9/2/09 Wegelin
Wegelin & Co., Switzerland’s oldest bank, is telling wealthy clients to sell their U.S. assets, or switch banks, because of concerns new rules will saddle investors with tax obligations in the world’s biggest economy.
With oil at $68 a barrel and natural gas at $2.80 per tcf (thousand cubic feet), the price divergence between the two commodities is near a 20-year high. These prices compare with nearly a 13-to-one average this past year. If heating the home is cheap this year, more consumers will turn on the heaters, thus using up existing supply.
ZeroHedge: "With import prices down some 19% yoy and even a record 7.3% yoy if one excludes petroleum, no wonder the price of domestic purchases has already fallen into deflation. If anything, domestic purchases inflation leads trends in both GDP and core CPI, so this is significant news."
Brett Steenbarger: "One data point worth noting is that we're already seeing more stocks making 20- and 65-day lows than we saw at those August lows. That tells me that, although the market averages are above their previous low points, we're starting to see individual stocks breaking down. Of the sector groups, the raw materials stocks (XLB) are closest to those August lows, reflecting continued weakness among commodities."
The ABC News Consumer Comfort Index stands at -45 on its scale of -100 to +100, matching last week's mark as the best since May. Four weeks without any retreat is the longest such stretch since spring, when the CCI reached its 2009 high, -42 on May 10.
Utah has 25 natural gas fueling stations in operation up and down the state. The cost is about 90 cents a gallon equivalent to about three times the cost for gasoline. We have enough supply of natural gas in the U.S. to eliminate the importation of all foreign oil.
AMR Corp's American Airlines said on Tuesday it would cut 921 flight attendant jobs, part of a previously announced capacity cut as the industry struggles with flagging demand.
ADP said 298,000 private-sector jobs were lost in August, fewer than a revised 360,000 jobs lost in July. The July decline was originally reported at 371,000 last month."Employment losses are clearly diminishing," Joel Prakken, chairman of Macroeconomic Advisors, said in a statement. "Despite recent indications that overall economic activity is stabilizing, employment, which usually trails overall economic activity, is still likely to decline for at least several more months, albeit at a diminishing rate."
Layoffs planned by major U.S. corporations dropped 21% during August from July's pace of job-cut announcements, according to Challenger Gray & Christmas. The August total of 76,456 was the second lowest of 2009 as compiled by the Chicago-based outplacement firm in its tally of job-cut announcements. Layoff announcements sank to 74,393 in June, a 15-month low, then rose to 97,373 in July. Job cuts ran 14% lower than the 88,736 layoffs announced in August 2008. Including the latest month, job-cut announcements have dropped on a month-to-month basis six times in seven, Challenger Gray said. Still, the firm's unscientific count of announced job cuts for all of 2009 has now cracked the 1 million mark, exceeding 1.07 million -- 60% more than at this point a year ago. Challenger Gray's total for all of 2008 was nearly 1.224 million. The job-cut figures aren't seasonally adjusted, and count only a fraction of the actual number of layoffs that take place each month, mostly in small- and medium-sized firms.
Baker Hughes' $5.5 billion bid for BJ Services is a marriage made in recession.
The deal between the two Houston energy services companies is as much a bet on a rebound in natural gas prices as it is a strategic move for Baker Hughes to compete with Halliburton and Schlumberger. Natural gas prices have fallen 64 percent in the past year, closing Tuesday at $2.82 per million British thermal units.
Baker Hughes hopes to expand on BJ Services' expertise in drilling for shale gas, which has been one of the hottest exploration markets in recent years. Company executives predict the acquisition will add to earnings by 2011, based on the assumption of increased drilling activity that would result if prices rise to at least $6.50, said Ted Harper, a senior research analyst with Frost Investment Advisers in Houston.
“This is definitely a call that they think we are at or near the bottom,” he said.
In early Wed. trading, gold for December delivery was up $9.30, or 1%, at $965.80 an ounce in electronic trade. U.S. stock futures were under pressure, while crude oil futures rose after two days of heavy losses and ahead of petroleum inventories data.
John Wasik: "Growing unemployment, stagnant wages and diminished home equity are weighing even more on those who may join the ranks of the foreclosed. The delinquency rate on U.S. mortgages -- those falling behind on payments -- reached a record in the first half of the year, according to the Mortgage Bankers Association, a trade group in Washington.
The current deleveraging is paring consumer spending as buyers are borrowing less for everything. They don’t feel wealthy either since their retirement funds were clobbered during the last bear market.
Lost home equity not only represented diminished wealth, it hurt confidence in the future.
BP has made a giant oil discovery at its Tiber Prospect in the deepwater Gulf of Mexico.
The well, located in Keathley Canyon block 102, approximately 250 miles (400 kilometers) southeast of Houston, is in 4,132 feet (1,259 meters) of water. The Tiber well, drilled by Transocean's Deepwater Horizon semisub, was drilled to a total depth of approximately 35,055 feet (10,685 meters) making it one of the deepest wells ever drilled by the oil and gas industry. The well found oil in multiple Lower Tertiary reservoirs. Appraisal will be required to determine the size and commerciality of the discovery.
Russian Professor Igor Panarin says that events are continuing to confirm his doomsday prediction first made over 10 years ago, that the United States will completely collapse like the Soviet Union before the end of 2010, and warns that the chaos could begin to unfold in as little as two months.
Panarin, doctor of political sciences and professor of the Russian Diplomatic Academy Ministry of Foreign Affairs, told journalists during the unveiling of his new book yesterday that President Obama has done nothing to forestall the fast approaching crisis and that it could begin to properly unfold in November.
“Obama is “the president of hope”, but in a year there won’t be any hope,” said Panarin. “He’s practically another Gorbachev – he likes to talk but hasn’t really managed to do anything. Gorbachev at least had been a secretary of a regional communist party administration, whereas Obama was just a social worker. His mentality is totally different. He’s a nice person and talks nicely – but he’s not a leader and will take America to a crash. When Americans understand that – it will be like a bomb explosion.”
Yesterday Chinese Premier Wen Jiabao seemed to give assurances that there’s no reason to be concerned Beijing will be taking away the punch bowl from China’s easy-money party. According to this story from the official Xinhua news agency, “China would not change the orientation of its stimulating economic policy” and “would continue to pursue proactive fiscal and moderately easy monetary policies.” The agency went on to quote Wen directly saying “we will not change the orientation of our policy.”
Mortgage filings drop a seasonally adjusted 2.2% in the week ended Aug. 28 compared with the week before, as lower interest rates offered on home loans prove an insufficient lure for applicants, Mortgage Bankers Association data show.
The Labor Department said Wednesday that productivity, the amount of output per hour of work, rose at an annual rate of 6.6 percent in the April-June quarter, the largest advance since the summer of 2003. Economists expected an increase of 6.4 percent, matching the government's initial estimate last month.
Labor costs fell at an annual rate of 5.9 percent. That's the largest drop since the second quarter of 2000, and slightly bigger than the 5.8 percent decline estimated a month ago.
The last time natural gas prices were below $3.00 per MMBtu, oil prices were below $30 per barrel. Similarly, when oil prices have been near $70, natural gas prices have been around $6.00.
Samsonite Company Stores LLC, the U.S. retail unit of the luggage maker, on Wednesday filed for Chapter 11 protection with a prepackaged reorganization plan that includes store closures.
The company said there would be a "significant" reduction in the number of mall-based and other stores as it concentrates its efforts on its more profitable outlet stores. It did not specify how many of its 173 U.S. stores would shut down.
Factory orders increased 1.3% in July, slightly slower than the 2.0% rise expected by economists surveyed by MarketWatch. This is the fourth straight monthly increase. Orders for durable goods increased 5.1% in July, revised up from 4.9% estimated a week ago. However, orders for nondurable goods fell 1.9%, the sharpest decline since last December. Non-defense capital goods orders excluding aircraft, known as "core" orders, fell 0.3% in July after rising 3.8% in June, the government said.
Russia ’s grain exports may fall 43% to between 1.6 million metric tons and 1.8 million tons in September from a year earlier as global trade declines, said grain transporter ZAO Rusagrotrans.
- China , the world’s largest soybean importer, may purchase 2.6 million metric tons of the commodity this month, falling below 3 million tons for the second month, the China National Grain & Oils Information Center said.
The latest Rasmussen Reports national telephone survey shows that 43% would vote for their district’s Republican congressional candidate while 36% would opt for his or her Democratic opponent.
U.S. crude oil refinery inputs averaged nearly 15.0 million barrels per day
during the week ending August 28, 468 thousand barrels per day above the
previous week's average. Refineries operated at 87.2 percent of their operable
capacity last week. Gasoline production increased last week, averaging 9.2
million barrels per day. Distillate fuel production increased last week,
averaging 4.1 million barrels per day.
U.S. crude oil imports averaged 9.6 million barrels per day last week, up 351
thousand barrels per day from the previous week. Over the last four weeks,
crude oil imports have averaged 9.1 million barrels per day, 1.2 million
barrels per day below the same four-week period last year.
U.S. commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) decreased by 0.4 million barrels from the previous week. At
343.4 million barrels, U.S. crude oil inventories are above the upper boundary
of the average range for this time of year. Total motor gasoline inventories
decreased by 3.0 million barrels last week, and are in the upper half of the
average range. Both gasoline inventories and gasoline blending components
decreased last week. Distillate fuel inventories increased by 1.2 million
barrels, and are above the upper boundary of the average range for this time
of year. Propane/propylene inventories decreased by 1.6 million barrels last
week and are above the upper limit of the average range. Total commercial
petroleum inventories decreased by 4.5 million barrels last week,
and are above the upper limit of the average range for this time of year.
Danaher said it will cut 1,000 more jobs and
shut 14 more factories in addition to plans announced n April.
In all, the company will reduce 3,330 jobs and eliminate 30
facilities.
Fed officials were more confident that the steep downturn in the economy was coming to an end, but had no firm grasp about the likely strength of the recovery, minutes of their Aug. 11-12 policy meeting showed.
Gold rose $25 to $981 while crude closed unchanged.
The number of Americans who view Congress favorably has dipped to a 24-year low.
The Dow Jones Industrial Average fell 29.93 points, or 0.3%, to 9,280.67. The S&P 500 Index shed 3.29 points, or 0.3%, to 994.75, while the Nasdaq Composite dropped 1.82 points, or 0.1%, to rest at 1,967.07.
Wednesday, September 02, 2009
Tuesday, September 01, 2009
Chandrasekhar Debt Limit
9/1/09 Chandrasekhar Debt Limit
PetroChina, Asia's largest oil and gas company, is making a $1.7 billion investment in the Canadian oil sands.
Athabasca Oil Sands said Monday that PetroChina is buying a 60 percent working interest in its Mackay River and Dover oil sands projects in northeastern Alberta.
A German court has ruled that Google Inc. must change terms of service that could be interpreted to compromise a user's rights, a decision the consumer advocacy group that brought the suit welcomed today as a victory for online transparency.
China’s manufacturing expanded at the fastest pace in 16 months in August as the economy maintained momentum after record lending in the first half of the year.
The official Purchasing Managers’ Index rose to a seasonally adjusted 54 from 53.3 in July, the Federation of Logistics and Purchasing said today in Beijing in an e-mailed statement.
George F. Will, the elite conservative commentator, will call in his next column for U.S. ground troops to leave Afghanistan, according to publishing sources.
“[F]orces should be substantially reduced to serve a comprehensively revised policy: America should do only what can be done from offshore, using intelligence, drones, cruise missiles, airstrikes and small, potent special forces units, concentrating on the porous 1,500-mile border with Pakistan, a nation that actually matters,” Will writes in the column, scheduled for publication later this week.
Australia's current-account deficit widened more than expected, doubling in the second quarter from the first quarter, according to government data released Tuesday.
The deficit grew to a seasonally adjusted 13.35 billion Australian dollars ($11.27 billion) from a revised 6.35 billion Australian dollar deficit seen in the first quarter of 2009, figures from the Australia Bureau of Statistics showed.
Chain-store sales for the week ended Aug. 29 fell 0.7% from the year-earlier period, according to a survey released Tuesday by the International Council of Shopping Centers and Goldman Sachs. On a week-over-week basis, sales dropped 0.5%. "Although the back-to-school calendar shifts will, on balance, boost year-over-year sales in August a tad, there was little discernible improvement in the trend during the entire month otherwise," said Michael Niemira, ICSC's chief economist. ICSC forecast August comparable sales to decline 3.5% to 4%.
Obama blocked large pay raises for tens of thousands of federal employees, overriding statutory formulas to hold pay increases to 2% in 2010. Obama's approval rating has dropped to 42%.
For the quarter ended in June, the national rate of auto loans that were 60 days past due was up 7.35 percent, according to credit reporting agency TransUnion. While still a relatively low 0.73 percent, the rate rose from 0.68 percent at the same time a year ago.
The National Retail Federation predicts that consumers this year will spend about $47.5 billion on back-to-school and back-to-college goods. Retailers typically do swift business during the season, which starts in July and lasts through mid-September.
But the down economy means that consumer spending is likely to fall this year, after years of steady growth. The average family with students in grades K to 12 is expected to spend $548 on school merchandise, about eight percent less than last year.
Sweden's Riksbank's -0.25% deposit rate means that banks with accounts at the central bank are paying Riksbank 0.25% in interest to keep deposits at the institution. In effect, the arrangement turns the concept of a bank account on its head. Instead of earning interest, depositors are paying the bank to maintain the accounts.
Tony Allison: "The cold reality is that millions of the 76 million-strong Baby Boom generation, now starting to reach retirement age, will be unable to retire. Ever. These boomers will reach their golden years without enough assets and savings to survive for long without a paycheck. Some will reach retirement age with little but debt and good memories. For others working into their 60’s and 70’s will be no big deal. They enjoy what they do and will continue for as long as they can. For many, perhaps too many, they will be forced to keep working to make ends meet, which is not a happy prospect, especially if health concerns are an issue."
Nonperforming loans now make up 2.77% of the entire banking industry’s assets. This is up from 1.4% in June 2008 and 0.47% in June 2006.
Unemployment in the Eurozone has risen to its highest level in ten years. The latest data released by the European Union's statistics office on Tuesday showed that unemployment rate in the 16-country euro currency area rose to 9.5 percent from 9.4 percent in June.
The number of people without a job in the euro zone rose by 167,000 in July to 15.09 million.
The rise in joblessness was highest in Ireland, Spain and France.
In the whole European Union of 27 member states, unemployment rose to 9.0 percent of the workforce from June's 8.9 percent, increasing by 225,000 to 21.8 million people.
Commercial jet market still awaits recovery, EADS chief says.
Consumer prices in the euro zone fell 0.2% in August from a year earlier.
The AAII survey, which measures the percentage of individual investors who are bullish, bearish and neutral on the stock market over the coming six months, last week saw bullish sentiment falling to 34%, beneath the long-term average of 38.9%; neutral sentiment dropping to 17.5%, below the long-term average of 31.1%; and bearish sentiment climbing to 48.5%, above the long-term average of 30%.
Boosted by low prices and a home-buyer tax credit, pending sales of existing homes rose in July for the six straight month, the longest streak on record, a real estate trade group reported Tuesday. The pending home sales index rose 3.2% in July, the National Association of Realtors said. The index is 12% above July 2008.
Teachers — once among the groups exempted from furlough days — are being forced to take unpaid days off amid massive state budget cuts. School districts are facing historic cuts amid the worst economic decline in decades. But even if a district manages to avoid layoffs, teachers still are having to take furloughs on days when they would typically be planning lessons, going to conferences and meeting with other educators.
Conditions for the nation's manufacturers expanded for the first time in 19 months in August, the Institute for Supply Management reported Tuesday. The ISM index rose to 52.9% in August from 48.9% in July. This is the first time the index has been above the breakeven point since January 2008.
According to Bloomberg, “Paul Tudor Jones, the billionaire hedge-fund manager who outperformed peers last year, is wagering that Goldman Sachs Group Inc. and Morgan Stanley got it wrong in declaring the start of an economic recovery. Jones’s Tudor Investment Corp., Clarium Capital Management LLC and Horseman Capital Management Ltd. are taking a bearish stand as U.S. stock and bond prices rise, saying that record government spending may be forestalling another slowdown and market selloff. The firms oversee a combined $15 billion in so- called macro funds, which seek to profit from economic trends by trading stocks, bonds, currencies and commodities.”
July Construction Spending -0.2% to $958B/year, 10.5% below the year-ago estimate. For the first seven months, spending was $543.8B, 11.4% below the same period in 2008.
Illinois consumers will pay more for toiletries, candy, soft drinks and liquor starting Tuesday as lawmakers raise cash to pay for a statewide construction program.
Most candy — currently carrying a 1 percent sales tax — will be taxed at 6.25 percent. And it'll be the same for shampoos and toothpaste that until now were taxed at the lower rate if shop keepers deemed they had a medicinal effect.
Paul B. Farrell: "Lobbyists now run America, own America, rule America. Forget the 537 politicians you thought we elected to the White House, Senate and Congress to run America for us. No, they're mere puppets, pawns for the "Happy Conspiracy," an oligopoly, plutocracy, cabal, monopoly all-in-one -- a private club of America's richest few on Wall Street, in Washington and in Corporate America.
Voters and elections are irrelevant. Lobbyists decide what's in the best interests of this elite club. The usual suspects? Try the Forbes 400."
At least 49 U.S. troops died in Afghanistan in August, according to a count by The Associated Press based on official announcements.
President Barack Obama committed 21,000 new American forces to Afghanistan this year, bringing the total U.S. commitment to 68,000 by the end of the year.
A record 100,000 U.S. and NATO troops are stationed in Afghanistan.
Chrysler U.S. August sales fall 15% to 93,222. Ford Motor Co.said Tuesday that total U.S. sales in August rose 17% to 182,149 vehicles from 155,690 last year. GM August U.S. sales: -20.2%.
It's a new phenomenon - expectations are now higher than the printed consensus," said Art Hogan, chief market strategist at Jefferies & Co.
Last October, the blog, economicdisconnect, asked if the US has a debt Chandrasekhar Limit, meaning is there a point at which the US will incur so much debt that it will go supernova and explode. Now it's 11 months later. I think the answer to that question is quite clear.
Brett Steenbarger: " Particularly notable, however, was the volume to the downside: volume during the 10:00 AM CT half hour ran about four times the average value for that time of day or about eight standard deviations above the norm!
That tells us that there was tremendous institutional participation to the downside. Those are the kinds of moves with legs. The fact that the downside move followed from a scenario of continuing technical weakness was also strongly supportive of the bear case. Stocks making fresh 20-day lows continue to expand and continue to outnumber new highs, suggesting that we have, indeed, made an intermediate-term shift away from the bull."
The Oil Drum: "There is no doubt that there is a huge amount of resource in place - between 1.7 and 2.5 trillion barrels, according to the Oil Sands Discovery Centre's Oil Sands Story. Of this, 173 billion barrels (about 10%) is considered producible with current technology at 2006 prices ($66 barrel for WTI). Production to date has been relatively low, though--only 1.2 million barrels a day in 2008, according to Canadian Association of Petroleum Producers."
Market Skeptics: "I took special note of how 2,920 metric tonnes of “Gold Compounds” had been exported from the U.S. in 2008. This number seemed BIGGER than BIG – because the U.S is only alleged to have stockpiles of sovereign gold of 8,100 metric tonnes while annual U.S. mine production of gold is roughly 228 metric tonnes. This figure of 2,920 metric tonnes is equal to 36 % of all alleged sovereign U.S. gold stocks or more than 14 times annual U.S. gold mine production. So, I was left wondering, “just what is/are ‘gold compounds’?I contacted the USGS and queried a qualified individual [who had working knowledge of this data stream] about the definition of “Gold Compounds”. I was told that, according to the U.S. Census Bureau – who supplies not only the definition but the actual reported numbers, gold compounds were typified by industrial type products containing low percentages/amounts of actual gold content – like gold paint. I then reasoned with the USGS person, if such were the case, why would U.S. exports have increased in 2008 to nearly 3,000 metric tonnes [when the Global Economy was slowing and the U.S. Dollar was strong] from 2007, when U.S. exports totaled approximately 2,000 metric tonnes [when the U.S. Dollar was weaker and the Global Economy was booming]? I noted that this was counter-intuitive and made no fundamental economic sense...When confronted with reason, the individual for the USGS agreed that the data, as published, did not make logical sense and explained that the U.S. Census Bureau was questioned as to the veracity of this particular line item in their data.I asked the USGS employee if the gross weight or the gross value [not shown in the table but known to the USGS] of the “Gold Compounds” was queried. The individual confirmed that their query to the U.S. Census Bureau dealt with the gross value being assigned to these exported goods.I responded rhetorically, “being an issue of gross value – then let me guess that the U.S. Census Bureau is assigning an astronomically high value to these goods. Such a high value would be COMPLETELY INCONSISTENT with what the U.S. Census Bureau claims these items are- namely, industrial goods. The values being reported would be more in line with these goods being gold bullion or equivalents”.The individual from the USGS confirmed my reasoning when he responded, “that would be CORRECT”.
