2/11/06 A Time For Caution
The U.S. Federal January budget surplus was $3 billion less than the $24 billion surplus expected by the Congressional Budget Office in its monthly budget outlook. The difference came mostly on the outlay side. Receipts rose 13.7% year-over-year to $230 billion. It's a record for receipts in the month of January. Outlays rose 7.9% year-over-year to $209 billion, also a record for the month of January.
The yield curve is getting seriously inverted. The 2-year climbed to a 4.68% yield, the 10-year increased to 4.58%, and the 30-year closed at 4.55%. Meanwhile, for the week, gold declined 3.2%, silver dropped 3.9%, oil slipped 5.4%, gasoline plunged 13%, and natural gas plummeted 15%. On Friday, you witnessed some real selling in oil, natural gas, copper, cement, and other companies focusing on materials. Yet, bond yields rose, and quite sharply. Analysts maintain that earnings will continue to expand. Yet, the quality and breath of the equity market is questionable. This is not about a market that climbs a wall of worry. It's about a lack of leadership. The biggest pharmaceutical company, Pfizer, stated they would earn only $2 a share in 2006. They disappointed in 2005 and now they will disappoint in 2006. Google and Apple have taken recent hits. Intel is selling near the low. Are Cisco and Dell going to lead the advance in the tech sector? I would rather look at the other side of the coin. Rising interest rates will impact the rates on the ARMs and the spending ability of the consumer.
The level of economic activity will be impacted. I prefer to be early. As such, at the very least, one might consider sharply cutting back positions in copper and steel stocks. Buying puts on rallying days would also be a viable alternative.
Michael Brown, former head of FEMA, told the Senate Homeland Security and Governmental Affairs Committee he had held a video conference call the afternoon of Aug. 28, the day before the hurricane struck, which he specifically recalled Bush listened in on. Brown said he warned top administration officials on the call that a disaster was looming and that the government should go on top alert and cut through red tape in its response. "I knew in my gut this was the bad one," he said. How is this different from Bush's lack of action after the plane flew into the twin towers? He went back to the children in the classroom. He is a man unfit for the position of the presidency. But, that's a five-year old story.
Christopher Galakoutis: “If we somehow discover intelligent life actually willing to purchase US dollar assets, a rather miraculous accomplishment in itself, let us hope they are a god fearing species. At the very least, they could always turn to prayer when all hell breaks loose.”
According to the most recent U.S. Census figures, Hispanics make up one-seventh of the U.S. population and accounted for half the population growth in 2004. It's estimated that Univision's three television networks account for more than three-fourths of all Hispanic viewers in the nation.
Paul Pillar, a high-level CIA veteran who oversaw Middle East intelligence assessments from 2000-2005: "If the entire body of official intelligence on Iraq had a policy implication, it was to avoid war — or, if war was going to be launched, to prepare for a messy aftermath," Mr. Pillar wrote. "What is most remarkable about prewar U.S. intelligence on Iraq is not that it got things wrong and thereby misled policymakers; it is that it played so small a role in one of the most important U.S. policy decisions in decades."
Bush: "It's hard work to cut out and cut back on programs that don't work.” It’s really back-breaking work to reduce the size of government. You can assess his hard work by looking at the twin tower deficits.
Peter Schiff: “For financially strapped homeowners living paycheck to paycheck with little or no home equity, the payment shocks associated with ARM resets will be the financial equivalent of a knock-out punch. Even if most savings-short households can somehow manage to swing the higher payments, it will require the complete abandonment of just about any other discretionary spending.
Since better than 70% of America's bubble economy is comprised of consumer spending, such austerity will result in wide-spread unemployment. If homeowners have trouble making increased mortgage payments while still collecting paychecks, imagine how much harder it will become when they lose their jobs.”
The California State Automobile Association is moving 200 of its information technology jobs located in the Bay Area to a new call center in Glendale, Arizona, one that will open early this summer and eventually be manned by up to 1,400 workers. However, AAA has delayed further plans to relocate its remaining 1,000 San Francisco workers.
According to the Detroit Free Press, General Motors Corp. and the UAW are working on an early-retirement program aimed at averting a crippling strike at automotive parts supplier Delphi Corp.
Doug Noland: “There is certainly good reason to suspect that the "yen carry trade" (borrowing in yen and/or shorting low-yielding yen-denominated securities and using the proceeds to finance holdings in inflating markets) has ballooned to massive proportions and has, in the process, become a Seminal Source of "Blow-off" Finance.”
