8/8/08 Global
Toyota Motor Corp posted a 28 percent drop in quarterly net profit, dented by a strong yen and slumping U.S. sales, and kept its forecasts unchanged for what is set to be its most challenging year in recent memory.
Israel is building up its strike capabilities amid growing anxiety over Iran's nuclear ambitions and appears confident that a military attack would cripple Tehran's atomic program, even if it can't destroy it.
Such talk could be more threat than reality. However, Iran's refusal to accept Western conditions is worrying Israel as is the perception that Washington now prefers diplomacy over confrontation with Tehran.
The Jewish state has purchased 90 F-16I fighter planes that can carry enough fuel to reach Iran, and will receive 11 more by the end of next year. It has bought two new Dolphin submarines from Germany reportedly capable of firing nuclear-armed warheads — in addition to the three it already has.
Ayn Rand: "A government is the most dangerous threat to man's rights: it holds a legal monopoly on the use of physical force against legally disarmed victims. "
China announced changes to its foreign-exchange rules to address surging growth in its hard currency reserves, saying domestic companies can now keep their foreign-currency income overseas and pledging tougher penalties for illicit capital inflows. The new rules were announced late Wednesday and take effect immediately.
In early trading, oil prices rebounded on Thursday, regaining the $120 level on supply concerns, while gold firmed and base metals rose.
BP's announced Wednesday that it will invest $90 million in U.S. biofuels company Verenium Corp.
Turkey said a pipeline carrying crude to the country's Mediterranean coast from Azerbaijan may remain shut for two weeks following an explosion on Tuesday.
It may be as long as two weeks before the pipeline reopens, Ali Gungor, the governor of Erzincan province where the blast occurred, said in a phone interview today, citing information from a repair team that's studying the extent of the damage. The explosion prompted BP to cancel export obligations from the 1-million-barrel-a-day pipeline.
According to Bloomberg, a year after losses on U.S. subprime mortgages caused a seizure in credit markets worldwide, European companies are starting to default.
As many as 6 percent to 7 percent of corporate borrowers may fail to pay debts on time in the next year, a 10-fold increase from July, according to Dresdner Kleinwort, a unit of Germany's third-biggest bank. That would be the highest since July 2003, according to data compiled by Moody's Investors Service, straining an already faltering economy.
``Companies that would have refinanced a year ago find now that they can't,'' said Andy Stoneman, managing partner at MCR Corporate Restructuring in London, the administrator for General Trading Co., the store where Prince Charles and Princess Diana had their wedding list.
Target Corp. said Thursday that its July sales at stores open at least one year fell 1.2%.
First-time claims for state unemployment benefits remained unusually high in the latest week as more workers qualified for regular benefits under an unrelated extended federal benefits program, the Labor Department reported Thursday. Claims for the week ending Aug. 2 rose to 455,000, a gain of 7,000 from the 448,000 claims reported a week prior. The four-week average of new claims rose by 26,750 to 419,500, the highest since July 2003. Continuing unemployment claims rose by 31,000 to 3.3 million.
The average conforming 30-year fixed mortgage rate rose to 6.74% from 6.70% a week ago, while the average 15-year fixed mortgage rate increased to 6.27% from 6.22% a week earlier.
Nordstrom, Inc. reported preliminary sales of $840 million for the four-week period ended August 2, 2008, a decrease of 6.7 percent compared to sales of $901 million for the four-week period ended August 4, 2007. Same-store sales decreased 6.1 percent.
Preliminary second quarter sales of $2.29 billion decreased 4.3 percent compared to sales of $2.39 billion during the same period in 2007. Second quarter same-store sales decreased 6.0 percent.
Preliminary year-to-date sales of $4.17 billion decreased 4.1 percent compared to sales of $4.34 billion for the same period in 2007. Year-to-date same-store sales decreased 6.2 percent.
J. C. Penney Company, Inc.'s comparable store sales decreased 6.5 percent for the four-week period ended Aug. 2, 2008, compared with the Company’s guidance for sales to decrease mid-single digits. In last year’s July period, comparable store sales increased 12.0 percent, largely driven by a calendar shift that moved sales for an important Back-To-School selling week from August into the July reporting period. Total Company sales in the 2008 July period decreased 4.9 percent.
WCI Communities Inc, the luxury home builder led by Carl Icahn that recently filed Chapter 11 bankruptcy, said on Wednesday the bankruptcy court approved its use of $50 million in cash on hand. WCI said its access to funds will provide sufficient liquidity to run the business until it can finalize a deal for a new debtor-in-possession credit facility, which the company expects the court to approve on Aug. 27.
Japan painted a darker picture of its economic health Thursday, warning of deteriorating exports, output and corporate profits -- signals that may point toward a contraction of the world's second largest economy. "The economy is recently weakening," the Cabinet Office said in its monthly economic report for August.
Although it did not include the word "recession," the government notably left out any reference to an economic "recovery" for the first time in more than six years.
Sunoco's net income in the second quarter fell to $82 million, or 70 cents a share, from $509 million, or $4.20 a share, from last year.
Excluding one-time items, the company said on Wednesday it earned 52 cents a share. Analysts, on average, had expected 34 cents a share, according to Reuters Estimates.
Still, the company warned its refining margins for gasoline continue to be weak in the third quarter, despite recent declines in crude oil prices.
The Philadelphia-based company said it would reduce output at its refineries given the weaker demand for products. It also said it was looking to focus on buying cheaper types of light, sweet crude.
Nouriel Roubini: "It is now clear that all G7 economies are headed towards a recession; the US is in a recession; the UK is headed towards one with the bust of their housing; Japan - as recognized today by its government is entering a recession; Italy's economy is comatose and borderline in recession; Canada had negative growth in Q1 and its economy is tied to the US; while Germany and France (as well as Ireland and Spain and Portugal especially but also the rest of the Eurozone are headed towards a recession.
So all of the G7 economies are now in a recession or headed in the short run towards a recessionary hard landing. Add to these G7 the recession in the rest of the Eurozone (starting with Spain Ireland and Portugal but by now all of the Eurozone as industrial production, sales and business confidence are plunging in all of the Eurozone). Add also the recession in Estonia, Latvia, the risk of hard landing in South East Europe (Bulgaria Romania Hungary and Turkey) and the recession in New Zealand
These generalized recession in the advanced economies will soon lead to a sharp growth slowdown in the BRICs (Brazil Russia India and China) that is already evident in the data and a significant growth slowdown in the rest of emerging market economies.
A sharply slower global growth starting with the G7 recession, falling commodity prices, an increase in global investors' risk aversion, falling equity markets in emerging markets (EM), the weakness of the US dollar and the rise of EM currencies both in nominal and real terms, a tightening of monetary policies in emerging markets to control inflation, the effect of the global liquidity and credit crunch, the risk of a sudden stop and reversal of capital inflows in those EMs with large current account deficits) (the 20 countries in Europe from the Baltics to Turkey as well as India, South Africa and other capital importing EMs) are the factors that will lead to a sharp growth slowdown in the EMs as well as downward pressures on their equity and other financial markets."
Ben Levisohn: "How much is mortgage-finance giant Freddie Mac (FRE) worth? Judging by the stock market, $4.2 billion, its market capitalization at the close of trading on Aug. 6. But the company's update on its second-quarter earnings and financial condition, released Aug. 6, seems to tell a grimmer story.
Look past the devastating $821 million loss it reported for the quarter—nearly three times what Wall Street analysts had forecast. Ignore the $1 billion writedown the government-sponsored enterprise took on subprime and other risky mortgages, only the latest in a painful series. Disregard the rising rate of foreclosures, which grew 20% in the June quarter from the preceding quarter. Drill down to its fair value—a measure of the total worth of the assets on its balance sheet, minus its total liabilities. What do you see?
It looks an awful lot like a gaping hole. Freddie's fair value as of June 30 was a negative $5.6 billion. Based on this particular measure of its financial condition, if it had to sell its assets today, Freddie Mac would be worth less than nothing."
Hedge funds tracked by Hennessee Group LLC fell 1.95% on average in July, partly because a popular trade of betting against financial-services stocks and investing in energy-related securities backfired. "Hedge funds underperformed in July due to sharp reversals in the equity markets during the second half of the month," said E. Lee Hennessee, Managing Principal of Hennessee Group.
An index of sales contracts on previously owned U.S. homes rose 5.3% in June from the prior month, the National Association of Realtors reported Thursday. The index, which is considered a leading indicator of existing home sales, was down 12.3% from the June 2007 level. Pending home sales in June rose in all regions, with a gain of 9.3% in the South, 4.6% in the West, 3.4% in the Northeast and 1.3% in the Midwest. The May pending home sales index was revised to a decline of 4.9% from the prior estimate of a 4.7% drop.
Ayn Rand: "Government "help" to business is just as disastrous as government persecution... the only way a government can be of service to national prosperity is by keeping its hands off."
Natural-gas inventories rose by 56 billion cubic feet for the week ended August 1, the Energy Department said Thursday. The figure matched expectations from analysts at Global Insight. Total stocks now stand at 2.517 trillion cubic feet, down 353 billion cubic feet from the year-ago level and 6 billion cubic feet below the five-year average, the government data said. September natural gas was up 23.8 cents at $9.011 per million British thermal units on Globex.
September crude closed at $120.02 per barrel Thursday on the New York Mercantile Exchange, up $1.44, or 1.2%, for the session. December gold closed at $877.90 an ounce in New York Thursday, down $5.10 for the session.
Influential Iraqi Shi'ite cleric Moqtada al-Sadr would dissolve his Mehdi Army militia if the United States starts withdrawing troops according to a set timetable, a spokesman said.
According to AMG Data Services, including ETF activity, Equity funds report net cash inflows totaling $4.721 billion in the week ended 8/6/08 with Domestic funds reporting net inflows of $4.847 billion and Non-domestic funds reporting net outflows of -$126 million;
Excluding ETF activity, Equity funds report net cash outflows totaling -$1.148 billion with Domestic funds reporting net outflows of -$656 million and Non-domestic funds reporting net outflows totaling -$493 million.
Friday, August 08, 2008
Thursday, August 07, 2008
China
8/7/08 China
Wal-Mart Stores Inc. said that its July sales at stores open at least a year rose 3%, missing the average estimate of a 3.4% gain of analysts surveyed by Thomson Reuters. Wal-Mart U.S. same-store sales rose 3% and Sam's Club's increased 3.5%, both missing estimates. The company expects its August sales to slow.
Costco Wholesale said July same-store sales rose 10%, with U.S. growth of 10% and international growth of 11%. Excluding gasoline price inflation, U.S. comparable sales would have climbed 6%, and excluding exchange rates, international comparable sales would have climbed 9%.
December gold closed at $883 an ounce in New York Wednesday, down $3.10 for the session, pressured by weaker oil prices as the U.S. dollar gained ground against other major currencies.
American International Group reported a $5.36 billion second-quarter net loss late Wednesday as the insurance giant was hit again by write-downs and impairments on mortgage-related exposures. The net loss was $2.06 per common share. A year ago, AIG reported net income of $4.28 billion, or $1.64 a share. The quarterly net loss included $5.57 billion of unrealized market valuation losses on AIG's super senior credit default swap portfolio. It also included $6.08 billion of net realized capital losses, the company disclosed.
The Bank of Korea lifted its base lending rate a quarter-point to 5.25% Thursday, noting surging inflation remains at the forefront of its concerns even though economic growth is decelerating.
China's central bank has loosened controls on lending to small- and medium-size companies hit hardest by credit limits and slowing exports, state media reports said Wednesday, the latest evidence of growing concern over an economic slowdown.
The People's Bank of China advised local commercial banks that their annual quota for loans to smaller companies was raised by 10 percent, while the quotas for national commercial banks were increased by 5 percent, China Daily and other state-run newspapers reported.
Smaller companies have long suffered from a lack of access to bank loans, and recent efforts to fight inflation by imposing stringent controls on lending have hit them hardest.
China's chief economic planning agency, the National Development and Reform Commission, estimates that 67,000 such companies went bankrupt in the first half of the year due to credit controls and the deteriorating business environment, the state-run Shanghai Securities News reported.
Higher costs for energy and other materials have left many low-cost exporters, especially makers of toys, shoes and other light industrial goods, struggling to survive at a time when demand is weakening. At the same time, the surging value of the Chinese currency, the yuan, against the U.S. dollar has sapped their competitiveness in overseas markets.
Sprint Nextel booked $1.1 billion in cash flow from operating activities and held $3.5 billion in cash at the end of the quarter. Looking ahead, Sprint Nextel expects to report higher post-paid subscriber losses in the third quarter, "due to a seasonal uptick in churn," the company said.
Barry Ritholtz: "Tuesday was the first 90% day we have seen June 26th. On the NYSE, there were 2526 advances and 862 declines. That means up volume was 91.4%. Paul Desmond of Lowry's notes that bottoms are usually accompanied by a series of 90% up and down days. The absence of 90% Days is very unusual, especially given the Uptick Rule has not been in place. Since this was the first 90% day in 2 months, that makes it noteworthy. Back on July 15, the Dow made a closing low of 10962.54 -- the lowest Dow close since July 2006. Yesterday, it closed at 11,615.77. So we have yet to run even 1,000 points. Hence, despite the turmoil, this is still early in the rally's lifespan.
On the other side of the ledger, we have Lowry's Selling Pressure Index at those highs. Normally, it declines well ahead of a market bottom. The new high in this Index does not equate with the thesis that we're near a market bottom.
Further, Paul Desmond tells me that since we did not have any 90% Down Days close to the mid-July low, we have not seen the required selling exhaustion for a major bottom.
Further, its been 3 weeks since the lows, and we did not have a 90% Upside Day quickly after the rally began. Paul's prior work on market bottoms suggests that almost always accompanies major market bottoms. He views the recent rallies as primarily short-covering by hedge funds rather than accumulation from investors. I agree.
Bottom line: A classic Bear Market rally, one that could run for a few more weeks. My best guess is to 12,250 - 12,500."
Brett Steenbarger: "The market rose sharply on Tuesday, but we only had 1027 stocks making fresh 20-day highs against 868 new 20-day lows across the NYSE, NASDAQ, and ASE. That is fewer new highs than we saw during the prior market bounces in July. I will be watching closely to see if the rally is gaining or losing traction, particularly among the small cap stocks, which have shown less relative strength of late."
Heather Bellini of UBS AG, ranked the best software analyst by Institutional Investor magazine in 2007, expects Microsoft to complete the repurchase -- at least five times larger than its average per quarter in the last fiscal year -- over the next three months.
``They won't announce it until it's done,'' Bellini said.
A buyback of between $15 billion and $20 billion would lift earnings per share by as much as 10 cents annually, Bellini said. She expects shares of the Redmond, Washington-based company to climb 53 percent to $40 in the next year.
Transocean Inc., the world's largest offshore oil driller, said profit rose for the eighth quarter in a row as record crude prices spurred demand for deepwater rigs, pushing rents to an all-time high. Net income doubled to $1.11 billion, or $3.45 a share, from $549 million, or $2.63, a year earlier, Houston-based Transocean said today in a public filing. The company was expected to earn $3.21 a share, the average of 34 analyst estimates compiled by Bloomberg.
Oil refiner Sunoco Inc. reported late Wednesday second-quarter net income fell to $82 million, or 70 cents a share, from $509 million, or $4.20, a year ago. Excluding one-time items, income for the quarter was $61 million, or 52 cents a share. There were no special items in the year-ago quarter. Revenue for the three months ended June 30 rose to $16.08 billion from $10.76 billion. Analysts surveyed by FactSet Research predicted the Philadelphia-based company would post earnings of 72 cents a share on $12.47 billion in revenue.
Xstrata Plc, the owner of mines on four continents, made a hostile 5 billion-pound ($9.8 billion) bid for Lonmin Plc to double revenue from Africa and become the world's third-largest platinum producer.
Xstrata, based in Zug, Switzerland, offered 3,300 pence a share for Lonmin, 42 percent more than the company's London closing price yesterday. Lonmin called the all-cash bid ``entirely unwelcome'' as its shares rose as much as 51 percent.
Gold and platinum advanced in London on speculation the $9.8 billion takeover offer of Lonmin Plc will spur consolidation of South African mines and limit supplies. Palladium rose the most in three months.
Xstrata Plc, the world's fourth-largest copper producer, bid for Lonmin to add mines in South Africa and diversify its metals output to include more platinum. South Africa is the world's second-biggest gold producer after China and largest miner of platinum used in jewelry and car parts.
Government defaults on both local-and foreign-currency debt have increased ``dramatically'' since the mid-1990s, according to a Moody's Investors Service report.
Forty-one percent of sovereign defaults since 1997 included halting payments on debt obligations denominated in local and foreign currencies, up from 5 percent from 1960 to 1996, Moody's analysts Elena Duggar and Guido Cipriani wrote.
Rob Hanna: "The CBOE hit it lowest level since December 20th on Tuesday...While the SPX was up over 2% Tuesday, I used a 1% spike to ensure a decent amount of instances. More often than not the market tended to pull back over the next couple of weeks. While the downside edge isn’t huge on a percentage basis, the risk is quite a bit higher than the reward. Overall not encouraging for the bullish case over the next 2 weeks."
The Oil Drum: "If the peak oil folks are correct -- and I'm not saying they are, but their predictions seem to be coming to pass, so they deserve a decent hearing in the world media -- it constitutes a story of immense importance.
The world runs on oil. The prosperity of the middle classes of the industrialized world was built on it. So was the green revolution that allowed world population to increase from two billion to six and a half billion. So was globalization, which allows the flow of goods from everywhere to everywhere on a magic carpet of cheap oil. So was air travel and mass tourism. The list goes on and on."
According to Bloomberg, China's soybean production, the world's fourth-biggest, may surge 36.7 percent from year ago after farmers boosted planting and favorable weather improved yields, a state-owned market forecaster said.
Output may rise to 17.5 million metric tons, the China National Grain and Oils Information Center said in an e-mailed monthly forecast report. Corn production may surge 2.7 percent to a record 156 million tons, it said.
The country's output of wheat, the world's biggest producer, may gain 2.4 percent to 112.5 million tons, while rice production may rise 0.5 percent to 186.5 million tons, the center said.
Production of rapeseed may also increase 8.5 percent to 11.5 million tons, it said.
The housing correction "has some distance to go" and prices will fall another 5% "if we're lucky," says Lawrence White, professor of economics at NYU's Stern School of Business.
And if we're "unlucky," White sees another 10%-15% downside in the national average for house prices, which would wipe out over $1 trillion in household wealth.
Either way, the economist does not see housing bottoming until the second half of 2009 at the earliest, and foresees no quick snapback for real estate after the bust.
George Ure: "If it's wrong for terrorists to attack our national borders, security and identity and steal our liberties, why should tax exempt groups with soft versions of the same objectives get a pass? Arguing for America's integration into a non-elected regional super-government doesn't square with the Constitution I read.
But then, come to think of it, it doesn't say anything about 'administrative law' and shadow governance, either."
Time Magazine: " Writing in the International Herald Tribune last week, Trita Parsi, President of the National Iranian American Council, and analyst Anatol Lieven, argued that insisting Iran give up its right to any uranium enrichment is untenable, and instead suggested that the Western powers base their demands on the rights and limitations of the Nuclear Non-Proliferation Treaty — which would allow the international community "to place a verifiable cap on Iranian enrichment and other nuclear capabilities well short of weaponization."