At a minimum, this is a very peculiar event. Does the US sell that much gold paint, or those little gold flakes for alcohol shots? Does the US export enough "industrial use" gold to significantly effect US trade numbers? Market Skeptics offers his own idea:Until someone explains to me what these “gold compounds” were, I am going to assume that they were half the US gold reserves leaving the country.
I am not ready to jump on that ship, but either this is a way to quietly move gold bullion on a large scale back to foreign central banks, or the numbers themselves are fictitious and constitute a blatant data manipulation on trade numbers. In any case, this is an important story."
General Electric Co expects conditions in most of its core markets to remain "challenging" for the next 12 to 18 months, a top executive of the largest U.S. conglomerate said on Tuesday.
Eric Janzsen: " Low stock valuations and interest rates have increased the number of pension funds that are not 100% or better funded from 67.6% in FY 2008 to 92.7% in FY 2009 ending in June. The median funded level has fallen to a mere 46%. By law, companies have to bring these funds up to 100%. Unless both stock prices and interest rates rise, they will have to make up shortfalls out of operating cash flow rather than of investing in growth, such as in hiring and capital expenditure."
The Dow Jones Industrial Average fell 185.68 points, or 2%, to 9,310.6, its worst daily hit in two weeks. The S&P 500 Index fell 22.58 points, or 2.2%, to end at 998.04, the index's first close below 1,000 since Aug. 20. The Nasdaq Composite Index shed 40.17 points, or 2%, to 1,968.89.
Crude dropped $1.80 to $68.15. Gold rose $4.30 to $957.80.
PetroChina, Asia's largest oil and gas company, is making a $1.7 billion investment in the Canadian oil sands.
Athabasca Oil Sands said Monday that PetroChina is buying a 60 percent working interest in its Mackay River and Dover oil sands projects in northeastern Alberta.
A German court has ruled that Google Inc. must change terms of service that could be interpreted to compromise a user's rights, a decision the consumer advocacy group that brought the suit welcomed today as a victory for online transparency.
China’s manufacturing expanded at the fastest pace in 16 months in August as the economy maintained momentum after record lending in the first half of the year.
The official Purchasing Managers’ Index rose to a seasonally adjusted 54 from 53.3 in July, the Federation of Logistics and Purchasing said today in Beijing in an e-mailed statement.
George F. Will, the elite conservative commentator, will call in his next column for U.S. ground troops to leave Afghanistan, according to publishing sources.
“[F]orces should be substantially reduced to serve a comprehensively revised policy: America should do only what can be done from offshore, using intelligence, drones, cruise missiles, airstrikes and small, potent special forces units, concentrating on the porous 1,500-mile border with Pakistan, a nation that actually matters,” Will writes in the column, scheduled for publication later this week.
Australia's current-account deficit widened more than expected, doubling in the second quarter from the first quarter, according to government data released Tuesday.
The deficit grew to a seasonally adjusted 13.35 billion Australian dollars ($11.27 billion) from a revised 6.35 billion Australian dollar deficit seen in the first quarter of 2009, figures from the Australia Bureau of Statistics showed.
Chain-store sales for the week ended Aug. 29 fell 0.7% from the year-earlier period, according to a survey released Tuesday by the International Council of Shopping Centers and Goldman Sachs. On a week-over-week basis, sales dropped 0.5%. "Although the back-to-school calendar shifts will, on balance, boost year-over-year sales in August a tad, there was little discernible improvement in the trend during the entire month otherwise," said Michael Niemira, ICSC's chief economist. ICSC forecast August comparable sales to decline 3.5% to 4%.
Obama blocked large pay raises for tens of thousands of federal employees, overriding statutory formulas to hold pay increases to 2% in 2010. Obama's approval rating has dropped to 42%.
For the quarter ended in June, the national rate of auto loans that were 60 days past due was up 7.35 percent, according to credit reporting agency TransUnion. While still a relatively low 0.73 percent, the rate rose from 0.68 percent at the same time a year ago.
The National Retail Federation predicts that consumers this year will spend about $47.5 billion on back-to-school and back-to-college goods. Retailers typically do swift business during the season, which starts in July and lasts through mid-September.
But the down economy means that consumer spending is likely to fall this year, after years of steady growth. The average family with students in grades K to 12 is expected to spend $548 on school merchandise, about eight percent less than last year.
Sweden's Riksbank's -0.25% deposit rate means that banks with accounts at the central bank are paying Riksbank 0.25% in interest to keep deposits at the institution. In effect, the arrangement turns the concept of a bank account on its head. Instead of earning interest, depositors are paying the bank to maintain the accounts.
Tony Allison: "The cold reality is that millions of the 76 million-strong Baby Boom generation, now starting to reach retirement age, will be unable to retire. Ever. These boomers will reach their golden years without enough assets and savings to survive for long without a paycheck. Some will reach retirement age with little but debt and good memories. For others working into their 60’s and 70’s will be no big deal. They enjoy what they do and will continue for as long as they can. For many, perhaps too many, they will be forced to keep working to make ends meet, which is not a happy prospect, especially if health concerns are an issue."
Nonperforming loans now make up 2.77% of the entire banking industry’s assets. This is up from 1.4% in June 2008 and 0.47% in June 2006.
Unemployment in the Eurozone has risen to its highest level in ten years. The latest data released by the European Union's statistics office on Tuesday showed that unemployment rate in the 16-country euro currency area rose to 9.5 percent from 9.4 percent in June.
The number of people without a job in the euro zone rose by 167,000 in July to 15.09 million.
The rise in joblessness was highest in Ireland, Spain and France.
In the whole European Union of 27 member states, unemployment rose to 9.0 percent of the workforce from June's 8.9 percent, increasing by 225,000 to 21.8 million people.
Commercial jet market still awaits recovery, EADS chief says.
Consumer prices in the euro zone fell 0.2% in August from a year earlier.
The AAII survey, which measures the percentage of individual investors who are bullish, bearish and neutral on the stock market over the coming six months, last week saw bullish sentiment falling to 34%, beneath the long-term average of 38.9%; neutral sentiment dropping to 17.5%, below the long-term average of 31.1%; and bearish sentiment climbing to 48.5%, above the long-term average of 30%.
Boosted by low prices and a home-buyer tax credit, pending sales of existing homes rose in July for the six straight month, the longest streak on record, a real estate trade group reported Tuesday. The pending home sales index rose 3.2% in July, the National Association of Realtors said. The index is 12% above July 2008.
Teachers — once among the groups exempted from furlough days — are being forced to take unpaid days off amid massive state budget cuts. School districts are facing historic cuts amid the worst economic decline in decades. But even if a district manages to avoid layoffs, teachers still are having to take furloughs on days when they would typically be planning lessons, going to conferences and meeting with other educators.
Conditions for the nation's manufacturers expanded for the first time in 19 months in August, the Institute for Supply Management reported Tuesday. The ISM index rose to 52.9% in August from 48.9% in July. This is the first time the index has been above the breakeven point since January 2008.
According to Bloomberg, “Paul Tudor Jones, the billionaire hedge-fund manager who outperformed peers last year, is wagering that Goldman Sachs Group Inc. and Morgan Stanley got it wrong in declaring the start of an economic recovery. Jones’s Tudor Investment Corp., Clarium Capital Management LLC and Horseman Capital Management Ltd. are taking a bearish stand as U.S. stock and bond prices rise, saying that record government spending may be forestalling another slowdown and market selloff. The firms oversee a combined $15 billion in so- called macro funds, which seek to profit from economic trends by trading stocks, bonds, currencies and commodities.”
July Construction Spending -0.2% to $958B/year, 10.5% below the year-ago estimate. For the first seven months, spending was $543.8B, 11.4% below the same period in 2008.
Illinois consumers will pay more for toiletries, candy, soft drinks and liquor starting Tuesday as lawmakers raise cash to pay for a statewide construction program.
Most candy — currently carrying a 1 percent sales tax — will be taxed at 6.25 percent. And it'll be the same for shampoos and toothpaste that until now were taxed at the lower rate if shop keepers deemed they had a medicinal effect.
Paul B. Farrell: "Lobbyists now run America, own America, rule America. Forget the 537 politicians you thought we elected to the White House, Senate and Congress to run America for us. No, they're mere puppets, pawns for the "Happy Conspiracy," an oligopoly, plutocracy, cabal, monopoly all-in-one -- a private club of America's richest few on Wall Street, in Washington and in Corporate America.
Voters and elections are irrelevant. Lobbyists decide what's in the best interests of this elite club. The usual suspects? Try the Forbes 400."
At least 49 U.S. troops died in Afghanistan in August, according to a count by The Associated Press based on official announcements.
President Barack Obama committed 21,000 new American forces to Afghanistan this year, bringing the total U.S. commitment to 68,000 by the end of the year.
A record 100,000 U.S. and NATO troops are stationed in Afghanistan.
Chrysler U.S. August sales fall 15% to 93,222. Ford Motor Co.said Tuesday that total U.S. sales in August rose 17% to 182,149 vehicles from 155,690 last year. GM August U.S. sales: -20.2%.
It's a new phenomenon - expectations are now higher than the printed consensus," said Art Hogan, chief market strategist at Jefferies & Co.
Last October, the blog, economicdisconnect, asked if the US has a debt Chandrasekhar Limit, meaning is there a point at which the US will incur so much debt that it will go supernova and explode. Now it's 11 months later. I think the answer to that question is quite clear.
Brett Steenbarger: " Particularly notable, however, was the volume to the downside: volume during the 10:00 AM CT half hour ran about four times the average value for that time of day or about eight standard deviations above the norm!
That tells us that there was tremendous institutional participation to the downside. Those are the kinds of moves with legs. The fact that the downside move followed from a scenario of continuing technical weakness was also strongly supportive of the bear case. Stocks making fresh 20-day lows continue to expand and continue to outnumber new highs, suggesting that we have, indeed, made an intermediate-term shift away from the bull."
The Oil Drum: "There is no doubt that there is a huge amount of resource in place - between 1.7 and 2.5 trillion barrels, according to the Oil Sands Discovery Centre's Oil Sands Story. Of this, 173 billion barrels (about 10%) is considered producible with current technology at 2006 prices ($66 barrel for WTI). Production to date has been relatively low, though--only 1.2 million barrels a day in 2008, according to Canadian Association of Petroleum Producers."
Market Skeptics: "I took special note of how 2,920 metric tonnes of “Gold Compounds” had been exported from the U.S. in 2008. This number seemed BIGGER than BIG – because the U.S is only alleged to have stockpiles of sovereign gold of 8,100 metric tonnes while annual U.S. mine production of gold is roughly 228 metric tonnes. This figure of 2,920 metric tonnes is equal to 36 % of all alleged sovereign U.S. gold stocks or more than 14 times annual U.S. gold mine production. So, I was left wondering, “just what is/are ‘gold compounds’?I contacted the USGS and queried a qualified individual [who had working knowledge of this data stream] about the definition of “Gold Compounds”. I was told that, according to the U.S. Census Bureau – who supplies not only the definition but the actual reported numbers, gold compounds were typified by industrial type products containing low percentages/amounts of actual gold content – like gold paint. I then reasoned with the USGS person, if such were the case, why would U.S. exports have increased in 2008 to nearly 3,000 metric tonnes [when the Global Economy was slowing and the U.S. Dollar was strong] from 2007, when U.S. exports totaled approximately 2,000 metric tonnes [when the U.S. Dollar was weaker and the Global Economy was booming]? I noted that this was counter-intuitive and made no fundamental economic sense...When confronted with reason, the individual for the USGS agreed that the data, as published, did not make logical sense and explained that the U.S. Census Bureau was questioned as to the veracity of this particular line item in their data.I asked the USGS employee if the gross weight or the gross value [not shown in the table but known to the USGS] of the “Gold Compounds” was queried. The individual confirmed that their query to the U.S. Census Bureau dealt with the gross value being assigned to these exported goods.I responded rhetorically, “being an issue of gross value – then let me guess that the U.S. Census Bureau is assigning an astronomically high value to these goods. Such a high value would be COMPLETELY INCONSISTENT with what the U.S. Census Bureau claims these items are- namely, industrial goods. The values being reported would be more in line with these goods being gold bullion or equivalents”.The individual from the USGS confirmed my reasoning when he responded, “that would be CORRECT”.
At a minimum, this is a very peculiar event. Does the US sell that much gold paint, or those little gold flakes for alcohol shots? Does the US export enough "industrial use" gold to significantly effect US trade numbers? Market Skeptics offers his own idea:Until someone explains to me what these “gold compounds” were, I am going to assume that they were half the US gold reserves leaving the country.
I am not ready to jump on that ship, but either this is a way to quietly move gold bullion on a large scale back to foreign central banks, or the numbers themselves are fictitious and constitute a blatant data manipulation on trade numbers. In any case, this is an important story."
General Electric Co expects conditions in most of its core markets to remain "challenging" for the next 12 to 18 months, a top executive of the largest U.S. conglomerate said on Tuesday.
Eric Janzsen: " Low stock valuations and interest rates have increased the number of pension funds that are not 100% or better funded from 67.6% in FY 2008 to 92.7% in FY 2009 ending in June. The median funded level has fallen to a mere 46%. By law, companies have to bring these funds up to 100%. Unless both stock prices and interest rates rise, they will have to make up shortfalls out of operating cash flow rather than of investing in growth, such as in hiring and capital expenditure."
The Dow Jones Industrial Average fell 185.68 points, or 2%, to 9,310.6, its worst daily hit in two weeks. The S&P 500 Index fell 22.58 points, or 2.2%, to end at 998.04, the index's first close below 1,000 since Aug. 20. The Nasdaq Composite Index shed 40.17 points, or 2%, to 1,968.89.
Crude dropped $1.80 to $68.15. Gold rose $4.30 to $957.80.
Monday, August 31, 2009
Redeterminations
8/31/09 Redeterminations
Baker Hughes Inc. entered a definitive agreement to acquire BJ Services in a stock-and-cash transaction valued at $5.5 billion, the companies announced. The deal carries an acquisition premium of about 16%, based on the Aug. 28 closing price on BJ Services stock. Terms call for BJ Services shareholders to receive 0.40035 of a share of Baker Hughes as well as cash in the amount of $2.69 in exchange for each of their BJ Services common shares. "Our two companies have highly complementary products and services with very little overlap," said Chad Deaton, chairman, president and chief executive of Houston-based Baker Hughes.
According to Bloomberg, Natural-gas producers in the U.S. are heading for a day of reckoning with their banks as soon as this week.
At issue are so-called redeterminations, where banks review gas companies’ credit lines periodically and adjust amounts that can be borrowed when fuel reserves securing the debts change in value. The next redeterminations for many producers are in September, and this time around, plunging gas prices will cause credit lines to be slashed, Southwestern Energy Co. Chief Executive Officer Steven Mueller said.
“A lot of guys barely held on last redetermination, and we’ll just see what happens here,” Mueller said in an interview in Houston, where Southwestern is based.
Without the financing needed to keep their rigs operating, producers such as Forest Oil Corp. and Chesapeake Energy Corp. may need to raise capital by selling shares or bonds, said Haag Sherman, chief investment officer at Salient Partners in Houston. Companies may also opt to seek buyers, creating acquisition opportunities for larger producers such as Devon Energy Corp. and Apache Corp., he said.
“I’d be building my war chest if I were the big guys,” said Sherman, who helps manage $7.3 billion at Salient. “It could be a great year and a half for M&A activity.”
There’s little cause to hope that gas prices will rise enough in the next few weeks as credit lines are reviewed, said B.J. Willingham, chief investment officer at Moncrief Willingham Energy Advisers in Houston. Only when cold weather arrives will there be support for higher prices, he said. Benchmark gas prices will average $3.75 for the rest of this year and may climb to about $4.50 in 2010, Standard & Poor’s predicted in a report this month. Most U.S. gas-drilling projects need prices at $6 to $8 to be worthwhile, S&P said.
Consumer prices in the euro zone fell 0.2% in August, according to an initial estimate issued by Eurostat on Monday, from a 0.7% fall in July.
"Both China and America are addressing bubbles by creating more bubbles and we're just taking advantage of that. So we can't lose." - Lou Jiwei, Head Of China Sovereign Wealth Fund
India's economy grew 6.1% in the fiscal first quarter compared with the year-earlier period, according to estimates released Monday by the Central Statistical Organization. The result beat expectations for 5.8% growth reported in a Dow Jones Newswires survey of economists.
Chinese shares slumped 5.4% to end the morning session in Shanghai at 2,706.96, a level the benchmark index hasn't seen since May, as concerns about the impact of weakening bank lending and capital-raising issues continued to weigh on sentiment.
Data compiled by real estate research firm Foresight Analytics in Oakland last week showed that the percentage of commercial property owners in the Bay Area with mortgages 30 days or more past due had increased to about 4 percent in the second quarter, which concluded at the end of June.
The loan delinquency rate, roughly three percentage points higher than during the same quarter last year, is on par with the national average and is getting close to the level that analysts say restricts lenders' ability to extend existing loans or make new ones.
"Five percent is a threshold that we watch for because it digs into the banks' capital," said Matthew Anderson, a partner at Foresight. "It makes them less flexible with their loans and increases the tightness in the credit market, making it harder to get loans."
John Hussman: "Straight to the chase – the U.S. stock market is overvalued, but not severely so. Prospective 10-year total returns for the S&P 500 are uninspiring, but they have been even more dismal for much of the past decade. Market action in the major indices has been clearly strong, as is breadth, but evidence of robust sponsorship is weak – particularly on the basis of trading volume. Several measures of risk aversion have abated, but have been replaced by exuberant investor sentiment, which has not been as bullish since the 2007 market peak. From the standpoint of typical post-war market cycles, there is little to get excited about, but there also does not seem to be a great deal to complain about either. That is, again, if we assume that this is a typical post-war market cycle....There is no assurance, in my view, that the current economic stabilization we've observed is more than an artifact of enormous government spending, or that the underlying structure is invulnerable to a steep double-dip."
Freedom Communications, which owns over 30 daily newspapers and 8 TV stations, reportedly plans to declare bankruptcy this week and has reached debt restructuring agreements with its lenders. Private-equity firms Blackstone Group (BX) and Providence Equity Partners, which paid $460M in 2004 for a 40% stake in Freedom, have both written down the value of their investment to zero.
Gold for December delivery was down $12.50, or 1.3%, at $946.30 an ounce in electronic trading. Shanghai's Composite Index fell 6.7%, while the Shenzhen Composite Index plunged 7.1%, among concerns of slower bank lending and that leading companies will issue new shares, diluting the value of their stock.
The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows that 32% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-two percent (42%) Strongly Disapprove. That’s the highest level of Strong Disapproval yet recorded for this President and it gives Obama a Presidential Approval Index rating of -10 (see trends).
If Americans could vote to keep or replace the entire Congress, 57% would throw out all the legislators and start over again. Just 25% would vote to keep the Congress.
According to the FT, Brazil is preparing to infringe patents on US pharmaceutical products, in retaliation against subsidies for US cotton farmers, according to the Brazilian press.
The World Trade Organisation is expected to rule on Monday that Brazil can contravene the drug patents, say the reports.
Brazil led a challenge against US cotton subsidies in 2002 and, two years later, the WTO ruled that about $3bn paid to US cotton farmers each year distorted global prices and violated trade rules.
The US has continued the subsidies, arguing that the measures were consistent with its WTO obligations. But the WTO has supported Brazil’s case. It allowed Brazil to retaliate in 2005 but Brasília has instead sought a negotiated settlement to avoid damaging relations with the US, until recently its biggest trading partner.
