7/2/06 Realities
Bain, Blackstone and TH Lee emerge as the winners with a $6 billion-plus bid or $44 a share for Michaels Stores. The bid took me by surprise. I anticipated a value of only $40 per share.
Wal-Mart's June same-store sales rose 1.2%. Some will consider this figure disappointing; however, one should note that one year ago June same-store sales rose 4.5%.
New Jersey Governor Jon Corzine signed the first-ever order yesterday shutting down government operations as he waited for the legislature to pass a budget bill to keep the state in business. Corzine signed the order nine hours after the deadline passed for the state to have its fiscal 2007 appropriations bill in place, said spokesman Anthony Coley. The governor waited in his Trenton office until midnight and then returned before 8 a.m. to be available to sign a balanced budget plan. ``We've taken, we believe, every reasonable and responsible measure to ensure that this day would not come,'' Corzine said today in a statement. ``But here we are.''
Now all we need is for the federal government to pass a balanced budget or be shut down.
This reported by Bloomberg: “China’s exporters are increasingly using non-dollar currencies for settlement to reduce foreign-exchange risks, China International Business Daily reported. The companies are also raising export prices and using hedging tools to lower the risk of currency fluctuations…” I have wriiten frequently that this would take place. It is the tip of the iceberg.
Meanwhile, China’s reserves increased by around $20 billion in April and $30 billion in May, and that brings the total to roughly $925 billion (not including June).
Yesterday, Russia lifted all currency controls on the rouble and made it fully convertible. I wrote about this a few weeks ago.
Doug Noland: "The Federal Reserve is simply not institutionally prepared for the unfolding challenging environment, although the same could be said for policymakers and the public generally. The Fed is left floundering in the shallowest of central banking doctrine, bereft of any substance as to the key underlying forces driving the economy, the markets and, increasingly, inflationary pressures. At the same time, the Fed’s benign neglect of Credit Bubble excesses is buttressed by the view from the White House to the Halls of Congress that domestic and international growth are the only avenues for rectifying imbalances. It’s quite dangerous dogma, yet the markets are happy to play along."
For weeks I have stated that the GDP would grow at least 3% in the second quarter. I would like to refine that to a minimum of 3.4%. Countries all over the world are raising their growth projections for the second quarter. Some of that growth is the result of inflation. Some is the result of massive government spending on infrastructure. Interest rates will continue to rise. Make no mistake about it. In addition, it is only a matter of time until wages rise in the U.S. Why? Less Mexicans, for example, are coming across the border to work. It is difficult to get workers to harvest wine grapes. Those that do come are offered higher paying jobs in landscaping, painting, etc. Those on Main Street need higher wages to offset higher energy and medical expenses. Inflation has taken a foothold on Main Street budgets. Wages will need to rise and business profit margins will begin to dip.
Earnings from trading of cash instruments and derivatives at U.S. banks rose to a record $5.7 billion in the first quarter, a federal bank regulator said on Friday. Derivatives held by U.S. insured commercial banks increased to a record $110.2 trillion in the same three-month period, according to the Office of the Comptroller of the Currency. (That is not a misprint. $110 TRILLION).
Morgan Stanley is warning overseas investors the New Zealand dollar will slide to 57 US cents by the end of the year. Morgan Stanley says New Zealand is overburdened with debt, and its trade deficit ranks it with the likes of Latvia, Bulgaria, and Iceland.
The Central Bank of China (CBC), Taiwan's central bank, raised its key rate by an eighth of a percentage point Thursday. On Friday, the New Taiwan dollar surged sharply after foreign investors purchased the NT$ heavily to make more local investments and after importers/exporters sold their holdings in the U.S. dollar. The NT$ closed yesterday at NT$32.399 against the U.S. dollar, up NT$0.221 from the previous trading day.
Gasoline prices around the Chicago area hit an all-time high Friday with prices for regular gas hitting $3.124 on average in the Chicago area, according to AAA-Chicago Motor Club. research.
Saturday, July 01, 2006
Friday, June 30, 2006
Expectations
7/1/06 Expectations
University of Michigan's final June reading on one-year U.S. inflation expectations was 3.3 percent, versus 4.0 percent in May. Median expectations for inflation over a five-year horizon eased to 2.9 percent from 3.2 percent in May.
A letter from Kerkorian's investment company, Tracinda Corp., said the company believes Renault and Nissan are receptive to the idea of including General Motors in their partnership and purchasing "a significant minority interest" in the Detroit automaker. The GM board called an emergency meeting to discuss this matter. As I have mentioned previously, I believe Renault/Nissan would be better served by purchasing 100% of Ford. The latter offers a better cash flow picture, and much less risk with GM now at $29+ per share.
Inflation, as measured by a price gauge tied to consumer spending, rose by 0.4 percent in May and was up 0.2 percent when energy and food prices are excluded. This measure of core inflation is up 2.1 percent when compared to May 2005, slightly above the Fed's upper bounds for core inflation of 2 percent.
As of July 1, Beijing removed foreign exchange quotas for firms investing abroad. I expect many more Chinese companies making acquisitions in the U.S.
U.S. net debt increased 14% to $2.69 trillion in 2005. It was the 20th straight year our country was a net debtor.
Over the years I have frequently quoted Martin Pring, a well-known market technician. His latest work is close to 30 pages. I thought I would include Martin's summary:"1. Secular trends in equity prices are determined by multi-decade swings in sentiment, as investors move from a generational swing in pessimism to the overconfident and "irrational exuberance" at peaks.
2. History tells us that once an extreme optimism has been reached, it takes a very long time, decades, in fact, for the pendulum to move to the other extreme.
3. Our indicators advocate that a secular peak was seen in the year 2000.
4. These types of secular market turning points have always been followed by massive bear markets like the one that developed in 1929, or multi-year trading ranges as witnessed in 1900/21 and 1986/81 periods.
5. Without exception, stock prices, when adjusted for inflation, experienced a significant loss in purchasing power following previous long-term tops.
The evidence, whether it comes for monetary aspects, financial market sequences, or intermarket analysis, is syrongly bearish."
You can read the entire article at pring.com.
Crude oil for August delivery finished on the New York Mercantile Exchange with a 41-cent gain at $73.93 a barrel, a seven-week high.