The WSJ noted that, membership in the National Association of Realtors, rose 6% since 2000 to about 1.25 million.
With record warm weather in January, housing starts could increase 10%. Are the short sellers in the housing stocks prepared for these numbers? A near-term rally could occur in this sector.
George Washington: “Worry is the interest paid by those who borrow trouble.”
Saturday, February 11, 2006
Friday, February 10, 2006
Around The Bend
2/10/06 Around The Bend
Gary Lammert: “Equity, commodity and bond patterns suggest a unified low or crash
with a nodal point in the April-May 2006 time frame. A nodal low in
the oil commodity stocks in this time frame (May-June) would confound
most prognosticators who are focused on Kuwait's recent revelations
and the volcanic unpredictability and volatility of Iran's recent rantings and threats.”
Rigzone: “Exxon Mobil's biggest competitor in the quest for oil reserves is not BP or Royal Dutch Shell. It is the governments of China, South Korea and India.”
Oil Daily mentioned “in order for investors in the popular Goldman Sachs Commodity Index to break even this year, crude oil prices need to hit $77/bbl, according to Deutsche Bank, largely because of the contango price structure hurting roll returns.” Contago is
where distant delivery prices for futures exceed spot prices, often due to the costs of storing and insuring the underlying commodity. It is the opposite of backwardation.
Doug Wakefield: “After all, the umbrella of diversification may be enough to shelter them from the summer rain. But, this same umbrella is an ill-suited tool for a level five.”
Crude oil futures were slightly lower Friday after the International Energy Agency trimmed its 2006 oil demand forecast, to 1.78 million barrels of oil a day from 1.83 million barrels. Crude oil futures were trading down 22 cents at $62.40 a barrel.
Yesterday, natural gas prices traded down to $7.37 per million BTUs, the lowest level in one year.
I found it interesting that yesterday’s 30-year Treasury bond auction, the first in 5 years, could produce a bid-to-cover of only 2.05. In addition, I found it significant the Fed Funds rate exceeds the yield on these 30-year Treasury bonds--- that is magic—given our
Country’s twin tower deficits. Why accept a low yield while lending to a heavily indebted nation?
Financial Times: “It is harder to see why investors would flock to the bonds at these prices. They must assume a very benign inflationary environment for a long time – just think of the changes in the economy since 1976 – and they get no real premium for tying up the funds for so many years.”
Investors should sell the dollar versus the euro because the U.S. currency has reached its ``peak'' and reflects expectations the Federal Reserve will keep raising interest rates, said Goldman, Sachs & Co. ``The dollar is going to have a hard time,'' said Jens Nordvig, a currency strategist in New York with Goldman, in an interview yesterday. ``Investor expectations for the Fed will run out of steam.''
European stocks traded at a 4 ½ year high.
Don Basch: “In comparison with the chart setup preceding the decline of 1987, domestic markets appear poised on the precipice overlooking a yawning crevasse, as do international markets which are awash in speculative hot money. Bears are licking their chops, relishing an impending decline on both domestic and international indices, and why shouldn't they? Most have been proven wrong all the way up. But every dog has its day.”
DP World, Dubai's port company, will acquire Peninsula & Oriental Steam Navigation, UK’s largest port operator and a 168 year-old company, for 520 pence a share, or 3.88 billion pounds ($6.8 billion), after PSA International Pte, Singapore's largest port company, said in a statement today that paying a higher price wouldn't make ``business sense.''
Yesterday, I made an incorrect statement. I stated Oracle was cutting 1,000 jobs.
They are eliminating 2,000 jobs. Oracle expects to buy back 139 million shares in the fourth quarter to make up for the shares issued to purchase Siebel.
Microsoft will spend $1 billion on its Redmond headquarters over the next three years.
Jacob Weisberg: “A country that saves and invests so little may be able to postpone a decline in living standards but it cannot do so indefinitely.”
Former Expedia founder initiated the beta version of Zillow.com on Wednesday. After the automated home appraisal site had 2 million hits, it crashed. Thursday it was back up and operational. This business could truly change the residential real estate business in a hurry. It would be foolish to underestimate Richard Barton. He made a real success of Expedia.
