2/16/08 Deteriorating Conditions
The U.S. Import Price Index increased 1.7 percent in January,
led by a 5.5 percent increase in petroleum prices.
The overall increase followed a 0.2 percent decline in
December. U.S. export prices advanced 1.2 percent in
January following a 0.4 percent rise in December.
Top electronics retailer Best Buy Co cut its full-year outlook
on Friday, saying fourth-quarter sales would miss its
expectations as the softer U.S. economy hurt January store
traffic, pushing its shares down 3 percent. Lower revenue for advanced televisions, MP3 devices and video games
will result in a modest fall in sales at stores open at least 14
months, or same-store sales, Best Buy said.
"The macroeconomic environment grew more challenging after the holidays," Jim Muehlbauer, interim chief financial officer, said in a statement. "Our post-holiday results are not going to be what we originally expected."
An index of consumer sentiment fell to a 16-year low. The index fell to 69.6 in mid-February from 78.4 in January.
Crude futures for March delivery gained 4 cents to close at $95.50 a barrel on the New York Mercantile Exchange. Platinum for April delivery soared as high as $2,079.90 an ounce, beating the previous record set on Thursday. The contract finished up $57.80 at $2,063.70 an ounce. Platinum futures soared $179.70, or nearly 10%, this week from last Friday's closing level of $1,884. Gold for April delivery dropped $4.70 to end at $906.10 an ounce. Gold posted a weekly loss of $16.20 from last Friday's closing level of $922.30.
Countrywide's delinquencies and foreclosures also continued to rise, with delinquencies up to 7.47% from 7.27% and foreclosures growing to 1.48% from 1.44% a month earlier.
The Empire State manufacturing survey indicates that conditions for New York manufacturers deteriorated in February, the Federal Reserve Bank of New York said Friday. The general business conditions index tumbled nearly 21 points to -11.7, falling below zero for the first time since May 2005.
ConocoPhillips raised its quarterly dividend 15% to 47 cents from 41 cents. The dividend is payable March 3 to shareholders of record as of Feb. 25.
Wilsons The Leather Experts Inc. plans to begin a program of reducing its mall store base, implementing aggressive cost cutting initiatives and launching a new accessories store concept. As part of the initiative, Wilsons said it plans to close up to 160 mall locations "that do not fit its go-forward strategy." All remaining 100 stores in the mall division will be remodeled to a new "Studio" concept, a brand-driven store for women focusing on fashion accessories. The Minneapolis-based retailer said the plan will affect approximately 938 store-related positions.
China's trade surplus in January totaled $19.49 billion, up 22.5% from a year earlier, but down against the preceding month, according to data released by China's General Administration of Customs Friday. China's surplus in December totaled $22.69 billion.
According to a Business Council survey released Thursday, 81% of CEOs polled by the group expected "sluggish" U.S. economic growth of 0% to 2% this year.
The credit crunch driven by the U.S. housing crisis appears to have hit another engine of the American economy -- small businesses. "We've been concerned about this for some time, but things are really beginning to deteriorate," said Todd McCracken, president of the National Small Business Association (NSBA).
New York state governor Eliot Spitzer warned Thursday that bond and credit woes afflicting Wall Street and global markets could turn into a more damaging "financial tsunami."
Paul Krugman: "Why has a crisis that began with loans to a limited group of home buyers ended up disrupting so much of the financial system? Because, ultimately, it’s more than a subprime crisis; indeed, it’s more than a housing crisis. It’s a crisis of faith."
According to AMG Data Services, including ETF activity, Equity funds report net cash outflows totaling -$7.606 billion in the week ended 2/13/08 with Domestic funds reporting net outflows of -$6.795 billion and Non-domestic funds reporting net outflows of -$811 million; Excluding ETF activity, Equity funds report net cash outflows totaling -$332 million with Domestic funds reporting net outflows of -$4 million and Non-domestic funds reporting net outflows totaling -$328 million.
Saturday, February 16, 2008
Wednesday, February 13, 2008
The Big Easy
2/13/08 The Big Easy
Homeowners threatened with foreclosure would in some instances get a 30-day reprieve under an initiative the Bush administration announced Tuesday. Dubbed "Project Lifeline," the program will be available to people who have taken out all types of mortgages, not just the high-cost subprime loans that have been the focus of previous relief efforts. The program was put together by six of the nation's largest financial institutions, which service almost 50 percent of the nation's mortgages.
Warren Buffett said Tuesday that he has offered to help out troubled bond insurers by offering a second level of insurance on up to $800 billion in municipal bonds. In an interview on CNBC, Buffett said his Berkshire Hathaway holding company made the offer of reinsurance to bond insurers Ambac Financial Group Inc., MBIA Inc. and Financial Guaranty Insurance Co. Buffett said one firm rejected his offer, and he was still waiting to hear from the other two. He did not say which was which.
n its monthly review of the government's finances, the Treasury Department said Tuesday that the budget was in surplus in January, but totals $87.7 billion so far this budget year, double the $42.2 billion imbalance recorded during the same period in 2007. The new budget year started last Oct. 1.
General Motors Corp. reported a $38.7 billion loss for 2007 on Tuesday, the largest annual loss ever for an automotive company, and said it is making a new round of buyout offers to U.S. hourly workers in hopes of replacing some of them with lower-paid help.
U.S. Crude oil for March delivery lost 81 cents, or 0.9%, to close at $92.78 a barrel on the New York Mercantile Exchange. Gold for April delivery declined $15.60 at $911.10 an ounce on the New York Mercantile Exchange.
"We think this deal is a strategic imperative for Microsoft, and that Yahoo is in a tough spot if it wishes to remain independent," said Miller, manager of Legg Mason Value Trust, a large holder of Yahoo stock. He thinks Microsoft will have to enhance its offer it wants to seal the deal for Yahoo.
The outlook for 2008 is much weaker than three months ago but a recession is still unlikely, according to the median forecast of 50 economists surveyed by the Philadelphia Federal Reserve Bank. The forecasters expect growth of 0.7% in the first quarter and 1.3% in the second quarter, much weaker than the average 2.25% average growth in the two quarters previously forecast.
As expected, Yahoo Inc began carrying out lay-offs up to 1,000 employees on Tuesday, as part of job cutbacks announced last month, several employees at the company's headquarters said on Tuesday. U.K. inflation accelerated to a seven-month high in January as soaring gasoline and food costs blunted the impact of discounting by fashion stores. Consumer prices climbed 2.2 percent from a year earlier, compared with 2.1 percent in December, the Office for National Statistics said today in London.
Homeowners threatened with foreclosure would in some instances get a 30-day reprieve under an initiative the Bush administration announced Tuesday. Dubbed "Project Lifeline," the program will be available to people who have taken out all types of mortgages, not just the high-cost subprime loans that have been the focus of previous relief efforts. The program was put together by six of the nation's largest financial institutions, which service almost 50 percent of the nation's mortgages.
Warren Buffett said Tuesday that he has offered to help out troubled bond insurers by offering a second level of insurance on up to $800 billion in municipal bonds. In an interview on CNBC, Buffett said his Berkshire Hathaway holding company made the offer of reinsurance to bond insurers Ambac Financial Group Inc., MBIA Inc. and Financial Guaranty Insurance Co. Buffett said one firm rejected his offer, and he was still waiting to hear from the other two. He did not say which was which.
n its monthly review of the government's finances, the Treasury Department said Tuesday that the budget was in surplus in January, but totals $87.7 billion so far this budget year, double the $42.2 billion imbalance recorded during the same period in 2007. The new budget year started last Oct. 1.
General Motors Corp. reported a $38.7 billion loss for 2007 on Tuesday, the largest annual loss ever for an automotive company, and said it is making a new round of buyout offers to U.S. hourly workers in hopes of replacing some of them with lower-paid help.
U.S. Crude oil for March delivery lost 81 cents, or 0.9%, to close at $92.78 a barrel on the New York Mercantile Exchange. Gold for April delivery declined $15.60 at $911.10 an ounce on the New York Mercantile Exchange.
"We think this deal is a strategic imperative for Microsoft, and that Yahoo is in a tough spot if it wishes to remain independent," said Miller, manager of Legg Mason Value Trust, a large holder of Yahoo stock. He thinks Microsoft will have to enhance its offer it wants to seal the deal for Yahoo.
The outlook for 2008 is much weaker than three months ago but a recession is still unlikely, according to the median forecast of 50 economists surveyed by the Philadelphia Federal Reserve Bank. The forecasters expect growth of 0.7% in the first quarter and 1.3% in the second quarter, much weaker than the average 2.25% average growth in the two quarters previously forecast.
As expected, Yahoo Inc began carrying out lay-offs up to 1,000 employees on Tuesday, as part of job cutbacks announced last month, several employees at the company's headquarters said on Tuesday. U.K. inflation accelerated to a seven-month high in January as soaring gasoline and food costs blunted the impact of discounting by fashion stores. Consumer prices climbed 2.2 percent from a year earlier, compared with 2.1 percent in December, the Office for National Statistics said today in London.
Monday, February 11, 2008
Subprime Loss Estimates
2/12/08 Subprime Loss Estimates
"If you end up freezing (Venezuelan assets) and it harms us, we're going to harm you," Chavez said during his weekly radio and television program, "Hello, President." "Do you know how? We aren't going to send oil to the United States. Take note, Mr. Bush, Mr. Danger."
Democratic Sen. Hillary Rodham Clinton replaced campaign manager Patti Solis Doyle with longtime aide Maggie Williams on Sunday, a staff shake-up coming just hours after presidential rival Barack Obama's weekend sweep of three contests. According to the Chicago Tribune, over the last seven years, Clinton had raised $175 million for her reelection and her presidential campaign. But Solis Doyle didn't tell Clinton that there was next to no cash on hand until after the New Hampshire primary."We were lying about money," a source said. "The cash on hand was nothing." In turn, Clinton didn't tell Solis Doyle that she was lending her own money to keep the campaign afloat. Solis Doyle found out third-hand. And when she asked Clinton about it, the senator told her she couldn't understand how the campaign had gotten to such a point.
Microsoft, Sony Ericsson to launch Window mobile phone.
The negotiating committee of the Writers Guild of America voted unanimously to accept a tentative three-year deal with major Hollywood studios, clearing the way for final approval of the agreement by striking film and TV writers, The Wall Street Journal reported Sunday.
Coal prices rose to a record for a third straight week at Australia's Newcastle port, a benchmark for Asia, as snowstorms in China cut exports, adding to supply disruptions in Australia and South Africa.
Sun Capital to buy Kellwood for $21 a share.
Yahoo is seeking to restart merger talks with the AOL unit of Time Warner as a way to defend itself from a hostile Microsoft approach, The Times (of London) newspaper reported Monday, citing an unnamed source. The report said tie-ups with Google and Disney also are being explored.
Losses linked to the subprime-credit turmoil could hit $400 billion, implying global financial institutions have yet to write down the full amount of the soured investments, The Financial Times reported Monday. The report cited German Financial Minister Peer Steinbrück speaking after the gathering of the Group of Seven finance leaders in Tokyo as the source of the figure. The estimate is well above the U.S. Federal Reserve's estimates of subprime losses last year of $100 billion to $150 billion and higher than the $120 billion in losses reported by Wall Street banks and other financial institutions in recent weeks.
According to the WSJ, Motorola Inc. and Nortel Networks Corp. are in talks to combine their wireless-infrastructure units in a joint venture, said people familiar with the situation, the latest response to slowing growth in the telecom-equipment industry.
According to Bloomberg, Ford Motor Co., the world's third- largest automaker, may eliminate as many as 9,000 more U.S. factory jobs through its latest buyout offers, a person with direct knowledge of the situation said. The cuts would be in addition to the 33,600 union workers who left through buyouts and early retirements in 2006 and 2007, when Ford lost a combined $15.3 billion.
According to FT, Microsoft has a team of advisers in place for any proxy fight. It includes Alan Miller of Innisfree, the proxy solicitation firm, and Joele Frank, the New York M&A public relations specialist, as well as financial advisers from the Blackstone Group and Morgan Stanley. Yahoo is using Dan Burch at MacKenzie Partners, a proxy firm that would lobby shareholders to try to secure their votes in favour of the current board. Microsoft has until March 13 to nominate a new slate of directors.
The auction of Getty Images , the distributor of pictures and video, appears to be in jeopardy, The New York Times reported Monday.Though several bidders, mostly private equity firms like Kohlberg Kravis Roberts, Bain Capital and Providence Equity partners, had expressed interest last month, Getty received no offers significantly above its current market value of $1.6 billion, according to The Times.
Mobile phone coupon company Cellfire has raised $12 million in a third round of funding. The round includes a new investor, Silver Creek Ventures, and existing ones, including Menlo Ventures and Storm Ventures. People who sign up for Cellfire’s service automatically receive coupons on their cell phones. If they accept the coupon, users receive a unique redemption code that’s redeemed at the store.
Drybulk rates increased into the Chinese New Year.
The Houston Chronicle reports the U.S. housing market still has a long way to fall — and with it the nation's economy — and China's economy won't cushion the blow as it did in the 2001 slump. That's the view of two top economists scheduled to make presentations this week at CERAWeek, Cambridge Energy Research Associates' annual energy forum in Houston. Robert Shiller, the Yale economist who is widely credited with the earliest warnings of the subprime mortgage crisis, said signs are pointing toward steeper declines in U.S. home prices. Average home prices fell by 8 percent last year, according to the Standard & Poor's/Case-Shiller index based on 20 big American cities."This may be a major turning point where we see years of falling home prices and economic decline," Shiller, an originator of the Case-Shiller index, said in an interview with the Chronicle.
John Hussman: "At present, we've cleared that overbought condition, so there's nothing that would allow us to form pointed short-term expectations for market returns. Presently, the Market Climate remains broadly unfavorable, and that is enough to hold us to a fully hedged investment stance in the Strategic Growth Fund...The strongest factor driving market returns here is the unfavorable condition of market internals including price/volume behavior, breadth, leadership, industry action, credit spreads, and other factors. Meanwhile, it's important to reiterate that P/E ratios based on “forward operating earnings” and even our own “price/peak-earnings” measures are somewhat corrupted here by the fact that the earnings in these ratios implicitly assume the continuation of record profit margins about 40-50% above long-term norms. As a result, we are also attending to measures that take profit margins into account more explicitly. To the extent that profit margins are not likely to be sustained indefinitely, P/E ratios are likely to be a poor metric of valuation, encouraging investors to believe that stocks are cheap on the basis of recent earnings, when they are not at all cheap on the basis of long-term earnings power."
Microsoft Corp. said Monday it has entered into an agreement to acquire Danger Inc., a company which produces software and services for consumer handsets.
YAHOO SAYS MICROSOFT OFFER 'SUBSTANTIALLY' UNDERVALUED, KEEPING OPTIONS OPEN. I view this as a generic and weak negotiating response. Whether it's true that off the record Microsoft offered $40 or $43 a year ago for Yahoo when the latter's stock was trading at $28 is irrelevant. It is relative that a year later Yahoo shares were at the $19 level. Had the company been performing well, it would have have been doubtful to trade at a 52-week low. Over the past year, Microsoft has used much of its cash position on other acquisitions. The company will need to take on debt to buy Yahoo at $31, and it will be dilutive to earnings. No other company will pay $31 and Yahoo is not in a position to deliver $31 in value to shareholders on their own. Yahoo's option is to try and get a small kiss from Microsoft and call it a day. Their management has had its chance at running the company and can't hack it to the next level.
BANK OF AMERICA, CHEVRON ADDED TO DOW INDUSTRIALS, REPLACING ALTRIA AND HONEYWELL.
The dollar was buying 106.64 yen, compared with 107.43 yen late Friday.
In early Monday trading, natural gas is trading at $8.54. Gas has advanced 13.3 percent so far this year. That's a turkey sandwich! The cold weather is taking its toll on the short sellers.
AIG unsure of value of some of its credit derivatives. AIG auditors cite "material weakness" in financial reporting. In addition, the company increased its estimates of losses in October and November from insuring mortgage-related instruments from about $1bn to nearly $5bn.
Hypercom Corp. rose $1.24, or 31 percent, to $5.19. Ingenico SA offered to buy the maker of electronic-payment software for about $332 million, or $6.25 a share, in cash.
A report released Monday by Forrester Research Inc. says U.S. companies and government agencies are expected to increase their spending on information technology by just 2.8 percent this year. That is a substantial downward revision from the 4.6 percent growth that Forrester was predicting in December.
BJ Services: "For the second fiscal quarter of 2008, we expect drilling activity to remain relatively flat in the U.S. market, and we expect pricing pressures to continue at least until the latter part of the year. We do expect continued high demand for our services in a number of areas, especially in gas shale areas in Arkansas, the Rockies and the Mid-Continent region, and we anticipate increased Gulf of Mexico activity particularly in the deep water area. Canadian drilling activity is expected to increase in the second fiscal quarter as we enter the winter drilling season, and we expect our operating results to improve there compared to the first fiscal quarter. We also anticipate increased revenue and improved margins in the International Pressure Pumping segment. Both the Blue Angel stimulation vessel in Brazil and the Vestfonn stimulation vessel in India have returned to work after being dry-docked for a portion of the first fiscal quarter. We have a number of new projects in our international pressure pumping operations that either have already begun or are scheduled to begin in the second fiscal quarter in Latin America, North Africa and China that we believe will help to improve international operating margins. Our Oilfield Services group is projected to be up slightly in the second quarter as revenue growth from Completion Tools and Completion Fluids will be partially offset by continued seasonal decline in our Process and Pipeline Services business." Board member John Huff bought $819,000 worth of BJ Services stock last Wednesday. That's the largest insider purchase at the company in over five years and only the third such buy during that time frame, according to InsiderScore.com. Huff acquired 37,545 shares in the transaction, at an average per-share price of $21.82, according to a Securities and Exchange Commission filing on Friday
Crude-oil futures for March delivery rallied $1.82, or 2%, to close at $93.59 a barrel. Gold for April delivery gained $4.40 to end at $926.70 an ounce on the New York Mercantile Exchange. Platinum for April delivery surged to a record $1,949 an ounce Monday. The contract soared $55.40, or 3%, to end at $1,939.40 an ounce.
A merger between Delta Air Lines Inc and Northwest Airlines Corp could be announced in the next few weeks as Northwest pilots review details of a proposed deal, people briefed on the situation said on Monday.
``It is unfortunate that Yahoo has not embraced our full and fair proposal to combine our companies,'' Microsoft said in a statement today, without outlining a specific plan or timetable. ``We are confident that moving forward promptly to consummate a transaction is in the best interests of all parties.''
BlackBerry smartphones experienced a "critical severity outage" on Monday, the company told clients in an e-mail.
Starbucks Corp. and AT&T Inc. will start offering a mix of free and paid wireless Internet service in most of the international coffee retailer's U.S. shops, beginning this spring. The move announced Monday ends a six-year partnership T-Mobile, which did not include free Wi-Fi and charged higher fees than AT&T will. Starbucks said it will give customers who use a Starbucks card two hours of free wireless access per day. More time than that will cost $3.99 for a two-hour session. Monthly memberships will cost $19.99 and include access to any of AT&T's 70,000 hot spots worldwide. Nearly all of AT&T's broadband Internet customers, about 12 million, will automatically have unlimited free Wi-Fi access at Starbucks, the companies said. The deal boosts the number of AT&T hotspots in the U.S. to 17,000 — the most in the nation.
Obama is leading in polls in Virginia, Maryland and Washington, D.C., which all vote tomorrow. Obama held his first rally today at the Comcast Center arena at the University of Maryland's College Park campus. The arena, which seats more than 17,500 people, was packed with cheering Obama supporters. He plans a similar event at a stadium in Baltimore. At stake tomorrow are 168 pledged delegates to the Democratic National Convention in August from the two states and Washington, D.C.
"If you end up freezing (Venezuelan assets) and it harms us, we're going to harm you," Chavez said during his weekly radio and television program, "Hello, President." "Do you know how? We aren't going to send oil to the United States. Take note, Mr. Bush, Mr. Danger."
Democratic Sen. Hillary Rodham Clinton replaced campaign manager Patti Solis Doyle with longtime aide Maggie Williams on Sunday, a staff shake-up coming just hours after presidential rival Barack Obama's weekend sweep of three contests. According to the Chicago Tribune, over the last seven years, Clinton had raised $175 million for her reelection and her presidential campaign. But Solis Doyle didn't tell Clinton that there was next to no cash on hand until after the New Hampshire primary."We were lying about money," a source said. "The cash on hand was nothing." In turn, Clinton didn't tell Solis Doyle that she was lending her own money to keep the campaign afloat. Solis Doyle found out third-hand. And when she asked Clinton about it, the senator told her she couldn't understand how the campaign had gotten to such a point.
