1/1/07 2007
I would like to take this opportunity to wish you and your families a very happy and healthy New Year. I want to do something a bit different and will provide a forecast for 2007. In my view it will be highly volatile year-- in politics, in weather conditions, in the economy, and in the stock market. Let's get specific.
Please do not move to commit me. My initial prediction is that Bush and Cheney will not be president and vice president by the end of 2007, and that the country will have its first female as president, Nancy Pelosi.
I believe there will be a winter prior to Spring 2007 and would take advantage of natural gas prices as a trading vehicle. The range most likely will be between $5.50 and $9.50.
The drought in some areas of the country and outside our borders will come into play once again in 2007. That will make for increased demand for water and for several soft commodities.
The dollar will decrease in importance as an instrument of trade, and there will be a move towards trading bonds, equities,and commodities in both dollars and euros and possibly even yen.
A major focus will be on 2008- for China and the Olympics and for the U.S. presidential election. China's infrastructure demands will continue to increase and press supplies of various construction supplies. Thus, inflation will be alive and well.
As for interest rates, they will follow the path of inflation. The Fed will do their part, and will continue to print money at a 5-6% rate, and thus, depreciate the value of your dollar holdings by a similar rate.
As for the stock market, the VIX will no longer be forgotten. It will be alive and well. There will be large swings in the equity indices, and a range of 25% from the highs and lows would not be a surprise.
What stocks would I buy for 2007? I would buy Interactive Brokers when it goes public this year. In addition, I would buy the following: USO, BJ Services, Helmerich and Payne, Bronco Drilling, Nabors, and the Tribune Company.
Lastly, it is wise to remember that, in many instances, it is cheaper to buy a company than to build from scratch. As such, M&A activity will remain at a high level.
Sunday, December 31, 2006
Saturday, December 30, 2006
The Dry Bulk Market
12/31/06 The Dry Bulk Market
Marsoft: "Although dry bulk freight rates for 2006 as a whole have been down somewhat relative to their average 2005 levels, the rally which began in the middle of this year has gained further momentum over the past month. By early December, the Baltic Dry Index had climbed above 4,400 for the first time since April 2005.
All segments of the dry bulk market have seen moderate gains over the past month. The Baltic Cape TC Index rose from $63,000 per day in mid-November to $66,000 per day by mid-December. On our benchmark Tubarao/Rotterdam iron ore route, Cape rates rosefrom $17 per tonne, or $60,000 per day, in mid-November to $18.5 per tonne, or $67,000 per day, by mid-December...Although dry bulk fleet growth has accelerated in recent months, due to a surge of deliveries, this has not been enough to keep pace with demand. However, ordering activity has also accelerated during the past couple of months, with the orderbook now representing 22% of the existing fleet. This is not likely to pose much of a problem in the near-term, as most of the recently placed orders are not due for delivery until 2009 or 2010."
The Independent: "A vast ice shelf in the Canadian Arctic has broken up, a further sign of the astonishing rate at which polar ice is now melting because of global warming.
The Ayles ice shelf, more than 40 square miles in extent - over five times the size of central London - has broken clear from the coast of Ellesmere Island, about 500 miles south of the North Pole in the Canadian Arctic, it emerged yesterday.
The broken shelf has formed an ice island, in what a leading scientist described as a "dramatic and disturbing event", citing climate change as the cause."
Bloomberg reported India's foreign-exchange reserves rose by $32.18 billion over the past year.
For the year, the dollar index dropped 8.3%. That makes the stock market gains in the U.S. a good deal less appealing for many foreign investors. By comparison, the Australian dollar rose 8% to a 20-month high.
Doug Noland:"The bottom line is that the largest economy in the world – custodian of the global system’s “reserve currency” – has reached the point where only enormous Credit growth and financial sector leveraging are capable of maintaining inflated asset markets and sustaining sufficiently moderate economic expansion. This historic predicament is fomenting Escalating Global Monetary Disorder. Disregard all the “soft-landing” talk as nonsense. While housing and auto sectors were in downturn, the expansive “services”/finance dominated U.S. economy remained firmly entrenched in Bubble Dynamics... Instead of beginning to brace for the inevitable downside of the Credit Cycle, ultra-loose “money” enticed the system into embarking on the greatest expansion of risky Credits and the most outrageous speculation in Credit-related instruments/derivatives the world has ever known. At what cost? Well, a nearly $900 billion Current Account Deficit along with unprecedented speculative flows (to play global markets) literally inundated the world with liquidity...The year comes to a close with a troubling dichotomy: On the one hand, there are today’s fervently bullish perceptions with regard to the underlying soundness and resiliency of the U.S. economy and prospects of another banner year for U.S stocks in 2007. On the other hand, there is ominous dollar weakness, with the worn greenback exhibiting the erosion from yet another year of Bubble-induced non-productive debt expansion."
On Friday, the temperature range in Tucson was a high of 49 and a low of 40. Who says the cold weather is behind us?
On Saturday, a winter storm was expected to produce blizzard conditions and could dump up to 16 inches of snow across eastern Colorado, Kansas and New Mexico as far south as Albuquerque, forecasters said.
Interstate 70 and several other major east-west highways were closed Saturday from the Rockies east into Kansas. Interstate 25 heading south into New Mexico was closed at the border.
Marsoft: "Although dry bulk freight rates for 2006 as a whole have been down somewhat relative to their average 2005 levels, the rally which began in the middle of this year has gained further momentum over the past month. By early December, the Baltic Dry Index had climbed above 4,400 for the first time since April 2005.
All segments of the dry bulk market have seen moderate gains over the past month. The Baltic Cape TC Index rose from $63,000 per day in mid-November to $66,000 per day by mid-December. On our benchmark Tubarao/Rotterdam iron ore route, Cape rates rosefrom $17 per tonne, or $60,000 per day, in mid-November to $18.5 per tonne, or $67,000 per day, by mid-December...Although dry bulk fleet growth has accelerated in recent months, due to a surge of deliveries, this has not been enough to keep pace with demand. However, ordering activity has also accelerated during the past couple of months, with the orderbook now representing 22% of the existing fleet. This is not likely to pose much of a problem in the near-term, as most of the recently placed orders are not due for delivery until 2009 or 2010."
The Independent: "A vast ice shelf in the Canadian Arctic has broken up, a further sign of the astonishing rate at which polar ice is now melting because of global warming.
The Ayles ice shelf, more than 40 square miles in extent - over five times the size of central London - has broken clear from the coast of Ellesmere Island, about 500 miles south of the North Pole in the Canadian Arctic, it emerged yesterday.
The broken shelf has formed an ice island, in what a leading scientist described as a "dramatic and disturbing event", citing climate change as the cause."
Bloomberg reported India's foreign-exchange reserves rose by $32.18 billion over the past year.
For the year, the dollar index dropped 8.3%. That makes the stock market gains in the U.S. a good deal less appealing for many foreign investors. By comparison, the Australian dollar rose 8% to a 20-month high.
Doug Noland:"The bottom line is that the largest economy in the world – custodian of the global system’s “reserve currency” – has reached the point where only enormous Credit growth and financial sector leveraging are capable of maintaining inflated asset markets and sustaining sufficiently moderate economic expansion. This historic predicament is fomenting Escalating Global Monetary Disorder. Disregard all the “soft-landing” talk as nonsense. While housing and auto sectors were in downturn, the expansive “services”/finance dominated U.S. economy remained firmly entrenched in Bubble Dynamics... Instead of beginning to brace for the inevitable downside of the Credit Cycle, ultra-loose “money” enticed the system into embarking on the greatest expansion of risky Credits and the most outrageous speculation in Credit-related instruments/derivatives the world has ever known. At what cost? Well, a nearly $900 billion Current Account Deficit along with unprecedented speculative flows (to play global markets) literally inundated the world with liquidity...The year comes to a close with a troubling dichotomy: On the one hand, there are today’s fervently bullish perceptions with regard to the underlying soundness and resiliency of the U.S. economy and prospects of another banner year for U.S stocks in 2007. On the other hand, there is ominous dollar weakness, with the worn greenback exhibiting the erosion from yet another year of Bubble-induced non-productive debt expansion."
On Friday, the temperature range in Tucson was a high of 49 and a low of 40. Who says the cold weather is behind us?
On Saturday, a winter storm was expected to produce blizzard conditions and could dump up to 16 inches of snow across eastern Colorado, Kansas and New Mexico as far south as Albuquerque, forecasters said.
Interstate 70 and several other major east-west highways were closed Saturday from the Rockies east into Kansas. Interstate 25 heading south into New Mexico was closed at the border.
Friday, December 29, 2006
Liquidity
12/30/06 Liquidity
The European Central Bank announced an M3 money supply growth rate of 9.3 pct year-on-year, up from October's 8.5 pct and well ahead of economists' forecasts for 8.7 pct. Loans to the private sector grew 11.2 pct year-on-year in November, unchanged from October. What do you think of the chances of the ECB raising interest rates in February? Will increased rates accelerate the shift from dollars to euros?
Online retailers rang up $23.11 billion in holiday sales so far this year, a 26percent increase over 2005, according to data released Thursday by comScore Networks.
U.S. Web spending during the work week before Christmas grew 38 percent to $2.25 billion from last year.
The volume of help-wanted advertising in major U.S. newspapers was unchanged in November, the Conference Board said Friday. The research group's help-wanted index remained at 30 in November. A year ago, it was 38. Total online job ads declined by 119,800 or 3 percent to 3,711,300 in November, according to The Conference Board Help-Wanted OnLine Data Series(TM). There were 2.4 advertised vacancies online for every 100 persons in the labor force in November.
China's population of Internet users has risen by 30 percent over the past year to 132 million, a state news agency said Friday.
The figure was up from 123 million at the end of June, the Xinhua News Agency said, citing the government's China Internet Network Information Center.
The kidnappings and armed attacks plaguing oil companies operating in Nigeria's oil-rich Niger Delta are among the top security challenges U.S. businesses are likely to face in 2007, a State Department official said Thursday.
US oil demand in October was a whopping 560,000 barrels per day lower than initially thought, data from the Energy Information Administration (EIA) shows, with all key fuels coming in below earlier weekly estimates. Hence, the cutback in February scheduled by OPEC.
Natural gas bills in January are expected to drop 10.0% from last year. PG&E's residential customers can expect to pay $12.37 less for natural gas in January of 2007, compared to January of 2006.
France's unemployment rate fell to 8.7 per cent in November, the lowest level since July 2001.
The Financial Times: "The dollar interest rate swap market, which you probably do not spend much time thinking about, had, as of June, about $65,000bn in notional outstanding value, or something like five times the US gross domestic product. It is big, invisible plumbing and, like water mains, it is of little interest most of the time. Until, of course, there is a gurgling and nothing comes out of the pipe. To use analogies from the more visible markets, a five standard deviation move in the Dow Jones Industrial Average would be a decline of 350 basis points, or a 40-point drop in the S&P?500. That would have got your attention...“The key question,” says a banker, “is at what price the residual risk is held on the dealers’ books. The 5 per cent residual piece of a sub-prime mortgage securitisation might be written down to zero. That would be the conservative approach.”
However, the income from that written down asset is still counted when rating agencies, and swaps market counterparties, assess the creditworthiness of a bank or dealer. In other words, it may have disappeared from the asset side of the balance sheet but it remains on the profit and loss statement."
For the year, the Dow was up 16%, the S&P 500 14%, and the Nasdaq 10%. Gold finished at $638, crude at $61.05.
The Energy Department said Friday that supplies of natural gas held in storage in underground facilities fell by 46 billion cubic feet in the week ended Dec. 22. The draw was smaller than the 70 billion-cubic-feet decline analysts were expecting, according to Fimat USA. Stocks are now 458 billion cubic feet higher than they were a year ago and are 355 billion cubic feet above the 5-year average.
The European Central Bank announced an M3 money supply growth rate of 9.3 pct year-on-year, up from October's 8.5 pct and well ahead of economists' forecasts for 8.7 pct. Loans to the private sector grew 11.2 pct year-on-year in November, unchanged from October. What do you think of the chances of the ECB raising interest rates in February? Will increased rates accelerate the shift from dollars to euros?
Online retailers rang up $23.11 billion in holiday sales so far this year, a 26percent increase over 2005, according to data released Thursday by comScore Networks.
U.S. Web spending during the work week before Christmas grew 38 percent to $2.25 billion from last year.
The volume of help-wanted advertising in major U.S. newspapers was unchanged in November, the Conference Board said Friday. The research group's help-wanted index remained at 30 in November. A year ago, it was 38. Total online job ads declined by 119,800 or 3 percent to 3,711,300 in November, according to The Conference Board Help-Wanted OnLine Data Series(TM). There were 2.4 advertised vacancies online for every 100 persons in the labor force in November.
China's population of Internet users has risen by 30 percent over the past year to 132 million, a state news agency said Friday.
The figure was up from 123 million at the end of June, the Xinhua News Agency said, citing the government's China Internet Network Information Center.
The kidnappings and armed attacks plaguing oil companies operating in Nigeria's oil-rich Niger Delta are among the top security challenges U.S. businesses are likely to face in 2007, a State Department official said Thursday.
US oil demand in October was a whopping 560,000 barrels per day lower than initially thought, data from the Energy Information Administration (EIA) shows, with all key fuels coming in below earlier weekly estimates. Hence, the cutback in February scheduled by OPEC.
Natural gas bills in January are expected to drop 10.0% from last year. PG&E's residential customers can expect to pay $12.37 less for natural gas in January of 2007, compared to January of 2006.
France's unemployment rate fell to 8.7 per cent in November, the lowest level since July 2001.
The Financial Times: "The dollar interest rate swap market, which you probably do not spend much time thinking about, had, as of June, about $65,000bn in notional outstanding value, or something like five times the US gross domestic product. It is big, invisible plumbing and, like water mains, it is of little interest most of the time. Until, of course, there is a gurgling and nothing comes out of the pipe. To use analogies from the more visible markets, a five standard deviation move in the Dow Jones Industrial Average would be a decline of 350 basis points, or a 40-point drop in the S&P?500. That would have got your attention...“The key question,” says a banker, “is at what price the residual risk is held on the dealers’ books. The 5 per cent residual piece of a sub-prime mortgage securitisation might be written down to zero. That would be the conservative approach.”
However, the income from that written down asset is still counted when rating agencies, and swaps market counterparties, assess the creditworthiness of a bank or dealer. In other words, it may have disappeared from the asset side of the balance sheet but it remains on the profit and loss statement."
For the year, the Dow was up 16%, the S&P 500 14%, and the Nasdaq 10%. Gold finished at $638, crude at $61.05.
The Energy Department said Friday that supplies of natural gas held in storage in underground facilities fell by 46 billion cubic feet in the week ended Dec. 22. The draw was smaller than the 70 billion-cubic-feet decline analysts were expecting, according to Fimat USA. Stocks are now 458 billion cubic feet higher than they were a year ago and are 355 billion cubic feet above the 5-year average.
Thursday, December 28, 2006
Data Points
12/29/06 Data Points
The chief executive of Iceland's FL Group, which on Wednesday disclosed it has a 6% stake in American Airlines parent AMR Corp. (AMR), told The Times (of London) newspaper in an interview that he's seeking a meeting with the carrier's board to discuss his views that the company must be a part of airline consolidation. "I think enough has changed in the industry since then that American should be seen as a candidate," Hannes Smarason told the newspaper. "For the most part, as any big investor, we would like to sit down and have a chat." FL Group is AMR's third-largest shareholder.
Sales of U.S. existing homes rose 0.6% in November, to a seasonally adjusted annual rate of 6.28 million, the National Association of Realtors said. Inventories of unsold homes fell 1%, to 3.82 million, representing a 7.3-month supply. The national median existing-home price (2) for all housing types was $218,000 in November, which is 3.1 percent lower than November 2005 when the median price was $225,000.
The Conference Board said U.S. consumer confidence index climbed to 109.0 in December from a revised 105.3 in November. Economists were expecting a decline to about 101.9 from the previously reported 102.9. The Present Situation Index increased to 129.9 from 125.4. The Expectations Index improved to 95.1 from 91.9 last month.
The Chicago PMI rose to 52.4 in December from 49.9 in November. Within the index, the new orders subindex rose to 57.8 from 52 in November. The prices paid index was flat at 60.2.
Crude inventories fell by 8.1 million barrels in the latest week, the Department of Energy said Thursday. Gasoline inventories rose by 3 million barrels, and distillates supplies, which include heating oil and jet fuel, rose by 500,000 barrels.
Iron ore prices are set to increase by 9.5% in 2007. This will impact the price for steel products and ultimately the cost of construction.
"Yields leapt higher after the trifecta of firm data, which all came in higher than expected," wrote analysts at research firm Action Economics. "The gains in existing home sales and Chicago-PMI (after rumors of a sub-50 print) were especially unfriendly to bonds." In intraday trading, the 10-year yield touched 4.709%, the highest level since Nov. 6.
Doug Noland: "Financial historians will reflect back on this period’s prevailing complacency, especially with respect to the massive U.S. Trade and Current Account Deficits, with astonishment and disbelief. Yet for now years of Credit and asset inflation – parceling out unimaginable financial rewards along the way - have Wall Street reassured that There’s Simply Not an Imbalance Not to Love. The Street now appreciates that massive and intractable Trade Deficits provide the fountainhead of global liquidity overabundance. Moreover, the markets keenly recognize that the Bernanke Fed (like Greenspan’s) is content to acquiesce to deficit and liquidity excesses. There is today no constituency for reining in the Bubble(s).
This week’s release of a record quarterly Current Account Deficit ($225.6bn in Q3) garnered little attention from the media and even less in the markets. This despite the Deficit having now reached $900 billion annualized, or 6.8% of GDP. For perspective, the deficit for all of 1998 was $229 billion. At $877 billion, the Current Account Deficit over the previous four quarters compares to 2005’s $812 billion, 2004’s $664 billion, 2003’s $537 billion, and 2002’s $506 billion. And it is worth noting that the third quarter’s deficit was up 36% from Q2 2004’s $166 billion, back when the Fed commenced its fateful “tightening” cycle."
Ronald R. Cooke: "The Algerian Parliament has decided to increase Algeria’s share of oil production revenues by placing an “excess” profits tax on oil shipments whenever oil prices exceed $30.00 per barrel. Algeria, one of Africa’s largest oil and natural gas exporters, will levy the new tax starting in 2007. Depending on total output, the excess profits tax will range from 5% to 50% on the Algerian profits of foreign companies, including Shell, BP, Anadarko Petroleum and Hess Corporation.
The Parliament also signed into law a provision that the country’s oil monopoly, Sonatrach, must take a 51 percent controlling interest in all future production and refining contracts. This, despite the fact that most of the financing and technical expertise for oil and natural gas exploration, production and refining has been furnished by foreign corporations and financial institutions."
Ford Motor Co. likely will see a large sales drop in December, while Toyota Motor Corp. could gain enough to take over Ford's traditional role as the No. 2 auto company in the U.S. for the month, according to some industry analysts.
The chief executive of Iceland's FL Group, which on Wednesday disclosed it has a 6% stake in American Airlines parent AMR Corp. (AMR), told The Times (of London) newspaper in an interview that he's seeking a meeting with the carrier's board to discuss his views that the company must be a part of airline consolidation. "I think enough has changed in the industry since then that American should be seen as a candidate," Hannes Smarason told the newspaper. "For the most part, as any big investor, we would like to sit down and have a chat." FL Group is AMR's third-largest shareholder.
Sales of U.S. existing homes rose 0.6% in November, to a seasonally adjusted annual rate of 6.28 million, the National Association of Realtors said. Inventories of unsold homes fell 1%, to 3.82 million, representing a 7.3-month supply. The national median existing-home price (2) for all housing types was $218,000 in November, which is 3.1 percent lower than November 2005 when the median price was $225,000.
The Conference Board said U.S. consumer confidence index climbed to 109.0 in December from a revised 105.3 in November. Economists were expecting a decline to about 101.9 from the previously reported 102.9. The Present Situation Index increased to 129.9 from 125.4. The Expectations Index improved to 95.1 from 91.9 last month.
The Chicago PMI rose to 52.4 in December from 49.9 in November. Within the index, the new orders subindex rose to 57.8 from 52 in November. The prices paid index was flat at 60.2.
Crude inventories fell by 8.1 million barrels in the latest week, the Department of Energy said Thursday. Gasoline inventories rose by 3 million barrels, and distillates supplies, which include heating oil and jet fuel, rose by 500,000 barrels.
Iron ore prices are set to increase by 9.5% in 2007. This will impact the price for steel products and ultimately the cost of construction.
"Yields leapt higher after the trifecta of firm data, which all came in higher than expected," wrote analysts at research firm Action Economics. "The gains in existing home sales and Chicago-PMI (after rumors of a sub-50 print) were especially unfriendly to bonds." In intraday trading, the 10-year yield touched 4.709%, the highest level since Nov. 6.