Bill Bonner (Daily Reckoning): "And millions of Americans are facing "retirement poverty," continued the salmon-colored paper. Why? They haven't saved enough…and their houses - on which they had counted to finance their golden years - suddenly seem to be made of base metal.
Fannie Mae faces a "glut of unsold homes," reports the Chicago Tribune. (What the paper means is that it faces a glut of houses, not homes. A home is what people make of a house. But if it is unsold, it is a house, not a home. And many of the houses built in America in the last 10 years will probably never be homes. They are too expensive. Too far out. And too many.)
"Ghost towns across America," is how the Wall Street Journal describes them."
Republican presidential candidate John McCain opposes the $300 billion farm bill and subsidies for ethanol, positions that both supporters and opponents say might cost him votes he needs in the upper Midwest this November.
The International Monetary Fund on Wednesday said it expects Britain's gross domestic product to grow by only 1.4% in 2008 and 1.1% in 2009, down from its earlier projections of 1.8% for this year and 1.7% in 2009.
Whole Foods also sharply cut its outlook for 2009, saying it now expects sales growth of 6 percent to 10 percent for the year — rather than the previously stated 25 percent to 30 percent growth. And it said its comparable-store sales are expected to grow 1 percent to 5 percent, down from the previously anticipated growth of 7.5 percent to 9.5 percent.
Ladenburg Thalmann & Co. analyst Richard Bove in a research note Wednesday cut his profit estimates on Lehman Brothers and reduced the price target on the stock to $23 from $27. The analyst predicted the company, which has been pressured by the credit tumult, will sell assets, raise capital and cut the dividend payout. "My sense is that Lehman feels a need to take action now to stop, for once and, hopefully, for all, the constant stories and rumors swirling around the company," Bove wrote.
U.S. house prices will fall by as much as 20% nationally and the current mortgage finance crisis is about half-way through, Freddie Mac's CEO said.
The worldwide count of rotary drilling rigs in operation compiled by Baker Hughes stood at 3,436 last month, up 167 from the count for June and up 292 from July 2007, said the provider of drilling and production services for oil and natural gas. Offshore rigs in operation totaled 380, off from 388 in June but up from 376 in July 2007. U.S. offshore rigs held steady on a month-to-month basis at 67 but were down from 78 in operation in July 2007, Baker Hughes' data showed. Land-based drilling rigs in operation in the U.S. jumped to 1,865 in July, up from 1,699 a year earlier and compared to 1,834 in June 2008.
September crude fell further late Wednesday morning to trade at $117.46 a barrel on Globex, down $1.71. The American Petroleum Institute accidentally released its report on supplies 5 minutes early -- ahead of the Energy Department's data. The API had reported a fall of 2.6 million barrels in crude supplies, but the Energy Dept. said they rose by 1.7 million. When the API figures came out, "people bought -- and later had to sell" when the government data were released, said Phil Flynn, a vice president at Alaron Trading.
Motor gasoline supplies were down 1.8 million barrels, the API said. The government had reported that supplies fell by 4.4 million barrels. Distillate supplies were up 3.1 million barrels, the API said. They were up 2.8 million barrels, according to the Energy Department.
Wal-Mart Stores Inc. said that its July sales at stores open at least a year rose 3%, missing the average estimate of a 3.4% gain of analysts surveyed by Thomson Reuters. Wal-Mart U.S. same-store sales rose 3% and Sam's Club's increased 3.5%, both missing estimates. The company expects its August sales to slow.
Costco Wholesale said July same-store sales rose 10%, with U.S. growth of 10% and international growth of 11%. Excluding gasoline price inflation, U.S. comparable sales would have climbed 6%, and excluding exchange rates, international comparable sales would have climbed 9%.
December gold closed at $883 an ounce in New York Wednesday, down $3.10 for the session, pressured by weaker oil prices as the U.S. dollar gained ground against other major currencies.
American International Group reported a $5.36 billion second-quarter net loss late Wednesday as the insurance giant was hit again by write-downs and impairments on mortgage-related exposures. The net loss was $2.06 per common share. A year ago, AIG reported net income of $4.28 billion, or $1.64 a share. The quarterly net loss included $5.57 billion of unrealized market valuation losses on AIG's super senior credit default swap portfolio. It also included $6.08 billion of net realized capital losses, the company disclosed.
The Bank of Korea lifted its base lending rate a quarter-point to 5.25% Thursday, noting surging inflation remains at the forefront of its concerns even though economic growth is decelerating.
China's central bank has loosened controls on lending to small- and medium-size companies hit hardest by credit limits and slowing exports, state media reports said Wednesday, the latest evidence of growing concern over an economic slowdown.
The People's Bank of China advised local commercial banks that their annual quota for loans to smaller companies was raised by 10 percent, while the quotas for national commercial banks were increased by 5 percent, China Daily and other state-run newspapers reported.
Smaller companies have long suffered from a lack of access to bank loans, and recent efforts to fight inflation by imposing stringent controls on lending have hit them hardest.
China's chief economic planning agency, the National Development and Reform Commission, estimates that 67,000 such companies went bankrupt in the first half of the year due to credit controls and the deteriorating business environment, the state-run Shanghai Securities News reported.
Higher costs for energy and other materials have left many low-cost exporters, especially makers of toys, shoes and other light industrial goods, struggling to survive at a time when demand is weakening. At the same time, the surging value of the Chinese currency, the yuan, against the U.S. dollar has sapped their competitiveness in overseas markets.
Sprint Nextel booked $1.1 billion in cash flow from operating activities and held $3.5 billion in cash at the end of the quarter. Looking ahead, Sprint Nextel expects to report higher post-paid subscriber losses in the third quarter, "due to a seasonal uptick in churn," the company said.
Barry Ritholtz: "Tuesday was the first 90% day we have seen June 26th. On the NYSE, there were 2526 advances and 862 declines. That means up volume was 91.4%. Paul Desmond of Lowry's notes that bottoms are usually accompanied by a series of 90% up and down days. The absence of 90% Days is very unusual, especially given the Uptick Rule has not been in place. Since this was the first 90% day in 2 months, that makes it noteworthy. Back on July 15, the Dow made a closing low of 10962.54 -- the lowest Dow close since July 2006. Yesterday, it closed at 11,615.77. So we have yet to run even 1,000 points. Hence, despite the turmoil, this is still early in the rally's lifespan.
On the other side of the ledger, we have Lowry's Selling Pressure Index at those highs. Normally, it declines well ahead of a market bottom. The new high in this Index does not equate with the thesis that we're near a market bottom.
Further, Paul Desmond tells me that since we did not have any 90% Down Days close to the mid-July low, we have not seen the required selling exhaustion for a major bottom.
Further, its been 3 weeks since the lows, and we did not have a 90% Upside Day quickly after the rally began. Paul's prior work on market bottoms suggests that almost always accompanies major market bottoms. He views the recent rallies as primarily short-covering by hedge funds rather than accumulation from investors. I agree.
Bottom line: A classic Bear Market rally, one that could run for a few more weeks. My best guess is to 12,250 - 12,500."
Brett Steenbarger: "The market rose sharply on Tuesday, but we only had 1027 stocks making fresh 20-day highs against 868 new 20-day lows across the NYSE, NASDAQ, and ASE. That is fewer new highs than we saw during the prior market bounces in July. I will be watching closely to see if the rally is gaining or losing traction, particularly among the small cap stocks, which have shown less relative strength of late."
Heather Bellini of UBS AG, ranked the best software analyst by Institutional Investor magazine in 2007, expects Microsoft to complete the repurchase -- at least five times larger than its average per quarter in the last fiscal year -- over the next three months.
``They won't announce it until it's done,'' Bellini said.
A buyback of between $15 billion and $20 billion would lift earnings per share by as much as 10 cents annually, Bellini said. She expects shares of the Redmond, Washington-based company to climb 53 percent to $40 in the next year.
Transocean Inc., the world's largest offshore oil driller, said profit rose for the eighth quarter in a row as record crude prices spurred demand for deepwater rigs, pushing rents to an all-time high. Net income doubled to $1.11 billion, or $3.45 a share, from $549 million, or $2.63, a year earlier, Houston-based Transocean said today in a public filing. The company was expected to earn $3.21 a share, the average of 34 analyst estimates compiled by Bloomberg.
Oil refiner Sunoco Inc. reported late Wednesday second-quarter net income fell to $82 million, or 70 cents a share, from $509 million, or $4.20, a year ago. Excluding one-time items, income for the quarter was $61 million, or 52 cents a share. There were no special items in the year-ago quarter. Revenue for the three months ended June 30 rose to $16.08 billion from $10.76 billion. Analysts surveyed by FactSet Research predicted the Philadelphia-based company would post earnings of 72 cents a share on $12.47 billion in revenue.
Xstrata Plc, the owner of mines on four continents, made a hostile 5 billion-pound ($9.8 billion) bid for Lonmin Plc to double revenue from Africa and become the world's third-largest platinum producer.
Xstrata, based in Zug, Switzerland, offered 3,300 pence a share for Lonmin, 42 percent more than the company's London closing price yesterday. Lonmin called the all-cash bid ``entirely unwelcome'' as its shares rose as much as 51 percent.
Gold and platinum advanced in London on speculation the $9.8 billion takeover offer of Lonmin Plc will spur consolidation of South African mines and limit supplies. Palladium rose the most in three months.
Xstrata Plc, the world's fourth-largest copper producer, bid for Lonmin to add mines in South Africa and diversify its metals output to include more platinum. South Africa is the world's second-biggest gold producer after China and largest miner of platinum used in jewelry and car parts.
Government defaults on both local-and foreign-currency debt have increased ``dramatically'' since the mid-1990s, according to a Moody's Investors Service report.
Forty-one percent of sovereign defaults since 1997 included halting payments on debt obligations denominated in local and foreign currencies, up from 5 percent from 1960 to 1996, Moody's analysts Elena Duggar and Guido Cipriani wrote.
Rob Hanna: "The CBOE hit it lowest level since December 20th on Tuesday...While the SPX was up over 2% Tuesday, I used a 1% spike to ensure a decent amount of instances. More often than not the market tended to pull back over the next couple of weeks. While the downside edge isn’t huge on a percentage basis, the risk is quite a bit higher than the reward. Overall not encouraging for the bullish case over the next 2 weeks."
The Oil Drum: "If the peak oil folks are correct -- and I'm not saying they are, but their predictions seem to be coming to pass, so they deserve a decent hearing in the world media -- it constitutes a story of immense importance.
The world runs on oil. The prosperity of the middle classes of the industrialized world was built on it. So was the green revolution that allowed world population to increase from two billion to six and a half billion. So was globalization, which allows the flow of goods from everywhere to everywhere on a magic carpet of cheap oil. So was air travel and mass tourism. The list goes on and on."
According to Bloomberg, China's soybean production, the world's fourth-biggest, may surge 36.7 percent from year ago after farmers boosted planting and favorable weather improved yields, a state-owned market forecaster said.
Output may rise to 17.5 million metric tons, the China National Grain and Oils Information Center said in an e-mailed monthly forecast report. Corn production may surge 2.7 percent to a record 156 million tons, it said.
The country's output of wheat, the world's biggest producer, may gain 2.4 percent to 112.5 million tons, while rice production may rise 0.5 percent to 186.5 million tons, the center said.
Production of rapeseed may also increase 8.5 percent to 11.5 million tons, it said.
The housing correction "has some distance to go" and prices will fall another 5% "if we're lucky," says Lawrence White, professor of economics at NYU's Stern School of Business.
And if we're "unlucky," White sees another 10%-15% downside in the national average for house prices, which would wipe out over $1 trillion in household wealth.
Either way, the economist does not see housing bottoming until the second half of 2009 at the earliest, and foresees no quick snapback for real estate after the bust.
George Ure: "If it's wrong for terrorists to attack our national borders, security and identity and steal our liberties, why should tax exempt groups with soft versions of the same objectives get a pass? Arguing for America's integration into a non-elected regional super-government doesn't square with the Constitution I read.
But then, come to think of it, it doesn't say anything about 'administrative law' and shadow governance, either."
Time Magazine: " Writing in the International Herald Tribune last week, Trita Parsi, President of the National Iranian American Council, and analyst Anatol Lieven, argued that insisting Iran give up its right to any uranium enrichment is untenable, and instead suggested that the Western powers base their demands on the rights and limitations of the Nuclear Non-Proliferation Treaty — which would allow the international community "to place a verifiable cap on Iranian enrichment and other nuclear capabilities well short of weaponization."
Bill Bonner (Daily Reckoning): "And millions of Americans are facing "retirement poverty," continued the salmon-colored paper. Why? They haven't saved enough…and their houses - on which they had counted to finance their golden years - suddenly seem to be made of base metal.
Fannie Mae faces a "glut of unsold homes," reports the Chicago Tribune. (What the paper means is that it faces a glut of houses, not homes. A home is what people make of a house. But if it is unsold, it is a house, not a home. And many of the houses built in America in the last 10 years will probably never be homes. They are too expensive. Too far out. And too many.)
"Ghost towns across America," is how the Wall Street Journal describes them."
Republican presidential candidate John McCain opposes the $300 billion farm bill and subsidies for ethanol, positions that both supporters and opponents say might cost him votes he needs in the upper Midwest this November.
The International Monetary Fund on Wednesday said it expects Britain's gross domestic product to grow by only 1.4% in 2008 and 1.1% in 2009, down from its earlier projections of 1.8% for this year and 1.7% in 2009.
Whole Foods also sharply cut its outlook for 2009, saying it now expects sales growth of 6 percent to 10 percent for the year — rather than the previously stated 25 percent to 30 percent growth. And it said its comparable-store sales are expected to grow 1 percent to 5 percent, down from the previously anticipated growth of 7.5 percent to 9.5 percent.
Ladenburg Thalmann & Co. analyst Richard Bove in a research note Wednesday cut his profit estimates on Lehman Brothers and reduced the price target on the stock to $23 from $27. The analyst predicted the company, which has been pressured by the credit tumult, will sell assets, raise capital and cut the dividend payout. "My sense is that Lehman feels a need to take action now to stop, for once and, hopefully, for all, the constant stories and rumors swirling around the company," Bove wrote.
U.S. house prices will fall by as much as 20% nationally and the current mortgage finance crisis is about half-way through, Freddie Mac's CEO said.
The worldwide count of rotary drilling rigs in operation compiled by Baker Hughes stood at 3,436 last month, up 167 from the count for June and up 292 from July 2007, said the provider of drilling and production services for oil and natural gas. Offshore rigs in operation totaled 380, off from 388 in June but up from 376 in July 2007. U.S. offshore rigs held steady on a month-to-month basis at 67 but were down from 78 in operation in July 2007, Baker Hughes' data showed. Land-based drilling rigs in operation in the U.S. jumped to 1,865 in July, up from 1,699 a year earlier and compared to 1,834 in June 2008.
September crude fell further late Wednesday morning to trade at $117.46 a barrel on Globex, down $1.71. The American Petroleum Institute accidentally released its report on supplies 5 minutes early -- ahead of the Energy Department's data. The API had reported a fall of 2.6 million barrels in crude supplies, but the Energy Dept. said they rose by 1.7 million. When the API figures came out, "people bought -- and later had to sell" when the government data were released, said Phil Flynn, a vice president at Alaron Trading.
Motor gasoline supplies were down 1.8 million barrels, the API said. The government had reported that supplies fell by 4.4 million barrels. Distillate supplies were up 3.1 million barrels, the API said. They were up 2.8 million barrels, according to the Energy Department.
Wednesday, August 06, 2008
Another Volatile Market Day
8/6/08 Another Volatile Market Day
"Operating margin was up due to overhead productivity improvements and increased pricing, which combined, more than offset a significant increase in commodity and energy costs," P&G said. The Cincinnati household products giant expects first-quarter earnings 98 cents to $1 a share vs. the forecast of $1 a share. Adjusted 2009 earnings are seen at $3.80 to $3.87 a share, compared to the analyst expectation of $3.83 a share.
D.R. Horton said it closed on 6,167 homes in the latest quarter, compared with 9,643 in the year-ago quarter.
Retail sales volume across the 15-nation euro zone saw a 0.6% monthly fall in June and declined 3.1% from the same month a year ago, the statistical agency Eurostat reported Tuesday.
The purchasing managers index for the euro-zone's services sector fell to 48.3 in July from 49.1 in June, news reports said Tuesday.
LONDON (MarketWatch) -- More financial institutions could see government bailouts before the credit crisis runs its course, former U.S. Federal Reserve chairman Alan Greenspan wrote in Tuesday's Financial Times. "There may be numbers of banks and other financial institutions that, at the edge of defaulting, will end up being bailed out by governments," Greenspan said. The crisis will end only when U.S. home prices begin to stabilize, clarifying equity levels, which serve as collateral support for mortgage-backed securities. Greenspan warned against governments seeking to "reassert their grip" on economic affairs. "If that becomes widespread, globalization could reverse -- at awesome cost," he wrote.
International dairy prices are likely to decline next year from record peaks as demand falls and production increases, New Zealand's Ministry of Agriculture said Tuesday.
"During 2008 and 2009, weaker world economic growth is likely to mean lower demand for dairy products," the ministry said in its annual situation and outlook report.
According to the NY Times, for more than three years starting in 2005, there has been a reduction in the number of voters who register with the Republican Party and a rise among voters who affiliate with Democrats and, almost as often, with no party at all.
Bloomberg reported supertanker owners are slowing down their vessels in response to higher fuel costs and plunging rental rates, three shipbrokers said.
Benchmark hire rates for very large crude carriers, ships bigger than the Chrysler Building designed to ship 2 million barrels of crude, plunged 65 percent last week. Bunker, or fuel, costs have advanced 47 percent this year.
"Most owners say they have ordered the ships to slow down to economical speed," Halvor Ellefsen, a broker at SeaLeague AS in Oslo, said in an e-mail today.
The five-member Bloomberg Tanker Index has dropped 15 percent since the start of last month, on concern that lower rental rates and higher fuel costs will curb earnings for shipowners including Frontline Ltd. Slower sailing speeds reduce vessel availability and may bolster hire rates.
Japanese automaker Toyota has laid off 800 people at a plant in southwestern Japan, or about 10 percent of the plant's work force, in response to declining sales in North America, a company official said Tuesday.
Mike Allen: "A new book by the author Ron Suskind claims that the White House ordered the CIA to forge a back-dated, handwritten letter from the head of Iraqi intelligence to Saddam Hussein.
Suskind writes in “The Way of the World,” to be published Tuesday, that the alleged forgery – adamantly denied by the White House – was designed to portray a false link between Hussein’s regime and al Qaeda as a justification for the Iraq war.
The author also claims that the Bush administration had information from a top Iraqi intelligence official “that there were no weapons of mass destruction in Iraq – intelligence they received in plenty of time to stop an invasion.”
The letter’s existence has been reported before, and it had been written about as if it were genuine. It was passed in Baghdad to a reporter for The (London) Sunday Telegraph who wrote about it on the front page of Dec. 14, 2003, under the headline, “Terrorist behind September 11 strike ‘was trained by Saddam.’”
The Telegraph story by Con Coughlin (which, coincidentally, ran the day Hussein was captured in his “spider hole”) was touted in the U.S. media by supporters of the war, and he was interviewed on NBC's "Meet the Press."
The 10 percent of households with the highest incomes account for nearly a quarter of all spending, according to data compiled by research firm Moody's Economy.com from a 2006 federal survey.
"That does suggest those folks are important for the spending outlook, and the overall economic outlook," said Scott Hoyt, Moody's director of consumer economics.