Del Monte Fresh Produce’s announcement that it would stop planting pineapple in Kunia on Feb. 19 and phase out other operations over the next three years will affect about 700 International Longshore and Warehouse Union employees, as well as an undetermined number of nonunion positions. Del Monte's departure will leave Maui Pineapple Co. and Dole Food Co. Hawaii as the only two pineapple growers in the state.
VW stated up to 20,000 employees could be cut.
Our trade deficit was $618 billion in 2004. In 2005 it probably approximated $725 billion.
Jack Abramoff: “The guy (Bush) saw me in almost a dozen settings, and joked with me about a bunch of things, including details of my kids.” I’m sure there will be a lack of memory also about Scooter Libby who testified that his superiors instructed him to leak information to reporters from an intelligence report.
Gary Lammert: “Equity, commodity and bond patterns suggest a unified low or crash
with a nodal point in the April-May 2006 time frame. A nodal low in
the oil commodity stocks in this time frame (May-June) would confound
most prognosticators who are focused on Kuwait's recent revelations
and the volcanic unpredictability and volatility of Iran's recent rantings and threats.”
Rigzone: “Exxon Mobil's biggest competitor in the quest for oil reserves is not BP or Royal Dutch Shell. It is the governments of China, South Korea and India.”
Oil Daily mentioned “in order for investors in the popular Goldman Sachs Commodity Index to break even this year, crude oil prices need to hit $77/bbl, according to Deutsche Bank, largely because of the contango price structure hurting roll returns.” Contago is
where distant delivery prices for futures exceed spot prices, often due to the costs of storing and insuring the underlying commodity. It is the opposite of backwardation.
Doug Wakefield: “After all, the umbrella of diversification may be enough to shelter them from the summer rain. But, this same umbrella is an ill-suited tool for a level five.”
Crude oil futures were slightly lower Friday after the International Energy Agency trimmed its 2006 oil demand forecast, to 1.78 million barrels of oil a day from 1.83 million barrels. Crude oil futures were trading down 22 cents at $62.40 a barrel.
Yesterday, natural gas prices traded down to $7.37 per million BTUs, the lowest level in one year.
I found it interesting that yesterday’s 30-year Treasury bond auction, the first in 5 years, could produce a bid-to-cover of only 2.05. In addition, I found it significant the Fed Funds rate exceeds the yield on these 30-year Treasury bonds--- that is magic—given our
Country’s twin tower deficits. Why accept a low yield while lending to a heavily indebted nation?
Financial Times: “It is harder to see why investors would flock to the bonds at these prices. They must assume a very benign inflationary environment for a long time – just think of the changes in the economy since 1976 – and they get no real premium for tying up the funds for so many years.”
Investors should sell the dollar versus the euro because the U.S. currency has reached its ``peak'' and reflects expectations the Federal Reserve will keep raising interest rates, said Goldman, Sachs & Co. ``The dollar is going to have a hard time,'' said Jens Nordvig, a currency strategist in New York with Goldman, in an interview yesterday. ``Investor expectations for the Fed will run out of steam.''
European stocks traded at a 4 ½ year high.
Don Basch: “In comparison with the chart setup preceding the decline of 1987, domestic markets appear poised on the precipice overlooking a yawning crevasse, as do international markets which are awash in speculative hot money. Bears are licking their chops, relishing an impending decline on both domestic and international indices, and why shouldn't they? Most have been proven wrong all the way up. But every dog has its day.”
DP World, Dubai's port company, will acquire Peninsula & Oriental Steam Navigation, UK’s largest port operator and a 168 year-old company, for 520 pence a share, or 3.88 billion pounds ($6.8 billion), after PSA International Pte, Singapore's largest port company, said in a statement today that paying a higher price wouldn't make ``business sense.''
Yesterday, I made an incorrect statement. I stated Oracle was cutting 1,000 jobs.
They are eliminating 2,000 jobs. Oracle expects to buy back 139 million shares in the fourth quarter to make up for the shares issued to purchase Siebel.
Microsoft will spend $1 billion on its Redmond headquarters over the next three years.
Jacob Weisberg: “A country that saves and invests so little may be able to postpone a decline in living standards but it cannot do so indefinitely.”
Former Expedia founder initiated the beta version of Zillow.com on Wednesday. After the automated home appraisal site had 2 million hits, it crashed. Thursday it was back up and operational. This business could truly change the residential real estate business in a hurry. It would be foolish to underestimate Richard Barton. He made a real success of Expedia.
