7/23/06 Demand
According to Metals Place, overall, world production of primary aluminium rose by almost 900,000 tons compared with January to May 2005.
"China accounted for half of the growth, using imported bauxite as feed," World Bureau of Metal Statistics said.
"Chinese bauxite imports rose to 2.6 million tons in the first five months of the year from 0.55 million tons in the comparable period of 2005," WBMS added.
Increased primary aluminium production in Russia, Canada, Bahrain, Brazil and the reemergence of Ghana contributed the remainder of the additional output of metal.
Demand rose by only 550,000 tons to 13.70 million tons, with almost all of the increases recorded in China where total demand was 22% higher.
WBMS said that Chinese demand slipped in the first three months of the year but has recovered to 650,000 tons and 692,000 tons in April and May respectively.
Output of processed aluminium products in China was 35% higher than in the previous year.
With the annual CPI averaging at least 4.3% over the past 12 months, one would best best served to concentrate on well capitalized companies with a p/e no higher than 13. In addition, one must not ignore extraordinary benefits from a low tax rate and/or the reduction in outstanding shares resulting from buybacks. In addition, a dividend yield of 35 or more will help to buffer the downside. To make the risk/reward even more in your favor, another plus might be whether the company's management is considering a possible sale in order to maximize shareholder value. Lastly, watch to see whether insiders are current buyers of the stock. If there are a good many insiders selling, forget it. There are too many other fish in the sea.
Ludwig von Mises: "Full government control of all activities of the individual is virtually the goal of both national parties."
Saturday, July 22, 2006
Friday, July 21, 2006
Land Mines
7/22/06 Land Mines
Median weekly earnings of the nation's 105.9 million full-time wage and
salary workers were $659 in the second quarter of 2006, the Bureau of Labor
Statistics of the U.S. Department of Labor reported today. This was 2.5
percent higher than a year earlier, compared with a gain of 4.0 percent in
the Consumer Price Index for All Urban Consumers (CPI-U) over the same pe-
riod. Women who usually worked full time had median earnings of $593 per
week, or 81.1 percent of the $731 median for men.(Now you know why those on Main Street have low ratings on the economy.)
Dell expects to earn between 21 cents and 23 cents a share on revenue of $14 billion, while analysts surveyed by Thomson First Call had forecast Dell to earn 32 cents a share on $14.23 billion in revenue. Basically, the problem is not a revenue one but that of margins. Do I believe the problem can be fixed? Yes I do. However, there is also a problem of providing better service and that is a more difficult problem to address.
In this reporting season there have been some nice surprises -- Google, Apple, Caterpillar, Motorola, Schlumberger, Pepsi, and Coke. On the other hand, there have been too many land mines, such as, MMM, GE, Capital One, Yahoo, Intel, Advanced Micro Devices, Broadcom, Qualcomm, and Halliburton. How can Schlumberger exceed forecasts and Halliburton disappoint? It's called management.
Looking ahead, Nucor said its current orders and backlogs are healthy across all of its product lines, and that it expects third-quarter earnings to continue to be "very strong."
You want to see inflation. Look at this and read carefully please. St. Louis-based Arch Coal said its operating margin per ton increased substantially in the quarter due to the roll-off of lower-priced sales contracts and the restructuring of its assets in Central Appalachia. The company's tons sold fell to 32 million in the quarter from 34.6 million a year ago but operating margin per ton swelled to $3.67 from $1.19 last year. The average estimate of analysts polled by Thomson First Call was for a profit of 43 cents a share in the June period. Looking ahead, Arch sees earnings of $1.87 to $2.12 a share with total sales volume of between 135 million and 140 million tons.
Weatherford's Chief Executive Officer Bernard Duroc-Danner on drilling prospects:``We view the North American market as near equilibrium certainly for the next 12 months. But it is not correct to assume Weatherford is vulnerable in North America.''
``Some temporary slowing of natural-gas drilling activity cannot be excluded, though currently there are no clear signs of this,'' Schlumberger Chief Executive Officer Andrew Gould said in a statement. In my view, this is to be expected as natural gas had declined from the spike price of $15 to its present $6 per million BTUs.
Despite being widely reported in the media that the U.S. and other countries have not found any weapons of mass destruction in Iraq, surprisingly; more U.S. adults (50%) think that Iraq had such weapons when the U.S. invaded Iraq. This is an increase from 36 percent in February 2005. Overall, attitudes toward the war in Iraq
are negative, and less than half of the U.S. population believes that the
threat of terrorism has been reduced. U.S. adults are not confident that
Iraq's government will eventually become stable, and many think the war in
Iraq is continuing to hurt respect for the U.S. around the world. Most
people do not think that U.S. troops will be out of Iraq in the next two years.
These are some of the results of The Harris Poll of 1,020 U.S. adults
(ages 18 and over) surveyed by telephone by Harris Interactive(R) between
July 5 and 11, 2006.
The Nasdaq Composite registered its third straight weekly loss and fell 19.03 points to 2,020.29, its lowest close since May, 2005. The S&P 500 dropped 8.84 points to 1,240.29 and the Dow Jones Industrial Average lost 59.72 points to end at 10,868.38.
Meanwhile, the VIX opened at 16.23, the low for the day, and closed up at 17.40, near the high for the day. Still, the volatility index is far below the most recent high of 24.
According to a report, Advanced Micro Devices Inc. may be planning a $5.6-billion takeover bid for Markham, Ontario-based ATI. AMD's board has approved a takeover offer, the Globe and Mail reported, citing an investment banker familiar with the talks. That may be one reason AMD shares got crushed on Friday to $18+. Buying ATI would give Advanced Micro the ability to package graphics chips with its latest processors and get them to customers faster. That maybe but $5.6 billion is a big price tag. Why? The entire market cap for AMD is now $8.7 billion.
Even though the quarterly results were excellent for bot Caterpillar and Schlumberger, both closed down on Friday. On the other hand, Lennar and Centex, two homebuilders, closed higher.
Nouriel Roubini suggests the Chinese yuan will appreciate by 5% by the end of 2006.