Other government data show households in the top one-fifth of the U.S. population ranked by income earn about half of all total personal income before taxes — an imbalance that gives the wealthy immense economic clout, said Sara Johnson, an economist at the research firm Global Insight.
"Consumer spending makes up 70 percent of gross domestic product, and when one group accounts for a very substantial share of consumer spending, they also account for a large share of the economic activity that creates jobs," Johnson said.
EMarketer Inc. expects spending on such ads to grow to $25.9 billion this year, from $21.1 billion last year, and hit $30 billion in 2009.
Online advertising is "not going to grow as much as expected, but it's still going to be growing more than other media," Hallerman said.
Chinese factories reported a plunge in new orders last month. Exports are barely growing. The real estate market is weakening, with apartment prices sinking in southeastern China, the region hardest hit by economic troubles.
Weyerhaeuser said it expects challenging market conditions to continue into the third quarter, with operating losses "slightly less than second quarter." The company also said it closed the sale of its containerboard packaging assets unit on Tuesday.
Rep. Ron Paul: "Some mistakenly identify the falling home prices as the disease instead of merely a symptom - which they plan to fix with more easy credit and more liquidity to push more unqualified buyers back into the market for homes they still cannot afford. This is akin to the drug addict identifying withdrawal symptoms as his problem and searching for another fix as his solution. The cycle continues and the problems compound themselves. The addiction deepens.
Addicts are told the first step to recovery is to admit their problem. To cure this addiction to intervention we have to honestly admit the problem and once and for all, kick the habit. That will involve some pain, without a doubt. There is no easy, painless solution to the mess the disastrous economic interventions of the past have wrought. The question is - do we allow some lending institutions to collapse, or do we allow the dollar to collapse? To extend the metaphor, do we endure the temporary discomfort of withdrawal, or do we continue on until there is a fatal overdose? We can delay the agony, but only for a little while, and then we will all end up paying the price for the mistakes of a few.
With the final passage of the Housing Bailout Bill quietly on a Saturday in the Senate, and the President's signature, our government has unfortunately chosen the latter."
Rob Hanna: "The S&P fell on Monday for the third consecutive day. There are some short-term price indicators reaching oversold levels at this point. More often than not, when the market goes into a Fed meeting and is short-term oversold, the result is a bounce."
OPEC production reached its highest level so far this year in July on increased barrels from Saudi Arabia and Iraq and a recovery in Nigerian output, a Dow Jones Newswires survey released Friday said.
The 13 members of the Organization of Petroleum Exporting Countries pumped 32.675 million barrels a day on average last month, up 1.1%, or 366,000 barrels, from 32.309 million barrels a day in June.
The ISM nonmanufacturing index rose to 49.5% in July from 48.2% in June. The new-orders index fell to 47.9% from 48.6%, while employment rose to 47.1% from 43.8%. The production index slipped to 49.6% from 49.9%. Nine of 18 industries were growing in July.
Australia's central bank signaled it may cut borrowing costs for the first time in almost seven years as slowing economic growth cools inflation.
The Federal Reserve held interest rates steady on Tuesday, expressing concerns about both economic growth and inflation and indicating it is in no rush to push borrowing costs higher. Policymakers said "downside risks to growth remain" and "the inflation outlook remains highly uncertain."
Cisco's
earnings excluding items rose to 40 cents per share from 36 cents and exceeded the average analyst forecast by a penny, according to Reuters Estimates.
Quarterly revenue rose 9.9 percent to $10.4 billion, the first quarter in the company's history to surpass $10 billion, it said. Analysts on average expected revenue of $10.3 billion.
The Treasury Department announced Tuesday that it has hired Morgan Stanley to analyze Fannie Mae and Freddie Mac.
The Dow Jones Industrial Average gained 331 points, or 3%, to end at 11,615. This marked the blue chip index's biggest one-day point gain since April 1. The S&P 500 index gained 35 points, or 2.9%, to 1,284, while the Nasdaq Composite rose 64 points, or 2.8%, to 2,349.
September crude closed at $119.17 per barrel in New York Tuesday, down $2.24, or 1.2%, as concerns over oil demand continued.
December gold was up $1.80 at $887.90 an ounce in Globex electronic trading after the Federal Open Market Committee on Tuesday kept its benchmark federal funds rate unchanged at 2.0%. December gold had closed earlier on New York Mercantile Exchange at $886.10 with a loss of $21.80.
Weyerhaeuser Co.seeks to trim 1,500 jobs, or about 6% of its workforce, over the next 18 months, according to a conference call transcript from FactSet Research.
Hurricane forecasters Philip Klotzbach and William Gray at Colorado State University raised their forecasts for the Atlantic Hurricane season in a report issued Tuesday. The report pegs the total seasonal forecast at 17 named storms for the region, up from 15 predicted in June. The forecasters also raised the number of expected Altantic hurricanes to nine for the seasson, compared to eight in the June forecast.
Morgan Stanley told several thousand clients this week that they won't be allowed to withdraw money on their home- equity credit lines, said a person familiar with the situation.
The action mostly affected clients with properties that have lost value, according to the person, who declined to be identified because the information isn't public. The New York- based investment bank will review home equity lines of credit, or HELOCS, monthly from now on, the person said.
Foster Wheeler's consolidated backlog in terms of future revenue jumped, but new orders booked came in below levels seen in the year-earlier second quarter.
Freddie Mac said it swung to a second-quarter loss of $821 million, or $1.63 a share, after taking $2.5 billion in provisions for credit losses. Revenue fell to $1.69 billion from $2.34 billion. Analysts polled by FactSet Research had expected a loss of 38 cents a share. The mortgage giant is going to cut its third-quarter dividend to 5 cents a share or less from 25 cents a share and pay the full preferred dividend.
News Corp."isn't talking to anybody right now," said Chief Operating Officer Peter Chernin when asked if the commpany is talking to AOL, Yahoo or Microsoft about a possible deal or alliance.
"Operating margin was up due to overhead productivity improvements and increased pricing, which combined, more than offset a significant increase in commodity and energy costs," P&G said. The Cincinnati household products giant expects first-quarter earnings 98 cents to $1 a share vs. the forecast of $1 a share. Adjusted 2009 earnings are seen at $3.80 to $3.87 a share, compared to the analyst expectation of $3.83 a share.
D.R. Horton said it closed on 6,167 homes in the latest quarter, compared with 9,643 in the year-ago quarter.
Retail sales volume across the 15-nation euro zone saw a 0.6% monthly fall in June and declined 3.1% from the same month a year ago, the statistical agency Eurostat reported Tuesday.
The purchasing managers index for the euro-zone's services sector fell to 48.3 in July from 49.1 in June, news reports said Tuesday.
LONDON (MarketWatch) -- More financial institutions could see government bailouts before the credit crisis runs its course, former U.S. Federal Reserve chairman Alan Greenspan wrote in Tuesday's Financial Times. "There may be numbers of banks and other financial institutions that, at the edge of defaulting, will end up being bailed out by governments," Greenspan said. The crisis will end only when U.S. home prices begin to stabilize, clarifying equity levels, which serve as collateral support for mortgage-backed securities. Greenspan warned against governments seeking to "reassert their grip" on economic affairs. "If that becomes widespread, globalization could reverse -- at awesome cost," he wrote.
International dairy prices are likely to decline next year from record peaks as demand falls and production increases, New Zealand's Ministry of Agriculture said Tuesday.
"During 2008 and 2009, weaker world economic growth is likely to mean lower demand for dairy products," the ministry said in its annual situation and outlook report.
According to the NY Times, for more than three years starting in 2005, there has been a reduction in the number of voters who register with the Republican Party and a rise among voters who affiliate with Democrats and, almost as often, with no party at all.
Bloomberg reported supertanker owners are slowing down their vessels in response to higher fuel costs and plunging rental rates, three shipbrokers said.
Benchmark hire rates for very large crude carriers, ships bigger than the Chrysler Building designed to ship 2 million barrels of crude, plunged 65 percent last week. Bunker, or fuel, costs have advanced 47 percent this year.
"Most owners say they have ordered the ships to slow down to economical speed," Halvor Ellefsen, a broker at SeaLeague AS in Oslo, said in an e-mail today.
The five-member Bloomberg Tanker Index has dropped 15 percent since the start of last month, on concern that lower rental rates and higher fuel costs will curb earnings for shipowners including Frontline Ltd. Slower sailing speeds reduce vessel availability and may bolster hire rates.
Japanese automaker Toyota has laid off 800 people at a plant in southwestern Japan, or about 10 percent of the plant's work force, in response to declining sales in North America, a company official said Tuesday.
Mike Allen: "A new book by the author Ron Suskind claims that the White House ordered the CIA to forge a back-dated, handwritten letter from the head of Iraqi intelligence to Saddam Hussein.
Suskind writes in “The Way of the World,” to be published Tuesday, that the alleged forgery – adamantly denied by the White House – was designed to portray a false link between Hussein’s regime and al Qaeda as a justification for the Iraq war.
The author also claims that the Bush administration had information from a top Iraqi intelligence official “that there were no weapons of mass destruction in Iraq – intelligence they received in plenty of time to stop an invasion.”
The letter’s existence has been reported before, and it had been written about as if it were genuine. It was passed in Baghdad to a reporter for The (London) Sunday Telegraph who wrote about it on the front page of Dec. 14, 2003, under the headline, “Terrorist behind September 11 strike ‘was trained by Saddam.’”
The Telegraph story by Con Coughlin (which, coincidentally, ran the day Hussein was captured in his “spider hole”) was touted in the U.S. media by supporters of the war, and he was interviewed on NBC's "Meet the Press."
The 10 percent of households with the highest incomes account for nearly a quarter of all spending, according to data compiled by research firm Moody's Economy.com from a 2006 federal survey.
"That does suggest those folks are important for the spending outlook, and the overall economic outlook," said Scott Hoyt, Moody's director of consumer economics.
Other government data show households in the top one-fifth of the U.S. population ranked by income earn about half of all total personal income before taxes — an imbalance that gives the wealthy immense economic clout, said Sara Johnson, an economist at the research firm Global Insight.
"Consumer spending makes up 70 percent of gross domestic product, and when one group accounts for a very substantial share of consumer spending, they also account for a large share of the economic activity that creates jobs," Johnson said.
EMarketer Inc. expects spending on such ads to grow to $25.9 billion this year, from $21.1 billion last year, and hit $30 billion in 2009.
Online advertising is "not going to grow as much as expected, but it's still going to be growing more than other media," Hallerman said.
Chinese factories reported a plunge in new orders last month. Exports are barely growing. The real estate market is weakening, with apartment prices sinking in southeastern China, the region hardest hit by economic troubles.
Weyerhaeuser said it expects challenging market conditions to continue into the third quarter, with operating losses "slightly less than second quarter." The company also said it closed the sale of its containerboard packaging assets unit on Tuesday.
Rep. Ron Paul: "Some mistakenly identify the falling home prices as the disease instead of merely a symptom - which they plan to fix with more easy credit and more liquidity to push more unqualified buyers back into the market for homes they still cannot afford. This is akin to the drug addict identifying withdrawal symptoms as his problem and searching for another fix as his solution. The cycle continues and the problems compound themselves. The addiction deepens.
Addicts are told the first step to recovery is to admit their problem. To cure this addiction to intervention we have to honestly admit the problem and once and for all, kick the habit. That will involve some pain, without a doubt. There is no easy, painless solution to the mess the disastrous economic interventions of the past have wrought. The question is - do we allow some lending institutions to collapse, or do we allow the dollar to collapse? To extend the metaphor, do we endure the temporary discomfort of withdrawal, or do we continue on until there is a fatal overdose? We can delay the agony, but only for a little while, and then we will all end up paying the price for the mistakes of a few.
With the final passage of the Housing Bailout Bill quietly on a Saturday in the Senate, and the President's signature, our government has unfortunately chosen the latter."
Rob Hanna: "The S&P fell on Monday for the third consecutive day. There are some short-term price indicators reaching oversold levels at this point. More often than not, when the market goes into a Fed meeting and is short-term oversold, the result is a bounce."
OPEC production reached its highest level so far this year in July on increased barrels from Saudi Arabia and Iraq and a recovery in Nigerian output, a Dow Jones Newswires survey released Friday said.
The 13 members of the Organization of Petroleum Exporting Countries pumped 32.675 million barrels a day on average last month, up 1.1%, or 366,000 barrels, from 32.309 million barrels a day in June.
The ISM nonmanufacturing index rose to 49.5% in July from 48.2% in June. The new-orders index fell to 47.9% from 48.6%, while employment rose to 47.1% from 43.8%. The production index slipped to 49.6% from 49.9%. Nine of 18 industries were growing in July.
Australia's central bank signaled it may cut borrowing costs for the first time in almost seven years as slowing economic growth cools inflation.
The Federal Reserve held interest rates steady on Tuesday, expressing concerns about both economic growth and inflation and indicating it is in no rush to push borrowing costs higher. Policymakers said "downside risks to growth remain" and "the inflation outlook remains highly uncertain."
Cisco's
earnings excluding items rose to 40 cents per share from 36 cents and exceeded the average analyst forecast by a penny, according to Reuters Estimates.
Quarterly revenue rose 9.9 percent to $10.4 billion, the first quarter in the company's history to surpass $10 billion, it said. Analysts on average expected revenue of $10.3 billion.
The Treasury Department announced Tuesday that it has hired Morgan Stanley to analyze Fannie Mae and Freddie Mac.
The Dow Jones Industrial Average gained 331 points, or 3%, to end at 11,615. This marked the blue chip index's biggest one-day point gain since April 1. The S&P 500 index gained 35 points, or 2.9%, to 1,284, while the Nasdaq Composite rose 64 points, or 2.8%, to 2,349.
September crude closed at $119.17 per barrel in New York Tuesday, down $2.24, or 1.2%, as concerns over oil demand continued.
December gold was up $1.80 at $887.90 an ounce in Globex electronic trading after the Federal Open Market Committee on Tuesday kept its benchmark federal funds rate unchanged at 2.0%. December gold had closed earlier on New York Mercantile Exchange at $886.10 with a loss of $21.80.
Weyerhaeuser Co.seeks to trim 1,500 jobs, or about 6% of its workforce, over the next 18 months, according to a conference call transcript from FactSet Research.
Hurricane forecasters Philip Klotzbach and William Gray at Colorado State University raised their forecasts for the Atlantic Hurricane season in a report issued Tuesday. The report pegs the total seasonal forecast at 17 named storms for the region, up from 15 predicted in June. The forecasters also raised the number of expected Altantic hurricanes to nine for the seasson, compared to eight in the June forecast.
Morgan Stanley told several thousand clients this week that they won't be allowed to withdraw money on their home- equity credit lines, said a person familiar with the situation.
The action mostly affected clients with properties that have lost value, according to the person, who declined to be identified because the information isn't public. The New York- based investment bank will review home equity lines of credit, or HELOCS, monthly from now on, the person said.
Foster Wheeler's consolidated backlog in terms of future revenue jumped, but new orders booked came in below levels seen in the year-earlier second quarter.
Freddie Mac said it swung to a second-quarter loss of $821 million, or $1.63 a share, after taking $2.5 billion in provisions for credit losses. Revenue fell to $1.69 billion from $2.34 billion. Analysts polled by FactSet Research had expected a loss of 38 cents a share. The mortgage giant is going to cut its third-quarter dividend to 5 cents a share or less from 25 cents a share and pay the full preferred dividend.
News Corp."isn't talking to anybody right now," said Chief Operating Officer Peter Chernin when asked if the commpany is talking to AOL, Yahoo or Microsoft about a possible deal or alliance.
Monday, August 04, 2008
Expensive Insurance
8/5/08 Expensive Insurance
John Hussman: " Once an ongoing (and in my view, probably deepening) recession becomes broadly recognized, we may observe abrupt losses as the likelihood of more sustained earnings disappointments and much broader default risk becomes reflected in one fell swoop...Having worked in the financial markets in one capacity or another for nearly three decades, I've observed that market declines typically don't hit bottom until sometime after the phrase “free fall” begins emerging with regularity. We haven't seen that yet. To the contrary, there appears to be a general consensus that the lows set a few weeks ago were, if not the final lows, quite close to the ultimate bottom."
Humana now sees annual earnings between $4.30 and $4.40 a share, up from a prior range of $4.10 to $4.35.
Industrial producer prices across the 15-nation euro zone rose at a monthly pace of 0.9% in June for an annual rise of 8%, Eurostat reported Monday.
The Kuwait Investment Authority plans to triple its investments in Japan to 48 billion dollars, the country's finance minister Mustafa al-Shimali said, according to a Nikkei business daily report Monday.
Vikas Bajaj: "Homeowners with good credit are falling behind on their payments in growing numbers, just as the problems with subprime mortgages have begun to level off."
Washington Post: "Democratic Sen. Barack Obama holds a 2 to 1 edge over Republican Sen. John McCain among the nation's low-wage workers, but many are unconvinced that either presidential candidate would be better than the other at fixing the ailing economy or improving the health-care system, according to a new national poll.
Obama's advantage is attributable largely to overwhelming support from two traditional Democratic constituencies: African Americans and Hispanics. But even among white workers -- a group of voters that has been targeted by both parties as a key to victory in November -- Obama leads McCain by 10 percentage points, 47 percent to 37 percent, and has the advantage as the more empathetic candidate.
Still, one in six of the white workers polled remains uncommitted to either candidate. And a majority of those polled, both white and minority, are ambivalent about the impact of the election, saying that no matter who wins, their personal finances are unlikely to change."
Real consumer spending fell in June for the first time since February as the windfall of cash from Washington was eaten up by the worst inflation in 27 years, the Commerce Department reported Monday. Nominal spending rose 0.6%, but the increase was all due to higher prices, which rose 0.8% during the month, the most in 27 years. Real spending (which is adjusted for inflation) fell 0.2% in June. Real disposable incomes fell 2.6% in June after a 5.2% gain in May. Inflation surged in June. The personal consumption expenditure price index rose 0.8% in June compared with May and is up 4.1% in the past year, the largest year-over-year inflation in 17 years.
The latest GDP rise comes from consumer spending, which rose 1.5% in Q2. Adjusted for inflation do you really believe that GDP rose in the quarter? If you do, then check your brain into life support.
Family-held department store chain Boscov's has filed for Chapter 11 bankruptcy protection, Reuters reported Monday, citing a Delaware court filing. The Reading, Pa. chain with 49 stores had $538 million of assets and $479 million of liabilities as of May 3, the report said. The company was hurt by a promotion where it gave customers who cashed their IRS rebate check at their stores an additional 10% payout.
Brett Steenbarger: "I continue to view the recent market bounce more in terms of sector rotation and short-covering than in terms of fresh longer-term capital being put to work to take advantage of attractive valuations. We need to see increased money flows and an expansion in the number of stocks registering fresh new highs for this rebound to have legs."
Iran's military tested a new naval weapon with a range of more than 300 kilometers (185 miles), the commander of the Islamic Revolutionary Guards Corps said.
The technology in the anti-ship weapon hasn't been used by other nations, Brigadier General Mohammad-Ali Ja'fari said today in comments carried by state-run news agencies including Press TV and the Islamic Republic News Agency. Details of the weapon weren't given.
Planned layoffs at U.S. companies totaled 103,312 in July, compared with June's 81,755, employment consulting firm Challenger, Gray & Christmas Inc said.
Announced job cuts at U.S. companies last month were the second highest total so far in 2008, more than double the 42,897 a year earlier, the report said.