Del Monte Fresh Produce’s announcement that it would stop planting pineapple in Kunia on Feb. 19 and phase out other operations over the next three years will affect about 700 International Longshore and Warehouse Union employees, as well as an undetermined number of nonunion positions. Del Monte's departure will leave Maui Pineapple Co. and Dole Food Co. Hawaii as the only two pineapple growers in the state.
VW stated up to 20,000 employees could be cut.
Our trade deficit was $618 billion in 2004. In 2005 it probably approximated $725 billion.
Jack Abramoff: “The guy (Bush) saw me in almost a dozen settings, and joked with me about a bunch of things, including details of my kids.” I’m sure there will be a lack of memory also about Scooter Libby who testified that his superiors instructed him to leak information to reporters from an intelligence report.
Around The Bend
2/10/06 Around The Bend
Gary Lammert: “Equity, commodity and bond patterns suggest a unified low or crash
with a nodal point in the April-May 2006 time frame. A nodal low in
the oil commodity stocks in this time frame (May-June) would confound
most prognosticators who are focused on Kuwait's recent revelations
and the volcanic unpredictability and volatility of Iran's recent rantings and threats.”
Rigzone: “Exxon Mobil's biggest competitor in the quest for oil reserves is not BP or Royal Dutch Shell. It is the governments of China, South Korea and India.”
Oil Daily mentioned “in order for investors in the popular Goldman Sachs Commodity Index to break even this year, crude oil prices need to hit $77/bbl, according to Deutsche Bank, largely because of the contango price structure hurting roll returns.” Contago is
where distant delivery prices for futures exceed spot prices, often due to the costs of storing and insuring the underlying commodity. It is the opposite of backwardation.
Doug Wakefield: “After all, the umbrella of diversification may be enough to shelter them from the summer rain. But, this same umbrella is an ill-suited tool for a level five.”
Crude oil futures were slightly lower Friday after the International Energy Agency trimmed its 2006 oil demand forecast, to 1.78 million barrels of oil a day from 1.83 million barrels. Crude oil futures were trading down 22 cents at $62.40 a barrel.
Yesterday, natural gas prices traded down to $7.37 per million BTUs, the lowest level in one year.
I found it interesting that yesterday’s 30-year Treasury bond auction, the first in 5 years, could produce a bid-to-cover of only 2.05. In addition, I found it significant the Fed Funds rate exceeds the yield on these 30-year Treasury bonds--- that is magic—given our
Country’s twin tower deficits. Why accept a low yield while lending to a heavily indebted nation?
Financial Times: “It is harder to see why investors would flock to the bonds at these prices. They must assume a very benign inflationary environment for a long time – just think of the changes in the economy since 1976 – and they get no real premium for tying up the funds for so many years.”
Investors should sell the dollar versus the euro because the U.S. currency has reached its ``peak'' and reflects expectations the Federal Reserve will keep raising interest rates, said Goldman, Sachs & Co. ``The dollar is going to have a hard time,'' said Jens Nordvig, a currency strategist in New York with Goldman, in an interview yesterday. ``Investor expectations for the Fed will run out of steam.''
European stocks traded at a 4 ½ year high.
Don Basch: “In comparison with the chart setup preceding the decline of 1987, domestic markets appear poised on the precipice overlooking a yawning crevasse, as do international markets which are awash in speculative hot money. Bears are licking their chops, relishing an impending decline on both domestic and international indices, and why shouldn't they? Most have been proven wrong all the way up. But every dog has its day.”
DP World, Dubai's port company, will acquire Peninsula & Oriental Steam Navigation, UK’s largest port operator and a 168 year-old company, for 520 pence a share, or 3.88 billion pounds ($6.8 billion), after PSA International Pte, Singapore's largest port company, said in a statement today that paying a higher price wouldn't make ``business sense.''
Yesterday, I made an incorrect statement. I stated Oracle was cutting 1,000 jobs.
They are eliminating 2,000 jobs. Oracle expects to buy back 139 million shares in the fourth quarter to make up for the shares issued to purchase Siebel.
Microsoft will spend $1 billion on its Redmond headquarters over the next three years.
Jacob Weisberg: “A country that saves and invests so little may be able to postpone a decline in living standards but it cannot do so indefinitely.”