The growth in China's demand for oil to feed its galloping economy will slow to an average rate of 5% over the next decade and is not enough to trigger a crisis in global supply or a demand crunch, said energy consultancy Wood Mackenzie in a report published Friday.
According to Oil Daily, bids for a 268,000 b/d refinery in Houston, Texas exceeded $5 billion, but that was not enough for the seller. Lyondell Chemical Co., which owns almost 59% of the refinery in a joint venture with Citgo Petroleum. They took the refinery off the market on Thursday, calling the bids it received "insufficient.
NOAA: "The average temperature for the continental United States from January through June 2006 was the warmest first half of any year since records began in 1895."
Mark Twain:“Beautiful credit! The foundation of modern society. Who shall say that this is not the golden age of mutual trust, of unlimited reliance upon human promises? That is a peculiar condition of society which enables a whole nation to instantly recognize point and meaning in the familiar newspaper anecdote, which puts into the mouth of a distinguished speculator in lands and mines this remark: -- ''I wasn't worth a cent two years ago, and now I owe two millions of dollars.''”
Median weekly earnings of the nation's 105.9 million full-time wage and
salary workers were $659 in the second quarter of 2006, the Bureau of Labor
Statistics of the U.S. Department of Labor reported today. This was 2.5
percent higher than a year earlier, compared with a gain of 4.0 percent in
the Consumer Price Index for All Urban Consumers (CPI-U) over the same pe-
riod. Women who usually worked full time had median earnings of $593 per
week, or 81.1 percent of the $731 median for men.(Now you know why those on Main Street have low ratings on the economy.)
Dell expects to earn between 21 cents and 23 cents a share on revenue of $14 billion, while analysts surveyed by Thomson First Call had forecast Dell to earn 32 cents a share on $14.23 billion in revenue. Basically, the problem is not a revenue one but that of margins. Do I believe the problem can be fixed? Yes I do. However, there is also a problem of providing better service and that is a more difficult problem to address.
In this reporting season there have been some nice surprises -- Google, Apple, Caterpillar, Motorola, Schlumberger, Pepsi, and Coke. On the other hand, there have been too many land mines, such as, MMM, GE, Capital One, Yahoo, Intel, Advanced Micro Devices, Broadcom, Qualcomm, and Halliburton. How can Schlumberger exceed forecasts and Halliburton disappoint? It's called management.
Looking ahead, Nucor said its current orders and backlogs are healthy across all of its product lines, and that it expects third-quarter earnings to continue to be "very strong."
You want to see inflation. Look at this and read carefully please. St. Louis-based Arch Coal said its operating margin per ton increased substantially in the quarter due to the roll-off of lower-priced sales contracts and the restructuring of its assets in Central Appalachia. The company's tons sold fell to 32 million in the quarter from 34.6 million a year ago but operating margin per ton swelled to $3.67 from $1.19 last year. The average estimate of analysts polled by Thomson First Call was for a profit of 43 cents a share in the June period. Looking ahead, Arch sees earnings of $1.87 to $2.12 a share with total sales volume of between 135 million and 140 million tons.
Weatherford's Chief Executive Officer Bernard Duroc-Danner on drilling prospects:``We view the North American market as near equilibrium certainly for the next 12 months. But it is not correct to assume Weatherford is vulnerable in North America.''
``Some temporary slowing of natural-gas drilling activity cannot be excluded, though currently there are no clear signs of this,'' Schlumberger Chief Executive Officer Andrew Gould said in a statement. In my view, this is to be expected as natural gas had declined from the spike price of $15 to its present $6 per million BTUs.
Despite being widely reported in the media that the U.S. and other countries have not found any weapons of mass destruction in Iraq, surprisingly; more U.S. adults (50%) think that Iraq had such weapons when the U.S. invaded Iraq. This is an increase from 36 percent in February 2005. Overall, attitudes toward the war in Iraq
are negative, and less than half of the U.S. population believes that the
threat of terrorism has been reduced. U.S. adults are not confident that
Iraq's government will eventually become stable, and many think the war in
Iraq is continuing to hurt respect for the U.S. around the world. Most
people do not think that U.S. troops will be out of Iraq in the next two years.
These are some of the results of The Harris Poll of 1,020 U.S. adults
(ages 18 and over) surveyed by telephone by Harris Interactive(R) between
July 5 and 11, 2006.
The Nasdaq Composite registered its third straight weekly loss and fell 19.03 points to 2,020.29, its lowest close since May, 2005. The S&P 500 dropped 8.84 points to 1,240.29 and the Dow Jones Industrial Average lost 59.72 points to end at 10,868.38.
Meanwhile, the VIX opened at 16.23, the low for the day, and closed up at 17.40, near the high for the day. Still, the volatility index is far below the most recent high of 24.
According to a report, Advanced Micro Devices Inc. may be planning a $5.6-billion takeover bid for Markham, Ontario-based ATI. AMD's board has approved a takeover offer, the Globe and Mail reported, citing an investment banker familiar with the talks. That may be one reason AMD shares got crushed on Friday to $18+. Buying ATI would give Advanced Micro the ability to package graphics chips with its latest processors and get them to customers faster. That maybe but $5.6 billion is a big price tag. Why? The entire market cap for AMD is now $8.7 billion.
Even though the quarterly results were excellent for bot Caterpillar and Schlumberger, both closed down on Friday. On the other hand, Lennar and Centex, two homebuilders, closed higher.
Nouriel Roubini suggests the Chinese yuan will appreciate by 5% by the end of 2006.
The growth in China's demand for oil to feed its galloping economy will slow to an average rate of 5% over the next decade and is not enough to trigger a crisis in global supply or a demand crunch, said energy consultancy Wood Mackenzie in a report published Friday.
According to Oil Daily, bids for a 268,000 b/d refinery in Houston, Texas exceeded $5 billion, but that was not enough for the seller. Lyondell Chemical Co., which owns almost 59% of the refinery in a joint venture with Citgo Petroleum. They took the refinery off the market on Thursday, calling the bids it received "insufficient.
NOAA: "The average temperature for the continental United States from January through June 2006 was the warmest first half of any year since records began in 1895."