However, Brazil has become increasingly frustrated by the US refusal to remove its subsidies and, under pressure from its own cotton growers, is reported to be preparing to retaliate.
Walt Disney Co. has agreed to acquire Marvel Entertainment Inc. in a stock and cash transaction. Based on the closing price of Disney stock on Aug. 28, the transaction value is $50 per Marvel share or approximately $4 billion. Marvel shareholders would receive a total of $30 per share in cash plus approximately 0.745 Disney shares for each Marvel share they own.
US natural gas drilling rigs are still down sharply since peaking above 1600 in September, and now stand at 907 rigs, or 56 percent, below the same week a year ago.
Zman Energy Brain: "Expect to see more natural gas production curtailments in coming weeks."
Kinder Morgan Energy Partners LP will buy Crosstex Energy LP's gas-treatment business for $266 million, in a deal Kinder touts will make it the largest provider of contract-provided treating plants in the country.
Huntington, Long Island will begin to retrofit some of its municipal vehicles to use compressed natural gas. Those vehicles are used to pick up commercial garbage in business districts and residential garbage in Centerport, Huntington Station and Huntington village.
The rate for leasing capesize ships, boats three times the size of the Statue of Liberty, will drop about 50 percent from the current price of $37,865 a day to as low as $18,000 before the end of the year, according to the median in a Bloomberg survey of six analysts and fund managers. Forward freight agreements traded by brokers show the fourth-quarter average price will be 7 percent lower.
Shipping rates, which already fell 59 percent from this year’s high, are retreating as the Organization for Economic Cooperation and Development predicts a 16 percent drop in world trade for all of 2009. China’s State Council called for curbs on steel and cement production last week. A record 146 capesizes will be added this year, equal to 28 percent of the fleet, according to Fearnley Consultants A/S.
“The pressure of the new ships will be overwhelming,” said Andreas Vergottis, the Hong Kong-based research director at Tufton Oceanic Ltd., which manages the world’s largest shipping hedge fund, with $1 billion of assets. “It will take a lot of time and a lot of pain before shipping recovers.”
Each electric Prius motor requires 1 kilogram (2.2 lb) of neodymium, and each battery uses 10 to 15 kg (22-33 lb) of lanthanum. That number will nearly double under Toyota's plans to boost the car's fuel economy, he said. Currently, between 45,000 and 50,000 tons of sintered neodymium magnets are produced each year, mainly from China and Japan.
August Chicago PMI: 50 vs. consensus of 48 and up from 43.4 in July; it's the highest since Sept. 2008. New orders were up 4.5 to 52.5, while prices paid jumped 15 points to 50.
Private banker Konrad Hummler. He says that around 30%, or CHF 1,000 billion, of the CHF 2,800 billion or so of foreign assets in Swiss banks is untaxed “black money”. According to Bruce Krasting, Konrad Hummler is managing partner of Wegelin & Co., private bankers, and has acted for many years as personal advisor to the chairman of the board of directors of the Union Bank of Switzerland (UBS). He serves as a colonel in the general staff of the Swiss Army.
Tyler Durden: "Tishman Speyer's 2006 acquisition of Stuyvesant Town for $5.4 billion apparently is about to turn terminally sour. The "biggest deal for a single American property in modern times" which never managed to be profitable from day one, is on the verge of completely exhausting reserve accounts tied to $3 billion of securitized accounts.The premise - take the 11,227 rent-stabilized units apartment complex and convert them to market-rate. Alas, the timing could not have been worse due to an implosion in the NY rent market, coupled with legal difficulties - to date only 4,350 of the units have been converted to market rate, while the remaining rent-controlled units will likely increase in number due to a recent court ruling."
A wildfire scorching the mountains north of Los Angeles doubled in size in the past day, threatening more than 10,000 homes and causing more than 2,000 people to flee as hot, dry weather and winds fan the flames.
This month, PepsiCo Inc.'s Aquafina brand sold at some grocery stores for as little as $2.99 for a 24-pack of half-liter bottles -- less than a penny an ounce and about half of its typical price. Still, that wasn't as cheap as the private-label brand at supermarket chain Kroger Co., on sale for $2.49. "It used to be $6.99 for a 24-pack, then $5.99," said Michael Bellas, chief executive of New York consulting firm Beverage Marketing Corp. "But $2.49? That's the lowest I've seen." Coke's refusal to lower Dasani prices has come at a cost: The brand's U.S. sales volume slid nearly 26% in grocery and other stores, excluding Wal-Mart, in the 12 weeks ended Aug. 8, according to a report by J.P. Morgan Chase & Co., which cited data from Nielsen Syndicate Market Data.
Aquafina's sales fell a less-steep 13.8% over the same period, helped by a 5% price cut. Sales of Poland Spring, owned by Nestlé, fell 8.9% while its prices sank 11.3%.
Copper plunged the most in two months in New York as equity markets fell in Asia and Europe, signaling slower demand for industrial metals. Zinc prices also declined in Shanghai.
Fitch's Prime Credit Card Chargeoff Index fell to 10.55% in July from 10.79% the previous month.
Crude oil dropped $3 to $69.60. Gold dropped $6.20 to $952.60.
Up 3.5% for August, the Dow Jones Industrial Average fell 47.92 points, or 0.5%, to end at 9,496.28. The S&P 500 Index declined 8.31 points, or 0.8%, to stand at 1,020.62, leaving it with a 3.4% advance for August. The Nasdaq Composite dropped 19.71 points, or 1%, to rest at 2,009.06, a level that leaves the technology-laden index with a 1.5% monthly gain.
Elliott Wave's current issue, dated Aug. 27, says: "The stock market is poised to complete the bear-market rally from March. Besides achieving to price objectives originally forecast in March, the five-month push has generated optimistic extremes that exceed those that were recorded at the October 2007 all-time high." Furthermore, "The Dow is just short of the most likely stopping point, 9654/9764, previous fourth wave extreme. ... The worst seasonal month of the year is at hand (September). Prices should decline at least as fast as they rebounded. For those who felt trapped in Primary Wave 1, Wave 2 will offer a respectable place to exit. But we know from past experience that many will hold out for even higher prices, hoping to 'break even.'"
Baker Hughes Inc. entered a definitive agreement to acquire BJ Services in a stock-and-cash transaction valued at $5.5 billion, the companies announced. The deal carries an acquisition premium of about 16%, based on the Aug. 28 closing price on BJ Services stock. Terms call for BJ Services shareholders to receive 0.40035 of a share of Baker Hughes as well as cash in the amount of $2.69 in exchange for each of their BJ Services common shares. "Our two companies have highly complementary products and services with very little overlap," said Chad Deaton, chairman, president and chief executive of Houston-based Baker Hughes.
According to Bloomberg, Natural-gas producers in the U.S. are heading for a day of reckoning with their banks as soon as this week.
At issue are so-called redeterminations, where banks review gas companies’ credit lines periodically and adjust amounts that can be borrowed when fuel reserves securing the debts change in value. The next redeterminations for many producers are in September, and this time around, plunging gas prices will cause credit lines to be slashed, Southwestern Energy Co. Chief Executive Officer Steven Mueller said.
“A lot of guys barely held on last redetermination, and we’ll just see what happens here,” Mueller said in an interview in Houston, where Southwestern is based.
Without the financing needed to keep their rigs operating, producers such as Forest Oil Corp. and Chesapeake Energy Corp. may need to raise capital by selling shares or bonds, said Haag Sherman, chief investment officer at Salient Partners in Houston. Companies may also opt to seek buyers, creating acquisition opportunities for larger producers such as Devon Energy Corp. and Apache Corp., he said.
“I’d be building my war chest if I were the big guys,” said Sherman, who helps manage $7.3 billion at Salient. “It could be a great year and a half for M&A activity.”
There’s little cause to hope that gas prices will rise enough in the next few weeks as credit lines are reviewed, said B.J. Willingham, chief investment officer at Moncrief Willingham Energy Advisers in Houston. Only when cold weather arrives will there be support for higher prices, he said. Benchmark gas prices will average $3.75 for the rest of this year and may climb to about $4.50 in 2010, Standard & Poor’s predicted in a report this month. Most U.S. gas-drilling projects need prices at $6 to $8 to be worthwhile, S&P said.
Consumer prices in the euro zone fell 0.2% in August, according to an initial estimate issued by Eurostat on Monday, from a 0.7% fall in July.
"Both China and America are addressing bubbles by creating more bubbles and we're just taking advantage of that. So we can't lose." - Lou Jiwei, Head Of China Sovereign Wealth Fund
India's economy grew 6.1% in the fiscal first quarter compared with the year-earlier period, according to estimates released Monday by the Central Statistical Organization. The result beat expectations for 5.8% growth reported in a Dow Jones Newswires survey of economists.
Chinese shares slumped 5.4% to end the morning session in Shanghai at 2,706.96, a level the benchmark index hasn't seen since May, as concerns about the impact of weakening bank lending and capital-raising issues continued to weigh on sentiment.
Data compiled by real estate research firm Foresight Analytics in Oakland last week showed that the percentage of commercial property owners in the Bay Area with mortgages 30 days or more past due had increased to about 4 percent in the second quarter, which concluded at the end of June.
The loan delinquency rate, roughly three percentage points higher than during the same quarter last year, is on par with the national average and is getting close to the level that analysts say restricts lenders' ability to extend existing loans or make new ones.
"Five percent is a threshold that we watch for because it digs into the banks' capital," said Matthew Anderson, a partner at Foresight. "It makes them less flexible with their loans and increases the tightness in the credit market, making it harder to get loans."
John Hussman: "Straight to the chase – the U.S. stock market is overvalued, but not severely so. Prospective 10-year total returns for the S&P 500 are uninspiring, but they have been even more dismal for much of the past decade. Market action in the major indices has been clearly strong, as is breadth, but evidence of robust sponsorship is weak – particularly on the basis of trading volume. Several measures of risk aversion have abated, but have been replaced by exuberant investor sentiment, which has not been as bullish since the 2007 market peak. From the standpoint of typical post-war market cycles, there is little to get excited about, but there also does not seem to be a great deal to complain about either. That is, again, if we assume that this is a typical post-war market cycle....There is no assurance, in my view, that the current economic stabilization we've observed is more than an artifact of enormous government spending, or that the underlying structure is invulnerable to a steep double-dip."
Freedom Communications, which owns over 30 daily newspapers and 8 TV stations, reportedly plans to declare bankruptcy this week and has reached debt restructuring agreements with its lenders. Private-equity firms Blackstone Group (BX) and Providence Equity Partners, which paid $460M in 2004 for a 40% stake in Freedom, have both written down the value of their investment to zero.
Gold for December delivery was down $12.50, or 1.3%, at $946.30 an ounce in electronic trading. Shanghai's Composite Index fell 6.7%, while the Shenzhen Composite Index plunged 7.1%, among concerns of slower bank lending and that leading companies will issue new shares, diluting the value of their stock.
The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows that 32% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-two percent (42%) Strongly Disapprove. That’s the highest level of Strong Disapproval yet recorded for this President and it gives Obama a Presidential Approval Index rating of -10 (see trends).
If Americans could vote to keep or replace the entire Congress, 57% would throw out all the legislators and start over again. Just 25% would vote to keep the Congress.
According to the FT, Brazil is preparing to infringe patents on US pharmaceutical products, in retaliation against subsidies for US cotton farmers, according to the Brazilian press.
The World Trade Organisation is expected to rule on Monday that Brazil can contravene the drug patents, say the reports.
Brazil led a challenge against US cotton subsidies in 2002 and, two years later, the WTO ruled that about $3bn paid to US cotton farmers each year distorted global prices and violated trade rules.
The US has continued the subsidies, arguing that the measures were consistent with its WTO obligations. But the WTO has supported Brazil’s case. It allowed Brazil to retaliate in 2005 but Brasília has instead sought a negotiated settlement to avoid damaging relations with the US, until recently its biggest trading partner.
However, Brazil has become increasingly frustrated by the US refusal to remove its subsidies and, under pressure from its own cotton growers, is reported to be preparing to retaliate.
Walt Disney Co. has agreed to acquire Marvel Entertainment Inc. in a stock and cash transaction. Based on the closing price of Disney stock on Aug. 28, the transaction value is $50 per Marvel share or approximately $4 billion. Marvel shareholders would receive a total of $30 per share in cash plus approximately 0.745 Disney shares for each Marvel share they own.
US natural gas drilling rigs are still down sharply since peaking above 1600 in September, and now stand at 907 rigs, or 56 percent, below the same week a year ago.
Zman Energy Brain: "Expect to see more natural gas production curtailments in coming weeks."
Kinder Morgan Energy Partners LP will buy Crosstex Energy LP's gas-treatment business for $266 million, in a deal Kinder touts will make it the largest provider of contract-provided treating plants in the country.
Huntington, Long Island will begin to retrofit some of its municipal vehicles to use compressed natural gas. Those vehicles are used to pick up commercial garbage in business districts and residential garbage in Centerport, Huntington Station and Huntington village.
The rate for leasing capesize ships, boats three times the size of the Statue of Liberty, will drop about 50 percent from the current price of $37,865 a day to as low as $18,000 before the end of the year, according to the median in a Bloomberg survey of six analysts and fund managers. Forward freight agreements traded by brokers show the fourth-quarter average price will be 7 percent lower.
Shipping rates, which already fell 59 percent from this year’s high, are retreating as the Organization for Economic Cooperation and Development predicts a 16 percent drop in world trade for all of 2009. China’s State Council called for curbs on steel and cement production last week. A record 146 capesizes will be added this year, equal to 28 percent of the fleet, according to Fearnley Consultants A/S.
“The pressure of the new ships will be overwhelming,” said Andreas Vergottis, the Hong Kong-based research director at Tufton Oceanic Ltd., which manages the world’s largest shipping hedge fund, with $1 billion of assets. “It will take a lot of time and a lot of pain before shipping recovers.”
Each electric Prius motor requires 1 kilogram (2.2 lb) of neodymium, and each battery uses 10 to 15 kg (22-33 lb) of lanthanum. That number will nearly double under Toyota's plans to boost the car's fuel economy, he said. Currently, between 45,000 and 50,000 tons of sintered neodymium magnets are produced each year, mainly from China and Japan.
August Chicago PMI: 50 vs. consensus of 48 and up from 43.4 in July; it's the highest since Sept. 2008. New orders were up 4.5 to 52.5, while prices paid jumped 15 points to 50.
Private banker Konrad Hummler. He says that around 30%, or CHF 1,000 billion, of the CHF 2,800 billion or so of foreign assets in Swiss banks is untaxed “black money”. According to Bruce Krasting, Konrad Hummler is managing partner of Wegelin & Co., private bankers, and has acted for many years as personal advisor to the chairman of the board of directors of the Union Bank of Switzerland (UBS). He serves as a colonel in the general staff of the Swiss Army.
Tyler Durden: "Tishman Speyer's 2006 acquisition of Stuyvesant Town for $5.4 billion apparently is about to turn terminally sour. The "biggest deal for a single American property in modern times" which never managed to be profitable from day one, is on the verge of completely exhausting reserve accounts tied to $3 billion of securitized accounts.The premise - take the 11,227 rent-stabilized units apartment complex and convert them to market-rate. Alas, the timing could not have been worse due to an implosion in the NY rent market, coupled with legal difficulties - to date only 4,350 of the units have been converted to market rate, while the remaining rent-controlled units will likely increase in number due to a recent court ruling."
A wildfire scorching the mountains north of Los Angeles doubled in size in the past day, threatening more than 10,000 homes and causing more than 2,000 people to flee as hot, dry weather and winds fan the flames.
This month, PepsiCo Inc.'s Aquafina brand sold at some grocery stores for as little as $2.99 for a 24-pack of half-liter bottles -- less than a penny an ounce and about half of its typical price. Still, that wasn't as cheap as the private-label brand at supermarket chain Kroger Co., on sale for $2.49. "It used to be $6.99 for a 24-pack, then $5.99," said Michael Bellas, chief executive of New York consulting firm Beverage Marketing Corp. "But $2.49? That's the lowest I've seen." Coke's refusal to lower Dasani prices has come at a cost: The brand's U.S. sales volume slid nearly 26% in grocery and other stores, excluding Wal-Mart, in the 12 weeks ended Aug. 8, according to a report by J.P. Morgan Chase & Co., which cited data from Nielsen Syndicate Market Data.
Aquafina's sales fell a less-steep 13.8% over the same period, helped by a 5% price cut. Sales of Poland Spring, owned by Nestlé, fell 8.9% while its prices sank 11.3%.
Copper plunged the most in two months in New York as equity markets fell in Asia and Europe, signaling slower demand for industrial metals. Zinc prices also declined in Shanghai.
Fitch's Prime Credit Card Chargeoff Index fell to 10.55% in July from 10.79% the previous month.
Crude oil dropped $3 to $69.60. Gold dropped $6.20 to $952.60.
Up 3.5% for August, the Dow Jones Industrial Average fell 47.92 points, or 0.5%, to end at 9,496.28. The S&P 500 Index declined 8.31 points, or 0.8%, to stand at 1,020.62, leaving it with a 3.4% advance for August. The Nasdaq Composite dropped 19.71 points, or 1%, to rest at 2,009.06, a level that leaves the technology-laden index with a 1.5% monthly gain.
Elliott Wave's current issue, dated Aug. 27, says: "The stock market is poised to complete the bear-market rally from March. Besides achieving to price objectives originally forecast in March, the five-month push has generated optimistic extremes that exceed those that were recorded at the October 2007 all-time high." Furthermore, "The Dow is just short of the most likely stopping point, 9654/9764, previous fourth wave extreme. ... The worst seasonal month of the year is at hand (September). Prices should decline at least as fast as they rebounded. For those who felt trapped in Primary Wave 1, Wave 2 will offer a respectable place to exit. But we know from past experience that many will hold out for even higher prices, hoping to 'break even.'"
Sunday, August 30, 2009
U.S. National Debt
8/30/09 U.S. National Debt
Richard Russell: "The US national debt is now over $11 trillion dollars. The interest on our national debt is now $340 billion. This is about at 3.04% rate of interest. In ten years the Obama administration admits that they will add $9 trillion to the national debt. That would take it to $20 trillion. Let's say that by some miracle the interest on the national debt in 10 years will still be 3.09%. That would mean that the interest on the national debt would be $618 billion a year or over one billion a day. No nation can hold up in the face of those kinds of expenses. Either the dollar would collapse or interest rates would go through the roof...."As I said all along, it would have been better to have allowed the bear market to run its course to conclusion. That would have been extremely painful, but the US would have recovered. However, deficits in the trillions could ultimately 'break' this nation. I can't imagine how Bernanke-Obama plan to handle the coming mind-blowing deficits, plus the interest on those deficits.
"The pressure will be on the reserve status of the dollar, the level of the dollar compared to other international currencies, interest rates, and the standard of living of all of us living in the new 'banana republic', the United States of 'bankrupt' America.
"When you take all this in, you can begin to see how this bear market could end with stocks selling below known values and people despising the stock market and capitalism."
Chris Puplava: "September has proven to be the worst month of the year and the percent of NYSE issues making new highs have not confirmed the recent market highs in the S&P 500, so a garden variety correction may be what lies in store in the coming weeks."
"Based on how participants rated their own physical and mental health, we found that people who were persistently concerned about losing their jobs reported significantly worse overall health in both studies and were more depressed in one of the studies than those who had actually lost and regained their jobs recently," said Sarah Burgard, a sociologist at the University of Michigan.
OPEC is unlikely to announce a new production cut during its meeting next week, a senior Kuwaiti oil official said in remarks published Sunday.
Imad al-Atiqi, a member of the Supreme Petroleum Council, told the Al-Seyassah daily newspaper that oil prices were stable. Oil ministers from the 12-member Organization of the Petroleum Exporting Countries will instead focus on compliance with current output quotas, he said.
Chinese companies have spent at least $13 billion acquiring oil assets overseas since December, including purchases in Singapore, Syria and Kazakhstan.
According to the Journal's story "roughly 8% of households are delinquent with utility payments." So the utilities are lettting people pay 25% now and 75% later.
The USA Today, also has a story along these lines today, saying that power is getting shut off because consumers can't afford to pay their bills.