Former Expedia founder initiated the beta version of Zillow.com on Wednesday. After the automated home appraisal site had 2 million hits, it crashed. Thursday it was back up and operational. This business could truly change the residential real estate business in a hurry. It would be foolish to underestimate Richard Barton. He made a real success of Expedia.
Del Monte Fresh Produce’s announcement that it would stop planting pineapple in Kunia on Feb. 19 and phase out other operations over the next three years will affect about 700 International Longshore and Warehouse Union employees, as well as an undetermined number of nonunion positions. Del Monte's departure will leave Maui Pineapple Co. and Dole Food Co. Hawaii as the only two pineapple growers in the state.
VW stated up to 20,000 employees cut be cut.
Our trade deficit was $618 billion in 2004. In 2005 it probably approximated $725 billion.
Jack Abramoff: “The guy (Bush) saw me in almost a dozen settings, and joked with me about a bunch of things, including details of my kids.” I’m sure there will be a lack of memory also about Scooter Libby who testified that his superiors instructed him to leak information to reporters from an intelligence report.
Gary Lammert: “Equity, commodity and bond patterns suggest a unified low or crash
with a nodal point in the April-May 2006 time frame. A nodal low in
the oil commodity stocks in this time frame (May-June) would confound
most prognosticators who are focused on Kuwait's recent revelations
and the volcanic unpredictability and volatility of Iran's recent rantings and threats.”
Rigzone: “Exxon Mobil's biggest competitor in the quest for oil reserves is not BP or Royal Dutch Shell. It is the governments of China, South Korea and India.”
Oil Daily mentioned “in order for investors in the popular Goldman Sachs Commodity Index to break even this year, crude oil prices need to hit $77/bbl, according to Deutsche Bank, largely because of the contango price structure hurting roll returns.” Contago is
where distant delivery prices for futures exceed spot prices, often due to the costs of storing and insuring the underlying commodity. It is the opposite of backwardation.
Doug Wakefield: “After all, the umbrella of diversification may be enough to shelter them from the summer rain. But, this same umbrella is an ill-suited tool for a level five.”
Crude oil futures were slightly lower Friday after the International Energy Agency trimmed its 2006 oil demand forecast, to 1.78 million barrels of oil a day from 1.83 million barrels. Crude oil futures were trading down 22 cents at $62.40 a barrel.
Yesterday, natural gas prices traded down to $7.37 per million BTUs, the lowest level in one year.
I found it interesting that yesterday’s 30-year Treasury bond auction, the first in 5 years, could produce a bid-to-cover of only 2.05. In addition, I found it significant the Fed Funds rate exceeds the yield on these 30-year Treasury bonds--- that is magic—given our
Country’s twin tower deficits. Why accept a low yield while lending to a heavily indebted nation?
Financial Times: “It is harder to see why investors would flock to the bonds at these prices. They must assume a very benign inflationary environment for a long time – just think of the changes in the economy since 1976 – and they get no real premium for tying up the funds for so many years.”
Investors should sell the dollar versus the euro because the U.S. currency has reached its ``peak'' and reflects expectations the Federal Reserve will keep raising interest rates, said Goldman, Sachs & Co. ``The dollar is going to have a hard time,'' said Jens Nordvig, a currency strategist in New York with Goldman, in an interview yesterday. ``Investor expectations for the Fed will run out of steam.''
European stocks traded at a 4 ½ year high.
Don Basch: “In comparison with the chart setup preceding the decline of 1987, domestic markets appear poised on the precipice overlooking a yawning crevasse, as do international markets which are awash in speculative hot money. Bears are licking their chops, relishing an impending decline on both domestic and international indices, and why shouldn't they? Most have been proven wrong all the way up. But every dog has its day.”
DP World, Dubai's port company, will acquire Peninsula & Oriental Steam Navigation, UK’s largest port operator and a 168 year-old company, for 520 pence a share, or 3.88 billion pounds ($6.8 billion), after PSA International Pte, Singapore's largest port company, said in a statement today that paying a higher price wouldn't make ``business sense.''
Yesterday, I made an incorrect statement. I stated Oracle was cutting 1,000 jobs.
They are eliminating 2,000 jobs. Oracle expects to buy back 139 million shares in the fourth quarter to make up for the shares issued to purchase Siebel.