Mark Twain:“Beautiful credit! The foundation of modern society. Who shall say that this is not the golden age of mutual trust, of unlimited reliance upon human promises? That is a peculiar condition of society which enables a whole nation to instantly recognize point and meaning in the familiar newspaper anecdote, which puts into the mouth of a distinguished speculator in lands and mines this remark: -- ''I wasn't worth a cent two years ago, and now I owe two millions of dollars.''”
Thursday, July 20, 2006
Ford
7/21/06 Ford
Have you been checking your electricity bills lately? Since the Fed says inflation is not out of control, maybe you can explain to them the huge rise in your bill for electricity.
Bernanke: "Higher real wages are compatible with low inflation." Obviously here is the problem. The increase in real wages has been modest at best for the past four years. No wonder inflation is a problem.
Ford's loss from operations was 3 cents for the quarter. I did anticipate this number for a couple of reasons -- the sharp downturn in profits from the financial services division and the deteriorating operations at Jaguar, Land Rover, Aston Martin, and Volvo. Europe's pre-tax profits still rose and the pre-tax loss from North American operations was less. In the first quarter cash was $23.7 billion and now it's $23.6 billion -- no real change. Stockholder's equity at 12/31/05 was $12.9 billion and now it's $14.7 billion. Seven months ago most media reporters were announcing the coming demise of GM. Now they are onto Ford. Things are improving but they need to do much more. A combo with GM would make the turnaround easier for both companies.
The Philly Fed index fell to 6.0 in July from 13.1 in June. The new orders index fell to 10.1 from 17.7. Shipments fell to 10.2 from 17.7. Prices paid rose to 50.3 from 48.7. Prices received rose to 17.1 from 14.0. The index of future activity rose to 15.4 from 6.8.
The index of leading economic indicators increased 0.1% in June after two consecutive declines, the Conference Board reported Thursday. "The U.S. economy is cooling at mid-year," said Ken Goldstein, a labor economist at the private group. The leading indicators "suggest that the economy could cool even more in the third and fourth quarters of the year." The coincident index increased 0.2%. The lagging index increased 0.6%.
Bernanke: "The recent acceleration in core inflation is broad-based and not a "statistical illusion."
CEO of D.R. Horton: "June sales fell off the Richter scale."
Microsoft announced a tender off to buy back $20 billion worth of its stock and a further buy back program worth up to another $20 billion. Since I don't own any Microsoft, I can't tender shares to them at $24.50. I guess this is the best they can do with their cash.
Yesterday the Dow Transports dropped 205 points or 4%. Still the VIX only had a range of one and a half points and only managed a .66 of a point gain.
I guess I look silly having said interest rates were going to 5.30% in the short term. The 10-year yield dropped sharply to 5.03%. I guess I got my numbers reversed!
The thing I like about Bill Ford, CEO of Ford, is his honesty and knowing he is open to doing what's best for shareowners. He is sincere and on top of the business. I can't make that statement about too many CEOs of public companies. Patient investors will be rewarded, in my view.
Grupo Televisa sued Univision Communications Inc. for the right to distribute its programming over the Internet in the United States, according to Thursday news reports.
In the suit, filed Wednesday in Los Angeles Superior Court, Televisa is seeking a ruling on whether its current agreement to provide programming to Univision prohibits the company from broadcasting the content over the internet.
Have you been checking your electricity bills lately? Since the Fed says inflation is not out of control, maybe you can explain to them the huge rise in your bill for electricity.
Bernanke: "Higher real wages are compatible with low inflation." Obviously here is the problem. The increase in real wages has been modest at best for the past four years. No wonder inflation is a problem.
Ford's loss from operations was 3 cents for the quarter. I did anticipate this number for a couple of reasons -- the sharp downturn in profits from the financial services division and the deteriorating operations at Jaguar, Land Rover, Aston Martin, and Volvo. Europe's pre-tax profits still rose and the pre-tax loss from North American operations was less. In the first quarter cash was $23.7 billion and now it's $23.6 billion -- no real change. Stockholder's equity at 12/31/05 was $12.9 billion and now it's $14.7 billion. Seven months ago most media reporters were announcing the coming demise of GM. Now they are onto Ford. Things are improving but they need to do much more. A combo with GM would make the turnaround easier for both companies.
The Philly Fed index fell to 6.0 in July from 13.1 in June. The new orders index fell to 10.1 from 17.7. Shipments fell to 10.2 from 17.7. Prices paid rose to 50.3 from 48.7. Prices received rose to 17.1 from 14.0. The index of future activity rose to 15.4 from 6.8.
The index of leading economic indicators increased 0.1% in June after two consecutive declines, the Conference Board reported Thursday. "The U.S. economy is cooling at mid-year," said Ken Goldstein, a labor economist at the private group. The leading indicators "suggest that the economy could cool even more in the third and fourth quarters of the year." The coincident index increased 0.2%. The lagging index increased 0.6%.
Bernanke: "The recent acceleration in core inflation is broad-based and not a "statistical illusion."
CEO of D.R. Horton: "June sales fell off the Richter scale."
Microsoft announced a tender off to buy back $20 billion worth of its stock and a further buy back program worth up to another $20 billion. Since I don't own any Microsoft, I can't tender shares to them at $24.50. I guess this is the best they can do with their cash.
Yesterday the Dow Transports dropped 205 points or 4%. Still the VIX only had a range of one and a half points and only managed a .66 of a point gain.
I guess I look silly having said interest rates were going to 5.30% in the short term. The 10-year yield dropped sharply to 5.03%. I guess I got my numbers reversed!
The thing I like about Bill Ford, CEO of Ford, is his honesty and knowing he is open to doing what's best for shareowners. He is sincere and on top of the business. I can't make that statement about too many CEOs of public companies. Patient investors will be rewarded, in my view.
Grupo Televisa sued Univision Communications Inc. for the right to distribute its programming over the Internet in the United States, according to Thursday news reports.
In the suit, filed Wednesday in Los Angeles Superior Court, Televisa is seeking a ruling on whether its current agreement to provide programming to Univision prohibits the company from broadcasting the content over the internet.