George Ure: "Not only are the nation's banking reserves gone, but they are now funding their day-to-day operations on....tax dollars and printer's ink!...We lose how many umpteen billions in 401(k) and real estate equity, and see banks falling left and right, and yet as a national we still claim a positive savings rate? LOl, OMG who are we kidding? Maybe I can get some nitrous from that whipping cream can, too... "Special accounting rules' no doubt - sort of like banks borrowing all their assets and then some?"
Residential builder WCI Communities Inc. on Monday said it and about 130 subsidiaries have filed for Chapter 11 to restructure debt and capital. Billionaire investor Carl Icahn, the company's chairman, said the company had tried to avoid a bankruptcy filing, but it became necessary "because of the recent failed effort to obtain financing and the recognition that the company's entire $1.8 billion of debt may soon be in default."
Global airline passenger growth has slowed to 3.8%, its lowest since the industry was rocked by a SARS panic in 2003, the International Air Transport Association said Monday. Passenger load factors, which measures how many seats airlines are able to fill on the average flight, fell 1.2 points to 77.6%.
Bill Bonner: " Net corporate tax receipts are expected to fall by $100 billion in 2009. Net individual tax receipts should fall by $100 billion too. Hey, a billion here…a billion there…pretty soon, the government is running a trillion-dollar deficit…"
"GM credit spreads continue to be priced on the basis that just about everything will keep going wrong," Glenn Reynolds, senior analyst at fixed-income research service CreditSights, said in a report on Monday.
"The price action has now blown past the Chrysler meltdown of the second half of 1990" and is reminiscent of the bursting of the tech and telecommunications bubble, he said.
GM's five-year credit default swaps rose to 47.5 percent of the sum insured as an upfront payment from 46.5 percent at Friday's close, plus 500 basis points in annual payments, according to Phoenix Partners Group. This means it would cost $4.75 million to insure $10 million in debt for five years, plus $500,000 a year.
HSBC Holdings Plc said its first-half pretax loss in North America was $2.9 billion, compared with profit of $2.4 billion in the year-earlier period. U.S. consumer bad loan charges and other provisions rose 85 percent to $6.8 billion as the bank reduced its number of branches by 10 percent to 900 and said it would ``run off'' its $13 billion vehicle finance operation. The shares dropped 2 percent in London.
Second-quarter profits at the 355 companies in the S&P 500 that reported results so far dropped 20 percent on average, dragged down by losses at financial companies including Merrill Lynch & Co.
Mexican cement maker Cemex SAB de CV said Monday it will raise U.S. concrete prices $25 per cubic yard, effective Oct. 1, in response to escalating fuel prices.
"We have put forth this new, transparent pricing structure that will allow our customers to count on a firm price through January 2010," Gilberto Perez, president of Cemex USA, said in a statement.
"We are effectively removing all fuel surcharges and taking on fuel price risk through this time."
Beth Ann Bovino, senior economist at Standard & Poor's, says the Fed can't do much more than talk tough about inflation now.
Bovino believes the central bank will tighten as soon as there's evidence the economy is stabilizing, most likely in the second or third quarter of 2009. But the Fed's need to address inflation could stifle any recovery before it gets a chance to flourish; that's one big reason why Bovino thinks the recession will be "long" and admits the downturn could ultimately be a lot worse than "mild."
December gold closed at $907.60 an ounce in New York Monday, down $9.60, or 1%, for the session after trading as low as $903. September crude closed at $121.41 per barrel on the New York Mercantile Exchange Monday, down $3.69, or 3%, for the session. The contract marked its lowest closing level since May 6.
The iShares DJ U.S. Home Construction Index (ITB) was off nearly 4% at last check. The ETF is down almost 30% the past three months.
Corn futures slumped more than 3% Monday on concerns that cooler weather will help the crop's pollination. Soybeans and wheat also tumbled. Corn futures for December delivery slumped 20.25 cents, or 3.5%, to $5.65 a bushel on the Chicago Board of Trade. Soybeans for November delivery dropped 56 cents, or 4.1%, to $13.09 a bushel, and September wheat fell 29 cents, or 3.7%, to $7.65 a bushel. "A forecast for relatively cooler weather this week will be beneficial for" corn's pollination, said Elaine Kub, a grain analyst at commodities research firm DTN.
Pulte Homes Inc.'s CEO says a new, temporary tax credit for first-time homebuyers signed into law last week is a "shot in the arm" to the housing industry and the builder will help promote it by offering a matching discount.
The Energy Intelligence Group reported that global oil production remained at a record high of 87.8 million barrels per day in June, with global demand at 86.8 million barrels per day.
Merrill Lynch & Co Inc Chief Executive John Thain said Monday if the company loses more money, it may have to raise more capital, leaving the door open to further capital raises if markets deteriorate.
John Hussman: " Once an ongoing (and in my view, probably deepening) recession becomes broadly recognized, we may observe abrupt losses as the likelihood of more sustained earnings disappointments and much broader default risk becomes reflected in one fell swoop...Having worked in the financial markets in one capacity or another for nearly three decades, I've observed that market declines typically don't hit bottom until sometime after the phrase “free fall” begins emerging with regularity. We haven't seen that yet. To the contrary, there appears to be a general consensus that the lows set a few weeks ago were, if not the final lows, quite close to the ultimate bottom."
Humana now sees annual earnings between $4.30 and $4.40 a share, up from a prior range of $4.10 to $4.35.
Industrial producer prices across the 15-nation euro zone rose at a monthly pace of 0.9% in June for an annual rise of 8%, Eurostat reported Monday.
The Kuwait Investment Authority plans to triple its investments in Japan to 48 billion dollars, the country's finance minister Mustafa al-Shimali said, according to a Nikkei business daily report Monday.
Vikas Bajaj: "Homeowners with good credit are falling behind on their payments in growing numbers, just as the problems with subprime mortgages have begun to level off."
Washington Post: "Democratic Sen. Barack Obama holds a 2 to 1 edge over Republican Sen. John McCain among the nation's low-wage workers, but many are unconvinced that either presidential candidate would be better than the other at fixing the ailing economy or improving the health-care system, according to a new national poll.
Obama's advantage is attributable largely to overwhelming support from two traditional Democratic constituencies: African Americans and Hispanics. But even among white workers -- a group of voters that has been targeted by both parties as a key to victory in November -- Obama leads McCain by 10 percentage points, 47 percent to 37 percent, and has the advantage as the more empathetic candidate.
Still, one in six of the white workers polled remains uncommitted to either candidate. And a majority of those polled, both white and minority, are ambivalent about the impact of the election, saying that no matter who wins, their personal finances are unlikely to change."
Real consumer spending fell in June for the first time since February as the windfall of cash from Washington was eaten up by the worst inflation in 27 years, the Commerce Department reported Monday. Nominal spending rose 0.6%, but the increase was all due to higher prices, which rose 0.8% during the month, the most in 27 years. Real spending (which is adjusted for inflation) fell 0.2% in June. Real disposable incomes fell 2.6% in June after a 5.2% gain in May. Inflation surged in June. The personal consumption expenditure price index rose 0.8% in June compared with May and is up 4.1% in the past year, the largest year-over-year inflation in 17 years.
The latest GDP rise comes from consumer spending, which rose 1.5% in Q2. Adjusted for inflation do you really believe that GDP rose in the quarter? If you do, then check your brain into life support.
Family-held department store chain Boscov's has filed for Chapter 11 bankruptcy protection, Reuters reported Monday, citing a Delaware court filing. The Reading, Pa. chain with 49 stores had $538 million of assets and $479 million of liabilities as of May 3, the report said. The company was hurt by a promotion where it gave customers who cashed their IRS rebate check at their stores an additional 10% payout.
Brett Steenbarger: "I continue to view the recent market bounce more in terms of sector rotation and short-covering than in terms of fresh longer-term capital being put to work to take advantage of attractive valuations. We need to see increased money flows and an expansion in the number of stocks registering fresh new highs for this rebound to have legs."
Iran's military tested a new naval weapon with a range of more than 300 kilometers (185 miles), the commander of the Islamic Revolutionary Guards Corps said.
The technology in the anti-ship weapon hasn't been used by other nations, Brigadier General Mohammad-Ali Ja'fari said today in comments carried by state-run news agencies including Press TV and the Islamic Republic News Agency. Details of the weapon weren't given.
Planned layoffs at U.S. companies totaled 103,312 in July, compared with June's 81,755, employment consulting firm Challenger, Gray & Christmas Inc said.
Announced job cuts at U.S. companies last month were the second highest total so far in 2008, more than double the 42,897 a year earlier, the report said.
George Ure: "Not only are the nation's banking reserves gone, but they are now funding their day-to-day operations on....tax dollars and printer's ink!...We lose how many umpteen billions in 401(k) and real estate equity, and see banks falling left and right, and yet as a national we still claim a positive savings rate? LOl, OMG who are we kidding? Maybe I can get some nitrous from that whipping cream can, too... "Special accounting rules' no doubt - sort of like banks borrowing all their assets and then some?"
Residential builder WCI Communities Inc. on Monday said it and about 130 subsidiaries have filed for Chapter 11 to restructure debt and capital. Billionaire investor Carl Icahn, the company's chairman, said the company had tried to avoid a bankruptcy filing, but it became necessary "because of the recent failed effort to obtain financing and the recognition that the company's entire $1.8 billion of debt may soon be in default."
Global airline passenger growth has slowed to 3.8%, its lowest since the industry was rocked by a SARS panic in 2003, the International Air Transport Association said Monday. Passenger load factors, which measures how many seats airlines are able to fill on the average flight, fell 1.2 points to 77.6%.
Bill Bonner: " Net corporate tax receipts are expected to fall by $100 billion in 2009. Net individual tax receipts should fall by $100 billion too. Hey, a billion here…a billion there…pretty soon, the government is running a trillion-dollar deficit…"
"GM credit spreads continue to be priced on the basis that just about everything will keep going wrong," Glenn Reynolds, senior analyst at fixed-income research service CreditSights, said in a report on Monday.
"The price action has now blown past the Chrysler meltdown of the second half of 1990" and is reminiscent of the bursting of the tech and telecommunications bubble, he said.
GM's five-year credit default swaps rose to 47.5 percent of the sum insured as an upfront payment from 46.5 percent at Friday's close, plus 500 basis points in annual payments, according to Phoenix Partners Group. This means it would cost $4.75 million to insure $10 million in debt for five years, plus $500,000 a year.
HSBC Holdings Plc said its first-half pretax loss in North America was $2.9 billion, compared with profit of $2.4 billion in the year-earlier period. U.S. consumer bad loan charges and other provisions rose 85 percent to $6.8 billion as the bank reduced its number of branches by 10 percent to 900 and said it would ``run off'' its $13 billion vehicle finance operation. The shares dropped 2 percent in London.
Second-quarter profits at the 355 companies in the S&P 500 that reported results so far dropped 20 percent on average, dragged down by losses at financial companies including Merrill Lynch & Co.
Mexican cement maker Cemex SAB de CV said Monday it will raise U.S. concrete prices $25 per cubic yard, effective Oct. 1, in response to escalating fuel prices.
"We have put forth this new, transparent pricing structure that will allow our customers to count on a firm price through January 2010," Gilberto Perez, president of Cemex USA, said in a statement.
"We are effectively removing all fuel surcharges and taking on fuel price risk through this time."
Beth Ann Bovino, senior economist at Standard & Poor's, says the Fed can't do much more than talk tough about inflation now.
Bovino believes the central bank will tighten as soon as there's evidence the economy is stabilizing, most likely in the second or third quarter of 2009. But the Fed's need to address inflation could stifle any recovery before it gets a chance to flourish; that's one big reason why Bovino thinks the recession will be "long" and admits the downturn could ultimately be a lot worse than "mild."
December gold closed at $907.60 an ounce in New York Monday, down $9.60, or 1%, for the session after trading as low as $903. September crude closed at $121.41 per barrel on the New York Mercantile Exchange Monday, down $3.69, or 3%, for the session. The contract marked its lowest closing level since May 6.
The iShares DJ U.S. Home Construction Index (ITB) was off nearly 4% at last check. The ETF is down almost 30% the past three months.
Corn futures slumped more than 3% Monday on concerns that cooler weather will help the crop's pollination. Soybeans and wheat also tumbled. Corn futures for December delivery slumped 20.25 cents, or 3.5%, to $5.65 a bushel on the Chicago Board of Trade. Soybeans for November delivery dropped 56 cents, or 4.1%, to $13.09 a bushel, and September wheat fell 29 cents, or 3.7%, to $7.65 a bushel. "A forecast for relatively cooler weather this week will be beneficial for" corn's pollination, said Elaine Kub, a grain analyst at commodities research firm DTN.
Pulte Homes Inc.'s CEO says a new, temporary tax credit for first-time homebuyers signed into law last week is a "shot in the arm" to the housing industry and the builder will help promote it by offering a matching discount.
The Energy Intelligence Group reported that global oil production remained at a record high of 87.8 million barrels per day in June, with global demand at 86.8 million barrels per day.
Merrill Lynch & Co Inc Chief Executive John Thain said Monday if the company loses more money, it may have to raise more capital, leaving the door open to further capital raises if markets deteriorate.
Sunday, August 03, 2008
Storm Clouds
8/4/08 Storm Clouds
Prices at the gas pump continued their downward trend over the weekend, with the national average price for a gallon of self-serve regular hitting $3.892, a fraction of a penny lower than Friday, according to AAA's Daily Fuel Gauge Report. The average for midgrade gasoline was $4.059 and diesel was $4.674. While lower than the month-ago averages, when regular was $4.098, fuel prices are substantially higher than they were a year ago. On Aug. 2, 2007, the national average for a gallon of regular gasoline was $2.858.
Iran rebuffed an informal U.N Security Council deadline to stop expanding uranium enrichment or face more sanctions. Mahmoud Ahmadinejad reasserted his country's right to nuclear technology during discussions with Syria's president.
Obama campaign manager David Plouffe said “Due to the late date of the two parties’ nominating conventions, and the relatively short period between the end of the conventions and the first proposed debate, it is likely that the four Commission debates will be the sole series of debates in the fall campaign.”
The Federal Deposit Insurance Corporation revealed on Friday that it had issued warnings to four small US banks that lacked sufficient reserves to cover potential loan losses.
The cease-and-desist orders issued in June said the four banks needed to raise more capital, expand their loss allowances and better oversee and diversify their loan portfolios. A fifth bank was cited for violating consumer protection laws.
Larry Rohter: "Many see evidence that companies looking to keep prices low will have to move some production closer to consumers. Globe-spanning supply chains — Brazilian iron ore turned into Chinese steel used to make washing machines shipped to Long Beach, Calif., and then trucked to appliance stores in Chicago — make less sense today than they did a few years ago.
To avoid having to ship all its products from abroad, the Swedish furniture manufacturer Ikea opened its first factory in the United States in May. Some electronics companies that left Mexico in recent years for the lower wages in China are now returning to Mexico, because they can lower costs by trucking their output overland to American consumers."
Citywide in NYC, 2,216 residents have lost their homes to foreclosure already this year. The figure was 338 last month alone - compared to 203 in July 2007.
Mike Burk: "For the past week or so the market has been consolidating without any major glitches. There should be another leg up, soon. I expect the major indices to be higher on Friday August 8 than they were on Friday August 1."
“If we think about the Wal-Mart model, it is incredibly fuel-intensive at every stage, and at every one of those stages we are now seeing an inflation of the costs for boats, trucks, cars,” said Naomi Klein, the author of “The Shock Doctrine: The Rise of Disaster Capitalism.”
“That is necessarily leading to a rethinking of this emissions-intensive model, whether the increased interest in growing foods locally, producing locally or shopping locally, and I think that’s great.”
Nouriel Roubini: “Yes, That's $2 Trillion of Debt-Related Losses”
Brian Fabbri: "Business continues to layoff temporary workers and cut back hours
worked. Another 29k temporary workers were eliminated in July
raising the total of temporary jobs lost in the past 7 months to 189k;
this represents 29% of all private payroll jobs lost this year.
Temporary workers account for only 2.2% of all private workers on
establishment payrolls. Businesses, however, sensed that domestic
demand growth was beginning to cool last year and began reducing
its temporary work force starting in January 2007. Thus total
temporary jobs lost in the past 19 months cumulate to 268k.
Nevertheless, as the economic downturn deepens business will soon
have to begin cutting more core workers than they have."
Mike Shedlock: "Perhaps the boldest move by Freddie Mac on Thursday — and one that won’t get much press attention — was its decision to eliminate foreclosure timeline compensation altogether for servicers, effective immediately. In other words, servicers will no longer earn a bonus based on how quickly they can foreclose.
If that doesn’t scream “modify more loans,” then the GSE’s decision to double compensation for servicers in completing workouts certainly will. Freddie said it will now pay servicers $800 for a loan modification, $2,200 for a short payoff or make-whole preforeclosure sale, and $500 per repayment plan. Deeds-in-lieu of foreclosure didn’t get Freddie’s same endorsement, however, and will remain at the current incentive level of $250, the GSE said."
According to the WSJ, hedge funds appear set to post their worst monthly performance in six years as strategies run into trouble. Some previously highflying funds are sustaining declines in the double digits, and several managers are down more than 20% for the year.
The WSJ reported Chrysler Financial was unable to renew all of $30 billion in short-term debt it was trying to refinance in a month, coming up $5 billion to $6 billion short.
The FT said the Federal Reserve, European Central Bank and the Bank of England are likely to keep interest rates on hold this week, amid deteriorating global growth and high inflation.
Crude oil rose for a second day as a storm threatened U.S. output in the Gulf of Mexico and Israel and U.S. officials sought extra sanctions against Iran.
Tropical storm Edouard lies about 95 miles (155 kilometers) southeast of the Mississippi River mouth and may strengthen to a hurricane as it heads west toward Texas, the National Hurricane Center said. Oil rose from an 11-week low last week as U.S. fuel stockpiles fell and Iran ignored a deadline in its dispute with the United Nations over its nuclear research.
``Those wildcat factors'' are holding up prices today, Gavin Wendt, senior resources analyst at Fat Prophets in Sydney, said in a Bloomberg Television interview. ``Prices should be a lot stronger than they were a week ago,'' given the risks from the storm and Iran, he said.
The U.S. said on Sunday that Iran has left the United Nations Security Council no choice but to increase sanctions against it for ignoring demands that it halt sensitive nuclear activities.
Prices at the gas pump continued their downward trend over the weekend, with the national average price for a gallon of self-serve regular hitting $3.892, a fraction of a penny lower than Friday, according to AAA's Daily Fuel Gauge Report. The average for midgrade gasoline was $4.059 and diesel was $4.674. While lower than the month-ago averages, when regular was $4.098, fuel prices are substantially higher than they were a year ago. On Aug. 2, 2007, the national average for a gallon of regular gasoline was $2.858.
Iran rebuffed an informal U.N Security Council deadline to stop expanding uranium enrichment or face more sanctions. Mahmoud Ahmadinejad reasserted his country's right to nuclear technology during discussions with Syria's president.
Obama campaign manager David Plouffe said “Due to the late date of the two parties’ nominating conventions, and the relatively short period between the end of the conventions and the first proposed debate, it is likely that the four Commission debates will be the sole series of debates in the fall campaign.”
The Federal Deposit Insurance Corporation revealed on Friday that it had issued warnings to four small US banks that lacked sufficient reserves to cover potential loan losses.