The 10-year Treasury was last trading at 5.141%, compared with 5.205% late Thursday. The yield curve was inverted with the 2-year note yielding 5.158%. Meanwhile, there was follow-through selling in the dollar and the dollar index traded below 85.
The Chicago PMI index fell to 56.5 in June, versus expectations of 59.4. Inflation pressures accelerated with the prices-paid index rising to 89.0% from 76.9% in May. Separately, U.S. consumer sentiment improved to 84.9 from 82.4 in early June and 79.1 in May, according to the University of Michigan.
Gold futures closed at their highest level since June 7, gaining 4% in the second quarter, in a broad metals rally triggered by the falling dollar. Gold for August delivery ended the session up $27.10 at $616.0 an ounce on the New York Mercantile Exchange, an increase of 4.8% for the week. Gold hasn't closed above $600 since June 12.
In Friday's trading, the VIX was basically unchanged.
Emil W. Henry Jr., Assistant Secretary for financial institutions at the U.S. Treasury:
"There are numerous levels of risk presented by the mortgage investment portfolios, but at a basic level, the risk is created as follows: GSE portfolios are comprised primarily of fixed-rate mortgages, either held as whole loans, mortgage-backed securities (MBS), or other mortgage-related assets. While mortgages in the U.S. typically allow borrowers the option to prepay at will, the aggregation of fixed-rate mortgages requires that the investor develop strategies to mitigate risks presented by these uncertain cash flows -- both prepayments and extensions. Unless the portfolios are hedged properly, in a period of significant interest rate movement, there is the risk to the GSEs that their assets and liabilities will quickly become broadly mismatched, which can lead to insolvency -- much like the dynamics of the S&L crisis."
As the dollar gets cheaper, it will less costly for foreigners to buy our companies. In sum, we will
"manufacture" companies on the cheap.
Handing a significant win to those clamoring for more domestic energy supply, the House of Representatives on Thursday voted to dismantle the nearly 25-year ban on offshore drilling in much of the US coastline.
"I think we are going to see a big increase in bankruptcies in 2007-08," Wilbur Ross, chairman and chief executive of the private equity group that bears his name, told the Financial Times. "Every time you compound leverage, you cut the margins for error."
John Stuart Mill: “There is a limit to the legitimate interference of collective opinion with individual independence: and to find that limit, and maintain it against encroachment, is as indispensable to a good condition of human affairs, as protection against politica”
University of Michigan's final June reading on one-year U.S. inflation expectations was 3.3 percent, versus 4.0 percent in May. Median expectations for inflation over a five-year horizon eased to 2.9 percent from 3.2 percent in May.
A letter from Kerkorian's investment company, Tracinda Corp., said the company believes Renault and Nissan are receptive to the idea of including General Motors in their partnership and purchasing "a significant minority interest" in the Detroit automaker. The GM board called an emergency meeting to discuss this matter. As I have mentioned previously, I believe Renault/Nissan would be better served by purchasing 100% of Ford. The latter offers a better cash flow picture, and much less risk with GM now at $29+ per share.
Inflation, as measured by a price gauge tied to consumer spending, rose by 0.4 percent in May and was up 0.2 percent when energy and food prices are excluded. This measure of core inflation is up 2.1 percent when compared to May 2005, slightly above the Fed's upper bounds for core inflation of 2 percent.
As of July 1, Beijing removed foreign exchange quotas for firms investing abroad. I expect many more Chinese companies making acquisitions in the U.S.
U.S. net debt increased 14% to $2.69 trillion in 2005. It was the 20th straight year our country was a net debtor.
Over the years I have frequently quoted Martin Pring, a well-known market technician. His latest work is close to 30 pages. I thought I would include Martin's summary:"1. Secular trends in equity prices are determined by multi-decade swings in sentiment, as investors move from a generational swing in pessimism to the overconfident and "irrational exuberance" at peaks.
2. History tells us that once an extreme optimism has been reached, it takes a very long time, decades, in fact, for the pendulum to move to the other extreme.
3. Our indicators advocate that a secular peak was seen in the year 2000.
4. These types of secular market turning points have always been followed by massive bear markets like the one that developed in 1929, or multi-year trading ranges as witnessed in 1900/21 and 1986/81 periods.
5. Without exception, stock prices, when adjusted for inflation, experienced a significant loss in purchasing power following previous long-term tops.
The evidence, whether it comes for monetary aspects, financial market sequences, or intermarket analysis, is syrongly bearish."
You can read the entire article at pring.com.
Crude oil for August delivery finished on the New York Mercantile Exchange with a 41-cent gain at $73.93 a barrel, a seven-week high.
The 10-year Treasury was last trading at 5.141%, compared with 5.205% late Thursday. The yield curve was inverted with the 2-year note yielding 5.158%. Meanwhile, there was follow-through selling in the dollar and the dollar index traded below 85.
The Chicago PMI index fell to 56.5 in June, versus expectations of 59.4. Inflation pressures accelerated with the prices-paid index rising to 89.0% from 76.9% in May. Separately, U.S. consumer sentiment improved to 84.9 from 82.4 in early June and 79.1 in May, according to the University of Michigan.
Gold futures closed at their highest level since June 7, gaining 4% in the second quarter, in a broad metals rally triggered by the falling dollar. Gold for August delivery ended the session up $27.10 at $616.0 an ounce on the New York Mercantile Exchange, an increase of 4.8% for the week. Gold hasn't closed above $600 since June 12.
In Friday's trading, the VIX was basically unchanged.
Emil W. Henry Jr., Assistant Secretary for financial institutions at the U.S. Treasury:
"There are numerous levels of risk presented by the mortgage investment portfolios, but at a basic level, the risk is created as follows: GSE portfolios are comprised primarily of fixed-rate mortgages, either held as whole loans, mortgage-backed securities (MBS), or other mortgage-related assets. While mortgages in the U.S. typically allow borrowers the option to prepay at will, the aggregation of fixed-rate mortgages requires that the investor develop strategies to mitigate risks presented by these uncertain cash flows -- both prepayments and extensions. Unless the portfolios are hedged properly, in a period of significant interest rate movement, there is the risk to the GSEs that their assets and liabilities will quickly become broadly mismatched, which can lead to insolvency -- much like the dynamics of the S&L crisis."