Microsoft will spend $1 billion on its Redmond headquarters over the next three years.
Jacob Weisberg: “A country that saves and invests so little may be able to postpone a decline in living standards but it cannot do so indefinitely.”
Former Expedia founder initiated the beta version of Zillow.com on Wednesday. After the automated home appraisal site had 2 million hits, it crashed. Thursday it was back up and operational. This business could truly change the residential real estate business in a hurry. It would be foolish to underestimate Richard Barton. He made a real success of Expedia.
Del Monte Fresh Produce’s announcement that it would stop planting pineapple in Kunia on Feb. 19 and phase out other operations over the next three years will affect about 700 International Longshore and Warehouse Union employees, as well as an undetermined number of nonunion positions. Del Monte's departure will leave Maui Pineapple Co. and Dole Food Co. Hawaii as the only two pineapple growers in the state.
VW stated up to 20,000 employees cut be cut.
Our trade deficit was $618 billion in 2004. In 2005 it probably approximated $725 billion.
Jack Abramoff: “The guy (Bush) saw me in almost a dozen settings, and joked with me about a bunch of things, including details of my kids.” I’m sure there will be a lack of memory also about Scooter Libby who testified that his superiors instructed him to leak information to reporters from an intelligence report.
Wednesday, February 08, 2006
Spanish Media
2/9/06 Spanish Media
Univisión reaches about 98 percent of U.S. Spanish-speaking households through its 62 TV stations, more than 90 affiliate stations and more than 2,000 cable affiliates. The Hispanic population is expected to jump 68 percent to 72.1 million, or 20 percent of U.S. residents, by 2025, according to researcher Global Insight.
Grupo Televisa, Mexico's largest media company, owns 11% of Univision. Televisa provides the popular telenovelas and Mexican soccer matches that made Univision a programming powerhouse. U.S. law forbids foreign citizens from owning more than 25% of a U.S. broadcasting company. Univision is now our country's 5th largest network.
Univision's board has voted to explore strategic alternatives, and the most likely scenario is the sale of the company.
Wal-Mart has approximately 3200 stores. Last year they opened 341 new stores. In 2006,
they have plans to open 370 new stores.
Oracle will announce cutting 1,000 employees from its payroll.
Univisión reaches about 98 percent of U.S. Spanish-speaking households through its 62 TV stations, more than 90 affiliate stations and more than 2,000 cable affiliates. The Hispanic population is expected to jump 68 percent to 72.1 million, or 20 percent of U.S. residents, by 2025, according to researcher Global Insight.
Grupo Televisa, Mexico's largest media company, owns 11% of Univision. Televisa provides the popular telenovelas and Mexican soccer matches that made Univision a programming powerhouse. U.S. law forbids foreign citizens from owning more than 25% of a U.S. broadcasting company. Univision is now our country's 5th largest network.
Univision's board has voted to explore strategic alternatives, and the most likely scenario is the sale of the company.
Wal-Mart has approximately 3200 stores. Last year they opened 341 new stores. In 2006,
they have plans to open 370 new stores.
Oracle will announce cutting 1,000 employees from its payroll.
Tuesday, February 07, 2006
Palatin
2/8/06 Palatin
Palatin Technologies, Inc. and King Pharmaceuticals, Inc. announced that the
companies have initiated enrollment in a double-blind, placebo-controlled
Phase IIb clinical trial of PT-141 in patients with female sexual arousal
disorder (FSAD). The primary objective is to evaluate the safety and efficacy
of PT-141 in FSAD patients in the "at-home" environment.
This Phase IIb clinical trial is designed to enroll approximately sixty
women with a confirmed diagnosis of FSAD. The clinical trial entails a two-
month treatment period and will be conducted at approximately ten clinical
trial sites throughout the United States.
Dr. Trevor Hallam, Executive Vice President, Research and Development of
Palatin, stated, "Together with our colleagues at King, we are very excited to
commence this important, initial exploratory trial to evaluate PT-141 in FSAD
patients in the 'at-home' environment. The data we gather from this study
should prove significant for purposes of determining the future course of
development for PT-141 in the treatment of female sexual dysfunction."
The companies expect this Phase IIb clinical trial to conclude in the second
half of 2006.
The fastest growing item in the Bush budget: interest costs. They will amount to
approximately one quarter of a trillion dollars this year. While I'm on this
subject, rates on Treasury bonds have been on the rise. The 2-year is at 4.60%, the
10-year at 4.57% (an inverted yield curve), and the 30-year settled in at 4.65%.
