8/6/06 Take A Hard Look
Crude oil prices may increase to $100 a barrel on winter demand and because of concern over supplies getting disrupted, Iran's Deputy Oil Minister Hadi Nejad-Hosseinian said.
"There is still a possibility of crude reaching $100 a barrel due to geopolitical problems worldwide and peaking of winter demand,"
One cannot ignore geopolitical issues and their impact on the price of crude. However, it might prove more fruitful to take a hard look at the current conditions
of Saudi Arabia's Ghawar field and Mexico's Cantarell field, certainly two of the world's largest. Production has topped out in both and declining quickly in the
Cantarell field. In all likelihood, production at Ghawar is overstated. I found it interesting that China is getting more daily crude from Africa than from the Saudis.
Since the U.S. is so dependent on foreign oil, just from where do you believe we will get our future deliveries to meet current demand? At the moment, when there are three consecutive days of intense heat, we will curtail our demand and therefore avoid overloading the grid. Will we be forced to curtail our daily demand for crude?
I see this coming around the bend.
Doug Noland: "I actually believe that major Greenspan-style unilateral rate cuts in response to economic weakness are a thing of the past. Whether it appreciates it today or not, the Bernanke Fed has lost significant autonomy to the now massive flows of global finance. Importantly, this powerful pool of global finance Bubble increasingly dictates inflationary trends, and the Fed's determination to sustain the U.S. Credit Bubble only ensures that these global flows become only more commanding and destabilizing. Inflationary pressures are building and, as we are observing with energy prices, increasingly destabilizing. And, the dollar...
The vulnerable dollar is poised to play spoiler for the inflationists and the Fed. In this regard, it is worth pondering this evening that when the Fed cut rates 50 bps to 6% on January 1, 2001, the dollar index traded at 110. A year later, after the Fed had quickly dropped rates to 1.75%, the dollar index was approaching its high of 120. Clearly, the Fed back then enjoyed great leeway to cut and inflate. Conversely, the Fed began raising rates from the low of 1% in June of 2004 with the dollar index at about 90. Now, 17 hikes later, the dollar index is near 84. It is also worth repeating that when the Fed was cutting rates aggressively in 2001 Current Account Deficits were running less than $100 billion quarterly. They are now double this amount."
The nation's governors on Saturday launched a bipartisan drive to block a move to expand the president's authority to take over National Guard troops in case of natural disaster or homeland security threats.
In Naperville,Illinois, in the past 12 months, 28 homes have sold from $1.2 million to $1.6 million. Currently, there are 89 on the market -- a 30-month supply. As an incentive to buyers, one homeowner is offering a new Hummer.
Mike Burk: "Diminishing new lows make a good case that a cycle low occurred on July 21, but many of the short term momentum indicators are at or near their highs of the past 3 months suggesting a pull back next week. I expect the major indices to be lower on Friday August 11 than they were on Friday August 4."
In Australia, the Olivier Internet Job Index rose by 2.22 per cent to a new high of 232,283 new jobs advertised online last month.
Olivier Group director Robert Olivier said the high level of employment was creating wages pressure, which in turn was helping to drive inflation.
The boiling hot employment market was a significant factor behind the Reserve Bank of Australia's (RBA) decision to lift interest rates last week, Mr Olivier added.
"It's the price of people, as workers, not just the price of petrol or bananas that looks like the driver to us," he said.
"Unemployment is at a record low, the skills shortage is biting hard and in-demand employees know they have the upper hand."
According to The Guardian, a consortium led by Qatar's state-owned investment fund and investment bank UBS is expected to join the £7bn battle to acquire Thames Water which has been put up for sale by German owner, RWE.
The Hong Kong government is currently consulting the public about a possible sales tax. It said in a statement that Hong Kong must take advantage of its current economic strength to shore up public finances for future generations.
"We must act now to broaden our tax base for the future prosperity of Hong Kong. This will ultimately affect each Hong Kong resident individually," the statement said.
Saturday, August 05, 2006
Friday, August 04, 2006
Employment
8/5/04 Employment
Nonfarm payroll employment increased by 113,000 in
July, and the unemployment rate rose to 4.8 percent. Average hourly earnings
increased by 7 cents, or 0.4 percent, in July. Over the 12 months ending in July,
average hourly earnings have risen by 3.8 percent.
In the service-providing sector, employment in
professional and business services rose by 43,000 over
the month. Employment was flat over
the month in temporary help services.
Employment in leisure and hospitality increased by
42,000 in July, mainly due to continued job growth in food
services and drinking places (+29,000). Health care
employment also continued on an upward trend, with an
increase of 23,000. Job gains occurred in hospitals and
in nursing and residential care facilities.