Microsoft, Sony Ericsson to launch Window mobile phone.
The negotiating committee of the Writers Guild of America voted unanimously to accept a tentative three-year deal with major Hollywood studios, clearing the way for final approval of the agreement by striking film and TV writers, The Wall Street Journal reported Sunday.
Coal prices rose to a record for a third straight week at Australia's Newcastle port, a benchmark for Asia, as snowstorms in China cut exports, adding to supply disruptions in Australia and South Africa.
Sun Capital to buy Kellwood for $21 a share.
Yahoo is seeking to restart merger talks with the AOL unit of Time Warner as a way to defend itself from a hostile Microsoft approach, The Times (of London) newspaper reported Monday, citing an unnamed source. The report said tie-ups with Google and Disney also are being explored.
Losses linked to the subprime-credit turmoil could hit $400 billion, implying global financial institutions have yet to write down the full amount of the soured investments, The Financial Times reported Monday. The report cited German Financial Minister Peer Steinbrück speaking after the gathering of the Group of Seven finance leaders in Tokyo as the source of the figure. The estimate is well above the U.S. Federal Reserve's estimates of subprime losses last year of $100 billion to $150 billion and higher than the $120 billion in losses reported by Wall Street banks and other financial institutions in recent weeks.
According to the WSJ, Motorola Inc. and Nortel Networks Corp. are in talks to combine their wireless-infrastructure units in a joint venture, said people familiar with the situation, the latest response to slowing growth in the telecom-equipment industry.
According to Bloomberg, Ford Motor Co., the world's third- largest automaker, may eliminate as many as 9,000 more U.S. factory jobs through its latest buyout offers, a person with direct knowledge of the situation said. The cuts would be in addition to the 33,600 union workers who left through buyouts and early retirements in 2006 and 2007, when Ford lost a combined $15.3 billion.
According to FT, Microsoft has a team of advisers in place for any proxy fight. It includes Alan Miller of Innisfree, the proxy solicitation firm, and Joele Frank, the New York M&A public relations specialist, as well as financial advisers from the Blackstone Group and Morgan Stanley. Yahoo is using Dan Burch at MacKenzie Partners, a proxy firm that would lobby shareholders to try to secure their votes in favour of the current board. Microsoft has until March 13 to nominate a new slate of directors.
The auction of Getty Images , the distributor of pictures and video, appears to be in jeopardy, The New York Times reported Monday.Though several bidders, mostly private equity firms like Kohlberg Kravis Roberts, Bain Capital and Providence Equity partners, had expressed interest last month, Getty received no offers significantly above its current market value of $1.6 billion, according to The Times.
Mobile phone coupon company Cellfire has raised $12 million in a third round of funding. The round includes a new investor, Silver Creek Ventures, and existing ones, including Menlo Ventures and Storm Ventures. People who sign up for Cellfire’s service automatically receive coupons on their cell phones. If they accept the coupon, users receive a unique redemption code that’s redeemed at the store.
Drybulk rates increased into the Chinese New Year.
The Houston Chronicle reports the U.S. housing market still has a long way to fall — and with it the nation's economy — and China's economy won't cushion the blow as it did in the 2001 slump. That's the view of two top economists scheduled to make presentations this week at CERAWeek, Cambridge Energy Research Associates' annual energy forum in Houston. Robert Shiller, the Yale economist who is widely credited with the earliest warnings of the subprime mortgage crisis, said signs are pointing toward steeper declines in U.S. home prices. Average home prices fell by 8 percent last year, according to the Standard & Poor's/Case-Shiller index based on 20 big American cities."This may be a major turning point where we see years of falling home prices and economic decline," Shiller, an originator of the Case-Shiller index, said in an interview with the Chronicle.
John Hussman: "At present, we've cleared that overbought condition, so there's nothing that would allow us to form pointed short-term expectations for market returns. Presently, the Market Climate remains broadly unfavorable, and that is enough to hold us to a fully hedged investment stance in the Strategic Growth Fund...The strongest factor driving market returns here is the unfavorable condition of market internals including price/volume behavior, breadth, leadership, industry action, credit spreads, and other factors. Meanwhile, it's important to reiterate that P/E ratios based on “forward operating earnings” and even our own “price/peak-earnings” measures are somewhat corrupted here by the fact that the earnings in these ratios implicitly assume the continuation of record profit margins about 40-50% above long-term norms. As a result, we are also attending to measures that take profit margins into account more explicitly. To the extent that profit margins are not likely to be sustained indefinitely, P/E ratios are likely to be a poor metric of valuation, encouraging investors to believe that stocks are cheap on the basis of recent earnings, when they are not at all cheap on the basis of long-term earnings power."
Microsoft Corp. said Monday it has entered into an agreement to acquire Danger Inc., a company which produces software and services for consumer handsets.
YAHOO SAYS MICROSOFT OFFER 'SUBSTANTIALLY' UNDERVALUED, KEEPING OPTIONS OPEN. I view this as a generic and weak negotiating response. Whether it's true that off the record Microsoft offered $40 or $43 a year ago for Yahoo when the latter's stock was trading at $28 is irrelevant. It is relative that a year later Yahoo shares were at the $19 level. Had the company been performing well, it would have have been doubtful to trade at a 52-week low. Over the past year, Microsoft has used much of its cash position on other acquisitions. The company will need to take on debt to buy Yahoo at $31, and it will be dilutive to earnings. No other company will pay $31 and Yahoo is not in a position to deliver $31 in value to shareholders on their own. Yahoo's option is to try and get a small kiss from Microsoft and call it a day. Their management has had its chance at running the company and can't hack it to the next level.
BANK OF AMERICA, CHEVRON ADDED TO DOW INDUSTRIALS, REPLACING ALTRIA AND HONEYWELL.
The dollar was buying 106.64 yen, compared with 107.43 yen late Friday.
In early Monday trading, natural gas is trading at $8.54. Gas has advanced 13.3 percent so far this year. That's a turkey sandwich! The cold weather is taking its toll on the short sellers.
AIG unsure of value of some of its credit derivatives. AIG auditors cite "material weakness" in financial reporting. In addition, the company increased its estimates of losses in October and November from insuring mortgage-related instruments from about $1bn to nearly $5bn.
Hypercom Corp. rose $1.24, or 31 percent, to $5.19. Ingenico SA offered to buy the maker of electronic-payment software for about $332 million, or $6.25 a share, in cash.
A report released Monday by Forrester Research Inc. says U.S. companies and government agencies are expected to increase their spending on information technology by just 2.8 percent this year. That is a substantial downward revision from the 4.6 percent growth that Forrester was predicting in December.
BJ Services: "For the second fiscal quarter of 2008, we expect drilling activity to remain relatively flat in the U.S. market, and we expect pricing pressures to continue at least until the latter part of the year. We do expect continued high demand for our services in a number of areas, especially in gas shale areas in Arkansas, the Rockies and the Mid-Continent region, and we anticipate increased Gulf of Mexico activity particularly in the deep water area. Canadian drilling activity is expected to increase in the second fiscal quarter as we enter the winter drilling season, and we expect our operating results to improve there compared to the first fiscal quarter. We also anticipate increased revenue and improved margins in the International Pressure Pumping segment. Both the Blue Angel stimulation vessel in Brazil and the Vestfonn stimulation vessel in India have returned to work after being dry-docked for a portion of the first fiscal quarter. We have a number of new projects in our international pressure pumping operations that either have already begun or are scheduled to begin in the second fiscal quarter in Latin America, North Africa and China that we believe will help to improve international operating margins. Our Oilfield Services group is projected to be up slightly in the second quarter as revenue growth from Completion Tools and Completion Fluids will be partially offset by continued seasonal decline in our Process and Pipeline Services business." Board member John Huff bought $819,000 worth of BJ Services stock last Wednesday. That's the largest insider purchase at the company in over five years and only the third such buy during that time frame, according to InsiderScore.com. Huff acquired 37,545 shares in the transaction, at an average per-share price of $21.82, according to a Securities and Exchange Commission filing on Friday
Crude-oil futures for March delivery rallied $1.82, or 2%, to close at $93.59 a barrel. Gold for April delivery gained $4.40 to end at $926.70 an ounce on the New York Mercantile Exchange. Platinum for April delivery surged to a record $1,949 an ounce Monday. The contract soared $55.40, or 3%, to end at $1,939.40 an ounce.
A merger between Delta Air Lines Inc and Northwest Airlines Corp could be announced in the next few weeks as Northwest pilots review details of a proposed deal, people briefed on the situation said on Monday.
``It is unfortunate that Yahoo has not embraced our full and fair proposal to combine our companies,'' Microsoft said in a statement today, without outlining a specific plan or timetable. ``We are confident that moving forward promptly to consummate a transaction is in the best interests of all parties.''
BlackBerry smartphones experienced a "critical severity outage" on Monday, the company told clients in an e-mail.
Starbucks Corp. and AT&T Inc. will start offering a mix of free and paid wireless Internet service in most of the international coffee retailer's U.S. shops, beginning this spring. The move announced Monday ends a six-year partnership T-Mobile, which did not include free Wi-Fi and charged higher fees than AT&T will. Starbucks said it will give customers who use a Starbucks card two hours of free wireless access per day. More time than that will cost $3.99 for a two-hour session. Monthly memberships will cost $19.99 and include access to any of AT&T's 70,000 hot spots worldwide. Nearly all of AT&T's broadband Internet customers, about 12 million, will automatically have unlimited free Wi-Fi access at Starbucks, the companies said. The deal boosts the number of AT&T hotspots in the U.S. to 17,000 — the most in the nation.
Obama is leading in polls in Virginia, Maryland and Washington, D.C., which all vote tomorrow. Obama held his first rally today at the Comcast Center arena at the University of Maryland's College Park campus. The arena, which seats more than 17,500 people, was packed with cheering Obama supporters. He plans a similar event at a stadium in Baltimore. At stake tomorrow are 168 pledged delegates to the Democratic National Convention in August from the two states and Washington, D.C.
Sunday, February 10, 2008
Keep It Real
2/11/08 Keep It Real
The Wall Street Journal had quoted an unnamed source as saying Microsoft's offer of $31 per share was an attempt to "steal" the company and that Yahoo was unlikely to consider anything under $40 per share -- double its price in January.
When was the last time Yahoo stock sold at $40? It was the winter of 2005, and before that during the dotcom craze. Yahoo has done little over the past six years for shreholders. Their cash flow performance has been poor and they have shown an inability to monetize their web efforts. If Microsoft chooses to pursue this acquisition, I would begin a cash tender for 50.1% of Yahoo's outstanding shares at $30 a share. In addition, I would file papers to initiate a proxy fight in order to place directors on the board at the June annual meeting for Yahoo. (During last year's annual meeting, one-third of shareholder votes were cast against re-electing Bostock and two other committee members.) In addition, I'd propose that the remaining shares of Yahoo not purchased in the tender would be acquired for cash or stock or debt or a combination of any of those choices.
"We keep at things," Microsoft's CEO Ballmer told employees when the bid was announced. "We don't start and stop."
Is Microsoft looking to rent even more office space in Bellevue?
The hottest rumor among local commercial real-estate brokers has the Redmond software giant leasing almost all of 26-story City Center Plaza, now under construction at Northeast Sixth Street and 110th Avenue Northeast.
That would be another 550,000 square feet or so for Microsoft in Bellevue, on top of the 317,000 it now occupies at Lincoln Square and the 1.3 million it has committed to lease at two projects under construction, The Bravern on Northeast Eighth and Advanta Office Commons in Eastgate. It is quite possible that this space is planned for the growth envisioned with the acquisition of Yahoo.
OPEC could switch the pricing of oil from dollars into euros within a decade, secretary general Abdullah al-Badri told a weekly magazine.
At the start of 2007, Google commanded 52.6 percent of the search market, Yahoo had 26.9 percent and Microsoft had 10.4 percent, according to comScore. By December, Google's share had edged up to 58.6 percent while Yahoo's slipped to 22.4 percent and Microsoft was at 9.8 percent.
Dietrich Bonhoeffer: "To understand reality is not the same as to know about outward events. It is to perceive the essential nature of things. The best-informed man is not necessarily the wisest. Indeed there is a danger that precisely in the multiplicity of his knowledge he will lose sight of what is essential. But on the other hand, knowledge of an apparently trivial detail quite often makes it possible to see into the depth of things. And so the wise man will seek to acquire the best possible knowledge about events, but always without becoming dependent upon this knowledge. To recognize the significant in the factual is wisdom."
Mike Burk: "Although prices fell sharply last week the breadth indicators all held up well...The secondaries lead both up and down and since the middle of January the secondaries have been outperforming the blue chips...The bad news is the extreme number of new lows in mid January implies another retest of the recent lows in the next few months...I expect the major indices to be higher on Friday February 15 than they were on Friday February 8."
European Central Bank President Jean- Claude Trichet said there's no end to financial-market turmoil in sight and policy makers will continue to take ``appropriate measures'' if necessary. ``We are observing an ongoing, significant market correction,'' said Trichet at a press conference after meeting finance ministers and central bankers from the Group of Seven nations in Tokyo.
Financial regulators and central bankers delivered a grim assessment of the credit market upheaval on Saturday, warning that worse may lie ahead as banks tighten lending and an economic slowdown spreads.
Shares of Fannie Mae fell Friday as a Morgan Stanley analyst said he expects it to report decaying credit quality in its portfolio, a worrying sign that the meltdown in subprime lending may be spilling over into prime mortgage.
Louise Nevelson: "What we call reality is an agreement that people have arrived at to make life more livable."
The Wall Street Journal had quoted an unnamed source as saying Microsoft's offer of $31 per share was an attempt to "steal" the company and that Yahoo was unlikely to consider anything under $40 per share -- double its price in January.
When was the last time Yahoo stock sold at $40? It was the winter of 2005, and before that during the dotcom craze. Yahoo has done little over the past six years for shreholders. Their cash flow performance has been poor and they have shown an inability to monetize their web efforts. If Microsoft chooses to pursue this acquisition, I would begin a cash tender for 50.1% of Yahoo's outstanding shares at $30 a share. In addition, I would file papers to initiate a proxy fight in order to place directors on the board at the June annual meeting for Yahoo. (During last year's annual meeting, one-third of shareholder votes were cast against re-electing Bostock and two other committee members.) In addition, I'd propose that the remaining shares of Yahoo not purchased in the tender would be acquired for cash or stock or debt or a combination of any of those choices.
"We keep at things," Microsoft's CEO Ballmer told employees when the bid was announced. "We don't start and stop."
Is Microsoft looking to rent even more office space in Bellevue?
The hottest rumor among local commercial real-estate brokers has the Redmond software giant leasing almost all of 26-story City Center Plaza, now under construction at Northeast Sixth Street and 110th Avenue Northeast.
That would be another 550,000 square feet or so for Microsoft in Bellevue, on top of the 317,000 it now occupies at Lincoln Square and the 1.3 million it has committed to lease at two projects under construction, The Bravern on Northeast Eighth and Advanta Office Commons in Eastgate. It is quite possible that this space is planned for the growth envisioned with the acquisition of Yahoo.
OPEC could switch the pricing of oil from dollars into euros within a decade, secretary general Abdullah al-Badri told a weekly magazine.
At the start of 2007, Google commanded 52.6 percent of the search market, Yahoo had 26.9 percent and Microsoft had 10.4 percent, according to comScore. By December, Google's share had edged up to 58.6 percent while Yahoo's slipped to 22.4 percent and Microsoft was at 9.8 percent.
Dietrich Bonhoeffer: "To understand reality is not the same as to know about outward events. It is to perceive the essential nature of things. The best-informed man is not necessarily the wisest. Indeed there is a danger that precisely in the multiplicity of his knowledge he will lose sight of what is essential. But on the other hand, knowledge of an apparently trivial detail quite often makes it possible to see into the depth of things. And so the wise man will seek to acquire the best possible knowledge about events, but always without becoming dependent upon this knowledge. To recognize the significant in the factual is wisdom."
Mike Burk: "Although prices fell sharply last week the breadth indicators all held up well...The secondaries lead both up and down and since the middle of January the secondaries have been outperforming the blue chips...The bad news is the extreme number of new lows in mid January implies another retest of the recent lows in the next few months...I expect the major indices to be higher on Friday February 15 than they were on Friday February 8."
European Central Bank President Jean- Claude Trichet said there's no end to financial-market turmoil in sight and policy makers will continue to take ``appropriate measures'' if necessary. ``We are observing an ongoing, significant market correction,'' said Trichet at a press conference after meeting finance ministers and central bankers from the Group of Seven nations in Tokyo.
Financial regulators and central bankers delivered a grim assessment of the credit market upheaval on Saturday, warning that worse may lie ahead as banks tighten lending and an economic slowdown spreads.
Shares of Fannie Mae fell Friday as a Morgan Stanley analyst said he expects it to report decaying credit quality in its portfolio, a worrying sign that the meltdown in subprime lending may be spilling over into prime mortgage.
Louise Nevelson: "What we call reality is an agreement that people have arrived at to make life more livable."
Friday, February 08, 2008
Reason For Optimism?
2/9/08 Reason For Optimism?
Robert McHugh: "Trannies do not seem too worried about economic prospects, and may be sending a message that a bottom is in, that the worst will be over before long, and that over the horizon, perhaps the latter half of 2008, we will see a rebound in both markets and the economy. Dow Theory says that for this Bear Market to continue, both the Industrials and the Transportation average must close below their recent closing lows. A crash now would accomplish that. The two key numbers are January 22nd, 2008's 11,971.19 in the Industrials, and January 17th, 2008's 4,140.29 in the Trannies. As of Thursday's close, the Industrials sit 275.81 points above this Bear market re-confirmation level, pretty close, however, the Trannies sit 616.58 points, about 15 percent, above its threshold. In other words, it would take a stock market crash for Trannies to confirm. Put another way, unless we get a stock market crash that takes the Trannies down with it, this Bear Market is terminal. Amazing.
Here is the thing: Dow Theory says, if one of the averages hits a new low, but the other fails to confirm, then this primary trend decline can no longer be trusted. It also sets the stage for a potential new primary trend Bull Market signal, should both averages then rise above their previous highs. In other words, it is possible the blue chips will plunge another 10 percent within this Bear market, however if Trannies do not follow, do not close below 4,140.29, it gives reason for optimism. Over the past week, while the Industrials and techs sunk nearly 5 percent, the Trannies held relatively firm, down only 1.5 percent, and in fact rose the past two days."
According to AMG Data Services, Including ETF activity, Equity funds report net cash outflows totaling -$7.912 billion in the week ended 2/6/08 with Domestic funds reporting net outflows of -$9.144 billion and Non-domestic funds reporting net inflows of $1.232 billion;
Excluding ETF activity, Equity funds report net cash inflows totaling $1.829 billion with Domestic funds reporting net inflows of $1.313 billion and Non-domestic funds reporting net inflows totaling $516 million.
A U.S. recession is now an even bet as job losses and the housing contraction jeopardize the longest- ever expansion in consumer spending, according to a Bloomberg News survey.
ExxonMobil has won a court battle to freeze $12 billion in assets of Petroleos de Venezuela as compensation for nationalization of projects.
Business Week: "Microsoft has long been underappreciated by the Street and by investors. Martin Sass figures the stock, currently trading at a price-earnings ratio of 14, is cheap based on the company's expectations of yearly double-digit growth in 2008 and 2009. Revenue growth is projected at 14% to 18% over the next two years, says Sass. In the current difficult economic times, Microsoft and Google are both doing fairly well, he adds. Microsoft should continue to gain market share in software, generating 60% of its revenues in foreign markets. Excluding any deal with Yahoo, Sass expects Microsoft stock to hit $40 in a year. Should Microsoft bag Yahoo, that would be a big positive for Microsoft shares, says Sass. Some analysts worry that the potential integration challenges in buying Yahoo could generate headaches for Microsoft, in part because of a dilution in earnings. But they agree that the hostile bid for Yahoo makes strategic sense to jump-start Microsoft's online presence with consumers, advertisers, and publishers. It would enable the software giant to "better monetize its online assets over time," says Brad Reback of Oppenheimer."
Coventry Health expects 2008 annual earnings between $4.42 to $4.58 on revenue between $12.35 billion and $12.9 billion.
In early Friday trading, crude oil futures rose over $1 a barrel on Friday, up $1.05 to $89.16 a barrel. Iran has started building a second atomic power plant, Itar-Tass news agency quoted Iran's ambassador to Russia as saying, according to Reuters.
Imperial Sugar Co said an explosion late Thursday damaged its refinery in Port Wentworth, Georgia and injured a number of workers. The company said the number and severity of the injuries is not fully known. It added the extent of the damage caused is being investigated and it doesn't know how long the facility will have to be closed.