Insider selling is 30.6x greater than insider buying! This is the highest ratio on record since TrimTabs began tracking this data in 2004. Furthermore, their data reveals that insiders have sold a record $105.2 billion worth of stock in just the last four months.
Brett Steenbarger: " The current 20-day median TRIN is the lowest value we've seen since 2000 at around .75.
I'm not exactly sure what to make of that. What I can tell you with certainty is that two of the past historical occasions in which we've had 20-day price highs and ultra low median 20-day TRIN readings have been March 2000 and late May/early June, 2007. Both corresponded more or less to bull market peaks."
Japan's voters Sunday appear to have soundly rejected the ruling party that has set the nation's course for more than half a century, according to media tallies.
“We’re at an inflection point with respect to the American consumer,” said Mark Zandi, chief economist at Moody’s Economy.com, who correctly forecast a dip in spending heading into the recession, and who provided data supporting sustained weakness.
“Lower-income households can’t borrow, and higher-income households no longer feel wealthy,” Mr. Zandi added. “There’s still a lot of debt out there. It throws a pall over the potential for a strong recovery. The economy is going to struggle.”
“Not only have people lost money, but they don’t expect as much appreciation in the money they have, and that should affect consumption,” said Andrew Tilton, an economist at Goldman Sachs. “This is a cultural shift going on. People will save more.”
Natural Gas Production – according to Bentek Energy, LLC, and U.S. marketed production of natural gas for August 2009 was down about one percent from that in August 2008. In addition, domestic natural gas production that averaged about 58.8 Bcf per day in July 2009 was down to 58.5 Bcf per day in August.
Accuweather's Chief Meteorologist and Expert Long Range Forecaster Joe Bastardi has released an early prediction for this coming winter. In fact, he believes that this winter will be the "Snowiest in Over 5 Years NYC to D.C.".
Eric Savitz: "Hewlett-Packard recently said it doesn't expect Windows 7 to be a big enough improvement over XP and Vista to spark a major refresh. Is there really a reason to be bullish on Dell? I don't see it."
Oct. crude rises 37 cents to $73.11/barrel. Oct. natural gas up 2.3 cents to $3.056/mbtu.
Spot gold up $4 to $959.60/troy ounce.
Japan's industrial production index rose a seasonally adjusted 1.9% on month in July, the Ministry of Economy, Trade and Industry said Monday. Inventories, meanwhile, fell 0.2% on month in July, the seventh straight drop. The Nomura/JMMA Manufacturing Purchasing Managers Index hit a seasonally adjusted 53.6 in August, up from the previous month's 50.4, marking the highest level since November 2006, according to Reuters. Reports cited the output index as rising to 58.7, up from 54.7.
Stronger Chinese demand may reduce the global economy’s dependence on consumers in the U.S. and Europe and rein in China’s trade surplus, curbing global imbalances in spending and saving that may have contributed to the financial crisis. The surplus fell $16.6 billion in the first seven months to $108 billion, on track for the first annual decline since 2003.
“We’re clearly seeing a surge in imports driven by domestic demand that is consistent with a new direction for China’s economy,” said Louis Kuijs, a senior China economist with the Washington-based World Bank in Beijing.
China is the world’s second- largest exporter behind Germany and the third-biggest importer after the U.S. and Germany.
Richard Russell: "The US national debt is now over $11 trillion dollars. The interest on our national debt is now $340 billion. This is about at 3.04% rate of interest. In ten years the Obama administration admits that they will add $9 trillion to the national debt. That would take it to $20 trillion. Let's say that by some miracle the interest on the national debt in 10 years will still be 3.09%. That would mean that the interest on the national debt would be $618 billion a year or over one billion a day. No nation can hold up in the face of those kinds of expenses. Either the dollar would collapse or interest rates would go through the roof...."As I said all along, it would have been better to have allowed the bear market to run its course to conclusion. That would have been extremely painful, but the US would have recovered. However, deficits in the trillions could ultimately 'break' this nation. I can't imagine how Bernanke-Obama plan to handle the coming mind-blowing deficits, plus the interest on those deficits.
"The pressure will be on the reserve status of the dollar, the level of the dollar compared to other international currencies, interest rates, and the standard of living of all of us living in the new 'banana republic', the United States of 'bankrupt' America.
"When you take all this in, you can begin to see how this bear market could end with stocks selling below known values and people despising the stock market and capitalism."
Chris Puplava: "September has proven to be the worst month of the year and the percent of NYSE issues making new highs have not confirmed the recent market highs in the S&P 500, so a garden variety correction may be what lies in store in the coming weeks."
"Based on how participants rated their own physical and mental health, we found that people who were persistently concerned about losing their jobs reported significantly worse overall health in both studies and were more depressed in one of the studies than those who had actually lost and regained their jobs recently," said Sarah Burgard, a sociologist at the University of Michigan.
OPEC is unlikely to announce a new production cut during its meeting next week, a senior Kuwaiti oil official said in remarks published Sunday.
Imad al-Atiqi, a member of the Supreme Petroleum Council, told the Al-Seyassah daily newspaper that oil prices were stable. Oil ministers from the 12-member Organization of the Petroleum Exporting Countries will instead focus on compliance with current output quotas, he said.
Chinese companies have spent at least $13 billion acquiring oil assets overseas since December, including purchases in Singapore, Syria and Kazakhstan.
According to the Journal's story "roughly 8% of households are delinquent with utility payments." So the utilities are lettting people pay 25% now and 75% later.
The USA Today, also has a story along these lines today, saying that power is getting shut off because consumers can't afford to pay their bills.
Insider selling is 30.6x greater than insider buying! This is the highest ratio on record since TrimTabs began tracking this data in 2004. Furthermore, their data reveals that insiders have sold a record $105.2 billion worth of stock in just the last four months.
Brett Steenbarger: " The current 20-day median TRIN is the lowest value we've seen since 2000 at around .75.
I'm not exactly sure what to make of that. What I can tell you with certainty is that two of the past historical occasions in which we've had 20-day price highs and ultra low median 20-day TRIN readings have been March 2000 and late May/early June, 2007. Both corresponded more or less to bull market peaks."
Japan's voters Sunday appear to have soundly rejected the ruling party that has set the nation's course for more than half a century, according to media tallies.
“We’re at an inflection point with respect to the American consumer,” said Mark Zandi, chief economist at Moody’s Economy.com, who correctly forecast a dip in spending heading into the recession, and who provided data supporting sustained weakness.
“Lower-income households can’t borrow, and higher-income households no longer feel wealthy,” Mr. Zandi added. “There’s still a lot of debt out there. It throws a pall over the potential for a strong recovery. The economy is going to struggle.”
“Not only have people lost money, but they don’t expect as much appreciation in the money they have, and that should affect consumption,” said Andrew Tilton, an economist at Goldman Sachs. “This is a cultural shift going on. People will save more.”
Natural Gas Production – according to Bentek Energy, LLC, and U.S. marketed production of natural gas for August 2009 was down about one percent from that in August 2008. In addition, domestic natural gas production that averaged about 58.8 Bcf per day in July 2009 was down to 58.5 Bcf per day in August.
Accuweather's Chief Meteorologist and Expert Long Range Forecaster Joe Bastardi has released an early prediction for this coming winter. In fact, he believes that this winter will be the "Snowiest in Over 5 Years NYC to D.C.".
Eric Savitz: "Hewlett-Packard recently said it doesn't expect Windows 7 to be a big enough improvement over XP and Vista to spark a major refresh. Is there really a reason to be bullish on Dell? I don't see it."
Oct. crude rises 37 cents to $73.11/barrel. Oct. natural gas up 2.3 cents to $3.056/mbtu.
Spot gold up $4 to $959.60/troy ounce.
Japan's industrial production index rose a seasonally adjusted 1.9% on month in July, the Ministry of Economy, Trade and Industry said Monday. Inventories, meanwhile, fell 0.2% on month in July, the seventh straight drop. The Nomura/JMMA Manufacturing Purchasing Managers Index hit a seasonally adjusted 53.6 in August, up from the previous month's 50.4, marking the highest level since November 2006, according to Reuters. Reports cited the output index as rising to 58.7, up from 54.7.
Stronger Chinese demand may reduce the global economy’s dependence on consumers in the U.S. and Europe and rein in China’s trade surplus, curbing global imbalances in spending and saving that may have contributed to the financial crisis. The surplus fell $16.6 billion in the first seven months to $108 billion, on track for the first annual decline since 2003.
“We’re clearly seeing a surge in imports driven by domestic demand that is consistent with a new direction for China’s economy,” said Louis Kuijs, a senior China economist with the Washington-based World Bank in Beijing.
China is the world’s second- largest exporter behind Germany and the third-biggest importer after the U.S. and Germany.
Saturday, August 29, 2009
September
8//29/09 September
Doug Noland: "it is the Credit system driving the real economy - not vice-versa. Only massive fiscal and monetary stimulus was capable of stabilizing the system. Total non-financial Credit expanded $470 billion 1991. It is my view that the maladjusted U.S. “Bubble” economy will require non-financial Credit growth of at least $2.0 TN this year. With the banking system and Wall Street finance severely impaired, “federal” (Treasury, agency, GSE MBS) Credit will account for the vast majority of system Credit growth this year....I also believe it matters greatly to both the U.S. economy and markets that our government has become the predominant source of system finance. Granted, it may not matter so much right now as artificial recoveries flourish in the markets and economy. But those believing the stock market is forecasting a happy ending to this, the latest stage of the Bubble, will again be disappointed. I haven’t forgotten how the Wall Street boom papered over a lot of problems and structural issues."
Mike Burk: "Over all years since 1928, the SPX, in September, has been up 44% of the time with an average loss of 1.2%, making it the worst month of the year. During the 1st year of the Presidential Cycle the SPX has been up only 30% of the time with an average loss of 2.3%, also the worst month of year in the 1st year of the Presidential Cycle....The market is overbought any way you want to measure it and new highs are deteriorating. It is likely to take a while for the momentum to bleed off, on the other hand there is unlikely to be much upside either.
I expect the major indices to be lower on Friday September 4 than they were on Friday August 28."
Three more banks were closed by regulators Friday, bringing the 2009 toll to 84.
Guaranty Financial Group Inc has filed for Chapter 11 bankruptcy protection, less than a week after regulators seized its banking unit and sold most of its assets to the Spanish bank, Banco Bilbao Vizcaya Argentaria SA .
Edmunds predicts that the 1.17 million cars will be sold this month, which is up 18% from last month and down “only” 6% from last year. Thank you clunkers.
Zerohedge: "From January to May the total capital outflows from the U.S. amount to ($314) billion in assets, consisting of central bank purchases of $50 billion, however, matched with private investor dispositions of $364 billion....agency bonds peaked in October of 2008 at nearly a trillion dollars but have declined by $178 billion since then. Treasuries, on the other hand, have increased by over $500 billion over that same span of time. A half a trillion dollars!
Shell #1: Foreign central banks sell agency debt out of the custody account.
Shell #2: The Federal Reserve buys those agency bonds with money created out of thin air.
Shell #3: Foreign central banks use that very same money to buy Treasuries at the next government auction."
Chris Martenson: "The Federal Reserve has effectively been monetizing far more US government debt than has openly been revealed, by cleverly enabling foreign central banks to swap their agency debt for Treasury debt. This is not a sign of strength and reveals a pattern of trading temporary relief for future difficulties.
This is very nearly the same path that Zimbabwe took, resulting in the complete abandonment of the Zimbabwe dollar as a unit of currency. The difference is in the complexity of the game being played, not the substance of the actions themselves.The shell game that the Fed is currently playing does not change the basic equation: Money is being printed out of thin air so that it can be used to buy US government debt. When the full scope of this program is more widely recognized, ever more pressure will fall upon the dollar, as more and more private investors shun the dollar and all dollar-denominated instruments as stores of value and wealth. This will further burden the efforts of the various central banks around the world as they endeavor to meet the vast borrowing desires of the US government.One possible result of the abandonment of these efforts is a wholesale flight out of the dollar and into other assets. To US residents, this will be experienced as rapidly rising import costs and increasing costs for all internationally-traded basic commodities, especially food items. For the rest of the world, the results will range from discomforting to disastrous, depending on their degree of dollar linkage. "
“India’s future is threatene by shortages of food, water and energy and these should be addressed on a priority basis, the Prime Minister’s security adviser said. ‘These are part of a broad national security plan, and defense is only one aspect of it,’ Shekhar Dutt, India’s deputy national security adviser, said… ‘We think water is going to be a very severe determinant of prosperity and well-being.’”
Brett Steenbarger: "The current 20-day median TRIN is the lowest value we've seen since 2000 at around .75.
I'm not exactly sure what to make of that. What I can tell you with certainty is that two of the past historical occasions in which we've had 20-day price highs and ultra low median 20-day TRIN readings have been March, 2000 and late May/early June, 2007. Both corresponded more or less to bull market peaks."
The European Union signed a temporary trade pact Saturday with Mauritius, Seychelles, Zimbabwe and Madagascar calling for tariffs on European goods would be removed over the next 15 years.
The four countries in southeast Africa have had full access to the EU consumer market -- the world's biggest -- since the start of 2008 for most goods. Trade barriers for rice and sugar, however, are being removed gradually.
The new deal excludes trade on agricultural products such as milk, meat, vegetables, textiles, footwear and clothing.
The Oil Drum: "Declining industrial electricity demand and an abundance of cheap natural gas will threaten coal's status as the dominant U.S. fuel to generate electric power, even after the economic recession ends.
Power companies are reducing use of coal plants because of declining demand from heavy industry, the economic sector hardest hit by the recession. The loss of industrial "baseload" looks long term, analysts and executives say.
Natural gas-fired plants, easier to stop and start, have remained busy serving commercial and household power demand, which varies hour by hour and has been less affected by the recession."
WSJ: "The U.S. recovery is a tale of two economies. At one extreme are big companies with an enviable access to credit; at the other are small, struggling firms that can't borrow."
Peter Goodman: "Even though consumer spending rose in July, many Americans are still watching their pennies, and some said their newfound frugality would not be temporary."
Internet companies and civil liberties groups were alarmed this spring when a U.S. Senate bill proposed handing the White House the power to disconnect private-sector computers from the Internet.
They're not much happier about a revised version that aides to Sen. Jay Rockefeller, a West Virginia Democrat, have spent months drafting behind closed doors. CNET News has obtained a copy of the 55-page draft of S.773 (excerpt), which still appears to permit the president to seize temporary control of private-sector networks during a so-called cybersecurity emergency.
The new version would
allow the president to "declare a cybersecurity emergency" relating to "non-governmental" computer networks and do what's necessary to respond to the threat. Other sections of the proposal include a federal certification program for "cybersecurity professionals," and a requirement that certain computer systems and networks in the private sector be managed by people who have been awarded that license.
The California Building Industry Association says its members reported a significant drop in traffic to their developments in July because the state stopped taking applications for a $10,000 tax credit for new home buyers.
The $10,000 credit was authorized by the state legislature last February as a way to jump start California construction jobs. The credit, coupled with the $8,000 federal new home buyer credit, had been a big reason why builders in California saw a jump in sales this past spring.
Now with the initial funding exhausted, buyers are less eager. “Activity stopped as quickly as it started, which is bad news for housing and the broader economy,” says Robert Rivinius, the builder association’s president. The trade group is lobbying to get the credit extended.
Doug Noland: "it is the Credit system driving the real economy - not vice-versa. Only massive fiscal and monetary stimulus was capable of stabilizing the system. Total non-financial Credit expanded $470 billion 1991. It is my view that the maladjusted U.S. “Bubble” economy will require non-financial Credit growth of at least $2.0 TN this year. With the banking system and Wall Street finance severely impaired, “federal” (Treasury, agency, GSE MBS) Credit will account for the vast majority of system Credit growth this year....I also believe it matters greatly to both the U.S. economy and markets that our government has become the predominant source of system finance. Granted, it may not matter so much right now as artificial recoveries flourish in the markets and economy. But those believing the stock market is forecasting a happy ending to this, the latest stage of the Bubble, will again be disappointed. I haven’t forgotten how the Wall Street boom papered over a lot of problems and structural issues."
Mike Burk: "Over all years since 1928, the SPX, in September, has been up 44% of the time with an average loss of 1.2%, making it the worst month of the year. During the 1st year of the Presidential Cycle the SPX has been up only 30% of the time with an average loss of 2.3%, also the worst month of year in the 1st year of the Presidential Cycle....The market is overbought any way you want to measure it and new highs are deteriorating. It is likely to take a while for the momentum to bleed off, on the other hand there is unlikely to be much upside either.
I expect the major indices to be lower on Friday September 4 than they were on Friday August 28."
Three more banks were closed by regulators Friday, bringing the 2009 toll to 84.
Guaranty Financial Group Inc has filed for Chapter 11 bankruptcy protection, less than a week after regulators seized its banking unit and sold most of its assets to the Spanish bank, Banco Bilbao Vizcaya Argentaria SA .
Edmunds predicts that the 1.17 million cars will be sold this month, which is up 18% from last month and down “only” 6% from last year. Thank you clunkers.
Zerohedge: "From January to May the total capital outflows from the U.S. amount to ($314) billion in assets, consisting of central bank purchases of $50 billion, however, matched with private investor dispositions of $364 billion....agency bonds peaked in October of 2008 at nearly a trillion dollars but have declined by $178 billion since then. Treasuries, on the other hand, have increased by over $500 billion over that same span of time. A half a trillion dollars!
Shell #1: Foreign central banks sell agency debt out of the custody account.
Shell #2: The Federal Reserve buys those agency bonds with money created out of thin air.
Shell #3: Foreign central banks use that very same money to buy Treasuries at the next government auction."
Chris Martenson: "The Federal Reserve has effectively been monetizing far more US government debt than has openly been revealed, by cleverly enabling foreign central banks to swap their agency debt for Treasury debt. This is not a sign of strength and reveals a pattern of trading temporary relief for future difficulties.
This is very nearly the same path that Zimbabwe took, resulting in the complete abandonment of the Zimbabwe dollar as a unit of currency. The difference is in the complexity of the game being played, not the substance of the actions themselves.The shell game that the Fed is currently playing does not change the basic equation: Money is being printed out of thin air so that it can be used to buy US government debt. When the full scope of this program is more widely recognized, ever more pressure will fall upon the dollar, as more and more private investors shun the dollar and all dollar-denominated instruments as stores of value and wealth. This will further burden the efforts of the various central banks around the world as they endeavor to meet the vast borrowing desires of the US government.One possible result of the abandonment of these efforts is a wholesale flight out of the dollar and into other assets. To US residents, this will be experienced as rapidly rising import costs and increasing costs for all internationally-traded basic commodities, especially food items. For the rest of the world, the results will range from discomforting to disastrous, depending on their degree of dollar linkage. "
“India’s future is threatene by shortages of food, water and energy and these should be addressed on a priority basis, the Prime Minister’s security adviser said. ‘These are part of a broad national security plan, and defense is only one aspect of it,’ Shekhar Dutt, India’s deputy national security adviser, said… ‘We think water is going to be a very severe determinant of prosperity and well-being.’”
Brett Steenbarger: "The current 20-day median TRIN is the lowest value we've seen since 2000 at around .75.
I'm not exactly sure what to make of that. What I can tell you with certainty is that two of the past historical occasions in which we've had 20-day price highs and ultra low median 20-day TRIN readings have been March, 2000 and late May/early June, 2007. Both corresponded more or less to bull market peaks."
The European Union signed a temporary trade pact Saturday with Mauritius, Seychelles, Zimbabwe and Madagascar calling for tariffs on European goods would be removed over the next 15 years.
The four countries in southeast Africa have had full access to the EU consumer market -- the world's biggest -- since the start of 2008 for most goods. Trade barriers for rice and sugar, however, are being removed gradually.
The new deal excludes trade on agricultural products such as milk, meat, vegetables, textiles, footwear and clothing.
The Oil Drum: "Declining industrial electricity demand and an abundance of cheap natural gas will threaten coal's status as the dominant U.S. fuel to generate electric power, even after the economic recession ends.
Power companies are reducing use of coal plants because of declining demand from heavy industry, the economic sector hardest hit by the recession. The loss of industrial "baseload" looks long term, analysts and executives say.
Natural gas-fired plants, easier to stop and start, have remained busy serving commercial and household power demand, which varies hour by hour and has been less affected by the recession."
