in 213 deals, up four from a year ago.

The Organization of Petroleum Exporting Countries doesn't need to raise oil production and any increase will not affect prices, officials including the group's president, Chakib Khelil, said. ``Any increase in production now will not have an impact on prices because there is a balance between supply and demand,'' Khelil said during a visit to the Kuwait Chamber of Commerce and Industry, Kuwait's state news agency reported today. ``We in OPEC raised production last year and prices remained high. If we increase production we will not find people to buy the increment.''

President George W. Bush said that a free trade agreement with Colombia is ``dead'' unless House Speaker Nancy Pelosi revives it by allowing a vote on the measure.

Royal Bank of Scotland Group Plc will announce writedowns of between 5 billion pounds ($10 billion) and 7 billion pounds this week as it prepares a share sale, the Sunday Times reported, without saying where it got the information. The U.K.'s second-biggest lender, whose board meets today, also plans to announce a stock offering of between 10 billion and 12 billion pounds, and is looking to raise as much as 5 billion pounds by the end of this financial year through asset disposals, the newspaper said.

Former Bank of England policy maker Willem Buiter said the central bank will need to offer loan swaps to financial institutions of at least 100 billion pounds ($200 billion) to kick-start the U.K. mortgage market.

Philip K. Dick: "Reality is that which, when you stop believing in it, doesn't go away."

Pennsylvania, with 15.6 percent of its citizens over 65, is second only to retirement retreat Florida in the percentage of residents who are elderly. Among registered Democratic voters, 26 percent are under 34 and 38 percent are older than 55.

Oil prices spiked to a record $117.40 a barrel after a Japanese oil tanker was hit by a rocket near Yemen and militants in Nigeria claimed two attacks on pipelines. The 150,000-ton tanker Takayama was attacked about 270 miles off the east coast Yemen coast in the Gulf of Aden while it was heading for Saudi Arabia, its Japanese operator, Nippon Yusen K.K., said in a statement.

Bank of America Corp. said Monday that its first-quarter profit fell 77% as credit-loss provisions jumped $4.78 billion, driven by weakness in home-equity loans as well as credit extended to small businesses and homebuilders.

According to the Financial Times, a group of mutual funds and hedge funds led by Corsair Capital, a little-known private equity firm, prepared to invest $7bn (£3.5bn) to $8bn in National City, the 10th-biggest US bank. The deal is expected to be announced on Monday, according to people familiar with the matter.

“There’s been a lot of discussion over the last several days about how this campaign gets so negative, how we get distracted, how we exploit divisions,” Mr. Obama told voters in Reading on Sunday afternoon. “Look, our campaign’s not perfect. There’ve been times where, you know, if you get elbowed enough, eventually you start elbowing back.”

John Hussman: "We are intentionally avoiding such risk sectors on the expectation of further financial sector weakness, and because materials and cyclical stocks currently rely on sustained commodity price strength and “decoupling” between the U.S. and foreign countries. I continue to view commodities as cyclical, and decoupling as implausible – indeed, my impression is that the commodity surge will likely be turned on its head within a few months, about the point where 10-year Treasury yields move above the year-over-year CPI inflation rate...Indeed, to the extent that we can take any information signal from developing market action, it is that we should revise our expectations to allow for a much more significant slowdown in consumer spending than we have anticipated thus far. If anything, the evidence suggests revising our expectations about consumer spending and economic prospects downward....Given that the market is once again overbought in an unfavorable Market Climate, my impression is that the risk of a free-fall is significant. Aside from short-term speculative pressures (largely driven by relief about Bear Stearns), nothing in recent data suggests a material abatement of recession risk, mortgage risk, profit margin risk, or dollar risk."

Another Bailiut Plan

4/19/08 Another Bailout Plan

According to the Financial Times, The Bank of England will announce Monday a scheme which will see it lend money to banks in return for collateral in a bid to help the troubled U.K. mortgage market, U.K. Chancellor of the Exchequer Alistair Darling said Sunday."The Bank of England will be making an announcement tomorrow in which what it will do is effectively lend banks money to unfreeze the [mortgage market] situation we've got at the moment," Mr. Darling said in a television interview on the British Broadcasting Corporation.

Alliance Data Systems Corp said on Friday it terminated a $6.76 billion sale to Blackstone Group LP affiliates and has sued to win a $170 million business interruption payment. Alliance said the Blackstone affiliates tried to cancel the contract on Friday. That attempt at cancellation was void because Blackstone was already in breach of the contract, Alliance said.

Wage and fiscal policy in the euro zone could buoy inflation and the European Central Bank may need to act, ECB Governing Council member Axel Weber said in a newspaper interview released on Saturday. "I am concerned that, with regard to the conduct of wage and fiscal policy, the recent temporary heightened inflation rate could be consolidated for longer than is necessary above the tolerance level of the Eurosystem," Weber said. "Should indications of this increase, we must react with interest rate policy," he added.

According to the WSJ, Libor's unexpected rise threatens to add billions to the bills of borrowers around the world. The London interbank offered rate jumped 0.09 percentage point Friday, its highest in nearly six weeks.