Chrysler LLC is working on plans to nearly halve the number of models in its product line and significantly reduce the number of dealers, The Wall Street Journal reported late Thursday in its online edition. Chrysler executives told dealers in meetings recently that they have accepted the "reality" that Chrysler can't expect to increase its sales volume dramatically, the newspaper said.
According to the WSJ, credit-card delinquencies are rising across the nation, a sign that some Americans are at the end of their rope financially. The result could be a sharp pullback in consumer spending that would further weaken the U.S. economy.
According to the WSJ, Sen. Clinton raised $118.3 million in 2007, compared with Sen. Obama's $103.8 million. But that advantage didn't last long. The campaign brought in $13.5 million in January, compared with a record-breaking $32 million for Sen. Obama during the same period. The Obama campaign now says it is on track to bring in $30 million this month.
Randall Forsyth: "According to the productivity numbers, total hours worked fell by 1.5% in the fourth quarter. Looking at the Labor Department's payroll data, however, hours worked rose 1% during that period. Why the discrepancy? The payrolls data count workers on companies' payrolls. The productivity data, by contrast, count all workers, including the self-employed. If the latter rose while the former fell, it's reasonable to infer that the self-employed were working less. That's important because the self-employed have become an increasingly large portion of the U.S. economy, and not just because of the E-bay entrepreneurs that Vice President Dick Cheney is fond of citing. During the housing bubble, the army of mortgage brokers and realtors swelled. The barriers to entry into those fields are minimal. As the former head of mortgage operations of a major New York bank once told me, a mortgage broker is a used-car salesman with a better suit. (Apologies to used-car salesmen.) In any case, thousands of people began to earn a living by getting a slice of the housing boom. But even when they went to work for a mortgage or real-estate firm, they remained independent contractors, not employees. That meant that they weren't on firms' payrolls (and not counted in the establishment survey of the monthly employment report.) Their independent-contractor status also precludes their receiving unemployment benefits. The legions of freelancers extend beyond the salesmen and saleswomen who raked it in during the housing boom to those did the honest work in the construction trades, from electricians to carpenters, who worked for contractors (also entrepreneurs.) Many of this corps that swelled and prospered during the housing bubble are out of work. But they can't file for unemployment insurance. According to Paul Kasriel, the director of economic research for Northern Trust, hours worked by the self-employed were down sharply in the fourth quarter. Jobless claims, meanwhile, are moving up but not as rapidly as in past recessions. "So, the independent-contractor hypothesis might be the explanation given everything else seems to indicate we have entered a recession," he writes in an e-mail."
According to Bloomberg, The risk of companies defaulting soared to a record on speculation funds invested in credit derivatives are being liquidated, according to traders of credit-default swaps. Contracts on the benchmark Markit iTraxx Europe index of 125 companies with investment-grade ratings rose 7.25 basis points to a 98.75, the highest since the index started in 2004, according to JPMorgan Chase & Co. The Markit CDX North America Investment Grade Index rose 5.5 basis points to 129.5 at 7 a.m. in New York, according to Lehman Brothers Holdings Inc. ``There is speculation structured products are being unwound,'' said Jim Reid, head of fundamental credit strategy at Deutsche Bank AG in London. Structured credit funds typically generate income by selling credit-default swaps on investment-grade companies. Funds have lost money since the cost of insuring against company default soared in the wake of the credit crisis triggered by the worst U.S. housing slump in 26 years. They are now having to buy default protection to offset losses, driving benchmark indexes higher. Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates worsening perceptions of credit quality; a decline, the opposite. The Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings increased 15 basis points to a record 540 today, JPMorgan prices show."
If Mike Bloomberg were to put his toe in the presidential race, what impact could that have on the results in November?
Henry To: "The best thing that one can do to his/her financial health right now is to stop watching CNBC and to stop reading the business section of newspapers."
According to the Chicago Tribune, four major U.S. carriers, including United Airlines, appear closer to consummating deals that would radically remake the airline industry, say people close to the airlines.
Chicago-based United is in merger talks with Continental Airlines and is poised to seal its deal if Delta Air Lines and Northwest Airlines combine first, sources say.
As mortgage crisis claims more Bay Area homes, an increasing number of tenants face rapid evictions.
According to the SF Chronicle, the president of a Japanese mobile carrier that owns a stake in Yahoo said Thursday he is in talks with Yahoo chief Jerry Yang about how to respond to Microsoft's takeover bid. "The talks have just started," said Masayoshi Son, president of Softbank Corp., at a news conference about earnings. "We need much more exchange before coming to a final decision." Last week, Microsoft offered to buy Yahoo Inc. for about $44.6 billion. Softbank owns a 3.9 percent stake in Yahoo of the U.S. and about 40 percent of Yahoo Japan. Yahoo Inc. in turn owns about a third of Yahoo Japan.
Zman: "This week's natural gas withdrawal eroded the surplus to the five year average and built upon the YoY deficit...
Where do we exit the withdrawal season relative to historical averages?
* Their are 8 weeks left in the typical injection season. Over the last five years, aggregate withdrawals during these 8 weeks have ranged from 650 to 825 Bcf.
* This would yield a season end (end of March) range of 1,230 to 1,400 Bcf. Last year gas troughed at 1,511 Bcf.
* An average for storage is pretty useless here as we've had a wide range of end of season levels over the last 5 years (700 to 1,700 Bcf)…
* …but a sub 2007 level (1,511 Bcf) start to the injection season is a good start.
* I'll have a new supply growth and summer demand growth piece out relatively soon…
* …and a piece on the growing liquefaction and regas capacity for 2008/09."
Brett Steenbarger: "We still have only 29% of stocks in the S&P 500 Index trading above their 50-day moving averages. While that's above Wednesday's low level of 17%, it suggests that weakness is still dominant for many sectors. Indeed, only 40% of the SPX stocks are trading above their 20-day averages. Interestingly, a greater proportion of small caps (49%) are trading above their 20-day averages than large caps. On the other hand, we're only seeing 25% of NASDAQ 100 issues trading above that benchmark. That having been said, the majority of issues are off their recent 52-week lows: among NYSE common stocks only we had 40 new lows on Thursday. That level hit 700 at the January lows."
The euro had a big drop versus the dollar as European Central Bank President Jean-Claude Trichet acknowledged that Europe won't escape the fallout from the U.S. economic slowdown. The dollar erased its loss for the year against the euro and an index measuring its performance against six of the U.S.'s biggest trading partners climbed to the highest in three weeks after Trichet said yesterday he's open to cutting interest rates.
The Organization of Petroleum Exporting Countries may cut crude production when it meets next month to keep the price above $80 a barrel, oil ministry officials from four of the group's nations said.
With the Yahoo board meeting, there is no question in my mind that their legal advisor, Skadden Arps, will strongly suggest that the board accept the Microsoft offer. At best, in my view, Microsoft would add another 50 cents to the pot. If I were running Microsoft, I'd add zip.
The Wall Street Journal writes that inflation concerns are increasing at the Fed.
Shell said it will not be able to honor all its export contracts from its southern Nigerian Bonny export terminal for two months because of sabotage.
McDonald's Corp. said sales at locations open more than 13 months increased 5.7 percent in January, spurred by growth in Europe and Asia. Comparable-store sales at U.S. outlets rose 1.9 percent, more than the 1.5 percent increase McDonald's forecast Jan. 28.
Weyerhaeuser Co. said Friday it swung to a fourth-quarter loss as the deteriorating U.S. housing market cut into demand for lumber — a downturn the paper and wood products company expects will continue through 2008.
Wal-Mart says its shoppers are redeeming their holiday gift cards for basic items — pasta sauce, diapers, laundry detergent — instead of iPods or DVDs.
Bill Bonner: "Yesterday, we noted that Americans had misunderstood what capitalism is. It is not a system that makes people rich. It is only a context, in which people CAN get rich, if they do the right thing. It is a moral context, in which virtue is rewarded and error is punished. Given misleading signals by their financial authorities, Americans made a big error - they spent too much and saved too little. Now they are being punished for it, even while the feds tell them that they were doing the right thing all along…and that they're going to get more money and credit so they can continue doing it. But nature - whom capitalism allows to express herself - will have her way. Nature wants to correct the errors of the past five years, at least. Maybe she wants to correct the errors of the last 25 years…we don't know. But she's got a switch in her hand, and we're staying out of her way!"
Tiffany said Friday it expects 2008 earnings of $2.50-$2.55 a share.
Nucor to buy David J. Joseph Co. for about $1.44 billion.
Alliance Data Systems Corp. has withdrawn its lawsuit against affiliates of The Blackstone Group, saying the private equity firm appears to be working to complete its proposed acquisition of the company. "Blackstone has in its court filings, correspondence with federal regulators and public statements said that it is committed to working toward the closing of its acquisition of the company, including working with Alliance Data on proposals directed to resolving regulatory issues," Alliance said in a statement. The company said Friday it has now “identified various potential solutions” to the regulatory hurdles Blackstone had cited in backing away from the acquisition.
As I have said previously, I expect this deal to be completed, but at a lower price than the original $81.75. I believe a fair value in today's environment would be in the $73 range.
Gold for April delivery surged $12.30 at $922.30 an ounce on the New York Mercantile Exchange. Crude for March delivery rallied $3.66, or 4.2%, to close at $91.77 a barrel on the New York Mercantile Exchange.
A federal appeals court struck down a Bush Administration policy that would exempt power plants from certain environmental regulations, The Associated Press reported Friday.
The Dow Jones Industrial Average fell 64.9 points to 12,182.1, off 4.4% from a week ago. The S&P 500 fell 5.62 points to 1,331.29, down 4.6% on the week, while the Nasdaq Composite climbed 11.82 points to close at 2,304.85, a weekly drop of 4.5%.
Polaroid Corp. is shutting its remaining U.S. film plants in March and will get out of making film for its venerable instant-picture cameras by the end of the year.
A fall in US inventories of wheat to a 60-year low drove prices of the grain sharply higher on Friday to a fresh record, intensifying fears of rising global food price inflation.
US wheat futures – global benchmarks for the grain – have jumped by their daily trading limit each day this week. Prices for Minneapolis wheat, the US variety most suitable for making flour, rose 10.7 per cent on the week, extending its price surge since the beginning of the year to 50 per cent.
A fall in US inventories of wheat to a 60-year low drove prices of the grain sharply higher on Friday to a fresh record, intensifying fears of rising global food price inflation. US wheat futures – global benchmarks for the grain – have jumped by their daily trading limit each day this week. Prices for Minneapolis wheat, the US variety most suitable for making flour, rose 10.7 per cent on the week, extending its price surge since the beginning of the year to 50 per cent. As a result of the price pressure, the Minneapolis Grain Exchange will remove the daily price limit on the spot-month hard red spring wheat contract for trading on February 25, the first time it has done so.
Robert McHugh: "Trannies do not seem too worried about economic prospects, and may be sending a message that a bottom is in, that the worst will be over before long, and that over the horizon, perhaps the latter half of 2008, we will see a rebound in both markets and the economy. Dow Theory says that for this Bear Market to continue, both the Industrials and the Transportation average must close below their recent closing lows. A crash now would accomplish that. The two key numbers are January 22nd, 2008's 11,971.19 in the Industrials, and January 17th, 2008's 4,140.29 in the Trannies. As of Thursday's close, the Industrials sit 275.81 points above this Bear market re-confirmation level, pretty close, however, the Trannies sit 616.58 points, about 15 percent, above its threshold. In other words, it would take a stock market crash for Trannies to confirm. Put another way, unless we get a stock market crash that takes the Trannies down with it, this Bear Market is terminal. Amazing.
Here is the thing: Dow Theory says, if one of the averages hits a new low, but the other fails to confirm, then this primary trend decline can no longer be trusted. It also sets the stage for a potential new primary trend Bull Market signal, should both averages then rise above their previous highs. In other words, it is possible the blue chips will plunge another 10 percent within this Bear market, however if Trannies do not follow, do not close below 4,140.29, it gives reason for optimism. Over the past week, while the Industrials and techs sunk nearly 5 percent, the Trannies held relatively firm, down only 1.5 percent, and in fact rose the past two days."
According to AMG Data Services, Including ETF activity, Equity funds report net cash outflows totaling -$7.912 billion in the week ended 2/6/08 with Domestic funds reporting net outflows of -$9.144 billion and Non-domestic funds reporting net inflows of $1.232 billion;
Excluding ETF activity, Equity funds report net cash inflows totaling $1.829 billion with Domestic funds reporting net inflows of $1.313 billion and Non-domestic funds reporting net inflows totaling $516 million.
A U.S. recession is now an even bet as job losses and the housing contraction jeopardize the longest- ever expansion in consumer spending, according to a Bloomberg News survey.
ExxonMobil has won a court battle to freeze $12 billion in assets of Petroleos de Venezuela as compensation for nationalization of projects.
Business Week: "Microsoft has long been underappreciated by the Street and by investors. Martin Sass figures the stock, currently trading at a price-earnings ratio of 14, is cheap based on the company's expectations of yearly double-digit growth in 2008 and 2009. Revenue growth is projected at 14% to 18% over the next two years, says Sass. In the current difficult economic times, Microsoft and Google are both doing fairly well, he adds. Microsoft should continue to gain market share in software, generating 60% of its revenues in foreign markets. Excluding any deal with Yahoo, Sass expects Microsoft stock to hit $40 in a year. Should Microsoft bag Yahoo, that would be a big positive for Microsoft shares, says Sass. Some analysts worry that the potential integration challenges in buying Yahoo could generate headaches for Microsoft, in part because of a dilution in earnings. But they agree that the hostile bid for Yahoo makes strategic sense to jump-start Microsoft's online presence with consumers, advertisers, and publishers. It would enable the software giant to "better monetize its online assets over time," says Brad Reback of Oppenheimer."
Coventry Health expects 2008 annual earnings between $4.42 to $4.58 on revenue between $12.35 billion and $12.9 billion.
In early Friday trading, crude oil futures rose over $1 a barrel on Friday, up $1.05 to $89.16 a barrel. Iran has started building a second atomic power plant, Itar-Tass news agency quoted Iran's ambassador to Russia as saying, according to Reuters.
Imperial Sugar Co said an explosion late Thursday damaged its refinery in Port Wentworth, Georgia and injured a number of workers. The company said the number and severity of the injuries is not fully known. It added the extent of the damage caused is being investigated and it doesn't know how long the facility will have to be closed.
Chrysler LLC is working on plans to nearly halve the number of models in its product line and significantly reduce the number of dealers, The Wall Street Journal reported late Thursday in its online edition. Chrysler executives told dealers in meetings recently that they have accepted the "reality" that Chrysler can't expect to increase its sales volume dramatically, the newspaper said.
According to the WSJ, credit-card delinquencies are rising across the nation, a sign that some Americans are at the end of their rope financially. The result could be a sharp pullback in consumer spending that would further weaken the U.S. economy.
According to the WSJ, Sen. Clinton raised $118.3 million in 2007, compared with Sen. Obama's $103.8 million. But that advantage didn't last long. The campaign brought in $13.5 million in January, compared with a record-breaking $32 million for Sen. Obama during the same period. The Obama campaign now says it is on track to bring in $30 million this month.
Randall Forsyth: "According to the productivity numbers, total hours worked fell by 1.5% in the fourth quarter. Looking at the Labor Department's payroll data, however, hours worked rose 1% during that period. Why the discrepancy? The payrolls data count workers on companies' payrolls. The productivity data, by contrast, count all workers, including the self-employed. If the latter rose while the former fell, it's reasonable to infer that the self-employed were working less. That's important because the self-employed have become an increasingly large portion of the U.S. economy, and not just because of the E-bay entrepreneurs that Vice President Dick Cheney is fond of citing. During the housing bubble, the army of mortgage brokers and realtors swelled. The barriers to entry into those fields are minimal. As the former head of mortgage operations of a major New York bank once told me, a mortgage broker is a used-car salesman with a better suit. (Apologies to used-car salesmen.) In any case, thousands of people began to earn a living by getting a slice of the housing boom. But even when they went to work for a mortgage or real-estate firm, they remained independent contractors, not employees. That meant that they weren't on firms' payrolls (and not counted in the establishment survey of the monthly employment report.) Their independent-contractor status also precludes their receiving unemployment benefits. The legions of freelancers extend beyond the salesmen and saleswomen who raked it in during the housing boom to those did the honest work in the construction trades, from electricians to carpenters, who worked for contractors (also entrepreneurs.) Many of this corps that swelled and prospered during the housing bubble are out of work. But they can't file for unemployment insurance. According to Paul Kasriel, the director of economic research for Northern Trust, hours worked by the self-employed were down sharply in the fourth quarter. Jobless claims, meanwhile, are moving up but not as rapidly as in past recessions. "So, the independent-contractor hypothesis might be the explanation given everything else seems to indicate we have entered a recession," he writes in an e-mail."
According to Bloomberg, The risk of companies defaulting soared to a record on speculation funds invested in credit derivatives are being liquidated, according to traders of credit-default swaps. Contracts on the benchmark Markit iTraxx Europe index of 125 companies with investment-grade ratings rose 7.25 basis points to a 98.75, the highest since the index started in 2004, according to JPMorgan Chase & Co. The Markit CDX North America Investment Grade Index rose 5.5 basis points to 129.5 at 7 a.m. in New York, according to Lehman Brothers Holdings Inc. ``There is speculation structured products are being unwound,'' said Jim Reid, head of fundamental credit strategy at Deutsche Bank AG in London. Structured credit funds typically generate income by selling credit-default swaps on investment-grade companies. Funds have lost money since the cost of insuring against company default soared in the wake of the credit crisis triggered by the worst U.S. housing slump in 26 years. They are now having to buy default protection to offset losses, driving benchmark indexes higher. Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates worsening perceptions of credit quality; a decline, the opposite. The Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings increased 15 basis points to a record 540 today, JPMorgan prices show."
If Mike Bloomberg were to put his toe in the presidential race, what impact could that have on the results in November?
Henry To: "The best thing that one can do to his/her financial health right now is to stop watching CNBC and to stop reading the business section of newspapers."
According to the Chicago Tribune, four major U.S. carriers, including United Airlines, appear closer to consummating deals that would radically remake the airline industry, say people close to the airlines.
Chicago-based United is in merger talks with Continental Airlines and is poised to seal its deal if Delta Air Lines and Northwest Airlines combine first, sources say.
As mortgage crisis claims more Bay Area homes, an increasing number of tenants face rapid evictions.
According to the SF Chronicle, the president of a Japanese mobile carrier that owns a stake in Yahoo said Thursday he is in talks with Yahoo chief Jerry Yang about how to respond to Microsoft's takeover bid. "The talks have just started," said Masayoshi Son, president of Softbank Corp., at a news conference about earnings. "We need much more exchange before coming to a final decision." Last week, Microsoft offered to buy Yahoo Inc. for about $44.6 billion. Softbank owns a 3.9 percent stake in Yahoo of the U.S. and about 40 percent of Yahoo Japan. Yahoo Inc. in turn owns about a third of Yahoo Japan.
Zman: "This week's natural gas withdrawal eroded the surplus to the five year average and built upon the YoY deficit...
Where do we exit the withdrawal season relative to historical averages?
* Their are 8 weeks left in the typical injection season. Over the last five years, aggregate withdrawals during these 8 weeks have ranged from 650 to 825 Bcf.
* This would yield a season end (end of March) range of 1,230 to 1,400 Bcf. Last year gas troughed at 1,511 Bcf.
* An average for storage is pretty useless here as we've had a wide range of end of season levels over the last 5 years (700 to 1,700 Bcf)…
* …but a sub 2007 level (1,511 Bcf) start to the injection season is a good start.
* I'll have a new supply growth and summer demand growth piece out relatively soon…
* …and a piece on the growing liquefaction and regas capacity for 2008/09."
Brett Steenbarger: "We still have only 29% of stocks in the S&P 500 Index trading above their 50-day moving averages. While that's above Wednesday's low level of 17%, it suggests that weakness is still dominant for many sectors. Indeed, only 40% of the SPX stocks are trading above their 20-day averages. Interestingly, a greater proportion of small caps (49%) are trading above their 20-day averages than large caps. On the other hand, we're only seeing 25% of NASDAQ 100 issues trading above that benchmark. That having been said, the majority of issues are off their recent 52-week lows: among NYSE common stocks only we had 40 new lows on Thursday. That level hit 700 at the January lows."
The euro had a big drop versus the dollar as European Central Bank President Jean-Claude Trichet acknowledged that Europe won't escape the fallout from the U.S. economic slowdown. The dollar erased its loss for the year against the euro and an index measuring its performance against six of the U.S.'s biggest trading partners climbed to the highest in three weeks after Trichet said yesterday he's open to cutting interest rates.