Doug Noland: "Financial historians will reflect back on this period’s prevailing complacency, especially with respect to the massive U.S. Trade and Current Account Deficits, with astonishment and disbelief. Yet for now years of Credit and asset inflation – parceling out unimaginable financial rewards along the way - have Wall Street reassured that There’s Simply Not an Imbalance Not to Love. The Street now appreciates that massive and intractable Trade Deficits provide the fountainhead of global liquidity overabundance. Moreover, the markets keenly recognize that the Bernanke Fed (like Greenspan’s) is content to acquiesce to deficit and liquidity excesses. There is today no constituency for reining in the Bubble(s).
This week’s release of a record quarterly Current Account Deficit ($225.6bn in Q3) garnered little attention from the media and even less in the markets. This despite the Deficit having now reached $900 billion annualized, or 6.8% of GDP. For perspective, the deficit for all of 1998 was $229 billion. At $877 billion, the Current Account Deficit over the previous four quarters compares to 2005’s $812 billion, 2004’s $664 billion, 2003’s $537 billion, and 2002’s $506 billion. And it is worth noting that the third quarter’s deficit was up 36% from Q2 2004’s $166 billion, back when the Fed commenced its fateful “tightening” cycle."
Ronald R. Cooke: "The Algerian Parliament has decided to increase Algeria’s share of oil production revenues by placing an “excess” profits tax on oil shipments whenever oil prices exceed $30.00 per barrel. Algeria, one of Africa’s largest oil and natural gas exporters, will levy the new tax starting in 2007. Depending on total output, the excess profits tax will range from 5% to 50% on the Algerian profits of foreign companies, including Shell, BP, Anadarko Petroleum and Hess Corporation.
The Parliament also signed into law a provision that the country’s oil monopoly, Sonatrach, must take a 51 percent controlling interest in all future production and refining contracts. This, despite the fact that most of the financing and technical expertise for oil and natural gas exploration, production and refining has been furnished by foreign corporations and financial institutions."
Ford Motor Co. likely will see a large sales drop in December, while Toyota Motor Corp. could gain enough to take over Ford's traditional role as the No. 2 auto company in the U.S. for the month, according to some industry analysts.
Tuesday, December 26, 2006
Insider Buying
12/28/06 Insider Buying
John Hussman: "Meanwhile, the "smart money" shows a distinctly different pattern. The latest figures from Vickers show heavy insider selling at 8.4 shares sold for every 1 share purchased. The 8-week average is running at a ratio of 6.9 to 1. As Paul Macrae Montgomery asks, " We keep reading about how the share buy-backs, cash takeovers, and leveraged buyouts are proof positive that stock prices are a great 'value'. Well if stock prices are such great values, why is it that all this buying is being down with 'other peoples money,' and why are the savvy insiders simultaneously selling their own stock?"
Thomson Financial's stats for the first two weeks of December reveals a ratio of 55.5 to 1. That's 55 times as many shares sold as buys!
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, for the week ended December 22 decreased 14.2 percent to 555.8, its lowest level since early August. The index stood at 647.6 in the previous week.
According to Bloomberg, The United Arab Emirates will convert 8 percent of its foreign-exchange reserves to euros from dollars before September after the U.S. currency slumped this year, the country's central bank governor said.
The U.A.E. has started ``in a limited way'' to sell part of its dollar reserves, Sultan Bin Nasser al-Suwaidi said in an interview in Abu Dhabi on Dec. 24. ``We will accumulate euros each time the market appears to dip,'' as part of a plan to expand the country's holding of euros to 10 percent of the total from 2 percent today, he said. The total value of the U.A.E.'s current reserves is $24.9 billion, 98 percent in dollars and 2 percent in euros, al-Suwaidi said.
Sales of new homes rose 3.5% in November to a seasonally adjusted annual rate of 1.047 million, the Commerce Department reported Wednesday. Sales are now down 15.3% in the past year. October's sales pace was revised to 1.013 million, from an earlier-estimated 1.004 million. The median sales price of a new home rose to $251,700 from $243,800.
India's Essar group has made an offer to buy Hutchison Whampoa's 67 percent stake in mobile phone operator Hutchison Essar at an estimated enterprise value of $17-$18 billion, the Economic Times said.
Richard Daughty: "The government budgeted $2.6 trillion, and they spent another $600 billion on top of that, to the tune of $3.2 trillion in cash outlays last year! The GDP of the United States is only $13 trillion, for crying out loud! And the actual, real-life deficit last fiscal year, as reported by the Treasury itself, was $4.6 trillion! 35% of GDP! In one year!...the President estimates that 2006 government income (taxes, fees, tariffs, etc) to be about $2.3 trillion. In 2011, four years from now, he is projecting government income to rise steadily, linearly, to over $3 trillion!...A 30% increase in government income in four years? My God!"...we go over and try to Google up a single time in history, anybody's history, ever, where taxes going up 30% in four years is associated with a healthy, growing economy. No hits so far! Now we try to Google up a period in time where taxes increasing by 30% in four years is associated with recessions, depressions, doom, destruction, bankruptcy, misery, suffering and the stench of "hell on earth" permeating almost everything. We get so many hits that a small curl of blue smoke rises from the back of the computer."
An afternoon auction of $20 billion in 2-year Treasury notes met with weak demand. The 10-year note ended down 14/32 at 99 24/32, yielding 4.657%, up from 4.603% late Tuesday.
Irene Haas, an analyst with Canaccord Adams in Houston: "No one has really slowed down drilling in the U.S."
John Hussman: "Meanwhile, the "smart money" shows a distinctly different pattern. The latest figures from Vickers show heavy insider selling at 8.4 shares sold for every 1 share purchased. The 8-week average is running at a ratio of 6.9 to 1. As Paul Macrae Montgomery asks, " We keep reading about how the share buy-backs, cash takeovers, and leveraged buyouts are proof positive that stock prices are a great 'value'. Well if stock prices are such great values, why is it that all this buying is being down with 'other peoples money,' and why are the savvy insiders simultaneously selling their own stock?"
Thomson Financial's stats for the first two weeks of December reveals a ratio of 55.5 to 1. That's 55 times as many shares sold as buys!
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, for the week ended December 22 decreased 14.2 percent to 555.8, its lowest level since early August. The index stood at 647.6 in the previous week.
According to Bloomberg, The United Arab Emirates will convert 8 percent of its foreign-exchange reserves to euros from dollars before September after the U.S. currency slumped this year, the country's central bank governor said.
The U.A.E. has started ``in a limited way'' to sell part of its dollar reserves, Sultan Bin Nasser al-Suwaidi said in an interview in Abu Dhabi on Dec. 24. ``We will accumulate euros each time the market appears to dip,'' as part of a plan to expand the country's holding of euros to 10 percent of the total from 2 percent today, he said. The total value of the U.A.E.'s current reserves is $24.9 billion, 98 percent in dollars and 2 percent in euros, al-Suwaidi said.
Sales of new homes rose 3.5% in November to a seasonally adjusted annual rate of 1.047 million, the Commerce Department reported Wednesday. Sales are now down 15.3% in the past year. October's sales pace was revised to 1.013 million, from an earlier-estimated 1.004 million. The median sales price of a new home rose to $251,700 from $243,800.
India's Essar group has made an offer to buy Hutchison Whampoa's 67 percent stake in mobile phone operator Hutchison Essar at an estimated enterprise value of $17-$18 billion, the Economic Times said.
Richard Daughty: "The government budgeted $2.6 trillion, and they spent another $600 billion on top of that, to the tune of $3.2 trillion in cash outlays last year! The GDP of the United States is only $13 trillion, for crying out loud! And the actual, real-life deficit last fiscal year, as reported by the Treasury itself, was $4.6 trillion! 35% of GDP! In one year!...the President estimates that 2006 government income (taxes, fees, tariffs, etc) to be about $2.3 trillion. In 2011, four years from now, he is projecting government income to rise steadily, linearly, to over $3 trillion!...A 30% increase in government income in four years? My God!"...we go over and try to Google up a single time in history, anybody's history, ever, where taxes going up 30% in four years is associated with a healthy, growing economy. No hits so far! Now we try to Google up a period in time where taxes increasing by 30% in four years is associated with recessions, depressions, doom, destruction, bankruptcy, misery, suffering and the stench of "hell on earth" permeating almost everything. We get so many hits that a small curl of blue smoke rises from the back of the computer."
An afternoon auction of $20 billion in 2-year Treasury notes met with weak demand. The 10-year note ended down 14/32 at 99 24/32, yielding 4.657%, up from 4.603% late Tuesday.
Irene Haas, an analyst with Canaccord Adams in Houston: "No one has really slowed down drilling in the U.S."
Sanctions Don't Work
12/27/06 Sanctions Don't Work
Gholanhossein Nozari, the managing director of National Iranian Oil Company, said that 57 per cent of Iran’s income from oil exports was now received in euros.
"If necessary, Iran will use any weapon to defend itself," Oil Minister Kazem Vaziri-Hamaneh was quoted as saying by the semi-official Fars news agency on Tuesday.
Omar Bongo: "Economic sanctions rarely achieve the desired results."
Brett Steenbarger: "As long as we expand fresh 20-day lows and see new price lows day over day, the short-term trend will remain down."
"We knew spending would be slower than last year,” said Wayne Best, senior vice president of economic analysis at Visa USA. “But it seems to be even slower than we predicted."
John Hussman: "The Russell Investment Group just published their quarterly money managers poll, which shows a fairly stunning 85% of advisors bullish for the coming year. Another roughly 4% expect a flat market, about 9% expect a decline of less than 10%, and just 2% expect a decline of 10% or more. That's amazing given that this is already the second-longest span on record for which the market has not experienced even a 10% correction."
According to new numbers from the Leading Indicator of National Employment [LINE(TM)]
report, there will be more job growth in January 2007 than in January 2006,
and employers from both the manufacturing and the service sectors revealed
no evidence of increasing wage inflation. The findings are reported in the
January report of the LINE(TM) index, a collaborative effort between the
Society for Human Resource Management (SHRM) and the Rutgers University
School of Management and Labor Relations.
Despite the major decline in overall job vacancies, firms continue to
face considerable difficulty in finding highly qualified applicants to fill
key positions. Within both the manufacturing and service sectors,
recruiting difficulty continues to be a major concern, due to a drop in the
large pool of qualified job seekers eager to take open positions. The
recruiting difficulty indexes for the manufacturing and service sectors
remain at nearly the same level (19.5 percent and 22.3 percent). The LINE
"net increasing index" is calculated by taking the percentage increasing
minus the percentage decreasing.
MarketWatch.com: "For the first time since mid-August, the Nasdaq has violated its five-month uptrend."
U.S. antitrust authorities said on Tuesday they have approved Freeport McMoRan Copper & Gold Inc.'s bid to buy Phelps Dodge Corp.
"Based on our channel checks, shoppers were out and they were buying, but not at the level we had expected, especially at many of the apparel driven retailers," Roth Capital Partners analyst Elizabeth Pierce wrote in a note to clients.
"Although results were softer than we expected over the weekend, we believe it is premature to 'call' the holiday season given the increasing popularity of gift cards," she added.
Abu Dhabi's state oil firm, the main producer in the United Arab Emirates, said it would cut exports of nearly half its crude grades by 3-5 percent in February.
Caspar Weinberger: "Sanctions and negotiations can be very ineffective, and indeed foolish, unless the people you are talking with and negotiating with and trying to reach agreements with are people who can be trusted to keep their word."
Crude for February delivery fell $1.31 to $61.10 a barrel. Natural gas prices dropped 7.9% to $6.11 per million British thermal units on forecasts for continuing mild weather throughout much of the nation.
Gold for February delivery closed up $4.60 at $626.90 an ounce. Silver futures added 9 cents to $12.725 an ounce, platinum rose $1.50 to $1,123 an ounce and palladium rose $3 to $329.20 an ounce. Copper futures rose 2.4 cents to $2.878 a pound.
TransCanada and its TC Pipelines affiliate have agreed to buy US gas pipeline and storage assets from El Paso in a move that will greatly extend the Canadian company's reach into US markets. The deal is valued at more than $4 billion, including assumed debt.
The 2006 holiday season was Amazon.com Inc.'s "best ever," peaking with more than 4 million orders placed on Dec. 11, the Web retailer said Tuesday.
The S&P/Case-Shiller composite index showed a 2.4 percent year-over-year increase in the price of a single-family home based on prices of existing homes tracked over time in 10 metropolitan markets. For its 20-city composite index, prices grew 2.9 percent, the slowest rate ever for that data, according to the S&P index committee chairman, David Blitzer.
"Home price gains are continuing their steep deceleration," said Chief Economist Robert Shiller of MacroMarkets LLC. "We can clearly see that the monthly price declines are wide spread nationally."
The growth rate of the 10-city composite index is sharply below the 3.7 percent rise posted in September and the slowest since a 2 percent growth rate in February 1997, according to S&P.
Ludwig von Mises: "There can be neither effective political cooperation nor solidarity and collective security among nations fighting each other in the economic sphere."
Gholanhossein Nozari, the managing director of National Iranian Oil Company, said that 57 per cent of Iran’s income from oil exports was now received in euros.
"If necessary, Iran will use any weapon to defend itself," Oil Minister Kazem Vaziri-Hamaneh was quoted as saying by the semi-official Fars news agency on Tuesday.
Omar Bongo: "Economic sanctions rarely achieve the desired results."
Brett Steenbarger: "As long as we expand fresh 20-day lows and see new price lows day over day, the short-term trend will remain down."
"We knew spending would be slower than last year,” said Wayne Best, senior vice president of economic analysis at Visa USA. “But it seems to be even slower than we predicted."
John Hussman: "The Russell Investment Group just published their quarterly money managers poll, which shows a fairly stunning 85% of advisors bullish for the coming year. Another roughly 4% expect a flat market, about 9% expect a decline of less than 10%, and just 2% expect a decline of 10% or more. That's amazing given that this is already the second-longest span on record for which the market has not experienced even a 10% correction."
According to new numbers from the Leading Indicator of National Employment [LINE(TM)]
report, there will be more job growth in January 2007 than in January 2006,
and employers from both the manufacturing and the service sectors revealed
no evidence of increasing wage inflation. The findings are reported in the
January report of the LINE(TM) index, a collaborative effort between the
Society for Human Resource Management (SHRM) and the Rutgers University
School of Management and Labor Relations.
Despite the major decline in overall job vacancies, firms continue to
face considerable difficulty in finding highly qualified applicants to fill
key positions. Within both the manufacturing and service sectors,
recruiting difficulty continues to be a major concern, due to a drop in the
large pool of qualified job seekers eager to take open positions. The
recruiting difficulty indexes for the manufacturing and service sectors
remain at nearly the same level (19.5 percent and 22.3 percent). The LINE
"net increasing index" is calculated by taking the percentage increasing
minus the percentage decreasing.
MarketWatch.com: "For the first time since mid-August, the Nasdaq has violated its five-month uptrend."
U.S. antitrust authorities said on Tuesday they have approved Freeport McMoRan Copper & Gold Inc.'s bid to buy Phelps Dodge Corp.
"Based on our channel checks, shoppers were out and they were buying, but not at the level we had expected, especially at many of the apparel driven retailers," Roth Capital Partners analyst Elizabeth Pierce wrote in a note to clients.
"Although results were softer than we expected over the weekend, we believe it is premature to 'call' the holiday season given the increasing popularity of gift cards," she added.
Abu Dhabi's state oil firm, the main producer in the United Arab Emirates, said it would cut exports of nearly half its crude grades by 3-5 percent in February.
Caspar Weinberger: "Sanctions and negotiations can be very ineffective, and indeed foolish, unless the people you are talking with and negotiating with and trying to reach agreements with are people who can be trusted to keep their word."
Crude for February delivery fell $1.31 to $61.10 a barrel. Natural gas prices dropped 7.9% to $6.11 per million British thermal units on forecasts for continuing mild weather throughout much of the nation.
Gold for February delivery closed up $4.60 at $626.90 an ounce. Silver futures added 9 cents to $12.725 an ounce, platinum rose $1.50 to $1,123 an ounce and palladium rose $3 to $329.20 an ounce. Copper futures rose 2.4 cents to $2.878 a pound.
TransCanada and its TC Pipelines affiliate have agreed to buy US gas pipeline and storage assets from El Paso in a move that will greatly extend the Canadian company's reach into US markets. The deal is valued at more than $4 billion, including assumed debt.
The 2006 holiday season was Amazon.com Inc.'s "best ever," peaking with more than 4 million orders placed on Dec. 11, the Web retailer said Tuesday.
The S&P/Case-Shiller composite index showed a 2.4 percent year-over-year increase in the price of a single-family home based on prices of existing homes tracked over time in 10 metropolitan markets. For its 20-city composite index, prices grew 2.9 percent, the slowest rate ever for that data, according to the S&P index committee chairman, David Blitzer.
"Home price gains are continuing their steep deceleration," said Chief Economist Robert Shiller of MacroMarkets LLC. "We can clearly see that the monthly price declines are wide spread nationally."
The growth rate of the 10-city composite index is sharply below the 3.7 percent rise posted in September and the slowest since a 2 percent growth rate in February 1997, according to S&P.
Ludwig von Mises: "There can be neither effective political cooperation nor solidarity and collective security among nations fighting each other in the economic sphere."
Sharing The Wealth
12/26/07 Sharing The Wealth
"We've had nine years of great productivity growth, and most workers see no gain for it," said Dean Baker, co-director of the liberal Center for Economic and Policy Research.
The Houston Chronicle points out corporate earnings generated in the U.S. totaled $1.42 trillion at an annualized rate in the third quarter, or 10.7 percent of the economy's gross domestic income, government data show. That was the highest share of income that companies claimed since the 1960s and was up from 6.2 percent in 2000.
By contrast, total labor compensation accounted for 56.4 percent of gross domestic income in the period. That percentage has fallen from 58.4 percent in the fourth quarter of 2000 and has been in general decline since the early 1980s.
Singapore's manufacturing output for November jumped 14.7% year-on-year, to reach a five-month high.
Best Buy is opening its first outlet in China.
The Nikkei hit a 7-month high.
Forty Percent of Employers to Add Jobs in 2007, CareerBuilder.com Survey Finds.
The question remains at what pay and at what benefits?
Anadarko Petroleum Corp. agreed to sell its Vernon and Ansley fields to Exco Resources Inc. for $1.6 billion. Both fields are located in in Jackson Parish, La.
"We've had nine years of great productivity growth, and most workers see no gain for it," said Dean Baker, co-director of the liberal Center for Economic and Policy Research.
The Houston Chronicle points out corporate earnings generated in the U.S. totaled $1.42 trillion at an annualized rate in the third quarter, or 10.7 percent of the economy's gross domestic income, government data show. That was the highest share of income that companies claimed since the 1960s and was up from 6.2 percent in 2000.
By contrast, total labor compensation accounted for 56.4 percent of gross domestic income in the period. That percentage has fallen from 58.4 percent in the fourth quarter of 2000 and has been in general decline since the early 1980s.
Singapore's manufacturing output for November jumped 14.7% year-on-year, to reach a five-month high.
Best Buy is opening its first outlet in China.
The Nikkei hit a 7-month high.
Forty Percent of Employers to Add Jobs in 2007, CareerBuilder.com Survey Finds.
The question remains at what pay and at what benefits?
Anadarko Petroleum Corp. agreed to sell its Vernon and Ansley fields to Exco Resources Inc. for $1.6 billion. Both fields are located in in Jackson Parish, La.
Sunday, December 24, 2006
Happy Holidays
12/25/06 Happy Holidays
Mike Burk: " Next year is the 3rd year in the 4 year Presidential Cycle and, on average, the strongest by a wide margin.
Since 1963 the OTC has been up every 3rd year except 1987. The average gain for the 3rd year has been 36.5%, nearly 3 times the average gain of all years combined.
Since 1928 the SPX has been up every 3rd year except 1931 and 1939. The average gain has been 15.5%, a little over double its average gain of all years combined."
Tim Wood: "Things are not as rosy as they appear. All the while the public is numb.Personally, I have my doubts about the "powers that be" being able to pump the economy enough to save it again. After all, we are still seeing the deflating of the bubbles in housing and commodities from the last, or really the ongoing, reinflation effort. All the while, stock market is still hanging on from these reinflation efforts but is increasingly moving onto thinner and thinner ice. I believe that the housing and commodity markets were the first dominos to topple and that the stock market will likely be the next. We are certainly seeing indications of this anyway. Also, the sentiment data tells me that the public is fearlessly complacent and obliviously numb to the real danger here. So, in light of these warnings and in spite of the fact that the stock market is at all time highs I don't like what I see and the overall picture here makes me nervous."