WSJ: "The U.S. recovery is a tale of two economies. At one extreme are big companies with an enviable access to credit; at the other are small, struggling firms that can't borrow."
Peter Goodman: "Even though consumer spending rose in July, many Americans are still watching their pennies, and some said their newfound frugality would not be temporary."
Internet companies and civil liberties groups were alarmed this spring when a U.S. Senate bill proposed handing the White House the power to disconnect private-sector computers from the Internet.
They're not much happier about a revised version that aides to Sen. Jay Rockefeller, a West Virginia Democrat, have spent months drafting behind closed doors. CNET News has obtained a copy of the 55-page draft of S.773 (excerpt), which still appears to permit the president to seize temporary control of private-sector networks during a so-called cybersecurity emergency.
The new version would
allow the president to "declare a cybersecurity emergency" relating to "non-governmental" computer networks and do what's necessary to respond to the threat. Other sections of the proposal include a federal certification program for "cybersecurity professionals," and a requirement that certain computer systems and networks in the private sector be managed by people who have been awarded that license.
The California Building Industry Association says its members reported a significant drop in traffic to their developments in July because the state stopped taking applications for a $10,000 tax credit for new home buyers.
The $10,000 credit was authorized by the state legislature last February as a way to jump start California construction jobs. The credit, coupled with the $8,000 federal new home buyer credit, had been a big reason why builders in California saw a jump in sales this past spring.
Now with the initial funding exhausted, buyers are less eager. “Activity stopped as quickly as it started, which is bad news for housing and the broader economy,” says Robert Rivinius, the builder association’s president. The trade group is lobbying to get the credit extended.
Friday, August 28, 2009
Benchmark
8/29/09 Benchmark
A benchmark for the mid- Atlantic region, power fell $3.68, or 10 percent, to $32.31 a megawatt-hour on the Atlanta-based Intercontinental Exchange. That’s the lowest for the region, which stretches from Washington to Chicago, since Dec. 31, 2003.
Mild summer weather and a weak economy have reduced industrial and residential demand for electricity as offices and factories shut and consumers cut back spending.
Meanwhile, consumers reported the worst assessments of their finances since the surveys began in 1946.
Tiffany said sales trends in August are meeting its expectations. It raised its profit forecast for the year to $1.65 to $1.75 a share from a previous projection of as much as $1.60. It forecast a sales decline of about 10%.
German gross domestic product is on track to shrink by 5% or 6% in 2009, Chancellor Angela Merkel said Friday, according to Dow Jones Newswires. Merkel said the economy may have reached bottom but warned that the crisis isn't over.
The UK economy shrank by 0.7 per cent in the second quarter, marginally less than the 0.8 per cent initially estimated, according to official figures published on Friday.
"Personal income increased $3.8 billion, or less than 0.1 percent, and disposable personal income (DPI) decreased $4.6 billion, or less than 0.1 percent, in July, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $25.0 billion, or 0.2 percent. In June, personal income decreased $133.4 billion, or 1.1 percent, DPI decreased $119.9 billion, or 1.1 percent, and PCE increased $60.9 billion, or 0.6 percent, based on revised estimates. Real disposable income decreased 0.1 percent in July, compared with a decrease of 1.6 percent in June. Real PCE increased 0.2 percent, compared with an increase of 0.1 percent." US consumer spending was lifted by the government's "cash-for-clunkers" program that fueled demand for autos.
"Personal saving -- DPI less personal outlays – was $458.5 billion in July, compared with $486.8 billion in June. Personal saving as a percentage of disposable personal income was 4.2 percent in July, compared with 4.5 percent in June. "
Newspapers' financial woes worsened in the second quarter as advertising sales shrank by 29 percent, leaving publishers with $2.8 billion less revenue than they had at the same time last year.
Japan’s consumer prices fell at a record pace in July, adding to signs that deflation will hamper a rebound from the nation’s worst postwar recession.
Consumer prices excluding fresh food declined 2.2 percent from a year earlier after dropping 1.7 percent in the previous month, the statistics bureau said today in Tokyo. It was the sharpest decrease since the survey began in 1971.
The president slips to 50% in the Gallup Poll, reaching that point more quickly than most of his predecessors did.
Copper rose to the highest in almost 11 months in New York on speculation revived economic growth will spur demand. Lead jumped to a one-year high.
Chinese shares fell Friday amid concerns about a possible decline in liquidity, ending the week down 3.4 percent.
Japan's unemployment rate rose to an all-time high in July, deflation intensified and families cut spending — a triple dose of bad news for Prime Minister Taro Aso as his party heads for almost certain defeat in Sunday's parliamentary elections.
The jobless rate hit a seasonally adjusted 5.7 percent, the highest level in Japan's post-World War II era and worsening from 5.4 percent in June, the government said Friday.
The previous record was 5.5 percent, last hit in April 2003.
In some geographic areas, it is currently cheaper to use natural gas than coal. Shocking, right?
U.S. consumer confidence fell to its lowest in four months in August on worries over high unemployment and dismal personal finances, though the mood managed to improve from earlier this month, a survey showed on Friday.
The Reuters/University of Michigan Surveys of Consumers said its final index of confidence for August fell to 65.7 from 66.0 in July.
That was the lowest since 65.1 in April.
Consumers rated the current economic conditions the worst since March, when the stock market hit 12-year lows. This index fell to 66.6 from 70.5 in July.
Fannie Mae, Freddie Mac, AIG, Citi, and Vonage show big gains in August. Insanity is back in force. The U.S. doolar index remains weak while oil is at $73, gold at $958, and natural gas is at the rear at $3.06.
intel issued a forecast calling for revenue of $8.8 billion to $9.2 billion in the current quarter, up from a previously forecast $8.1 billion to $8.9 billion.
Whirlpool Corp. said Friday it will cut 1,100 jobs and close a refrigerator factory in Evansville, Ind., to cut excess production capacity.The jobs will be eliminated in mid-2010.
An Obama administration plan to cut Medicare payments to heart and cancer doctors by $1.4 billion next year is generating a backlash that’s undermining the president’s health-care overhaul.
Xebec Adsorption Inc, a global leader in the drying and purification of natural gas for NGV refueling stations, announced today that the U.S. Department of Energy's (DOE) Clean Cities program has awarded US$300 million in funding to build more than 9,000 alternative fuel and energy efficient vehicles and 542 refueling stations.
"Xebec believes that natural gas as a transportation fuel in the United States has a bright future and the decision by the DOE is an important step in the direction of making the U.S. energy independent while at the same time significantly reducing green house gas admissions," said Kurt Sorschak, President and CEO of Xebec. "Xebec has been in the natural gas vehicle refueling market for over 25 years and enjoys a market share of over 90% in the dehydration of natural gas for refueling stations in the United States."
Raymond James' Buck Horne:"A large part of the completed spec inventory the builders are still holding is simply the wrong product for this environment -- an many of those homes are only getting older. Notice the jump in the median months for sale from 11.8 to 12.4. The newly designed, simplified, downsized product is selling well. All those older homes with lots of bells and whistles are still sitting out there collecting dust."
Apple will sell somewhere between five and seven million iPhones in China in 2010 as a result of its deal with the country's second-largest mobile carrier, a Wall Street analyst said today.
The Chinese market will account for about 15% to 20% of Apple's worldwide iPhone sales next year, said Brian Marshall, an analyst with Broadpoint AmTech. "The upside for Apple is great."
Earlier today, China Unicom, the country's No. 2 carrier, announced a three-year agreement with Apple to sell the latter's iPhone, confirming rumors and reports that the two were nearing a deal. Last March, Web sites and bloggers reported that China Unicom had confirmed it would start selling the iPhone the following month, something that did not happen.
The S&P 500 Index slipped 2.05 points, or 0.2%, to 1,028.93, leaving the broad market gauge up 0.3% for the week. The technology-laden Nasdaq Composite added 1.04 points, or 0.1%, to rest at 2,028.77, leaving it with a weekly gain of 0.4%. The Dow Jones Industrial Average fell 36.43 points, or 0.4%, to 9,544.20, up 0.4% from the week-ago close.
Art Cashin:"The employment situation is hanging tough. Even though I know unemployment is a lagging indicator, with the severe layoffs we've had recently, you find people looking and saying, 'okay, I've still got my job, but the guy down the block lost his, and those two guys over there lost theirs' — and that's beginning to rain down further on housing."
A benchmark for the mid- Atlantic region, power fell $3.68, or 10 percent, to $32.31 a megawatt-hour on the Atlanta-based Intercontinental Exchange. That’s the lowest for the region, which stretches from Washington to Chicago, since Dec. 31, 2003.
Mild summer weather and a weak economy have reduced industrial and residential demand for electricity as offices and factories shut and consumers cut back spending.
Meanwhile, consumers reported the worst assessments of their finances since the surveys began in 1946.
Tiffany said sales trends in August are meeting its expectations. It raised its profit forecast for the year to $1.65 to $1.75 a share from a previous projection of as much as $1.60. It forecast a sales decline of about 10%.
German gross domestic product is on track to shrink by 5% or 6% in 2009, Chancellor Angela Merkel said Friday, according to Dow Jones Newswires. Merkel said the economy may have reached bottom but warned that the crisis isn't over.
The UK economy shrank by 0.7 per cent in the second quarter, marginally less than the 0.8 per cent initially estimated, according to official figures published on Friday.
"Personal income increased $3.8 billion, or less than 0.1 percent, and disposable personal income (DPI) decreased $4.6 billion, or less than 0.1 percent, in July, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $25.0 billion, or 0.2 percent. In June, personal income decreased $133.4 billion, or 1.1 percent, DPI decreased $119.9 billion, or 1.1 percent, and PCE increased $60.9 billion, or 0.6 percent, based on revised estimates. Real disposable income decreased 0.1 percent in July, compared with a decrease of 1.6 percent in June. Real PCE increased 0.2 percent, compared with an increase of 0.1 percent." US consumer spending was lifted by the government's "cash-for-clunkers" program that fueled demand for autos.
"Personal saving -- DPI less personal outlays – was $458.5 billion in July, compared with $486.8 billion in June. Personal saving as a percentage of disposable personal income was 4.2 percent in July, compared with 4.5 percent in June. "
Newspapers' financial woes worsened in the second quarter as advertising sales shrank by 29 percent, leaving publishers with $2.8 billion less revenue than they had at the same time last year.
Japan’s consumer prices fell at a record pace in July, adding to signs that deflation will hamper a rebound from the nation’s worst postwar recession.
Consumer prices excluding fresh food declined 2.2 percent from a year earlier after dropping 1.7 percent in the previous month, the statistics bureau said today in Tokyo. It was the sharpest decrease since the survey began in 1971.
The president slips to 50% in the Gallup Poll, reaching that point more quickly than most of his predecessors did.
Copper rose to the highest in almost 11 months in New York on speculation revived economic growth will spur demand. Lead jumped to a one-year high.
Chinese shares fell Friday amid concerns about a possible decline in liquidity, ending the week down 3.4 percent.
Japan's unemployment rate rose to an all-time high in July, deflation intensified and families cut spending — a triple dose of bad news for Prime Minister Taro Aso as his party heads for almost certain defeat in Sunday's parliamentary elections.
The jobless rate hit a seasonally adjusted 5.7 percent, the highest level in Japan's post-World War II era and worsening from 5.4 percent in June, the government said Friday.
The previous record was 5.5 percent, last hit in April 2003.
In some geographic areas, it is currently cheaper to use natural gas than coal. Shocking, right?
U.S. consumer confidence fell to its lowest in four months in August on worries over high unemployment and dismal personal finances, though the mood managed to improve from earlier this month, a survey showed on Friday.
The Reuters/University of Michigan Surveys of Consumers said its final index of confidence for August fell to 65.7 from 66.0 in July.
That was the lowest since 65.1 in April.
Consumers rated the current economic conditions the worst since March, when the stock market hit 12-year lows. This index fell to 66.6 from 70.5 in July.
Fannie Mae, Freddie Mac, AIG, Citi, and Vonage show big gains in August. Insanity is back in force. The U.S. doolar index remains weak while oil is at $73, gold at $958, and natural gas is at the rear at $3.06.
intel issued a forecast calling for revenue of $8.8 billion to $9.2 billion in the current quarter, up from a previously forecast $8.1 billion to $8.9 billion.
Whirlpool Corp. said Friday it will cut 1,100 jobs and close a refrigerator factory in Evansville, Ind., to cut excess production capacity.The jobs will be eliminated in mid-2010.
An Obama administration plan to cut Medicare payments to heart and cancer doctors by $1.4 billion next year is generating a backlash that’s undermining the president’s health-care overhaul.
Xebec Adsorption Inc, a global leader in the drying and purification of natural gas for NGV refueling stations, announced today that the U.S. Department of Energy's (DOE) Clean Cities program has awarded US$300 million in funding to build more than 9,000 alternative fuel and energy efficient vehicles and 542 refueling stations.
"Xebec believes that natural gas as a transportation fuel in the United States has a bright future and the decision by the DOE is an important step in the direction of making the U.S. energy independent while at the same time significantly reducing green house gas admissions," said Kurt Sorschak, President and CEO of Xebec. "Xebec has been in the natural gas vehicle refueling market for over 25 years and enjoys a market share of over 90% in the dehydration of natural gas for refueling stations in the United States."
Raymond James' Buck Horne:"A large part of the completed spec inventory the builders are still holding is simply the wrong product for this environment -- an many of those homes are only getting older. Notice the jump in the median months for sale from 11.8 to 12.4. The newly designed, simplified, downsized product is selling well. All those older homes with lots of bells and whistles are still sitting out there collecting dust."
Apple will sell somewhere between five and seven million iPhones in China in 2010 as a result of its deal with the country's second-largest mobile carrier, a Wall Street analyst said today.
The Chinese market will account for about 15% to 20% of Apple's worldwide iPhone sales next year, said Brian Marshall, an analyst with Broadpoint AmTech. "The upside for Apple is great."
Earlier today, China Unicom, the country's No. 2 carrier, announced a three-year agreement with Apple to sell the latter's iPhone, confirming rumors and reports that the two were nearing a deal. Last March, Web sites and bloggers reported that China Unicom had confirmed it would start selling the iPhone the following month, something that did not happen.
The S&P 500 Index slipped 2.05 points, or 0.2%, to 1,028.93, leaving the broad market gauge up 0.3% for the week. The technology-laden Nasdaq Composite added 1.04 points, or 0.1%, to rest at 2,028.77, leaving it with a weekly gain of 0.4%. The Dow Jones Industrial Average fell 36.43 points, or 0.4%, to 9,544.20, up 0.4% from the week-ago close.
Art Cashin:"The employment situation is hanging tough. Even though I know unemployment is a lagging indicator, with the severe layoffs we've had recently, you find people looking and saying, 'okay, I've still got my job, but the guy down the block lost his, and those two guys over there lost theirs' — and that's beginning to rain down further on housing."
Thursday, August 27, 2009
Exhausting Benefits
8/27/09 Exhausting Benefits
Despite repeated extensions of the unemployment compensation program — up to a record 79 weeks in many states, compared to the standard 26 weeks in normal times — some 1.5 million people are expected to exhaust their benefits by year’s end.
In the first big wave, some 540,000 are expected to fall out of the program by the end of September, according to the nonprofit National Employment Law Project.
“Every state is going to experience a substantial increase in people exhausting their benefits,” says Chris Owen, executive director of the Washington, D.C.-based worker advocacy group. “That means more people who will not be able to pay their mortgages, and who will not be able to shop and buy things. It will be a blow for the national economy, and for state and local economies.”
The FDIC on Thursday will disclose how much is left in its insurance fund, and update the number of banks on its list of troubled institutions. That number shot up to 305 in the first quarter — the highest since 1994 and up from 252 late last year.
FDIC Chairman Sheila Bair may also use the quarterly briefing to discuss how the agency plans to shore up its accounts.
Small and midsize banks across the country have been hurt by rising loan defaults in the recession. When they fail, the FDIC is responsible for making sure depositors don't lose a cent.
It has two options to replenish its insurance fund in the short run: It can charge banks higher fees or it can take the more radical step of borrowing from the U.S. Treasury.
The U.S. added 111 lenders to its list of “problem banks” in the second quarter, a 36 percent increase that pushed the group to a 15-year high.
A total of 416 banks with combined assets of $299.8 billion failed the Federal Deposit Insurance Corp.’s grading system for asset quality, liquidity and earnings, the most since June 1994, the Washington-based FDIC said in a report today. Regulators didn’t identify companies deemed “problem” banks.
Since February, default and foreclosure rates on option ARMs have passed those of subprime mortgages, according to the research firm First American CoreLogic, in part because so many subprime mortgages have already failed.
“Everyone’s been focused on subprime, but we’re more concerned about this,” said Todd Jadlos, managing director of
LPS Applied Analytics, which analyzes data for the financial industry. “By the time subprime defaults had increased 200 percent, in June and July of 2007, option ARMs had gone up 400 percent. People just didn’t notice because the overall numbers weren’t as high.”
First American CoreLogic anticipates 600,000 option ARMS will reset within four years.
Toll Brothers Inc. says it lost $472.3 million in its fiscal third quarter, as the luxury homebuilder took a large tax hit.
But while Toll Brothers' results were worse than analysts expected, the company is seeing signs of improvement in the industry.
The builder said Thursday it lost $2.93 a share in the three months ended July 31. That compares with a loss of $29.3 million, or 18 cents a share, the same period last year.
Toll Brothers sold 792 homes with revenue totaling $461.4 million. Those results were down 36 percent and 42 percent, respectively, from the third fiscal quarter last year.
First-time claims for state unemployment benefits fell for the first time in three weeks, the Labor Department reported Thursday. The number of initial claims in the week ending Aug. 22 fell 10,000 to 570,000. The consensus forecast of Wall Street economists was for claims to fall to 565,000. Claims in the previous week were revised to an increase of 19,000 to 580,000 compared with the initial estimate of a increase of 15,000 to 576,000. Claims had risen 26,000 in the past two weeks. The four-week average of initial claims fell 4,750 to 566,250. Meanwhile, the number of Americans receiving state jobless benefits fell 119,000 to 6.13 million in the week ending Aug. 15. This is the lowest level since early April. The four-week moving average of continuing claims fell 27,000 to 6.24 million.
Retail maven Howard Davidowitz paid another visit to Tech Ticker this week. And despite signs of improvement in consumer confidence and retail stocks rising, Davidowitz is steadfast in his belief the consumer is dead.
Rather than summarize, let me just highlight some of his best one-liners:
On retail:
"The retail business is terrible... It's almost all negative." "We're going to close hundreds of thousands of stores."
On the consumer:
"They’re still over leveraged, they're losing jobs, their credit has been cut back."
On America:
"We are in the tank forever. As a country we are out of control, we're in a death spiral."
Boeing Co said on Thursday that its 787 Dreamliner would make its first flight by the end of this year, with the first delivery expected in the fourth quarter of 2010.
The plane maker said it has concluded that the initial test-flight planes of the long-delayed 787 have no commercial market value because of necessary modifications that have been made.
It added that costs previously recorded for the first three test planes would be reclassified as research and development expense, resulting in an estimated pretax charge of $2.5 billion, or $2.21 a share, against results for the third quarter.
The aircraft, already two years behind its original schedule, was to fly in the second quarter of 2009, but the flight was delayed so Boeing could address a structural problem.
Working gas in storage was 3,258 Bcf as of Friday, August 21, 2009, according to EIA estimates. This represents a net increase of 54 Bcf from the previous week. Stocks were 516 Bcf higher than last year at this time and 500 Bcf above the 5-year average of 2,758 Bcf. In the East Region, stocks were 153 Bcf above the 5-year average following net injections of 43 Bcf. Stocks in the Producing Region were 271 Bcf above the 5-year average of 808 Bcf after a net injection of 5 Bcf. Stocks in the West Region were 76 Bcf above the 5-year average after a net addition of 6 Bcf. At 3,258 Bcf, total working gas is above the 5-year historical range.
Analysts surveyed by Platts expected an addition of between 48 and 52 billion cubic feet, while IHS Global Insight projected a build of 52 billion cubic feet.
Wyoming's unemployment rate climbed to 6.5 percent in July, its highest rate in more than 20 years.
According to the Wyoming Department of Employment, the state has lost about 8,900 jobs from July 2008 through last month. The main losses over the year included 4,400 jobs in the construction sector and 4,200 jobs from natural resources and mining.