The Organization of Petroleum Exporting Countries may cut crude production when it meets next month to keep the price above $80 a barrel, oil ministry officials from four of the group's nations said.
With the Yahoo board meeting, there is no question in my mind that their legal advisor, Skadden Arps, will strongly suggest that the board accept the Microsoft offer. At best, in my view, Microsoft would add another 50 cents to the pot. If I were running Microsoft, I'd add zip.
The Wall Street Journal writes that inflation concerns are increasing at the Fed.
Shell said it will not be able to honor all its export contracts from its southern Nigerian Bonny export terminal for two months because of sabotage.
McDonald's Corp. said sales at locations open more than 13 months increased 5.7 percent in January, spurred by growth in Europe and Asia. Comparable-store sales at U.S. outlets rose 1.9 percent, more than the 1.5 percent increase McDonald's forecast Jan. 28.
Weyerhaeuser Co. said Friday it swung to a fourth-quarter loss as the deteriorating U.S. housing market cut into demand for lumber — a downturn the paper and wood products company expects will continue through 2008.
Wal-Mart says its shoppers are redeeming their holiday gift cards for basic items — pasta sauce, diapers, laundry detergent — instead of iPods or DVDs.
Bill Bonner: "Yesterday, we noted that Americans had misunderstood what capitalism is. It is not a system that makes people rich. It is only a context, in which people CAN get rich, if they do the right thing. It is a moral context, in which virtue is rewarded and error is punished. Given misleading signals by their financial authorities, Americans made a big error - they spent too much and saved too little. Now they are being punished for it, even while the feds tell them that they were doing the right thing all along…and that they're going to get more money and credit so they can continue doing it. But nature - whom capitalism allows to express herself - will have her way. Nature wants to correct the errors of the past five years, at least. Maybe she wants to correct the errors of the last 25 years…we don't know. But she's got a switch in her hand, and we're staying out of her way!"
Tiffany said Friday it expects 2008 earnings of $2.50-$2.55 a share.
Nucor to buy David J. Joseph Co. for about $1.44 billion.
Alliance Data Systems Corp. has withdrawn its lawsuit against affiliates of The Blackstone Group, saying the private equity firm appears to be working to complete its proposed acquisition of the company. "Blackstone has in its court filings, correspondence with federal regulators and public statements said that it is committed to working toward the closing of its acquisition of the company, including working with Alliance Data on proposals directed to resolving regulatory issues," Alliance said in a statement. The company said Friday it has now “identified various potential solutions” to the regulatory hurdles Blackstone had cited in backing away from the acquisition.
As I have said previously, I expect this deal to be completed, but at a lower price than the original $81.75. I believe a fair value in today's environment would be in the $73 range.
Gold for April delivery surged $12.30 at $922.30 an ounce on the New York Mercantile Exchange. Crude for March delivery rallied $3.66, or 4.2%, to close at $91.77 a barrel on the New York Mercantile Exchange.
A federal appeals court struck down a Bush Administration policy that would exempt power plants from certain environmental regulations, The Associated Press reported Friday.
The Dow Jones Industrial Average fell 64.9 points to 12,182.1, off 4.4% from a week ago. The S&P 500 fell 5.62 points to 1,331.29, down 4.6% on the week, while the Nasdaq Composite climbed 11.82 points to close at 2,304.85, a weekly drop of 4.5%.
Polaroid Corp. is shutting its remaining U.S. film plants in March and will get out of making film for its venerable instant-picture cameras by the end of the year.
A fall in US inventories of wheat to a 60-year low drove prices of the grain sharply higher on Friday to a fresh record, intensifying fears of rising global food price inflation.
US wheat futures – global benchmarks for the grain – have jumped by their daily trading limit each day this week. Prices for Minneapolis wheat, the US variety most suitable for making flour, rose 10.7 per cent on the week, extending its price surge since the beginning of the year to 50 per cent.
A fall in US inventories of wheat to a 60-year low drove prices of the grain sharply higher on Friday to a fresh record, intensifying fears of rising global food price inflation. US wheat futures – global benchmarks for the grain – have jumped by their daily trading limit each day this week. Prices for Minneapolis wheat, the US variety most suitable for making flour, rose 10.7 per cent on the week, extending its price surge since the beginning of the year to 50 per cent. As a result of the price pressure, the Minneapolis Grain Exchange will remove the daily price limit on the spot-month hard red spring wheat contract for trading on February 25, the first time it has done so.
Thursday, February 07, 2008
Extra Caution
2/8/08 Extra Caution
Warren Buffett: ``If something is unsustainable, it's going to have consequences; so far the consequences have been a general decline in the dollar against major currencies. If we continue the same policies, we're going to get the same results in the next five or 10 years.''...Problems in the U.S. financial sector are "poetic justice" for bankers who designed and sold complex investments that have since gone sour, the billionaire investor Warren Buffett said on Wednesday. "It's sort of a little poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end," he said.
Harry Truman: " Never kick a fresh turd on a hot day."
The Bank of England cut its key interest rate by a quarter percentage point to 5.25%, as expected while the ECB left its rate unchanged at 4%.
The next wave from the subprime mortgage crisis will flow past lenders and homebuilders and strike nonfinancial U.S. companies with forced write-downs, the chief executive of PricewaterhouseCoopers warned. Samuel DiPiazza, chief executive of the Big Four accounting firm, pointed out that many nonfinancial companies were exposed through securities in their own investment portfolios, according to a Reuters report.
According to the FT, the US Treasury inflation securities market is currently playing down concern about inflation and focusing on the gloomy growth prospects for the economy. The recent performance of the Treasury inflation protected security (Tips) market suggests that investors do not strongly believe that the Federal Reserve has damaged its inflation credibility with its aggressive cuts in interest rates.
For 2008, Bunge said it's looking to generate earnings of $6.01 to $6.30 a share, as opposed to the FactSet-derived mean of $6.50 a share.
Excluding restructuring charges and tax gains, PepsiCo's earnings rose to 80 cents from 74 cents. .
Costco Wholesale's January same-store sales rose 7%, with 5% growth in the U.S. and 19% growth overseas.
Wal-Mart Stores Inc reported a lower-than-expected 0.5 percent rise in its January sales at U.S. stores open at least a year, excluding fuels sales, citing unfavorable weather and gift card redemptions that were below expectations. "Comparable store sales in the United States for the February four-week period are estimated to be between flat and two percent," said Tom Schoewe, executive vice president and chief financial officer.
The company will open "The Clinic at Wal-Mart" as a joint venture with local hospital systems in Atlanta, Dallas and Little Rock, Ark., starting in April.
Target Corp.'s January same-store sales fell 1.1% from a year earlier, hurt in part by weaker lawn and garden and jewelry sales.
Seeking Alpha on Cisco: "The stock is trading with a 7% free cash flow yield (a level that typically attracts value buyers) and 14x PE new lowered forecasts. Reducing 6-month price target to $28 from $32."
Millennium Pharmaceuticals expects 2008 net income of $10 million to $25 million and non-GAAP earnings of $80 million to $95 million.
Gap Inc. said January same-store sales fell 2% from a year earlier, hurt in part by Gap North America and Old Navy North America sales.
For fiscal 2008, Ross Stores expects to earn $1.89 to $1.90 a share. For fiscal 2009 it's forecasting same-store sales gains of 1% to 2% and earnings per share in the range of $2.10 to $2.20.
Kohl's Corp. said January same-store sales fell by 8.3%.
Abercrombie & Fitch's January sales at stores open at least one year were flat compared with results from a year ago.
Initial U.S. jobless claims for the week ended Feb. 2 fell by 22,000 to 356,000, the lowest level in two weeks. Last week's claims, however, were revised upward, to 378,000 from 375,000. The four-week moving average of new claims rose by 8,500 to 335,000. Continuing jobless claims rose to their highest level since October 2005, by 75,000 to 2.78 million.
Bank of America says it's raising rates on some card accounts based on "periodic" reviews of consumers' risk. The change, it says, isn't directly linked to delinquencies on mortgages and other consumer loans. But as banks' losses mount, they're jacking up fees and rates and tightening rules on all sorts of consumer loans — from credit cards to auto loans — to cushion their losses, some analysts say. "Banks will want to make up that income somewhere," says William McCracken of Synergistics Research, a research firm. "They're going to be much more aggressive. Everyone is going to see some (price) increase unless they have perfect credit."
BJ's Wholesale's January same-store sales rose 7.8%.
Family Dollar Stores Inc.'s January same-store sales remained flat.
Ann Taylor's January same-store sales broke even in January.
Nordstrom Inc.'s January sales at stores open at least one year fell 6.6%.
Timberland's same-store sales, or sales at stores open at least a year, fell 9.3 percent at domestic locations and 5.5 percent worldwide.
Diamond Offshore Drilling Inc.will pay a special dividend of $1.25 a share on March 3 to shareholders of record on Feb. 18. The Houston firm also declared its regular cash dividend of 12.5 cents a share.
D.R. Horton posted a fiscal first-quarter loss of $128.8 million, or 41 cents a share, with revenue falling to $1.71 billion from $2.8 billion. The quarterly results included $245.5 million in pre-tax charges to cost of sales for inventory impairments and write-offs of deposits and pre-acquisition costs related to land option contracts that the company does not intend to pursue. It earned $109.7 million in the year-ago period. Its sales order backlog of homes under contract at Dec. 31, 2007 was 8,138 homes worth $2 billion, compared to 16,694 homes worth $4.7 billion at Dec. 31, 2006.
Denver builder M.D.C. Holdings said its fourth-quarter net loss widened to $281 million, or $6.14 a share, from a loss of $6.46 million, or 14 cents a share, in the year-ago period. Revenue dropped to $785 million from $1.34 billion, and the company took pre-tax charges of $175.2 million for asset impairments and $7.8 million for write-offs of deposits and pre-acquisition costs associated with land option contracts the company does not intend to pursue. It had orders, net of cancellations, for 748 homes with an estimated sales value of $187.0 million during the 2007 fourth quarter, compared with net orders for 1,571 homes with an estimated sales value of $515.0 million during the same period in 2006.
George Ure: "Expect Israel to lash out, perhaps in the next week, and attempt some serious butt-kicking in the Middle East, but perhaps doing so in a way which backfires and results in heaps of world public opinion/scorn being laid at Israel's feet."
Sam Zell bought $737 million in stock, becoming Starwood's second-largest holder.
Right now, Clinton leads in pledged delegates, 811 to 794, according to the Associated Press.
Oil Minister Gholam Hossein Nozari said Iran's oil output hit a record 4.184 mln barrels per day, the highest since the 1979 Islamic revolution, the official IRNA agency reported.
Rob Hanna: "Price is becoming stretched, but the price drop alone isn’t providing any huge edge. An example would be the current Nasdaq price action. The Nasdaq has dropped over 1.25% three days in a row. Looking back to 1985 this has happened 48 other times. Over the next 1-2 days the Nasdaq has rebounded about 2/3 of the time. Not a bad ratio, but the average losing trade dropped about 4%. That’s more downside risk than I’d like to take on."
Since announcing the $44.6 billion offer for Yahoo, Microsoft's share value has declined by over $30 billion.
The U.S. economy has slipped into a mild recession, said Nigel Gault, U.S. chief economist for Global Insight.
Sales contracts on previously owned U.S. homes fell 1.5% in December, a sign that home sales will continue to decline, the National Association of Realtors reported Thursday. The pending home sales index, based on contracts signed but not closed in December, was down 24.2% from the prior year's period.
Energy Information Administration reported on Thursday that U.S. natural gas inventories fell 200 billion cubic feet in the week ending Feb. 1, more than a drop of 170 billion cubic feet expected by analysts at Global Insight, a research firm.
Total seasonally adjusted consumer debt increased by $4.5 billion, or a 2.1% annual rate, in December to $2.55 trillion, the Fed reported. Consumer debt rose a revised $17.1 billion or 8.2% in November, up from the initial estimate of a $15.5 billion or 7.5% gain. Credit-card debt rose by $2.1 billion, or 2.7%, in December to $943.5 billion after a 13.7% gain in November. Non-revolving credit - such as auto loans, personal loans and student loans - increased by $2.4 billion, or 1.8%, to $1.56 trillion after a 4.9% rise in November. For the year, consumer credit grew 5.5%, compared with a 4.5% rise in 2006.
Lydia Maria Child: "Every human being has, like Socrates, an attendant spirit; and wise are they who obey its signals. If it does not always tell us what to do, it always cautions us what not to do."
Warren Buffett: ``If something is unsustainable, it's going to have consequences; so far the consequences have been a general decline in the dollar against major currencies. If we continue the same policies, we're going to get the same results in the next five or 10 years.''...Problems in the U.S. financial sector are "poetic justice" for bankers who designed and sold complex investments that have since gone sour, the billionaire investor Warren Buffett said on Wednesday. "It's sort of a little poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end," he said.
Harry Truman: " Never kick a fresh turd on a hot day."
The Bank of England cut its key interest rate by a quarter percentage point to 5.25%, as expected while the ECB left its rate unchanged at 4%.
The next wave from the subprime mortgage crisis will flow past lenders and homebuilders and strike nonfinancial U.S. companies with forced write-downs, the chief executive of PricewaterhouseCoopers warned. Samuel DiPiazza, chief executive of the Big Four accounting firm, pointed out that many nonfinancial companies were exposed through securities in their own investment portfolios, according to a Reuters report.
According to the FT, the US Treasury inflation securities market is currently playing down concern about inflation and focusing on the gloomy growth prospects for the economy. The recent performance of the Treasury inflation protected security (Tips) market suggests that investors do not strongly believe that the Federal Reserve has damaged its inflation credibility with its aggressive cuts in interest rates.
For 2008, Bunge said it's looking to generate earnings of $6.01 to $6.30 a share, as opposed to the FactSet-derived mean of $6.50 a share.
Excluding restructuring charges and tax gains, PepsiCo's earnings rose to 80 cents from 74 cents. .
Costco Wholesale's January same-store sales rose 7%, with 5% growth in the U.S. and 19% growth overseas.
Wal-Mart Stores Inc reported a lower-than-expected 0.5 percent rise in its January sales at U.S. stores open at least a year, excluding fuels sales, citing unfavorable weather and gift card redemptions that were below expectations. "Comparable store sales in the United States for the February four-week period are estimated to be between flat and two percent," said Tom Schoewe, executive vice president and chief financial officer.
The company will open "The Clinic at Wal-Mart" as a joint venture with local hospital systems in Atlanta, Dallas and Little Rock, Ark., starting in April.
Target Corp.'s January same-store sales fell 1.1% from a year earlier, hurt in part by weaker lawn and garden and jewelry sales.
Seeking Alpha on Cisco: "The stock is trading with a 7% free cash flow yield (a level that typically attracts value buyers) and 14x PE new lowered forecasts. Reducing 6-month price target to $28 from $32."
Millennium Pharmaceuticals expects 2008 net income of $10 million to $25 million and non-GAAP earnings of $80 million to $95 million.
Gap Inc. said January same-store sales fell 2% from a year earlier, hurt in part by Gap North America and Old Navy North America sales.
For fiscal 2008, Ross Stores expects to earn $1.89 to $1.90 a share. For fiscal 2009 it's forecasting same-store sales gains of 1% to 2% and earnings per share in the range of $2.10 to $2.20.
Kohl's Corp. said January same-store sales fell by 8.3%.
Abercrombie & Fitch's January sales at stores open at least one year were flat compared with results from a year ago.
Initial U.S. jobless claims for the week ended Feb. 2 fell by 22,000 to 356,000, the lowest level in two weeks. Last week's claims, however, were revised upward, to 378,000 from 375,000. The four-week moving average of new claims rose by 8,500 to 335,000. Continuing jobless claims rose to their highest level since October 2005, by 75,000 to 2.78 million.
Bank of America says it's raising rates on some card accounts based on "periodic" reviews of consumers' risk. The change, it says, isn't directly linked to delinquencies on mortgages and other consumer loans. But as banks' losses mount, they're jacking up fees and rates and tightening rules on all sorts of consumer loans — from credit cards to auto loans — to cushion their losses, some analysts say. "Banks will want to make up that income somewhere," says William McCracken of Synergistics Research, a research firm. "They're going to be much more aggressive. Everyone is going to see some (price) increase unless they have perfect credit."
BJ's Wholesale's January same-store sales rose 7.8%.
Family Dollar Stores Inc.'s January same-store sales remained flat.
Ann Taylor's January same-store sales broke even in January.
Nordstrom Inc.'s January sales at stores open at least one year fell 6.6%.
Timberland's same-store sales, or sales at stores open at least a year, fell 9.3 percent at domestic locations and 5.5 percent worldwide.
Diamond Offshore Drilling Inc.will pay a special dividend of $1.25 a share on March 3 to shareholders of record on Feb. 18. The Houston firm also declared its regular cash dividend of 12.5 cents a share.
D.R. Horton posted a fiscal first-quarter loss of $128.8 million, or 41 cents a share, with revenue falling to $1.71 billion from $2.8 billion. The quarterly results included $245.5 million in pre-tax charges to cost of sales for inventory impairments and write-offs of deposits and pre-acquisition costs related to land option contracts that the company does not intend to pursue. It earned $109.7 million in the year-ago period. Its sales order backlog of homes under contract at Dec. 31, 2007 was 8,138 homes worth $2 billion, compared to 16,694 homes worth $4.7 billion at Dec. 31, 2006.
Denver builder M.D.C. Holdings said its fourth-quarter net loss widened to $281 million, or $6.14 a share, from a loss of $6.46 million, or 14 cents a share, in the year-ago period. Revenue dropped to $785 million from $1.34 billion, and the company took pre-tax charges of $175.2 million for asset impairments and $7.8 million for write-offs of deposits and pre-acquisition costs associated with land option contracts the company does not intend to pursue. It had orders, net of cancellations, for 748 homes with an estimated sales value of $187.0 million during the 2007 fourth quarter, compared with net orders for 1,571 homes with an estimated sales value of $515.0 million during the same period in 2006.
George Ure: "Expect Israel to lash out, perhaps in the next week, and attempt some serious butt-kicking in the Middle East, but perhaps doing so in a way which backfires and results in heaps of world public opinion/scorn being laid at Israel's feet."
Sam Zell bought $737 million in stock, becoming Starwood's second-largest holder.
Right now, Clinton leads in pledged delegates, 811 to 794, according to the Associated Press.
Oil Minister Gholam Hossein Nozari said Iran's oil output hit a record 4.184 mln barrels per day, the highest since the 1979 Islamic revolution, the official IRNA agency reported.
Rob Hanna: "Price is becoming stretched, but the price drop alone isn’t providing any huge edge. An example would be the current Nasdaq price action. The Nasdaq has dropped over 1.25% three days in a row. Looking back to 1985 this has happened 48 other times. Over the next 1-2 days the Nasdaq has rebounded about 2/3 of the time. Not a bad ratio, but the average losing trade dropped about 4%. That’s more downside risk than I’d like to take on."
Since announcing the $44.6 billion offer for Yahoo, Microsoft's share value has declined by over $30 billion.
The U.S. economy has slipped into a mild recession, said Nigel Gault, U.S. chief economist for Global Insight.
Sales contracts on previously owned U.S. homes fell 1.5% in December, a sign that home sales will continue to decline, the National Association of Realtors reported Thursday. The pending home sales index, based on contracts signed but not closed in December, was down 24.2% from the prior year's period.
Energy Information Administration reported on Thursday that U.S. natural gas inventories fell 200 billion cubic feet in the week ending Feb. 1, more than a drop of 170 billion cubic feet expected by analysts at Global Insight, a research firm.
Total seasonally adjusted consumer debt increased by $4.5 billion, or a 2.1% annual rate, in December to $2.55 trillion, the Fed reported. Consumer debt rose a revised $17.1 billion or 8.2% in November, up from the initial estimate of a $15.5 billion or 7.5% gain. Credit-card debt rose by $2.1 billion, or 2.7%, in December to $943.5 billion after a 13.7% gain in November. Non-revolving credit - such as auto loans, personal loans and student loans - increased by $2.4 billion, or 1.8%, to $1.56 trillion after a 4.9% rise in November. For the year, consumer credit grew 5.5%, compared with a 4.5% rise in 2006.
Lydia Maria Child: "Every human being has, like Socrates, an attendant spirit; and wise are they who obey its signals. If it does not always tell us what to do, it always cautions us what not to do."