Wednesday, July 19, 2006
Examining The Happenings
7/20/06 Examining The Happenings
I don't get caught up in the cheering or the doubting, whichever is applicable at the time. For me, it's just business. I look at the facts. Yesterday the Dow and The S&P rose about 2%. Why? Was it short covering, Bernanke, the spectre of option expiration on Friday, specialists trying to mark up their positions, etc? Let's look at Bernanke. He said growth was moderating. That's interesting. I have been the one who has stated that growth going forwward from the first quarter would exceed 3%. I was alone in this projection. Now Bernanke has said the same thing. In other words, growth will be higher than what economists have been forecasting. He said inflation would moderate when growth moderates. Will the Fed stop printing money at a 5% or higher rate? No way. Is China, India, etc. going to have slower growth rates? Will the demand for oil and other commodities and materials be less in China and India? You get my drift? I'm all for a bull market in stocks and bonds when it's based on facts. The sooner the Street stops listening to others and thinks for itself, the greater the chance that some degree of worth will come from Wall Street analysts and economists. Don't hold your breath.
Average weekly earnings rose by 4.5 percent, seasonally adjusted, from June 2005 to June 2006. After deflation by the CPI-W, average weekly earnings increased by 0.1 percent. Consumer prices increased at a seasonally adjusted annual rate (SAAR) of 5.1 percent in the second quarter after advancing at a 4.3 percent rate in the first three months of 2006. This brings the year-to-date annual rate to 4.7 percent and compares with an increase of 3.4 percent in all of 2005.
Bernanke: "I see inflation in a broad range of goods and services."
The market has now taken the view that the Fed will raise rates in August and then pause. All of this is now based on yesterday's testimony by the Fed chief. Volatility was generated in a matter of minutes. The dollar index fell from 87.30 to 86.30 and the 2-year treasury note yield dropped from 5.24% to 5.13% -- all in what seemed like nanoseconds. Is this the norm? Do we have global warming? The VIX opened at 17.62 and quickly sold down to 14.47. The Dow opened plus about 50 points and quickly was up 160 points. If you were out of the trading room in the bathroom, you missed gigantic moves.
Gold traded up $10 an ounce but oil continued to sell down and traded near $72 a barrel.
Builders began new housing construction at a slower rate in June, the Commerce Department said Wednesday, as the number of building permits issued also continued to decline. New construction of U.S. houses fell 5.3% in June to a seasonally adjusted annual rate of 1.85 million, the Commerce Department reported. Housing starts in May were revised slightly downward to 1.95 million from 1.96 million. Estimated housing starts were weaker than the 1.89 million pace expected by economists surveyed by MarketWatch. Building permits, a leading indicator of housing construction, fell 4.3% to a seasonally adjusted annual rate of 1.86 million in June from 1.95 million in May.
Ryland's homebuilding revenue grew 3 percent, while financial services revenue dropped 8 percent. Total expenses increased 5 percent to $1.05 billion. The average closing price of a Ryland home rose 8.5 percent to $295,000. Homebuilding pretax earnings of $157.6 million were off more than 8 percent. Ryland had 3,803 closings in the quarter, down 5.8 percent from the same period last year. New orders fell over 39 percent, to 3,023 units. The company says it expects fiscal 2006 earnings to be between $7.75 and $8.25 per share. Previously, the company said it expects a profit of $8.50 to $9 per share. For the year, analysts see a profit of $7.99 a share.
Richard Daughty: "I pick up my Mogambo High-Powered Megaphone (MHPM) and fairly scream through it "The JOC-ECRI Industrial Price Index jumped in July, rising to 130.17 from 128.18! That one-month gain of 1.6% in prices is a lot of inflation in one month! What is even more interesting, if you think that being eaten alive by inflation is 'interesting', is that the index is up from 108.95 a year ago at this time, which is an inflation rate of 19.5%!"
Intel's second quarter sales fell 10% to $8 billion. Analysts surveyed by Thomson First Call estimated Intel would post sales of $8.3 billion. The company also offered a softer-than-expected sales forecast for the quarter ending in September.
Yogi Berra: "You got to be careful if you don't know where you're going, because you might not get there."
I don't get caught up in the cheering or the doubting, whichever is applicable at the time. For me, it's just business. I look at the facts. Yesterday the Dow and The S&P rose about 2%. Why? Was it short covering, Bernanke, the spectre of option expiration on Friday, specialists trying to mark up their positions, etc? Let's look at Bernanke. He said growth was moderating. That's interesting. I have been the one who has stated that growth going forwward from the first quarter would exceed 3%. I was alone in this projection. Now Bernanke has said the same thing. In other words, growth will be higher than what economists have been forecasting. He said inflation would moderate when growth moderates. Will the Fed stop printing money at a 5% or higher rate? No way. Is China, India, etc. going to have slower growth rates? Will the demand for oil and other commodities and materials be less in China and India? You get my drift? I'm all for a bull market in stocks and bonds when it's based on facts. The sooner the Street stops listening to others and thinks for itself, the greater the chance that some degree of worth will come from Wall Street analysts and economists. Don't hold your breath.
Average weekly earnings rose by 4.5 percent, seasonally adjusted, from June 2005 to June 2006. After deflation by the CPI-W, average weekly earnings increased by 0.1 percent. Consumer prices increased at a seasonally adjusted annual rate (SAAR) of 5.1 percent in the second quarter after advancing at a 4.3 percent rate in the first three months of 2006. This brings the year-to-date annual rate to 4.7 percent and compares with an increase of 3.4 percent in all of 2005.
Bernanke: "I see inflation in a broad range of goods and services."
The market has now taken the view that the Fed will raise rates in August and then pause. All of this is now based on yesterday's testimony by the Fed chief. Volatility was generated in a matter of minutes. The dollar index fell from 87.30 to 86.30 and the 2-year treasury note yield dropped from 5.24% to 5.13% -- all in what seemed like nanoseconds. Is this the norm? Do we have global warming? The VIX opened at 17.62 and quickly sold down to 14.47. The Dow opened plus about 50 points and quickly was up 160 points. If you were out of the trading room in the bathroom, you missed gigantic moves.