As the dollar gets cheaper, it will less costly for foreigners to buy our companies. In sum, we will
"manufacture" companies on the cheap.
Handing a significant win to those clamoring for more domestic energy supply, the House of Representatives on Thursday voted to dismantle the nearly 25-year ban on offshore drilling in much of the US coastline.
"I think we are going to see a big increase in bankruptcies in 2007-08," Wilbur Ross, chairman and chief executive of the private equity group that bears his name, told the Financial Times. "Every time you compound leverage, you cut the margins for error."
John Stuart Mill: “There is a limit to the legitimate interference of collective opinion with individual independence: and to find that limit, and maintain it against encroachment, is as indispensable to a good condition of human affairs, as protection against politica”
Thursday, June 29, 2006
Flounder
6/30/06 Flounder
It's that time of year. Get out the bait and go for the bottom fish, the flounder. St. Simons Island Bait & Tackle owner Mike Wooten, likes to use live bait, such as mud minnows or live shrimp. "You can fish for flounder, and maybe catch some trout and reds, too," Wooten said. "Live bait is the way to go, especially if you don't know what you're doing." Wall Street likes to use live bait too - especially right before the quarter ends. It's called a mark em up and salvage job. Wall Street drops the bait from a helicopter. It's called a Benny. Not Jack Benny. This one has a beard and isn't funny. Even a busted clock is right twice a day, and yesterday the bait worked like a charm. The fish were really biting. The Dow jumped over 200 points, the Nasdaq over 60, and the S&P and the Russell about 27. The Dow Jones Transportation Average jumped more than 100 points late Thursday to 4844.12. Bonds joined in and the yield on the 10-year dropped to 5.20% and the 2-year to 5.19%.
Gold futures surpassed $600 in electronic trade Thursday for the first time since June 13, as the dollar tumbled following a statement from the Federal Reserve that was less hawkish than many expected.
Crude-oil futures closed at their highest level in seven weeks Thursday to tally a 6% climb in the last seven sessions. August crude rose $1.33 to close at $73.52 a barrel, its highest close since May 12. Meanwhile, the price of gas at the tank rose 4 cents a gallon in the Bay Area.
The odds that the Federal Reserve will raise overnight interest rates after their meeting in August declined, according to pricing in the fed funds futures market, after the Fed raised its fed funds target to a widely-anticipated 5.25% from 5%, and said in its accompanying statement that economic growth was moderating. The Fed said that "any additional firming that may be needed" will depend on the economic outlook.There is now a 52% chance that the Fed will raise its fed funds target to 5.5% after its policy setting meeting on Aug. 8. Just prior to the Fed statement, August fed funds futures gave a 60% chance of a 0.25 percentage point move.
The dollar slumped against the euro and yen after the Federal Open Market Committee lifted the fed funds target rate to 5.25% from 5%.
Microsoft will now aim for a launch of Office 2007 to business customers by the end of 2006 rather than an earlier target of October. Microsoft also said it would delay the general availability of the Office upgrade to early 2007 from its previous January target.
It's that time of year. Get out the bait and go for the bottom fish, the flounder. St. Simons Island Bait & Tackle owner Mike Wooten, likes to use live bait, such as mud minnows or live shrimp. "You can fish for flounder, and maybe catch some trout and reds, too," Wooten said. "Live bait is the way to go, especially if you don't know what you're doing." Wall Street likes to use live bait too - especially right before the quarter ends. It's called a mark em up and salvage job. Wall Street drops the bait from a helicopter. It's called a Benny. Not Jack Benny. This one has a beard and isn't funny. Even a busted clock is right twice a day, and yesterday the bait worked like a charm. The fish were really biting. The Dow jumped over 200 points, the Nasdaq over 60, and the S&P and the Russell about 27. The Dow Jones Transportation Average jumped more than 100 points late Thursday to 4844.12. Bonds joined in and the yield on the 10-year dropped to 5.20% and the 2-year to 5.19%.
Gold futures surpassed $600 in electronic trade Thursday for the first time since June 13, as the dollar tumbled following a statement from the Federal Reserve that was less hawkish than many expected.
Crude-oil futures closed at their highest level in seven weeks Thursday to tally a 6% climb in the last seven sessions. August crude rose $1.33 to close at $73.52 a barrel, its highest close since May 12. Meanwhile, the price of gas at the tank rose 4 cents a gallon in the Bay Area.
The odds that the Federal Reserve will raise overnight interest rates after their meeting in August declined, according to pricing in the fed funds futures market, after the Fed raised its fed funds target to a widely-anticipated 5.25% from 5%, and said in its accompanying statement that economic growth was moderating. The Fed said that "any additional firming that may be needed" will depend on the economic outlook.There is now a 52% chance that the Fed will raise its fed funds target to 5.5% after its policy setting meeting on Aug. 8. Just prior to the Fed statement, August fed funds futures gave a 60% chance of a 0.25 percentage point move.
The dollar slumped against the euro and yen after the Federal Open Market Committee lifted the fed funds target rate to 5.25% from 5%.
Microsoft will now aim for a launch of Office 2007 to business customers by the end of 2006 rather than an earlier target of October. Microsoft also said it would delay the general availability of the Office upgrade to early 2007 from its previous January target.
In March, the company pushed back the consumer launch of the 2007 Microsoft Office package, which includes the Word processor, Excel spreadsheet and PowerPoint presentation software to January to coincide with the debut of its Windows Vista operating system.
EMC Corp.said late Thursday it has entered into an agreement to acquire digital-security software firm RSA Security Inc. for $2.1 billion in cash, net of RSA's cash balance, which values RSA at $28 share.
The Andersons, Inc. announced that it has filed a registration statement with the Securities and Exchange Commission relating to a proposed public offering of 2.28 million shares of its common stock, of which 2 million shares are proposed to be sold by the Company and 280,000 shares are proposed to be sold by certain selling shareholders named in the prospectus.
Aventine Renewable Energy Holdings, Inc., the latest ethanol company to go public, announced thepricing of its initial public offering of 9,058,450 shares of common stock, at a price of $43.00 per share. Maybe they should not have raised the offering price and enlarged the size of the IPO. The deal was a bust and closed at $38.37.