Motley Fool: "In the world of energy, expectations of a status quo in demand and production still provide lots of work for service companies such as Schlumberger (NYSE: SLB), Baker Hughes (NYSE: BHI), and BJ Services (NYSE: BJS), along with exploration and production companies ExxonMobil, ConocoPhillips (NYSE: COP), and others. That's simply because both oil and gas wells lose pressure over time and the ability to produce at prior levels, which necessitates remedial steps to revitalize production, along with the drilling of additional wells to compensate for the declines."
Rigzone reported State-run Petroleos de Venezuela S.A. is teaming up with an Iranian shipbuilding firm to make offshore platforms, said PdVSA on Friday. PdVSA
signed the initial paperwork to form a jointly-owned company with Sadra America Latina, a division of Sadra, an Iranian marine construction firm that has been expanding into the offshore oil and natural gas business. PdVSA said the new venture, Venezirian Oil Company, will give Venezuela access to new offshore technology.
Vodafone and a consortium of private equity funds led by the Texas Pacific Group have forged ahead in talks for acquiring Hutchison Telecom International Ltd’s 67% stake in India’s fourth largest mobile operator.
Bloomberg reported Japan's consumer price gains probably accelerated in November, giving the central bank room to increase the lowest interest rates among major economies.
Marcel Pagnol: "The reason people find it so hard to be happy is that they always see the past better than it was, the present worse than it is, and the future less resolved than it will be."
Mike Burk: " Next year is the 3rd year in the 4 year Presidential Cycle and, on average, the strongest by a wide margin.
Since 1963 the OTC has been up every 3rd year except 1987. The average gain for the 3rd year has been 36.5%, nearly 3 times the average gain of all years combined.
Since 1928 the SPX has been up every 3rd year except 1931 and 1939. The average gain has been 15.5%, a little over double its average gain of all years combined."
Tim Wood: "Things are not as rosy as they appear. All the while the public is numb.Personally, I have my doubts about the "powers that be" being able to pump the economy enough to save it again. After all, we are still seeing the deflating of the bubbles in housing and commodities from the last, or really the ongoing, reinflation effort. All the while, stock market is still hanging on from these reinflation efforts but is increasingly moving onto thinner and thinner ice. I believe that the housing and commodity markets were the first dominos to topple and that the stock market will likely be the next. We are certainly seeing indications of this anyway. Also, the sentiment data tells me that the public is fearlessly complacent and obliviously numb to the real danger here. So, in light of these warnings and in spite of the fact that the stock market is at all time highs I don't like what I see and the overall picture here makes me nervous."
Motley Fool: "In the world of energy, expectations of a status quo in demand and production still provide lots of work for service companies such as Schlumberger (NYSE: SLB), Baker Hughes (NYSE: BHI), and BJ Services (NYSE: BJS), along with exploration and production companies ExxonMobil, ConocoPhillips (NYSE: COP), and others. That's simply because both oil and gas wells lose pressure over time and the ability to produce at prior levels, which necessitates remedial steps to revitalize production, along with the drilling of additional wells to compensate for the declines."
Rigzone reported State-run Petroleos de Venezuela S.A. is teaming up with an Iranian shipbuilding firm to make offshore platforms, said PdVSA on Friday. PdVSA
signed the initial paperwork to form a jointly-owned company with Sadra America Latina, a division of Sadra, an Iranian marine construction firm that has been expanding into the offshore oil and natural gas business. PdVSA said the new venture, Venezirian Oil Company, will give Venezuela access to new offshore technology.
Vodafone and a consortium of private equity funds led by the Texas Pacific Group have forged ahead in talks for acquiring Hutchison Telecom International Ltd’s 67% stake in India’s fourth largest mobile operator.
Bloomberg reported Japan's consumer price gains probably accelerated in November, giving the central bank room to increase the lowest interest rates among major economies.
Marcel Pagnol: "The reason people find it so hard to be happy is that they always see the past better than it was, the present worse than it is, and the future less resolved than it will be."
Saturday, December 23, 2006
Holiday Greetings
12/24/06 Holiday Greetings
An explosion rocked the outside of a government building in Nigeria's southern oil hub Saturday, soon after the military reported an overnight bombing of a water pipeline leading into a refinery.
The attacks came at the end of a week of violent strikes against petroleum companies in Africa's largest oil-producing nation. Militant groups say people in the oil region aren't benefiting enough from the wealth.
A suspected car bomb blew up outside the headquarters of Rivers State government in Nigeria's oil capital Port Harcourt on Saturday but no one was killed, officials said.
The explosion occurred moments after militants from the Movement for the Emancipation of the Niger Delta (MEND) said they were about to detonate two car bombs in the region. The MEND is fighting for regional autonomy of Nigeria's oil producing south.
David Chapman: "The seventh year of the decade has a decidedly mixed record. The record for the Dow Jones Industrials since inception is a dead heat of six up and six down.
It doesn't particularly help us if the prior year (ending in 6) was an up year or a down year. When years ending in 6 were up (seven times), the year ending in 7 was down four times and up three times, including the past two. When years ending in 6 were down (five times) the year ending in 7 was up three times and down twice (and down big, both times)...With the record of years ending in 7 a dead heat, following an up year in 6 slightly favoring the bears, the third year of a second-term president favoring the bulls, and a the pre-election year also favoring the bulls we have to turn to our key cycles to look for a hint of what is to come for 2007...
Our conclusions on market direction in 2007 are clear. While the broad market could survive until March, we believe that will be either the high or a secondary high. Following that we will begin a five-year bear market with a big portion of the collapse occurring in 2007-08, very similar to the collapse of 1937-38. Gold and precious metals should resume their bull runs in 2007, with an outside chance of gold running to $1,000 an ounce. Other commodities should also rise. Oil should resume its bull market once again once we break out over $70. The US dollar should go into decline, but we expect it to be orderly, with periodic sharp corrections."
Peter Schiff: "The secondary effects of the 1 in 5 sub-prime default rate will be a chain reaction of rising interest rates and falling home prices engendering still more defaults, with the added foreclosures causing the cycle to repeat. In my opinion, when the cycle is fully played out we are more likely to see an 80% default rate rather than 20%.
The main problem is that the majority of these loans were made to people who really cannot afford to repay them and were collateralized by properties whose true values were but a fraction of the loan amounts. Once the music stops and prices return to earth, borrowers who put little or no money down may decide to simply mail in their house keys rather than make additional mortgage payments. Why would anyone stretch to spend 40% of his or her monthly income to service a $700,000 mortgage on a condo valued at $500,000, especially when there are plenty of comparable rentals that are far more affordable?"
It is hard to believe that 70 million Americans were forecast to go out and shop on Dec. 23.
Essar Shipping and Logistics (ESOL), through its subsidiary Essar Oilfields Services, has acquired a semi-submersible rig for $ 220 million (nearly Rs 1000 crore). Essar was the first Indian company to offer contract drilling services in 1985 both for onshore as well as offshore exploration and production (E&P) activity.
The rig has a drilling depth capacity of 25,000 feet and is equipped with top drive, automatic pipe handling systems and rough weather BOP launch system. Industry analysts pointed out the rates for rig had doubled in last six months and companies were scouting for brand new rigs. Essar stated “The shipyards building drilling rigs are overbooked and there are no second hand quality rigs available in the market."
In my view, it is much more advantageous to go out and buy a drilling company than to
contract to have the rigs built. The market has overlooked the long-range demand for rigs, and Helmerich and Payne, Nabors, and Bronco Drilling are selling for a fraction of their true worth- naturally, this is simply my opinion. The same can be said for the oil service companies, and, in particular, BJ Services. At some point, you will look back and kick yourself for not owning shares in these companies.
A Chevron senior drill-site manager comments, "There's a lot of prospects out here we'd like to drill but can't yet because there aren't enough rigs."
Statoil cut 95,000 barrels per day at North Sea oil and gas field for five months.
An explosion rocked the outside of a government building in Nigeria's southern oil hub Saturday, soon after the military reported an overnight bombing of a water pipeline leading into a refinery.
The attacks came at the end of a week of violent strikes against petroleum companies in Africa's largest oil-producing nation. Militant groups say people in the oil region aren't benefiting enough from the wealth.
A suspected car bomb blew up outside the headquarters of Rivers State government in Nigeria's oil capital Port Harcourt on Saturday but no one was killed, officials said.
The explosion occurred moments after militants from the Movement for the Emancipation of the Niger Delta (MEND) said they were about to detonate two car bombs in the region. The MEND is fighting for regional autonomy of Nigeria's oil producing south.
David Chapman: "The seventh year of the decade has a decidedly mixed record. The record for the Dow Jones Industrials since inception is a dead heat of six up and six down.
It doesn't particularly help us if the prior year (ending in 6) was an up year or a down year. When years ending in 6 were up (seven times), the year ending in 7 was down four times and up three times, including the past two. When years ending in 6 were down (five times) the year ending in 7 was up three times and down twice (and down big, both times)...With the record of years ending in 7 a dead heat, following an up year in 6 slightly favoring the bears, the third year of a second-term president favoring the bulls, and a the pre-election year also favoring the bulls we have to turn to our key cycles to look for a hint of what is to come for 2007...
Our conclusions on market direction in 2007 are clear. While the broad market could survive until March, we believe that will be either the high or a secondary high. Following that we will begin a five-year bear market with a big portion of the collapse occurring in 2007-08, very similar to the collapse of 1937-38. Gold and precious metals should resume their bull runs in 2007, with an outside chance of gold running to $1,000 an ounce. Other commodities should also rise. Oil should resume its bull market once again once we break out over $70. The US dollar should go into decline, but we expect it to be orderly, with periodic sharp corrections."
Peter Schiff: "The secondary effects of the 1 in 5 sub-prime default rate will be a chain reaction of rising interest rates and falling home prices engendering still more defaults, with the added foreclosures causing the cycle to repeat. In my opinion, when the cycle is fully played out we are more likely to see an 80% default rate rather than 20%.
The main problem is that the majority of these loans were made to people who really cannot afford to repay them and were collateralized by properties whose true values were but a fraction of the loan amounts. Once the music stops and prices return to earth, borrowers who put little or no money down may decide to simply mail in their house keys rather than make additional mortgage payments. Why would anyone stretch to spend 40% of his or her monthly income to service a $700,000 mortgage on a condo valued at $500,000, especially when there are plenty of comparable rentals that are far more affordable?"
It is hard to believe that 70 million Americans were forecast to go out and shop on Dec. 23.
Essar Shipping and Logistics (ESOL), through its subsidiary Essar Oilfields Services, has acquired a semi-submersible rig for $ 220 million (nearly Rs 1000 crore). Essar was the first Indian company to offer contract drilling services in 1985 both for onshore as well as offshore exploration and production (E&P) activity.
The rig has a drilling depth capacity of 25,000 feet and is equipped with top drive, automatic pipe handling systems and rough weather BOP launch system. Industry analysts pointed out the rates for rig had doubled in last six months and companies were scouting for brand new rigs. Essar stated “The shipyards building drilling rigs are overbooked and there are no second hand quality rigs available in the market."
In my view, it is much more advantageous to go out and buy a drilling company than to
contract to have the rigs built. The market has overlooked the long-range demand for rigs, and Helmerich and Payne, Nabors, and Bronco Drilling are selling for a fraction of their true worth- naturally, this is simply my opinion. The same can be said for the oil service companies, and, in particular, BJ Services. At some point, you will look back and kick yourself for not owning shares in these companies.
A Chevron senior drill-site manager comments, "There's a lot of prospects out here we'd like to drill but can't yet because there aren't enough rigs."
Statoil cut 95,000 barrels per day at North Sea oil and gas field for five months.
Friday, December 22, 2006
Spelling It Out
12/23/06 Spelling It Out
Jas Jain: "For the Year Ending In September 2006:
Number of Housing Units added in a year (Supply) = 2,100,000
Increase In Number of Housing Units Occupied in a year (Demand) = 1,200,000
For the Month of November 2006:
Number of New Housing Units For Which Permits Were Filed = 1,500,000
Number of Housing Units Started = 1,600,000"
You believe the housing market has bottomed?
Paul Kasriel: "The fact that the dollar price of copper has declined along with the fall in the dollar implies that the price of copper has declined in terms of other currencies, not just the dollar. This could suggest that manufacturing activity globally is slowing."
comScore Networks Inc. raised its estimates for total online holiday shopping this season to $24.6 billion, from $24.3 billion, and representing a 25% increase from last year's season.
"For at least the past six years, gas prices have typically been on the decline at this time of year, partly because demand is lower," said Auto Club spokeswoman Carol Thorp. "But lower production levels at California refineries in the past month pushed wholesale gas prices sharply upward around Thanksgiving, and now that increase has been passed on to consumers." Inflation is muted?
George Ure: "Personal saving -- DPI less personal outlays -- was a negative $95.0 billion in November, compared with a negative $71.4 billion in October. Personal saving as a percentage of disposable personal income was a negative 1.0 percent in November, compared with a negative 0.7 percent in October."
Rupert Murdoch's News Corp. will swap its controlling stake in the satellite TV broadcaster DirecTV Group Inc. with Liberty Media Corp. in exchange for Liberty's 16 percent stake in News Corp.
Dan Denning: "The tech bubble may turn out to be a dress rehearsal for an even bigger bubble and threat now. Why do I say that?
"Here's the difference between today and 2000. Seven trillion dollars was wiped out when the tech bubble burst, proving that it was largely fictitious wealth. The real economy didn't really miss a beat…because the money people lost was not money people really had.
"It was paper gains, never realized, and ultimately lost…So all in all, for the most part, it was easy come, easy go.
"Today is much different. People have more at stake (the roof over their head), and less margin for error (fewer real assets on the balance sheet, more liabilities) and there is a connection between private equity/money shuffling capitalism and the housing markets…the connection is debt. And the debt is what makes this bubble different and worse than the last bubble.
"All that is at the household level. If the private equity boom continues (as I believe it will), it will also leave a mountain of debt rubble after the bubble bursts at the corporate level. It's odd, of course, that something as ephemeral as a bubble can leave real debt. Yet because the private equity guys are paying 40 cents for a $1.20 worth of future earnings (making up the difference with borrowed money), the newly-private companies are saddled up with debt they wouldn't have otherwise taken on before. This is, as the article notes, not real investment in new productive assets. It's debt that merely facilitates the transfer of ownership of the company's assets."
The 10-year benchmark Treasury note fell 17/32 to 100-2/32 with a yield of 4.619%, up from 4.55% late Thursday.
February crude closed at $62.41 a barrel, down 25 cents for the Friday session. January natural gas fell 16.5 cents to close at $6.635 per million British thermal units.
February gold closed at $622.30 an ounce, up 70 cents for the session. March silver rose 14.5 cents to close at $12.635 an ounce. March copper was at $2.8525 a pound, down 2.8 cents for the day.
Craig Walters: "A new poll conducted by the Kaiser Family Foundation shows that 65% of Americans strongly favor having the federal government negotiate prescription drug prices for Medicare. An additional 20% are somewhat in favor of this change."
The total U.S. death toll for American troops in Iraq is 2,960. By comparison, the 9/11 death toll was 2,752. You be the judge. Are we winning or losing the war? That does not include 25,000+ of our troops injured in Iraq.
Jas Jain: "For the Year Ending In September 2006:
Number of Housing Units added in a year (Supply) = 2,100,000
Increase In Number of Housing Units Occupied in a year (Demand) = 1,200,000
For the Month of November 2006:
Number of New Housing Units For Which Permits Were Filed = 1,500,000
Number of Housing Units Started = 1,600,000"
You believe the housing market has bottomed?
Paul Kasriel: "The fact that the dollar price of copper has declined along with the fall in the dollar implies that the price of copper has declined in terms of other currencies, not just the dollar. This could suggest that manufacturing activity globally is slowing."
comScore Networks Inc. raised its estimates for total online holiday shopping this season to $24.6 billion, from $24.3 billion, and representing a 25% increase from last year's season.
"For at least the past six years, gas prices have typically been on the decline at this time of year, partly because demand is lower," said Auto Club spokeswoman Carol Thorp. "But lower production levels at California refineries in the past month pushed wholesale gas prices sharply upward around Thanksgiving, and now that increase has been passed on to consumers." Inflation is muted?
George Ure: "Personal saving -- DPI less personal outlays -- was a negative $95.0 billion in November, compared with a negative $71.4 billion in October. Personal saving as a percentage of disposable personal income was a negative 1.0 percent in November, compared with a negative 0.7 percent in October."
Rupert Murdoch's News Corp. will swap its controlling stake in the satellite TV broadcaster DirecTV Group Inc. with Liberty Media Corp. in exchange for Liberty's 16 percent stake in News Corp.
Dan Denning: "The tech bubble may turn out to be a dress rehearsal for an even bigger bubble and threat now. Why do I say that?
"Here's the difference between today and 2000. Seven trillion dollars was wiped out when the tech bubble burst, proving that it was largely fictitious wealth. The real economy didn't really miss a beat…because the money people lost was not money people really had.
"It was paper gains, never realized, and ultimately lost…So all in all, for the most part, it was easy come, easy go.
"Today is much different. People have more at stake (the roof over their head), and less margin for error (fewer real assets on the balance sheet, more liabilities) and there is a connection between private equity/money shuffling capitalism and the housing markets…the connection is debt. And the debt is what makes this bubble different and worse than the last bubble.
"All that is at the household level. If the private equity boom continues (as I believe it will), it will also leave a mountain of debt rubble after the bubble bursts at the corporate level. It's odd, of course, that something as ephemeral as a bubble can leave real debt. Yet because the private equity guys are paying 40 cents for a $1.20 worth of future earnings (making up the difference with borrowed money), the newly-private companies are saddled up with debt they wouldn't have otherwise taken on before. This is, as the article notes, not real investment in new productive assets. It's debt that merely facilitates the transfer of ownership of the company's assets."
The 10-year benchmark Treasury note fell 17/32 to 100-2/32 with a yield of 4.619%, up from 4.55% late Thursday.
February crude closed at $62.41 a barrel, down 25 cents for the Friday session. January natural gas fell 16.5 cents to close at $6.635 per million British thermal units.
February gold closed at $622.30 an ounce, up 70 cents for the session. March silver rose 14.5 cents to close at $12.635 an ounce. March copper was at $2.8525 a pound, down 2.8 cents for the day.
Craig Walters: "A new poll conducted by the Kaiser Family Foundation shows that 65% of Americans strongly favor having the federal government negotiate prescription drug prices for Medicare. An additional 20% are somewhat in favor of this change."
The total U.S. death toll for American troops in Iraq is 2,960. By comparison, the 9/11 death toll was 2,752. You be the judge. Are we winning or losing the war? That does not include 25,000+ of our troops injured in Iraq.
Thursday, December 21, 2006
Rig Shortages
12/22/06 Shortages And Stress
I have written several times about drilling rig shortages and my suggestions to consider the purchase of Helmerich and Payne as well as Transocean. The following is a piece from seeking alpha: "Bloomberg reports a severe shortage of deep-sea oil drilling rig availability is creating delays in exploration and production for oil majors such as Chevron, which is struggling to exploit the "Jack" oil field in the Gulf of Mexico, the deepest well ever tested, announced in September. A Chevron senior drill-site manager comments, "There's a lot of prospects out here we'd like to drill but can't yet because there aren't enough rigs." Amidst the shortage, daily rental fees continue to rise, having doubled over the past 18 months. Transocean, the world's largest rig operator charges as much as $520,000/day. There are only 18 rigs in existence that can reach the deepest discoveries, and there are currently 31 rigs on order globally with such capabilities. Of these, only two will be finished next year and 13 will be ready in '08. Meanwhile, the delay in exploring and producing oil in the Gulf of Mexico means the U.S. will continue to rely on OPEC. Total daily rig operating costs which can exceed $1m/day are seen hurting profits of oil majors. Analysts surveyed by Bloomberg estimate average net income growth of 12% this year, versus 35% in '05. Earlier this month, Chevron announced a 23% increase in capex for '07 to $19.6b."
Arcelor Mittal has a memorandum of understanding with the state of Orissa in India to build a plant there in a project that will cost $9 billion.
China and oil-rich Kazakhstan have decided to work on a trans-border oil pipeline while completing the survey and delimitation of their border areas, the state media reported today.
This was stated in a document signed by Chinese President Hu Jintao and Kazakhstan President Nursultan Nazarbayev here last evening.
China and Kazakhstan also signed 11 cooperation agreements covering trade, energy, science and technology, culture and education.
The agreements include an outline agreement on oil pipeline construction and a framework agreement for Chinese funding worth USD 292.8 million.
The Labor Department reported that 315,000 U.S. workers filed initial claims for jobless benefits in the week ending Dec. 16, an increase of 9,000 from the previous week. Continuing jobless claims rose to 2.52 million, the highest amount since January.