The US banking system will lose some 1,000 institutions over the next two years, said John Kanas, whose private equity firm bought BankUnited of Florida in May.
“We’ve already lost 81 this year,” he told CNBC. “The numbers are climbing every day. Many of these institutions nobody’s ever heard of. They're smaller companies.”
The USDA says American farm profits will decline more than expected, falling 38% this year to $54B vs. an earlier forecast of $71.2B. While input costs for energy and feed are falling, product sales are falling faster, and swine flu and a dairy surplus aren't helping.
Nouriel Roubini: "Consider that by the end of 2010 most of the tax cuts legislated by the Bush administration in 2001 and 2003 are due to expire. This means that there will be a sharp tax hike, including income taxes, capital gains taxes and taxes on dividends and estates. This hike--equivalent to around 1.5% to 2% of GDP--is already factored in to future calculations of government indebtedness. So if by next year the recovery proves as anemic as I expect, and if unemployment is around 10.5%-11%, as I also expect, then the pressure for another stimulus round early in 2010 will be strong."
Oil futures end up $1.06 at $72.49/brl on Nymex.
Toyota Motor Corp.'s board voted to close the automaker's Fremont, Calif.-based plant by March, according to media reports Thursday. The plant housing New United Motor Manufacturing Inc., a joint venture with General Motors Co., employs about 4,600 workers, according to reports.
U.S. dollar index weak at 77.90.
The Dow Jones Industrial Average added 37.11 points, or 0.4%, to 9,580.63. The S&P 500 Index gained 2.86 points, or 0.3%, to stand at 1,030.98, while the Nasdaq Composite added 3.3 points, or 0.2%, to 2,027.73.
Despite repeated extensions of the unemployment compensation program — up to a record 79 weeks in many states, compared to the standard 26 weeks in normal times — some 1.5 million people are expected to exhaust their benefits by year’s end.
In the first big wave, some 540,000 are expected to fall out of the program by the end of September, according to the nonprofit National Employment Law Project.
“Every state is going to experience a substantial increase in people exhausting their benefits,” says Chris Owen, executive director of the Washington, D.C.-based worker advocacy group. “That means more people who will not be able to pay their mortgages, and who will not be able to shop and buy things. It will be a blow for the national economy, and for state and local economies.”
The FDIC on Thursday will disclose how much is left in its insurance fund, and update the number of banks on its list of troubled institutions. That number shot up to 305 in the first quarter — the highest since 1994 and up from 252 late last year.
FDIC Chairman Sheila Bair may also use the quarterly briefing to discuss how the agency plans to shore up its accounts.
Small and midsize banks across the country have been hurt by rising loan defaults in the recession. When they fail, the FDIC is responsible for making sure depositors don't lose a cent.
It has two options to replenish its insurance fund in the short run: It can charge banks higher fees or it can take the more radical step of borrowing from the U.S. Treasury.
The U.S. added 111 lenders to its list of “problem banks” in the second quarter, a 36 percent increase that pushed the group to a 15-year high.
A total of 416 banks with combined assets of $299.8 billion failed the Federal Deposit Insurance Corp.’s grading system for asset quality, liquidity and earnings, the most since June 1994, the Washington-based FDIC said in a report today. Regulators didn’t identify companies deemed “problem” banks.
Since February, default and foreclosure rates on option ARMs have passed those of subprime mortgages, according to the research firm First American CoreLogic, in part because so many subprime mortgages have already failed.
“Everyone’s been focused on subprime, but we’re more concerned about this,” said Todd Jadlos, managing director of
LPS Applied Analytics, which analyzes data for the financial industry. “By the time subprime defaults had increased 200 percent, in June and July of 2007, option ARMs had gone up 400 percent. People just didn’t notice because the overall numbers weren’t as high.”
First American CoreLogic anticipates 600,000 option ARMS will reset within four years.
Toll Brothers Inc. says it lost $472.3 million in its fiscal third quarter, as the luxury homebuilder took a large tax hit.
But while Toll Brothers' results were worse than analysts expected, the company is seeing signs of improvement in the industry.
The builder said Thursday it lost $2.93 a share in the three months ended July 31. That compares with a loss of $29.3 million, or 18 cents a share, the same period last year.
Toll Brothers sold 792 homes with revenue totaling $461.4 million. Those results were down 36 percent and 42 percent, respectively, from the third fiscal quarter last year.
First-time claims for state unemployment benefits fell for the first time in three weeks, the Labor Department reported Thursday. The number of initial claims in the week ending Aug. 22 fell 10,000 to 570,000. The consensus forecast of Wall Street economists was for claims to fall to 565,000. Claims in the previous week were revised to an increase of 19,000 to 580,000 compared with the initial estimate of a increase of 15,000 to 576,000. Claims had risen 26,000 in the past two weeks. The four-week average of initial claims fell 4,750 to 566,250. Meanwhile, the number of Americans receiving state jobless benefits fell 119,000 to 6.13 million in the week ending Aug. 15. This is the lowest level since early April. The four-week moving average of continuing claims fell 27,000 to 6.24 million.
Retail maven Howard Davidowitz paid another visit to Tech Ticker this week. And despite signs of improvement in consumer confidence and retail stocks rising, Davidowitz is steadfast in his belief the consumer is dead.
Rather than summarize, let me just highlight some of his best one-liners:
On retail:
"The retail business is terrible... It's almost all negative." "We're going to close hundreds of thousands of stores."
On the consumer:
"They’re still over leveraged, they're losing jobs, their credit has been cut back."
On America:
"We are in the tank forever. As a country we are out of control, we're in a death spiral."
Boeing Co said on Thursday that its 787 Dreamliner would make its first flight by the end of this year, with the first delivery expected in the fourth quarter of 2010.
The plane maker said it has concluded that the initial test-flight planes of the long-delayed 787 have no commercial market value because of necessary modifications that have been made.
It added that costs previously recorded for the first three test planes would be reclassified as research and development expense, resulting in an estimated pretax charge of $2.5 billion, or $2.21 a share, against results for the third quarter.
The aircraft, already two years behind its original schedule, was to fly in the second quarter of 2009, but the flight was delayed so Boeing could address a structural problem.
Working gas in storage was 3,258 Bcf as of Friday, August 21, 2009, according to EIA estimates. This represents a net increase of 54 Bcf from the previous week. Stocks were 516 Bcf higher than last year at this time and 500 Bcf above the 5-year average of 2,758 Bcf. In the East Region, stocks were 153 Bcf above the 5-year average following net injections of 43 Bcf. Stocks in the Producing Region were 271 Bcf above the 5-year average of 808 Bcf after a net injection of 5 Bcf. Stocks in the West Region were 76 Bcf above the 5-year average after a net addition of 6 Bcf. At 3,258 Bcf, total working gas is above the 5-year historical range.
Analysts surveyed by Platts expected an addition of between 48 and 52 billion cubic feet, while IHS Global Insight projected a build of 52 billion cubic feet.
Wyoming's unemployment rate climbed to 6.5 percent in July, its highest rate in more than 20 years.
According to the Wyoming Department of Employment, the state has lost about 8,900 jobs from July 2008 through last month. The main losses over the year included 4,400 jobs in the construction sector and 4,200 jobs from natural resources and mining.
The US banking system will lose some 1,000 institutions over the next two years, said John Kanas, whose private equity firm bought BankUnited of Florida in May.
“We’ve already lost 81 this year,” he told CNBC. “The numbers are climbing every day. Many of these institutions nobody’s ever heard of. They're smaller companies.”
The USDA says American farm profits will decline more than expected, falling 38% this year to $54B vs. an earlier forecast of $71.2B. While input costs for energy and feed are falling, product sales are falling faster, and swine flu and a dairy surplus aren't helping.
Nouriel Roubini: "Consider that by the end of 2010 most of the tax cuts legislated by the Bush administration in 2001 and 2003 are due to expire. This means that there will be a sharp tax hike, including income taxes, capital gains taxes and taxes on dividends and estates. This hike--equivalent to around 1.5% to 2% of GDP--is already factored in to future calculations of government indebtedness. So if by next year the recovery proves as anemic as I expect, and if unemployment is around 10.5%-11%, as I also expect, then the pressure for another stimulus round early in 2010 will be strong."
Oil futures end up $1.06 at $72.49/brl on Nymex.
Toyota Motor Corp.'s board voted to close the automaker's Fremont, Calif.-based plant by March, according to media reports Thursday. The plant housing New United Motor Manufacturing Inc., a joint venture with General Motors Co., employs about 4,600 workers, according to reports.
U.S. dollar index weak at 77.90.
The Dow Jones Industrial Average added 37.11 points, or 0.4%, to 9,580.63. The S&P 500 Index gained 2.86 points, or 0.3%, to stand at 1,030.98, while the Nasdaq Composite added 3.3 points, or 0.2%, to 2,027.73.
Wednesday, August 26, 2009
Moving Averages
8/26/09 Moving Averages
Rob Hanna: "Some extreme readings are appearing in a few Worden Bros. indicators that look at stocks relative to their 200 day moving averages. One is T2107, which simply looks at the percentage of stocks trading above their 200ma. The other is T2109, which looks at the percentage of stocks trading at least 1 standard deviation above their 200ma. Both indicators are near all time highs (dating back to 1986). In fact, the only period of time in which these indicators registered higher readings was in the beginning of 2004....the last time these levels were reached in 2004, the market continued to trudge higher for about 2 ½ months before finally beginning a meaningful correction."
Japan's provisional trade surplus for July more than quadrupled on year, rising 364% from the same month in 2008, according to data released Wednesday by the Ministry of Finance. The surplus totaled 380.2 billion yen ($4.05 billion), below expectations reported by Dow Jones Newswires for a 396.9 billion yen surplus. Exports for the month fell 36.5% on year, while imports lost 40.8%. Shipments to China, which just recently became Japan's largest trading partner, were down 26.5% from the year before, while those to the U.S. fell 39.5%, the ministry said.
Colonial BancGroup Inc., the Montgomery-based real estate lender whose banking unit was shut down by the government and sold to BB&T Corp. earlier this month, has filed for Chapter 11 bankruptcy protection.
Shipments for durable goods rose 2% in July after a 0.7% increase in June. Inventories fell 0.8% in July. Orders are down 26% in the first seven months of 2009 compared with the same period last year.
Orders for transportation equipment, which rose 18.4 percent, drove the overall increase. Commercial aircraft orders, a volatile category, more than doubled after falling 30 percent in June. Motor vehicle orders increased 0.9 percent.
Excluding transportation goods, orders rose 0.8 percent. That was the third straight increase, but just below analysts' expectations of a 0.9 percent rise.
The API said late Tuesday that crude supplies rose by 4.3 million barrels last week, according to media reports. The Energy Information Administration is due to release its more closely watched report on Wednesday morning, with analysts surveyed by Platts expecting a drop of 2.7 million barrels in crude inventories in the week ended Aug. 21.
China said it’s studying curbs on overcapacity in industries including steel and cement, adding to concern policy makers may seek to rein in growth fueled by record credit expansion this year.
The government will increase “guidance” of industries including steel, cement, glass and power equipment, the State Council, China’s cabinet, said in a statement on its Web site today. The government will strengthen controls on approval of stock and bond sales by companies in these industries, according to the statement.
China’s benchmark stock index has dropped 15 percent from its Aug. 4 high on concern economic growth will falter as banks rein in lending. China’s economy expanded 7.9 percent in the second quarter, rebounding from the weakest growth in almost a decade, after banks extended a record $1.1 trillion of new loans in the first six months.
Brett Steenbarger: "It also raises the possibility that we saw a momentum high in July, a stiff pullback last week, and now price highs on lower participation. If this is, indeed, a larger timeframe transition pattern in the making, we should fail at these highs and begin a sharp pullback that would take us below the lows of last week.
While I stick with my short-term indicators, such as Cumulative TICK and Demand/Supply, and those are bullish, the larger picture non-confirmations leave me nervous and ready to reverse views. We need to see day-over-day strength here, confirming the bull move. Expanding new 20-day lows would be an important indication that all is not well for the bull. Expanding 20-day highs would be important support for the bulls."
Crude-oil futures reduced their losses Wednesday after government data showed a small increase in crude inventories last week, in contrast with an earlier report released by an industry group that showed a big buildup. U.S. crude inventories rose by 200,000 barrels in the week ended Aug. 21, the Energy Information Administration reported. The American Petroleum Institute had reported late Tuesday that inventories rose by 4.3 million barrels. The API and the EIA use different methodologies to calculate stockpiles. After the EIA report, December crude futures fell 56 cents, or 0.8%, to $71.52 a barrel. They were down more than 1% before the data. The EIA also reported a drop of 1.7 million barrels in gasoline inventories and an increase of 800,000 barrels in distillate fuels, which include heating oil and diesel. Analysts surveyed by Platts had expected a drop of 2.7 million barrels in crude inventories, a decline of 1.5 million barrels for gasoline, and a drop of 700,000 barrels for distillates.
Paper and packaging producer International Paper Co said demand for its products has stagnated, and it sees no immediate signs of the U.S. economy
improving. "I don't think we've seen anything that could be called a
trend other than the flat market," Chief Financial Officer
Timothy Nicholls told the Reuters Paper and Packaging Summit on
Tuesday.
The rise of emerging economies such as China and Russia will prevent the U.S. dollar from remaining the world's only reserve currency, French President Nicolas Sarkozy said Wednesday, according to Dow Jones Newswires. "The political and economic reality of a multipolar world will have to find sooner or later a translation on the monetary level," Sarkozy said at a yearly reception for foreign ambassadors in Paris, the report said. Sarkozy also said he won't let the euro alone bear the weight of adjustments in the foreign exchange market, a phenomenon he said has occurred in the past.
Swiss private bank Wegelin & Co. said Tuesday it was pulling out of the United States in response to stricter U.S. measures against tax dodgers.
“Goodbye to America,” the bank said in a letter to investors, which cited increased regulatory requirements for foreign banks and planned changes to the estate tax as the reasons for its pullout.
The U.S. Internal Revenue Service has cracked down on suspected tax evaders recently.
A high-profile court case in Florida involving Swiss banking giant UBS was settled last week when Switzerland and the U.S. signed an agreement that will see details on almost 4,500 suspected tax dodgers handed over to the IRS.
Dollar Tree, which operated 3,717 stores as of Aug. 1, said quarterly sales rose 12 percent to $1.22 billion, while sales at stores open at least a year, a key retail gauge known as same-store sales, rose 6.8 percent.
The Consumer Comfort Index rose to a summer high of -45 in
the week to Aug. 23 from -46 the previous week, according to
ABC.The gauge first hit an all-time low of -54 in the week to
Dec. 1, 2008, and again in the week to Jan. 25, 2009.
Brown Shoe Co. lowered its full-year sales forecast Wednesday, after reporting a second-quarter revenue decline.
The footwear company now expects sales of $2.18 billion to $2.2 billion for 2009, with Famous Footwear same-store sales down in the low- to mid-single digits during the second half of the year. Its prior forecast was for sales of $2.2 billion to $2.3 billion.
Investors should buy an exchange- traded fund tracking natural gas futures while selling shares of the fuel’s producers, to boost returns after the companies outperformed the commodity, Societe Generale SA said.
A basket of 10 natural-gas producer stocks rose 26 percent this year before today, beating the 14 percent gain for the Standard & Poor’s 500 Index and 54 percent loss for the S&P GSCI Natural Gas index of returns from owning gas futures, equity derivatives strategist Rebecca Cheong wrote.
Investors should bet on a potential convergence between natural-gas producer stocks and gas futures, which moved in opposite directions this year after tracking one another in 2008, New York-based Cheong wrote yesterday.
Cheong advised buying the SPY, an ETF tracking the S&P 500, and the UNG, which tracks natural gas futures, while short- selling shares of Chesapeake Energy Corp., Apache Corp., Devon Energy Corp., and seven other producers. In a short sale, investors sell borrowed securities and agree to buy and return them to the shareholder later, profiting from any drop in the stock.
Dec. gold ends slightly lower at $945.80 an ounce.
The Investors Intelligence Advisors Sentiment Index, which gauges the stock advice of about 150 newsletters and other paid market-advice outlets, said bulls jumped to 51.6% in the recent week, the highest since the end of 2007. Bears fell to 19.8%, the first time since October 2007 that the percentage fell below 20%.
Rob Hanna: "Some extreme readings are appearing in a few Worden Bros. indicators that look at stocks relative to their 200 day moving averages. One is T2107, which simply looks at the percentage of stocks trading above their 200ma. The other is T2109, which looks at the percentage of stocks trading at least 1 standard deviation above their 200ma. Both indicators are near all time highs (dating back to 1986). In fact, the only period of time in which these indicators registered higher readings was in the beginning of 2004....the last time these levels were reached in 2004, the market continued to trudge higher for about 2 ½ months before finally beginning a meaningful correction."
Japan's provisional trade surplus for July more than quadrupled on year, rising 364% from the same month in 2008, according to data released Wednesday by the Ministry of Finance. The surplus totaled 380.2 billion yen ($4.05 billion), below expectations reported by Dow Jones Newswires for a 396.9 billion yen surplus. Exports for the month fell 36.5% on year, while imports lost 40.8%. Shipments to China, which just recently became Japan's largest trading partner, were down 26.5% from the year before, while those to the U.S. fell 39.5%, the ministry said.
Colonial BancGroup Inc., the Montgomery-based real estate lender whose banking unit was shut down by the government and sold to BB&T Corp. earlier this month, has filed for Chapter 11 bankruptcy protection.
Shipments for durable goods rose 2% in July after a 0.7% increase in June. Inventories fell 0.8% in July. Orders are down 26% in the first seven months of 2009 compared with the same period last year.
Orders for transportation equipment, which rose 18.4 percent, drove the overall increase. Commercial aircraft orders, a volatile category, more than doubled after falling 30 percent in June. Motor vehicle orders increased 0.9 percent.
Excluding transportation goods, orders rose 0.8 percent. That was the third straight increase, but just below analysts' expectations of a 0.9 percent rise.
The API said late Tuesday that crude supplies rose by 4.3 million barrels last week, according to media reports. The Energy Information Administration is due to release its more closely watched report on Wednesday morning, with analysts surveyed by Platts expecting a drop of 2.7 million barrels in crude inventories in the week ended Aug. 21.
China said it’s studying curbs on overcapacity in industries including steel and cement, adding to concern policy makers may seek to rein in growth fueled by record credit expansion this year.
The government will increase “guidance” of industries including steel, cement, glass and power equipment, the State Council, China’s cabinet, said in a statement on its Web site today. The government will strengthen controls on approval of stock and bond sales by companies in these industries, according to the statement.
China’s benchmark stock index has dropped 15 percent from its Aug. 4 high on concern economic growth will falter as banks rein in lending. China’s economy expanded 7.9 percent in the second quarter, rebounding from the weakest growth in almost a decade, after banks extended a record $1.1 trillion of new loans in the first six months.
Brett Steenbarger: "It also raises the possibility that we saw a momentum high in July, a stiff pullback last week, and now price highs on lower participation. If this is, indeed, a larger timeframe transition pattern in the making, we should fail at these highs and begin a sharp pullback that would take us below the lows of last week.
While I stick with my short-term indicators, such as Cumulative TICK and Demand/Supply, and those are bullish, the larger picture non-confirmations leave me nervous and ready to reverse views. We need to see day-over-day strength here, confirming the bull move. Expanding new 20-day lows would be an important indication that all is not well for the bull. Expanding 20-day highs would be important support for the bulls."
Crude-oil futures reduced their losses Wednesday after government data showed a small increase in crude inventories last week, in contrast with an earlier report released by an industry group that showed a big buildup. U.S. crude inventories rose by 200,000 barrels in the week ended Aug. 21, the Energy Information Administration reported. The American Petroleum Institute had reported late Tuesday that inventories rose by 4.3 million barrels. The API and the EIA use different methodologies to calculate stockpiles. After the EIA report, December crude futures fell 56 cents, or 0.8%, to $71.52 a barrel. They were down more than 1% before the data. The EIA also reported a drop of 1.7 million barrels in gasoline inventories and an increase of 800,000 barrels in distillate fuels, which include heating oil and diesel. Analysts surveyed by Platts had expected a drop of 2.7 million barrels in crude inventories, a decline of 1.5 million barrels for gasoline, and a drop of 700,000 barrels for distillates.