The floods from the Mid-Atlantic to the Northeast, from Virginia to Vermont, were some of the worst floods in the last 50 years.
Ford sees greater "headwinds" due to the gas prices impacting the sale of larger SUVs. Last year the company lost $1.6 billion in its North American operations and a similar result might be in store for 2006. However, the company showed a profit last year and was cash flow positive and I expect the same in 2006.
U.S. Treasury Secretary John Snow said on Thursday he had completed his last day on the job.
Europeans travelling to the US without a new high-tech passport could require a visa from October, the European Union's top justice official warned on Thursday.
Shareholders have filed two lawsuits against Univision Communications Inc. and its board members, claiming they breached their fiduciary duty when they agreed earlier this week to sell the Spanish-language broadcaster to a consortium of private investors. Both lawsuits were filed in Los Angeles Superior Court and seek class-action status. When was the last time you saw a $10+ billion auction sale of a public company not have at least two rounds of bidding?
The June 19 spill at a Citgo Petroleum Corp. refinery in Lake Charles forced the closure of the Calcasieu Ship Channel, a key lane for transporting petroleum in and out of the region's four refineries. About 11 miles of the channel remained closed Thursday. The entire 40 miles to the Gulf of Mexico had been closed.
The VIX took a pounding down to the 13 level, and that was last reached in mid-May or about the time the fireworks began. In sum, the VIX rallied from 12 to 24 and a round trip has just about been achieved. You think the fireworks are a thing of the past? If you believe that, then you believe Microsoft can bring out a major product on time.
Wednesday, June 28, 2006
The Next Six Months
6/29/06 The Next Six Months
The United States is the top buyer of Venezuelan oil. Venezuela remains among the top five suppliers to the U.S. A Venezuelan oil embargo against the United States would cause oil prices to jump by US$4 (euro3.18) to US$6 (euro4.77) a barrel and increase gasoline prices at the pump by 11 cents (euro.09) to 15 cents (euro.12) a gallon, stated the U.S. Gov't Accountability Office. Venezuela is the world's fifth-largest oil exporter.
Coming into the Fed's decision on interest rates, the 2-year is 5.27%, the 30-year 5.28%, and the 10-year is 5.25%. In sum, the market made the decision to raise rates and the Fed is simply a eunuch.
It was a tough quarter, for bonds, equities, commodities, housing, dollar-denominated assets, and wages (which continue to trail the rate of inflation.) With only two days left to the end of the quarter, where do we go from here? I prefer to stick with what I know -- where reward far outweighs risk, such as, the shares of Univision. Then there are the potential pockets of value. Should Chevron and ConocoPhillips decline 5 to 7% in price from current levels, those would be examples of value.
There are many stocks that look cheap on historical valuations; however, today's environment is not typical. Our country is carrying twin tower debt levels that exceed our ability to generate sufficient revenues with which to pay down those debts. In addition, our fiscal operations are highly dependent on foreign investors purchasing our debt instruments. Yesterday's 5-year Treasury auction reflects the potential danger when foreign buyers avoid an auction. Therefore, the auction was a bust and indirect bidding was at the lowest point in 3 years.
In May, China's demand for crude rose 13.5% over the level reached in May 2005.
Russia has the world's 3rd largest currency reserves. Before Cheney shoots his mouth off again, please let him know about Russia's newly found financial strength.
Yesterday, equities had a modest rally and the VIX once again had only a 1.15 point range with the close down a meager .45 of a point.
With respect to Univision, "the Buyer has obtained equity and debt financing commitments for the transactions contemplated by the Merger Agreement, the proceeds of which will be sufficient for Buyer to pay the aggregate merger consideration and all related fees and expenses of the transactions contemplated by the Merger Agreement. The closing of the merger is not conditioned on the receipt of the financing by Buyer."
The United States is the top buyer of Venezuelan oil. Venezuela remains among the top five suppliers to the U.S. A Venezuelan oil embargo against the United States would cause oil prices to jump by US$4 (euro3.18) to US$6 (euro4.77) a barrel and increase gasoline prices at the pump by 11 cents (euro.09) to 15 cents (euro.12) a gallon, stated the U.S. Gov't Accountability Office. Venezuela is the world's fifth-largest oil exporter.
Coming into the Fed's decision on interest rates, the 2-year is 5.27%, the 30-year 5.28%, and the 10-year is 5.25%. In sum, the market made the decision to raise rates and the Fed is simply a eunuch.
It was a tough quarter, for bonds, equities, commodities, housing, dollar-denominated assets, and wages (which continue to trail the rate of inflation.) With only two days left to the end of the quarter, where do we go from here? I prefer to stick with what I know -- where reward far outweighs risk, such as, the shares of Univision. Then there are the potential pockets of value. Should Chevron and ConocoPhillips decline 5 to 7% in price from current levels, those would be examples of value.
There are many stocks that look cheap on historical valuations; however, today's environment is not typical. Our country is carrying twin tower debt levels that exceed our ability to generate sufficient revenues with which to pay down those debts. In addition, our fiscal operations are highly dependent on foreign investors purchasing our debt instruments. Yesterday's 5-year Treasury auction reflects the potential danger when foreign buyers avoid an auction. Therefore, the auction was a bust and indirect bidding was at the lowest point in 3 years.
In May, China's demand for crude rose 13.5% over the level reached in May 2005.
Russia has the world's 3rd largest currency reserves. Before Cheney shoots his mouth off again, please let him know about Russia's newly found financial strength.
Yesterday, equities had a modest rally and the VIX once again had only a 1.15 point range with the close down a meager .45 of a point.
With respect to Univision, "the Buyer has obtained equity and debt financing commitments for the transactions contemplated by the Merger Agreement, the proceeds of which will be sufficient for Buyer to pay the aggregate merger consideration and all related fees and expenses of the transactions contemplated by the Merger Agreement. The closing of the merger is not conditioned on the receipt of the financing by Buyer."
American Technology Research analyst Shaw Wu predicted that because Apple switched suppliers, its iPod Nano player would ship in the fourth quarter rather than the third quarter. Wu also said he thinks the wide-screen video iPod, which was expected to debut in the fourth quarter, will be pushed back until the first half of 2007.