Yesterday's auction of the 3-year notes was disappointing with limited interest.
The government reported that consumer credit rose only 3% in 2005, the smallest
increase in 12 years. However, mortgage loans continued to rise to the sky. It is
certainly cheaper to take out equity from a home than to pay credit card interest
rates.
Seasonality has taken hold in the metals markets. Gold nosedived to $555 an ounce
and silver to $9.39. Even copper took a small hit down to $2.27. Still and all,
these are all pretty fabncy prices on an historical basis.
Crude oil prices fell more than $2 a barrel Tuesday to $63+ after the U.S.
Department of Energy lowered its global oil demand estimate, and as
traders expect the agency to report an increase in U.S. oil inventories
today. In addition, the warm weather generated a drop in natural gas to
$7.89/MLN BTUs, an 8 month low. The country's average temperature for the month
was 39.5 degrees Fahrenheit, 8.5 degrees above average for January, the National
Climatic Data Center said Tuesday. The old record for January warmth
was 37.3 degrees, set in 1953.
Google: ``We are testing the distribution of various technologies with Dell.''
The NY Times reported that Univision, the Spanish-language media company,
may put itslef up for sale, and hired UBS as an advisor.
Marc Faber: "So, if we combine the over-bought condition of the
stock market, investors' sentiment high optimism, equity mutual funds' low
cash positions, and also heavy foreign buying, we have all the ingredients
for a stock market correction in the US getting underway very shortly...
my view is that we shall, eventually, be able to buy one Dow Jones Industrial
Average with between just one and five ounces of gold."
Inflation Expectations And The Bush Budget
2/7/06 Inflation Expectations And The Bush Budget
Steve Saville: "The Fed's biggest fear is an uncontrolled rise in inflation expectations."
Now let's take a look at the market in real time. The Inflation Indexed Treasury bonds tell quite a story about inflation expectations. The 10-year TIP, as they are called, yields 1.99% but the 30-year TIP yields only 1.80%. Taking this a step further, a non-inflation indexed 30- year Treasury bond yields 4.62% or almost the identical yield as the 2-year Treasury bond with a return of 4.61%. How can that be? Copper is selling at an all-time high of $2.33 a pound and gold at $574.30 is in spitting distance of the most recent multi-year high of $480 an ounce. In sum, there's lots of inflation but yet the market has turned a deaf ear and states it will not continue far into the future.
Raghan Rajan: "Even though there are far more participants who are able to absorb risk today, the financial risks that are being created by the system are indeed greater."
The Fed has one eye on wages and the other eye on inflation. Clearly, wages have not kept with inflation for several years. As for inflation in general, the Fed is hardly watchful as it prints money in high single digits. That is not being accomodative. That is undermining the value of our currency.
Michael Maloni: "There isn't enough excess capacity systemwide now-across all ports- to handle any breakdown at any large port."
Bush's proposed budget: The biggest spending increase would go to the military, a 6.9 percent rise to $439.3 billion for 2007, a figure that does not include the costs of fighting wars in Iraq and Afghanistan. The administration said last week it will ask Congress for an additional $120 billion to cover fighting for the rest of this year and the early part of 2007.
Steve Saville: "The Fed's biggest fear is an uncontrolled rise in inflation expectations."
Now let's take a look at the market in real time. The Inflation Indexed Treasury bonds tell quite a story about inflation expectations. The 10-year TIP, as they are called, yields 1.99% but the 30-year TIP yields only 1.80%. Taking this a step further, a non-inflation indexed 30- year Treasury bond yields 4.62% or almost the identical yield as the 2-year Treasury bond with a return of 4.61%. How can that be? Copper is selling at an all-time high of $2.33 a pound and gold at $574.30 is in spitting distance of the most recent multi-year high of $480 an ounce. In sum, there's lots of inflation but yet the market has turned a deaf ear and states it will not continue far into the future.
Raghan Rajan: "Even though there are far more participants who are able to absorb risk today, the financial risks that are being created by the system are indeed greater."
The Fed has one eye on wages and the other eye on inflation. Clearly, wages have not kept with inflation for several years. As for inflation in general, the Fed is hardly watchful as it prints money in high single digits. That is not being accomodative. That is undermining the value of our currency.