The number of jobs in retail trade was unchanged in
July; employment in general merchandise stores declined by
8,000 over the month and has fallen by 74,000 since August
2005. Construction employment was little changed for the fifth month in a row; over
the period, job growth in nonresidential construction has been
offset by job losses in residential and heavy construction.
Manufacturing employment edged down by 15,000 in July,
largely offsetting an increase in June. Over the month,
manufacturing hours increased by 0.2 hour, while factory
overtime was down by 0.1 hour.
The number of unemployed persons edged up to 7.2 million in July. A year earlier, the number of unemployed persons was 7.5 million and the jobless rate was 5.0 percent.
Following a decline in June, the number of long-term unemployed
persons--those unemployed 27 weeks or longer--returned to its May level of 1.3 million. These long-term unemployed accounted for 18.6 percent of total unemployment, about the same as in May.
After trending down for several months, the number of unemployed persons who
were reentrants to the labor force increased to 2.4 million in July. This group
accounted for 32.7 percent of total unemployment, up from 30.0 percent in June.
The benchmark 10-year Treasury note closed 15/32 higher at 101 23/32 with a yield of 4.903%.
Even though the Fed Fund futures are predicting there is almost no chance for the Fed to raise ates next week, equities could not hold their opening rally and quickly turned into the red column. I know it doesn't mean much, but Ford continues to rally despite bad news. The stock powered through $7 on the upside and that has not taken place for quite some time. It is beginning to act like GM did at $19 and $20.
The question one must ask is where do we go from here? Do you want to buy 10-year Treasury bonds at 4.90% or the 30-year at 4.99% as the dollar weakens daily? Are stocks more attractive than bonds? Or is being hedged and/or in cash the smartest move?
Hovnanian, a homebuilder, now sees earnings in a range of $1.10 to $1.20 a share for the third quarter ended July 31, down from a range of $1.40 to $1.50 a share previously. And for the full year, Hovnanian's pegged its updated forecast at $5 to $5.75 a share, down from a prior range of $7.20 to $7.40 a share.
Christopherson Homes is laying off 18 percent of its employees over the next three to six months, company officials said Thursday.
Sonoma County's largest home builder will lay off 25 to 30 workers in a range of jobs at both its Santa Rosa headquarters and its Sacramento division.
"We hope this downturn will be short-lived but we will continue to make adjustments deemed necessary," said George Casey, the company's chief executive officer.
"We look forward to the time when the market rebounds and when Northern California begins to grow again. When this happens, we believe we will be well positioned to continue to grow Christopherson Homes as we have over the last nearly 30 years," he said.
Nonfarm payroll employment increased by 113,000 in
July, and the unemployment rate rose to 4.8 percent. Average hourly earnings
increased by 7 cents, or 0.4 percent, in July. Over the 12 months ending in July,
average hourly earnings have risen by 3.8 percent.
In the service-providing sector, employment in
professional and business services rose by 43,000 over
the month. Employment was flat over
the month in temporary help services.
Employment in leisure and hospitality increased by
42,000 in July, mainly due to continued job growth in food
services and drinking places (+29,000). Health care
employment also continued on an upward trend, with an
increase of 23,000. Job gains occurred in hospitals and
in nursing and residential care facilities.
The number of jobs in retail trade was unchanged in
July; employment in general merchandise stores declined by
8,000 over the month and has fallen by 74,000 since August
2005. Construction employment was little changed for the fifth month in a row; over
the period, job growth in nonresidential construction has been
offset by job losses in residential and heavy construction.
Manufacturing employment edged down by 15,000 in July,
largely offsetting an increase in June. Over the month,
manufacturing hours increased by 0.2 hour, while factory
overtime was down by 0.1 hour.
The number of unemployed persons edged up to 7.2 million in July. A year earlier, the number of unemployed persons was 7.5 million and the jobless rate was 5.0 percent.
Following a decline in June, the number of long-term unemployed
persons--those unemployed 27 weeks or longer--returned to its May level of 1.3 million. These long-term unemployed accounted for 18.6 percent of total unemployment, about the same as in May.
After trending down for several months, the number of unemployed persons who
were reentrants to the labor force increased to 2.4 million in July. This group
accounted for 32.7 percent of total unemployment, up from 30.0 percent in June.
The benchmark 10-year Treasury note closed 15/32 higher at 101 23/32 with a yield of 4.903%.