Russia's Putin announced a new foreign policy doctrine at a meeting with Russia's ambassadors yesterday. The priority countries for Russian foreign policy, in order, are the EU, China, India and the United States.
The nonpartisan Congressional Research Service said in a report that through the current fiscal year ending Sept. 30, the government will have spent $437 billion on overseas military and foreign aid funding. That includes the latest supplemental spending bill signed into law this month, which provided $69 billion for the war effort. Add in roughly $1.5 billion in fiscal 2007 Foreign Operations funds for Iraq and Afghanistan; $50 billion in Pentagon "bridge" funds for the first half of fiscal 2007, plus as-yet-undetermined supplemental funds for the remainder of the next fiscal year, and total war-related costs will easily soar over $500 billion one year from now. Aren't you overjoyed with the money we are spending to bring "freedom" to the Iraqi people. Meanwhile, Americans are footing the bill and losing their individual freedoms day by day. Did you know you voted for neo-Fascism in the last two presidential elections?
British Prime Minister Tony Blair is expected to announce he will resign as early as next May, The Telegraph reports, citing members of Parliament. The newspaper said Blair would likely leave office around the time of his 10th anniversary of prime minister. He took office May 2, 1997. That gives George W. about 10 months to make another friend. Everyone needs at least one friend.
Gary Lammert: "Large scale political and social turmoil are the carts that are pulled(or overturned) by the antecedent macroeconomic horsestumbling into the unexpected very deep and low viscosity quicksand found atop generational asset saturation areas."
Duke Energy’s board of directors has approved a plan to de-merge the company’s natural gas and electricity operations into two separate companies.
A motivational story for all times. A friend sent this to me a long time ago.
The Wooden Bowl
A frail old man went to live with his son, daughter-in-law, and four-year old grandson. The old man's hands trembled, his eyesight was blurred, and his step faltered. The family ate together at the table. But the elderly grandfather's shaky hands and failing sight made eating difficult. Peas rolled off his spoon onto the floor. When he grasped the glass, milk spilled on the tablecloth.
The son and daughter-in-law became irritated with the mess. "We must do something about father," said the son. "I've had enough of his spilled milk, noisy eating, and food on the floor." So the husband and wife set a small table in the corner. There, Grandfather ate alone while the rest of the family enjoyed dinner. Since Grandfather had broken a dish or two, his food was served in a wooden bowl! When the family glanced in Grandfather's direction, sometime he had a tear in his eye as he sat alone. Still, the only words the couple had for him were sharp admonitions when he dropped a fork or spilled food.
The four-year-old watched it all in silence.One evening before supper, the father noticed his son playing with wood scraps on the floor. He asked the child sweetly, "What are you making?"Just as sweetly, the boy responded, "Oh, I am making a little bowl for you and Mama to eat your food in when I grow up." The four-year-old smiled and went back to work.
The words so struck the parents that they were speechless. Then tears started to stream down their cheeks. Though no word was spoken, both knew what must be done.That evening the husband took Grandfather's hand and gently led him back to the family table. For the remainder of his days he ate every meal with the family. And for some reason, neither husband nor wife seemed to care any longer when a fork was dropped, milk spilled, or the tablecloth soiled.
On a positive note, I've learned that, no matter what happens, how bad it seems today, life does go on, and it will be better tomorrow. I've learned that you can tell a lot about a person by the way he/she handles three things: a rainy day, lost luggage, and tangled Christmas tree lights. I've learned that, regardless of your relationship with your parents, you'll miss them when they're gone from your life. I've learned that making a "living" is not the same thing as making a "life." I've learned that life sometimes gives you a second chance. I've learned that you shouldn't go through life with a catcher's mitt on both hands. You need to be able to throw something back. I've learned that if you pursue happiness, it will elude you. But, if you focus on your family, your friends, the needs of others, your work and doing the very best you can, happiness will find you. I've learned that whenever I decide something with an open heart, I usually make the right decision. I've learned that even when I have pains, I don't have to be one. I've learned that every day, you should reach out and touch someone. People love that human touch -- holding hands, a warm hug, or just a friendly pat on the back. I've learned that I still have a lot to learn.!
Tuesday, June 27, 2006
The Gift
6/28/06 The Gift
General Motors is faced with what the company called brutal year-over-year sales comparisons this summer, after turning in record results last year on the back of its wildly successful employee discount program. "June and July aren't going to be a picnic," said Mark LaNeve, GM's group vice president of sales, speaking to reporters in Detroit early Tuesday. GM said it would launch a limited-time zero-percent financing offer on many of its 2006 models. GM said that sale would run over the upcoming U.S. holiday weekend, between Thursday, June 29, and July 5.
The battle to acquire Univision has been one big amateur night. Investors are so busy reading and listening to the media, and the latter don't know their ass from first base. So little thinking is going on that it was possible to buy Univision stock at $32 per share on Monday. What a gift. Then there was another gift on Tuesday. Saban Capital Group and Madison Dearborn Partners, Providence Equity Partners, Texas Pacific Group, and Thomas H. Lee Partners joined together and had their $36.25 cash bid accepted by the Univision board. In addition, they will assume $1.4 billion in Univision debt. If that were all that is on the table, $34 a share in the market place would still be a gift. It should be noted that over 10% of the Univision outstanding shares changed hands on Tuesday. However, Televisa is still in the picture. Yes, there is a $1 a share break-up fee or $300 million. Listen to what Televisa had to say: "Televisa is disappointed about the outcome of the Univision auction. Not withstanding our repeated offers to discuss all aspects of our proposal including price, Univision and its advisors refused to enter into any discussions with us after we submitted our initial bid. Given this action by Univision's board, Televisa has a number of options it is considering." Yes, they could drop out, but I don't believe that will happen. If I were Televisa, I'd take my all-cash bid to the shareholders and let them decide. I am confident $38.50 a share in cash (and that includes the $1 a share break up fee) will get shareholder approval. In addition, I don't believe the Saban group can compete near that level, and $300 million is a nice piece of change.