Gold traded up $10 an ounce but oil continued to sell down and traded near $72 a barrel.
Builders began new housing construction at a slower rate in June, the Commerce Department said Wednesday, as the number of building permits issued also continued to decline. New construction of U.S. houses fell 5.3% in June to a seasonally adjusted annual rate of 1.85 million, the Commerce Department reported. Housing starts in May were revised slightly downward to 1.95 million from 1.96 million. Estimated housing starts were weaker than the 1.89 million pace expected by economists surveyed by MarketWatch. Building permits, a leading indicator of housing construction, fell 4.3% to a seasonally adjusted annual rate of 1.86 million in June from 1.95 million in May.
Ryland's homebuilding revenue grew 3 percent, while financial services revenue dropped 8 percent. Total expenses increased 5 percent to $1.05 billion. The average closing price of a Ryland home rose 8.5 percent to $295,000. Homebuilding pretax earnings of $157.6 million were off more than 8 percent. Ryland had 3,803 closings in the quarter, down 5.8 percent from the same period last year. New orders fell over 39 percent, to 3,023 units. The company says it expects fiscal 2006 earnings to be between $7.75 and $8.25 per share. Previously, the company said it expects a profit of $8.50 to $9 per share. For the year, analysts see a profit of $7.99 a share.
Richard Daughty: "I pick up my Mogambo High-Powered Megaphone (MHPM) and fairly scream through it "The JOC-ECRI Industrial Price Index jumped in July, rising to 130.17 from 128.18! That one-month gain of 1.6% in prices is a lot of inflation in one month! What is even more interesting, if you think that being eaten alive by inflation is 'interesting', is that the index is up from 108.95 a year ago at this time, which is an inflation rate of 19.5%!"
Intel's second quarter sales fell 10% to $8 billion. Analysts surveyed by Thomson First Call estimated Intel would post sales of $8.3 billion. The company also offered a softer-than-expected sales forecast for the quarter ending in September.
Yogi Berra: "You got to be careful if you don't know where you're going, because you might not get there."
Monday, July 17, 2006
Misery Loves Company
6/19/06 Misery Loves Comapny
On Monday evening, after the trading session had closed for some time, Target said it now sees July same-store sales rising 3% to 4%, below an earlier forecast of a 4% to 6% rise. Last July, Target's same-store sales, at stores open longer than a year, climbed 5%. It is true that 3% to 4% is still higher than Wal-Mart's most recent same-store sales estimate for July. We should not forget that Target's customer has a median income higher than that found at Wal-Mart. At the same time, $3 gas and wages that trail inflation do count for a Target customer too.Meanwhile, Target shares dropped to below $45 on Tuesday, and Wal-Mart to below $42.50.
Representative Ron Paul:"Spending is always a tax. The inflation tax, though hidden, only makes things worse. Taxing, borrowing, and inflating to satisfy wealth transfers from the middle class to the rich in an effort to pay for profligate government spending, can never make a nation wealthier. But it certainly can make it poorer."
Tom Au: "Suppose in period 1 (e.g., 2005) that cyclical companies initially represent 10% of earnings, and their stocks command an average P/E ratio of 8, while the rest of the market represents 90% of earnings and commands a P/E ratio of 16. Multiplying the respective P/E’s by the respective weights and adding, one comes up with a market cap and “blended” P/E ratio of 15.2. Now suppose in period 2 (e.g. 2006), the earnings of the cyclical stocks (e.g. Alcoa) double, so they represent 20% of period 1 earnings. At the same time, earnings for the rest of the market fall from 90% to 85% of period 1 earnings. Adding the two components, period 2 earnings are now 5% higher than period 1 earnings (85%+20%=105%). But the market cap is just the same as before (.85*16)+(.2*8)=15.2. And the blended P/E multiple has actually fallen, because the same market cap is now divided by earnings of 1.05 rather than 1.00. This example, in fact, appears to be describing the current market action, and is reminiscent of the 1970s."
There isn't a day that I don't read the market is oversold or the market got ahead of itself. In my view, ignoring buying and selling various indices, a stock is oversold when you buy it and then resell it for a profit, and similarly, a stock is ahead of itself when you sell it and it proceeds to go down in price. Stocks as a group do not move together. In any market, there will be winners and losers. It's your job to limit your risk and, at the same time,invest in a winner. There are times when the risk will be less than at other times; however, don't be a sucker. There's no sure thing in stocks, bonds, or commodities. That's not to say that I might not come across as highly confident about a particular investment, such as, Cascade Natural Gas. On the other hand, I feel confident about Ford and so far all I have going for me is a kick in the groin. However, give this a thought. If Exxon purchased Mobil and Chevron acquired Texaco, why can't GM and Ford merge?
Early Tuesday morning I noticed the report that about $70 billion flowed into the U.S. from foreigners. More telling, foreign central banks sold $14.3 billion in U.S. Treasury bonds and notes in the month of May. Am I the only one who cares? The $70 billion came from private investors. Who are the private investors?
During much of the Tuesday trading hours crude traded at $76 or above. At that time shares of Halliburton, BJ Services, Transocean, Diamond Offshore, Schlumberger, and Baker Hughes were down on the day. Not surprisingly, it didn't take long for crude to close below $74 a barrel. Those invested in the energy sector need to be wary. I suggested a few days ago that one should consider taking some profits.
I will be particularly interested in Ryland's quarterly report. It will be released early Wednesday morning. They are a homebuilder headquartered in Southern California.
We saw that the PPI reflected growing inflation. I anticipate the CPI to be even worse. Yields on Treasuries began to rise in earnest on Tuesday with the 2-year and the 30-year at about 5.18% and the 10-year at 5.13%. I expect yields to approach 5.30% very shortly.
Home builders' confidence plunged to a 15-year low in July, reflecting growing worries about rising interest rates and declining affordability, the National Association of Home Builders said Tuesday. The NAHB/Wells Fargo housing market index fell three more points to 39 in July, the lowest since December 1991. The index peaked at 72 last June and has fallen in 11 months since then. In July, all three components of the home builders' index fell. Current sales index fell to 43 from 47, the expected sales index dropped to 46 from 51, and the traffic of potential buyers index fell to 27 from 29.