Michael Maloni: "There isn't enough excess capacity systemwide now-across all ports- to handle any breakdown at any large port."
Bush's proposed budget: The biggest spending increase would go to the military, a 6.9 percent rise to $439.3 billion for 2007, a figure that does not include the costs of fighting wars in Iraq and Afghanistan. The administration said last week it will ask Congress for an additional $120 billion to cover fighting for the rest of this year and the early part of 2007.
Stephen Roach observed that "the overall Chinese savings rate rose above
45% last year."
Yesterday, Alcoa, one of the Dow stocks, rose 4.7% as JP Morgan upgraded the stock
to overweight and raised its EPS estimate to $2.15 from $1.88 due to rising
aluminum prices.
Paul Kasriel: "If history is any guide, a slowdown in household spending growth
in 2006 is likely to lead to a slowdown in capital spending growth."
Robert Eckel, M.D., President of the American Heart Association:
"On behalf of the more than 71 million Americans who suffer from some form
of heart disease, stroke, or other cardiovascular diseases, we are
disappointed that the President's budget has placed funding for programs that
help prevent, treat and cure these diseases on the back burner of his domestic
agenda. Cardiovascular disease is the number one killer of Americans and is
projected to cost this nation $403 billion in 2006 -- an amount equivalent to
this year's projected budget deficit. As the population ages, the prevalence
and costs of these conditions will escalate, producing a cardiovascular time
bomb with staggering implications for health care costs and quality of care.
With deaths from heart disease alone projected to increase by nearly 130
percent by 2050, it's a terrible mistake to make cardiovascular research,
prevention and treatment a mere afterthought in the proposed budget.
Funding for the National Institutes of Health is reduced below last year's
levels and spending on medical research has eroded in inflation-adjusted terms
by nearly 10 percent since 2003. The Centers for Disease Control and
Prevention's Heart Disease and Stroke Prevention program is reduced even
though the program currently funds efforts to prevent disease in only 14
states. The Health Resources and Services Administration's Rural and
Community Access to Emergency Devices (AED) Program has been terminated even
though communities with aggressive AED placement plans have achieved survival
rates from sudden cardiac arrest as high as 40 percent."
Bush's proposed budget,which will have to face approval by Congress,
calls for Medicare cuts totaling $36 billion over the next five years and
$105 billion over 10 years. Most of the cuts come in the form of reduced payments
to hospitals, nursing homes and other health providers.
According to Forrester Research, about 56% of U.S. internet users have sent a
photo over e-mail as an attachment.
Toyota's latest quarterly earnings rose 34%.
The number of U.S. military personnel since we invaded Iraq in March 2003 has risen
to least 2,257, according to an Associated Press count.
Bush's budget still assumes that the government will reap hundreds of
billions of extra dollars from the Alternative Minimum Tax over the next five years.
I would hope that this scenario would not be the case.
According to Automotive News, Gneral Motors cut its 50 cents quarterly dividend
in half.
For the last 7 years, small caps have outperformed big caps. One might consider
taking some money off the table in the Russell 2000 and the S&P 600.
Luxury homebuilder Toll Brothers cut its home delivery estimate for the year to
between 9,200 and 9,500 homes from 9,500 to 10,200 homes. However, for their
first quarter ended Jan. 31, revenues rose 35% and its backlog rose 22%. Some
analysts may be disappointed in this downward revision, but the recent new low of
$30+ takes this adequately into account. On the other hand, I would prefer buying
shares in other homebuilders concentrating in more reasonably priced homes.
Monday, February 06, 2006
Observations
2/06/06 Observations
Robert McHugh: "Since Jan. 2004, the 10 Day Average
NYSE new high trend-line has declined steadily,
diverging bearishly with prices." The questions are
two-fold: will the new high peaks and prices decline
in unison? If so, for how long?
Mike Burk: "The 4th thru 9th trading days of Feb.
during the 2nd year of the Presidential cycle are
strong. Tues-Thurs have historically been the
strongest 3 days of the month."
Volkmar Hable: "More than 75% of all online traders
lose money at any given time. More than 92% of all
online option traders lose money at any given time.
Those statistics refer to individual traders and
investors."
India's benchmark stock index, the 30-share Sensex,
vaulted above 10,000 to an all-time high.
Crude has climber once again above $66 per barrel.
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