I thank everyone for listening to the media and not doing independent thinking. You have made my Monday and Tuesday, and hopefully today as well. One more thought. Increasing amounts of media content is moving to the Web. The Saban group will be at a disadvantage very shortly. Televisa plans to air its television programs over the Web in the United States once a provision in its 17-year deal with Univision expires in December.
A weekly gauge of U.S. consumer attitudes improved to its highest reading since April, ABC News and the Washington Post said Tuesday. The ABC/Post consumer comfort index rose to negative 10 from negative 12 last week. The index has improved by nine points in the past five weeks, as gasoline prices have moderated, ABC noted. The index has averaged negative 9 in the past 20 years.
John Hussman: "In the context of slowing employment growth, a stall in aggregate weekly hours, an emerging widening in credit spreads, and other factors, my impression is that recession risks have increased considerably....For now, suffice it to say that recession risks are no longer dormant, but aren't yet acute. While we don't yet have enough evidence to anticipate a significant and impending economic downturn, the trends are continually turning in that direction, so it is becoming more a question of “when” than “if.”
Yesterday, the Dow had a 120 point loss and finished under 11,000. The Nasdaq closed at 2100, the S&P under 1240, and the Russell under 690. Yet, the VIX had a point and a quarter range with a close up only .78. The volatility of the VIX has been tame for the last several trading days.
Marcus Aurelius: "Each day provides its own gifts."
General Motors is faced with what the company called brutal year-over-year sales comparisons this summer, after turning in record results last year on the back of its wildly successful employee discount program. "June and July aren't going to be a picnic," said Mark LaNeve, GM's group vice president of sales, speaking to reporters in Detroit early Tuesday. GM said it would launch a limited-time zero-percent financing offer on many of its 2006 models. GM said that sale would run over the upcoming U.S. holiday weekend, between Thursday, June 29, and July 5.
The battle to acquire Univision has been one big amateur night. Investors are so busy reading and listening to the media, and the latter don't know their ass from first base. So little thinking is going on that it was possible to buy Univision stock at $32 per share on Monday. What a gift. Then there was another gift on Tuesday. Saban Capital Group and Madison Dearborn Partners, Providence Equity Partners, Texas Pacific Group, and Thomas H. Lee Partners joined together and had their $36.25 cash bid accepted by the Univision board. In addition, they will assume $1.4 billion in Univision debt. If that were all that is on the table, $34 a share in the market place would still be a gift. It should be noted that over 10% of the Univision outstanding shares changed hands on Tuesday. However, Televisa is still in the picture. Yes, there is a $1 a share break-up fee or $300 million. Listen to what Televisa had to say: "Televisa is disappointed about the outcome of the Univision auction. Not withstanding our repeated offers to discuss all aspects of our proposal including price, Univision and its advisors refused to enter into any discussions with us after we submitted our initial bid. Given this action by Univision's board, Televisa has a number of options it is considering." Yes, they could drop out, but I don't believe that will happen. If I were Televisa, I'd take my all-cash bid to the shareholders and let them decide. I am confident $38.50 a share in cash (and that includes the $1 a share break up fee) will get shareholder approval. In addition, I don't believe the Saban group can compete near that level, and $300 million is a nice piece of change.
I thank everyone for listening to the media and not doing independent thinking. You have made my Monday and Tuesday, and hopefully today as well. One more thought. Increasing amounts of media content is moving to the Web. The Saban group will be at a disadvantage very shortly. Televisa plans to air its television programs over the Web in the United States once a provision in its 17-year deal with Univision expires in December.
A weekly gauge of U.S. consumer attitudes improved to its highest reading since April, ABC News and the Washington Post said Tuesday. The ABC/Post consumer comfort index rose to negative 10 from negative 12 last week. The index has improved by nine points in the past five weeks, as gasoline prices have moderated, ABC noted. The index has averaged negative 9 in the past 20 years.
John Hussman: "In the context of slowing employment growth, a stall in aggregate weekly hours, an emerging widening in credit spreads, and other factors, my impression is that recession risks have increased considerably....For now, suffice it to say that recession risks are no longer dormant, but aren't yet acute. While we don't yet have enough evidence to anticipate a significant and impending economic downturn, the trends are continually turning in that direction, so it is becoming more a question of “when” than “if.”
Yesterday, the Dow had a 120 point loss and finished under 11,000. The Nasdaq closed at 2100, the S&P under 1240, and the Russell under 690. Yet, the VIX had a point and a quarter range with a close up only .78. The volatility of the VIX has been tame for the last several trading days.
Marcus Aurelius: "Each day provides its own gifts."
Monday, June 26, 2006
Big Mergers
6/27/06 Big Mergers
I am not a fan of most big mergers. Why? Most do not prove successful. We have J&J purchasing Pfizer's consumer products division for $16.6 billion, and they state it should be accretive to earnings in a couple of years. On the surface, it appears like a big price.
Phelps Dodge is buying Inco and Falconbridge for $40 billion. The lasy time I looked nickel and copper were cyclical commodities. Right now both commodities are in short supply. How long will that continue.
Then there is Mittal buying Arcelor for close to $34 billion. Again, steel is cyclical. How long will price increases continue for steel?
We're not finished. Houston Exploration Co. late Monday said it has determined that the $62-per-share unsolicited acquisition offer from Jana Partners LLC undervalues the company and is not in the best interest of its shareholders. The company also said it has engaged Lehman Brothers Inc. to assist it in exploring strategic alternatives to further enhance shareholder value. The alternatives may include the recapitalization of the company either through additional share buybacks or a special dividend; operating partnerships and/or strategic alliances; and the sale or merger of the company, among other options, Houston Exploration said.
There is more. Bain Capital may be close to buying Jones Apparel. The list goes on, and we approach the $2 trillion level in buyouts in 2006.
When reading the small print on housing, it appears that the median price of a home has been declining, and that despite new home sales remain firm. Why? Builders are providing more and more incentives due to the 5.5 months of inventory on hand. It reminds me of the auto companies in 2005.
Interest rates are still climbing, and the 30-year hit 5.28%, the 2-year 5.27%, and the 10-year 5.24%. Higher interest rates will produce a greater budget deficit for the U.S. government. Of cours, mortgage rates will head higher too.