Gold closed down $22 an ounce while the dollar remained firm (to my surprise).
Home sales in Philadelphia, South Jersey and Delaware fell in the first six months of 2006 compared to a year ago for the first time in about a decade, according to a report released Monday by a real estate firm.
The research division of Prudential Fox & Roach Realtors in Devon, Pa., said sales in the 12-county region fell by more than 4 percent from January to June, and the number of days it took to sell a home on average soared by 48 percent to 32 days.
Gross domestic product jumped 11.3 percent after rising 10.3 percent in the first quarter, the statistics bureau said in Beijing today. That's the biggest gain since 1994, when the economy was less than a third of its current size.
Grid operators in the New York, the mid-Atlantic, Midwest, Texas and California broke last year’s all-time power-use records on Monday afternoon as residents and businesses cranked up air conditioners. Power outages have begun to pop up in various sections of the U.S.
Victoria Marklew: "The Central Bank of Russia (CBR) made a surprise shift in the ruble's exchange rate this morning, allowing the currency to rise 0.3% against its dollar/euro basket.
The small ruble increase may not seem all important, but the central bank had said back in early June that it saw no need for the currency to rise further in the near-term. Today's shift not only signals an assumption that record high oil prices will bring renewed upward pressure on the ruble, it also implies that the bank foresees a further rise in inflation over the coming months...With petrodollars flowing into the country at a record rate, the country's gold and forex reserves are rising rapidly (reaching $253.2 billion on July 7), as is the Oil Stabilization Fund, which was set up in 2004 and now totals about $77 billion. Russia also lifted its remaining restrictions on currency movements on July 1, paving the way for full ruble convertibility. Although the country still attracts a relatively small proportion of the world's foreign direct investment - in large part thanks to a hostile attitude toward foreign investors and a marked lack of attention to the rule of law - the combination of a rising ruble, soaring energy prices, and further currency liberalization will attract more cash inflows."
Yesterday, the Nasdaq 100 traded at a new 52-week low.
In the dumb and dumber department, yesterday IBM traded at a new 52-week low and then rallied sharply in extended hours trading when the company's quarterly results met expectations. In the second quarter IBM signed $9.6 billion of services contracts down from $11.4 billion in the first quarter and down from $14.6 billion in the year ago quarter. The tax rate at 30% was lower by 2.3 percentage points than the second quarter of 2005. In addition, during this quarter IBM repurchased $2.5 billion worht of stock. That's what the company does best- repurchase shares. For the longest period of time the smart thing to do was sell IBM on strength. Why mess with success?
Then we come to Yahoo. It appears to me that the company is continuing to lose market share in the search business to Google. I don't see that getting any better. The company will delay the launch of its new advertising technolgoy until the fourth quarter of this year, rather than launching it during the third quarter as planned. As for Microsoft, and they are doing even worse against Google in search. No surprise there.
Televisa's Executive Vice President Alfonso De Angoitia told analysts in a conference call that Televisa had still not ruled out the possibility of a counter bid for Univision, but he would not speculate on the price, according to Reuters reports. Angoitia also stressed that Televisa would not join the other group that includes Saban and other U.S. private equity firms in the acquisition.
Addison Mizner: "Misery loves company, but company does not reciprocate."
On Monday evening, after the trading session had closed for some time, Target said it now sees July same-store sales rising 3% to 4%, below an earlier forecast of a 4% to 6% rise. Last July, Target's same-store sales, at stores open longer than a year, climbed 5%. It is true that 3% to 4% is still higher than Wal-Mart's most recent same-store sales estimate for July. We should not forget that Target's customer has a median income higher than that found at Wal-Mart. At the same time, $3 gas and wages that trail inflation do count for a Target customer too.Meanwhile, Target shares dropped to below $45 on Tuesday, and Wal-Mart to below $42.50.
Representative Ron Paul:"Spending is always a tax. The inflation tax, though hidden, only makes things worse. Taxing, borrowing, and inflating to satisfy wealth transfers from the middle class to the rich in an effort to pay for profligate government spending, can never make a nation wealthier. But it certainly can make it poorer."
Tom Au: "Suppose in period 1 (e.g., 2005) that cyclical companies initially represent 10% of earnings, and their stocks command an average P/E ratio of 8, while the rest of the market represents 90% of earnings and commands a P/E ratio of 16. Multiplying the respective P/E’s by the respective weights and adding, one comes up with a market cap and “blended” P/E ratio of 15.2. Now suppose in period 2 (e.g. 2006), the earnings of the cyclical stocks (e.g. Alcoa) double, so they represent 20% of period 1 earnings. At the same time, earnings for the rest of the market fall from 90% to 85% of period 1 earnings. Adding the two components, period 2 earnings are now 5% higher than period 1 earnings (85%+20%=105%). But the market cap is just the same as before (.85*16)+(.2*8)=15.2. And the blended P/E multiple has actually fallen, because the same market cap is now divided by earnings of 1.05 rather than 1.00. This example, in fact, appears to be describing the current market action, and is reminiscent of the 1970s."
There isn't a day that I don't read the market is oversold or the market got ahead of itself. In my view, ignoring buying and selling various indices, a stock is oversold when you buy it and then resell it for a profit, and similarly, a stock is ahead of itself when you sell it and it proceeds to go down in price. Stocks as a group do not move together. In any market, there will be winners and losers. It's your job to limit your risk and, at the same time,invest in a winner. There are times when the risk will be less than at other times; however, don't be a sucker. There's no sure thing in stocks, bonds, or commodities. That's not to say that I might not come across as highly confident about a particular investment, such as, Cascade Natural Gas. On the other hand, I feel confident about Ford and so far all I have going for me is a kick in the groin. However, give this a thought. If Exxon purchased Mobil and Chevron acquired Texaco, why can't GM and Ford merge?
Early Tuesday morning I noticed the report that about $70 billion flowed into the U.S. from foreigners. More telling, foreign central banks sold $14.3 billion in U.S. Treasury bonds and notes in the month of May. Am I the only one who cares? The $70 billion came from private investors. Who are the private investors?