The cease-and-desist orders issued in June said the four banks needed to raise more capital, expand their loss allowances and better oversee and diversify their loan portfolios. A fifth bank was cited for violating consumer protection laws.
Larry Rohter: "Many see evidence that companies looking to keep prices low will have to move some production closer to consumers. Globe-spanning supply chains — Brazilian iron ore turned into Chinese steel used to make washing machines shipped to Long Beach, Calif., and then trucked to appliance stores in Chicago — make less sense today than they did a few years ago.
To avoid having to ship all its products from abroad, the Swedish furniture manufacturer Ikea opened its first factory in the United States in May. Some electronics companies that left Mexico in recent years for the lower wages in China are now returning to Mexico, because they can lower costs by trucking their output overland to American consumers."
Citywide in NYC, 2,216 residents have lost their homes to foreclosure already this year. The figure was 338 last month alone - compared to 203 in July 2007.
Mike Burk: "For the past week or so the market has been consolidating without any major glitches. There should be another leg up, soon. I expect the major indices to be higher on Friday August 8 than they were on Friday August 1."
“If we think about the Wal-Mart model, it is incredibly fuel-intensive at every stage, and at every one of those stages we are now seeing an inflation of the costs for boats, trucks, cars,” said Naomi Klein, the author of “The Shock Doctrine: The Rise of Disaster Capitalism.”
“That is necessarily leading to a rethinking of this emissions-intensive model, whether the increased interest in growing foods locally, producing locally or shopping locally, and I think that’s great.”
Nouriel Roubini: “Yes, That's $2 Trillion of Debt-Related Losses”
Brian Fabbri: "Business continues to layoff temporary workers and cut back hours
worked. Another 29k temporary workers were eliminated in July
raising the total of temporary jobs lost in the past 7 months to 189k;
this represents 29% of all private payroll jobs lost this year.
Temporary workers account for only 2.2% of all private workers on
establishment payrolls. Businesses, however, sensed that domestic
demand growth was beginning to cool last year and began reducing
its temporary work force starting in January 2007. Thus total
temporary jobs lost in the past 19 months cumulate to 268k.
Nevertheless, as the economic downturn deepens business will soon
have to begin cutting more core workers than they have."
Mike Shedlock: "Perhaps the boldest move by Freddie Mac on Thursday — and one that won’t get much press attention — was its decision to eliminate foreclosure timeline compensation altogether for servicers, effective immediately. In other words, servicers will no longer earn a bonus based on how quickly they can foreclose.
If that doesn’t scream “modify more loans,” then the GSE’s decision to double compensation for servicers in completing workouts certainly will. Freddie said it will now pay servicers $800 for a loan modification, $2,200 for a short payoff or make-whole preforeclosure sale, and $500 per repayment plan. Deeds-in-lieu of foreclosure didn’t get Freddie’s same endorsement, however, and will remain at the current incentive level of $250, the GSE said."
According to the WSJ, hedge funds appear set to post their worst monthly performance in six years as strategies run into trouble. Some previously highflying funds are sustaining declines in the double digits, and several managers are down more than 20% for the year.
The WSJ reported Chrysler Financial was unable to renew all of $30 billion in short-term debt it was trying to refinance in a month, coming up $5 billion to $6 billion short.
The FT said the Federal Reserve, European Central Bank and the Bank of England are likely to keep interest rates on hold this week, amid deteriorating global growth and high inflation.
Crude oil rose for a second day as a storm threatened U.S. output in the Gulf of Mexico and Israel and U.S. officials sought extra sanctions against Iran.
Tropical storm Edouard lies about 95 miles (155 kilometers) southeast of the Mississippi River mouth and may strengthen to a hurricane as it heads west toward Texas, the National Hurricane Center said. Oil rose from an 11-week low last week as U.S. fuel stockpiles fell and Iran ignored a deadline in its dispute with the United Nations over its nuclear research.
``Those wildcat factors'' are holding up prices today, Gavin Wendt, senior resources analyst at Fat Prophets in Sydney, said in a Bloomberg Television interview. ``Prices should be a lot stronger than they were a week ago,'' given the risks from the storm and Iran, he said.
The U.S. said on Sunday that Iran has left the United Nations Security Council no choice but to increase sanctions against it for ignoring demands that it halt sensitive nuclear activities.
Friday, August 01, 2008
Run Away
8/2/08 Run Away
Jeremy Grantham: “I thought things would be bad enough but they turned out to be a lot worse. I thought a year ago we were looking at the ‘first truly global bubble’ in asset prices. The credit crisis looked to be so predictably powerful and unstoppable then that I likened the experience to ‘watching a slow-motion train wreck’, and I predicted that ‘one major bank (broadly defined) will fail within 5 years’, for which I got considerable grief as a doomsayer, as the less optimistic strategists usually do. Well, a year later one bank failure looks positively quaint as a prediction.
“Ironically for a ‘perma bear’, I underestimated in almost every way how badly economic and financial fundamentals would turn out. Events must now be disturbing to everyone, and I for one am officially scared!” “Don’t be brave, run away. Live to fight another day.”
Seeking Alpha on Cleveland Cliffs: "Mittal may crash Cleveland party. ArcelorMittal (MT) is considering whether to disrupt the $8.8B takeover of Alpha Natural Resources (ANR) by Cleveland-Cliffs with a counter-bid. It may also sit on the sidelines until the deal closes, and then make a move for the combo. Sources say MT indicated it was willing to make an all-cash offer of about $110/share for ANR in June, prompting it to seek other bids."
General Motors Corp posted a $15.5 billion quarterly loss on Friday, as North American sales dropped by 20 percent and plunging prices for SUVs prompted deep charges for its auto finance business.
Ingersoll Rand confirmed its 2008 full-year forecast of $3.80 to $3.90 a share earnings from continuing operations, excluding one-time items.
Lehman Brothers is engaged in talks with prospective buyers about offloading some $30 billion in commercial mortgage assets and other hard-to-value securities that have dogged its balance sheet for months, The New York Post reported Friday without attribution.
The July purchasing managers index for the British manufacturing sector signaled a sharper contraction in activity from June, news reports said. The PMI reportedly fell to 44.3 from 45.9 in June.
The final purchasing managers index for the euro-zone manufacturing sector in July dipped to 47.4, off slightly from the preliminary estimate of 47.5, news reports said.
The purchasing managers index in China fell to a series low of 48.4 in July, a level indicating economic contraction, according to news reports. The reading was 52.0 in June.
U.S. banks' direct primary credit borrowing from the Federal Reserve rose to a record high in the latest week. Banks primary credit borrowings averaged $17.45 billion per day in the latest week, up from the previous record set last week of $16.38 billion, the Fed said on Thursday. On the day of July 30, banks' primary credit borrowings inched lower to $17.38 billion, down from $17.68 billion on July 23. Banks' overall discount window borrowings averaged $17.64 billion per day in the week ended July 23, up from an average of $16.51 billion per day the week before. Dealers borrowed $3 billion average per day from the Primary Dealer Credit Facility in the latest week after not borrowing at all the week before.
In Houston, the average price had dropped to $3.77 per gallon. While that's a 19-cent drop from its high point in mid-July, a gallon of regular self-serve was selling for $2.73 in Houston one year ago.
IndyMac Bancorp, the third-largest banking failure in United States history, said Friday that it had filed for bankruptcy protection, less than three weeks after being seized by federal regulators following a bank run by depositors. The company, based in Pasadena, Calif., filed for Chapter 7 protection on Thursday with the federal bankruptcy court in Los Angeles, indicating it plans to liquidate.
Total, the world's fourth-largest oil and gas company said it earned 4.73 billion euros ($7.38 billion) in the three monrths ended June 30, up from 3.41 billion euros in the same period a year ago.
Jim Marrs, Author, The Rise of the Fourth Reich: “Without habeas corpus in the United States today, what we now have is a Fourth Reich, somebody in a position of power - the President, the Attorney General, the head of Homeland Security – can simply point a figure at you and designate you as an undesirable and hence, an enemy combatant, and they can grab you and imprison you and you don’t even get a day in court, much less a lawyer.”
Commodities prices suffered their largest monthly drop in 28 years in July as crude oil prices nose-dived more than $20 from an all-time high of $147.27 a barrel.
The Jefferies-Reuters CRB index, a global commodities benchmark, lost 10 per cent, its largest monthly decline since it fell 10.5 per cent in March 1980, amid worries about lower economic growth damping demand for raw materials.
Natural gas, corn, wheat and freight costs plunged last month between 10 and 30 per cent, although from record levels. However, lead, used in car batteries, surged almost 25 per cent on tight supplies.
Chevron Corp.said second-quarter net income for the three months ended June 30 rose 11% to $6 billion, or $2.90 a share, from $5.4 billion, or $2.52 a share in the year-ago period. Analysts expected earnings of $3.03 a share for the San Ramon, Calif. oil production and refining giant, according to a survey by FactSet Research. Chevron's sales and other operating revenue increased to $81 billion, compared with $54 billion. Exploration and production net income nearly doubled to $7.25 billion from $3.64 billion. Chevron lost $734 million in its refining, marketing and transportation business, compared to a $1.3 billion profit in the year-ago period.
Nonfarm payrolls fell for the seventh straight month in July while the unemployment jumped to 5.7%, a four-year high, the Labor Department reported Friday. Nonfarm payrolls fell by 51,000 in July, led by losses in manufacturing, construction, retail and temporary help. Since December, 463,000 jobs have been lost, the strongest signal that the economy is in a recession. Economists surveyed by MarketWatch expected payrolls to shrink by 70,000 and for the unemployment rate to rise to 5.6% from 5.5% in June. Many young people streamed into the labor market looking for summer jobs. This year, however, fewer of them were able to find work, the government said. The unemployment rate for teenagers jumped to 20.3 percent, the highest since late 1992. Manufacturers cut 35,000 positions, construction companies got rid of 22,000 and retailers shed 17,000 jobs. Those losses swamped job gains elsewhere, including in the government, education and health care.
George Ure: " The amount of FDIC Insurance in 1980 was raised to $100,000. Now, not to be 'negative', but just to show how this operates just like a real insurance company, I'd point out that if FDIC coverage had kept pace with inflation alone (using the Federal Reserve's own calculator (left column) then FDIC insurance today should be $261,650.49 basis the 1980 coverage levels. OK, true that IRA accounts are insured to $250,000, but few financially literate people (and no one in my circle of friends) would put $250K in a long term account that doesn't keep up with inflation, but that's another issue."
Federal agents may take a traveler's laptop or other electronic device to an off-site location for an unspecified period of time without any suspicion of wrongdoing, as part of border search policies the Department of Homeland Security recently disclosed.
Also, officials may share copies of the laptop's contents with other agencies and private entities for language translation, data decryption or other reasons, according to the policies, dated July 16 and issued by two DHS agencies, U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement.
Bill Bonner: "But "change" is the one thing people most don't want - not when it involves paying for past mistakes. The homeowners don't want to give up their houses. The lenders don't want to go out of business. Investors don't want to lose money. And so they all hope for a miracle. And along comes the miracle worker himself - Uncle Sam.
What makes it possible for the federal government to perform miracles, as Ben Bernanke might explain it, "is a little technology called the printing press. [The feds] can create new dollars at almost zero cost."
How do the feds get any real money? They can only take it away from real people. The net effect to the economy is zero. The only way they can add to the total supply of money is to…well…add to the supply of money. They have to create it - out of thin air. Otherwise, they are just taking money from people who didn't make mistakes in order to keep people who did make mistakes from being forced to own up to them."
Home prices fell in 23 of 25 U.S. metropolitan areas in May from a year earlier as foreclosure sales pushed down values and most areas remained mired in the housing recession.
Sacramento had the biggest price drop, falling 31 percent from May 2007. Las Vegas declined 29.5 percent, San Diego 27.2 percent, St. Louis 26.9 percent and Phoenix 25.8 percent, said real estate data company Radar Logic Inc. Sales rose in 22 areas in May from April, driven by ``motivated'' sellers including banks, the company said.
Pimco's Mohamed El-Erian said the unemployment rate is headed toward 6 percent, as the year-long global financial market turmoil continues to have a growing effect on the U.S. economy as a whole.
Ford Motor Co said on Friday its U.S. sales fell 14.9 percent in July on an unadjusted basis amid the downturn in the U.S. auto industry, especially for sales of large trucks and SUVs.
For the week, the Dow lost 0.4%. The broad S&P 500 index found late support from a rebound in financial shares Friday, but still ended down 7 points at 1,260. For the week, the broad index gained 0.2%. The Nasdaq Composite lost 14 points to 2,310 on Friday and finished flat for the week.
Chrysler LLC on Friday reported a 28.8% drop in July U.S. sales to 98,109 vehicles from 137,728 in July 2007.
September crude closed at $125.10 per barrel in New York Friday. The contract gained $1.02 for the session to end the week 1.5% higher. December gold closed at $917.50 an ounce Friday. The contract lost $5.20 for the trading session in New York and finished the week with a loss of 2.1%.
First Priority Bank of Bradenton, Fla. was closed by the Commissioner of the Florida Office of Financial Regulation, and the Federal Deposit Insurance Corporation was named receiver, the FDIC said late Friday. The closure marks the eighth U.S. bank failure this year.
Jeremy Grantham: “I thought things would be bad enough but they turned out to be a lot worse. I thought a year ago we were looking at the ‘first truly global bubble’ in asset prices. The credit crisis looked to be so predictably powerful and unstoppable then that I likened the experience to ‘watching a slow-motion train wreck’, and I predicted that ‘one major bank (broadly defined) will fail within 5 years’, for which I got considerable grief as a doomsayer, as the less optimistic strategists usually do. Well, a year later one bank failure looks positively quaint as a prediction.
“Ironically for a ‘perma bear’, I underestimated in almost every way how badly economic and financial fundamentals would turn out. Events must now be disturbing to everyone, and I for one am officially scared!” “Don’t be brave, run away. Live to fight another day.”
Seeking Alpha on Cleveland Cliffs: "Mittal may crash Cleveland party. ArcelorMittal (MT) is considering whether to disrupt the $8.8B takeover of Alpha Natural Resources (ANR) by Cleveland-Cliffs with a counter-bid. It may also sit on the sidelines until the deal closes, and then make a move for the combo. Sources say MT indicated it was willing to make an all-cash offer of about $110/share for ANR in June, prompting it to seek other bids."
General Motors Corp posted a $15.5 billion quarterly loss on Friday, as North American sales dropped by 20 percent and plunging prices for SUVs prompted deep charges for its auto finance business.
Ingersoll Rand confirmed its 2008 full-year forecast of $3.80 to $3.90 a share earnings from continuing operations, excluding one-time items.
Lehman Brothers is engaged in talks with prospective buyers about offloading some $30 billion in commercial mortgage assets and other hard-to-value securities that have dogged its balance sheet for months, The New York Post reported Friday without attribution.
The July purchasing managers index for the British manufacturing sector signaled a sharper contraction in activity from June, news reports said. The PMI reportedly fell to 44.3 from 45.9 in June.
The final purchasing managers index for the euro-zone manufacturing sector in July dipped to 47.4, off slightly from the preliminary estimate of 47.5, news reports said.
The purchasing managers index in China fell to a series low of 48.4 in July, a level indicating economic contraction, according to news reports. The reading was 52.0 in June.
U.S. banks' direct primary credit borrowing from the Federal Reserve rose to a record high in the latest week. Banks primary credit borrowings averaged $17.45 billion per day in the latest week, up from the previous record set last week of $16.38 billion, the Fed said on Thursday. On the day of July 30, banks' primary credit borrowings inched lower to $17.38 billion, down from $17.68 billion on July 23. Banks' overall discount window borrowings averaged $17.64 billion per day in the week ended July 23, up from an average of $16.51 billion per day the week before. Dealers borrowed $3 billion average per day from the Primary Dealer Credit Facility in the latest week after not borrowing at all the week before.
In Houston, the average price had dropped to $3.77 per gallon. While that's a 19-cent drop from its high point in mid-July, a gallon of regular self-serve was selling for $2.73 in Houston one year ago.
IndyMac Bancorp, the third-largest banking failure in United States history, said Friday that it had filed for bankruptcy protection, less than three weeks after being seized by federal regulators following a bank run by depositors. The company, based in Pasadena, Calif., filed for Chapter 7 protection on Thursday with the federal bankruptcy court in Los Angeles, indicating it plans to liquidate.
Total, the world's fourth-largest oil and gas company said it earned 4.73 billion euros ($7.38 billion) in the three monrths ended June 30, up from 3.41 billion euros in the same period a year ago.
Jim Marrs, Author, The Rise of the Fourth Reich: “Without habeas corpus in the United States today, what we now have is a Fourth Reich, somebody in a position of power - the President, the Attorney General, the head of Homeland Security – can simply point a figure at you and designate you as an undesirable and hence, an enemy combatant, and they can grab you and imprison you and you don’t even get a day in court, much less a lawyer.”
Commodities prices suffered their largest monthly drop in 28 years in July as crude oil prices nose-dived more than $20 from an all-time high of $147.27 a barrel.
The Jefferies-Reuters CRB index, a global commodities benchmark, lost 10 per cent, its largest monthly decline since it fell 10.5 per cent in March 1980, amid worries about lower economic growth damping demand for raw materials.
Natural gas, corn, wheat and freight costs plunged last month between 10 and 30 per cent, although from record levels. However, lead, used in car batteries, surged almost 25 per cent on tight supplies.
Chevron Corp.said second-quarter net income for the three months ended June 30 rose 11% to $6 billion, or $2.90 a share, from $5.4 billion, or $2.52 a share in the year-ago period. Analysts expected earnings of $3.03 a share for the San Ramon, Calif. oil production and refining giant, according to a survey by FactSet Research. Chevron's sales and other operating revenue increased to $81 billion, compared with $54 billion. Exploration and production net income nearly doubled to $7.25 billion from $3.64 billion. Chevron lost $734 million in its refining, marketing and transportation business, compared to a $1.3 billion profit in the year-ago period.
Nonfarm payrolls fell for the seventh straight month in July while the unemployment jumped to 5.7%, a four-year high, the Labor Department reported Friday. Nonfarm payrolls fell by 51,000 in July, led by losses in manufacturing, construction, retail and temporary help. Since December, 463,000 jobs have been lost, the strongest signal that the economy is in a recession. Economists surveyed by MarketWatch expected payrolls to shrink by 70,000 and for the unemployment rate to rise to 5.6% from 5.5% in June. Many young people streamed into the labor market looking for summer jobs. This year, however, fewer of them were able to find work, the government said. The unemployment rate for teenagers jumped to 20.3 percent, the highest since late 1992. Manufacturers cut 35,000 positions, construction companies got rid of 22,000 and retailers shed 17,000 jobs. Those losses swamped job gains elsewhere, including in the government, education and health care.
George Ure: " The amount of FDIC Insurance in 1980 was raised to $100,000. Now, not to be 'negative', but just to show how this operates just like a real insurance company, I'd point out that if FDIC coverage had kept pace with inflation alone (using the Federal Reserve's own calculator (left column) then FDIC insurance today should be $261,650.49 basis the 1980 coverage levels. OK, true that IRA accounts are insured to $250,000, but few financially literate people (and no one in my circle of friends) would put $250K in a long term account that doesn't keep up with inflation, but that's another issue."
Federal agents may take a traveler's laptop or other electronic device to an off-site location for an unspecified period of time without any suspicion of wrongdoing, as part of border search policies the Department of Homeland Security recently disclosed.