Even though the Fed Fund futures are predicting there is almost no chance for the Fed to raise ates next week, equities could not hold their opening rally and quickly turned into the red column. I know it doesn't mean much, but Ford continues to rally despite bad news. The stock powered through $7 on the upside and that has not taken place for quite some time. It is beginning to act like GM did at $19 and $20.
The question one must ask is where do we go from here? Do you want to buy 10-year Treasury bonds at 4.90% or the 30-year at 4.99% as the dollar weakens daily? Are stocks more attractive than bonds? Or is being hedged and/or in cash the smartest move?
Hovnanian, a homebuilder, now sees earnings in a range of $1.10 to $1.20 a share for the third quarter ended July 31, down from a range of $1.40 to $1.50 a share previously. And for the full year, Hovnanian's pegged its updated forecast at $5 to $5.75 a share, down from a prior range of $7.20 to $7.40 a share.
Christopherson Homes is laying off 18 percent of its employees over the next three to six months, company officials said Thursday.
Sonoma County's largest home builder will lay off 25 to 30 workers in a range of jobs at both its Santa Rosa headquarters and its Sacramento division.
"We hope this downturn will be short-lived but we will continue to make adjustments deemed necessary," said George Casey, the company's chief executive officer.
"We look forward to the time when the market rebounds and when Northern California begins to grow again. When this happens, we believe we will be well positioned to continue to grow Christopherson Homes as we have over the last nearly 30 years," he said.
Thursday, August 03, 2006
Further Evidence
8/4/06 Further Evidence
The ECB, The Bank of England, and the Bank of Australia all raised their interest rates. Therefore, it is not surprising to see the U.S. dollar index remain under 85.
Iran's President has a solution to the Mideast conflict -- the answer is to destroy Israel.
Factory orders for June increased 1.2%. The July ISM Services Index was 54.8 versus 57 in June.Within the index, the price component rose to 74.8% from 73.9% in June, suggesting inflation pressures continue to build.
Palatin Technologies, Inc. and King Pharmaceuticals, Inc. announced results of Part 2 of a Phase IIa pilot study evaluating the effects of bremelanotide in post-menopausal women diagnosed with female sexual arousal disorder (FSAD). Results showed that on a 14-item questionnaire, 73 percent of the women reported an increased level of genital arousal while on bremelanotide compared with 23 percent of women on placebo. Also, 46 percent of women on bremelanotide reported an increased level of sexual desire while only 19 percent of women responded similarly after placebo treatment. Additionally, subjects receiving bremelanotide reported a higher incidence of engaging in sexual activity compared to placebo. The current study follows a similarly designed clinical study conducted with
pre-menopausal patients with FSAD, the results of which were recently published in the July 2006 issue of The Journal of Sexual Medicine.
"The results of this study in post-menopausal women corroborate the previous results reported in pre-menopausal women and supports the further advancement of bremelanotide for the treatment of FSAD," said Trevor Hallam, Ph.D., Executive Vice President, Research & Development of Palatin Technologies.
I continue to believe that long-term investors in Palatin will be nicely rewarded. Institutions largely ignore stocks priced under $5. In my view, they will catch on in due time.
Wm. Stacy Locke, Pioneer Drilling's President and Chief Executive Officer, stated, "Demand for our rigs has remained strong and we have continued to see increases in dayrates in each of our operating areas. Average drilling revenues per day increased $1,532 per revenue day to $19,154 in our fiscal first quarter of 2007, compared to our fourth quarter of fiscal 2006. Average drilling costs increased $801 per revenue day during the same period, of which $541 related to labor costs and $241 to supply, repair, maintenance and equipment disposal costs. As a result, average drilling margins per revenue day increased $731 per day to $9,004, or an increase of 9% over the fourth quarter of fiscal 2006. We continued to pursue term drilling contracts during the quarter. Currently, 44 of our 59 rigs, or 75%, are operating under term contracts of six months to two years in duration, of which 15 have remaining terms of six to 12 months, eight have a remaining term of 12 to 18 months and four have a remaining term in excess of 18 months.
"To date, we have completed eight rigs of our 16 rig new-build program and expect to have the eight remaining rigs begin working under contract over the next nine months or so," continued Mr. Locke. "Since April 1, 2006, the beginning of our new fiscal year, we have added four 1000-hp electric rigs: one rig to the Utah division; one rig to the South Texas division; and two rigs to the North Texas division. Each of these rigs is designed to be quick- to-move and rig up, contains modern mud-cleaning equipment and has two independently powered, high-horsepower mud pumps.
"Our investment in new-build rigs and our commitment to upgrade and modernize our existing fleet has allowed Pioneer to expand its customer base. Currently, 59% of the rigs are working for publicly traded independents or major oil and gas companies. In the June quarter, we spent approximately $8,300,000 upgrading six rigs, using over 230 potential revenue days in the upgrade process. We believe that our fleet is well positioned to be highly competitive in any market conditions we encounter."