The U.S. economy grew at a 2% real seasonally adjusted annual rate in the third quarter, slightly lower than the 2.2% estimated a month ago, the Commerce Department reported Thursday. It was the slowest growth since the fourth quarter of 2005. The economy grew at a 2.6% pace in the second quarter.
Representatives from the California-based Chandler family, Tribune Co.'s largest shareholder, attended sales presentations for the company at its Chicago headquarters this week, according to a published report.
Citing unidentified sources with knowledge of the situation, the Chicago Tribune reported Thursday that the family seems to be working with at least one of the private-equity firms that have shown interest in the company.
The Conference Board reported that the Composite Index of Leading Economic Indicators
increased 0.1% in November, following a 0.1% increase in October, and a
0.4% increase in September.
Says Ken Goldstein, Labor Economist at The Conference Board: "The
slower economy of the second half of 2006 might continue into the first
half of 2007. But it may not get any slower. Energy prices are down. The
housing slump does not appear to be deepening. And the economy retains
considerable strength. The unemployment rate remains relatively low.
Inflation is low, and so are interest rates. These are all positives with
respect to consumption and investment. At this stage, something else must
develop, either to give the economy a new jolt of energy to speed it up, or
a new snag that could force the economy to slow more."
The Conference Board reported that the Coincident Index increased 0.2%
in November, as well as in October, and increased 0.1 percent in September.
The Lagging Index increased 0.5% in November, compared with a 0.2% rise in
October and September.
About three-fourths of people in the United States, Australia, Canada, France, Germany, Italy, South Korea and the United Kingdom say they experience stress on a daily basis, according to AP-Ipsos polling. Those anxious feelings are even more intense during the holidays.
The Iranian government and China's biggest offshore oil producer, CNOOC Ltd. (0883.HK), have signed a $16-billion natural gas deal, Iranian news agency Mehr reported Wednesday. The deal would cover the development of Iran's northern Pars gas field and the construction of liquefied natural gas facilities which will export gas to China.
Rigzone reported the Iranian Oil Ministry will carry out all its oil-industry related equipment purchases in euros instead of dollars after the Iranian government decided to base its new-year budget in euros, Iran's oil minister, Kazem Vaziri Hamaneh, said Wednesday.
"Based on the government's policy of substituting the euro for the dollar, all oil industry purchase contracts will be done in the euro," the official IRNA news agency quoted Vaziri as saying.
Government spokesman Ghollam Hussein Elham said earlier this week that all national hard currency revenues, including those from oil exports, will be calculated in euros in the Iranian budget being drafted for the Iranian fiscal year beginning March 21.
The Energy Department said natural-gas inventories fell 71 billion cubic feet for the week ended Dec. 15. Global Insight expected a decline of 73 billion. Total stocks now stand at 3.167 trillion cubic feet, up 342 billion cubic feet from the year-ago level, and 274 billion cubic feet above the five-year average, the government data said.
Iran’s oil minister on Wednesday admitted that Tehran was having trouble financing oil projects, in a rare acknowledgment of the economic cost of its nuclear dispute.
“Currently, overseas banks and financiers have decreased their co-operation,” Kazem Vaziri-Hamaneh told the oil ministry news agency, Shana.
Richmond Federal Reserve Bank President Jeffery Lacker said he's not persuaded that inflation has moderated. "Such a moderation is not yet evident, despite the two most recent CPI reports.It would take several months worth of data to provide statistically convincing evidence of a moderation in inflation."
February gold fell $2.70 to close at $621.60 an ounce in New York Thursday. March silver fell 15.5 cents, or 1.2%, to end at $12.49 an ounce and March copper finished at a fresh, six-month low of $2.8805 a pound, down 7.4 cents, or 2.5%.
The Federal Reserve Bank of Philadelphia said its Philly Fed index fell to negative 4.3 in December from positive 5.1 in November. Indicators for new orders and unfilled orders also fell below zero. Shipments remained healthy.
February crude fell $1.06 to close at $62.66 a barrel Thursday. January natural-gas futures finished at $6.80 per million British thermal units.
I have written several times about drilling rig shortages and my suggestions to consider the purchase of Helmerich and Payne as well as Transocean. The following is a piece from seeking alpha: "Bloomberg reports a severe shortage of deep-sea oil drilling rig availability is creating delays in exploration and production for oil majors such as Chevron, which is struggling to exploit the "Jack" oil field in the Gulf of Mexico, the deepest well ever tested, announced in September. A Chevron senior drill-site manager comments, "There's a lot of prospects out here we'd like to drill but can't yet because there aren't enough rigs." Amidst the shortage, daily rental fees continue to rise, having doubled over the past 18 months. Transocean, the world's largest rig operator charges as much as $520,000/day. There are only 18 rigs in existence that can reach the deepest discoveries, and there are currently 31 rigs on order globally with such capabilities. Of these, only two will be finished next year and 13 will be ready in '08. Meanwhile, the delay in exploring and producing oil in the Gulf of Mexico means the U.S. will continue to rely on OPEC. Total daily rig operating costs which can exceed $1m/day are seen hurting profits of oil majors. Analysts surveyed by Bloomberg estimate average net income growth of 12% this year, versus 35% in '05. Earlier this month, Chevron announced a 23% increase in capex for '07 to $19.6b."
Arcelor Mittal has a memorandum of understanding with the state of Orissa in India to build a plant there in a project that will cost $9 billion.
China and oil-rich Kazakhstan have decided to work on a trans-border oil pipeline while completing the survey and delimitation of their border areas, the state media reported today.
This was stated in a document signed by Chinese President Hu Jintao and Kazakhstan President Nursultan Nazarbayev here last evening.
China and Kazakhstan also signed 11 cooperation agreements covering trade, energy, science and technology, culture and education.
The agreements include an outline agreement on oil pipeline construction and a framework agreement for Chinese funding worth USD 292.8 million.
The Labor Department reported that 315,000 U.S. workers filed initial claims for jobless benefits in the week ending Dec. 16, an increase of 9,000 from the previous week. Continuing jobless claims rose to 2.52 million, the highest amount since January.
The U.S. economy grew at a 2% real seasonally adjusted annual rate in the third quarter, slightly lower than the 2.2% estimated a month ago, the Commerce Department reported Thursday. It was the slowest growth since the fourth quarter of 2005. The economy grew at a 2.6% pace in the second quarter.
Representatives from the California-based Chandler family, Tribune Co.'s largest shareholder, attended sales presentations for the company at its Chicago headquarters this week, according to a published report.
Citing unidentified sources with knowledge of the situation, the Chicago Tribune reported Thursday that the family seems to be working with at least one of the private-equity firms that have shown interest in the company.
The Conference Board reported that the Composite Index of Leading Economic Indicators
increased 0.1% in November, following a 0.1% increase in October, and a
0.4% increase in September.
Says Ken Goldstein, Labor Economist at The Conference Board: "The
slower economy of the second half of 2006 might continue into the first
half of 2007. But it may not get any slower. Energy prices are down. The
housing slump does not appear to be deepening. And the economy retains
considerable strength. The unemployment rate remains relatively low.
Inflation is low, and so are interest rates. These are all positives with
respect to consumption and investment. At this stage, something else must
develop, either to give the economy a new jolt of energy to speed it up, or
a new snag that could force the economy to slow more."
The Conference Board reported that the Coincident Index increased 0.2%
in November, as well as in October, and increased 0.1 percent in September.
The Lagging Index increased 0.5% in November, compared with a 0.2% rise in
October and September.
About three-fourths of people in the United States, Australia, Canada, France, Germany, Italy, South Korea and the United Kingdom say they experience stress on a daily basis, according to AP-Ipsos polling. Those anxious feelings are even more intense during the holidays.
The Iranian government and China's biggest offshore oil producer, CNOOC Ltd. (0883.HK), have signed a $16-billion natural gas deal, Iranian news agency Mehr reported Wednesday. The deal would cover the development of Iran's northern Pars gas field and the construction of liquefied natural gas facilities which will export gas to China.
Rigzone reported the Iranian Oil Ministry will carry out all its oil-industry related equipment purchases in euros instead of dollars after the Iranian government decided to base its new-year budget in euros, Iran's oil minister, Kazem Vaziri Hamaneh, said Wednesday.
"Based on the government's policy of substituting the euro for the dollar, all oil industry purchase contracts will be done in the euro," the official IRNA news agency quoted Vaziri as saying.
Government spokesman Ghollam Hussein Elham said earlier this week that all national hard currency revenues, including those from oil exports, will be calculated in euros in the Iranian budget being drafted for the Iranian fiscal year beginning March 21.
The Energy Department said natural-gas inventories fell 71 billion cubic feet for the week ended Dec. 15. Global Insight expected a decline of 73 billion. Total stocks now stand at 3.167 trillion cubic feet, up 342 billion cubic feet from the year-ago level, and 274 billion cubic feet above the five-year average, the government data said.
Iran’s oil minister on Wednesday admitted that Tehran was having trouble financing oil projects, in a rare acknowledgment of the economic cost of its nuclear dispute.
“Currently, overseas banks and financiers have decreased their co-operation,” Kazem Vaziri-Hamaneh told the oil ministry news agency, Shana.
Richmond Federal Reserve Bank President Jeffery Lacker said he's not persuaded that inflation has moderated. "Such a moderation is not yet evident, despite the two most recent CPI reports.It would take several months worth of data to provide statistically convincing evidence of a moderation in inflation."
February gold fell $2.70 to close at $621.60 an ounce in New York Thursday. March silver fell 15.5 cents, or 1.2%, to end at $12.49 an ounce and March copper finished at a fresh, six-month low of $2.8805 a pound, down 7.4 cents, or 2.5%.
The Federal Reserve Bank of Philadelphia said its Philly Fed index fell to negative 4.3 in December from positive 5.1 in November. Indicators for new orders and unfilled orders also fell below zero. Shipments remained healthy.
February crude fell $1.06 to close at $62.66 a barrel Thursday. January natural-gas futures finished at $6.80 per million British thermal units.
Wednesday, December 20, 2006
Further Developments
12/21/06 Further Developments
Palatin Technologies and King Pharmaceuticals Complete Enrollment in
Pre-Menopausal Cohort of a Phase 2 Clinical Trial Evaluating Bremelanotide in Pre- and Post-Menopausal Female Sexual Dysfunction Patients. "Based on positive results from a pilot safety/clinical pharmacology study evaluating bremelanotide in FSD patients, Palatin and King Pharmaceuticals are jointly committed to advancing the clinical development of bremelanotide for FSD and are pleased to report continued progress in the execution of our development program," said Trevor Hallam, Ph.D., Palatin's Executive Vice President of Research & Development. "Both female sexual dysfunction and male sexual dysfunction represent significant market opportunities where we believe bremelanotide has the potential to address unmet medical needs."
George Ure: "Turn off all the power (as people in the Pacific Northwest found out last week) and suddenly you can't get milk or gasoline because the credit card machines don't work." That's true of gas pumps and gasoline etc.
Sasol will spend R45 billion in the three years to June 2009 on its capital expenditure programme.
"About 75 percent of this is set to take place within the energy sector, and an estimated 60 percent of the total will be spent in South Africa," Sasol added.
The petrochemicals group again indicated that it was engaged in preliminary feasibility studies to examine the possibility of building a second coal-to-liquids plant in South Africa.
Charlie Bobrinskoy of Ariel Capital Management in Chicago, which owns 6.6 percent of Tribune, said, "We are pleased that the board and its advisers are running a thorough process to explore all opportunities to maximize shareholder value."
M&F Worldwide Corp. said it would buy John H. Harland Company for $1.7 billion, or $52.75 a share in cash, a premium of $8.28, or 19%, over its Tuesday closing price of $44.47 a share. The merger is expected to close in the second half of 2007. M&F is controlled by Ronald Perelman, and hence, I have no interest in following this transaction to possible completion.
Bush said Tuesday for the first time that American forces were not winning in Iraq. He also said the military would be expanded to fight a long-term battle against terrorism.
Research firm Gartner expects there to be over 21 million WiMax connections in North America by 2011.
John Williams: "GAAP-Based Federal Deficit Jumps to $4.6 Trillion. Total Federal Obligations at $54.6 Trillion. Energy Pricing Gimmicks Distort CPI and Trade Deficit."
FedEx Corp. reported lower-than-expected quarterly profit on Wednesday and forecast earnings in the current period below Wall Street estimates.
Talisman Energy Inc. said Tuesday it is expanding its share buyback and will repurchase up to 10 percent of its public float over the year ending March 27.
From time to time, I mention various technology I believe will resonate over the long term. Some has been in the biotech field and some in other technology, such as, Google's search and Skype's voip. Today I'd like to leave you with Arts Alliance Labs, Inc. and their Consumer Recommendation Software for online retail businesses, a secure infrastructure for the growing Digital Cinema network around the globe, and BenTen, a framework for online community applications. I believe the offerings from AAL are the thing of the present and the future.
The American Petroleum Institute reported a drop of 4.3 million barrels in crude supplies for the week ended Dec. 15. The Energy Department had reported a fall of 6.3 million. Motor gasoline supplies were down 300,000 barrels, the API said, but the government's reported a rise of 1 million. Distillate supplies were down 1.4 million barrels, the API said, contrary to the 1.2 million-barrel rise reported by the government.
Bill Cara: "I think markets will only truly revert to normal after the next spike in gold -- something like we saw in the 1970's, where currency imbalances had to be dealt with (and gold spiked), which led to a series of Bear markets (1973-4, 1978, and 1981-2).
At this point, traders can expect a growing number of analyst downgrades and fewer numbers of upgrades because objective analysts on Wall Street can no longer ignore the fact that debt (public and private) is being created faster than wealth (ie, the increase of real enterprise value)."
A new Center for Responsible Lending (CRL) study reveals that 2.2 million American households will lose their homes and as much as $164 billion due to foreclosures in the subprime mortgage market. Titled, "Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners," the CRL study is the first comprehensive, nationwide review of millions of subprime mortgages originated from 1998 through the third quarter of 2006.
February gold fell $1.10 to close at $624.30 an ounce and March silver ended at $12.69 an ounce, down 2 cents for the session. March copper lost 6.3 cents, or 2.1%, to finish at $2.9545 a pound.
It's been about one week since approximately 150,000 of Puget Sound's customers have been without power in the Pacific Northwest. It should be noted that a similar storm hit the area in 1993. In the interim, Puget Sound has had several rate increases but only marginally improved the underground infrastructure of the power delivered to the customers. We are talking about elderly without electricity or heat in 30 degree weather. We are talking about non-working elevators. For a time, pharmacies had no power and prescriptions could not be filled. I have not even begun to discuss the business lost during the holiday season, and that should approach $750 million. Puget Sound will ask for more rate increases. Unfortunately the local PUC is an old boy network. They should make Puget Sound pay each residential customer at least $1,000 for the food thrown out and the extra expense for gasoline ( the local gasoline stations that had power raised their prices by 10 to 20 cents a gallon and the gas lines were an hour long)and for the doctor bills caused by no heat. In addition, the PUC should then all resign for the lack of due diligence. As an aside, I have not dealt with the hundreds of millions of dollars lost by businesses during the past week and going forward into Christmas. Puget Sound should be held accountable. If I were stupid enough to be a Puget Sound stockholder, I would surely sell the shares.
Charles Kingsley: "Pain is no evil, unless it conquers us."
David Walker, Comptroller of the US, recently stated that the GAO had found so many significant material deficiencies in the government’s accounting systems that the GAO was “unable to express an opinion” on the financial statements. Can you imagine if the United States of America were a public company? Enron looks good by comparison. How would you like to be a creditor of the U.S.?
Here's a little more to chew on from David Walker: "Despite improvement in both the fiscal year 2006 reported net operating cost and the cash-based budget deficit, the U.S. government’s total reported liabilities, net social insurance commitments, and other fiscal exposures continue to grow and now total approximately $50 trillion, representing approximately four times the Nation’s total output (GDP) in fiscal year 2006, up from about $20 trillion, or two times GDP in fiscal year 2000.
As this long-term fiscal imbalance continues to grow, the retirement of the “baby boom” generation is closer to becoming a reality with the first wave of boomers eligible for early retirement under Social Security in 2008.
Given these and other factors, it seems clear that the nation’s current fiscal path is unsustainable and that tough choices by the President and the Congress are necessary in order to address the nation’s large and growing long-term fiscal imbalance." Don't be alarmed. The remedy from Bush is to go out and shop!
Natural-gas futures closed down 4.4% ahead of a government supply update on Thursday.
February crude rose 26 cents to close at $63.72 a barrel Wednesday.
ElkCorp said Wednesday it has received an unsolicited cash tender offer to purchase all of its shares for $40 each from Building Materials Corporation of America. It is amazing to me the multiple offers forthcoming for so many companies.
Albert Einstein: "The only justifiable purpose of political institutions is to ensure the unhindered development of the individual."
Palatin Technologies and King Pharmaceuticals Complete Enrollment in
Pre-Menopausal Cohort of a Phase 2 Clinical Trial Evaluating Bremelanotide in Pre- and Post-Menopausal Female Sexual Dysfunction Patients. "Based on positive results from a pilot safety/clinical pharmacology study evaluating bremelanotide in FSD patients, Palatin and King Pharmaceuticals are jointly committed to advancing the clinical development of bremelanotide for FSD and are pleased to report continued progress in the execution of our development program," said Trevor Hallam, Ph.D., Palatin's Executive Vice President of Research & Development. "Both female sexual dysfunction and male sexual dysfunction represent significant market opportunities where we believe bremelanotide has the potential to address unmet medical needs."
George Ure: "Turn off all the power (as people in the Pacific Northwest found out last week) and suddenly you can't get milk or gasoline because the credit card machines don't work." That's true of gas pumps and gasoline etc.
Sasol will spend R45 billion in the three years to June 2009 on its capital expenditure programme.
"About 75 percent of this is set to take place within the energy sector, and an estimated 60 percent of the total will be spent in South Africa," Sasol added.
The petrochemicals group again indicated that it was engaged in preliminary feasibility studies to examine the possibility of building a second coal-to-liquids plant in South Africa.
Charlie Bobrinskoy of Ariel Capital Management in Chicago, which owns 6.6 percent of Tribune, said, "We are pleased that the board and its advisers are running a thorough process to explore all opportunities to maximize shareholder value."
M&F Worldwide Corp. said it would buy John H. Harland Company for $1.7 billion, or $52.75 a share in cash, a premium of $8.28, or 19%, over its Tuesday closing price of $44.47 a share. The merger is expected to close in the second half of 2007. M&F is controlled by Ronald Perelman, and hence, I have no interest in following this transaction to possible completion.
Bush said Tuesday for the first time that American forces were not winning in Iraq. He also said the military would be expanded to fight a long-term battle against terrorism.
Research firm Gartner expects there to be over 21 million WiMax connections in North America by 2011.
John Williams: "GAAP-Based Federal Deficit Jumps to $4.6 Trillion. Total Federal Obligations at $54.6 Trillion. Energy Pricing Gimmicks Distort CPI and Trade Deficit."
FedEx Corp. reported lower-than-expected quarterly profit on Wednesday and forecast earnings in the current period below Wall Street estimates.
Talisman Energy Inc. said Tuesday it is expanding its share buyback and will repurchase up to 10 percent of its public float over the year ending March 27.
From time to time, I mention various technology I believe will resonate over the long term. Some has been in the biotech field and some in other technology, such as, Google's search and Skype's voip. Today I'd like to leave you with Arts Alliance Labs, Inc. and their Consumer Recommendation Software for online retail businesses, a secure infrastructure for the growing Digital Cinema network around the globe, and BenTen, a framework for online community applications. I believe the offerings from AAL are the thing of the present and the future.
The American Petroleum Institute reported a drop of 4.3 million barrels in crude supplies for the week ended Dec. 15. The Energy Department had reported a fall of 6.3 million. Motor gasoline supplies were down 300,000 barrels, the API said, but the government's reported a rise of 1 million. Distillate supplies were down 1.4 million barrels, the API said, contrary to the 1.2 million-barrel rise reported by the government.
Bill Cara: "I think markets will only truly revert to normal after the next spike in gold -- something like we saw in the 1970's, where currency imbalances had to be dealt with (and gold spiked), which led to a series of Bear markets (1973-4, 1978, and 1981-2).
At this point, traders can expect a growing number of analyst downgrades and fewer numbers of upgrades because objective analysts on Wall Street can no longer ignore the fact that debt (public and private) is being created faster than wealth (ie, the increase of real enterprise value)."
A new Center for Responsible Lending (CRL) study reveals that 2.2 million American households will lose their homes and as much as $164 billion due to foreclosures in the subprime mortgage market. Titled, "Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners," the CRL study is the first comprehensive, nationwide review of millions of subprime mortgages originated from 1998 through the third quarter of 2006.