Chuck Butler: "“I can't wait to hear what Big Ben has to say on Thursday. I'll bet a dollar to a Krispy Kreme that he'll be so full of baloney a local deli will be wondering what happened to their stash!”
Crude jumped to $71.80 and gasoline reached $2.17. It doesn't appear that we will see much lower prices at the pump.
General Motors Corp. said on Monday that 35,000 workers have accepted buyout and early retirement offers.
Richard Daughty: "The scene is now perfectly set to reveal the ugly fact that total deposits at the banks are up to $5.2 trillion, which is 47 times bigger than it was in 1995. That's a growth rate of 42% a year, compounded! And the total loans and leases is now $5.7 trillion, which is 27 times bigger than in 1995, which works out to an annual growth rate of 35% a year! Big, Big increases! Yet against that monstrous, cancerous rise in both assets and liabilities, the required reserves went down from $57 billion in 1995 to only $42 billion today in 2006! Hahahaha! Surprise! Down! Required reserves went down! Hahahaha! To keep the same 0.518 ratio of required reserves against total deposits in the banking system in 1995, the banks would need to have, right now in required reserves, $2.693 trillion! Instead, they have only $42 billion, 1.6% as much! Hahahaha! In short, more than all of the money and credit created in the banking system since 1995 has been literally created without any underlying cash deposits of any kind! None! Zero money! This is an infinite multiplication of deposits! Fractional-reserve banking at its insane, suicidal extreme!"
Although equities had a modest rise on Monday, the VIX hadabout a one point range and closed down a mere .27 on the day.
Russia's Gazprom and Iran have decided to consider the possibility of setting up a joint venture to develop oil and gas fields.
Central banks will have to move faster to raise interest rates because global inflationary pressures are rising and the economy remains vulnerable to a “bang” of market turbulence, the Bank of International Settlements warned on Monday.
David Ogilvy: “I always said that mega-mergers were for megalomaniacs."
I am not a fan of most big mergers. Why? Most do not prove successful. We have J&J purchasing Pfizer's consumer products division for $16.6 billion, and they state it should be accretive to earnings in a couple of years. On the surface, it appears like a big price.
Phelps Dodge is buying Inco and Falconbridge for $40 billion. The lasy time I looked nickel and copper were cyclical commodities. Right now both commodities are in short supply. How long will that continue.
Then there is Mittal buying Arcelor for close to $34 billion. Again, steel is cyclical. How long will price increases continue for steel?
We're not finished. Houston Exploration Co. late Monday said it has determined that the $62-per-share unsolicited acquisition offer from Jana Partners LLC undervalues the company and is not in the best interest of its shareholders. The company also said it has engaged Lehman Brothers Inc. to assist it in exploring strategic alternatives to further enhance shareholder value. The alternatives may include the recapitalization of the company either through additional share buybacks or a special dividend; operating partnerships and/or strategic alliances; and the sale or merger of the company, among other options, Houston Exploration said.
There is more. Bain Capital may be close to buying Jones Apparel. The list goes on, and we approach the $2 trillion level in buyouts in 2006.
When reading the small print on housing, it appears that the median price of a home has been declining, and that despite new home sales remain firm. Why? Builders are providing more and more incentives due to the 5.5 months of inventory on hand. It reminds me of the auto companies in 2005.
Interest rates are still climbing, and the 30-year hit 5.28%, the 2-year 5.27%, and the 10-year 5.24%. Higher interest rates will produce a greater budget deficit for the U.S. government. Of cours, mortgage rates will head higher too.
Chuck Butler: "“I can't wait to hear what Big Ben has to say on Thursday. I'll bet a dollar to a Krispy Kreme that he'll be so full of baloney a local deli will be wondering what happened to their stash!”
Crude jumped to $71.80 and gasoline reached $2.17. It doesn't appear that we will see much lower prices at the pump.
General Motors Corp. said on Monday that 35,000 workers have accepted buyout and early retirement offers.
Richard Daughty: "The scene is now perfectly set to reveal the ugly fact that total deposits at the banks are up to $5.2 trillion, which is 47 times bigger than it was in 1995. That's a growth rate of 42% a year, compounded! And the total loans and leases is now $5.7 trillion, which is 27 times bigger than in 1995, which works out to an annual growth rate of 35% a year! Big, Big increases! Yet against that monstrous, cancerous rise in both assets and liabilities, the required reserves went down from $57 billion in 1995 to only $42 billion today in 2006! Hahahaha! Surprise! Down! Required reserves went down! Hahahaha! To keep the same 0.518 ratio of required reserves against total deposits in the banking system in 1995, the banks would need to have, right now in required reserves, $2.693 trillion! Instead, they have only $42 billion, 1.6% as much! Hahahaha! In short, more than all of the money and credit created in the banking system since 1995 has been literally created without any underlying cash deposits of any kind! None! Zero money! This is an infinite multiplication of deposits! Fractional-reserve banking at its insane, suicidal extreme!"
Although equities had a modest rise on Monday, the VIX hadabout a one point range and closed down a mere .27 on the day.
Russia's Gazprom and Iran have decided to consider the possibility of setting up a joint venture to develop oil and gas fields.
Central banks will have to move faster to raise interest rates because global inflationary pressures are rising and the economy remains vulnerable to a “bang” of market turbulence, the Bank of International Settlements warned on Monday.
David Ogilvy: “I always said that mega-mergers were for megalomaniacs."
Sunday, June 25, 2006
Additional Thoughts
6/26/06 Additional Thoughts
This provided by crudethoughts.blogspot.com:
These are some of the facts from the recent release from EIA 1) Domestic production of oil is down 7.1% for the first 166 days of this year compared to the same time period last year on a bpd ( barrels per day ) basis. 2) Exports are down 55% ( Granted, it is fraction of a relatively small number) 3) Refinery gains are down 3.7% YTD compared to last year. 4) Net product supply has ( including refined products, NGL etc ) increased only 0.2% 5) Net imports have increased 3.6% 6) Total nventory including SPR and finished products is 1732.8 million bpd, enough to last us for 83-84 days at the current level of consumption. 7) Total inventory excluding SPR is up 0.8% compared to last year. Nothing to write home about. 8) Total inventory including SPR and finished products is up 0.1% compared to last year.