Wednesday, February 06, 2008
Caution
2/7/08 Caution
Toll Bros.said Wednesday that the firm doesn't see any end in sight to housing market woes, and said its first quarter home building revenues fell 22% compared to year-ago levels. ""The housing market remains very weak in most areas. Based on current traffic and deposits, we are not yet seeing much light at the end of the tunnel," said Robert Toll, the firm's chairman and CEO. Toll, the firm, said its backlog fell to $2.40 billion, down 42% from the fiscal first quarter of 2007. It said the number of signed contracts on homes fell 46% from last year. It said the average price of a house it sold fell, while the average price of the cancelled houses rose. Joel Rassman, Toll's chief financial officer, said in a press release, "with conditions still weak in most markets, we expect to continue to face challenging times ahead. We are still in the midst of finalizing our first-quarter impairment analysis; however, we currently estimate that pre-tax write-downs in FY 2008's first quarter will be between $150 million and $300 million." Toll said it will report full fiscal 2008 first quarter results on February 27.
Analysts at Keefe Bruyette & Woods, a firm specializing in the financial sector, cautioned Wednesday that large cap banking stocks may have moved to far, too fast, and it believes the sector is likely to fall in 2008. They said investors have reacted positively to a series of deep Fed interest rate cuts and have bought shares, afraid they might miss a sharp move higher, without paying enough attention to underlying issues. "Investors appear to have looked past weak fundamentals," the analysts cautioned.
Japan's index of leading economic indicators rose in December, but remained below the key 50-level threshold, suggesting the economy may slow or contract. The Cabinet office said Wednesday the index stood at 40.0 in December, up from 18.2 in November.
Japanese stocks ended sharply lower Wednesday, as investors dumped shares amid concerns over the health of the global economy and accelerated economic weakening in the United States. The benchmark Nikkei 225 Average shed 4.7%, or 646.26 points to close at 13,099.24. The broader tracking Topix index was down 4.2% to 1298.41. Elsewhere in the region, Hong Kong's Hang Seng Index ended 5.4% lower at 23,469.46 in shortened half-day trading ahead of the Lunar New Year holidays.
GMAC, the financial services group owned by Cerberus Capital Management and General Motors, is considering the sale of at least part of Residential Capital, its troubled mortgage lender, ResCapafter a hefty fourth-quarter loss.
Time Warner Inc. today said it expected profit growth this year to be in the range of 7% to 9%, down from 17% in 2007 but in line with Wall Street's expectations.
According to the NY Times, the chief executive of Amgen said Monday that the company's decision to sell Japanese distribution rights to many of the drugs in its pipeline was not solely a response to financial pressures caused by the decline in sales of Amgen's flagship anemia drugs. Kevin Sharer, the chief executive, said the deal, which was announced early Monday and could bring the company as much as $1.2 billion, was forged because Amgen had too many experimental compounds to develop on its own. "We just can't, either operationally or financially, develop all these molecules in the three principal geographies," he said, referring to the United States, Europe and Japan. He said financial pressures contributed to the timing of the deal. But "this was an inevitable development" because of the high costs of research and development, he said.
Nouriel Roubini: Tthere is now a rising probability of a “catastrophic” financial and economic outcome, i.e. a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe. The Fed is seriously worried about this vicious circle and about the risks of a systemic financial meltdown. That is the reason the Fed had thrown all caution to the wind – after a year in which it was behind the curve and underplaying the economic and financial risks – and has taken a very aggressive approach to risk management; this is a much more aggressive approach than the Greenspan one in spite of the initial views that the Bernanke Fed would be more cautious than Greenspan in reacting to economic and financial vulnerabilities...now that home prices are falling and a severe credit crunch is emerging the retrenchment of private consumption will be serious and protracted. So let us suppose that the recession of 2008 will last at least four quarters and, possibly, up to six quarters."
For the full-year, Devon Energy posted profit of $3.6 billion, or $8 per share, compared with $2.84 billion, or $6.34 per share, in 2006. Revenue rose 16 percent to $11.36 billion. The Wall Street consensus predicted profit of $6.39 per share and revenue of $11.16 billion.
Rob Hanna: "The recent bottom is now looking very much in question. The positive feelings the bounce brought about were nearly all washed away yesterday and today. As I’ve been pointing out, the action immediately after a Follow Through Day is normally telling. So far it doesn’t look good."
Robert McHugh: "Very bad day on Wall Street. You think the crash from October 2007 has been bad? Think again. It may be about to get a lot worse. The S&P 500 had its single worst day in a year Tuesday. The S&P 500's two day drop this week is the worst in five years. If this is the start of Micro degree wave 3 down, as we suspect it is, we are about to enter into the sweet spot of a multi-month Bear market, with potential for a severe stock market crash. Consider this: We have not seen an index's price fail to retrace to the midpoint of its weekly Bollinger Bands after falling below the bottom band, any time over the past 8 years, which includes the last Bear Market, from 2000 to 2002. If this is wave 3 down, it has arrived early, which means this time is different. Not good. Countertrend rallies in Bear Markets almost always reach at least the 20 week moving average in the weekly Bollinger Band analysis, the dotted line shown on page 9, that minimum target suggesting the Industrials should have headed for 13,000, possibly slightly above. Countertrend rallies in Bear Markets almost always reach at least the level where the Fast line for the Full Stochastics analysis reaches at least the 50 level, and more probably reaches the 80 measure. The top for the move would then be confirmed when the Fast crossed decisively below the Slow after reaching one of those target levels. This suggests a minimum upside target for the Industrials of 13,000 +/-. Not looking like it is going to happen."
In California, Clinton won support from seven in 10 Hispanics and three-quarters of Asian voters. I was surprised by the extent of the Latino support.
Productivity of the U.S. non-farm business sector slowed to a 1.8% annual rate in the fourth quarter, the Labor Department estimated Wednesday. Unit labor costs - a key inflationary signal - rose at an annual rate of 2.1% in the fourth quarter. Real hourly compensation fell 0.3%. For all of 2007, productivity rose 1.6%, up from a 1.0% gain in 2006. Unit labor costs rose 3.1%, the most since 2000.
Global steel output increased by 7.5% in 2007, according to the International Iron and Steel Institute. Brazil's output grew by 9.3%. U.S. steel production fell 1.4% in 2007, due in part to cheaper imports.
In early Wednesday trading, Yahoo shares were selling above those of Microsoft.
I guess investors are expecting a small kiss from Microsoft.
Diebold will reduce it global work force by about 800 full-time positions, primarily in North America, Brazil and Western Europe, as part of its $100 million cost-reduction plan. The company said it is evaluating further global manufacturing realignment in the Americas, and additional supply chain rationalization.
George Ure: "We see that the Federal Reserve's H.3 Reserves of Depository Institutions shows that for the last week of January, both on a seasonally adjusted and not seasonally adjusted basis, all the financial reserves (required reserves to support the fractional banking system) were negative. In other words, the fraction in fractional reserve has disappeared. We're now in an 'all borrowed' banking system."
Brent crude oil rose in London after Total SA shut its Elgin-Franklin fields, reducing oil production in the U.K. North Sea. A Total SA spokeswoman was unable to say when production from the fields would resume. Elgin-Franklin produces 175,000 barrels of day of condensate that feeds into the benchmark Forties blend of North Sea oil. Some Forties shipments will be delayed this month because of the halt, traders said. ``If there are disruptions to North Sea shipments then that can definitely raise supply concerns,'' said Stanislav Nazarati, a trader at Letofin AS in Estonia.
U.S. crude inventories rose by 7 million barrels to 300 million barrels in the week ending Feb. 1, U.S. Energy Information Administration reported on Wednesday. After the data, crude-oil futures for March delivery fell $1.03, or 1.2%, to $87.38 a barrel on the New York Mercantile Exchange. Gasoline supplies rose by 3.6 million barrels in the latest week, while distillate stocks grew by 100,000 barrels, EIA reported.
McClatchy, the third-largest U.S. newspaper publisher by circulation, said it now expects first-quarter advertising to decline in the low double-digit percentage. range.
Finance Committee Chairman Max Baucus (D-Mont.) and three of the committee’s other Democrats held a press conference Tuesday with the chief executive officers of three of the country’s top homebuilders. The lawmakers and industry leaders hailed a $14.4 billion tax break in the Finance package that would help homebuilders. The provision would loosen manufacturers’ tax liability by allowing them to use their 2007 and 2008 losses to claim a refund on any taxes paid over the past five years.
"BHP Billiton's offers, while improved, still fail to recognise the underlying value of Rio Tinto's quality assets and prospects," said Rio Tinto Chairman Paul Skinner in a statement. "Our plans are unchanged, and will remain so unless a proposal is made that fully reflects the value of Rio Tinto."
U.S. credit markets are trading as if the economy is in a recession because investors' ``fear has overwhelmed greed,'' Goldman Sachs Group Inc. Chief Financial Officer David Viniar said today.
Macy's reported a January same-store sales drop of 7.1%, well below what the company had forecast for the period. The company said it sees earnings for the full year of $1.85 to $2.15 a share, excluding one-time items and will layoff 2,550 employees.
An overly aggressive Federal Reserve easing campaign would only fuel higher inflation down the road, said Philadelphia Fed president Charles Plosser on Wednesday. "There are those who have expressed the view that in times of economic weakness, the Fed must not worry about inflation and should focus its entire effort on restoring economic growth by dramatically driving interest rates down as far and as rapidly as possible," Plosser said, calling this a "damn the torpedoes, full speed ahead" approach to policy. Ignoring inflation during times of economic weakness "risks undermining our ability to achieve economic growth over the long run," Plosser said. Speaking to a business group in his hometown of Birmingham, Alabama, Plosser said he doesn't agree with conventional wisdom that slower growth will automatically lead to lower inflation.
In after hours shares of Cisco dropped from $23+ to $21+. Why was that? CEO John Chambers said the company expects revenue for the April quarter to grow 10% from the previous year. That equates to revenue of about $9.8 billion, lower than the $10.19 billion expected by analysts for the period, according to Thomson Financial. Chambers said order-growth rates in the month of January were below expectations, leading the company to be cautious about the outlook for the next few months. In the meantime, earnings for the second fiscal quarter grew 10.5%, in line with Wall Street's estimates. On a non-GAAP basis, Cisco said it would have earned $2.4 billion, or 38 cents per share, for the recent quarter. Revenue grew nearly 17% to $9.8 billion. Analysts were expecting earnings of 38 cents a share on revenue of $9.79 billion, according to consensus forecasts from Thomson Financial. In sum, Chambers is saying third quarter revenue will be the same as this second quarter's. For that the shares were punished for $12 billion or 40 times the $300 million revenue shortfall for the third quarter? That's utterly ridiculous. I'll be buying Thursday morning. Chambers said "As we enter the second half of the fiscal year, our innovation pipeline is in excellent shape, our balanced product momentum across core and advanced technologies continues to be solid, and execution against our long-term strategy remains unwavering. This constant evolution of moving into new markets and product adjacencies, alongside our core operational and financial strength, is the hallmark of Cisco’s ability to act upon key market transitions."
For 2007 the most profitable day of the week for equities was Wednesday. Early in the trading day the Dow rallied to plus 95 points. By the end of the day, the Dow ended 65 points in the red.
It seems Billery ran out of money after Super Tuesday. I guess she thought she'd have the nomination sewed up because the coffers ran dry and she needed to loan her campaign $5 million. Obama has plenty of money left. Maybe he's a fiscal conservative.
Gold for April delivery surged $14.70, or 1.6%, to end at $905 an ounce on the New York Mercantile Exchange.
Toll Bros.said Wednesday that the firm doesn't see any end in sight to housing market woes, and said its first quarter home building revenues fell 22% compared to year-ago levels. ""The housing market remains very weak in most areas. Based on current traffic and deposits, we are not yet seeing much light at the end of the tunnel," said Robert Toll, the firm's chairman and CEO. Toll, the firm, said its backlog fell to $2.40 billion, down 42% from the fiscal first quarter of 2007. It said the number of signed contracts on homes fell 46% from last year. It said the average price of a house it sold fell, while the average price of the cancelled houses rose. Joel Rassman, Toll's chief financial officer, said in a press release, "with conditions still weak in most markets, we expect to continue to face challenging times ahead. We are still in the midst of finalizing our first-quarter impairment analysis; however, we currently estimate that pre-tax write-downs in FY 2008's first quarter will be between $150 million and $300 million." Toll said it will report full fiscal 2008 first quarter results on February 27.
Analysts at Keefe Bruyette & Woods, a firm specializing in the financial sector, cautioned Wednesday that large cap banking stocks may have moved to far, too fast, and it believes the sector is likely to fall in 2008. They said investors have reacted positively to a series of deep Fed interest rate cuts and have bought shares, afraid they might miss a sharp move higher, without paying enough attention to underlying issues. "Investors appear to have looked past weak fundamentals," the analysts cautioned.
Japan's index of leading economic indicators rose in December, but remained below the key 50-level threshold, suggesting the economy may slow or contract. The Cabinet office said Wednesday the index stood at 40.0 in December, up from 18.2 in November.
Japanese stocks ended sharply lower Wednesday, as investors dumped shares amid concerns over the health of the global economy and accelerated economic weakening in the United States. The benchmark Nikkei 225 Average shed 4.7%, or 646.26 points to close at 13,099.24. The broader tracking Topix index was down 4.2% to 1298.41. Elsewhere in the region, Hong Kong's Hang Seng Index ended 5.4% lower at 23,469.46 in shortened half-day trading ahead of the Lunar New Year holidays.
GMAC, the financial services group owned by Cerberus Capital Management and General Motors, is considering the sale of at least part of Residential Capital, its troubled mortgage lender, ResCapafter a hefty fourth-quarter loss.
Time Warner Inc. today said it expected profit growth this year to be in the range of 7% to 9%, down from 17% in 2007 but in line with Wall Street's expectations.
According to the NY Times, the chief executive of Amgen said Monday that the company's decision to sell Japanese distribution rights to many of the drugs in its pipeline was not solely a response to financial pressures caused by the decline in sales of Amgen's flagship anemia drugs. Kevin Sharer, the chief executive, said the deal, which was announced early Monday and could bring the company as much as $1.2 billion, was forged because Amgen had too many experimental compounds to develop on its own. "We just can't, either operationally or financially, develop all these molecules in the three principal geographies," he said, referring to the United States, Europe and Japan. He said financial pressures contributed to the timing of the deal. But "this was an inevitable development" because of the high costs of research and development, he said.
Nouriel Roubini: Tthere is now a rising probability of a “catastrophic” financial and economic outcome, i.e. a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe. The Fed is seriously worried about this vicious circle and about the risks of a systemic financial meltdown. That is the reason the Fed had thrown all caution to the wind – after a year in which it was behind the curve and underplaying the economic and financial risks – and has taken a very aggressive approach to risk management; this is a much more aggressive approach than the Greenspan one in spite of the initial views that the Bernanke Fed would be more cautious than Greenspan in reacting to economic and financial vulnerabilities...now that home prices are falling and a severe credit crunch is emerging the retrenchment of private consumption will be serious and protracted. So let us suppose that the recession of 2008 will last at least four quarters and, possibly, up to six quarters."
For the full-year, Devon Energy posted profit of $3.6 billion, or $8 per share, compared with $2.84 billion, or $6.34 per share, in 2006. Revenue rose 16 percent to $11.36 billion. The Wall Street consensus predicted profit of $6.39 per share and revenue of $11.16 billion.
Rob Hanna: "The recent bottom is now looking very much in question. The positive feelings the bounce brought about were nearly all washed away yesterday and today. As I’ve been pointing out, the action immediately after a Follow Through Day is normally telling. So far it doesn’t look good."
Robert McHugh: "Very bad day on Wall Street. You think the crash from October 2007 has been bad? Think again. It may be about to get a lot worse. The S&P 500 had its single worst day in a year Tuesday. The S&P 500's two day drop this week is the worst in five years. If this is the start of Micro degree wave 3 down, as we suspect it is, we are about to enter into the sweet spot of a multi-month Bear market, with potential for a severe stock market crash. Consider this: We have not seen an index's price fail to retrace to the midpoint of its weekly Bollinger Bands after falling below the bottom band, any time over the past 8 years, which includes the last Bear Market, from 2000 to 2002. If this is wave 3 down, it has arrived early, which means this time is different. Not good. Countertrend rallies in Bear Markets almost always reach at least the 20 week moving average in the weekly Bollinger Band analysis, the dotted line shown on page 9, that minimum target suggesting the Industrials should have headed for 13,000, possibly slightly above. Countertrend rallies in Bear Markets almost always reach at least the level where the Fast line for the Full Stochastics analysis reaches at least the 50 level, and more probably reaches the 80 measure. The top for the move would then be confirmed when the Fast crossed decisively below the Slow after reaching one of those target levels. This suggests a minimum upside target for the Industrials of 13,000 +/-. Not looking like it is going to happen."
In California, Clinton won support from seven in 10 Hispanics and three-quarters of Asian voters. I was surprised by the extent of the Latino support.
Productivity of the U.S. non-farm business sector slowed to a 1.8% annual rate in the fourth quarter, the Labor Department estimated Wednesday. Unit labor costs - a key inflationary signal - rose at an annual rate of 2.1% in the fourth quarter. Real hourly compensation fell 0.3%. For all of 2007, productivity rose 1.6%, up from a 1.0% gain in 2006. Unit labor costs rose 3.1%, the most since 2000.
Global steel output increased by 7.5% in 2007, according to the International Iron and Steel Institute. Brazil's output grew by 9.3%. U.S. steel production fell 1.4% in 2007, due in part to cheaper imports.
In early Wednesday trading, Yahoo shares were selling above those of Microsoft.
I guess investors are expecting a small kiss from Microsoft.
Diebold will reduce it global work force by about 800 full-time positions, primarily in North America, Brazil and Western Europe, as part of its $100 million cost-reduction plan. The company said it is evaluating further global manufacturing realignment in the Americas, and additional supply chain rationalization.
George Ure: "We see that the Federal Reserve's H.3 Reserves of Depository Institutions shows that for the last week of January, both on a seasonally adjusted and not seasonally adjusted basis, all the financial reserves (required reserves to support the fractional banking system) were negative. In other words, the fraction in fractional reserve has disappeared. We're now in an 'all borrowed' banking system."
Brent crude oil rose in London after Total SA shut its Elgin-Franklin fields, reducing oil production in the U.K. North Sea. A Total SA spokeswoman was unable to say when production from the fields would resume. Elgin-Franklin produces 175,000 barrels of day of condensate that feeds into the benchmark Forties blend of North Sea oil. Some Forties shipments will be delayed this month because of the halt, traders said. ``If there are disruptions to North Sea shipments then that can definitely raise supply concerns,'' said Stanislav Nazarati, a trader at Letofin AS in Estonia.
U.S. crude inventories rose by 7 million barrels to 300 million barrels in the week ending Feb. 1, U.S. Energy Information Administration reported on Wednesday. After the data, crude-oil futures for March delivery fell $1.03, or 1.2%, to $87.38 a barrel on the New York Mercantile Exchange. Gasoline supplies rose by 3.6 million barrels in the latest week, while distillate stocks grew by 100,000 barrels, EIA reported.
McClatchy, the third-largest U.S. newspaper publisher by circulation, said it now expects first-quarter advertising to decline in the low double-digit percentage. range.
Finance Committee Chairman Max Baucus (D-Mont.) and three of the committee’s other Democrats held a press conference Tuesday with the chief executive officers of three of the country’s top homebuilders. The lawmakers and industry leaders hailed a $14.4 billion tax break in the Finance package that would help homebuilders. The provision would loosen manufacturers’ tax liability by allowing them to use their 2007 and 2008 losses to claim a refund on any taxes paid over the past five years.
"BHP Billiton's offers, while improved, still fail to recognise the underlying value of Rio Tinto's quality assets and prospects," said Rio Tinto Chairman Paul Skinner in a statement. "Our plans are unchanged, and will remain so unless a proposal is made that fully reflects the value of Rio Tinto."
U.S. credit markets are trading as if the economy is in a recession because investors' ``fear has overwhelmed greed,'' Goldman Sachs Group Inc. Chief Financial Officer David Viniar said today.
Macy's reported a January same-store sales drop of 7.1%, well below what the company had forecast for the period. The company said it sees earnings for the full year of $1.85 to $2.15 a share, excluding one-time items and will layoff 2,550 employees.
An overly aggressive Federal Reserve easing campaign would only fuel higher inflation down the road, said Philadelphia Fed president Charles Plosser on Wednesday. "There are those who have expressed the view that in times of economic weakness, the Fed must not worry about inflation and should focus its entire effort on restoring economic growth by dramatically driving interest rates down as far and as rapidly as possible," Plosser said, calling this a "damn the torpedoes, full speed ahead" approach to policy. Ignoring inflation during times of economic weakness "risks undermining our ability to achieve economic growth over the long run," Plosser said. Speaking to a business group in his hometown of Birmingham, Alabama, Plosser said he doesn't agree with conventional wisdom that slower growth will automatically lead to lower inflation.