During much of the Tuesday trading hours crude traded at $76 or above. At that time shares of Halliburton, BJ Services, Transocean, Diamond Offshore, Schlumberger, and Baker Hughes were down on the day. Not surprisingly, it didn't take long for crude to close below $74 a barrel. Those invested in the energy sector need to be wary. I suggested a few days ago that one should consider taking some profits.
I will be particularly interested in Ryland's quarterly report. It will be released early Wednesday morning. They are a homebuilder headquartered in Southern California.
We saw that the PPI reflected growing inflation. I anticipate the CPI to be even worse. Yields on Treasuries began to rise in earnest on Tuesday with the 2-year and the 30-year at about 5.18% and the 10-year at 5.13%. I expect yields to approach 5.30% very shortly.
Home builders' confidence plunged to a 15-year low in July, reflecting growing worries about rising interest rates and declining affordability, the National Association of Home Builders said Tuesday. The NAHB/Wells Fargo housing market index fell three more points to 39 in July, the lowest since December 1991. The index peaked at 72 last June and has fallen in 11 months since then. In July, all three components of the home builders' index fell. Current sales index fell to 43 from 47, the expected sales index dropped to 46 from 51, and the traffic of potential buyers index fell to 27 from 29.
Gold closed down $22 an ounce while the dollar remained firm (to my surprise).
Home sales in Philadelphia, South Jersey and Delaware fell in the first six months of 2006 compared to a year ago for the first time in about a decade, according to a report released Monday by a real estate firm.
The research division of Prudential Fox & Roach Realtors in Devon, Pa., said sales in the 12-county region fell by more than 4 percent from January to June, and the number of days it took to sell a home on average soared by 48 percent to 32 days.
Gross domestic product jumped 11.3 percent after rising 10.3 percent in the first quarter, the statistics bureau said in Beijing today. That's the biggest gain since 1994, when the economy was less than a third of its current size.
Grid operators in the New York, the mid-Atlantic, Midwest, Texas and California broke last year’s all-time power-use records on Monday afternoon as residents and businesses cranked up air conditioners. Power outages have begun to pop up in various sections of the U.S.
Victoria Marklew: "The Central Bank of Russia (CBR) made a surprise shift in the ruble's exchange rate this morning, allowing the currency to rise 0.3% against its dollar/euro basket.
The small ruble increase may not seem all important, but the central bank had said back in early June that it saw no need for the currency to rise further in the near-term. Today's shift not only signals an assumption that record high oil prices will bring renewed upward pressure on the ruble, it also implies that the bank foresees a further rise in inflation over the coming months...With petrodollars flowing into the country at a record rate, the country's gold and forex reserves are rising rapidly (reaching $253.2 billion on July 7), as is the Oil Stabilization Fund, which was set up in 2004 and now totals about $77 billion. Russia also lifted its remaining restrictions on currency movements on July 1, paving the way for full ruble convertibility. Although the country still attracts a relatively small proportion of the world's foreign direct investment - in large part thanks to a hostile attitude toward foreign investors and a marked lack of attention to the rule of law - the combination of a rising ruble, soaring energy prices, and further currency liberalization will attract more cash inflows."
Yesterday, the Nasdaq 100 traded at a new 52-week low.
In the dumb and dumber department, yesterday IBM traded at a new 52-week low and then rallied sharply in extended hours trading when the company's quarterly results met expectations. In the second quarter IBM signed $9.6 billion of services contracts down from $11.4 billion in the first quarter and down from $14.6 billion in the year ago quarter. The tax rate at 30% was lower by 2.3 percentage points than the second quarter of 2005. In addition, during this quarter IBM repurchased $2.5 billion worht of stock. That's what the company does best- repurchase shares. For the longest period of time the smart thing to do was sell IBM on strength. Why mess with success?
Then we come to Yahoo. It appears to me that the company is continuing to lose market share in the search business to Google. I don't see that getting any better. The company will delay the launch of its new advertising technolgoy until the fourth quarter of this year, rather than launching it during the third quarter as planned. As for Microsoft, and they are doing even worse against Google in search. No surprise there.
Televisa's Executive Vice President Alfonso De Angoitia told analysts in a conference call that Televisa had still not ruled out the possibility of a counter bid for Univision, but he would not speculate on the price, according to Reuters reports. Angoitia also stressed that Televisa would not join the other group that includes Saban and other U.S. private equity firms in the acquisition.
Addison Mizner: "Misery loves company, but company does not reciprocate."
Bunfire
7/18/06 Bunfire
Ford Motor Co. stated it has begun production of dedicated hydrogen-fueled V-10 engines. The company is the first automaker to begin making the engines, which will be used in its E-450 hydrogen-fueled shuttle buses. The buses are scheduled to be delivered to customers later this year, the company said.
Another sign that the economy's current GDP is stronger than anticipated --- U.S. industrial output surged 0.8% in June, boosted by strong output at factories, mines and utilities, the Federal Reserve said Monday. Capacity utilization rose to 82.4%, the highest level in six years, the Fed said. Manufacturing and utility output each rose 0.7% in June, while the output of mines rose 1.2%. For the second quarter, industrial production increased at a 6.6% annual rate, the most since the fourth quarter of 1999. With surging industrial output and rising capacity utilization, do you anticipate stronger than expected inflation numbers? You still believe rates are not headed higher? Why not buy treasury bonds with your own money.
The dollar rallied to a three-month high versus the yen and an almost three-week high versus the euro early Monday, continuing to benefit from safe-haven flows amid concerns over further Middle Eastern tensions. A sucker is born every day.
We've seen disappointing quarterly reports from MMM, GE, and Citigroup. How many more Dow stocks will disappoint over the next few weeks?
"John Hussman: "Poor internal market action should presently make us much more inclined to expect unfavorable economic and political news, and also to allow for abrupt or unexpected market weakness. With the major indices now back to a modestly oversold condition, it's certainly possible that we'll observe the typical “fast, furious, prone to failure” really to clear that oversold condition, but in any event, we haven't observed the sort of improvement in internals that would merit an increase in our willingness to accept broad market risk.