Incomes are down, prices are up, and Americans are feeling increasingly grim. That’s not unusual during a recession. What is remarkable is that these patterns have persisted for years — starting long before the current economic woes set in. An article in today’s Wall Street Journal examines the growing angst of the American middle class at a time when incomes of the top 1% of earners have expanded considerably.

Doug Noland: "The “recycling” of our “Bubble dollars” (in the process inflating local Credit systems, asset markets, commodities and economies across the globe) directly back into our securities markets rests at the epicenter of Global Monetary Dysfunction... Destabilizing price movements and myriad inflationary effects are poised to worsen. The specter of yet another year of near-$800bn Current Account Deficits coupled with huge speculative flows out of dollars is just too much for an acutely overheated and unstable global currency and economic “system” to cope with...Together, the Fed and Washington have effectively nationalized a large portion of both mortgage and market liquidity risk. It is, as well, worth noting that JPMorgan Chase expanded assets by $80.7bn during the first quarter (20.7% annualized) to $1.642 TN, with six-month growth of $163.3bn (22.1% annualized). Goldman Sachs expanded its balance sheets by $69.2bn during Q1 (24.7% annualized) to $1.189 TN, with half-year growth of $143.2bn (27.4%). Even Wells Fargo grew assets at an almost 14% pace this past quarter. And we know that Bank Credit overall has expanded at a 12.6% rate over the past 38 weeks. Meanwhile, GSE MBS issuance has been ramped up to a record pace. And let’s not forget the Credit intermediation function now being carried out by the money fund complex – with assets having increased an unprecedented $371bn y-t-d (41.3% annualized) and $900bn over the past 38 weeks (47.7% annualized). It is also worth noting the $184bn y-t-d increase (29% annualized) in foreign “custody” holdings held at the Fed. Sure, the Credit system remains under significant stress, with additional mortgage and corporate Credit deterioration in the offing. But, at least for now, policymakers have successfully stemmed systemic deleveraging. The Credit system is simply not in deflationary collapse mode. I could not be more pessimistic with regard to our economy’s prognosis. And certainly much more severe Credit problems lay ahead. I could argue further that recent Credit system developments are indeed consistent with the unfolding “worst-case scenario”. Yet I tend this evening to see benefits from analyzing the current backdrop in terms of the conclusion of the first Stage of the Crisis. The key aspect of this “first Stage” was a breakdown in Wall Street’s highly leveraged risk intermediation and securities speculation markets. The speed and force of the unwind was extraordinary and in notable contrast to traditional banking crises that track real economy developments. “Resolution” came only through the Federal Reserve and federal government assuming unprecedented risk – and at a cost of a policymaking mix of interest-rate cuts, marketplace interventions, and government guarantees...Fed funds are today ridiculously priced in comparison both to the inflationary backdrop and to global rates... When the Fed and Washington radically altered the rules of U.S. finance last month, they placed in jeopardy huge positions that had been put in place to hedge against and profit from systemic crisis. With the end of “Stage one” arises a major short squeeze in the Credit, equities, and derivatives markets. And when it comes to contemplating the scope and ramifications of today’s “hedging” activities, we’re clearly in Uncharted Waters. It is not beyond reason that a disorderly unwind of “bearish” Credit market positions could incite a mini bout of liquidity, speculation, and Credit excess that exacerbates Global Monetary Instability - while Setting the Backdrop for Stage Two of the Crisis."

Former Labor Secretary Robert Reich on Friday became the fifth former Clinton Cabinet member to endorse Barack Obama, saying that loyalty to his old friends the Clintons had been overwhelmed by unhappiness with the tone of Hillary Rodham Clinton's presidential campaign. "I did not plan to endorse. I wanted to stay out of the whole endorsement racket. But my conscience wouldn't let me stay silent after this latest round of mudslinging," Reich, a UC Berkeley professor of public policy, said in a telephone interview from his campus office. "When millions of Americans are losing their homes and jobs, when the economy is facing its worst crisis in 60 years, when the Iraq war is still causing chaos in the Middle East, to focus on whether Obama should have used the word 'bitter' when he talked about the plight of many in Pennsylvania, and to resurrect the old Republican themes of guns and religion, and to call Obama 'elitist' . . . just put me over the edge."

Soon, S.F. is expected to become America's first major city to pay an average of $4 for a gallon of regular gas.

Iran's president declared that crude oil prices, now above $115 a barrel, are too low, state media reported Saturday. President Mahmoud Ahmadinejad told an oil and gas exhibition in Tehran on Friday that he thought the commodity still had to "discover its real value," according to the Web site of Iran's state-run television.

The chief executive of Eni SpA said Sunday that the share of profits taken by governments of oil-rich countries is cutting international oil companies' profits, in some cases below their capital costs. "The average government take is now moving to overcome the critical barrier of 90 percent, which means that oil companies' profitability is decreasing," Paolo Scaroni, the CEO of Italy's largest oil and gas company by revenue, said in a speech at the International Energy Forum.