In after hours shares of Cisco dropped from $23+ to $21+. Why was that? CEO John Chambers said the company expects revenue for the April quarter to grow 10% from the previous year. That equates to revenue of about $9.8 billion, lower than the $10.19 billion expected by analysts for the period, according to Thomson Financial. Chambers said order-growth rates in the month of January were below expectations, leading the company to be cautious about the outlook for the next few months. In the meantime, earnings for the second fiscal quarter grew 10.5%, in line with Wall Street's estimates. On a non-GAAP basis, Cisco said it would have earned $2.4 billion, or 38 cents per share, for the recent quarter. Revenue grew nearly 17% to $9.8 billion. Analysts were expecting earnings of 38 cents a share on revenue of $9.79 billion, according to consensus forecasts from Thomson Financial. In sum, Chambers is saying third quarter revenue will be the same as this second quarter's. For that the shares were punished for $12 billion or 40 times the $300 million revenue shortfall for the third quarter? That's utterly ridiculous. I'll be buying Thursday morning. Chambers said "As we enter the second half of the fiscal year, our innovation pipeline is in excellent shape, our balanced product momentum across core and advanced technologies continues to be solid, and execution against our long-term strategy remains unwavering. This constant evolution of moving into new markets and product adjacencies, alongside our core operational and financial strength, is the hallmark of Cisco’s ability to act upon key market transitions."
For 2007 the most profitable day of the week for equities was Wednesday. Early in the trading day the Dow rallied to plus 95 points. By the end of the day, the Dow ended 65 points in the red.
It seems Billery ran out of money after Super Tuesday. I guess she thought she'd have the nomination sewed up because the coffers ran dry and she needed to loan her campaign $5 million. Obama has plenty of money left. Maybe he's a fiscal conservative.
Gold for April delivery surged $14.70, or 1.6%, to end at $905 an ounce on the New York Mercantile Exchange.
Tuesday, February 05, 2008
Weakening Economic News
2/6/08 Weakening Economic News
The ISM non-manufacturing index fell to 41.9% in January from 54.4% in December. The reading was well below the 53.0% expected by economists. Readings below 50% indicate most firms are contracting. A separate report today by Royal Bank of Scotland Group Plc showed Europe's service industries grew in January at the slowest pace since 2003. In early trading, crude oil futures fell $1.57 to $88.45 on continued woes tied to the slowing economy.
Richmond Fed President Jeffrey Lacker became the first Fed official to say publicly that the economy faces the risk of a recession. While the most-likely path for the economy is a period of sluggish growth followed by a pickup, Lacker added: "I can also see the possibility of a mild recession, similar to the last two we have experienced."
Banks are tightening lending standards for businesses and consumers -- even beyond real-estate loans -- and companies' demand for credit has weakened, a new Federal Reserve survey of senior bank-loan officers shows.
Banc of America Securities downgraded Yahoo to neutral from buy, although it increased its price target to $31 from $26. "Even if Yahoo shareholders approve a deal with Microsoft, we believe the acquisition could face significant regulatory hurdles in the U.S. and particularly in the E.U., which could delay the acquisition from closing for quite some time," the broker said.
According to the WSJ, Billiton is offering 3.4 shares of its stock for each share of Rio Tinto.
A weekly survey of consumer attitudes about the economy fell to its lowest level since late 1993, ABC News and the Washington Post reported Tuesday. The ABC/Post consumer comfort index fell six points last week to negative 33. The index has fallen 13 points in the past month, "an unsettling sign," ABC News said, noting a 13-point drop before the 1990 recession and a 14-point drop before the 2001 recession. Just 22% of the consumers polled view the economy as good or fair, a 5-point drop from a week earlier. Attitudes about the buying climate and personal finances also fell.
For the fiscal year, Emerson said it expects earnings of $2.95 to $3.05 a share.
In 2008, Whirlpool expects earnings per share from continuing operations in a range of $8.50 to $9.00.
Tyco in January lifted its 2008 adjusted earnings per share view to a range of $2.60 to $2.70 a share.
For 2008, earnings per share for Corn Products, including a five-cent benefit from CME Group shares, are seen between $2.65 and $2.85 after $2.59 in 2007.
Hedge funds withdrew about 900 billion yen ($8.44 billion) in equities and other investments from Japan last year, according to a published report Tuesday. At the close of 2007, hedge funds had about $24.3 billion in Japanese assets, down 31% from a year earlier, the Nikkei reported, citing data from Eurekahedge Pte. Ltd.
Citigroup doubled its 2008 price forecast for thermal and coking coal to $100 per ton and $200 per ton respectively, citing factors ranging from supply disruptions in Australia and South Africa, cost increases in producing countries, rising currencies in commodity-producing nations and generally tight supplies. Citigroup's previous 2008 price targets were $55 per ton for thermal coal and $95 for coking coal.
Yum Brands raised its 2008 profit target from $1.82 to $1.85 per share, excluding one-time gains.
Arizona expects a billion-dollar shortfall in its $11 billion budget. Forecasters expect a region that grew 7 percent in 2006 to contract this year. Retail sales, which rose 16 percent in 2006, are dropping. Dennis Hoffman, an economics professor at Arizona State University, said he had never seen such a sharp turnabout in 25 years studying the local economy.
Less than a year after Apollo Management LP paid $6.6 billion for real estate broker Realogy Corp., bond prices show the deal may be worthless. Debt used to finance the April purchase trades at 61 cents on the dollar, and derivatives tied to the securities indicate an 80 percent chance that Parsippany, New Jersey-based Realogy will default. Apollo, the private-equity firm run by Leon Black, put up about $2 billion of cash to buy the owner of Coldwell Banker and Century 21, borrowing the rest.
Wickes Furniture Co., hit by the downturn that has hit furniture retailers in the wake of the housing industry's big slump, filed Sunday for Chapter 11 bankruptcy protection. Wickes, based in Wheeling, Illinois is owned by Sun Capital Partners Inc., a Boca Raton investment firm that specializes in leveraged buyouts and other transactions. In its filing with the federal bankruptcy court in Wilmington, Del., Wickes declared that it has assets of between $10 million and $50 million, and estimated its liabilities at between $50 million and $100 million.
Australia's central bank blamed significant inflationary pressures for its decision on Tuesday to raise interest rates to their highest level in close to 12 years.
The 25 basis point rise in the benchmark cash rate to 7 per cent is the third increase in six months and comes despite aggressive cuts in US interest rates in recent weeks. The Reserve Bank of Australia said underlying annualized inflation was around 3.5 per cent, above the upper end of its 2 to 3 per cent target, and higher than it expected a few months ago.
Toyota's profit for the October-December quarter rose 7.5 percent from the previous year as booming sales in China, Africa and South America offset declining U.S. sales and a stronger yen.
BHP Billiton must decide by Wednesday whether it will proceed with a bid for a rival, the Rio Tinto Group, after China intervened with a strategic investment that could sharply increase the price of what would be one of the biggest mergers in corporate history.
According to FT, BP will cut 5,000 jobs.
Up to 5.8 million additional workers in the United States could join the ranks of the unemployed by 2011 if the economy were to fall into a severe recession, according to a report from the Center for Economic and Policy Research.
Martin Marietta sees 2008 EPS at $6.25-$7.00.
GMAC Financial Services said Tuesday it swung to a loss during the fourth quarter due to continued weakness in its residential lending division, Residential Capital LLC. GMAC Financial Services lost $724 million in the fourth quarter, compared with earnings of $1 billion in the prior year period.Residential Capital lost $921 million during the quarter because of continued deterioration in the housing market.
The Chapter 11 filing by supplier Plastech Engineered Products Inc. threatens to halt Chrysler LLC's production at its 14 assembly plants, the automaker says in court papers filed. Citing a parts shortage, Chrysler today said it temporarily closed four assembly plants and canceled a shift at a fifth plant after Plastech filed for Chapter 11 protection.
The Coca-Cola Company has completed an agreement for the purchase of a 40% interest in organic beverage maker Honest Tea.
The China Meteorological Administration said the weather was the coldest in 100 years in central Hubei and Hunan provinces, going by the total number of consecutive days of average temperature less than 1 degree Celsius (33.8 degrees Fahrenheit).
“The long collapse in the United States savings rate is over,” said Ethan S. Harris, chief United States economist for Lehman Brothers. “People are going to start saving the old-fashioned way, rather than letting the stock market and rising home values do it for them.”
To increase its talent pool in India, IT networking major Cisco System India Pvt Ltd has decided to increase its headcount six fold to nearly 360,000 in the next five years.
Gaining a bigger share of mobile advertising is a big reason Microsoft Corp. is bidding $44.6 billion for Yahoo Inc., according to industry observers. Mobile advertising is "part of what Microsoft wants to get into, no doubt," said Phillip Redman, an analyst at Gartner Inc. "Leadership in mobile advertising is still unclaimed, while Google is threatening to do there what it did on the Internet, so Microsoft is being preemptive." "Yahoo touches so many customers and there's so much advertising potential in this deal," said Jeffrey Kagan, an independent analyst in Atlanta. "It's huge."
In addition, it should be noted Yahoo's new Zimbra Collaboration Suite (ZCS) 5.0 allows users to read Microsoft Outlook e-mail alongside Yahoo Mail or Google's Gmail or Zimbra's own branded e-mail. In effect, Zimbra's upgrade lets users read work and personal e-mail side by side. "We really think this is the next generation of Outlook that we are announcing," said Satish Dharmaraj, co-founder and chief executive of Zimbra. Yahoo paid $350 million in September to buy Zimbra, a provider of e-mail, calendar and contacts software that competes with Microsoft and Google.
In my view, the Street does not truly appreciate the benefits of putting Yahoo and Microsoft together. I believe that a year from now Microsoft will be selling closer to $40 than $30. I believe it has excellent risk/reward potential.
Nabors Industries Ltd. reported late Tuesday fourth-quarter net income fell to $222.2 million, or 78 cents a share, from $237.8 million, or 84 cents a share, a year ago. Revenue for the quarter ended Dec. 31 rose slightly to $1.31 billion from $1.3 billion.
Excluding the gains and ABC Radio income, Disney would have earned 49 cents a share in the fiscal first quarter of 2007. Revenue rose 9% to $10.45 billion on improved results at Disney's television networks, theme parks and consumer products division. Disney was expected to earn 52 cents a share on $10 billion in revenue, according to a survey of analysts by Thomson Financial.
United Technologies Corp.has begun talks with Boeing Co. to sort out costs stemming from delays in the rollout of Boeing's 787 Dreamliner, Gregory Hayes, vice president of accounting and finance, told investors meeting here Tuesday. "We have been spending a lot on R&D. It's been a difficult process and we'd like to see some cash to resolve this," he said. Last year UTC's Hamilton Sundstrand subsidiary spent $200 million on research and design associated with the Boeing 787 program, or half of its R&D outlay that year. Currently the company is spending $4 million a week on R&D for the 787 program. It sees that dropping to $2 million to $3 million a week once the 787 is ready for flight. Boeing has said it expects to have the new passenger plane airborne this summer, about a year later than planned.
The Dow Jones Industrial Average fell 370 points, or 2.9%, to 12,265, with all of its 30 components in negative territory. It was the worst percentage decline for the Dow since February of 2007, when the index fell 3.3%. The S&P 500 index dropped 44 points, or 3.2%, to 1,336, while the Nasdaq Composite fell 73 points, or 3%, to 2,309.
Jim Jubak: "The central bank's interest-rate cuts may be a quick fix for 2008, but they'll create a massive inflationary push in 2009, leading us right back into another boom-bust cycle."
Moving company Allied Van Lines Inc., along with corporate parent Sirva Inc., filed Tuesday for bankruptcy protection, a victim of its heavy debt load and the downturn in the U.S. housing industry. The company, which listed assets of $924 million and debts of $1.2 billion, sought Chapter 11 protection in U.S. Bankruptcy Court in Manhattan after reaching a deal with its lenders to cut its debt by about $200 million.
Asian stock index futures dropped after U.S. service industries contracted at the fastest pace in six years and Fitch Ratings said it may downgrade the AAA insurance rating on MBIA Inc., the largest bond guarantor.
After the close on Wednesday Cisco will report quarterly results and they will approximate 38 cents in earnings per share on $9.8 billion in revenue. For the year that ends in July, I anticipate revenue of about $40 billion and EPS of about $1.59. At $23+, the shares are, in my view, sharply undervalued.
The ISM non-manufacturing index fell to 41.9% in January from 54.4% in December. The reading was well below the 53.0% expected by economists. Readings below 50% indicate most firms are contracting. A separate report today by Royal Bank of Scotland Group Plc showed Europe's service industries grew in January at the slowest pace since 2003. In early trading, crude oil futures fell $1.57 to $88.45 on continued woes tied to the slowing economy.
Richmond Fed President Jeffrey Lacker became the first Fed official to say publicly that the economy faces the risk of a recession. While the most-likely path for the economy is a period of sluggish growth followed by a pickup, Lacker added: "I can also see the possibility of a mild recession, similar to the last two we have experienced."
Banks are tightening lending standards for businesses and consumers -- even beyond real-estate loans -- and companies' demand for credit has weakened, a new Federal Reserve survey of senior bank-loan officers shows.
Banc of America Securities downgraded Yahoo to neutral from buy, although it increased its price target to $31 from $26. "Even if Yahoo shareholders approve a deal with Microsoft, we believe the acquisition could face significant regulatory hurdles in the U.S. and particularly in the E.U., which could delay the acquisition from closing for quite some time," the broker said.
According to the WSJ, Billiton is offering 3.4 shares of its stock for each share of Rio Tinto.
A weekly survey of consumer attitudes about the economy fell to its lowest level since late 1993, ABC News and the Washington Post reported Tuesday. The ABC/Post consumer comfort index fell six points last week to negative 33. The index has fallen 13 points in the past month, "an unsettling sign," ABC News said, noting a 13-point drop before the 1990 recession and a 14-point drop before the 2001 recession. Just 22% of the consumers polled view the economy as good or fair, a 5-point drop from a week earlier. Attitudes about the buying climate and personal finances also fell.
For the fiscal year, Emerson said it expects earnings of $2.95 to $3.05 a share.
In 2008, Whirlpool expects earnings per share from continuing operations in a range of $8.50 to $9.00.
Tyco in January lifted its 2008 adjusted earnings per share view to a range of $2.60 to $2.70 a share.
For 2008, earnings per share for Corn Products, including a five-cent benefit from CME Group shares, are seen between $2.65 and $2.85 after $2.59 in 2007.
Hedge funds withdrew about 900 billion yen ($8.44 billion) in equities and other investments from Japan last year, according to a published report Tuesday. At the close of 2007, hedge funds had about $24.3 billion in Japanese assets, down 31% from a year earlier, the Nikkei reported, citing data from Eurekahedge Pte. Ltd.
Citigroup doubled its 2008 price forecast for thermal and coking coal to $100 per ton and $200 per ton respectively, citing factors ranging from supply disruptions in Australia and South Africa, cost increases in producing countries, rising currencies in commodity-producing nations and generally tight supplies. Citigroup's previous 2008 price targets were $55 per ton for thermal coal and $95 for coking coal.
Yum Brands raised its 2008 profit target from $1.82 to $1.85 per share, excluding one-time gains.
Arizona expects a billion-dollar shortfall in its $11 billion budget. Forecasters expect a region that grew 7 percent in 2006 to contract this year. Retail sales, which rose 16 percent in 2006, are dropping. Dennis Hoffman, an economics professor at Arizona State University, said he had never seen such a sharp turnabout in 25 years studying the local economy.
Less than a year after Apollo Management LP paid $6.6 billion for real estate broker Realogy Corp., bond prices show the deal may be worthless. Debt used to finance the April purchase trades at 61 cents on the dollar, and derivatives tied to the securities indicate an 80 percent chance that Parsippany, New Jersey-based Realogy will default. Apollo, the private-equity firm run by Leon Black, put up about $2 billion of cash to buy the owner of Coldwell Banker and Century 21, borrowing the rest.
Wickes Furniture Co., hit by the downturn that has hit furniture retailers in the wake of the housing industry's big slump, filed Sunday for Chapter 11 bankruptcy protection. Wickes, based in Wheeling, Illinois is owned by Sun Capital Partners Inc., a Boca Raton investment firm that specializes in leveraged buyouts and other transactions. In its filing with the federal bankruptcy court in Wilmington, Del., Wickes declared that it has assets of between $10 million and $50 million, and estimated its liabilities at between $50 million and $100 million.
Australia's central bank blamed significant inflationary pressures for its decision on Tuesday to raise interest rates to their highest level in close to 12 years.
The 25 basis point rise in the benchmark cash rate to 7 per cent is the third increase in six months and comes despite aggressive cuts in US interest rates in recent weeks. The Reserve Bank of Australia said underlying annualized inflation was around 3.5 per cent, above the upper end of its 2 to 3 per cent target, and higher than it expected a few months ago.
Toyota's profit for the October-December quarter rose 7.5 percent from the previous year as booming sales in China, Africa and South America offset declining U.S. sales and a stronger yen.
BHP Billiton must decide by Wednesday whether it will proceed with a bid for a rival, the Rio Tinto Group, after China intervened with a strategic investment that could sharply increase the price of what would be one of the biggest mergers in corporate history.
According to FT, BP will cut 5,000 jobs.
Up to 5.8 million additional workers in the United States could join the ranks of the unemployed by 2011 if the economy were to fall into a severe recession, according to a report from the Center for Economic and Policy Research.
Martin Marietta sees 2008 EPS at $6.25-$7.00.
GMAC Financial Services said Tuesday it swung to a loss during the fourth quarter due to continued weakness in its residential lending division, Residential Capital LLC. GMAC Financial Services lost $724 million in the fourth quarter, compared with earnings of $1 billion in the prior year period.Residential Capital lost $921 million during the quarter because of continued deterioration in the housing market.
The Chapter 11 filing by supplier Plastech Engineered Products Inc. threatens to halt Chrysler LLC's production at its 14 assembly plants, the automaker says in court papers filed. Citing a parts shortage, Chrysler today said it temporarily closed four assembly plants and canceled a shift at a fifth plant after Plastech filed for Chapter 11 protection.
The Coca-Cola Company has completed an agreement for the purchase of a 40% interest in organic beverage maker Honest Tea.
The China Meteorological Administration said the weather was the coldest in 100 years in central Hubei and Hunan provinces, going by the total number of consecutive days of average temperature less than 1 degree Celsius (33.8 degrees Fahrenheit).
“The long collapse in the United States savings rate is over,” said Ethan S. Harris, chief United States economist for Lehman Brothers. “People are going to start saving the old-fashioned way, rather than letting the stock market and rising home values do it for them.”
To increase its talent pool in India, IT networking major Cisco System India Pvt Ltd has decided to increase its headcount six fold to nearly 360,000 in the next five years.
Gaining a bigger share of mobile advertising is a big reason Microsoft Corp. is bidding $44.6 billion for Yahoo Inc., according to industry observers. Mobile advertising is "part of what Microsoft wants to get into, no doubt," said Phillip Redman, an analyst at Gartner Inc. "Leadership in mobile advertising is still unclaimed, while Google is threatening to do there what it did on the Internet, so Microsoft is being preemptive." "Yahoo touches so many customers and there's so much advertising potential in this deal," said Jeffrey Kagan, an independent analyst in Atlanta. "It's huge."
In addition, it should be noted Yahoo's new Zimbra Collaboration Suite (ZCS) 5.0 allows users to read Microsoft Outlook e-mail alongside Yahoo Mail or Google's Gmail or Zimbra's own branded e-mail. In effect, Zimbra's upgrade lets users read work and personal e-mail side by side. "We really think this is the next generation of Outlook that we are announcing," said Satish Dharmaraj, co-founder and chief executive of Zimbra. Yahoo paid $350 million in September to buy Zimbra, a provider of e-mail, calendar and contacts software that competes with Microsoft and Google.
In my view, the Street does not truly appreciate the benefits of putting Yahoo and Microsoft together. I believe that a year from now Microsoft will be selling closer to $40 than $30. I believe it has excellent risk/reward potential.
Nabors Industries Ltd. reported late Tuesday fourth-quarter net income fell to $222.2 million, or 78 cents a share, from $237.8 million, or 84 cents a share, a year ago. Revenue for the quarter ended Dec. 31 rose slightly to $1.31 billion from $1.3 billion.
Excluding the gains and ABC Radio income, Disney would have earned 49 cents a share in the fiscal first quarter of 2007. Revenue rose 9% to $10.45 billion on improved results at Disney's television networks, theme parks and consumer products division. Disney was expected to earn 52 cents a share on $10 billion in revenue, according to a survey of analysts by Thomson Financial.