February gold fell $1.10 to close at $624.30 an ounce and March silver ended at $12.69 an ounce, down 2 cents for the session. March copper lost 6.3 cents, or 2.1%, to finish at $2.9545 a pound.
It's been about one week since approximately 150,000 of Puget Sound's customers have been without power in the Pacific Northwest. It should be noted that a similar storm hit the area in 1993. In the interim, Puget Sound has had several rate increases but only marginally improved the underground infrastructure of the power delivered to the customers. We are talking about elderly without electricity or heat in 30 degree weather. We are talking about non-working elevators. For a time, pharmacies had no power and prescriptions could not be filled. I have not even begun to discuss the business lost during the holiday season, and that should approach $750 million. Puget Sound will ask for more rate increases. Unfortunately the local PUC is an old boy network. They should make Puget Sound pay each residential customer at least $1,000 for the food thrown out and the extra expense for gasoline ( the local gasoline stations that had power raised their prices by 10 to 20 cents a gallon and the gas lines were an hour long)and for the doctor bills caused by no heat. In addition, the PUC should then all resign for the lack of due diligence. As an aside, I have not dealt with the hundreds of millions of dollars lost by businesses during the past week and going forward into Christmas. Puget Sound should be held accountable. If I were stupid enough to be a Puget Sound stockholder, I would surely sell the shares.
Charles Kingsley: "Pain is no evil, unless it conquers us."
David Walker, Comptroller of the US, recently stated that the GAO had found so many significant material deficiencies in the government’s accounting systems that the GAO was “unable to express an opinion” on the financial statements. Can you imagine if the United States of America were a public company? Enron looks good by comparison. How would you like to be a creditor of the U.S.?
Here's a little more to chew on from David Walker: "Despite improvement in both the fiscal year 2006 reported net operating cost and the cash-based budget deficit, the U.S. government’s total reported liabilities, net social insurance commitments, and other fiscal exposures continue to grow and now total approximately $50 trillion, representing approximately four times the Nation’s total output (GDP) in fiscal year 2006, up from about $20 trillion, or two times GDP in fiscal year 2000.
As this long-term fiscal imbalance continues to grow, the retirement of the “baby boom” generation is closer to becoming a reality with the first wave of boomers eligible for early retirement under Social Security in 2008.
Given these and other factors, it seems clear that the nation’s current fiscal path is unsustainable and that tough choices by the President and the Congress are necessary in order to address the nation’s large and growing long-term fiscal imbalance." Don't be alarmed. The remedy from Bush is to go out and shop!
Natural-gas futures closed down 4.4% ahead of a government supply update on Thursday.
February crude rose 26 cents to close at $63.72 a barrel Wednesday.
ElkCorp said Wednesday it has received an unsolicited cash tender offer to purchase all of its shares for $40 each from Building Materials Corporation of America. It is amazing to me the multiple offers forthcoming for so many companies.
Albert Einstein: "The only justifiable purpose of political institutions is to ensure the unhindered development of the individual."
Tuesday, December 19, 2006
Expectations
12/20/06 Expectations
Construction on new homes rebounded in November, rising 6.7% after a whopping 14% drop in October, the Commerce Department reported Tuesday. Building permits, meanwhile, fell 3% to a fresh nine-year low, signaling that the housing market remains very weak. Starts rose 6.7% in November to a seasonally adjusted annual rate of 1.588 million. Starts are down 25.5% in the past year. Building permits, considered a leading indicator, fell 3% to a seasonally adjusted annual rate of 1.506 million. Building permits are down 31.3% in the past year.
Producer prices rose by much more than expected in November, with the core producerprice index rising by the most since July 1980, the Labor Department said. The November producer price index climbed by 2%, the biggest rise since November 1974, statistics show. Most of the gain in the headline producer price number was in energy prices, which rose by 6.1%. Of that, 17.9% was gasoline prices, while 14.6% was diesel fuel. I find it interesting that, in other government data, inflation is tame because they state energy prices declined. If you go to the pump and/or pay for heating oil, the answer is pretty clear. By the way, regular unleaded gas in the Seattle area is now $2.77 a gallon.
A Pentagon report found an average of almost 960 attacks on U.S. and Iraqi targets every week from early August to early November.
The Thai government has reversed a decision to impose tough capital controls on foreign investors in the stock market after the benchmark SET index lost 15% overnight, according to Forex.com. The Thai central bank on Monday announced measures that would lock up 30% of new foreign currency deposits for a year and said the measures would become effective Tuesday. The central bank said it was trying to curb speculation that had caused the Thai baht to appreciate by about 17% against the dollar this year. "The government has now reversed the decision after seeing the effect," said Forex.com.
Nouriel Roubini provides some points in a speech by John Duggan, Comptroller of the Currency:
"* 5% of mortgage originations in 1994 were sub-prime; that is now up to 20%.
* Interest-only and payment-option ARMS were 2% of loan originations in 2000, they now account for 40%.
* 20% of payment-option ARMs originated in the past two years have loan value greater than home value, a figure that would double to 40% if home prices were to decline another 10%. Thus many mortgage holders have significant negative equity in their homes.
* 50% of the sub-prime market is now made up of ‘stated income’ mortgages where "the borrower pays the lender not to verify the borrower’s stated income on the loan application, making it possible for the borrower to artificially inflate the size of his or her income in order to qualify for a bigger mortgage."
* A study by the Mortgage Asset Research Institute found that 60% of applications for these ‘stated income’ loans exaggerated income by at least 50%.
* The increase in debt-servicing ("payment shock") coming from negative ammortization mortgages can be severe: if rates are reset even only by 2 percentage points the payment increase will amount to a near doubling of the amount of the initial monthly payments."
Zmann: "Houston Ship Channel has been shut in for 5 days with fog. 60 tankers await unloading. The region accounts for 12% of US refining capacity and I’ve seen one report of reduced throughput due to the delayed unloadings. This should set up some pretty sizable withdrawal expectations for this week and next for gasoline and heating oil."
Circuit City Stores Inc. said it swung to a loss in the fiscal third quarter as deep discounts on flat-panel televisions and computer hardware and software cut into profit margins. It also lowered its full-year sales outlook.
Oracle's sales fell short of expectations.
The peso's 6.2 percent gain against the dollar in the past six months adds to the savings for Mexicans on clothes, shoes and electronics. Mexican shoppers come from Monterrey, the northern industrial hub that is 150 miles south of Laredo, and from as far as Mexico City, 700 miles away. They spend $500 to $1,000 a trip, said Michael Patrick, director of the Texas Center for Border Economic and Enterprise Development at Texas A&M International University in Laredo.
From Daily Reckoning: "Mortgage equity withdrawal (MEW) has faltered, to an annualized rate of $214.2 billion in the third quarter of this year after peaking at $730.5 billion a year earlier."
Harrah's Entertainment Inc. has agreed to be acquired by private-equity firms Apollo Management and Texas Pacific Group for $16.7 billion plus the assumption of $11 billion in debt, according to a media report Tuesday. The private equity firms agreed to pay $90 a share for the Las Vegas casino giant, the Wall Street Journal reported on its Web site, citing a person close to the matter. Two months ago, the firms bid $81 a share, the report said. Harrah's top managers, including CEO Gary Loveman, are expected to be retained by the new owners, the Journal reported. Under the merger agreement, Harrah's may solicit superior proposals from third parties during the next 25 days, and the board of Harrah's intends to solicit superior proposals during this period. The transaction is expected to be completed in one year, and is subject to approval from shareholders and regulators.
January crude rose 94 cents to close at $63.15 a barrel on Tuesday. The February contract, which is now the front-month futures contract, climbed 67 cents to end at $63.46.
February gold climbed $7.50 to close at $625.40 an ounce Tuesday. March silver added 18.5 cents to finish at $12.71 an ounce, but March copper lost 1.2 cents to end at $3.0175 a pound.
Redback Networks Inc. announced a definitive agreement to be acquired by Ericsson for $2.1 billion or $25 dollars per Redback share. The acquisition is expected to occur by means of a tender offer for all of the outstanding shares of Redback common stock.
Construction on new homes rebounded in November, rising 6.7% after a whopping 14% drop in October, the Commerce Department reported Tuesday. Building permits, meanwhile, fell 3% to a fresh nine-year low, signaling that the housing market remains very weak. Starts rose 6.7% in November to a seasonally adjusted annual rate of 1.588 million. Starts are down 25.5% in the past year. Building permits, considered a leading indicator, fell 3% to a seasonally adjusted annual rate of 1.506 million. Building permits are down 31.3% in the past year.
Producer prices rose by much more than expected in November, with the core producerprice index rising by the most since July 1980, the Labor Department said. The November producer price index climbed by 2%, the biggest rise since November 1974, statistics show. Most of the gain in the headline producer price number was in energy prices, which rose by 6.1%. Of that, 17.9% was gasoline prices, while 14.6% was diesel fuel. I find it interesting that, in other government data, inflation is tame because they state energy prices declined. If you go to the pump and/or pay for heating oil, the answer is pretty clear. By the way, regular unleaded gas in the Seattle area is now $2.77 a gallon.
A Pentagon report found an average of almost 960 attacks on U.S. and Iraqi targets every week from early August to early November.
The Thai government has reversed a decision to impose tough capital controls on foreign investors in the stock market after the benchmark SET index lost 15% overnight, according to Forex.com. The Thai central bank on Monday announced measures that would lock up 30% of new foreign currency deposits for a year and said the measures would become effective Tuesday. The central bank said it was trying to curb speculation that had caused the Thai baht to appreciate by about 17% against the dollar this year. "The government has now reversed the decision after seeing the effect," said Forex.com.
Nouriel Roubini provides some points in a speech by John Duggan, Comptroller of the Currency:
"* 5% of mortgage originations in 1994 were sub-prime; that is now up to 20%.
* Interest-only and payment-option ARMS were 2% of loan originations in 2000, they now account for 40%.
* 20% of payment-option ARMs originated in the past two years have loan value greater than home value, a figure that would double to 40% if home prices were to decline another 10%. Thus many mortgage holders have significant negative equity in their homes.
* 50% of the sub-prime market is now made up of ‘stated income’ mortgages where "the borrower pays the lender not to verify the borrower’s stated income on the loan application, making it possible for the borrower to artificially inflate the size of his or her income in order to qualify for a bigger mortgage."
* A study by the Mortgage Asset Research Institute found that 60% of applications for these ‘stated income’ loans exaggerated income by at least 50%.
* The increase in debt-servicing ("payment shock") coming from negative ammortization mortgages can be severe: if rates are reset even only by 2 percentage points the payment increase will amount to a near doubling of the amount of the initial monthly payments."
Zmann: "Houston Ship Channel has been shut in for 5 days with fog. 60 tankers await unloading. The region accounts for 12% of US refining capacity and I’ve seen one report of reduced throughput due to the delayed unloadings. This should set up some pretty sizable withdrawal expectations for this week and next for gasoline and heating oil."
Circuit City Stores Inc. said it swung to a loss in the fiscal third quarter as deep discounts on flat-panel televisions and computer hardware and software cut into profit margins. It also lowered its full-year sales outlook.
Oracle's sales fell short of expectations.
The peso's 6.2 percent gain against the dollar in the past six months adds to the savings for Mexicans on clothes, shoes and electronics. Mexican shoppers come from Monterrey, the northern industrial hub that is 150 miles south of Laredo, and from as far as Mexico City, 700 miles away. They spend $500 to $1,000 a trip, said Michael Patrick, director of the Texas Center for Border Economic and Enterprise Development at Texas A&M International University in Laredo.
From Daily Reckoning: "Mortgage equity withdrawal (MEW) has faltered, to an annualized rate of $214.2 billion in the third quarter of this year after peaking at $730.5 billion a year earlier."
Harrah's Entertainment Inc. has agreed to be acquired by private-equity firms Apollo Management and Texas Pacific Group for $16.7 billion plus the assumption of $11 billion in debt, according to a media report Tuesday. The private equity firms agreed to pay $90 a share for the Las Vegas casino giant, the Wall Street Journal reported on its Web site, citing a person close to the matter. Two months ago, the firms bid $81 a share, the report said. Harrah's top managers, including CEO Gary Loveman, are expected to be retained by the new owners, the Journal reported. Under the merger agreement, Harrah's may solicit superior proposals from third parties during the next 25 days, and the board of Harrah's intends to solicit superior proposals during this period. The transaction is expected to be completed in one year, and is subject to approval from shareholders and regulators.
January crude rose 94 cents to close at $63.15 a barrel on Tuesday. The February contract, which is now the front-month futures contract, climbed 67 cents to end at $63.46.
February gold climbed $7.50 to close at $625.40 an ounce Tuesday. March silver added 18.5 cents to finish at $12.71 an ounce, but March copper lost 1.2 cents to end at $3.0175 a pound.
Redback Networks Inc. announced a definitive agreement to be acquired by Ericsson for $2.1 billion or $25 dollars per Redback share. The acquisition is expected to occur by means of a tender offer for all of the outstanding shares of Redback common stock.
Monday, December 18, 2006
Happenings
12/19/06 Happenings
Icos Corp.'s board said on Monday it had agreed to a sweetened takeover offer from Eli Lilly and Co. of $34 per share in cash, up from a previous offer of $32 per share.
Norway's Statoil on Monday said it has agreed to buy the oil and natural-gas division of Norsk Hydro in a deal that will create the world's largest offshore operator.
Pharmacy-benefit manager Express Scripts Inc. is preparing a $26 billion cash-and-stock offer for Caremark Rx Inc., in an effort to break up the company's existing takeover deal with drug chain CVS Corp., according to a media report.
Delta Air Lines Inc. is expected as soon as Tuesday to file a bankruptcy reorganization plan that values the company at $10 billion to $12 billion, substantially more than the $8.4 billion hostile-merger offer from U.S. Airways Group Inc., according to a media report Sunday.
VNU, the closely held media company with businesses like Nielsen Media Research and the publications Billboard and Hollywood Reporter, said it would cut 4000 jobs during 2007.
OPEC on Monday said the fundamentals of the world oil market show signs of weakening in 2007 as economic growth slows and supply from non-OPEC countries rises faster than global demand. In a monthly report, the group that pumps more than a third of the world's oil held its forecast for global demand growth at 1.3 million barrels per day and said a weakening U.S. economy posed risks to the outlook. "Risks for oil demand appear to be more weighed on the downside, given the dangers to global economic growth emanating from a visibly weakening U.S. economy," OPEC said of the 2007 forecast.
Home Depot Inc. said on Monday that investment firm Relational Investors LLC intends to submit a proposal asking the company to appoint a special committee of independent directors to evaluate its direction, management performance and strategic alternatives. Home Depot said it has advised Relational that it will arrange a meeting early in the new year but will oppose the resolution and proxy solicitation that Relational intends to pursue.
The National Retail Federation, a trade group, estimates that shoppers will buy $24.8 billion worth of cards, up 34 percent from last year. About 6 percent, or $4.8 billion, of this year's gift cards will go unused, estimated Laura Lane, vice president of unclaimed property services for Keane Co., a compliance and risk management consulting firm.
A MasterCard Advisors survey, which focuses on credit card spending and other economic indicators, shows that spending in November and December has climbed at half the rate of last year's 8-percent growth.
John Hussman: "So on any given day, what I'm actually doing is running variations of stock selection approaches on historical data – for example, testing the effectiveness of using operating P/E's, earnings momentum, etc. What I find is that the best performing approaches, even over the past decade, are those that emphasize normalized free cash flow, and are conscious of both valuations and market action. What I also find is that the versions that have performed best over the long-term are lagging this year, and that it's difficult to improve on our existing methodology. That's frustrating, but also somewhat comforting... Nothing prevents investors from driving the market higher over the short-term so long as Wall Street analysts propagate the same sort of ignorance that they encouraged in the late 1990's. In any event, further market gains on the hallucination that P/E multiples are “reasonable” will only make the long-term resolution worse. We're willing to accept a limited amount of call option exposure based on the current speculative mood of investors, but a larger speculative exposure is still best executed on a short-term pullback that clears the strenuously overbought condition of the market."
Verizon Communications may sign an agreement as early as Monday with five major Asian telecom carriers to build the first high-speed trans-Pacific undersea cable system directly linking the U.S and China, the Wall Street Journal reported, citing people familiar with the matter. The project is estimated to cost $500 million. The cable system is designed in part to serve the surging volumes of Internet and phone traffic produced by multinational corporations.
The U.S. current account deficit widened to $225.6 billion in the third quarter, or 6.8% of gross domestic product, the Commerce Department reported Monday.
Royal Ahold is in talks with private equity over potentially selling is US food service unit; reports put this as much as $4B to $5B.
Biomet has agreed to be acquired for some $10.9 Billion in cash, a $44 offer from buyers include Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts and the Texas Pacific Group, along with one of Biomet's founders, Dane A. Miller.
ElkCorp is being acquired by the Carlyle Group for $38.00 per share.
MacDermid gets $35 buyout offer from a CEO-led group.
Weight Watchers has launched a self-tender offer for up to 8.3 million shares of its common stock. The New York weight management services company said it would pay between $47 and $54 for each share. The company said the tender offer will expire at 12:00 a.m. Eastern on Jan. 18.
February gold fell $1.20 to close at $617.90 an ounce Monday. March silver dropped 45.5 cents, or 3.5%, to end at $12.525 an ounce. March copper gained 1.3 cents to close at $3.0295 a pound.
January natural gas dropped 33.4 cents, or 4.5%, to close at $7.075 per million British thermal units. January crude fell $1.22 to close at $62.21 a barrel, ahead of Tuesday's futures contract expiration.
The euro rose 0.5% to trade at $1.3164 against the dollar on Tuesday after data from the German Ifo survey showed that its business climate index rose to 108.7, from 106.8 in November, its highest level for 16 years.
For 2006, Cemex expects to meet its EBITDA outlook of $4.1 billion, on revenue of $18 billion. The company sees operating income of more than $2.9 billion. Cemex did not provide any outlook for 2007 due to the "uncertainty around the depth and duration of the ongoing correction in the U.S. residential sector."
Hovnanian Enterprises Inc. said it swung to a fourth-quarter net loss available to shareholders of $117.9 million, or $1.88 a share, as revenue fell and margins narrowed. In the same period last year, the Red Bank, N.J.-based home builder posted net earnings available to shareholders of $165.4 million, or $2.53 a share. Revenue fell 1.5% to $1.75 billion from $1.77 billion. The company expects 2007 per-share earnings of $1.50 to $2, on 16,000 to 18,000 home deliveries. For the first quarter, Hovnanian sees per-share earnings of 5 cents to 10 cents. "We believe that the overall U.S. housing market may hit the bottom in the first half of 2007," said Ara Hovnanian, the company's president and chief executive, in a statement. "However, the housing market is likely to bounce along the bottom for several quarters before pricing and sales pace improves."
A group of Tribune Co. executives led by Chief Executive Dennis FitzSimons together with a consortium of three private investment firms are expected to enter a bid for Tribune, according to a media report Monday. The management consortium includes Providence Equity Partners of Rhode Island, Apollo Management of New York and Madison Dearborn Partners, the Los Angeles Times reported. Tribune's largest shareholder, the Chandler family, is also in talks with investment firm Yucaipa Cos. about making an an offer for some or all of Tribune's assets, the L.A. Times said, citing people familiar with the matter.
Icos Corp.'s board said on Monday it had agreed to a sweetened takeover offer from Eli Lilly and Co. of $34 per share in cash, up from a previous offer of $32 per share.
Norway's Statoil on Monday said it has agreed to buy the oil and natural-gas division of Norsk Hydro in a deal that will create the world's largest offshore operator.
Pharmacy-benefit manager Express Scripts Inc. is preparing a $26 billion cash-and-stock offer for Caremark Rx Inc., in an effort to break up the company's existing takeover deal with drug chain CVS Corp., according to a media report.
Delta Air Lines Inc. is expected as soon as Tuesday to file a bankruptcy reorganization plan that values the company at $10 billion to $12 billion, substantially more than the $8.4 billion hostile-merger offer from U.S. Airways Group Inc., according to a media report Sunday.
VNU, the closely held media company with businesses like Nielsen Media Research and the publications Billboard and Hollywood Reporter, said it would cut 4000 jobs during 2007.
OPEC on Monday said the fundamentals of the world oil market show signs of weakening in 2007 as economic growth slows and supply from non-OPEC countries rises faster than global demand. In a monthly report, the group that pumps more than a third of the world's oil held its forecast for global demand growth at 1.3 million barrels per day and said a weakening U.S. economy posed risks to the outlook. "Risks for oil demand appear to be more weighed on the downside, given the dangers to global economic growth emanating from a visibly weakening U.S. economy," OPEC said of the 2007 forecast.