Paper and packaging producer International Paper Co said demand for its products has stagnated, and it sees no immediate signs of the U.S. economy
improving. "I don't think we've seen anything that could be called a
trend other than the flat market," Chief Financial Officer
Timothy Nicholls told the Reuters Paper and Packaging Summit on
Tuesday.
The rise of emerging economies such as China and Russia will prevent the U.S. dollar from remaining the world's only reserve currency, French President Nicolas Sarkozy said Wednesday, according to Dow Jones Newswires. "The political and economic reality of a multipolar world will have to find sooner or later a translation on the monetary level," Sarkozy said at a yearly reception for foreign ambassadors in Paris, the report said. Sarkozy also said he won't let the euro alone bear the weight of adjustments in the foreign exchange market, a phenomenon he said has occurred in the past.
Swiss private bank Wegelin & Co. said Tuesday it was pulling out of the United States in response to stricter U.S. measures against tax dodgers.
“Goodbye to America,” the bank said in a letter to investors, which cited increased regulatory requirements for foreign banks and planned changes to the estate tax as the reasons for its pullout.
The U.S. Internal Revenue Service has cracked down on suspected tax evaders recently.
A high-profile court case in Florida involving Swiss banking giant UBS was settled last week when Switzerland and the U.S. signed an agreement that will see details on almost 4,500 suspected tax dodgers handed over to the IRS.
Dollar Tree, which operated 3,717 stores as of Aug. 1, said quarterly sales rose 12 percent to $1.22 billion, while sales at stores open at least a year, a key retail gauge known as same-store sales, rose 6.8 percent.
The Consumer Comfort Index rose to a summer high of -45 in
the week to Aug. 23 from -46 the previous week, according to
ABC.The gauge first hit an all-time low of -54 in the week to
Dec. 1, 2008, and again in the week to Jan. 25, 2009.
Brown Shoe Co. lowered its full-year sales forecast Wednesday, after reporting a second-quarter revenue decline.
The footwear company now expects sales of $2.18 billion to $2.2 billion for 2009, with Famous Footwear same-store sales down in the low- to mid-single digits during the second half of the year. Its prior forecast was for sales of $2.2 billion to $2.3 billion.
Investors should buy an exchange- traded fund tracking natural gas futures while selling shares of the fuel’s producers, to boost returns after the companies outperformed the commodity, Societe Generale SA said.
A basket of 10 natural-gas producer stocks rose 26 percent this year before today, beating the 14 percent gain for the Standard & Poor’s 500 Index and 54 percent loss for the S&P GSCI Natural Gas index of returns from owning gas futures, equity derivatives strategist Rebecca Cheong wrote.
Investors should bet on a potential convergence between natural-gas producer stocks and gas futures, which moved in opposite directions this year after tracking one another in 2008, New York-based Cheong wrote yesterday.
Cheong advised buying the SPY, an ETF tracking the S&P 500, and the UNG, which tracks natural gas futures, while short- selling shares of Chesapeake Energy Corp., Apache Corp., Devon Energy Corp., and seven other producers. In a short sale, investors sell borrowed securities and agree to buy and return them to the shareholder later, profiting from any drop in the stock.
Dec. gold ends slightly lower at $945.80 an ounce.
The Investors Intelligence Advisors Sentiment Index, which gauges the stock advice of about 150 newsletters and other paid market-advice outlets, said bulls jumped to 51.6% in the recent week, the highest since the end of 2007. Bears fell to 19.8%, the first time since October 2007 that the percentage fell below 20%.
Tuesday, August 25, 2009
Cure Rate
8/25/09 Cure Rate
China's benchmark Shanghai Composite Index took another sharp dive Tuesday, falling 5.3% to 2,832.76 in late action.
James Hagerty: "Homeowners who fall behind on their mortgage payments have become much less likely to catch up again, a new study shows.
The report from Fitch Ratings Ltd., a credit-rating firm, focuses on a plunge in the "cure rate" for mortgages that were packaged into securities. The study excludes loans guaranteed by government-backed agencies as well as those that weren't bundled into securities. The cure rate is the portion of delinquent loans that return to current payment status each month.
Fitch found that the cure rate for prime loans dropped to 6.6% as of July from an average of 45% for the years 2000 through 2006. For so-called Alt-A loans -- a category between prime and subprime that typically involves borrowers who don't fully document their income or assets -- the cure rate has fallen to 4.3% from 30.2%. In the subprime category, the rate has declined to 5.3% from 19.4%.
"The cure rates have really collapsed," said Roelof Slump, a managing director at Fitch."
Aon Consulting, a subsidiary of Chicago-based Aon Corp., surveyed about 60 health insurers around the country earlier this year. The study found that, on average, insurers expect to pay out 10.5 percent more in claims costs in the next year — slightly less than the 10.6 percent increase forecast last year.
The expected increase doesn't necessarily mean the premiums employees pay will grow at the same clip.
TransUnion expects the percentage of California home loans that are at least 60 days late or are in foreclosure to skyrocket to more than 14% by year-end.
"New orders for manufactured goods in June, up four of the last five months, increased $1.4 billion or 0.4 percent to $349.0 billion, the U.S. Census Bureau reported today. This followed a 1.1 percent May increase. Excluding transportation, new orders increased 2.3 percent. Shipments, up following ten consecutive monthly decreases, increased $4.9 billion or 1.4 percent to $358.3 billion. This followed a 0.8 percent May decrease. Unfilled orders, down nine consecutive months, decreased $6.5 billion or 0.9 percent to $740.2 billion. This was the longest streak of consecutive monthly decreases since November 2001-July 2002. This followed a 0.3 percent May decrease. The unfilled orders-to-shipments ratio was 6.04, down from 6.15 in May. Inventories, down ten consecutive months, decreased $4.2 billion or 0.8 percent to $508.3 billion. This was the longest streak of consecutive monthly decreases since March 2003-January 2004 and followed a 0.8 percent May decrease. The inventories-to-shipments ratio was 1.42, down from 1.45 in May.
New orders for manufactured durable goods in June, down following two consecutive monthly increases, decreased $3.6 billion or 2.2 percent to $159.1 billion, revised from the previously published 2.5 percent decrease. This followed a 1.3 percent May increase.
New orders for manufactured nondurable goods increased $5.0 billion or 2.7 percent to $190.0 billion.
Shipments of manufactured durable goods in June, down eleven consecutive months, decreased $0.1 billion or 0.1 percent to $168.3 billion, revised from the previously published 0.2 percent decrease. This also was the longest streak of consecutive monthly decreases since the series was first published on a NAICS basis in 1992 and followed a 2.7 percent May decrease.
Unfilled orders for manufactured durable goods in June, down nine consecutive months, decreased $6.5 billion or 0.9 percent to $740.2 billion, unchanged from the previously published decrease. This followed a 0.3 percent May decrease.
The Federal Reserve must make public reports about recipients of emergency loans from U.S. taxpayers under programs created to address the financial crisis, a federal judge ruled.
Home prices in 20 U.S. cities fell in June at a slower pace than forecast, signaling the real- estate crisis that triggered the worst recession since the 1930s is dissipating.
The S&P/Case-Shiller home-price
index declined 15.4 percent from a year earlier, the smallest drop since April 2008, the group said today in New York. The gauge rose from the prior month by the most in four years. All of the 20 cities in the S&P/Case-Shiller index showed a year-over-year price decrease in June, led by a 32 percent plunge in Las Vegas. Dallas showed the smallest decline at 2.2 percent.
Chain store sales fell 0.7% in the first three weeks of August, Redbook says, slightly worse than the -0.6% expected. According to ICSC, weekly sales fell 0.2% Y/Y but rose 0.6% from the previous week.
The head of SunTrust Banks Inc., Georgia’s biggest lender, said U.S. financial institutions probably will report further credit losses as commercial real estate falters through next year.
“The industry is a long way from declaring any sort of victory, especially regarding credit issues,” Chief Executive Officer
James Wells III said today in a speech to the Rotary Club of Atlanta. “This credit cycle has yet to play itself out. We do not expect things to improve for the banking industry in the very near future.”
Figures released by the White House budget office foresee a cumulative $9 trillion deficit from 2010-2019, $2 trillion more than the administration estimated in May. Moreover, the figures show the public debt doubling by 2019 and reaching three-quarters the size of the entire national economy.
Obama economic adviser Christina Romer predicted unemployment could reach 10 percent this year and begin a slow decline next year. Still, she said, the average unemployment will be 9.3 in 2009 and 9.8 percent in 2010.
"This recession was simply worse than the information that we and other forecasters had back in last fall and early this winter," Romer said.
The revised estimates project that the economy will contract by 2.8 percent this year, more than twice what the White House predicted earlier this year. Romer projected that the economy would expand in 2010, but by 2 percent instead of the 3.2 percent growth the White House predicted in May. By 2011, Romer estimated, the economy would be humming at 3.6 percent growth.
The Conference Board said its consumer confidence index rose to 54.1 in August from 47.4 in July.
U.S. home prices rose 0.5% in June, the second increase in a row, the Federal Housing Finance Agency reported Tuesday. However, prices fell 0.7% in the second quarter, the agency said. Prices are down 6.1% in the past year, according to the FHFA index, which tracks sales of the same properties over time. Prices fell in six of the nine regions and in 38 states in the second quarter.
Toyota Motor Corp. plans to cut its global capacity production by 10%, or by 1 million vehicles, as early as this fiscal year, Nikkei reported on its online edition Tuesday in a story dated for Wednesday.
Irwin Kellner: "Guess what? The Federal Reserve has not only stopped depositing copious amounts of liquidity into the economy -- it now appears to be in the process of making a sizable withdrawal.
A close look at quantitative measures of monetary policy reveals a sudden change in trend. After growing at unprecedented rates for well over a year, these aggregates stopped rising several months ago and have since declined, according to data provided by the Federal Reserve Bank of St. Louis.
For example, the monetary base -- the raw material for the money supply -- has fallen at a seasonally adjusted annual rate of 8% from early April of this year through mid-August, after soaring at a 187% pace during the previous eight months."
The US Postal Service will offer buyouts to as many as 30000 employees under agreements with two unions that could save the government agency up to $500 million next year.
Obama aide Romer: 10% unemployment by year end.
The Dow industrials gained 30.01 points, or 0.3%, to 9,539.29. The S&P 500 Index added 2.43 points, or 0.2%, to finish at 1,028.01, while the Nasdaq Composite climbed 6.25 points, or 0.3%, to end at 2,024.23.
U.S. crude oil dropped $2.32 to settle at $72.05 a barrel, down from a high of $75, in the biggest percentage loss since August 14. Brent crude dropped $2.44 to $71.82. In a Dow Jones survey, analysts gave an average forecast for a 1.6 million-barrel drop in oil inventories, in data due out from the American Petroleum Institute later Tuesday, and the U.S. Department of Energy on Wednesday.
In October 2008 the Baltic Dry Index was decimated for a 72% loss. It would not be surprising to see a loss of 30% this month. China's commodity imports are slowing down
dramatically from the surge that took place this Spring.
More than half the employers in a new poll say they plan to hire full-time employees in the next 12 months, according to research released on Tuesday that could spell relief for unemployed U.S. workers.
Four in 10 employers plan to hire contract, temporary or project workers, and another four in 10 will be hiring part-time employees, according to the survey conducted for Robert Half International, a staffing company, and CareerBuilder.com, an online career site.
The study found 53 percent of employers said they expect to hire full-time employees over the next 12 months.
China's benchmark Shanghai Composite Index took another sharp dive Tuesday, falling 5.3% to 2,832.76 in late action.
James Hagerty: "Homeowners who fall behind on their mortgage payments have become much less likely to catch up again, a new study shows.
The report from Fitch Ratings Ltd., a credit-rating firm, focuses on a plunge in the "cure rate" for mortgages that were packaged into securities. The study excludes loans guaranteed by government-backed agencies as well as those that weren't bundled into securities. The cure rate is the portion of delinquent loans that return to current payment status each month.
Fitch found that the cure rate for prime loans dropped to 6.6% as of July from an average of 45% for the years 2000 through 2006. For so-called Alt-A loans -- a category between prime and subprime that typically involves borrowers who don't fully document their income or assets -- the cure rate has fallen to 4.3% from 30.2%. In the subprime category, the rate has declined to 5.3% from 19.4%.
"The cure rates have really collapsed," said Roelof Slump, a managing director at Fitch."
Aon Consulting, a subsidiary of Chicago-based Aon Corp., surveyed about 60 health insurers around the country earlier this year. The study found that, on average, insurers expect to pay out 10.5 percent more in claims costs in the next year — slightly less than the 10.6 percent increase forecast last year.
The expected increase doesn't necessarily mean the premiums employees pay will grow at the same clip.
TransUnion expects the percentage of California home loans that are at least 60 days late or are in foreclosure to skyrocket to more than 14% by year-end.
"New orders for manufactured goods in June, up four of the last five months, increased $1.4 billion or 0.4 percent to $349.0 billion, the U.S. Census Bureau reported today. This followed a 1.1 percent May increase. Excluding transportation, new orders increased 2.3 percent. Shipments, up following ten consecutive monthly decreases, increased $4.9 billion or 1.4 percent to $358.3 billion. This followed a 0.8 percent May decrease. Unfilled orders, down nine consecutive months, decreased $6.5 billion or 0.9 percent to $740.2 billion. This was the longest streak of consecutive monthly decreases since November 2001-July 2002. This followed a 0.3 percent May decrease. The unfilled orders-to-shipments ratio was 6.04, down from 6.15 in May. Inventories, down ten consecutive months, decreased $4.2 billion or 0.8 percent to $508.3 billion. This was the longest streak of consecutive monthly decreases since March 2003-January 2004 and followed a 0.8 percent May decrease. The inventories-to-shipments ratio was 1.42, down from 1.45 in May.
New orders for manufactured durable goods in June, down following two consecutive monthly increases, decreased $3.6 billion or 2.2 percent to $159.1 billion, revised from the previously published 2.5 percent decrease. This followed a 1.3 percent May increase.
New orders for manufactured nondurable goods increased $5.0 billion or 2.7 percent to $190.0 billion.
Shipments of manufactured durable goods in June, down eleven consecutive months, decreased $0.1 billion or 0.1 percent to $168.3 billion, revised from the previously published 0.2 percent decrease. This also was the longest streak of consecutive monthly decreases since the series was first published on a NAICS basis in 1992 and followed a 2.7 percent May decrease.
Unfilled orders for manufactured durable goods in June, down nine consecutive months, decreased $6.5 billion or 0.9 percent to $740.2 billion, unchanged from the previously published decrease. This followed a 0.3 percent May decrease.
The Federal Reserve must make public reports about recipients of emergency loans from U.S. taxpayers under programs created to address the financial crisis, a federal judge ruled.
Home prices in 20 U.S. cities fell in June at a slower pace than forecast, signaling the real- estate crisis that triggered the worst recession since the 1930s is dissipating.
The S&P/Case-Shiller home-price
index declined 15.4 percent from a year earlier, the smallest drop since April 2008, the group said today in New York. The gauge rose from the prior month by the most in four years. All of the 20 cities in the S&P/Case-Shiller index showed a year-over-year price decrease in June, led by a 32 percent plunge in Las Vegas. Dallas showed the smallest decline at 2.2 percent.
Chain store sales fell 0.7% in the first three weeks of August, Redbook says, slightly worse than the -0.6% expected. According to ICSC, weekly sales fell 0.2% Y/Y but rose 0.6% from the previous week.
The head of SunTrust Banks Inc., Georgia’s biggest lender, said U.S. financial institutions probably will report further credit losses as commercial real estate falters through next year.
“The industry is a long way from declaring any sort of victory, especially regarding credit issues,” Chief Executive Officer
James Wells III said today in a speech to the Rotary Club of Atlanta. “This credit cycle has yet to play itself out. We do not expect things to improve for the banking industry in the very near future.”
Figures released by the White House budget office foresee a cumulative $9 trillion deficit from 2010-2019, $2 trillion more than the administration estimated in May. Moreover, the figures show the public debt doubling by 2019 and reaching three-quarters the size of the entire national economy.
Obama economic adviser Christina Romer predicted unemployment could reach 10 percent this year and begin a slow decline next year. Still, she said, the average unemployment will be 9.3 in 2009 and 9.8 percent in 2010.
"This recession was simply worse than the information that we and other forecasters had back in last fall and early this winter," Romer said.
The revised estimates project that the economy will contract by 2.8 percent this year, more than twice what the White House predicted earlier this year. Romer projected that the economy would expand in 2010, but by 2 percent instead of the 3.2 percent growth the White House predicted in May. By 2011, Romer estimated, the economy would be humming at 3.6 percent growth.
The Conference Board said its consumer confidence index rose to 54.1 in August from 47.4 in July.
U.S. home prices rose 0.5% in June, the second increase in a row, the Federal Housing Finance Agency reported Tuesday. However, prices fell 0.7% in the second quarter, the agency said. Prices are down 6.1% in the past year, according to the FHFA index, which tracks sales of the same properties over time. Prices fell in six of the nine regions and in 38 states in the second quarter.
Toyota Motor Corp. plans to cut its global capacity production by 10%, or by 1 million vehicles, as early as this fiscal year, Nikkei reported on its online edition Tuesday in a story dated for Wednesday.
Irwin Kellner: "Guess what? The Federal Reserve has not only stopped depositing copious amounts of liquidity into the economy -- it now appears to be in the process of making a sizable withdrawal.
A close look at quantitative measures of monetary policy reveals a sudden change in trend. After growing at unprecedented rates for well over a year, these aggregates stopped rising several months ago and have since declined, according to data provided by the Federal Reserve Bank of St. Louis.
For example, the monetary base -- the raw material for the money supply -- has fallen at a seasonally adjusted annual rate of 8% from early April of this year through mid-August, after soaring at a 187% pace during the previous eight months."
The US Postal Service will offer buyouts to as many as 30000 employees under agreements with two unions that could save the government agency up to $500 million next year.
Obama aide Romer: 10% unemployment by year end.
The Dow industrials gained 30.01 points, or 0.3%, to 9,539.29. The S&P 500 Index added 2.43 points, or 0.2%, to finish at 1,028.01, while the Nasdaq Composite climbed 6.25 points, or 0.3%, to end at 2,024.23.
U.S. crude oil dropped $2.32 to settle at $72.05 a barrel, down from a high of $75, in the biggest percentage loss since August 14. Brent crude dropped $2.44 to $71.82. In a Dow Jones survey, analysts gave an average forecast for a 1.6 million-barrel drop in oil inventories, in data due out from the American Petroleum Institute later Tuesday, and the U.S. Department of Energy on Wednesday.
In October 2008 the Baltic Dry Index was decimated for a 72% loss. It would not be surprising to see a loss of 30% this month. China's commodity imports are slowing down
dramatically from the surge that took place this Spring.
More than half the employers in a new poll say they plan to hire full-time employees in the next 12 months, according to research released on Tuesday that could spell relief for unemployed U.S. workers.
Four in 10 employers plan to hire contract, temporary or project workers, and another four in 10 will be hiring part-time employees, according to the survey conducted for Robert Half International, a staffing company, and CareerBuilder.com, an online career site.
The study found 53 percent of employers said they expect to hire full-time employees over the next 12 months.
Monday, August 24, 2009
Layaway
8/24/09 Layaway
Premier Wen Jiabao cautioned against being "blindly optimistic" despite improvements in the economy, according to a statement on the Cabinet's Web site.
The economy "still faces many new difficulties and problems," Wen was quoted as saying during a visit to southeastern China that ended Monday. "There are still a lot of unstable and uncertain factors ahead and the economic situation ahead is still very grave, although both the world economy and the national economy are making positive changes now."
The premier cautioned that the effects of some government measures might fade while others would take time to show results, the Cabinet statement said. It gave no other details of potential problems.
John Talton: "The real unemployment rate nationally is nearly 17 percent, instead of the official 9.4 percent, when discouraged workers and part-timers who want full-time employment are factored in. Other workers have seen their hours cut or been forced to take furloughs.
Meanwhile, the number of Americans out of a job for six months or more is at a 70-year high."
Demand from China, the world’s fastest-growing major economy, is helping pull Japan out of its deepest postwar slump, a top Japanese government economist said.