United Technologies Corp.has begun talks with Boeing Co. to sort out costs stemming from delays in the rollout of Boeing's 787 Dreamliner, Gregory Hayes, vice president of accounting and finance, told investors meeting here Tuesday. "We have been spending a lot on R&D. It's been a difficult process and we'd like to see some cash to resolve this," he said. Last year UTC's Hamilton Sundstrand subsidiary spent $200 million on research and design associated with the Boeing 787 program, or half of its R&D outlay that year. Currently the company is spending $4 million a week on R&D for the 787 program. It sees that dropping to $2 million to $3 million a week once the 787 is ready for flight. Boeing has said it expects to have the new passenger plane airborne this summer, about a year later than planned.
The Dow Jones Industrial Average fell 370 points, or 2.9%, to 12,265, with all of its 30 components in negative territory. It was the worst percentage decline for the Dow since February of 2007, when the index fell 3.3%. The S&P 500 index dropped 44 points, or 3.2%, to 1,336, while the Nasdaq Composite fell 73 points, or 3%, to 2,309.
Jim Jubak: "The central bank's interest-rate cuts may be a quick fix for 2008, but they'll create a massive inflationary push in 2009, leading us right back into another boom-bust cycle."
Moving company Allied Van Lines Inc., along with corporate parent Sirva Inc., filed Tuesday for bankruptcy protection, a victim of its heavy debt load and the downturn in the U.S. housing industry. The company, which listed assets of $924 million and debts of $1.2 billion, sought Chapter 11 protection in U.S. Bankruptcy Court in Manhattan after reaching a deal with its lenders to cut its debt by about $200 million.
Asian stock index futures dropped after U.S. service industries contracted at the fastest pace in six years and Fitch Ratings said it may downgrade the AAA insurance rating on MBIA Inc., the largest bond guarantor.
After the close on Wednesday Cisco will report quarterly results and they will approximate 38 cents in earnings per share on $9.8 billion in revenue. For the year that ends in July, I anticipate revenue of about $40 billion and EPS of about $1.59. At $23+, the shares are, in my view, sharply undervalued.
Monday, February 04, 2008
Opportunity
2/5/08 Opportunity
Microsoft's (MSFT) historic $45 billion bid for Yahoo! (YHOO) is a fabulous deal for Yahoo shareholders, and creates a rare buying opportunity for Microsoft shares, Barron's magazine says.
A fresh surge in financial-sector layoffs contributed to a 69% increase in corporate job-cut announcements in January, according to the latest tally compiled by outplacement firm Challenger Gray & Christmas released Monday. U.S. corporations announced 74,986 job reductions last month, up from December's 44,416 and 19% higher compared with the previous January, Challenger Gray reported. The financial sector cut 15,789 positions, accounting for more than a fifth of the documented job cuts for January. Job cuts remain below levels seen in the 2001 recession, noted John Challenger, CEO of the firm that bears his name.
"If the economy dips into a full-blown recession, it will likely be caused by a drop in consumer spending and the effects of the high price of energy," Challenger said in a release. "In that case, we would expect to see job cutting in areas such as retail, consumer products, and transportation."
The White House expects the government to end the current fiscal year with a deficit of $410 billion. Don't be surprised if the number proves too low.
The World Bank Monday lowered its 2008 economic growth forecast for China to 9.6% from 10.8% previously, citing the impact on its exports from a global slowdown. The World Bank also raised its consumer price index forecast for China to 4.6% from 3.8% previously, according to reports.
According to Fortune Magazine, last week, buried deep in the ugly details of Countrywide Financial Corp.'s earnings release, was the news that its $32.4 billion portfolio of prime HELOCs - home equity lines of credit - had begun to rapidly deteriorate. The reeling Calabasas, Ca.-lender was forced to take a $704 million charge related to homeowners' inability to pay back equity they extracted from their homes.The structure of these loans appears to spell trouble for Countrywide and other home lenders with big home equity loan books. According to an overlooked Moody's Investors Services note that came out last Wednesday, once a certain threshold of losses is achieved in a home equity loan securitization pool, the bond holder is paid off ahead of the lender. What's worse is that it's difficult to see how large a lender's exposure is to home equity loans. Known as rapid amortization, this risk is treated as a contingent liability for Countrywide and other home equity loan lenders and is carried off balance sheet, until deterioration occurs and the lender goes on the hook for the loans. Countrywide is the nation's biggest home equity lender, with around 9% of the market.
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, climbed 378.18 to 4,950.12 at the 3 p.m. close, the biggest fluctuation among indexes included in global benchmarks. All of the measure's 300 members rose, apart from 15 that were suspended or unchanged.
Archer Daniels Midland Co. said Monday its fiscal second-quarter profit rose 7 percent, helped by higher volumes and selling prices. Profit for the quarter ended Dec. 31 rose to $473 million, or 73 cents per share, for the three months ended Dec. 31 from $441 million, or 67 cents per share, a year ago. Revenue rose 50 percent to $16.5 billion from $10.98 billion last year.
Brett Steenbarger: "Friday closed with 1728 new 20-day highs against only 256 new lows. Among NYSE common stocks only, we had 31 new 52-week highs against only 6 new lows. This strength has been mirrored by the very positive sentiment expressed in the Adjusted NYSE TICK, which has closed positive 7 of the last 9 trading sessions and quite positive for the last two sessions. I generally have not found it profitable to fade the market for anything more than a short-term trade when such strength is evident."
Hillary Clinton and Barack Obama are statistically tied for voter support nationwide, a Washington Post/ABC News poll found. In my view, the MO is going in Obama's direction.
According to Reuters, a long anticipated deal by Altria Group Inc to buy smokeless tobacco company UST Inc could be reached within months, but the price remains the toughest sticking point, sources familiar with the potential deal said on Friday.
John Hussman: "The current economic downturn is likely to focus its damage on asset prices – the U.S. dollar, home values, low and mid-quality debt, and equity prices (largely through the combination of narrowing profit margins and lower valuations). In short, I expect that we are in the process of what might be called a “write off recession,” where significant amounts of asset value and perceived wealth will ultimately be written off. There will undoubtedly be some “wealth effects” on the real economy, but I would expect these to be only moderate."
China's biggest bank, Industrial & Commercial Bank of China Ltd., has set aside reserves equal to 30 percent of its $1.2 billion in sub-prime holdings to cover possible losses, a state news agency reported Monday.
Google has been removed from the Goldman Sachs Technology Framework Favorite Growth List and the stock is also being removed from the Goldman Sachs Conviction Buy List.
Wendy's International posted a higher quarterly profit Monday as cost-savings overshadowed declining sales at its fast food restaurants.
Earthfiles: "February 4, 2008 - Fourth Undersea Fiber Optic Cable Cut. Cable linking Qatar to the United Arab Emirates was damaged on Sunday, February 3, causing more telecommunication disruptions. Egypt's Communications Ministry reported Sunday that damage to the undersea internet cables in the Mediterranean was not caused by ship anchors, as previously speculated. In fact, the Egyptian transport ministry said that onshore video cameras at the location of the damaged cables did not show any ship traffic in the area when the communication cables were damaged. Third damaged cable on Friday, February 1, 2008, is called Falcon and provides communication to countries in the Mediterranean and Gulf regions, according to Dow Jones Newswires. On Thursday, January 31, 2008, two other undersea fiber optic cables owned by Flag Telecom and consortium SeaMeWe-4 between Alexandria, Egypt and Palermo, Italy, were cut - according to Du, a state-owned Dubai telecom provider. Stephan Beckert, an analyst with TeleGeography, told CNN the first two damaged cables provide the majority of international communications between Europe and the Middle East. Cause? With public communications cut off in Iran and other Middle East regions, a geopolitical speculation is that cutting major undersea fiber optic communication cables is deliberate sabotage before some unknown upcoming event in the Middle East or elsewhere."
Clorox now expects earnings of $3.20 per share to $3.35 per share for the year, from a previous range of $3.33 per share to $3.50 per share. The previous range did not include its Burt's Bees acquisition.
Wm Wrigley Jr Co said profit was $155 million, or 56 cents a diluted share, compared with $128.8 million, or 46 cents a share, a year earlier. Quarterly net sales, for the fourth quarter that ended December 31, were $1.42 billion, up from $1.22 billion a year ago. The company declared a quarterly dividend of 33.5 cents per share, up 16 percent from its prior dividend of 29 cents.
Core capital equipment orders rose 4.5% in December, revised up from 4.4% estimated a week ago, the government said. Factory orders increased 2.3% in December. Orders for durable goods increased 5% in December, revised down from 5.2% estimated a week ago. Orders for nondurable goods fell 0.4%.
The $515.4 billion in Pentagon spending for 2009 that President Bush proposed to Congress on Monday does not include the cost of fighting the wars in Iraq and Afghanistan.
The inflation watch: $5 corn, $10 wheat, and $13 soybeans.
European producer-price inflation accelerated in December to the fastest pace in a year, boosted by surging energy costs. Factory-gate prices increased 4.3 percent from a year earlier after gaining 4.2 percent in November, the European Union statistics office in Luxembourg said today.
News Corp. Chairman Rupert Murdoch said Monday that the company has no intention of making a bid for Yahoo Inc.
Sun-Times Media Group Inc., the owner of the Chicago Sun-Times and other newspapers, said late Monday its board is evaluating strategic alternatives for the company, along with the possibility of a sale.
Fox television network is seeing no signs of an advertising slowdown, despite a struggling economy. Ad rates are up by a double-digit percentage compared with this time a year ago at both Fox Broadcasting and at the company's cable networks, led by Fox News Channel.
Super Bowl XLII generated $250 million in gross revenue for Fox and its television stations, the biggest one-day haul in News Corp.'s history. The game drew more than 97.5 million viewers, according to Nielsen Media Research's overnight measurement of the largest U.S. television markets, making it likely to be the most-watched Super Bowl ever.
The Dow Jones Industrial Average was down 108 points at 12,635, with 23 of its 30 component stocks in negative territory.The S&P 500 index lost 14 points to 1,380, while the Nasdaq Composite dropped 30 points to 2,382.
Crude oil for March delivery rose $1.06, or 1.2%, to close at $90.02 a barrel. Gold for April delivery declined $4.10 to end at $909.40 an ounce on the New York Mercantile Exchange.
Mike Burk: "The market is overbought...The rapid decline in the number of new lows implies risk is limited for the next few weeks, however, the extreme number of new lows at the January 22 low implies a retest of the price lows in the next few months...Over all years since 1928 February has been 2nd to September as the worst month of the year for the SPX, up 53% of the time with an average return of -0.3%. During the 4th year of the Presidential Cycle February’s returns have been similar to other years while April and May have had greater average losses...I expect the major indices to be higher on Friday February 8 than they were on Friday February 1."
Iran's Oil Bourse will serve as a place to trade oil products and crude oil. The Ministry of Economy will be setting up the petrochemicals section by February 19. The Oil Bourse is supposed to trade oil products in non-dollar currencies and many analysts hold the opinion that it could deal a blow to the already declining greenback.
Microsoft's (MSFT) historic $45 billion bid for Yahoo! (YHOO) is a fabulous deal for Yahoo shareholders, and creates a rare buying opportunity for Microsoft shares, Barron's magazine says.
A fresh surge in financial-sector layoffs contributed to a 69% increase in corporate job-cut announcements in January, according to the latest tally compiled by outplacement firm Challenger Gray & Christmas released Monday. U.S. corporations announced 74,986 job reductions last month, up from December's 44,416 and 19% higher compared with the previous January, Challenger Gray reported. The financial sector cut 15,789 positions, accounting for more than a fifth of the documented job cuts for January. Job cuts remain below levels seen in the 2001 recession, noted John Challenger, CEO of the firm that bears his name.
"If the economy dips into a full-blown recession, it will likely be caused by a drop in consumer spending and the effects of the high price of energy," Challenger said in a release. "In that case, we would expect to see job cutting in areas such as retail, consumer products, and transportation."
The White House expects the government to end the current fiscal year with a deficit of $410 billion. Don't be surprised if the number proves too low.
The World Bank Monday lowered its 2008 economic growth forecast for China to 9.6% from 10.8% previously, citing the impact on its exports from a global slowdown. The World Bank also raised its consumer price index forecast for China to 4.6% from 3.8% previously, according to reports.
According to Fortune Magazine, last week, buried deep in the ugly details of Countrywide Financial Corp.'s earnings release, was the news that its $32.4 billion portfolio of prime HELOCs - home equity lines of credit - had begun to rapidly deteriorate. The reeling Calabasas, Ca.-lender was forced to take a $704 million charge related to homeowners' inability to pay back equity they extracted from their homes.The structure of these loans appears to spell trouble for Countrywide and other home lenders with big home equity loan books. According to an overlooked Moody's Investors Services note that came out last Wednesday, once a certain threshold of losses is achieved in a home equity loan securitization pool, the bond holder is paid off ahead of the lender. What's worse is that it's difficult to see how large a lender's exposure is to home equity loans. Known as rapid amortization, this risk is treated as a contingent liability for Countrywide and other home equity loan lenders and is carried off balance sheet, until deterioration occurs and the lender goes on the hook for the loans. Countrywide is the nation's biggest home equity lender, with around 9% of the market.
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, climbed 378.18 to 4,950.12 at the 3 p.m. close, the biggest fluctuation among indexes included in global benchmarks. All of the measure's 300 members rose, apart from 15 that were suspended or unchanged.
Archer Daniels Midland Co. said Monday its fiscal second-quarter profit rose 7 percent, helped by higher volumes and selling prices. Profit for the quarter ended Dec. 31 rose to $473 million, or 73 cents per share, for the three months ended Dec. 31 from $441 million, or 67 cents per share, a year ago. Revenue rose 50 percent to $16.5 billion from $10.98 billion last year.
Brett Steenbarger: "Friday closed with 1728 new 20-day highs against only 256 new lows. Among NYSE common stocks only, we had 31 new 52-week highs against only 6 new lows. This strength has been mirrored by the very positive sentiment expressed in the Adjusted NYSE TICK, which has closed positive 7 of the last 9 trading sessions and quite positive for the last two sessions. I generally have not found it profitable to fade the market for anything more than a short-term trade when such strength is evident."
Hillary Clinton and Barack Obama are statistically tied for voter support nationwide, a Washington Post/ABC News poll found. In my view, the MO is going in Obama's direction.
According to Reuters, a long anticipated deal by Altria Group Inc to buy smokeless tobacco company UST Inc could be reached within months, but the price remains the toughest sticking point, sources familiar with the potential deal said on Friday.
John Hussman: "The current economic downturn is likely to focus its damage on asset prices – the U.S. dollar, home values, low and mid-quality debt, and equity prices (largely through the combination of narrowing profit margins and lower valuations). In short, I expect that we are in the process of what might be called a “write off recession,” where significant amounts of asset value and perceived wealth will ultimately be written off. There will undoubtedly be some “wealth effects” on the real economy, but I would expect these to be only moderate."
China's biggest bank, Industrial & Commercial Bank of China Ltd., has set aside reserves equal to 30 percent of its $1.2 billion in sub-prime holdings to cover possible losses, a state news agency reported Monday.
Google has been removed from the Goldman Sachs Technology Framework Favorite Growth List and the stock is also being removed from the Goldman Sachs Conviction Buy List.
Wendy's International posted a higher quarterly profit Monday as cost-savings overshadowed declining sales at its fast food restaurants.
Earthfiles: "February 4, 2008 - Fourth Undersea Fiber Optic Cable Cut. Cable linking Qatar to the United Arab Emirates was damaged on Sunday, February 3, causing more telecommunication disruptions. Egypt's Communications Ministry reported Sunday that damage to the undersea internet cables in the Mediterranean was not caused by ship anchors, as previously speculated. In fact, the Egyptian transport ministry said that onshore video cameras at the location of the damaged cables did not show any ship traffic in the area when the communication cables were damaged. Third damaged cable on Friday, February 1, 2008, is called Falcon and provides communication to countries in the Mediterranean and Gulf regions, according to Dow Jones Newswires. On Thursday, January 31, 2008, two other undersea fiber optic cables owned by Flag Telecom and consortium SeaMeWe-4 between Alexandria, Egypt and Palermo, Italy, were cut - according to Du, a state-owned Dubai telecom provider. Stephan Beckert, an analyst with TeleGeography, told CNN the first two damaged cables provide the majority of international communications between Europe and the Middle East. Cause? With public communications cut off in Iran and other Middle East regions, a geopolitical speculation is that cutting major undersea fiber optic communication cables is deliberate sabotage before some unknown upcoming event in the Middle East or elsewhere."
Clorox now expects earnings of $3.20 per share to $3.35 per share for the year, from a previous range of $3.33 per share to $3.50 per share. The previous range did not include its Burt's Bees acquisition.
Wm Wrigley Jr Co said profit was $155 million, or 56 cents a diluted share, compared with $128.8 million, or 46 cents a share, a year earlier. Quarterly net sales, for the fourth quarter that ended December 31, were $1.42 billion, up from $1.22 billion a year ago. The company declared a quarterly dividend of 33.5 cents per share, up 16 percent from its prior dividend of 29 cents.
Core capital equipment orders rose 4.5% in December, revised up from 4.4% estimated a week ago, the government said. Factory orders increased 2.3% in December. Orders for durable goods increased 5% in December, revised down from 5.2% estimated a week ago. Orders for nondurable goods fell 0.4%.
The $515.4 billion in Pentagon spending for 2009 that President Bush proposed to Congress on Monday does not include the cost of fighting the wars in Iraq and Afghanistan.
The inflation watch: $5 corn, $10 wheat, and $13 soybeans.
European producer-price inflation accelerated in December to the fastest pace in a year, boosted by surging energy costs. Factory-gate prices increased 4.3 percent from a year earlier after gaining 4.2 percent in November, the European Union statistics office in Luxembourg said today.
News Corp. Chairman Rupert Murdoch said Monday that the company has no intention of making a bid for Yahoo Inc.
Sun-Times Media Group Inc., the owner of the Chicago Sun-Times and other newspapers, said late Monday its board is evaluating strategic alternatives for the company, along with the possibility of a sale.
Fox television network is seeing no signs of an advertising slowdown, despite a struggling economy. Ad rates are up by a double-digit percentage compared with this time a year ago at both Fox Broadcasting and at the company's cable networks, led by Fox News Channel.
Super Bowl XLII generated $250 million in gross revenue for Fox and its television stations, the biggest one-day haul in News Corp.'s history. The game drew more than 97.5 million viewers, according to Nielsen Media Research's overnight measurement of the largest U.S. television markets, making it likely to be the most-watched Super Bowl ever.
The Dow Jones Industrial Average was down 108 points at 12,635, with 23 of its 30 component stocks in negative territory.The S&P 500 index lost 14 points to 1,380, while the Nasdaq Composite dropped 30 points to 2,382.
Crude oil for March delivery rose $1.06, or 1.2%, to close at $90.02 a barrel. Gold for April delivery declined $4.10 to end at $909.40 an ounce on the New York Mercantile Exchange.
Mike Burk: "The market is overbought...The rapid decline in the number of new lows implies risk is limited for the next few weeks, however, the extreme number of new lows at the January 22 low implies a retest of the price lows in the next few months...Over all years since 1928 February has been 2nd to September as the worst month of the year for the SPX, up 53% of the time with an average return of -0.3%. During the 4th year of the Presidential Cycle February’s returns have been similar to other years while April and May have had greater average losses...I expect the major indices to be higher on Friday February 8 than they were on Friday February 1."
Iran's Oil Bourse will serve as a place to trade oil products and crude oil. The Ministry of Economy will be setting up the petrochemicals section by February 19. The Oil Bourse is supposed to trade oil products in non-dollar currencies and many analysts hold the opinion that it could deal a blow to the already declining greenback.
Sunday, February 03, 2008
Funding
2/4/08 War Funding
President George W. Bush will seek $140.7 billion on Monday for the U.S. Army in fiscal 2009, including increased funds to buy helicopters and other equipment, according to budget documents obtained by Reuters. That request would be 8 percent higher than the Army budget requested for fiscal 2008. President George W. Bush will seek $515.4 billion for the Pentagon for fiscal 2009, up 7.5 percent from the funds Congress approved for this year, according to Pentagon documents obtained by Reuters on Friday. In his final budget request on Monday, Bush also will ask Congress for $70 billion in "emergency" funds for the wars in Iraq and Afghanistan, the documents show.
Boeing predicts that the first delivery of their 787 will be in the first quarter of 2009. Boeing said that it would update investors at the end of this year's first quarter on the progress of the 787 and then outline a new delivery schedule for airline customers in April. The company is still hoping to deliver 109 aircraft by the end of next year but if this slips there could be further earnings revisions to reflect compensation payments.