Home Depot Inc. said on Monday that investment firm Relational Investors LLC intends to submit a proposal asking the company to appoint a special committee of independent directors to evaluate its direction, management performance and strategic alternatives. Home Depot said it has advised Relational that it will arrange a meeting early in the new year but will oppose the resolution and proxy solicitation that Relational intends to pursue.
The National Retail Federation, a trade group, estimates that shoppers will buy $24.8 billion worth of cards, up 34 percent from last year. About 6 percent, or $4.8 billion, of this year's gift cards will go unused, estimated Laura Lane, vice president of unclaimed property services for Keane Co., a compliance and risk management consulting firm.
A MasterCard Advisors survey, which focuses on credit card spending and other economic indicators, shows that spending in November and December has climbed at half the rate of last year's 8-percent growth.
John Hussman: "So on any given day, what I'm actually doing is running variations of stock selection approaches on historical data – for example, testing the effectiveness of using operating P/E's, earnings momentum, etc. What I find is that the best performing approaches, even over the past decade, are those that emphasize normalized free cash flow, and are conscious of both valuations and market action. What I also find is that the versions that have performed best over the long-term are lagging this year, and that it's difficult to improve on our existing methodology. That's frustrating, but also somewhat comforting... Nothing prevents investors from driving the market higher over the short-term so long as Wall Street analysts propagate the same sort of ignorance that they encouraged in the late 1990's. In any event, further market gains on the hallucination that P/E multiples are “reasonable” will only make the long-term resolution worse. We're willing to accept a limited amount of call option exposure based on the current speculative mood of investors, but a larger speculative exposure is still best executed on a short-term pullback that clears the strenuously overbought condition of the market."
Verizon Communications may sign an agreement as early as Monday with five major Asian telecom carriers to build the first high-speed trans-Pacific undersea cable system directly linking the U.S and China, the Wall Street Journal reported, citing people familiar with the matter. The project is estimated to cost $500 million. The cable system is designed in part to serve the surging volumes of Internet and phone traffic produced by multinational corporations.
The U.S. current account deficit widened to $225.6 billion in the third quarter, or 6.8% of gross domestic product, the Commerce Department reported Monday.
Royal Ahold is in talks with private equity over potentially selling is US food service unit; reports put this as much as $4B to $5B.
Biomet has agreed to be acquired for some $10.9 Billion in cash, a $44 offer from buyers include Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts and the Texas Pacific Group, along with one of Biomet's founders, Dane A. Miller.
ElkCorp is being acquired by the Carlyle Group for $38.00 per share.
MacDermid gets $35 buyout offer from a CEO-led group.
Weight Watchers has launched a self-tender offer for up to 8.3 million shares of its common stock. The New York weight management services company said it would pay between $47 and $54 for each share. The company said the tender offer will expire at 12:00 a.m. Eastern on Jan. 18.
February gold fell $1.20 to close at $617.90 an ounce Monday. March silver dropped 45.5 cents, or 3.5%, to end at $12.525 an ounce. March copper gained 1.3 cents to close at $3.0295 a pound.
January natural gas dropped 33.4 cents, or 4.5%, to close at $7.075 per million British thermal units. January crude fell $1.22 to close at $62.21 a barrel, ahead of Tuesday's futures contract expiration.
The euro rose 0.5% to trade at $1.3164 against the dollar on Tuesday after data from the German Ifo survey showed that its business climate index rose to 108.7, from 106.8 in November, its highest level for 16 years.
For 2006, Cemex expects to meet its EBITDA outlook of $4.1 billion, on revenue of $18 billion. The company sees operating income of more than $2.9 billion. Cemex did not provide any outlook for 2007 due to the "uncertainty around the depth and duration of the ongoing correction in the U.S. residential sector."
Hovnanian Enterprises Inc. said it swung to a fourth-quarter net loss available to shareholders of $117.9 million, or $1.88 a share, as revenue fell and margins narrowed. In the same period last year, the Red Bank, N.J.-based home builder posted net earnings available to shareholders of $165.4 million, or $2.53 a share. Revenue fell 1.5% to $1.75 billion from $1.77 billion. The company expects 2007 per-share earnings of $1.50 to $2, on 16,000 to 18,000 home deliveries. For the first quarter, Hovnanian sees per-share earnings of 5 cents to 10 cents. "We believe that the overall U.S. housing market may hit the bottom in the first half of 2007," said Ara Hovnanian, the company's president and chief executive, in a statement. "However, the housing market is likely to bounce along the bottom for several quarters before pricing and sales pace improves."
A group of Tribune Co. executives led by Chief Executive Dennis FitzSimons together with a consortium of three private investment firms are expected to enter a bid for Tribune, according to a media report Monday. The management consortium includes Providence Equity Partners of Rhode Island, Apollo Management of New York and Madison Dearborn Partners, the Los Angeles Times reported. Tribune's largest shareholder, the Chandler family, is also in talks with investment firm Yucaipa Cos. about making an an offer for some or all of Tribune's assets, the L.A. Times said, citing people familiar with the matter.
Sunday, December 17, 2006
Comparing
12/18/06 Comparing
According to the BLS, in September 2006, private industry employer compensation costs averaged $25.52 per hour worked. Wages and salaries averaged $18.04 per hour (70.7 percent), while benefits averaged $7.48 (29.3 percent). By comparison,in state and local government, in September 2006, employer costs averaged $37.91 per
hour worked. Wages and salaries, which accounted for 67.3 percent of the total,
averaged $25.53, while benefits, which accounted for the remaining 32.7 percent, averaged $12.38. Benefit costs increased from 31.4 percent of total compensation
and $10.89 per hour for state and local government workers in September 2004.
I realize that I must be in far left field. I continually look for risk. It's much harder to produce on-going excellent returns if your are trying to overcome losses. Wall Street has clearly forgotten about volatility and risk. Just look at the VIX. It closed under 10 on Friday. Money managers dream of fees and soft landings. By comparison, I am always checking under the hood. How can one realistically expect a soft landing from the largest debtor nation in the history of the universe? Think about the scenario: the Fed will be on hold for the next 6 months and then ease. GDP growth will be around 2.5% in 2007. Foreign countries will still treasure U.S. treasuries. Housing prices will land on a soft cushion. U.S. vehicle demand will not decline below 15.5 million in 2007. By comparison, I'd rather side with the tooth fairy.
As for the tooth fairy, an interesting strategy for the wekend was selling the Harrah's Entertainment December 80 puts for 70 cents in Friday's trading. The puts were put to me over this weekend. That places a cost of $79.30 a share. We'll have to see how this works out on Monday or Tuesday. In the meantime, Private equity firms Apollo Management and Texas Pacific Group were near reaching a deal to buy Harrah's Entertainment Inc. on Sunday, with an announcement possible on Monday, sources familiar with the situation said.The Wall Street Journal reported on its Web site that the offer would be worth at least $90 per share, or $16.7 billion, based on 186 million shares outstanding. One must remember it takes quite some time to get all the gaming license approvals in a takeover of this type.
Royal Dutch Shell is on the brink of a deal to bring Russian gas monopoly Gazprom into the $22 billion Sakhalin-2 project, a spokesman said on Sunday.
comScore Networks released its estimates of consumer online non-travel (retail) spending at U.S. sites for the 2006 holiday season through December 15. During the first 45 days of the holiday season, total online retail spending reached $19.48 billion, marking a 25-percent increase versus the corresponding days in 2005.
Realogy Stockholders To Receive $30.00 Per Share. It has entered into a definitive agreement for the Company to be acquired by an affiliate of Apollo Management, L.P., a leading private equity firm, in a transaction valued at approximately $9.0 billion, including the assumption or repayment of approximately $1.6 billion of net indebtedness and legacy contingent and other liabilities of approximately $750 million.
A powerful tool of molecular biology may be able to ensure that breast cancer patients receive a correct
evaluation of lymph node status during initial surgery. Speaking at the 29th Annual San Antonio Breast Cancer Symposium, Peter Blumencranz, MD, from Morton Plant Mease Healthcare, reported the development of a new
assessment system based on reverse transcriptase-polymerase chain reaction (RT-PCR). This new system, called the GeneSearch(TM) Breast Lymph Node (BLN) assay, is being proposed as a more accurate replacement for
techniques currently in use, including frozen section and touch prep cytology.
When patients undergo surgery for breast cancer, lymph nodes suspected of harboring metastases are removed and sent to a pathologist for assessment while the patient is still under anesthesia. In frozen section evaluation, the lymph node is frozen and sliced, and the slice is examined under a microscope. For touch prep cytology, the node is cut open, and the cut surface touched to a slide, leaving behind a small sampling of cells that can be examined microscopically. Both techniques are very fast, but their accuracy is limited. After initially being classified as "node-negative" on the basis of these techniques, a patient may ultimately be reclassified as node-positive once
the node is examined more carefully. She must then undergo additional surgery and anesthesia in order to have an axillary dissection, which can be financially costly, as well as psychologically burdensome for the
patient. The BLN assay analyzes a full 50% of the lymph node, compared with about 5% in even the most meticulous standard approaches. The node is ground and analyzed with special probes that identify specific proteins
associated with breast cancer cells. This technique is so powerful that it can detect the presence of proteins from a single cancer cell. The BLN assay is a rapid, closed-tube system that takes approximately 30 minutes to run (roughly equivalent to the amount of time it takes to obtain a frozen section in many institutions). Because the results of the
assay are an objective "yes" or "no" for the presence of metastases, it can be easily administered by a trained technician, freeing up the valuable time of experienced pathologists. Only half of the lymph node is used, leaving the other half available for more intense study in those cases where the answer is "yes."
Two clinical trials in the US and Europe have validated the use of the BLN assay. These studies showed that the assay was much more accurate in detecting both micro- and macrometastases in suspicious lymph nodes,
compared with frozen section and particularly with touch prep cytology. This high degree of accuracy means that the number of call-backs for secondary axillary node surgery can be reduced, decreasing both cost and patient anxiety.
According to the BLS, in September 2006, private industry employer compensation costs averaged $25.52 per hour worked. Wages and salaries averaged $18.04 per hour (70.7 percent), while benefits averaged $7.48 (29.3 percent). By comparison,in state and local government, in September 2006, employer costs averaged $37.91 per
hour worked. Wages and salaries, which accounted for 67.3 percent of the total,
averaged $25.53, while benefits, which accounted for the remaining 32.7 percent, averaged $12.38. Benefit costs increased from 31.4 percent of total compensation
and $10.89 per hour for state and local government workers in September 2004.
I realize that I must be in far left field. I continually look for risk. It's much harder to produce on-going excellent returns if your are trying to overcome losses. Wall Street has clearly forgotten about volatility and risk. Just look at the VIX. It closed under 10 on Friday. Money managers dream of fees and soft landings. By comparison, I am always checking under the hood. How can one realistically expect a soft landing from the largest debtor nation in the history of the universe? Think about the scenario: the Fed will be on hold for the next 6 months and then ease. GDP growth will be around 2.5% in 2007. Foreign countries will still treasure U.S. treasuries. Housing prices will land on a soft cushion. U.S. vehicle demand will not decline below 15.5 million in 2007. By comparison, I'd rather side with the tooth fairy.
As for the tooth fairy, an interesting strategy for the wekend was selling the Harrah's Entertainment December 80 puts for 70 cents in Friday's trading. The puts were put to me over this weekend. That places a cost of $79.30 a share. We'll have to see how this works out on Monday or Tuesday. In the meantime, Private equity firms Apollo Management and Texas Pacific Group were near reaching a deal to buy Harrah's Entertainment Inc. on Sunday, with an announcement possible on Monday, sources familiar with the situation said.The Wall Street Journal reported on its Web site that the offer would be worth at least $90 per share, or $16.7 billion, based on 186 million shares outstanding. One must remember it takes quite some time to get all the gaming license approvals in a takeover of this type.
Royal Dutch Shell is on the brink of a deal to bring Russian gas monopoly Gazprom into the $22 billion Sakhalin-2 project, a spokesman said on Sunday.
comScore Networks released its estimates of consumer online non-travel (retail) spending at U.S. sites for the 2006 holiday season through December 15. During the first 45 days of the holiday season, total online retail spending reached $19.48 billion, marking a 25-percent increase versus the corresponding days in 2005.
Realogy Stockholders To Receive $30.00 Per Share. It has entered into a definitive agreement for the Company to be acquired by an affiliate of Apollo Management, L.P., a leading private equity firm, in a transaction valued at approximately $9.0 billion, including the assumption or repayment of approximately $1.6 billion of net indebtedness and legacy contingent and other liabilities of approximately $750 million.
A powerful tool of molecular biology may be able to ensure that breast cancer patients receive a correct
evaluation of lymph node status during initial surgery. Speaking at the 29th Annual San Antonio Breast Cancer Symposium, Peter Blumencranz, MD, from Morton Plant Mease Healthcare, reported the development of a new
assessment system based on reverse transcriptase-polymerase chain reaction (RT-PCR). This new system, called the GeneSearch(TM) Breast Lymph Node (BLN) assay, is being proposed as a more accurate replacement for
techniques currently in use, including frozen section and touch prep cytology.
When patients undergo surgery for breast cancer, lymph nodes suspected of harboring metastases are removed and sent to a pathologist for assessment while the patient is still under anesthesia. In frozen section evaluation, the lymph node is frozen and sliced, and the slice is examined under a microscope. For touch prep cytology, the node is cut open, and the cut surface touched to a slide, leaving behind a small sampling of cells that can be examined microscopically. Both techniques are very fast, but their accuracy is limited. After initially being classified as "node-negative" on the basis of these techniques, a patient may ultimately be reclassified as node-positive once
the node is examined more carefully. She must then undergo additional surgery and anesthesia in order to have an axillary dissection, which can be financially costly, as well as psychologically burdensome for the
patient. The BLN assay analyzes a full 50% of the lymph node, compared with about 5% in even the most meticulous standard approaches. The node is ground and analyzed with special probes that identify specific proteins
associated with breast cancer cells. This technique is so powerful that it can detect the presence of proteins from a single cancer cell. The BLN assay is a rapid, closed-tube system that takes approximately 30 minutes to run (roughly equivalent to the amount of time it takes to obtain a frozen section in many institutions). Because the results of the
assay are an objective "yes" or "no" for the presence of metastases, it can be easily administered by a trained technician, freeing up the valuable time of experienced pathologists. Only half of the lymph node is used, leaving the other half available for more intense study in those cases where the answer is "yes."
Two clinical trials in the US and Europe have validated the use of the BLN assay. These studies showed that the assay was much more accurate in detecting both micro- and macrometastases in suspicious lymph nodes,
compared with frozen section and particularly with touch prep cytology. This high degree of accuracy means that the number of call-backs for secondary axillary node surgery can be reduced, decreasing both cost and patient anxiety.
Saturday, December 16, 2006
Touchy Feely
12/17/06 Touchy Feely
According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (3.0% annualized rate) in November. Over the last 12 months, the median CPI rose 3.7%. Can you feel the pain from inflation? Look at a chart of the dollar over the last 12 months, 24 months, and so forth. That spells out your purchasing power. It spells PUKE.
"The inflation statistics have a Christmas-y feel to them, because they reflect heavydiscounting," said Chicago economist Robert Dederick. "There clearly is a lot of price-cutting taking place, especially in cars, apparel and electronics."
George Ure reported sources with a U.S. Delegation in Beijing have told The Hal Turner Show the Chinese government has informed visiting Bush Administration officials they intend to dump One TRILLION U.S. Dollars from China's Currency Reserves and convert those funds into Euros, gold and silver!
China was allegedly asked to withhold the announcement until Bullion Markets closed for the weekend to prevent an instant spike in gold and silver prices. This delay will give the world the weekend to consider appropriate actions rather than have a knee-jerk reaction which could see the U.S. Dollar totally collapse in value Monday.
According to this Senior source, China told the U.S. delegation they no longer have faith in U.S. Currency for several reasons:
1) The Federal Reserve Bank ceased publishing "M3" data in March, making it nearly impossible for anyone to know how much cash is being printed. China said this act made it impossible to tell how much a Dollar is worth.
2) The U.S. Dollar has lost upwards of thirty percent (30%) of its value against other foreign currencies in the recent past, meaning China has lost almost $300 Billion simply by holding U.S. Dollars in its reserves.
3) The U.S. has no plans whatsoever to reduce deficit spending or ability pay down any of its existing debt without printing money to pay it off.
For these reasons China has decided to implement an aggressive sell-off of U.S. Dollars before the rest of the world does so. China reportedly told the US delegation; "we are the largest holder of U.S. Currency and if the rest of the world unloads theirs before we unload ours, we will lose our shirts."
Douglas A. McIntyre: "Someone forgot to tell the programmers at Microsoft that the new Vista operating system had to work with current version of SQL server database management software. The database management interface is critical if Micorosft wants to take business from Oracle. The global database business is estimated at $14 billion. Microsoft has painted itself in a corner."
"India will overtake China next year as the world's fastest-growing major economy on rising consumer and government spending, Credit Suisse's chief Asia economist Dong Tao said. Credit Suisse raised its 2007 growth forecast for India's $775 billion economy, Asia's fourth biggest, to 10 percent from 8.5 percent... China's $2.2 trillion economy is expected to grow 9.9 percent next year from 10.4 percent in 2006..."
According to a Bloomberg report, "China's crude imports may rise 10.2 percent this year because of rising domestic demand, China Securities Journal reported, quoting a government official. The nation may import 140 million metric tons of crude this year, equivalent to 48 percent of total demand..."
John Mauldin points out that the Liscio Report observed "the weakening consumption trend is now established, and the majority of our tax contacts expressed real concern about slowing in sales tax collections. It now appears clear that consumers are not spending the billions of dollars they have saved on gas in recent months, and comments on the effects of the dual slowdowns in housing and manufacturing centered on how much more is to come." Liscio was referring to his checks on sales tax collections for the month of November.
Mike Burk: "Several short term indicators bottomed last week just in time for the year end rally that should begin next week. I expec the major indices to be higher on Friday December 22 than they were on Friday December 15."
From the BLS: "Real average weekly earnings rose by 0.2 percent from October to November after seasonal adjustment, according to preliminary data released by the Bureau of Labor Statistics of the U.S. Department of Labor. This increase
stemmed from a 0.2 percent increase in average hourly earnings combined with a
0.1 percent decrease in the Consumer Price Index for Urban Wage Earners and
Clerical Workers (CPI-W). Average weekly hours were unchanged...
Average weekly earnings rose by 4.4 percent, seasonally adjusted, from
November 2005 to November 2006. After deflation by the CPI-W, average weekly
earnings increased by 2.6 percent. Before adjustment for seasonal change and
inflation, average weekly earnings were $572.91 in November 2006, compared with
$550.94 a year earlier." Now think about the real inflation for health care and food and tuition etc, and you tell me how far your wage gains went AFTER TAXES.
According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (3.0% annualized rate) in November. Over the last 12 months, the median CPI rose 3.7%. Can you feel the pain from inflation? Look at a chart of the dollar over the last 12 months, 24 months, and so forth. That spells out your purchasing power. It spells PUKE.
"The inflation statistics have a Christmas-y feel to them, because they reflect heavydiscounting," said Chicago economist Robert Dederick. "There clearly is a lot of price-cutting taking place, especially in cars, apparel and electronics."
George Ure reported sources with a U.S. Delegation in Beijing have told The Hal Turner Show the Chinese government has informed visiting Bush Administration officials they intend to dump One TRILLION U.S. Dollars from China's Currency Reserves and convert those funds into Euros, gold and silver!
China was allegedly asked to withhold the announcement until Bullion Markets closed for the weekend to prevent an instant spike in gold and silver prices. This delay will give the world the weekend to consider appropriate actions rather than have a knee-jerk reaction which could see the U.S. Dollar totally collapse in value Monday.
According to this Senior source, China told the U.S. delegation they no longer have faith in U.S. Currency for several reasons:
1) The Federal Reserve Bank ceased publishing "M3" data in March, making it nearly impossible for anyone to know how much cash is being printed. China said this act made it impossible to tell how much a Dollar is worth.
2) The U.S. Dollar has lost upwards of thirty percent (30%) of its value against other foreign currencies in the recent past, meaning China has lost almost $300 Billion simply by holding U.S. Dollars in its reserves.
3) The U.S. has no plans whatsoever to reduce deficit spending or ability pay down any of its existing debt without printing money to pay it off.
For these reasons China has decided to implement an aggressive sell-off of U.S. Dollars before the rest of the world does so. China reportedly told the US delegation; "we are the largest holder of U.S. Currency and if the rest of the world unloads theirs before we unload ours, we will lose our shirts."