“There’s no mistake that China’s economic recovery is contributing to a rebound in Japan and other economies in the region,”
Tomoko Hayashi, director for overseas economies at the Cabinet Office in Tokyo, said in an interview on Aug. 21.
Liechtenstein’s Crown Prince Alois said his country will push ahead with moves to bolster adherence to global tax rules at the risk of losing bank clients.
The principality of 35,000, on the Organization for Economic Cooperation and Development “gray list” of tax havens that haven’t yet implemented OECD standards, will seek to be removed from the list by signing 12 tax-information exchange agreements in the coming months, the prince said in an interview on Aug. 21.
“If you move forward faster than other financial centers, there could be clients that perhaps don’t see the advantage for themselves in the process and then turn to another financial center,”
Prince Alois said, speaking by phone from the capital, Vaduz. “The majority of our clients will appreciate the direction we are taking in tax matters while still keeping very strong banking secrecy.”
The 12 tax-information exchange agreements, or TIEAs -- which the OECD has identified as one step toward removal from the “gray list” -- may be signed “as early as September or October,” the prince said.
“In any case it is likely to happen during the fall of this year,” he said. “We are in relatively advanced talks with some.”
Pacific Investment Management Co.’s
Paul McCulley said we’re at the bottom of a secular bull market in bonds.
The big gains in our lifetime in bonds have been made, McCulley said in an interview today with Bloomberg Radio.
Pimco has called for a “new normal” in the global economy that will include heightened government regulation, lower consumption, slower growth and a shrinking global role for the U.S. economy. U.S. growth rates will slow around 2 percent over the next several years, according to the firm.
The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows that 27% of the nation's voters Strongly Approve of the way that
Barack Obama is performing his role as President. Forty-one percent (41%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -14. These figures mark the lowest Approval Index rating yet recorded for this President. The previous low of -12 was reached on July 30.
PFC Energy, a consultancy, estimates advancements made by the independents – which carry out exploration and production of the natural gas but not refining – in developing natural gas from shale could, if taken abroad,
more than quadruple gas resources, increasing supplies of this alternative option to greenhouse-intensive oil, coal and oil sands fuels.
The
US is now believed to have 100 years’ worth of resources, at today’s usage rates, up from about 30 years just three years ago.
Given political concerns over carbon, the industry believes natural gas will have a major role in the energy future of the US and the world. This belief has stoked interest in spite of the drop in the natural gas price to about $3 per million British thermal units, down from last year’s record high of $13.694 per mBtu.
Yet the companies recognise that working shale gas is different from conventional production. The shale rock must be fractured with high-pressure water to produce the gas, which has been absorbed in the rock, trapped in the pore spaces and confined in fractures. And new wells must constantly be drilled to maintain production.
Aubrey McClendon, chief executive of independent
Chesapeake Energy, said there was an “enormous worldwide interest’’ in US shale resources. “There are acquirers from all parts of the globe currently kicking tyres on US shale plays.’’
Rob Hanna: " On Friday the CBOE reported the lowest relative equity put/call ever. It came in at 0.39, which is nearly 45% below its 200-day moving average. This is only the 2nd time it has closed as much as 40% below the 200. The other time was 11/15/04. The SPX dropped 0.7% the next day but that was basically the end of the selloff. A few more days of chop was followed by a further market rally."
John Mauldin: " Two-thirds of home sales are either foreclosures or banks taking a loss on the mortgage. And only a third of the remaining one-third – roughly 10% of overall sales – comes from something we could call a normal selling process.”
China central bank adviser Fan Gang predicts economic growth will stay at 8% next year, as property and corporate investment and rising exports take up the slack from waning government investment. While growth will be steady, the composition of the recovery will be more diverse and healthier than this year's, Gang says.
John Dalt: "According to the Energy Information Agency (EIA), we imported approximately four tcf of natural gas last year. Ninety percent of this imported gas came from Canada. Most of this natural gas comes from the Western Canada Sedimentary Basin, where production peaked in 2001. Production has decreased 8.1% since then. Natural gas well production declines much quicker than crude oil. It takes constant exploration and discoveries to replace the depletion. According to Baker Hughes (BHI), a drilling company, there are 688 rigs drilling for natural gas in the U.S. That is 56% less than a year ago. This is the future we face: natural gas is abundant, but we are not replacing the reserves to meet our future needs."
Struggling Japan Airlines Corp., which is in the midst of major restructuring, is considering slashing 5,000 jobs in three years, a news report said Monday.
Andy Xie: "The US will enter this second dip in the first quarter of next year. Its economic recovery in the second half of this year is being driven by inventory restocking and fiscal stimulus.
However, US households have lost their love for borrow-and-spend for good. American household demand won’t pick up when the temporary growth factors run out of steam. By the middle of the second quarter next year, most of the world will have entered the second dip. But, by then, financial markets will have collapsed...The final crash will come when the Fed raises the interest rate to 5 per cent or more. Most think that when the Fed does this, the global economy will be strong and, hence, exports would do well and bring in money to keep up asset markets. Unfortunately, this is not how our story will end this time. The growth model of the past two decades - Americans borrow and spend; Chinese lend and export - is broken for good. Policymakers have been busy stimulating, rather than reforming, in desperate attempts to bring growth back. The massive increase in money supplies around the world will spur inflation through commodity-market speculation and inflation expectations in wage setting. We are not in the midst of a new boom. We are at the last stage of the Greenspan bubble. It ends with stagflation."
Taylor, Bean & Whitaker Mortgage Corp on Monday filed for Chapter 11 bankruptcy protection, fewer than three weeks after it closed its mortgage lending business and was suspended by a federal agency.
The Ocala, Florida-based company, which was the nation's 12th-largest U.S. mortgage lender from January to June, filed for protection with the U.S. bankruptcy court in Jacksonville.
A record number of shoppers, shut off from credit and short on cash, are relying on Kmart's layaway program to pay for all of their kids' school needs, said Tom Aiello, a spokesman for Kmart's parent Sears Holdings Corp. Layaway allows shoppers to pay over time, interest- free, and pick up their merchandise when it's paid in full.
"It's a sight. In the past, we would see layaway start to pick up around Halloween" as people get a jump start for Christmas, said David Travis, manager of a Kmart store in Conover, N.C.
Burlington Coat Factory Warehouse Corp. said its layaway business is stronger than a year ago. And e-Layaway.com, which offers online layaway services for about 1,000 merchants, has seen its business double from the same time last year. Customers are setting aside even $25 calculators and $30 backpacks. Layaway has its roots in the Great Depression. Kmart's Travis predicts this Christmas will be a "record-setting" layaway season.
According to the WSJ, In Texas, revenue from gas-production taxes has fallen 43% from last year, costing the state more than $1 billion in lost revenue. Plus, when drilling slows, employment slows. Unemployed people don't pay taxes, and they don't spend much money, either, hurting the retail sector.
Equities closed flat on the day.
Premier Wen Jiabao cautioned against being "blindly optimistic" despite improvements in the economy, according to a statement on the Cabinet's Web site.
The economy "still faces many new difficulties and problems," Wen was quoted as saying during a visit to southeastern China that ended Monday. "There are still a lot of unstable and uncertain factors ahead and the economic situation ahead is still very grave, although both the world economy and the national economy are making positive changes now."
The premier cautioned that the effects of some government measures might fade while others would take time to show results, the Cabinet statement said. It gave no other details of potential problems.
John Talton: "The real unemployment rate nationally is nearly 17 percent, instead of the official 9.4 percent, when discouraged workers and part-timers who want full-time employment are factored in. Other workers have seen their hours cut or been forced to take furloughs.
Meanwhile, the number of Americans out of a job for six months or more is at a 70-year high."
Demand from China, the world’s fastest-growing major economy, is helping pull Japan out of its deepest postwar slump, a top Japanese government economist said.
“There’s no mistake that China’s economic recovery is contributing to a rebound in Japan and other economies in the region,”
Tomoko Hayashi, director for overseas economies at the Cabinet Office in Tokyo, said in an interview on Aug. 21.
Liechtenstein’s Crown Prince Alois said his country will push ahead with moves to bolster adherence to global tax rules at the risk of losing bank clients.
The principality of 35,000, on the Organization for Economic Cooperation and Development “gray list” of tax havens that haven’t yet implemented OECD standards, will seek to be removed from the list by signing 12 tax-information exchange agreements in the coming months, the prince said in an interview on Aug. 21.
“If you move forward faster than other financial centers, there could be clients that perhaps don’t see the advantage for themselves in the process and then turn to another financial center,”
Prince Alois said, speaking by phone from the capital, Vaduz. “The majority of our clients will appreciate the direction we are taking in tax matters while still keeping very strong banking secrecy.”
The 12 tax-information exchange agreements, or TIEAs -- which the OECD has identified as one step toward removal from the “gray list” -- may be signed “as early as September or October,” the prince said.
“In any case it is likely to happen during the fall of this year,” he said. “We are in relatively advanced talks with some.”
Pacific Investment Management Co.’s
Paul McCulley said we’re at the bottom of a secular bull market in bonds.
The big gains in our lifetime in bonds have been made, McCulley said in an interview today with Bloomberg Radio.
Pimco has called for a “new normal” in the global economy that will include heightened government regulation, lower consumption, slower growth and a shrinking global role for the U.S. economy. U.S. growth rates will slow around 2 percent over the next several years, according to the firm.
The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows that 27% of the nation's voters Strongly Approve of the way that
Barack Obama is performing his role as President. Forty-one percent (41%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -14. These figures mark the lowest Approval Index rating yet recorded for this President. The previous low of -12 was reached on July 30.
PFC Energy, a consultancy, estimates advancements made by the independents – which carry out exploration and production of the natural gas but not refining – in developing natural gas from shale could, if taken abroad,
more than quadruple gas resources, increasing supplies of this alternative option to greenhouse-intensive oil, coal and oil sands fuels.
The
US is now believed to have 100 years’ worth of resources, at today’s usage rates, up from about 30 years just three years ago.
Given political concerns over carbon, the industry believes natural gas will have a major role in the energy future of the US and the world. This belief has stoked interest in spite of the drop in the natural gas price to about $3 per million British thermal units, down from last year’s record high of $13.694 per mBtu.
Yet the companies recognise that working shale gas is different from conventional production. The shale rock must be fractured with high-pressure water to produce the gas, which has been absorbed in the rock, trapped in the pore spaces and confined in fractures. And new wells must constantly be drilled to maintain production.
Aubrey McClendon, chief executive of independent
Chesapeake Energy, said there was an “enormous worldwide interest’’ in US shale resources. “There are acquirers from all parts of the globe currently kicking tyres on US shale plays.’’
Rob Hanna: " On Friday the CBOE reported the lowest relative equity put/call ever. It came in at 0.39, which is nearly 45% below its 200-day moving average. This is only the 2nd time it has closed as much as 40% below the 200. The other time was 11/15/04. The SPX dropped 0.7% the next day but that was basically the end of the selloff. A few more days of chop was followed by a further market rally."
John Mauldin: " Two-thirds of home sales are either foreclosures or banks taking a loss on the mortgage. And only a third of the remaining one-third – roughly 10% of overall sales – comes from something we could call a normal selling process.”
China central bank adviser Fan Gang predicts economic growth will stay at 8% next year, as property and corporate investment and rising exports take up the slack from waning government investment. While growth will be steady, the composition of the recovery will be more diverse and healthier than this year's, Gang says.
John Dalt: "According to the Energy Information Agency (EIA), we imported approximately four tcf of natural gas last year. Ninety percent of this imported gas came from Canada. Most of this natural gas comes from the Western Canada Sedimentary Basin, where production peaked in 2001. Production has decreased 8.1% since then. Natural gas well production declines much quicker than crude oil. It takes constant exploration and discoveries to replace the depletion. According to Baker Hughes (BHI), a drilling company, there are 688 rigs drilling for natural gas in the U.S. That is 56% less than a year ago. This is the future we face: natural gas is abundant, but we are not replacing the reserves to meet our future needs."
Struggling Japan Airlines Corp., which is in the midst of major restructuring, is considering slashing 5,000 jobs in three years, a news report said Monday.
Andy Xie: "The US will enter this second dip in the first quarter of next year. Its economic recovery in the second half of this year is being driven by inventory restocking and fiscal stimulus.
However, US households have lost their love for borrow-and-spend for good. American household demand won’t pick up when the temporary growth factors run out of steam. By the middle of the second quarter next year, most of the world will have entered the second dip. But, by then, financial markets will have collapsed...The final crash will come when the Fed raises the interest rate to 5 per cent or more. Most think that when the Fed does this, the global economy will be strong and, hence, exports would do well and bring in money to keep up asset markets. Unfortunately, this is not how our story will end this time. The growth model of the past two decades - Americans borrow and spend; Chinese lend and export - is broken for good. Policymakers have been busy stimulating, rather than reforming, in desperate attempts to bring growth back. The massive increase in money supplies around the world will spur inflation through commodity-market speculation and inflation expectations in wage setting. We are not in the midst of a new boom. We are at the last stage of the Greenspan bubble. It ends with stagflation."
Taylor, Bean & Whitaker Mortgage Corp on Monday filed for Chapter 11 bankruptcy protection, fewer than three weeks after it closed its mortgage lending business and was suspended by a federal agency.
The Ocala, Florida-based company, which was the nation's 12th-largest U.S. mortgage lender from January to June, filed for protection with the U.S. bankruptcy court in Jacksonville.
A record number of shoppers, shut off from credit and short on cash, are relying on Kmart's layaway program to pay for all of their kids' school needs, said Tom Aiello, a spokesman for Kmart's parent Sears Holdings Corp. Layaway allows shoppers to pay over time, interest- free, and pick up their merchandise when it's paid in full.
"It's a sight. In the past, we would see layaway start to pick up around Halloween" as people get a jump start for Christmas, said David Travis, manager of a Kmart store in Conover, N.C.
Burlington Coat Factory Warehouse Corp. said its layaway business is stronger than a year ago. And e-Layaway.com, which offers online layaway services for about 1,000 merchants, has seen its business double from the same time last year. Customers are setting aside even $25 calculators and $30 backpacks. Layaway has its roots in the Great Depression. Kmart's Travis predicts this Christmas will be a "record-setting" layaway season.
According to the WSJ, In Texas, revenue from gas-production taxes has fallen 43% from last year, costing the state more than $1 billion in lost revenue. Plus, when drilling slows, employment slows. Unemployed people don't pay taxes, and they don't spend much money, either, hurting the retail sector.
Equities closed flat on the day.
Existing Home Sales
8/23/09 Existing Home Sales
The Oil Drum: "Refining one gallon of ethanol requires four gallons of water. This turns out to be a drop in the bucket compared with how much water it takes to grow enough corn to refine one gallon of ethanol: as much as 2,500 gallons."
Clif Droke: "The 10-year cycle told us to expect a strong recovery in 2009 and to date it has performed according to the historical script. The analysis of prior 10-year cycle peaks also gives us reason for an overall positive performance in the fourth quarter, notwithstanding the bumpiness which is always felt by the actual peaking of the 10-year cycle near the end of the third quarter."
Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise. The trustees who oversee Social Security are projecting there won't be a cost of living adjustment (COLA) for the next two years. That hasn't happened since automatic increases were adopted in 1975. By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly.
"I will promise you, they count on that COLA," said Barbara Kennelly, a former Democratic congresswoman from Connecticut who now heads the National Committee to Preserve Social Security and Medicare. "To some people, it might not be a big deal. But to seniors, especially with their health care costs, it is a big deal."
Cost of living adjustments are pegged to inflation, which has been negative this year, largely because energy prices are below 2008 levels.
That tells me that the economy will take a further hit in consumer spending. Seniors will cut back. Government numbers show that about 50 million citizens get payments from the fund.
Last year, the number of Americans with a net worth of at least $30 million dropped 24 percent, according to CapGemini and Merrill Lynch Wealth Management. Monthly income from stock dividends, which is concentrated among the affluent, has fallen more than 20 percent since last summer, the biggest such decline since the government began keeping records in 1959.
Existing home sales (ex-Condos) were down 10% from July 2007, flat from July 2008, and off 5% from June 2009. Mark Hanson: “If not for a surprise and suspect 16k increase in Northeast condo sales, Existing Home Sales would have been lower month-over-month and only up 12k units from July 2008, which was the worst year on record for housing.”
John Hussman: "Ben Bernanke (like Tim Geithner and his predecessor Hank Paulson), shows no hesitation in diverting the real resources of the American public to defend and compensate the bondholders of mismanaged financial companies who made reckless loans and who should have (and equally important, could have) been expected to write down principal or swap debt for equity as an alternative to receivership. This is not decisiveness. It is timidity and poor stewardship. Worse, the underlying problems are not healed - only band-aided temporarily by a flood of public money.
Unfortunately, the resources used in the recent bailout were not just free money tossed out of a helicopter. Only a partial-equilibrium economist thinks that way. No, this was an allocation of trillions of dollars of real resources that could be spent improving access of poor families to health care, finding cures for life-changing diseases, providing better education, and reversing the crowding-out of productive private investment. A public servant willing to act this carelessly with the resources entrusted to him, and so strongly in defense of fellow bankers, frankly does not deserve the job. Most likely, we will face the same credit issues a few quarters from now, given that the lull in the adjustable-rate reset schedule is near its end. We continue to expect a fresh acceleration of credit losses as we enter 2010. It would be best if we faced these challenges with more thoughtful leadership."
The Oil Drum: "Refining one gallon of ethanol requires four gallons of water. This turns out to be a drop in the bucket compared with how much water it takes to grow enough corn to refine one gallon of ethanol: as much as 2,500 gallons."
Clif Droke: "The 10-year cycle told us to expect a strong recovery in 2009 and to date it has performed according to the historical script. The analysis of prior 10-year cycle peaks also gives us reason for an overall positive performance in the fourth quarter, notwithstanding the bumpiness which is always felt by the actual peaking of the 10-year cycle near the end of the third quarter."
Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise. The trustees who oversee Social Security are projecting there won't be a cost of living adjustment (COLA) for the next two years. That hasn't happened since automatic increases were adopted in 1975. By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly.
"I will promise you, they count on that COLA," said Barbara Kennelly, a former Democratic congresswoman from Connecticut who now heads the National Committee to Preserve Social Security and Medicare. "To some people, it might not be a big deal. But to seniors, especially with their health care costs, it is a big deal."
Cost of living adjustments are pegged to inflation, which has been negative this year, largely because energy prices are below 2008 levels.
That tells me that the economy will take a further hit in consumer spending. Seniors will cut back. Government numbers show that about 50 million citizens get payments from the fund.
Last year, the number of Americans with a net worth of at least $30 million dropped 24 percent, according to CapGemini and Merrill Lynch Wealth Management. Monthly income from stock dividends, which is concentrated among the affluent, has fallen more than 20 percent since last summer, the biggest such decline since the government began keeping records in 1959.
Existing home sales (ex-Condos) were down 10% from July 2007, flat from July 2008, and off 5% from June 2009. Mark Hanson: “If not for a surprise and suspect 16k increase in Northeast condo sales, Existing Home Sales would have been lower month-over-month and only up 12k units from July 2008, which was the worst year on record for housing.”
John Hussman: "Ben Bernanke (like Tim Geithner and his predecessor Hank Paulson), shows no hesitation in diverting the real resources of the American public to defend and compensate the bondholders of mismanaged financial companies who made reckless loans and who should have (and equally important, could have) been expected to write down principal or swap debt for equity as an alternative to receivership. This is not decisiveness. It is timidity and poor stewardship. Worse, the underlying problems are not healed - only band-aided temporarily by a flood of public money.
Unfortunately, the resources used in the recent bailout were not just free money tossed out of a helicopter. Only a partial-equilibrium economist thinks that way. No, this was an allocation of trillions of dollars of real resources that could be spent improving access of poor families to health care, finding cures for life-changing diseases, providing better education, and reversing the crowding-out of productive private investment. A public servant willing to act this carelessly with the resources entrusted to him, and so strongly in defense of fellow bankers, frankly does not deserve the job. Most likely, we will face the same credit issues a few quarters from now, given that the lull in the adjustable-rate reset schedule is near its end. We continue to expect a fresh acceleration of credit losses as we enter 2010. It would be best if we faced these challenges with more thoughtful leadership."
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