Phelps Dodge and Inco have increased their offer for the Canadian miner to ward off Xstrata's sweetened hostile bid. The shares of Phelps Dodge took it on the chin yesterday.
Nearly 40 percent of employees think their companies pay less-than-market-rate salaries, compared with 28 percent last year, according to an annual survey of workplace attitudes by staffing agency Randstad USA with Harris Interactive Inc.
Yet a growing number of employers--50 percent this year compared with 42 percent in 2005--said they believed their salaries are competitive with the market rates, the survey found.
Daily Reckoning: "Based upon delays in adding silver and COMEX warehouse movements, I am convinced that they have effectively run out of available silver in London for the ETF and must get it elsewhere."
A new study conducted by researchers in Sweden has found that those with elevated blood sugar levels run a much higher risk of developing Alzheimer's disease.
The latest study was conducted by researchers at the Karolinska Institute in Stockholm. It examined 1,100 people who were at least 75-years-old over a nine-year period.
Jefferies & Co. on Monday lowered its rating on Grey Wolf Inc., Patterson-UTI Energy Inc., Union Drilling Inc. and Pioneer Drilling Co. to "hold" from "buy," saying the dayrate outlook for the onshore drilling sector is becoming more uncertain.
Yesterday the markets were quite mixed. As a group, equities had little change but the VIX had a one point range during the trading session and managed a gain of .64 of a point. The energy sector was weaker and so were the metals. Against that
backdrop, the dollar gained ground and bonds were slightly higher in yield.
India is likely to sign a deal in September to import 2.5 million tonnes of liquefied natural gas (LNG) from Australia.
Brazil's state controlled oil company Petrobras rejected Bolivia's demands for an increase in the price of natural gas it buys from that country, a move that might push La Paz to seek international arbitration.
William Herschel: "And it is doubtless our paramount duty, in every state of society, to alleviate the pressure of the purely evil part of this distribution, as much as possible, and, by all the means we can devise, secure the lower links in the chain of society from dragging in dishonor and wretchedness."
It's summer and that means it's garage sale time. This year there is a different theme. It's not just about getting rid of unwanted junk and raising some extra cash. It's also about raising some more money to pay for gas for the family car. That's the real world on Main Street.
Ford Motor Co. stated it has begun production of dedicated hydrogen-fueled V-10 engines. The company is the first automaker to begin making the engines, which will be used in its E-450 hydrogen-fueled shuttle buses. The buses are scheduled to be delivered to customers later this year, the company said.
Another sign that the economy's current GDP is stronger than anticipated --- U.S. industrial output surged 0.8% in June, boosted by strong output at factories, mines and utilities, the Federal Reserve said Monday. Capacity utilization rose to 82.4%, the highest level in six years, the Fed said. Manufacturing and utility output each rose 0.7% in June, while the output of mines rose 1.2%. For the second quarter, industrial production increased at a 6.6% annual rate, the most since the fourth quarter of 1999. With surging industrial output and rising capacity utilization, do you anticipate stronger than expected inflation numbers? You still believe rates are not headed higher? Why not buy treasury bonds with your own money.
The dollar rallied to a three-month high versus the yen and an almost three-week high versus the euro early Monday, continuing to benefit from safe-haven flows amid concerns over further Middle Eastern tensions. A sucker is born every day.
We've seen disappointing quarterly reports from MMM, GE, and Citigroup. How many more Dow stocks will disappoint over the next few weeks?
"John Hussman: "Poor internal market action should presently make us much more inclined to expect unfavorable economic and political news, and also to allow for abrupt or unexpected market weakness. With the major indices now back to a modestly oversold condition, it's certainly possible that we'll observe the typical “fast, furious, prone to failure” really to clear that oversold condition, but in any event, we haven't observed the sort of improvement in internals that would merit an increase in our willingness to accept broad market risk.
Phelps Dodge and Inco have increased their offer for the Canadian miner to ward off Xstrata's sweetened hostile bid. The shares of Phelps Dodge took it on the chin yesterday.
Nearly 40 percent of employees think their companies pay less-than-market-rate salaries, compared with 28 percent last year, according to an annual survey of workplace attitudes by staffing agency Randstad USA with Harris Interactive Inc.
Yet a growing number of employers--50 percent this year compared with 42 percent in 2005--said they believed their salaries are competitive with the market rates, the survey found.
Daily Reckoning: "Based upon delays in adding silver and COMEX warehouse movements, I am convinced that they have effectively run out of available silver in London for the ETF and must get it elsewhere."
A new study conducted by researchers in Sweden has found that those with elevated blood sugar levels run a much higher risk of developing Alzheimer's disease.
The latest study was conducted by researchers at the Karolinska Institute in Stockholm. It examined 1,100 people who were at least 75-years-old over a nine-year period.
Jefferies & Co. on Monday lowered its rating on Grey Wolf Inc., Patterson-UTI Energy Inc., Union Drilling Inc. and Pioneer Drilling Co. to "hold" from "buy," saying the dayrate outlook for the onshore drilling sector is becoming more uncertain.
Yesterday the markets were quite mixed. As a group, equities had little change but the VIX had a one point range during the trading session and managed a gain of .64 of a point. The energy sector was weaker and so were the metals. Against that
backdrop, the dollar gained ground and bonds were slightly higher in yield.
India is likely to sign a deal in September to import 2.5 million tonnes of liquefied natural gas (LNG) from Australia.
Brazil's state controlled oil company Petrobras rejected Bolivia's demands for an increase in the price of natural gas it buys from that country, a move that might push La Paz to seek international arbitration.
William Herschel: "And it is doubtless our paramount duty, in every state of society, to alleviate the pressure of the purely evil part of this distribution, as much as possible, and, by all the means we can devise, secure the lower links in the chain of society from dragging in dishonor and wretchedness."
It's summer and that means it's garage sale time. This year there is a different theme. It's not just about getting rid of unwanted junk and raising some extra cash. It's also about raising some more money to pay for gas for the family car. That's the real world on Main Street.
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