Douglas A. McIntyre: "Someone forgot to tell the programmers at Microsoft that the new Vista operating system had to work with current version of SQL server database management software. The database management interface is critical if Micorosft wants to take business from Oracle. The global database business is estimated at $14 billion. Microsoft has painted itself in a corner."
"India will overtake China next year as the world's fastest-growing major economy on rising consumer and government spending, Credit Suisse's chief Asia economist Dong Tao said. Credit Suisse raised its 2007 growth forecast for India's $775 billion economy, Asia's fourth biggest, to 10 percent from 8.5 percent... China's $2.2 trillion economy is expected to grow 9.9 percent next year from 10.4 percent in 2006..."
According to a Bloomberg report, "China's crude imports may rise 10.2 percent this year because of rising domestic demand, China Securities Journal reported, quoting a government official. The nation may import 140 million metric tons of crude this year, equivalent to 48 percent of total demand..."
John Mauldin points out that the Liscio Report observed "the weakening consumption trend is now established, and the majority of our tax contacts expressed real concern about slowing in sales tax collections. It now appears clear that consumers are not spending the billions of dollars they have saved on gas in recent months, and comments on the effects of the dual slowdowns in housing and manufacturing centered on how much more is to come." Liscio was referring to his checks on sales tax collections for the month of November.
Mike Burk: "Several short term indicators bottomed last week just in time for the year end rally that should begin next week. I expec the major indices to be higher on Friday December 22 than they were on Friday December 15."
From the BLS: "Real average weekly earnings rose by 0.2 percent from October to November after seasonal adjustment, according to preliminary data released by the Bureau of Labor Statistics of the U.S. Department of Labor. This increase
stemmed from a 0.2 percent increase in average hourly earnings combined with a
0.1 percent decrease in the Consumer Price Index for Urban Wage Earners and
Clerical Workers (CPI-W). Average weekly hours were unchanged...
Average weekly earnings rose by 4.4 percent, seasonally adjusted, from
November 2005 to November 2006. After deflation by the CPI-W, average weekly
earnings increased by 2.6 percent. Before adjustment for seasonal change and
inflation, average weekly earnings were $572.91 in November 2006, compared with
$550.94 a year earlier." Now think about the real inflation for health care and food and tuition etc, and you tell me how far your wage gains went AFTER TAXES.
Friday, December 15, 2006
Reality
12/16/06 Reality
Excluding food and energy, the CPI-U advanced at a 2.6 percent SAAR in the first 11 months of 2006 after increasing 2.2 percent in 2005. Some analysts suggested that investors reinterpreted the CPI data as a lagging indicator and noted that there are other signs showing that inflation in fact may be increasing.
On Friday morning, 700,000 of Puget Sound's customers in and around Seattle were without power. The Seahawks had a meltdown in the second half of Thursday's game with the 49ers.
In October, foreign investors bought a net $62.2 billion in securities, the Treasury said. It's up from $57.8 billion in September. In October, Chinese investors held $344.9 billion in Treasurys, up from $342.3 billion in September.
Illinois Tool Works Inc. on Friday warned it was cutting its forecast profit range for the fourth quarter, citing expected weakness in the North American market.
ITW, which also said it had already suffered two months of lower-than-expected base revenue growth, now expects to earn 72 cents to 74 cents a share in the fourth quarter, compared with a previous range of 77 cents to 81 cents.
From Seeking Alpha: "Gambling company Penn National made a mostly cash bid for its much larger competitor Harrah's Entertainment, challenging the current bid for Harrah's placed by private equity partners Texas Pacific and Apollo Management. The private equity group earlier in the week submitted an all-cash bid of $87 a share, and sources indicate Penn is offering $88.50. Harrah's currently trades at $79.10 a share, with a market cap of $14.7 billion vs. Penn's market cap of just $3.3 billion. The Penn offer, backed by Lehman Brothers and Wachovia, would create a joint entity with substantial debt. Harrah's is also considering a leveraged recapitalization, taking on more debt while paying shareholders a dividend or buying back stock. Penn stock has climbed 18.4% year to date, while Harrah's stock still trades well below the takeover prices due to the long period expected for casino licensing clearance."
Crude for January delivery rose 92 cents to $63.43 a barrel. January natural gas fell 14.6 cents to $7.409 per million British thermal units.
February gold fell $11.80 to close at $619.10 an ounce. March silver sank 97 cents to end at $12.98 an ounce after a four-week low of $12.96. March copper closed at six-month low of $3.0165 a pound, down 4.1 cents for the day and down 3.1% for the week.
Bloomberg reported Japanese five-year government notes fell the most in a month after stocks advanced and a Bank of Japan survey showed confidence among manufacturers rose to the highest in two years.
Five-year notes pared their gains for the week after the Tankan showed companies plan to boost spending at the fastest pace in 15 years. The report may restore confidence the world's second- largest economy will recover from slower-than-expected growth in the third quarter, supporting the central bank's case for raising interest rates in coming months.
``The Tankan survey will make it easier for the BOJ to justify raising rates in January,'' said Hiroaki Takai, who helps oversee the equivalent of about $6.8 billion in assets at Sumitomo Mitsui Asset Management Co. in Tokyo. ``Given that, yields look too low and investors probably won't be keen on buying bonds.'' It will be important to watch the yen carry trade if rates in Japan rise in January.
Excluding food and energy, the CPI-U advanced at a 2.6 percent SAAR in the first 11 months of 2006 after increasing 2.2 percent in 2005. Some analysts suggested that investors reinterpreted the CPI data as a lagging indicator and noted that there are other signs showing that inflation in fact may be increasing.
On Friday morning, 700,000 of Puget Sound's customers in and around Seattle were without power. The Seahawks had a meltdown in the second half of Thursday's game with the 49ers.
In October, foreign investors bought a net $62.2 billion in securities, the Treasury said. It's up from $57.8 billion in September. In October, Chinese investors held $344.9 billion in Treasurys, up from $342.3 billion in September.
Illinois Tool Works Inc. on Friday warned it was cutting its forecast profit range for the fourth quarter, citing expected weakness in the North American market.
ITW, which also said it had already suffered two months of lower-than-expected base revenue growth, now expects to earn 72 cents to 74 cents a share in the fourth quarter, compared with a previous range of 77 cents to 81 cents.
From Seeking Alpha: "Gambling company Penn National made a mostly cash bid for its much larger competitor Harrah's Entertainment, challenging the current bid for Harrah's placed by private equity partners Texas Pacific and Apollo Management. The private equity group earlier in the week submitted an all-cash bid of $87 a share, and sources indicate Penn is offering $88.50. Harrah's currently trades at $79.10 a share, with a market cap of $14.7 billion vs. Penn's market cap of just $3.3 billion. The Penn offer, backed by Lehman Brothers and Wachovia, would create a joint entity with substantial debt. Harrah's is also considering a leveraged recapitalization, taking on more debt while paying shareholders a dividend or buying back stock. Penn stock has climbed 18.4% year to date, while Harrah's stock still trades well below the takeover prices due to the long period expected for casino licensing clearance."
Crude for January delivery rose 92 cents to $63.43 a barrel. January natural gas fell 14.6 cents to $7.409 per million British thermal units.
February gold fell $11.80 to close at $619.10 an ounce. March silver sank 97 cents to end at $12.98 an ounce after a four-week low of $12.96. March copper closed at six-month low of $3.0165 a pound, down 4.1 cents for the day and down 3.1% for the week.
Bloomberg reported Japanese five-year government notes fell the most in a month after stocks advanced and a Bank of Japan survey showed confidence among manufacturers rose to the highest in two years.
Five-year notes pared their gains for the week after the Tankan showed companies plan to boost spending at the fastest pace in 15 years. The report may restore confidence the world's second- largest economy will recover from slower-than-expected growth in the third quarter, supporting the central bank's case for raising interest rates in coming months.
``The Tankan survey will make it easier for the BOJ to justify raising rates in January,'' said Hiroaki Takai, who helps oversee the equivalent of about $6.8 billion in assets at Sumitomo Mitsui Asset Management Co. in Tokyo. ``Given that, yields look too low and investors probably won't be keen on buying bonds.'' It will be important to watch the yen carry trade if rates in Japan rise in January.
Thursday, December 14, 2006
Option Expiration Day
12/15/06 Option Expiration Day
The Energy Department said natural-gas inventories fell 168 billion cubic feet for the week ended Dec. 8. Total stocks now stand at 3.238 trillion cubic feet, up 245 billion cubic feet from the year-ago level, and 225 billion cubic feet above the five-year average, the government data said.
OPEC's announced intention is to cut another 500,000 [barrels per day] of production, effective February 1st.
The Labor Department said initial jobless claims dropped by 20,000 to 304,000 in the week ending Dec. 9, lower than the 320,000 economists were expecting. Separately, the Department said the prices of goods imported into the U.S. rose 0.2% in November. Imported natural gas prices climbed 30.3% in November, hitting a two-year high, according to the Labor Department. Imported petroleum prices, meanwhile, dropped 1.6%. Excluding petroleum import prices, import prices rose by 0.7%. Import prices excluding all fuels rose by 0.1%.
Tobacco group Gallaher on Thursday confirmed it's received a preliminary offer approach. The group said it's in talks with the third party about the possibility of a recommended cash offer of 1,140 pence a share in cash.
North American production will continue its slide in 2007, despite falling to a longtime low in 2006. Ward's AutoForecasts projects total output in 2007 at 15.65 million units, 1.1% down from 2006's estimated 15.83 million, itself a 3.0% decline
from 2005.
Jim Rogers:"The slowest bull market in commodities lasted 15 years and the longest
23 years which means that investing in commodities will be profitable."
until at least 2013 and up to 2021...Investing in commodity-producing companies can turn out to be an even riskier bet than sticking with buying the things outright. Supply and demand will move the price of copper, for instance, while the share prices of copper miners can depend on less predictable factors such as the overall condition of the stock market, the company`s balance sheet, its executive team, labour problems, environmental issues, and so on."
Marketplace's Dan Grech: "Entertainment mogul David Geffen has offered $2 billion cash for the Los Angeles Times, but Tribune is holding out for a buyer who wants everything on the menu."
The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Wednesday, reported that the percentage of mortgage payments that were 30 or more days past due for all loans tracked jumped to 4.67 percent in the July-to-September quarter.
That marked a sharp rise from the second quarter's delinquency rate of 4.39 percent and was the worst showing since the final quarter of last year, when delinquent payments climbed to a 2 1/2-year high in the aftermath of the devastating Gulf Coast hurricanes.
This could be important. YRC Worldwide Inc.'s cut its fourth-quarter per-share earnings outlook to 95 cents to $1.05 from its prior view of $1.40 to $1.50. The company also lowered its 2006 earnings outlook to $5 to $5.10 a share from $5.45 to $5.55 a share. This is the merger of Yellow Freight and Roadway Express.
Manufacturing activity in the New York area slipped in December, the New York Federal Reserve Bank said Thursday. The bank's Empire State Manufacturing index fell to 23.1 in December from 26.7 in November. New orders rose to 25.1 in December from 22.4 in November. Shipments were little changed. The prices paid index fell to its lowest level of the year. The unfilled orders index also fell sharply. The inventories index dropped into negative territory.
January crude rose $1.14, or 1.9%, to close at $62.51 a barrel. January natural gas fell 11.8 cents to close at $7.555 per million British thermal units.
February gold fell $1.50 to end at $630.90 an ounce in New York. March silver was up 3.5 cents to end at $13.95 an ounce and March copper at $3.0575 a pound, closing up 2.45 cents.
The Energy Department said natural-gas inventories fell 168 billion cubic feet for the week ended Dec. 8. Total stocks now stand at 3.238 trillion cubic feet, up 245 billion cubic feet from the year-ago level, and 225 billion cubic feet above the five-year average, the government data said.
OPEC's announced intention is to cut another 500,000 [barrels per day] of production, effective February 1st.
The Labor Department said initial jobless claims dropped by 20,000 to 304,000 in the week ending Dec. 9, lower than the 320,000 economists were expecting. Separately, the Department said the prices of goods imported into the U.S. rose 0.2% in November. Imported natural gas prices climbed 30.3% in November, hitting a two-year high, according to the Labor Department. Imported petroleum prices, meanwhile, dropped 1.6%. Excluding petroleum import prices, import prices rose by 0.7%. Import prices excluding all fuels rose by 0.1%.
Tobacco group Gallaher on Thursday confirmed it's received a preliminary offer approach. The group said it's in talks with the third party about the possibility of a recommended cash offer of 1,140 pence a share in cash.
North American production will continue its slide in 2007, despite falling to a longtime low in 2006. Ward's AutoForecasts projects total output in 2007 at 15.65 million units, 1.1% down from 2006's estimated 15.83 million, itself a 3.0% decline
from 2005.
Jim Rogers:"The slowest bull market in commodities lasted 15 years and the longest
23 years which means that investing in commodities will be profitable."
until at least 2013 and up to 2021...Investing in commodity-producing companies can turn out to be an even riskier bet than sticking with buying the things outright. Supply and demand will move the price of copper, for instance, while the share prices of copper miners can depend on less predictable factors such as the overall condition of the stock market, the company`s balance sheet, its executive team, labour problems, environmental issues, and so on."
Marketplace's Dan Grech: "Entertainment mogul David Geffen has offered $2 billion cash for the Los Angeles Times, but Tribune is holding out for a buyer who wants everything on the menu."
The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Wednesday, reported that the percentage of mortgage payments that were 30 or more days past due for all loans tracked jumped to 4.67 percent in the July-to-September quarter.
That marked a sharp rise from the second quarter's delinquency rate of 4.39 percent and was the worst showing since the final quarter of last year, when delinquent payments climbed to a 2 1/2-year high in the aftermath of the devastating Gulf Coast hurricanes.
This could be important. YRC Worldwide Inc.'s cut its fourth-quarter per-share earnings outlook to 95 cents to $1.05 from its prior view of $1.40 to $1.50. The company also lowered its 2006 earnings outlook to $5 to $5.10 a share from $5.45 to $5.55 a share. This is the merger of Yellow Freight and Roadway Express.
Manufacturing activity in the New York area slipped in December, the New York Federal Reserve Bank said Thursday. The bank's Empire State Manufacturing index fell to 23.1 in December from 26.7 in November. New orders rose to 25.1 in December from 22.4 in November. Shipments were little changed. The prices paid index fell to its lowest level of the year. The unfilled orders index also fell sharply. The inventories index dropped into negative territory.
January crude rose $1.14, or 1.9%, to close at $62.51 a barrel. January natural gas fell 11.8 cents to close at $7.555 per million British thermal units.
February gold fell $1.50 to end at $630.90 an ounce in New York. March silver was up 3.5 cents to end at $13.95 an ounce and March copper at $3.0575 a pound, closing up 2.45 cents.
Wednesday, December 13, 2006
In The Works
12/14/06 In The Works
Seeking Alpha: "The Chandler Family, 20% owners and long-time critics of the Tribune Company, have begun talking with several private equity firms about forming a consortium to become majority shareholders in Tribune, the New York Times reported this morning.trb The family, one of Southern California's most powerful has clashed with Tribune's management for years and six months ago, got the company to agree to put itself on the auction block. However bids have been slow in coming, and for much less than the company anticipated, in large part due to the heavy tax payments that will accompany any transfer of the company. As insiders, the Chandlers can avoid many of the taxation issues while spinning off segments of the diversified media company, which owns two of the nation's largest papers - the L.A. Times and Chicago Tribune - two dozen TV stations and the Chicago Cubs. Neither the Chandlers nor the Tribune were available for comment."
"Zacks.com just released its latest additions and deletions to its proprietary All Star Analyst portfolio. Members on this exclusive list include BJ Services Company...This exclusive portfolio represents all stocks with a Strong Buy rating from at least four analysts with a 5-Star All Star ranking. These are the brokerage analysts whose stock recommendations proved to be the most profitable for investors. Since July 2002, this portfolio has generated an annualized return of 7.53%. Here is a synopsis of why these stocks are in the All Star Analysts Portfolio: BJ Services Company BJS announced that fiscal fourth quarter earnings per share surged year over year to 76 cents, while consolidated revenue of $1.22 billion jumped 36% from $892.3 million. EPS also bettered the consensus by 2.7%. The rebound in Canadian activity, as well as improvements in Africa, Latin America and the Middle East, led to the solid quarterly results. For the fiscal year, the oilfield services company reported earnings per share of $2.52, compared to $1.38 in the previous year, with consolidated revenue rising 35% to $4.4 billion from $3.2 billion in fiscal 2005. For fiscal 2007, BJ Services expects earnings per share between $3.15 and $3.25 with revenue growth expectations in excess of 20%."
Raymond James strategist Jeff Saut: "Almost 2% of the NYSE's entire market capitalization has been taken private... since the beginning of this year."
The volume of applications for mortgages from major U.S. banks climbed to the highest level in more than a year last week, the Mortgage Bankers Association reported Wednesday.
Applications, encompassing both those for loans to purchase homes and for refinancings of existing mortgages, increased 11.4% last week to the highest level since October 2005. Total applications are up 22.2% compared with the same week a year ago. Application volumes had been down by double-digit percentages for most of the year. Yet, Richard M. Kovacevich, chairman and chief executive of Wells Fargo, tells Barrons the mortgage market has turned "pretty ugly."
Showing surprising strength, seasonally adjusted U.S. retail sales increased by 1% in November, the first gain since July, the Commerce Department reported Wednesday. Excluding the 0.9% gain in motor vehicle sales, retail sales rose 1.1%, the largest gain since January. I continue to believe the stars this holiday shopping season will be gift cards and online sales. This is the same statement I have made for the last three years.
Randall Forsyth of Barrons: "Bridgewater Associates contends wiggles in the yen are having an impact on speculative positions, which are "now massive." The yen-carry trade -- which effectively means shorting the Japanese currency -- has pushed the yen to a record low against the euro, with the common currency fetching nearly 155 yen vs less than 140 yen at the beginning of 2006. Bridgewater sees the current market environment as precarious, and reminiscent of 1998, when the collapse of Long Term Capital Markets threatened the global financial system. They can't say what the catalyst of a break might be -- an increase in the Chinese yuan could be one, for instance. That could lead to an appreciation of all Asian currencies, including the yen, which have been suppressed by the region's central banks who don't want their economies to lose export competitiveness.The yen's rise could again ripple through the emerging markets, some of which already are looking shaky. India's SENSEX has been under pressure in recent days, which could spread to other emerging markets, write Bank of America's Raja Visweswaran and John Schofield. Emerging equity and debt markets are highly correlated, while emerging-market debt also is correlated with high-yield corporates. "We would assume a further widening of the current downward move in select [emerging market] indices would most likely result in a broader market correction across many other risk asset categories."
World energy demand is likely to climb an average 1.6 percent per year to reach about 325 million barrels of oil equivalent a day by 2030, Exxon Mobil predicts. That means global energy demand will be up about 60 percent from 2000 levels, Jaime Spellings, the Irving-based oil giant's general manager for corporate planning, told analysts.
The American Petroleum Institute reported a drop of 8.3 million barrels in crude supplies for the week ended Dec. 8. The Energy Department had reported a fall of 4.3 million. Motor gasoline supplies were down 1.1 million barrels, the API said, vs. the government's reported fall of 100,000. Distillate supplies were down 2.7 million barrels, the API said, compared with the 500,000-barrel fall reported by the government.
Inventories at U.S. businesses rose in October to their highest level in relation to sales in more than two and a half years, the Commerce Department reported Wednesday. Sales at U.S. businesses fell 0.2% in October after a record 2.3% drop in September. Meanwhile, inventories rose 0.4% in October, as expected by economists, after a revised 0.3% gain in September. The inventory-to-sales ratio rose to 1.31 from 1.30. It's the highest since February 2004.
January crude rose 35 cents to end at $61.37 a barrel. January natural gas gained 24.3 cents to end at $7.673 per million British thermal units.
February gold climbed 70 cents to close at $632.40 an ounce Wednesday. March silver fell 6.5 cents to end at $13.915 an ounce and March copper lost 6.15 cents to close at $3.033 a pound, its lowest closing level since late June.
Henry To: "U.S. households now have the most leveraged balance sheets in history. Moreover, in a credit-based and financially-leveraged society such as the United States, one needs to tread very carefully if you are a central banker, and thus the last thing that the Fed wants is a declining net worth of American households... Bottom line: The United States (and even more so, the United Kingdom since it does not have a great agricultural, technology, or entertainment industry such as what we have in the U.S.) today is more dependent on asset appreciation and the financial sector than ever - and both the Federal Reserve and the central banks of the world will continue to do what they can to uphold this trend going forward."