Also, officials may share copies of the laptop's contents with other agencies and private entities for language translation, data decryption or other reasons, according to the policies, dated July 16 and issued by two DHS agencies, U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement.
Bill Bonner: "But "change" is the one thing people most don't want - not when it involves paying for past mistakes. The homeowners don't want to give up their houses. The lenders don't want to go out of business. Investors don't want to lose money. And so they all hope for a miracle. And along comes the miracle worker himself - Uncle Sam.
What makes it possible for the federal government to perform miracles, as Ben Bernanke might explain it, "is a little technology called the printing press. [The feds] can create new dollars at almost zero cost."
How do the feds get any real money? They can only take it away from real people. The net effect to the economy is zero. The only way they can add to the total supply of money is to…well…add to the supply of money. They have to create it - out of thin air. Otherwise, they are just taking money from people who didn't make mistakes in order to keep people who did make mistakes from being forced to own up to them."
Home prices fell in 23 of 25 U.S. metropolitan areas in May from a year earlier as foreclosure sales pushed down values and most areas remained mired in the housing recession.
Sacramento had the biggest price drop, falling 31 percent from May 2007. Las Vegas declined 29.5 percent, San Diego 27.2 percent, St. Louis 26.9 percent and Phoenix 25.8 percent, said real estate data company Radar Logic Inc. Sales rose in 22 areas in May from April, driven by ``motivated'' sellers including banks, the company said.
Pimco's Mohamed El-Erian said the unemployment rate is headed toward 6 percent, as the year-long global financial market turmoil continues to have a growing effect on the U.S. economy as a whole.
Ford Motor Co said on Friday its U.S. sales fell 14.9 percent in July on an unadjusted basis amid the downturn in the U.S. auto industry, especially for sales of large trucks and SUVs.
For the week, the Dow lost 0.4%. The broad S&P 500 index found late support from a rebound in financial shares Friday, but still ended down 7 points at 1,260. For the week, the broad index gained 0.2%. The Nasdaq Composite lost 14 points to 2,310 on Friday and finished flat for the week.
Chrysler LLC on Friday reported a 28.8% drop in July U.S. sales to 98,109 vehicles from 137,728 in July 2007.
September crude closed at $125.10 per barrel in New York Friday. The contract gained $1.02 for the session to end the week 1.5% higher. December gold closed at $917.50 an ounce Friday. The contract lost $5.20 for the trading session in New York and finished the week with a loss of 2.1%.
First Priority Bank of Bradenton, Fla. was closed by the Commissioner of the Florida Office of Financial Regulation, and the Federal Deposit Insurance Corporation was named receiver, the FDIC said late Friday. The closure marks the eighth U.S. bank failure this year.
Inflation
8/1/08 Inflation
Exxon Mobil Corp.said second-quarter net income rose 14% to $11.68 billion, or $2.22 a share from $10.26 billion, or $1.83 a share in the year-ago period. Excluding items, net income rose to $2.27 a share from $1.83 a share. Capital expenditures rose 38% to $6.97 billion. Exxon Mobil was expected to earn $2.46 a share, according to a survey of analysts by FactSet. On an oil-equivalent basis, second-quarter production decreased 8% from the second quarter of 2007. Excluding impacts related to the Venezuela expropriation, the Nigeria labor strike and lower entitlement volumes, production fell 3%.
Barrick Gold Corp. said Barrick second-quarter net income rose 22% to $485 million, or 56 cents a share, from $396 million, or 46 cents a share in the year-ago period. Operating income rose to 61 cents a share from 39 cents a share. Wall Street analysts surveyed by FactSet forecast earnings of 57 cents a share, on average. The company cited higher gold prices for its bigger profit. Looking ahead, Barrick Gold raised its forecast for cash costs for gold production to $425 to $445 an ounce, from its earlier view of $390 to $415 an ounce. The view assumes a second half gold price of $950 per ounce and an oil price of $125 per barrel.
Inflation in the US could hit 6 per cent by the fall, CIBC World Markets' chief economist said on Wednesday.Consumer prices for June were up 5 percent from the year before, the fastest one-year change since 1991. Jeffrey Rubin, chief economist of Toronto-based investment bank CIBC, predicts a 6 per cent rate for overall inflation, a level last seen in 1982. His reasoning: Increased shipping costs are making goods produced in the United States more competitive with goods shipped from China.
``High energy prices give American manufacturing workers bargaining power that they have lacked for over a decade, while at the same time encouraging them to ask for larger pay raises to keep pace with the soaring price of gasoline,'' Rubin wrote.
Altria forecasts that 2008 adjusted full-year diluted earnings from continuing operations will be in the range of $1.63 to $1.67 a share.
AstraZeneca lifted its annual core earnings per share view by 15 cents a share to a range of $4.60 to $4.90 on a "good" operational and financial performance and further currency benefits.
Consumer inflation in the 15-nation euro zone accelerated at a record annual pace of 4.1% in July, according to a preliminary estimate by Eurostat. Annual inflation hit 4% in June, more than twice the European Central Bank's annual target of near but just below 2%.
U.K. house prices fell 1.7% during July, or down 8.1% on an annual basis, the lender Nationwide reported Thursday. That's the biggest annual fall since Nationwide began recording statistics in 1991.
Royal Dutch Shell became the second oil explorer to top the $10 billion mark for earnings in a single quarter, with its second-quarter profit rising 33% to $11.56 billion. Stripping out price changes on unsold inventories, and Shell's profit rose a more modest 5% to $7.9 billion, and the quarter also included a net $73 million in one-time gains. Production fell 1% to 3.05 million barrels of oil equivalent a day.
Marathon Oil reports quarterly results prior to Thursday's opening. Here are some comments prior to the release: Because demand for gasoline has fallen in recent months, companies like Marathon haven't been able to raise wholesale and retail prices fast enough to keep up with crude prices and other escalating expenses.
BY THE NUMBERS: Analysts polled by Thomson Financial expect a profit of $1.51 per share.
ANALYST TAKE: Caris & Co. expects the company to report a profit of $1.21, well below the consensus. "Derivate-related losses in its Canadian oil sands and refining business segments will unfortunately overshadow a strong performance from its oil and gas operations as well as its integrated gas business," the investment bank said in a note to clients this week.
Marathon Oil Cop.said second-quarter net income fell by half to $774 million, or $1.08 a share, from $1.55 billion, or $2.25 a share in the year-ago period. Adjusted net income fell to $1.20 a share from $2.25 a share. Analysts expected earnings of $1.54 a share, on average, according to a FactSet Rearch survey. The Houston oil and gas firm said the three months ended June 30 were challenging. Marathon cited, "significantly lower" refining and wholesale marketing margins and a derivatives loss incurred in its Oil Sands Mining segment. However, its upstream business posted a record quarter and its gas segment continues to perform well, Marathon said.
"While the downstream environment remains challenged with tight margins, Marathon is focused on lowering feedstock costs and increasing efficiency and flexibility by expanding our coking capacity. The 180,000 barrels per day (bpd) refinery expansion at our facility in Garyville, La., is almost 60 percent complete, on budget and scheduled for late 2009 startup. Construction recently started on the Detroit Heavy Oil Upgrading Project, and upon completion in late 2010, it will allow us to refine an additional 80,000 bpd of heavy crude oil," Cazalot said.
Marathon continues to ramp up production in the Bakken Shale resource play in North Dakota. The Company currently has seven rigs drilling which are achieving best-in-class drilling performance and continue to improve drilling time and well costs. Marathon expects to drill approximately 65 company- operated Bakken wells in 2008, and will have approximately 100 wells in the play by the end of the year. The Company's net production from the Bakken Shale increased 130 percent from the fourth quarter 2007 rate of 2,170 boepd to the second quarter of 2008 rate of 5,070 boepd, and is currently producing 6,200 boepd.
Marathon Oil Corp.said it's mulling a split of its operations into two publicly traded entities. One of the firms would consist of Marathon's exploration-and-production, integrated-gas and oil-sands-mining businesses, while the other would include its refining, marketing and transportation operations, the company said in a statement on Thursday. The board will decide in the fourth quarter whether to execute the split, Marathon said. If the directors give the go-ahead, the split likely would occur in 2009's first quarter.
Deutsche Bank took another €2.3bn hit on the value of its securities as second-quarter profits declined sharply at Germany’s largest bank.
Announcing net income of €645m for the three months to June – down from €1.8bn in the same period in 2007 – Josef Ackermann, chief executive, on Thursday highlighted measures taken to cut exposure to some of the bank’s riskiest investments.
Peter Goodman: "The number of Americans who have seen their full-time jobs chopped to part time because of weak business has swelled to more than 3.7 million — the largest figure since the government began tracking such data more than half a century ago."
BASF, the German chemical giant, is reportedly considering a major acquisition, with United States-based W.R. Grace said to be a possible target, according to a report in The Financial Times Deutschland.
In one of the largest rounds of job cuts to hit the legal community since mortgage meltdown began, Cadwalader, Wickersham & Taft announced that it is laying off 96 lawyers in the United States and Britain due to continued slowness in real estate finance and securitization, the firm’s core practices.
The latest round of layoffs comes after the New York law firm let go 35 lawyers in January.
Houston Chronicle: "The Houston company formed to develop nanoshells, Nanospectra Biosciences, has just begun its first human clinical trial, treating a patient with head and neck cancer.
The company hopes to heat nanoshells in the tumor with near-infrared light, burning the cancerous growth away.
For the company and for Houston, the trial marks a big step.
Nanoshells -- tiny spheres of glass coated with gold -- are the first engineered nanomaterial to enter into human trials. And discoveries made in Houston labs are typically developed by biotechnology firms elsewhere, such as Boston or San Diego.
"I'm thrilled," said Naomi Halas, the Rice chemist who created nanoshells in 1997 and realized a few years later their potential to treat cancer. "There's no question it's been a long road, but we always knew it was going to be that way."
Royal Dutch Shell said as much as 220,000 barrels a day of crude production in Nigeria is shut in because of militant attacks.
Drug store and pharmacy operator CVS Caremark says its second-quarter profit grew 7 percent due to improved sales at its retail drug stores.
The Financial Accounting Standards Board postponed a measure, opposed by Citigroup Inc. and the securities industry, forcing banks to bring off-balance-sheet assets such as mortgages and credit-card receivables back onto their books.
FASB, the Norwalk, Connecticut-based panel that sets U.S. accounting standards, voted 5-0 today to delay the rule change until fiscal years starting after Nov. 15, 2009. The board needs to give financial institutions more time to prepare for the switch, FASB member Thomas Linsmeier said at a board meeting. What a bunch of crap!
Brett Steenbarger: "You will never achieve great things surrounded by mediocrity. If you want to see what to change in yourself, look at what's missing around you."
Bristol-Myers Squibb Co.has offered to purchase the remaining shares of ImClone for $4.5 billion, or $60 each.
Just when American International Group Inc. shareholders figured things couldn't get worse at the world's largest insurer, profit from the company's private equity and hedge fund investments is evaporating.
Earnings from so-called alternative holdings were probably close to zero in the second quarter, after soaring 77 percent to $1.02 billion a year earlier, said Citigroup Inc. analyst Joshua Shanker. The drop follows the worst first half for hedge funds in almost two decades and a 73 percent decline in the value of announced leveraged buyouts, according to data compiled by Chicago-based Hedge Fund Research Inc. and Bloomberg.
The Oil Drum: "An important Dutch energy institute, the Clingendael International Energy Program (CIEP), recently published a report that confirms most of the conclusions about the oil market reached over the years at the oildrum. That the floor price of oil is now 110 dollars per barrel, that supply will not rise beyond 100-105 million b/d in the coming decades, that there will be an oil supply constraint for most of the next decade, that there are insufficient quantities of alternative fuels available and that thus demand destruction is inevitable. CIEP is especially important because it is endorsed by amongst others BP, Shell Netherlands, Total E&P Netherlands, three Dutch Ministries, Wintershall, Vopak Oil Europe Middle East and several Dutch energy companies. The report in english can be downloaded here (PDF 2.8 megabytes, 108 pages)...'This outlook of new scarcity is now exacerbated by the fact that not only available supply will determine what amount of demand can be satisfied; it will also bring about a new allocation of the available oil due to a lack of adequate supply growth compared with demand. In practice this means that demand rationing will be required in the OECD countries and particularly in the US, in order to accommodate growth in the newly developing countries, notably China and India. Different fuel prices for end-consumers in the different countries will be the dominant factor behind this ‘oil redistribution’.
GMAC Financial Services reported Thursday a 2008 second-quarter net loss of $2.5 billion, compared to net profit of $293 million in the second quarter of 2007. Affecting results in the quarter were a $716 million impairment of vehicle operating lease assets in the automotive finance business as a result of declining vehicle sales and lower used vehicle prices for certain segments, as well as significant losses at Residential Capital, LLC (ResCap) related to asset sales, valuation adjustments, and loan-loss provisions, the company said. These items were partially offset by profitable results in the insurance and international auto finance businesses, it said. Credit losses increased in the second quarter to 1.40% of managed retail assets, versus 0.92% in the second quarter of 2007, it said.
The costs of employing a U.S. worker held steady in the June quarter, the Labor Department reported Thursday. Overall compensation costs rose 0.7%, matching the prior quarter's gain. Economists were expecting a rise of 0.8%. In the June quarter, wage and salary costs rose 0.7%, compared with 0.8% growth in the prior quarter. Benefit costs in the June quarter increased 0.6%, matching the prior quarter. However, state and local government compensation rose 9%--big government is a cancerous growth.
The U.S. economy contracted in the fourth quarter of 2007, the first quarter of negative growth since the 2001 recession, the Commerce Department said Thursday in its annual revision to gross domestic product. Real GDP fell 0.2% in the quarter, compared with the 0.6% increase previously reported. Many economists who believe the economy is in recession believe it began in the fourth quarter. Growth in this year's first quarter of 2008 was revised lower. Separately, the Labor Department said initial claims for unemployment benefits rose 44,000 to 448,000 in the week ended July 26. The four-week moving average of initial claims rose 11,000 to 393,000. Meanwhile, the number of Americans receiving state jobless benefits rose 185,000 to 3.28 million in the week ending July 19. The four-week moving average of continuing claims rose 42,750 to 3.17 million.
Boosted by stimulus checks from Uncle Sam and big drop in imports, real growth in the U.S. economy accelerated in the second quarter to a 1.9% annual rate, the Commerce Department reported Thursday. Consumer spending was supported by the largest increase in disposable personal income in six years, thanks largely to about $75 billion in tax-rebate checks from Washington. The economy was held back by the crumbling housing market and by a huge drop in inventories. Investments in equipment and software also fell during the quarter. The economy grew a revised 0.9% annual rate in the first quarter.
Romania's central bank raised its benchmark interest rate by 25 basis points to 10.25% Thursday to fight inflationary pressures in the economy.
The Chicago business barometer rose to 50.8% from 49.6% in June.
Apache Corp.reported second-quarter net income more than doubled on 58% higher revenue. Earnings reached $1.45 billion, or $4.28 a share, from $633.5 million, or $1.89, in the year-earlier period. Revenue rose to $3.9 billion from $2.47 billion.
"It's the deal from hell," says Sam Zell, never one to mince words. "And it will continue to be the deal from hell until we turn it around." Zell is talking, of course, about his $8.5 billion purchase of Tribune Co. in December 2007, a transaction that's shaping up to be one of the most disastrous the media world has ever seen.
Top U.S. refiner Valero plans to cut gasoline production by an average of 330,000 barrels per day (bpd) in the third quarter at its 16 plants. At the same time Valero is looking to increase diesel production and export the diesel to foreign markets where the demand is high.
U.S. natural gas inventories rose 65 billion cubic feet in the week ending July 25, the Energy Information Administration reported on Thursday. At 2,461 billion cubic feet, natural gas stocks were 357 billion cubic feet less than last year at this time and 12 billion cubic feet below the five-year average, the EIA said.
According to AMG Data Services, including ETF activity, Equity funds report net cash inflows totaling $2.747 billion in the week ended 7/30/08 with Domestic funds reporting net inflows of $3.074 billion and Non-domestic funds reporting net outflows of -$327 million;
Excluding ETF activity, Equity funds report net cash outflows totaling -$1.304 billion with Domestic funds reporting net outflows of -$785 million and Non-domestic funds reporting net outflows totaling -$520 million;
Exchange Traded (Equity) funds report net inflows of $4.051 billion.
Exxon Mobil Corp.said second-quarter net income rose 14% to $11.68 billion, or $2.22 a share from $10.26 billion, or $1.83 a share in the year-ago period. Excluding items, net income rose to $2.27 a share from $1.83 a share. Capital expenditures rose 38% to $6.97 billion. Exxon Mobil was expected to earn $2.46 a share, according to a survey of analysts by FactSet. On an oil-equivalent basis, second-quarter production decreased 8% from the second quarter of 2007. Excluding impacts related to the Venezuela expropriation, the Nigeria labor strike and lower entitlement volumes, production fell 3%.
Barrick Gold Corp. said Barrick second-quarter net income rose 22% to $485 million, or 56 cents a share, from $396 million, or 46 cents a share in the year-ago period. Operating income rose to 61 cents a share from 39 cents a share. Wall Street analysts surveyed by FactSet forecast earnings of 57 cents a share, on average. The company cited higher gold prices for its bigger profit. Looking ahead, Barrick Gold raised its forecast for cash costs for gold production to $425 to $445 an ounce, from its earlier view of $390 to $415 an ounce. The view assumes a second half gold price of $950 per ounce and an oil price of $125 per barrel.
Inflation in the US could hit 6 per cent by the fall, CIBC World Markets' chief economist said on Wednesday.Consumer prices for June were up 5 percent from the year before, the fastest one-year change since 1991. Jeffrey Rubin, chief economist of Toronto-based investment bank CIBC, predicts a 6 per cent rate for overall inflation, a level last seen in 1982. His reasoning: Increased shipping costs are making goods produced in the United States more competitive with goods shipped from China.
``High energy prices give American manufacturing workers bargaining power that they have lacked for over a decade, while at the same time encouraging them to ask for larger pay raises to keep pace with the soaring price of gasoline,'' Rubin wrote.
Altria forecasts that 2008 adjusted full-year diluted earnings from continuing operations will be in the range of $1.63 to $1.67 a share.
AstraZeneca lifted its annual core earnings per share view by 15 cents a share to a range of $4.60 to $4.90 on a "good" operational and financial performance and further currency benefits.
Consumer inflation in the 15-nation euro zone accelerated at a record annual pace of 4.1% in July, according to a preliminary estimate by Eurostat. Annual inflation hit 4% in June, more than twice the European Central Bank's annual target of near but just below 2%.
U.K. house prices fell 1.7% during July, or down 8.1% on an annual basis, the lender Nationwide reported Thursday. That's the biggest annual fall since Nationwide began recording statistics in 1991.
Royal Dutch Shell became the second oil explorer to top the $10 billion mark for earnings in a single quarter, with its second-quarter profit rising 33% to $11.56 billion. Stripping out price changes on unsold inventories, and Shell's profit rose a more modest 5% to $7.9 billion, and the quarter also included a net $73 million in one-time gains. Production fell 1% to 3.05 million barrels of oil equivalent a day.
Marathon Oil reports quarterly results prior to Thursday's opening. Here are some comments prior to the release: Because demand for gasoline has fallen in recent months, companies like Marathon haven't been able to raise wholesale and retail prices fast enough to keep up with crude prices and other escalating expenses.