Britney Spears: "I did not have implants. I just had a growth spurt."
Arcelor SA backed a new takeover bid of about 25.9 billion euros ($32.4 billion) from Mittal Steel Co., ending five months of opposition to the steel industry's biggest-ever transaction.
Mittal raised its offer for a second time, by 10 percent, Arcelor Chairman Joseph Kinsch told reporters in Luxembourg Sunday after a board meeting that lasted more than eight hours. The board's backing was unanimous, he said. Mittal's previous offer was valued at 23.51 billion euros.
On July 27th Cascade Natural Gas will report its earnings for the second quarter. Analysts following the company are projecting a loss of 5 cents to 9 cents per share. Because of seasonality, the company reports a loss at this time of the year. That will not be the case this year. With new management and a dedication to holding down costs and increasing value for shareholders, I estimate Cascade will show a profit. I also estimate that the company will be sold for a sum in excess of analyst expectations.
George Eliot: "The strongest principle of growth lies in the human choice."
"Sources close to the Saban-led group did not rule out returning to talks with Univision." The demise of this auction has been greatly exaggerated. That's what happens when you trade with media reports. Doing your own thinking is the way to success in investing.
A new study not only confirms the link between childhood obesity and early onset of puberty but also demonstratethat a mother's age at her first period is linked to her children's riskfor obesity. Taken together, the results suggest a spiraling generational link between obesity and early puberty. This study, as well as two others on treatment of diabetes in children,were discussed at a media roundtable on Sunday, June 25th at 2:00 P.M.EDT during ENDO 2006, the 88th Annual Meeting of The Endocrine Society at the Boston Convention & Exhibition Center.
Since March, when Congress voted to block DP World from running dockside operations in America, the world's third-largest port operator has racked up an impressive list of deals and acquisitions, adding to its already bulging portfolio of operations in 13 countries.
In June, it landed a $210 million, 30-year concession to develop and run a container terminal in Peru's Callao port near Lima.
Also this month, DP World signed a $500 million deal to develop another container terminal at the Chinese port of Tianjin, China's fifth-largest port _ and the seventh Chinese port with DP World operations.
The company is due to finish construction this year on a new terminal at the Korean port of Pusan, the world's third-largest container port. DP World won rights to run that terminal for the next 30 years.
And work is under way on a new $500 million terminal in southern India and another DP World terminal in Vietnam. Late last year, the Dubai port operator bought terminals in Qingdao, China, and Yarmica, Turkey, and expanded operations in Romania.
There's a whole world outside of the U.S. That's where the growth is taking place and will take place in the future. Unfortunately, the Congress and the Bush Administration hold beliefs to the contrary.
Jean Vanier: "Growth begins when we begin to accept our own weakness."
This provided by crudethoughts.blogspot.com:
These are some of the facts from the recent release from EIA 1) Domestic production of oil is down 7.1% for the first 166 days of this year compared to the same time period last year on a bpd ( barrels per day ) basis. 2) Exports are down 55% ( Granted, it is fraction of a relatively small number) 3) Refinery gains are down 3.7% YTD compared to last year. 4) Net product supply has ( including refined products, NGL etc ) increased only 0.2% 5) Net imports have increased 3.6% 6) Total nventory including SPR and finished products is 1732.8 million bpd, enough to last us for 83-84 days at the current level of consumption. 7) Total inventory excluding SPR is up 0.8% compared to last year. Nothing to write home about. 8) Total inventory including SPR and finished products is up 0.1% compared to last year.
Britney Spears: "I did not have implants. I just had a growth spurt."
Arcelor SA backed a new takeover bid of about 25.9 billion euros ($32.4 billion) from Mittal Steel Co., ending five months of opposition to the steel industry's biggest-ever transaction.
Mittal raised its offer for a second time, by 10 percent, Arcelor Chairman Joseph Kinsch told reporters in Luxembourg Sunday after a board meeting that lasted more than eight hours. The board's backing was unanimous, he said. Mittal's previous offer was valued at 23.51 billion euros.
On July 27th Cascade Natural Gas will report its earnings for the second quarter. Analysts following the company are projecting a loss of 5 cents to 9 cents per share. Because of seasonality, the company reports a loss at this time of the year. That will not be the case this year. With new management and a dedication to holding down costs and increasing value for shareholders, I estimate Cascade will show a profit. I also estimate that the company will be sold for a sum in excess of analyst expectations.
George Eliot: "The strongest principle of growth lies in the human choice."
"Sources close to the Saban-led group did not rule out returning to talks with Univision." The demise of this auction has been greatly exaggerated. That's what happens when you trade with media reports. Doing your own thinking is the way to success in investing.
A new study not only confirms the link between childhood obesity and early onset of puberty but also demonstratethat a mother's age at her first period is linked to her children's riskfor obesity. Taken together, the results suggest a spiraling generational link between obesity and early puberty. This study, as well as two others on treatment of diabetes in children,were discussed at a media roundtable on Sunday, June 25th at 2:00 P.M.EDT during ENDO 2006, the 88th Annual Meeting of The Endocrine Society at the Boston Convention & Exhibition Center.
Since March, when Congress voted to block DP World from running dockside operations in America, the world's third-largest port operator has racked up an impressive list of deals and acquisitions, adding to its already bulging portfolio of operations in 13 countries.
In June, it landed a $210 million, 30-year concession to develop and run a container terminal in Peru's Callao port near Lima.
Also this month, DP World signed a $500 million deal to develop another container terminal at the Chinese port of Tianjin, China's fifth-largest port _ and the seventh Chinese port with DP World operations.
The company is due to finish construction this year on a new terminal at the Korean port of Pusan, the world's third-largest container port. DP World won rights to run that terminal for the next 30 years.
And work is under way on a new $500 million terminal in southern India and another DP World terminal in Vietnam. Late last year, the Dubai port operator bought terminals in Qingdao, China, and Yarmica, Turkey, and expanded operations in Romania.
There's a whole world outside of the U.S. That's where the growth is taking place and will take place in the future. Unfortunately, the Congress and the Bush Administration hold beliefs to the contrary.
Jean Vanier: "Growth begins when we begin to accept our own weakness."
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