Seeking Alpha: "The Chandler Family, 20% owners and long-time critics of the Tribune Company, have begun talking with several private equity firms about forming a consortium to become majority shareholders in Tribune, the New York Times reported this morning.trb The family, one of Southern California's most powerful has clashed with Tribune's management for years and six months ago, got the company to agree to put itself on the auction block. However bids have been slow in coming, and for much less than the company anticipated, in large part due to the heavy tax payments that will accompany any transfer of the company. As insiders, the Chandlers can avoid many of the taxation issues while spinning off segments of the diversified media company, which owns two of the nation's largest papers - the L.A. Times and Chicago Tribune - two dozen TV stations and the Chicago Cubs. Neither the Chandlers nor the Tribune were available for comment."
"Zacks.com just released its latest additions and deletions to its proprietary All Star Analyst portfolio. Members on this exclusive list include BJ Services Company...This exclusive portfolio represents all stocks with a Strong Buy rating from at least four analysts with a 5-Star All Star ranking. These are the brokerage analysts whose stock recommendations proved to be the most profitable for investors. Since July 2002, this portfolio has generated an annualized return of 7.53%. Here is a synopsis of why these stocks are in the All Star Analysts Portfolio: BJ Services Company BJS announced that fiscal fourth quarter earnings per share surged year over year to 76 cents, while consolidated revenue of $1.22 billion jumped 36% from $892.3 million. EPS also bettered the consensus by 2.7%. The rebound in Canadian activity, as well as improvements in Africa, Latin America and the Middle East, led to the solid quarterly results. For the fiscal year, the oilfield services company reported earnings per share of $2.52, compared to $1.38 in the previous year, with consolidated revenue rising 35% to $4.4 billion from $3.2 billion in fiscal 2005. For fiscal 2007, BJ Services expects earnings per share between $3.15 and $3.25 with revenue growth expectations in excess of 20%."
Raymond James strategist Jeff Saut: "Almost 2% of the NYSE's entire market capitalization has been taken private... since the beginning of this year."
The volume of applications for mortgages from major U.S. banks climbed to the highest level in more than a year last week, the Mortgage Bankers Association reported Wednesday.
Applications, encompassing both those for loans to purchase homes and for refinancings of existing mortgages, increased 11.4% last week to the highest level since October 2005. Total applications are up 22.2% compared with the same week a year ago. Application volumes had been down by double-digit percentages for most of the year. Yet, Richard M. Kovacevich, chairman and chief executive of Wells Fargo, tells Barrons the mortgage market has turned "pretty ugly."
Showing surprising strength, seasonally adjusted U.S. retail sales increased by 1% in November, the first gain since July, the Commerce Department reported Wednesday. Excluding the 0.9% gain in motor vehicle sales, retail sales rose 1.1%, the largest gain since January. I continue to believe the stars this holiday shopping season will be gift cards and online sales. This is the same statement I have made for the last three years.
Randall Forsyth of Barrons: "Bridgewater Associates contends wiggles in the yen are having an impact on speculative positions, which are "now massive." The yen-carry trade -- which effectively means shorting the Japanese currency -- has pushed the yen to a record low against the euro, with the common currency fetching nearly 155 yen vs less than 140 yen at the beginning of 2006. Bridgewater sees the current market environment as precarious, and reminiscent of 1998, when the collapse of Long Term Capital Markets threatened the global financial system. They can't say what the catalyst of a break might be -- an increase in the Chinese yuan could be one, for instance. That could lead to an appreciation of all Asian currencies, including the yen, which have been suppressed by the region's central banks who don't want their economies to lose export competitiveness.The yen's rise could again ripple through the emerging markets, some of which already are looking shaky. India's SENSEX has been under pressure in recent days, which could spread to other emerging markets, write Bank of America's Raja Visweswaran and John Schofield. Emerging equity and debt markets are highly correlated, while emerging-market debt also is correlated with high-yield corporates. "We would assume a further widening of the current downward move in select [emerging market] indices would most likely result in a broader market correction across many other risk asset categories."
World energy demand is likely to climb an average 1.6 percent per year to reach about 325 million barrels of oil equivalent a day by 2030, Exxon Mobil predicts. That means global energy demand will be up about 60 percent from 2000 levels, Jaime Spellings, the Irving-based oil giant's general manager for corporate planning, told analysts.
The American Petroleum Institute reported a drop of 8.3 million barrels in crude supplies for the week ended Dec. 8. The Energy Department had reported a fall of 4.3 million. Motor gasoline supplies were down 1.1 million barrels, the API said, vs. the government's reported fall of 100,000. Distillate supplies were down 2.7 million barrels, the API said, compared with the 500,000-barrel fall reported by the government.
Inventories at U.S. businesses rose in October to their highest level in relation to sales in more than two and a half years, the Commerce Department reported Wednesday. Sales at U.S. businesses fell 0.2% in October after a record 2.3% drop in September. Meanwhile, inventories rose 0.4% in October, as expected by economists, after a revised 0.3% gain in September. The inventory-to-sales ratio rose to 1.31 from 1.30. It's the highest since February 2004.
January crude rose 35 cents to end at $61.37 a barrel. January natural gas gained 24.3 cents to end at $7.673 per million British thermal units.
February gold climbed 70 cents to close at $632.40 an ounce Wednesday. March silver fell 6.5 cents to end at $13.915 an ounce and March copper lost 6.15 cents to close at $3.033 a pound, its lowest closing level since late June.
Henry To: "U.S. households now have the most leveraged balance sheets in history. Moreover, in a credit-based and financially-leveraged society such as the United States, one needs to tread very carefully if you are a central banker, and thus the last thing that the Fed wants is a declining net worth of American households... Bottom line: The United States (and even more so, the United Kingdom since it does not have a great agricultural, technology, or entertainment industry such as what we have in the U.S.) today is more dependent on asset appreciation and the financial sector than ever - and both the Federal Reserve and the central banks of the world will continue to do what they can to uphold this trend going forward."
Tuesday, December 12, 2006
No Surprises
12/13/06 No Surprises
The Energy Information Administration said Tuesday that it still expects world oil demand to grow by 1.5 million barrels a day in 2007. The EIA, the official energy statistics arm of the U.S. government, said it expects U.S. petroleum consumption to rise by 300,000 barrels a day in 2007 after a flat 2006. The agency is expecting surplus world crude oil production capacity to increase only slighty. "However, OPEC's production cuts mean that, for the first time in months, surplus production capacity is no longer restricted to just Saudi Arabia," it said.
The Fed remains on hold.
Fiscal fourth-quarter net income for Goldman Sachs surged to $3.15 billion, or $6.59 a share, for the three months ended November 24, from $1.63 billion, or $3.35, in the year-ago period. Goldman's net revenue rose 47 percent to $9.41 billion.
Texas Pacific Group and Silver Lake Partners will buy Sabre Holdings Corp. , owner of the Travelocity hotel and flight-booking Web site, for $4.45 billion as they look to profit from a boom in travel services.
The Commerce Department said the October trade gap in Washington narrowed 8.4 percent to $58.9 billion, less than forecast by economists.
The use of ethanol has caused a surge in the price of corn to an 11 year high.
Gary Gordon of Annaly Mortgage: "We Americans have tested the limits of affordability over the past five years," he says. "Since the end of 2001, disposable personal income is up about 25% and mortgage rates are little changed. That argues for 25% higher home prices. Instead, home prices rose by an average of 50% and in many markets by 100% or more."
Crude closed at $61.02 a barrel.
The White House says President Bush has largely decided on a new approach to the Iraq war that he will announce next month, but he gave no public hint of his plan Tuesday.
Australia's Qantas Airways Ltd. rejected on Wednesday a conditional A$10.9 billion ($8.6 billion) buyout offer from a group led by Macquarie Bank Ltd. and private equity firm Texas Pacific Group.
The WSJ reported that UAL and Continental are holding merger talks.
General Electric Co. on Tuesday affirmed its earnings estimate for the end of 2006 and forecast profit growth of 10% to 13% in 2007
"We will deliver a high-visibility, low-risk 2007," stated Jeff Immelt, General Electric CEO.
The Energy Information Administration said Tuesday that it still expects world oil demand to grow by 1.5 million barrels a day in 2007. The EIA, the official energy statistics arm of the U.S. government, said it expects U.S. petroleum consumption to rise by 300,000 barrels a day in 2007 after a flat 2006. The agency is expecting surplus world crude oil production capacity to increase only slighty. "However, OPEC's production cuts mean that, for the first time in months, surplus production capacity is no longer restricted to just Saudi Arabia," it said.
The Fed remains on hold.
Fiscal fourth-quarter net income for Goldman Sachs surged to $3.15 billion, or $6.59 a share, for the three months ended November 24, from $1.63 billion, or $3.35, in the year-ago period. Goldman's net revenue rose 47 percent to $9.41 billion.
Texas Pacific Group and Silver Lake Partners will buy Sabre Holdings Corp. , owner of the Travelocity hotel and flight-booking Web site, for $4.45 billion as they look to profit from a boom in travel services.
The Commerce Department said the October trade gap in Washington narrowed 8.4 percent to $58.9 billion, less than forecast by economists.
The use of ethanol has caused a surge in the price of corn to an 11 year high.
Gary Gordon of Annaly Mortgage: "We Americans have tested the limits of affordability over the past five years," he says. "Since the end of 2001, disposable personal income is up about 25% and mortgage rates are little changed. That argues for 25% higher home prices. Instead, home prices rose by an average of 50% and in many markets by 100% or more."
Crude closed at $61.02 a barrel.
The White House says President Bush has largely decided on a new approach to the Iraq war that he will announce next month, but he gave no public hint of his plan Tuesday.
Australia's Qantas Airways Ltd. rejected on Wednesday a conditional A$10.9 billion ($8.6 billion) buyout offer from a group led by Macquarie Bank Ltd. and private equity firm Texas Pacific Group.
The WSJ reported that UAL and Continental are holding merger talks.
General Electric Co. on Tuesday affirmed its earnings estimate for the end of 2006 and forecast profit growth of 10% to 13% in 2007
"We will deliver a high-visibility, low-risk 2007," stated Jeff Immelt, General Electric CEO.
Pressure Points
12/12/06 Pressure Points
"The exchange rate issue is A) a sovereign issue and this is our principle. B) We will take internal and external balances into account when making decisions on the yuan," People’s Bank of China assistant governor Yi Gang told reporters on the sidelines of a financial forum. China has let the yuan rise by about 3,45% since it revalued the currency by 2,1% in July last year.
Greenspan: "I expect that the dollar will continue to drift downwards until there will be a change in the U.S. balance of payments," Greenspan told a business conference here via video-link from the United States.
"There has been some evidence that OPEC nations are beginning to switch their reserves out of dollars and into euro and yen," Greenspan said.
"It is imprudent to hold everything in one currency," he said, adding that at some point the dollar will be moving lower.
"That will be the experience of the next few years," Greenspan said.
The inventory-to-sales ratio rose to 1.20 in October from 1.18 in September. The last time the ratio was bigger was in November 2003. The inventory-sales ratio stood at a record low 1.15 in May, June and July. The typical wholesaler has about 37 days of sales on hand, up from 35 days in July. As an aside, the gift card business amounted to $19 billion in 2005, and this year it is anticipated to rise to $30 billion. A good deal of these cards will be redeemed in January and not in December. Retailers cannot count the cards as sales until the merchandise is redeemed.
DuPont Co., the third-largest U.S. chemical maker, will eliminate 1,500 agriculture jobs and cut output of herbicides and pesticides in a plan to increase spending on genetically modified seeds.
Brazilian steelmaker CSN offered on Monday to buy Anglo-Dutch rival Corus Group Plc for 4.9 billion pounds ($9.6 billion) in cash, trumping a bid made only hours earlier by India's Tata Steel.
State-owned Dubai Ports World said on Monday it had agreed to sell its U.S. port operations to an American International Group unit after relinquishing control of them to allay concerns about U.S. national security. It is a 100% cash deal.
Multiple firms including Silver Lake Partners and Texas Pacific Group have bid for Saber Holdings , owner of the Travelocity Web site, according to a source familiar with the situation. The deal could approach $4.3 billion.
Next year will likely bring a second annual decline in existing home sales, the National Association of Realtors predicted on Monday. Sales of existing homes are expected to decline 8.6 percent to 6.47 million for 2006 and contract another 1 percent to 6.40 million units next year. I believe that forecast for 2007 is too optimistic.
Europe's biggest medical device maker, Smith & Nephew Plc , is close to bidding about $11 billion for U.S. rival Biomet Inc. , sources familiar with the situation said on Sunday. One of the sources told Reuters bids were due by Tuesday and other companies were also likely to submit offers for Biomet. A
winning bid of at least $45 a share would not surprise me.
Goldman Sachs reports their quarterly earnings tomorrow. They should surprise on the upside and that may be so for guidance going into 2007. Lehman and Bear Stearns report on Thursday. Morgan Stanley will report on December 19.
On Wednesday bids are due on Harrah's, and a final level of $86 could be in the cards.
Hedge fund S.A.C. Capital disclosed that it owned 5.1% of Phelps Dodge Corp. as of Dec. 7. But the fund said that it plans to vote its shares against Phelps Dodge's pending takeover by Freeport-McMoRan Copper & Gold. In a securities filing, S.A.C. said the deal "would not provide full and fair value to the issuer's shareholders."
DaimlerChrysler AG could lay off up to 16 percent of the workers in its North American truck operations next year due to an expected downturn in demand, the head of the automaker's truck operations said on Monday.
John Hussman: "Over the past three years, profit margins have widened to record levels, which has detached P/E ratios from other fundamental measures – such as price/revenue, price/dividend, and price/book ratios. The S&P 500 is currently about double its historical norms on those metrics. That isn't a forecast that stocks have to eliminate that valuation gap, but it certainly does suggest that stocks are priced to deliver unsatisfactory long-term returns from these prices.It bears repeating that if profit margins were at normal levels – even on the basis of profit margins that prevailed during the 1990's (indeed, anytime prior to the past 3 years) – the price/earnings ratio of the S&P 500 would currently be nearly 25. Unless investors want to speculate on the notion of a “permanently high plateau” in profit margins, the stock market is strenuously overvalued at present. Neither current earnings nor “forward” earnings should be considered – in themselves – as anything close to robust or reliable metrics of value here."
Texas Instruments Inc. cut its fourth-quarter financial targets late Monday, and forecast sales in the range of $3.35 billion to $3.50 billion and earnings per share from operations between 37 cents to 40 cents. Its previous outlook called for sales in the range of $3.46 billion to $3.75 billion and earnings per share between 40 cents to 46 cents.
January natural gas fell 13.4 cents to close at $7.427 per million British thermal units. January crude fell 81 cents to close at a two-week low of $61.22 a barrel.
Barclays Global Investors filed a new 13G on BJ Services and now is the holder of 10.15% of the outstanding shares.
Marsoft: "After a spectacular third quarter performance, the dry bulk market has been a bit more tame over the past couple of months. A brief October rally fizzled in the second half of the month, and a similar pattern was seen in November, with rates moving up at the start of the month before losing some momentum. But in general, the market remains very firm, with most freight rates at their highest levels since the first half of 2005. Over the past month, most rates have moved up, with the Baltic Cape TC index rising from $60,000 per day in mid-October to $63,000 per day by mid-November. Likewise, the Baltic Panamax TC Index rose from $30,000 per day to $33,000 per day over this period. However, the smaller ships saw a mild decline in spot rates over the past month.
Gottschalks Inc.said its board has retained UBS Investment Bank to assist its special strategic committee in exploring "various alternatives."
Benjamin Graham: "Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market."
"The exchange rate issue is A) a sovereign issue and this is our principle. B) We will take internal and external balances into account when making decisions on the yuan," People’s Bank of China assistant governor Yi Gang told reporters on the sidelines of a financial forum. China has let the yuan rise by about 3,45% since it revalued the currency by 2,1% in July last year.
Greenspan: "I expect that the dollar will continue to drift downwards until there will be a change in the U.S. balance of payments," Greenspan told a business conference here via video-link from the United States.
"There has been some evidence that OPEC nations are beginning to switch their reserves out of dollars and into euro and yen," Greenspan said.
"It is imprudent to hold everything in one currency," he said, adding that at some point the dollar will be moving lower.
"That will be the experience of the next few years," Greenspan said.
The inventory-to-sales ratio rose to 1.20 in October from 1.18 in September. The last time the ratio was bigger was in November 2003. The inventory-sales ratio stood at a record low 1.15 in May, June and July. The typical wholesaler has about 37 days of sales on hand, up from 35 days in July. As an aside, the gift card business amounted to $19 billion in 2005, and this year it is anticipated to rise to $30 billion. A good deal of these cards will be redeemed in January and not in December. Retailers cannot count the cards as sales until the merchandise is redeemed.
DuPont Co., the third-largest U.S. chemical maker, will eliminate 1,500 agriculture jobs and cut output of herbicides and pesticides in a plan to increase spending on genetically modified seeds.
Brazilian steelmaker CSN offered on Monday to buy Anglo-Dutch rival Corus Group Plc for 4.9 billion pounds ($9.6 billion) in cash, trumping a bid made only hours earlier by India's Tata Steel.
State-owned Dubai Ports World said on Monday it had agreed to sell its U.S. port operations to an American International Group unit after relinquishing control of them to allay concerns about U.S. national security. It is a 100% cash deal.
Multiple firms including Silver Lake Partners and Texas Pacific Group have bid for Saber Holdings , owner of the Travelocity Web site, according to a source familiar with the situation. The deal could approach $4.3 billion.
Next year will likely bring a second annual decline in existing home sales, the National Association of Realtors predicted on Monday. Sales of existing homes are expected to decline 8.6 percent to 6.47 million for 2006 and contract another 1 percent to 6.40 million units next year. I believe that forecast for 2007 is too optimistic.
Europe's biggest medical device maker, Smith & Nephew Plc , is close to bidding about $11 billion for U.S. rival Biomet Inc. , sources familiar with the situation said on Sunday. One of the sources told Reuters bids were due by Tuesday and other companies were also likely to submit offers for Biomet. A
winning bid of at least $45 a share would not surprise me.
Goldman Sachs reports their quarterly earnings tomorrow. They should surprise on the upside and that may be so for guidance going into 2007. Lehman and Bear Stearns report on Thursday. Morgan Stanley will report on December 19.
On Wednesday bids are due on Harrah's, and a final level of $86 could be in the cards.
Hedge fund S.A.C. Capital disclosed that it owned 5.1% of Phelps Dodge Corp. as of Dec. 7. But the fund said that it plans to vote its shares against Phelps Dodge's pending takeover by Freeport-McMoRan Copper & Gold. In a securities filing, S.A.C. said the deal "would not provide full and fair value to the issuer's shareholders."
DaimlerChrysler AG could lay off up to 16 percent of the workers in its North American truck operations next year due to an expected downturn in demand, the head of the automaker's truck operations said on Monday.
John Hussman: "Over the past three years, profit margins have widened to record levels, which has detached P/E ratios from other fundamental measures – such as price/revenue, price/dividend, and price/book ratios. The S&P 500 is currently about double its historical norms on those metrics. That isn't a forecast that stocks have to eliminate that valuation gap, but it certainly does suggest that stocks are priced to deliver unsatisfactory long-term returns from these prices.It bears repeating that if profit margins were at normal levels – even on the basis of profit margins that prevailed during the 1990's (indeed, anytime prior to the past 3 years) – the price/earnings ratio of the S&P 500 would currently be nearly 25. Unless investors want to speculate on the notion of a “permanently high plateau” in profit margins, the stock market is strenuously overvalued at present. Neither current earnings nor “forward” earnings should be considered – in themselves – as anything close to robust or reliable metrics of value here."
Texas Instruments Inc. cut its fourth-quarter financial targets late Monday, and forecast sales in the range of $3.35 billion to $3.50 billion and earnings per share from operations between 37 cents to 40 cents. Its previous outlook called for sales in the range of $3.46 billion to $3.75 billion and earnings per share between 40 cents to 46 cents.
January natural gas fell 13.4 cents to close at $7.427 per million British thermal units. January crude fell 81 cents to close at a two-week low of $61.22 a barrel.
Barclays Global Investors filed a new 13G on BJ Services and now is the holder of 10.15% of the outstanding shares.
Marsoft: "After a spectacular third quarter performance, the dry bulk market has been a bit more tame over the past couple of months. A brief October rally fizzled in the second half of the month, and a similar pattern was seen in November, with rates moving up at the start of the month before losing some momentum. But in general, the market remains very firm, with most freight rates at their highest levels since the first half of 2005. Over the past month, most rates have moved up, with the Baltic Cape TC index rising from $60,000 per day in mid-October to $63,000 per day by mid-November. Likewise, the Baltic Panamax TC Index rose from $30,000 per day to $33,000 per day over this period. However, the smaller ships saw a mild decline in spot rates over the past month.
Gottschalks Inc.said its board has retained UBS Investment Bank to assist its special strategic committee in exploring "various alternatives."
Benjamin Graham: "Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market."
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