Citigroup has told more than 160,000 customers in the U.K. that they will not be able to use their card cards after the first week of March, according to media reports Saturday. The bank is canceling credit cards for customers it considers risky following a review of accounts at Egg Banking PLC, an Internet bank Citigroup purchased in May 2007, according to a report in The Wall Street Journal. The figure represents about 7% of the Egg unit's credit card customers.
Yahoo Inc said it may take "quite a bit of time" to weigh its strategic options, including keeping the company independent, following Microsoft Corp's $45 billion offer to buy the company.
Yahoo Inc would consider a business alliance with Google Inc as one way to rebuff a $44.6 billion takeover proposal by Microsoft, a source familiar with Yahoo's strategy said on Sunday. Yahoo management is considering revisiting talks it held with Google several months ago on an alliance as an alternative to Microsoft's bid, that source said. At $31 a share, Yahoo believes the bid undervalues the company, two sources said.
Given the market share Google now has in the search business, I see no way Google could buy Yahoo and get government clearance. As far as outsourcing Yahoo's search business to Google, I take a dim view of that possibility too.
Google Inc. raised the specter of Microsoft Corp. using its proposed $42 billion acquisition of Yahoo Inc. to gain illegal control over the Internet, underscoring the online search leader's queasiness about its two biggest rivals teaming up.
China's largest bank said Sunday it has received approval to buy a 20 percent stake in South Africa's biggest lender.
Platinum roared to another record high on Monday as supply concerns persisted in main producer South Africa, lifting sister-metal palladium to its best level in six years.
According to the FT, the leveraged loan market begins the week in “disarray” following the collapse of efforts to syndicate $14bn of the debt used to finance the $30bn buy-out of Harrah’s Entertainment, bankers say. The group of banks backing buyers Apollo Management and Texas Pacific Group are having trouble selling on the leveraged buy-out debt to third parties. With the bulk of the debt remaining on their books, the banks are sitting on a sizable loss.
The freeze in the debt market means they now face larger potential losses on other big buy-outs, such as BCE and Clear Channel Communications, and will be more desperate to get out of the financing commitments on those deals. Banks are already saddled with more than $150bn of unsyndicated debt, most of it LBO-related, according to S&P data.
President George W. Bush will seek $140.7 billion on Monday for the U.S. Army in fiscal 2009, including increased funds to buy helicopters and other equipment, according to budget documents obtained by Reuters. That request would be 8 percent higher than the Army budget requested for fiscal 2008. President George W. Bush will seek $515.4 billion for the Pentagon for fiscal 2009, up 7.5 percent from the funds Congress approved for this year, according to Pentagon documents obtained by Reuters on Friday. In his final budget request on Monday, Bush also will ask Congress for $70 billion in "emergency" funds for the wars in Iraq and Afghanistan, the documents show.
Boeing predicts that the first delivery of their 787 will be in the first quarter of 2009. Boeing said that it would update investors at the end of this year's first quarter on the progress of the 787 and then outline a new delivery schedule for airline customers in April. The company is still hoping to deliver 109 aircraft by the end of next year but if this slips there could be further earnings revisions to reflect compensation payments.
Citigroup has told more than 160,000 customers in the U.K. that they will not be able to use their card cards after the first week of March, according to media reports Saturday. The bank is canceling credit cards for customers it considers risky following a review of accounts at Egg Banking PLC, an Internet bank Citigroup purchased in May 2007, according to a report in The Wall Street Journal. The figure represents about 7% of the Egg unit's credit card customers.
Yahoo Inc said it may take "quite a bit of time" to weigh its strategic options, including keeping the company independent, following Microsoft Corp's $45 billion offer to buy the company.
Yahoo Inc would consider a business alliance with Google Inc as one way to rebuff a $44.6 billion takeover proposal by Microsoft, a source familiar with Yahoo's strategy said on Sunday. Yahoo management is considering revisiting talks it held with Google several months ago on an alliance as an alternative to Microsoft's bid, that source said. At $31 a share, Yahoo believes the bid undervalues the company, two sources said.
Given the market share Google now has in the search business, I see no way Google could buy Yahoo and get government clearance. As far as outsourcing Yahoo's search business to Google, I take a dim view of that possibility too.
Google Inc. raised the specter of Microsoft Corp. using its proposed $42 billion acquisition of Yahoo Inc. to gain illegal control over the Internet, underscoring the online search leader's queasiness about its two biggest rivals teaming up.
China's largest bank said Sunday it has received approval to buy a 20 percent stake in South Africa's biggest lender.
Platinum roared to another record high on Monday as supply concerns persisted in main producer South Africa, lifting sister-metal palladium to its best level in six years.
According to the FT, the leveraged loan market begins the week in “disarray” following the collapse of efforts to syndicate $14bn of the debt used to finance the $30bn buy-out of Harrah’s Entertainment, bankers say. The group of banks backing buyers Apollo Management and Texas Pacific Group are having trouble selling on the leveraged buy-out debt to third parties. With the bulk of the debt remaining on their books, the banks are sitting on a sizable loss.
The freeze in the debt market means they now face larger potential losses on other big buy-outs, such as BCE and Clear Channel Communications, and will be more desperate to get out of the financing commitments on those deals. Banks are already saddled with more than $150bn of unsyndicated debt, most of it LBO-related, according to S&P data.
Friday, February 01, 2008
Deals
2/2/08 Deals
Microsoft Corp. is making an unsolicited $44.6 billion offer for Yahoo Inc. In a letter to Yahoo's board of directors, Microsoft Chief Executive Steve Ballmer said the company will bid $31 per share, representing a 62 percent premium to Yahoo's closing stock price Thursday. Yahoo shareholders could choose to receive cash or Microsoft common shares, with the total purchase consisting of 50 percent each cash and stock. Microsoft said it sees at least $1 billion cost savings generated by the merger, and intends to offer significant retention packages to Yahoo engineers, key leaders and employees. The software giant said it believes the takeover would receive regulatory clearance and close in the second half of 2008. MSN and Yahoo! together would have about 35% of the search market. Google has over 50%.
OPEC ministers decided to keep output at present levels at their meeting Friday out of fear that a softening global economy will translate into weakened demand. ``If prices continue to fall as we've seen in Venezuela until now, then we'd probably be prepared to propose a cut at the next OPEC meeting in March,'' Venezuelan Oil Minister Rafael Ramirez told reporters in Vienna yesterday.
Pioneer Drilling Co. will acquire Wedge Well Services, Wedge Wireline and Wedge Fishing and Rental Services from affiliates of Wedge Group Inc. for $303 million in cash. The Wedge Companies provide oil and gas well workover, wireline, and fishing and rental services for energy producers in the United States. Pioneer said that it expects the acquisition to be significantly accretive to 2008 earnings and cash flow per share.
Societe Generale rose 3.8% after BNP Paribas confirmed on Thursday it was mulling a bid and after reports that Credit Agricole could also be interested in buying the firm.
Chinalco and Alcoa said Friday that they've acquired a 12% stake in miner Rio Tinto. The stake was acquired by Shining Prospect, a Singapore-based entity that is wholly owned by Chinalco and into which Alcoa has committed $1.2 billion by way of convertible instruments. Chinalco and Alcoa said they do not currently intend to make an offer for Rio Tinto, but reserve the right to make an offer under certain circumstances. Investment bank Lehman Brothers said it bought the stake in Rio for Chinalco and Alcoa at 60 pounds a share, about 21 percent above Rio's closing price of 49.56 pounds on Thursday.
According to the WSJ, the next president, if he or she serves two terms, could find the U.S. government so deeply in hock that it would face losing its Triple-A credit rating, something that has never happened since Moody's Investors Service began grading U.S. securities in 1917.
John Ing: "America today absorbs about 75 percent of the world's surplus savings. However, a weakened Wall Street can no longer fix America's debt problem. America's trade deficit grew because its savings are less than investment. Between 1997 and 2007, the current deficit increased almost six times from an annual rate of 1.25 percent of GDP to 7 percent. The US needs over $2.5 billion a day of foreign capital to finance its growing deficits. Its consumers for example saw a dramatic jump in household debt to a record $2.5 trillion, which rises to $13.6 trillion if mortgages are added. And since 1995, mortgage debt as a percentage of disposable income increased from 56 percent in ten years to almost 100 percent. Credit card debt alone is almost $1 trillion. In November, consumer debt rose 7.5 percent led by credit card debt which rose 11.3 percent."
Google's CEO: “We are very, very pleased with our year and also with the quarter that just ended. We are optimistic about 2008,” he added.
From 2003 to 2006, the last year for which complete data are available, the world's oil production grew 6.25 percent, to reach 84.6 million barrels per day, according to the federal Energy Information Administration. But demand for oil grew faster, pushed by the growing economies of China and India. Worldwide demand rose 6.43 percent to 84.73 million barrels per day.
Zman: "The natural gas surplus is only a quarter of what it was this time last year given the help of a hot summer and now, a cold winter...The CPC has underestimated the cold of this winter for five of the last six weeks. Keep that up much longer and the old E&P complaint of , "oh, if only we could have a normal winter" may go by the wayside."
The Oil Drum: "Dr Jim Buckee has just retired as President and CEO of Talisman Energy, a major independent Canadian oil company with a market capitalisation of $25-billion. On the phone from Perth, Dr Buckee told me that 'peak oil' was now either here, or very close. JIM BUCKEE: It is the underlying decline of the world's major fields that is the dominant driving factor here. If you think that at the moment the world is consuming 30-plus billion barrels a year of oil and is finding seven or eight billion barrels a year. And this state of affairs has been going on now for 20 or more years. It's obviously unsustainable and the world is increasingly drawing on the bigger older fields. You couple that notion with the irreversibility of decline and you've got a very alarming picture."
Wireless equipment maker LM Ericsson AB reported a sharp drop in fourth-quarter net profits and said Friday it would lay off around 1,000 employees in Sweden because of costs cuts.
European Central Bank council member Nicholas Garganas said the bank won't be driven by investor expectations of an interest-rate cut as inflation remains ``a major concern.'' ``Our monetary policy is not led on what the markets expect,'' Garganas, who also heads the Greek central bank, said in an interview late yesterday in his office in Athens. ``I'm very concerned about the high inflation rate. Inflation risks remain on the upside.''
UBS AG, Europe's biggest bank by assets, increased its price forecasts for coal used in power plants in 2008 and 2009 as China's demand rises and rain disrupted supplies from Australia. The price of thermal contract coal will average $100 a metric ton this year, and $125 a ton in 2009, up from previous estimates of $90 and $110, UBS analysts led by Stephen Oldfield and Ghee Peh said in a report today.
According to AMG Data Services, "including ETF activity, Equity funds report net cash outflows totaling -$7.524 billion in the week ended 1/30/08 with Domestic funds reporting net outflows of -$6.315 billion and Non-domestic funds reporting net outflows of -$1.209 billion;
Excluding ETF activity, Equity funds report net cash outflows totaling -$3.724 billion with Domestic funds reporting net outflows of -$2.485 billion and Non-domestic funds reporting net outflows totaling -$1.238 billion."
Rob Hanna: "To summarize the two main points tonight:
1) Don’t be too eager to short. It’s doesn’t have positive expected value just after a Follow Through Day.
2) Watch market action closely over the next week. It should give you a pretty good indication of the intermediate-term."
Exxon's fourth quarter earnings rose to $2.13 a share from $1.76 a share last year. Chevron Q4 earnings $2.32 per share vs $1.74.
Job growth contracted in January for the first time in more than four years, the Labor Department said Friday. Nonfarm payrolls fell by 17,000 in January much weaker than the 85,000 expected by economists surveyed by MarketWatch. The unemployment rate ticked lower to 4.9% in January from 5.0% in the previous month. The department revised December's new-job total up to 82,000 from 18,000.
U.S. Jan. average workweek falls to 33.7 hours vs 33.8 Dec. U.S. Jan. average hourly earnings up 0.2%, up 3.7 yr-on-yr and continues to lag inflation.
Beazer Homes USA Inc said on Friday it would cease some operations, including mortgage origination, causing unspecified charges. The company said besides mortgage origination, it would exit some homebuilding operations in North Carolina, Ohio, South Carolina and Kentucky. Beazer also said it would enter a new marketing services deal with mortgage lender Countrywide Financial Corp .
In early Friday trading, the dollar index dropped 0.3% to 74.985.
Crude oil for March delivery slumped $2.79 to $88.96 a barrel on the New York Mercantile Exchange. Gold for April delivery fell $14.50 to end at $913.50 an ounce on the New York Mercantile Exchange.
The ISM index rose to 50.7% from 48.4% in December, the ISM said.
U.S. consumer sentiment rose in January, according to the University of Michigan consumer sentiment survey released Friday by UMich and Reuters. The index rose to 78.4 in January from 75.5 in December. The current conditions index rose to 94.4 from 91.0, while the expectations index gained to 68.1 from 65.6.
On a year-over-year basis, spending on private home construction was down 20.4% in December.
Rep. Ron Paul: "The Constitution was written for one specific purpose and that was to restrain the government, not to restrain the people."
Microsoft Corp. is making an unsolicited $44.6 billion offer for Yahoo Inc. In a letter to Yahoo's board of directors, Microsoft Chief Executive Steve Ballmer said the company will bid $31 per share, representing a 62 percent premium to Yahoo's closing stock price Thursday. Yahoo shareholders could choose to receive cash or Microsoft common shares, with the total purchase consisting of 50 percent each cash and stock. Microsoft said it sees at least $1 billion cost savings generated by the merger, and intends to offer significant retention packages to Yahoo engineers, key leaders and employees. The software giant said it believes the takeover would receive regulatory clearance and close in the second half of 2008. MSN and Yahoo! together would have about 35% of the search market. Google has over 50%.
OPEC ministers decided to keep output at present levels at their meeting Friday out of fear that a softening global economy will translate into weakened demand. ``If prices continue to fall as we've seen in Venezuela until now, then we'd probably be prepared to propose a cut at the next OPEC meeting in March,'' Venezuelan Oil Minister Rafael Ramirez told reporters in Vienna yesterday.
Pioneer Drilling Co. will acquire Wedge Well Services, Wedge Wireline and Wedge Fishing and Rental Services from affiliates of Wedge Group Inc. for $303 million in cash. The Wedge Companies provide oil and gas well workover, wireline, and fishing and rental services for energy producers in the United States. Pioneer said that it expects the acquisition to be significantly accretive to 2008 earnings and cash flow per share.
Societe Generale rose 3.8% after BNP Paribas confirmed on Thursday it was mulling a bid and after reports that Credit Agricole could also be interested in buying the firm.
Chinalco and Alcoa said Friday that they've acquired a 12% stake in miner Rio Tinto. The stake was acquired by Shining Prospect, a Singapore-based entity that is wholly owned by Chinalco and into which Alcoa has committed $1.2 billion by way of convertible instruments. Chinalco and Alcoa said they do not currently intend to make an offer for Rio Tinto, but reserve the right to make an offer under certain circumstances. Investment bank Lehman Brothers said it bought the stake in Rio for Chinalco and Alcoa at 60 pounds a share, about 21 percent above Rio's closing price of 49.56 pounds on Thursday.
According to the WSJ, the next president, if he or she serves two terms, could find the U.S. government so deeply in hock that it would face losing its Triple-A credit rating, something that has never happened since Moody's Investors Service began grading U.S. securities in 1917.
John Ing: "America today absorbs about 75 percent of the world's surplus savings. However, a weakened Wall Street can no longer fix America's debt problem. America's trade deficit grew because its savings are less than investment. Between 1997 and 2007, the current deficit increased almost six times from an annual rate of 1.25 percent of GDP to 7 percent. The US needs over $2.5 billion a day of foreign capital to finance its growing deficits. Its consumers for example saw a dramatic jump in household debt to a record $2.5 trillion, which rises to $13.6 trillion if mortgages are added. And since 1995, mortgage debt as a percentage of disposable income increased from 56 percent in ten years to almost 100 percent. Credit card debt alone is almost $1 trillion. In November, consumer debt rose 7.5 percent led by credit card debt which rose 11.3 percent."
Google's CEO: “We are very, very pleased with our year and also with the quarter that just ended. We are optimistic about 2008,” he added.
From 2003 to 2006, the last year for which complete data are available, the world's oil production grew 6.25 percent, to reach 84.6 million barrels per day, according to the federal Energy Information Administration. But demand for oil grew faster, pushed by the growing economies of China and India. Worldwide demand rose 6.43 percent to 84.73 million barrels per day.
Zman: "The natural gas surplus is only a quarter of what it was this time last year given the help of a hot summer and now, a cold winter...The CPC has underestimated the cold of this winter for five of the last six weeks. Keep that up much longer and the old E&P complaint of , "oh, if only we could have a normal winter" may go by the wayside."
The Oil Drum: "Dr Jim Buckee has just retired as President and CEO of Talisman Energy, a major independent Canadian oil company with a market capitalisation of $25-billion. On the phone from Perth, Dr Buckee told me that 'peak oil' was now either here, or very close. JIM BUCKEE: It is the underlying decline of the world's major fields that is the dominant driving factor here. If you think that at the moment the world is consuming 30-plus billion barrels a year of oil and is finding seven or eight billion barrels a year. And this state of affairs has been going on now for 20 or more years. It's obviously unsustainable and the world is increasingly drawing on the bigger older fields. You couple that notion with the irreversibility of decline and you've got a very alarming picture."
Wireless equipment maker LM Ericsson AB reported a sharp drop in fourth-quarter net profits and said Friday it would lay off around 1,000 employees in Sweden because of costs cuts.
European Central Bank council member Nicholas Garganas said the bank won't be driven by investor expectations of an interest-rate cut as inflation remains ``a major concern.'' ``Our monetary policy is not led on what the markets expect,'' Garganas, who also heads the Greek central bank, said in an interview late yesterday in his office in Athens. ``I'm very concerned about the high inflation rate. Inflation risks remain on the upside.''
UBS AG, Europe's biggest bank by assets, increased its price forecasts for coal used in power plants in 2008 and 2009 as China's demand rises and rain disrupted supplies from Australia. The price of thermal contract coal will average $100 a metric ton this year, and $125 a ton in 2009, up from previous estimates of $90 and $110, UBS analysts led by Stephen Oldfield and Ghee Peh said in a report today.
According to AMG Data Services, "including ETF activity, Equity funds report net cash outflows totaling -$7.524 billion in the week ended 1/30/08 with Domestic funds reporting net outflows of -$6.315 billion and Non-domestic funds reporting net outflows of -$1.209 billion;
Excluding ETF activity, Equity funds report net cash outflows totaling -$3.724 billion with Domestic funds reporting net outflows of -$2.485 billion and Non-domestic funds reporting net outflows totaling -$1.238 billion."
Rob Hanna: "To summarize the two main points tonight:
1) Don’t be too eager to short. It’s doesn’t have positive expected value just after a Follow Through Day.
2) Watch market action closely over the next week. It should give you a pretty good indication of the intermediate-term."
Exxon's fourth quarter earnings rose to $2.13 a share from $1.76 a share last year. Chevron Q4 earnings $2.32 per share vs $1.74.
Job growth contracted in January for the first time in more than four years, the Labor Department said Friday. Nonfarm payrolls fell by 17,000 in January much weaker than the 85,000 expected by economists surveyed by MarketWatch. The unemployment rate ticked lower to 4.9% in January from 5.0% in the previous month. The department revised December's new-job total up to 82,000 from 18,000.
U.S. Jan. average workweek falls to 33.7 hours vs 33.8 Dec. U.S. Jan. average hourly earnings up 0.2%, up 3.7 yr-on-yr and continues to lag inflation.
Beazer Homes USA Inc said on Friday it would cease some operations, including mortgage origination, causing unspecified charges. The company said besides mortgage origination, it would exit some homebuilding operations in North Carolina, Ohio, South Carolina and Kentucky. Beazer also said it would enter a new marketing services deal with mortgage lender Countrywide Financial Corp .
In early Friday trading, the dollar index dropped 0.3% to 74.985.
Crude oil for March delivery slumped $2.79 to $88.96 a barrel on the New York Mercantile Exchange. Gold for April delivery fell $14.50 to end at $913.50 an ounce on the New York Mercantile Exchange.
The ISM index rose to 50.7% from 48.4% in December, the ISM said.
U.S. consumer sentiment rose in January, according to the University of Michigan consumer sentiment survey released Friday by UMich and Reuters. The index rose to 78.4 in January from 75.5 in December. The current conditions index rose to 94.4 from 91.0, while the expectations index gained to 68.1 from 65.6.
On a year-over-year basis, spending on private home construction was down 20.4% in December.
Rep. Ron Paul: "The Constitution was written for one specific purpose and that was to restrain the government, not to restrain the people."
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