BY THE NUMBERS: Analysts polled by Thomson Financial expect a profit of $1.51 per share.
ANALYST TAKE: Caris & Co. expects the company to report a profit of $1.21, well below the consensus. "Derivate-related losses in its Canadian oil sands and refining business segments will unfortunately overshadow a strong performance from its oil and gas operations as well as its integrated gas business," the investment bank said in a note to clients this week.
Marathon Oil Cop.said second-quarter net income fell by half to $774 million, or $1.08 a share, from $1.55 billion, or $2.25 a share in the year-ago period. Adjusted net income fell to $1.20 a share from $2.25 a share. Analysts expected earnings of $1.54 a share, on average, according to a FactSet Rearch survey. The Houston oil and gas firm said the three months ended June 30 were challenging. Marathon cited, "significantly lower" refining and wholesale marketing margins and a derivatives loss incurred in its Oil Sands Mining segment. However, its upstream business posted a record quarter and its gas segment continues to perform well, Marathon said.
"While the downstream environment remains challenged with tight margins, Marathon is focused on lowering feedstock costs and increasing efficiency and flexibility by expanding our coking capacity. The 180,000 barrels per day (bpd) refinery expansion at our facility in Garyville, La., is almost 60 percent complete, on budget and scheduled for late 2009 startup. Construction recently started on the Detroit Heavy Oil Upgrading Project, and upon completion in late 2010, it will allow us to refine an additional 80,000 bpd of heavy crude oil," Cazalot said.
Marathon continues to ramp up production in the Bakken Shale resource play in North Dakota. The Company currently has seven rigs drilling which are achieving best-in-class drilling performance and continue to improve drilling time and well costs. Marathon expects to drill approximately 65 company- operated Bakken wells in 2008, and will have approximately 100 wells in the play by the end of the year. The Company's net production from the Bakken Shale increased 130 percent from the fourth quarter 2007 rate of 2,170 boepd to the second quarter of 2008 rate of 5,070 boepd, and is currently producing 6,200 boepd.
Marathon Oil Corp.said it's mulling a split of its operations into two publicly traded entities. One of the firms would consist of Marathon's exploration-and-production, integrated-gas and oil-sands-mining businesses, while the other would include its refining, marketing and transportation operations, the company said in a statement on Thursday. The board will decide in the fourth quarter whether to execute the split, Marathon said. If the directors give the go-ahead, the split likely would occur in 2009's first quarter.
Deutsche Bank took another €2.3bn hit on the value of its securities as second-quarter profits declined sharply at Germany’s largest bank.
Announcing net income of €645m for the three months to June – down from €1.8bn in the same period in 2007 – Josef Ackermann, chief executive, on Thursday highlighted measures taken to cut exposure to some of the bank’s riskiest investments.
Peter Goodman: "The number of Americans who have seen their full-time jobs chopped to part time because of weak business has swelled to more than 3.7 million — the largest figure since the government began tracking such data more than half a century ago."
BASF, the German chemical giant, is reportedly considering a major acquisition, with United States-based W.R. Grace said to be a possible target, according to a report in The Financial Times Deutschland.
In one of the largest rounds of job cuts to hit the legal community since mortgage meltdown began, Cadwalader, Wickersham & Taft announced that it is laying off 96 lawyers in the United States and Britain due to continued slowness in real estate finance and securitization, the firm’s core practices.
The latest round of layoffs comes after the New York law firm let go 35 lawyers in January.
Houston Chronicle: "The Houston company formed to develop nanoshells, Nanospectra Biosciences, has just begun its first human clinical trial, treating a patient with head and neck cancer.
The company hopes to heat nanoshells in the tumor with near-infrared light, burning the cancerous growth away.
For the company and for Houston, the trial marks a big step.
Nanoshells -- tiny spheres of glass coated with gold -- are the first engineered nanomaterial to enter into human trials. And discoveries made in Houston labs are typically developed by biotechnology firms elsewhere, such as Boston or San Diego.
"I'm thrilled," said Naomi Halas, the Rice chemist who created nanoshells in 1997 and realized a few years later their potential to treat cancer. "There's no question it's been a long road, but we always knew it was going to be that way."
Royal Dutch Shell said as much as 220,000 barrels a day of crude production in Nigeria is shut in because of militant attacks.
Drug store and pharmacy operator CVS Caremark says its second-quarter profit grew 7 percent due to improved sales at its retail drug stores.
The Financial Accounting Standards Board postponed a measure, opposed by Citigroup Inc. and the securities industry, forcing banks to bring off-balance-sheet assets such as mortgages and credit-card receivables back onto their books.
FASB, the Norwalk, Connecticut-based panel that sets U.S. accounting standards, voted 5-0 today to delay the rule change until fiscal years starting after Nov. 15, 2009. The board needs to give financial institutions more time to prepare for the switch, FASB member Thomas Linsmeier said at a board meeting. What a bunch of crap!
Brett Steenbarger: "You will never achieve great things surrounded by mediocrity. If you want to see what to change in yourself, look at what's missing around you."
Bristol-Myers Squibb Co.has offered to purchase the remaining shares of ImClone for $4.5 billion, or $60 each.
Just when American International Group Inc. shareholders figured things couldn't get worse at the world's largest insurer, profit from the company's private equity and hedge fund investments is evaporating.
Earnings from so-called alternative holdings were probably close to zero in the second quarter, after soaring 77 percent to $1.02 billion a year earlier, said Citigroup Inc. analyst Joshua Shanker. The drop follows the worst first half for hedge funds in almost two decades and a 73 percent decline in the value of announced leveraged buyouts, according to data compiled by Chicago-based Hedge Fund Research Inc. and Bloomberg.
The Oil Drum: "An important Dutch energy institute, the Clingendael International Energy Program (CIEP), recently published a report that confirms most of the conclusions about the oil market reached over the years at the oildrum. That the floor price of oil is now 110 dollars per barrel, that supply will not rise beyond 100-105 million b/d in the coming decades, that there will be an oil supply constraint for most of the next decade, that there are insufficient quantities of alternative fuels available and that thus demand destruction is inevitable. CIEP is especially important because it is endorsed by amongst others BP, Shell Netherlands, Total E&P Netherlands, three Dutch Ministries, Wintershall, Vopak Oil Europe Middle East and several Dutch energy companies. The report in english can be downloaded here (PDF 2.8 megabytes, 108 pages)...'This outlook of new scarcity is now exacerbated by the fact that not only available supply will determine what amount of demand can be satisfied; it will also bring about a new allocation of the available oil due to a lack of adequate supply growth compared with demand. In practice this means that demand rationing will be required in the OECD countries and particularly in the US, in order to accommodate growth in the newly developing countries, notably China and India. Different fuel prices for end-consumers in the different countries will be the dominant factor behind this ‘oil redistribution’.
GMAC Financial Services reported Thursday a 2008 second-quarter net loss of $2.5 billion, compared to net profit of $293 million in the second quarter of 2007. Affecting results in the quarter were a $716 million impairment of vehicle operating lease assets in the automotive finance business as a result of declining vehicle sales and lower used vehicle prices for certain segments, as well as significant losses at Residential Capital, LLC (ResCap) related to asset sales, valuation adjustments, and loan-loss provisions, the company said. These items were partially offset by profitable results in the insurance and international auto finance businesses, it said. Credit losses increased in the second quarter to 1.40% of managed retail assets, versus 0.92% in the second quarter of 2007, it said.
The costs of employing a U.S. worker held steady in the June quarter, the Labor Department reported Thursday. Overall compensation costs rose 0.7%, matching the prior quarter's gain. Economists were expecting a rise of 0.8%. In the June quarter, wage and salary costs rose 0.7%, compared with 0.8% growth in the prior quarter. Benefit costs in the June quarter increased 0.6%, matching the prior quarter. However, state and local government compensation rose 9%--big government is a cancerous growth.
The U.S. economy contracted in the fourth quarter of 2007, the first quarter of negative growth since the 2001 recession, the Commerce Department said Thursday in its annual revision to gross domestic product. Real GDP fell 0.2% in the quarter, compared with the 0.6% increase previously reported. Many economists who believe the economy is in recession believe it began in the fourth quarter. Growth in this year's first quarter of 2008 was revised lower. Separately, the Labor Department said initial claims for unemployment benefits rose 44,000 to 448,000 in the week ended July 26. The four-week moving average of initial claims rose 11,000 to 393,000. Meanwhile, the number of Americans receiving state jobless benefits rose 185,000 to 3.28 million in the week ending July 19. The four-week moving average of continuing claims rose 42,750 to 3.17 million.
Boosted by stimulus checks from Uncle Sam and big drop in imports, real growth in the U.S. economy accelerated in the second quarter to a 1.9% annual rate, the Commerce Department reported Thursday. Consumer spending was supported by the largest increase in disposable personal income in six years, thanks largely to about $75 billion in tax-rebate checks from Washington. The economy was held back by the crumbling housing market and by a huge drop in inventories. Investments in equipment and software also fell during the quarter. The economy grew a revised 0.9% annual rate in the first quarter.
Romania's central bank raised its benchmark interest rate by 25 basis points to 10.25% Thursday to fight inflationary pressures in the economy.
The Chicago business barometer rose to 50.8% from 49.6% in June.
Apache Corp.reported second-quarter net income more than doubled on 58% higher revenue. Earnings reached $1.45 billion, or $4.28 a share, from $633.5 million, or $1.89, in the year-earlier period. Revenue rose to $3.9 billion from $2.47 billion.
"It's the deal from hell," says Sam Zell, never one to mince words. "And it will continue to be the deal from hell until we turn it around." Zell is talking, of course, about his $8.5 billion purchase of Tribune Co. in December 2007, a transaction that's shaping up to be one of the most disastrous the media world has ever seen.
Top U.S. refiner Valero plans to cut gasoline production by an average of 330,000 barrels per day (bpd) in the third quarter at its 16 plants. At the same time Valero is looking to increase diesel production and export the diesel to foreign markets where the demand is high.
U.S. natural gas inventories rose 65 billion cubic feet in the week ending July 25, the Energy Information Administration reported on Thursday. At 2,461 billion cubic feet, natural gas stocks were 357 billion cubic feet less than last year at this time and 12 billion cubic feet below the five-year average, the EIA said.
According to AMG Data Services, including ETF activity, Equity funds report net cash inflows totaling $2.747 billion in the week ended 7/30/08 with Domestic funds reporting net inflows of $3.074 billion and Non-domestic funds reporting net outflows of -$327 million;
Excluding ETF activity, Equity funds report net cash outflows totaling -$1.304 billion with Domestic funds reporting net outflows of -$785 million and Non-domestic funds reporting net outflows totaling -$520 million;
Exchange Traded (Equity) funds report net inflows of $4.051 billion.
Inflation
Including ETF activity, Equity funds report net cash inflows totaling $2.747 billion in the week ended 7/30/08 with Domestic funds reporting net inflows of $3.074 billion and Non-domestic funds reporting net outflows of -$327 million;
Excluding ETF activity, Equity funds report net cash outflows totaling -$1.304 billion with Domestic funds reporting net outflows of -$785 million and Non-domestic funds reporting net outflows totaling -$520 million;
Exchange Traded (Equity) funds report net inflows of $4.051 billion
Excluding ETF activity, Equity funds report net cash outflows totaling -$1.304 billion with Domestic funds reporting net outflows of -$785 million and Non-domestic funds reporting net outflows totaling -$520 million;
Exchange Traded (Equity) funds report net inflows of $4.051 billion
Wednesday, July 30, 2008
The Crude Rally
7/31/08 The Crude Rally
Barack Obama told House Democrats on Tuesday that as president he would order his attorney general to scour White House executive orders and expunge any that "trample on liberty," several lawmakers said.
Obama also met with Pakistan's new leader, Prime Minister Yousuf Raza Gilani.
At a fundraising luncheon, he said he told Gilani "the only way we're going to be successful in the long term in defeating extremists ... is if we are giving people opportunities. If people have a chance for a better life, then they are not as likely to turn to the ideologies of violence and despair."
Bernard M. Baruch: "During my eighty-seven years I have witnessed a whole succession of technological revolutions. But none of them has done away with the need for character in the individual or the ability to think."
S&P said Tuesday it sees the default rate on high-yield corporate debt rising to 4.9% over the next 12 months - from a current 1.9%.
Economic sentiment plunged across the 15-nation euro zone in July, with the European Commission's economic sentiment indicator falling to 89.5 from 94.8 in June -- the biggest monthly drop since October 2001.
Japan's industrial production fell by a seasonally-adjusted 2% in June from the previous month on a decrease in the output of passenger cars and semiconductor products machinery, according to preliminary data released by the government Wednesday.
Paul Kasriel: "Current corporate profit behavior is consistent with past behavior in periods of recession."
Jesse Livermore: “And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine – that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.”
Back in March, I discussed the value in Amgen in the $41-$42 range. With the stock at $62+, I think it's prudent to ring the register. The risk/reward has changed significantly.
Garmin, which makes GPS devices, also said it expects to report full-year earnings of $4.13 a share, excluding foreign exchange, on revenue of $3.9 billion, citing macroeconomic conditions and high fuel prices. Previously, the company said it expected earnings to exceed $4.40 per share. Estimates include 27 cents per share related to the tender of Tele Atlas NV shares.
Avon Products Inc. said Wednesday that its second-quarter profit more than doubled to $235.6 million, or 55 cents a share, from $112.7 million, or 26 cents, a year earlier.
Comcast's free cash flow in the quarter quadrupled to $1.16 billion from $368 million.
Cameron said second-quarter net income rose 23% to $152 million, or 65 cents a share from $123.2 million, or 54 cents a share in the year-ago period. The Houston oil services firm said revenue increased 30% to $1.5 billion.
SPX now expects to earn $6.40 to $6.60 a share this year. That's up from the previous estimate of $6.20 to $6.40. The company had lifted the estimate for the first time in April, from a range of $6 to $6.20.
The US Securities and Exchange Commission on Tuesday night extended an emergency order against abusive short-selling in a select group of financial stocks as it prepares new rule proposals to ban the practice across the entire market.
The emergency order, which bars so-called “naked short-selling” in shares of the mortgage financiers Fannie Mae and Freddie Mac and 17 banks, including big Wall Street firms, was due to expire late Tuesday night. It will now be in effect until August 12 and will not be further extended, the SEC said.
Mortgage application volume tumbled 14.1 percent during the week ending July 25, hitting its lowest level of the year, according to the Mortgage Bankers Association's weekly application survey.
Volume fell even though interest rates on fixed-rate mortgages retreated from sharp increases a week earlier.
Refinance volume plunged 22.9 percent during the week, while purchase application volume fell 7.8 percent. Refinance applications accounted for 35.2 percent of total application volume during the week.
The overall application index fell to 420.8 from 489.6 a week earlier.
WSJ Editorial: "Meeting with us last December, before the primaries, he declared that "I will not agree to any tax increase," repeating the phrase for emphasis. He did not say any tax increase with the exception of Social Security. If Mr. McCain can't convince voters that he's better on taxes than is a Democrat who says matter-of-factly that he wants to raise taxes, the Republican is going to lose in a rout."
"I'd rate (earnings so far) as pretty bad," said Sam Stovall, chief investment strategist at S&P Equity Research. S&P forecast a 10% drop at the start of the quarter but now sees about a 20% shortfall, he said."
Office Depot Inc., the world's second-largest office-supplies retailer, posted a second-quarter loss as smaller businesses and consumers pared purchases at its U.S. and Canadian stores.
The loss was $2 million, or 1 cent a share, compared with net income of $105.6 million, or 38 cents, a year earlier, the company said today in a statement distributed by Business Wire. Excluding one-time items, earnings beat analyst estimates. Revenue fell to $3.61 billion from $3.63 billion.
S & A Restaurant Corp and some of its affiliates, which are popularly known as Bennigan's, Steak & Ale and Tavern restaurants, filed for Chapter 7 bankruptcy, said a statement from Plano, Texas-based Metromedia Restaurant Group, which ultimately owns all three restaurant chains.
Richard Daughty: "The historical high for silver was set 531 years ago in 1477, topping at (using the purchasing power of 1998 dollars) a princely $806 an ounce. By comparison, the price of silver less than $19 an ounce today, and was only about $5 an ounce in 1998, after having bottomed at under $4 an ounce in 1992.
Now, fast-forward to today as our 2008 dollars, which have fallen 50% in purchasing power since 1998, means that the all-time high price for silver, set in 1477, now stands at $1,012 an ounce, measured in the buying power of 2008 dollars! Over a thousand dollars an ounce! For silver! Whee!
In case you ain't noticed, we're unmistakably coming off the lows of a 530-year bear market in silver and, theoretically, entering a long bull market, which ought to be exciting to people who have a lot riding on silver gaining so much in price (me), or even just keep up with this kind of thing, like, for instance, Israel Friedman, writing at InvestmentRarities.com, who notes that there are 5 billion ounces of gold sitting around someplace in the world, but that there are only 2.5 billion ounces of silver, even though 5 times as much silver is mined every year than gold.
Therefore, silver is being consumed at prodigious rates, which is why Mr. Friedman says, "Silver is needed to maintain and improve future standards of living. Gold is needed for luxury and emotional reasons. Silver is for the optimist, gold for the pessimist."
Paul Kasriel: " From 1952 through 1998, household net financial investment had consistently been positive. Even with the generous tax treatment on capital gains and dividends instituted by the current Bush administration, household net financial investment as a percent of disposable personal income plumbed new lows. The standard measure of the household saving rate plumbed post-World War II lows in the past seven years."
Venezuela plans to maintain its stance not to increase oil output at the upcoming meeting of the Organization of Petroleum Exporting Countries, the oil minister said Tuesday.
"We maintain our position that we see no need for OPEC to increase oil output," Oil Minister Rafael Ramirez told reporters. "It would be a mistake to increase output and flood the market with oil since this would lead to a price collapse."
Hess Corp.said second-quarter net income rose to $900 million, or $2.76 a share, from $557 million, or $1.75 a share in the year-ago period. Oil and gas production rose 4% to 393,000 barrels a day from 378,000 barrels a day.
U.S. private-sector employment rose by 9,000 in July, according to the ADP employment index released Wednesday. Adding in some 20,000 government workers typically hired in a given month, the ADP index suggests U.S. nonfarm payrolls rose by about 30,000 in July.
Nouriel Roubini: "Super-Senior Tranches of CDOs are Worth Much Less than 22 Cents on the Dollar: Another Ponzi Scheme of “Selling” Toxic Garbage with More Leverage
Merrill Lynch decision to “sell” a good chunk of its remaining CDOs at 22 cents to the dollar has been widely praised as the firm finally recognizing the full extent of its losses on these toxic instruments. This batch of $30.6 billion of CDOs was already marked down to $11.1 billion. Now with the “sale” of it to Lone Star at a price of 6.7 billion Merrill Lynch is taking another $4.4 billion writedown and “selling” it at 22% of the original face value.
But is this a market-based “sale”? No way as calling this transaction a “sale” is a joke."
Gov. David A. Paterson announced on Tuesday afternoon that he would call the Legislature into an emergency session on Aug. 19 to address what he called an economic and budget crisis confronting New York State as a result of plummeting revenues and rising costs.
On the 27th of June tens of citizens of the Russian city of Kaliningrad witnessed an UFO. For nearly an hour the unknown silver object hung over the local Blue Lakes. According to the witnesses, the discus-shaped UFO attracted attention of the locals who had a rest at the lakes and they started waving their hands as a sign of greeting to the object. Some people started making shots of the object and shooting video with their mobile phones.
Despite the fact that tens of people witnessed the phenomenon, neither Baltic Navy nor the Ministry of Emergency Situations have officially commented the incident saying that they have not registered any unknown flying objects on that day.
UK's DailyMail: "A new drug halts the devastating progress of Alzheimer’s disease, say British scientists.It is said to be more than twice as effective as current treatments.
A daily capsule of rember, as the drug is known, stops Alzheimer’s disease progressing by as much as 81 per cent, according to trial results.
Patients with the brain disorder had no significant decline in their mental function over a 19-month period.
‘We appear to be bringing the worst affected parts of the brain functionally back to life,’ said Dr Claude Wischik, who led the research.
It is the first time medication has been developed to target the ‘tangles’ in the brain that destroy nerve cells, leading to deteriorating memory."
The Treasury Department will auction $27 billion in notes and bonds next week in its quarterly refunding auctions, the government said Wednesday. The department will auction $17 billion in 10-year notes and $10 billion in a 29-year, 9-month bonds to refund $43.5 billion in maturing securities and pay down approximately $16.5 billion. Treasury said it was considering a second reopening of the 10-year note in the month following the first reopening and moving to quarterly new issue 30-year bond auctions.
The Federal Reserve announced Wednesday several steps, including longer-term credit, in its efforts to provide cash to unfreeze financial markets. The Fed said it will now offer 84-day credits in addition to 28-day loans. The central bank also announced that it has extended its loans to broker-dealers, who are also primary dealers of Treasury debt, to the end of January from mid-September. The Fed will also auction options for primary dealers to borrow Treasury securities. These options are designed to help firms navigate periods of elevated stress in markets, such as quarter-ends. The Fed said the European Central Bank and the Swiss National Bank were also adding lengthier maturities. The Fed will increase its swap line with the ECB to $55 billion to help this shift to lengthier maturities.
"Now that Centex has $1.24 billion in cash on its balance sheet, the urgency to harvest assets through land sales, divestitures and aggressive pricing has diminished," said Deutsche Bank analysts in response to Centex's earnings report released after Tuesday's closing bell. "Impairments of $80 million were also down dramatically and at their lowest level in two years."
The Federal Reserve extended two emergency lending programs to Wall Street firms until Jan. 30, 2009, ``in light of continued fragile circumstances in financial markets,'' the central bank said today.
Hess Corp.said on a conference call with analysts that it has increased its acreage position in the Bakken Play in North Dakota to about 500,000 acres. Hess currently has seven rigs operating in the Bakken and will add one additional rig in the fourth quarter.
U.S. crude inventories fell less than expected, down 100,000 barrels to 295.2 million barrels in the week ending July 25, the U.S. Energy Information Administration reported on Wednesday. Analysts surveyed by energy information provider Platts expected a drop of 1.3 million barrels. After the data, crude-oil futures for September delivery pared losses, falling 10 cents, or 0.1%, to $122.09 a barrel on the New York Mercantile Exchange. Crude was down nearly 1% before the data. Gasoline supplies fell by 3.5 million barrels in the latest week, and distillate stocks gained by 2.4 million barrels, the EIA reported.
U.S. crude inventories fell by 2.1 million barrels to 302.7 million barrels in the week ending July 25, the American Petroleum Institute reported on Wednesday. Distillate stocks fell by 587,000 barrels to 126 million barrels in the same period, while gasoline stocks dropped 3.8 million barrels to 210 million barrels. In a separate report, the U.S. Energy Information Administration said crude inventories fell 100,000 barrels to 295.1 million barrels. The API, an association of the U.S. oil and natural gas industry, calculates inventories based on different criteria.
A House panel Wednesday voted to cite former top White House aide Karl Rove for contempt of Congress for defying a subpoena to answer questions about the dismissals of several federal prosecutors as its Senate counterpart explored punishments for an array of alleged Bush administration misdeeds.
The U.S. economy next year will be weaker than this year, the International Monetary Fund said Wednesday. Past history shows that the recovery from housing busts is often slow, the IMF said. The Fed should hold interest rates steady at 2%, but get ready to tighten if inflation risks mount.
Visa Inc.said late Wednesday that fiscal third-quarter net income came in at $422 million, or 51 cents per class A share, up 41% from a year earlier when the payment processing giant made $299 million. Visa was a private company a year ago, so it didn't have publicly-traded shares. Adjusting for certain costs from litigation and other issues, net income was $457 million, or 59 cents per class A common share, in the latest quarter, the company said.
Walt Disney Co. reported a fiscal third-quarter profit of $1.28 billion, or 66 cents a share, up from $1.18 billion, or 57 cents a share, a year ago. The most recent quarter included a one-time, per-share gain of 4 cents.
Express Scripts sees 2008 adjusted earnings of $3.03 to $3.10 a share. Analysts expect $3 a share.
The Dow Jones Industrial Average gained 186 points to end at 11,583. The Dow has now rallied more than 451 points over the past two sessions. The S&P 500 index gained 21 points to end at 1,284, while the Nasdaq Composite rose 10 points to 2,329.
The railroad stocks had a particularly strong day, and the last week has been good for that sector. The refining stocks also put in a strong performance, and that was led by Sunoco which rose $5.38 to $42.53. Harbinger Capital filed a 13D with 6.6% ownership. That's the same fund that owns 16% of Cleveland Cliffs. It was one year ago that I suggested purchase of Cleveland Cliffs at $35. It closed at $116. Just recently I suggested purchase of Sunoco at $35.
September crude closed at $126.77 per barrel in New York Wednesday, up $4.58, or 3.8%, for the trading session. August gold closed at $902.90 an ounce in New York Wednesday.
General Motors Corp. plans to cut 15% of its salaried workforce in the United States by November, The Wall Street Journal reported Wednesday on its Web site.
Barack Obama told House Democrats on Tuesday that as president he would order his attorney general to scour White House executive orders and expunge any that "trample on liberty," several lawmakers said.
Obama also met with Pakistan's new leader, Prime Minister Yousuf Raza Gilani.
At a fundraising luncheon, he said he told Gilani "the only way we're going to be successful in the long term in defeating extremists ... is if we are giving people opportunities. If people have a chance for a better life, then they are not as likely to turn to the ideologies of violence and despair."
Bernard M. Baruch: "During my eighty-seven years I have witnessed a whole succession of technological revolutions. But none of them has done away with the need for character in the individual or the ability to think."
S&P said Tuesday it sees the default rate on high-yield corporate debt rising to 4.9% over the next 12 months - from a current 1.9%.
Economic sentiment plunged across the 15-nation euro zone in July, with the European Commission's economic sentiment indicator falling to 89.5 from 94.8 in June -- the biggest monthly drop since October 2001.
Japan's industrial production fell by a seasonally-adjusted 2% in June from the previous month on a decrease in the output of passenger cars and semiconductor products machinery, according to preliminary data released by the government Wednesday.
Paul Kasriel: "Current corporate profit behavior is consistent with past behavior in periods of recession."
Jesse Livermore: “And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine – that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.”
Back in March, I discussed the value in Amgen in the $41-$42 range. With the stock at $62+, I think it's prudent to ring the register. The risk/reward has changed significantly.
Garmin, which makes GPS devices, also said it expects to report full-year earnings of $4.13 a share, excluding foreign exchange, on revenue of $3.9 billion, citing macroeconomic conditions and high fuel prices. Previously, the company said it expected earnings to exceed $4.40 per share. Estimates include 27 cents per share related to the tender of Tele Atlas NV shares.
Avon Products Inc. said Wednesday that its second-quarter profit more than doubled to $235.6 million, or 55 cents a share, from $112.7 million, or 26 cents, a year earlier.
Comcast's free cash flow in the quarter quadrupled to $1.16 billion from $368 million.
Cameron said second-quarter net income rose 23% to $152 million, or 65 cents a share from $123.2 million, or 54 cents a share in the year-ago period. The Houston oil services firm said revenue increased 30% to $1.5 billion.
SPX now expects to earn $6.40 to $6.60 a share this year. That's up from the previous estimate of $6.20 to $6.40. The company had lifted the estimate for the first time in April, from a range of $6 to $6.20.
The US Securities and Exchange Commission on Tuesday night extended an emergency order against abusive short-selling in a select group of financial stocks as it prepares new rule proposals to ban the practice across the entire market.
The emergency order, which bars so-called “naked short-selling” in shares of the mortgage financiers Fannie Mae and Freddie Mac and 17 banks, including big Wall Street firms, was due to expire late Tuesday night. It will now be in effect until August 12 and will not be further extended, the SEC said.
Mortgage application volume tumbled 14.1 percent during the week ending July 25, hitting its lowest level of the year, according to the Mortgage Bankers Association's weekly application survey.
Volume fell even though interest rates on fixed-rate mortgages retreated from sharp increases a week earlier.
Refinance volume plunged 22.9 percent during the week, while purchase application volume fell 7.8 percent. Refinance applications accounted for 35.2 percent of total application volume during the week.
The overall application index fell to 420.8 from 489.6 a week earlier.
WSJ Editorial: "Meeting with us last December, before the primaries, he declared that "I will not agree to any tax increase," repeating the phrase for emphasis. He did not say any tax increase with the exception of Social Security. If Mr. McCain can't convince voters that he's better on taxes than is a Democrat who says matter-of-factly that he wants to raise taxes, the Republican is going to lose in a rout."
"I'd rate (earnings so far) as pretty bad," said Sam Stovall, chief investment strategist at S&P Equity Research. S&P forecast a 10% drop at the start of the quarter but now sees about a 20% shortfall, he said."
Office Depot Inc., the world's second-largest office-supplies retailer, posted a second-quarter loss as smaller businesses and consumers pared purchases at its U.S. and Canadian stores.
The loss was $2 million, or 1 cent a share, compared with net income of $105.6 million, or 38 cents, a year earlier, the company said today in a statement distributed by Business Wire. Excluding one-time items, earnings beat analyst estimates. Revenue fell to $3.61 billion from $3.63 billion.
S & A Restaurant Corp and some of its affiliates, which are popularly known as Bennigan's, Steak & Ale and Tavern restaurants, filed for Chapter 7 bankruptcy, said a statement from Plano, Texas-based Metromedia Restaurant Group, which ultimately owns all three restaurant chains.
Richard Daughty: "The historical high for silver was set 531 years ago in 1477, topping at (using the purchasing power of 1998 dollars) a princely $806 an ounce. By comparison, the price of silver less than $19 an ounce today, and was only about $5 an ounce in 1998, after having bottomed at under $4 an ounce in 1992.
Now, fast-forward to today as our 2008 dollars, which have fallen 50% in purchasing power since 1998, means that the all-time high price for silver, set in 1477, now stands at $1,012 an ounce, measured in the buying power of 2008 dollars! Over a thousand dollars an ounce! For silver! Whee!
In case you ain't noticed, we're unmistakably coming off the lows of a 530-year bear market in silver and, theoretically, entering a long bull market, which ought to be exciting to people who have a lot riding on silver gaining so much in price (me), or even just keep up with this kind of thing, like, for instance, Israel Friedman, writing at InvestmentRarities.com, who notes that there are 5 billion ounces of gold sitting around someplace in the world, but that there are only 2.5 billion ounces of silver, even though 5 times as much silver is mined every year than gold.
Therefore, silver is being consumed at prodigious rates, which is why Mr. Friedman says, "Silver is needed to maintain and improve future standards of living. Gold is needed for luxury and emotional reasons. Silver is for the optimist, gold for the pessimist."
Paul Kasriel: " From 1952 through 1998, household net financial investment had consistently been positive. Even with the generous tax treatment on capital gains and dividends instituted by the current Bush administration, household net financial investment as a percent of disposable personal income plumbed new lows. The standard measure of the household saving rate plumbed post-World War II lows in the past seven years."
Venezuela plans to maintain its stance not to increase oil output at the upcoming meeting of the Organization of Petroleum Exporting Countries, the oil minister said Tuesday.
"We maintain our position that we see no need for OPEC to increase oil output," Oil Minister Rafael Ramirez told reporters. "It would be a mistake to increase output and flood the market with oil since this would lead to a price collapse."
Hess Corp.said second-quarter net income rose to $900 million, or $2.76 a share, from $557 million, or $1.75 a share in the year-ago period. Oil and gas production rose 4% to 393,000 barrels a day from 378,000 barrels a day.
U.S. private-sector employment rose by 9,000 in July, according to the ADP employment index released Wednesday. Adding in some 20,000 government workers typically hired in a given month, the ADP index suggests U.S. nonfarm payrolls rose by about 30,000 in July.
Nouriel Roubini: "Super-Senior Tranches of CDOs are Worth Much Less than 22 Cents on the Dollar: Another Ponzi Scheme of “Selling” Toxic Garbage with More Leverage
Merrill Lynch decision to “sell” a good chunk of its remaining CDOs at 22 cents to the dollar has been widely praised as the firm finally recognizing the full extent of its losses on these toxic instruments. This batch of $30.6 billion of CDOs was already marked down to $11.1 billion. Now with the “sale” of it to Lone Star at a price of 6.7 billion Merrill Lynch is taking another $4.4 billion writedown and “selling” it at 22% of the original face value.
But is this a market-based “sale”? No way as calling this transaction a “sale” is a joke."
Gov. David A. Paterson announced on Tuesday afternoon that he would call the Legislature into an emergency session on Aug. 19 to address what he called an economic and budget crisis confronting New York State as a result of plummeting revenues and rising costs.
On the 27th of June tens of citizens of the Russian city of Kaliningrad witnessed an UFO. For nearly an hour the unknown silver object hung over the local Blue Lakes. According to the witnesses, the discus-shaped UFO attracted attention of the locals who had a rest at the lakes and they started waving their hands as a sign of greeting to the object. Some people started making shots of the object and shooting video with their mobile phones.
Despite the fact that tens of people witnessed the phenomenon, neither Baltic Navy nor the Ministry of Emergency Situations have officially commented the incident saying that they have not registered any unknown flying objects on that day.
UK's DailyMail: "A new drug halts the devastating progress of Alzheimer’s disease, say British scientists.It is said to be more than twice as effective as current treatments.
A daily capsule of rember, as the drug is known, stops Alzheimer’s disease progressing by as much as 81 per cent, according to trial results.
Patients with the brain disorder had no significant decline in their mental function over a 19-month period.
‘We appear to be bringing the worst affected parts of the brain functionally back to life,’ said Dr Claude Wischik, who led the research.
It is the first time medication has been developed to target the ‘tangles’ in the brain that destroy nerve cells, leading to deteriorating memory."
The Treasury Department will auction $27 billion in notes and bonds next week in its quarterly refunding auctions, the government said Wednesday. The department will auction $17 billion in 10-year notes and $10 billion in a 29-year, 9-month bonds to refund $43.5 billion in maturing securities and pay down approximately $16.5 billion. Treasury said it was considering a second reopening of the 10-year note in the month following the first reopening and moving to quarterly new issue 30-year bond auctions.
The Federal Reserve announced Wednesday several steps, including longer-term credit, in its efforts to provide cash to unfreeze financial markets. The Fed said it will now offer 84-day credits in addition to 28-day loans. The central bank also announced that it has extended its loans to broker-dealers, who are also primary dealers of Treasury debt, to the end of January from mid-September. The Fed will also auction options for primary dealers to borrow Treasury securities. These options are designed to help firms navigate periods of elevated stress in markets, such as quarter-ends. The Fed said the European Central Bank and the Swiss National Bank were also adding lengthier maturities. The Fed will increase its swap line with the ECB to $55 billion to help this shift to lengthier maturities.
"Now that Centex has $1.24 billion in cash on its balance sheet, the urgency to harvest assets through land sales, divestitures and aggressive pricing has diminished," said Deutsche Bank analysts in response to Centex's earnings report released after Tuesday's closing bell. "Impairments of $80 million were also down dramatically and at their lowest level in two years."
The Federal Reserve extended two emergency lending programs to Wall Street firms until Jan. 30, 2009, ``in light of continued fragile circumstances in financial markets,'' the central bank said today.
Hess Corp.said on a conference call with analysts that it has increased its acreage position in the Bakken Play in North Dakota to about 500,000 acres. Hess currently has seven rigs operating in the Bakken and will add one additional rig in the fourth quarter.
U.S. crude inventories fell less than expected, down 100,000 barrels to 295.2 million barrels in the week ending July 25, the U.S. Energy Information Administration reported on Wednesday. Analysts surveyed by energy information provider Platts expected a drop of 1.3 million barrels. After the data, crude-oil futures for September delivery pared losses, falling 10 cents, or 0.1%, to $122.09 a barrel on the New York Mercantile Exchange. Crude was down nearly 1% before the data. Gasoline supplies fell by 3.5 million barrels in the latest week, and distillate stocks gained by 2.4 million barrels, the EIA reported.
U.S. crude inventories fell by 2.1 million barrels to 302.7 million barrels in the week ending July 25, the American Petroleum Institute reported on Wednesday. Distillate stocks fell by 587,000 barrels to 126 million barrels in the same period, while gasoline stocks dropped 3.8 million barrels to 210 million barrels. In a separate report, the U.S. Energy Information Administration said crude inventories fell 100,000 barrels to 295.1 million barrels. The API, an association of the U.S. oil and natural gas industry, calculates inventories based on different criteria.
A House panel Wednesday voted to cite former top White House aide Karl Rove for contempt of Congress for defying a subpoena to answer questions about the dismissals of several federal prosecutors as its Senate counterpart explored punishments for an array of alleged Bush administration misdeeds.
The U.S. economy next year will be weaker than this year, the International Monetary Fund said Wednesday. Past history shows that the recovery from housing busts is often slow, the IMF said. The Fed should hold interest rates steady at 2%, but get ready to tighten if inflation risks mount.
Visa Inc.said late Wednesday that fiscal third-quarter net income came in at $422 million, or 51 cents per class A share, up 41% from a year earlier when the payment processing giant made $299 million. Visa was a private company a year ago, so it didn't have publicly-traded shares. Adjusting for certain costs from litigation and other issues, net income was $457 million, or 59 cents per class A common share, in the latest quarter, the company said.
Walt Disney Co. reported a fiscal third-quarter profit of $1.28 billion, or 66 cents a share, up from $1.18 billion, or 57 cents a share, a year ago. The most recent quarter included a one-time, per-share gain of 4 cents.
Express Scripts sees 2008 adjusted earnings of $3.03 to $3.10 a share. Analysts expect $3 a share.
The Dow Jones Industrial Average gained 186 points to end at 11,583. The Dow has now rallied more than 451 points over the past two sessions. The S&P 500 index gained 21 points to end at 1,284, while the Nasdaq Composite rose 10 points to 2,329.
The railroad stocks had a particularly strong day, and the last week has been good for that sector. The refining stocks also put in a strong performance, and that was led by Sunoco which rose $5.38 to $42.53. Harbinger Capital filed a 13D with 6.6% ownership. That's the same fund that owns 16% of Cleveland Cliffs. It was one year ago that I suggested purchase of Cleveland Cliffs at $35. It closed at $116. Just recently I suggested purchase of Sunoco at $35.
September crude closed at $126.77 per barrel in New York Wednesday, up $4.58, or 3.8%, for the trading session. August gold closed at $902.90 an ounce in New York Wednesday.
General Motors Corp. plans to cut 15% of its salaried workforce in the United States by November, The Wall Street Journal reported Wednesday on its Web site.
Subscribe to:
Posts (Atom)