Time Warner Inc.'s AOL online division on Thursday said about 5,000, or about 26 percent of its 19,000 employees, will not be employed by the company within six months as a result of its retructuring.
The number of workers collecting jobless benefits rose by 11,000 to 2.48 million in the week ending July 22. The four-week average of continuing jobless claims rose by 8,000 to 2.47 million, the most since March. As a reminder, once an individual ceases to collect unemployment benefits, that individual is no longer counted as unemployed.
The audited financial statement — prepared by the Treasury Department — reveals a federal government in far worse financial shape than official budget reports indicate, a USA TODAY analysis found. The government has run a deficit of $2.9 trillion since 1997, according to the audited number. The official deficit since then is just $729 billion. The difference is equal to an entire year's worth of federal spending.
Univision Communications Inc. on Thursday said its second-quarter profit nearly tripled on a 38% revenue increase at its television networks and stations. The company earned $107.4 million, or 32 cents a share, compared with a profit of $36.1 million, or 10 cents a share -- including the writedown of a loss in the fair value of an investment -- in the prior year. Earnings in the latest three months include $16.3 million in charges related to the company's move to put itself up for sale, costs related to its ongoing litigation with Grupo Televisa and stock-based compensation. Excluding those charges, Univision would have earned $116.6 million, or 34 cents a share, in the latest quarter. Revenue rose to $634 million from $508 million. (Corrects profit excluding charges in latest quarter.) Unfortunately, yesterday was not a very good day for Starbucks, Medtronic, St. Jude Medical, Boston Scientific, CBS, Sprint, Transocean Oil, Prudential Financial, MGM Mirage, and Las Vegas Sands, to name a few.
The 2-year Treasury yield is 4.98% and the 10-year is 4.94%. Again, we have an inverted yield curve.
Many economists are suggesting that the nonfarm payrolls for July will increase by 143,000 and that wage inflation will rise slightly. As such, there is an increasing consensus that the Fed will pause next week. Will that help Target's sales or the results from the Gap? Pier I says they see a worsening macro-economic environment. It could be that their merchandise stinks the house out.
General John Abizaid, the top U.S. commander in the Middle East:``The sectarian violence is probably as bad as I've seen it, in Baghdad in particular,'' Abizaid told the Senate Armed Services Committee in Washington. ``If not stopped, Iraq could slide into civil war.'' As I have said for the last 5+ years, Bush will go down as the worst president in our history.
The ECB, The Bank of England, and the Bank of Australia all raised their interest rates. Therefore, it is not surprising to see the U.S. dollar index remain under 85.
Iran's President has a solution to the Mideast conflict -- the answer is to destroy Israel.
Factory orders for June increased 1.2%. The July ISM Services Index was 54.8 versus 57 in June.Within the index, the price component rose to 74.8% from 73.9% in June, suggesting inflation pressures continue to build.
Palatin Technologies, Inc. and King Pharmaceuticals, Inc. announced results of Part 2 of a Phase IIa pilot study evaluating the effects of bremelanotide in post-menopausal women diagnosed with female sexual arousal disorder (FSAD). Results showed that on a 14-item questionnaire, 73 percent of the women reported an increased level of genital arousal while on bremelanotide compared with 23 percent of women on placebo. Also, 46 percent of women on bremelanotide reported an increased level of sexual desire while only 19 percent of women responded similarly after placebo treatment. Additionally, subjects receiving bremelanotide reported a higher incidence of engaging in sexual activity compared to placebo. The current study follows a similarly designed clinical study conducted with
pre-menopausal patients with FSAD, the results of which were recently published in the July 2006 issue of The Journal of Sexual Medicine.
"The results of this study in post-menopausal women corroborate the previous results reported in pre-menopausal women and supports the further advancement of bremelanotide for the treatment of FSAD," said Trevor Hallam, Ph.D., Executive Vice President, Research & Development of Palatin Technologies.
I continue to believe that long-term investors in Palatin will be nicely rewarded. Institutions largely ignore stocks priced under $5. In my view, they will catch on in due time.
Wm. Stacy Locke, Pioneer Drilling's President and Chief Executive Officer, stated, "Demand for our rigs has remained strong and we have continued to see increases in dayrates in each of our operating areas. Average drilling revenues per day increased $1,532 per revenue day to $19,154 in our fiscal first quarter of 2007, compared to our fourth quarter of fiscal 2006. Average drilling costs increased $801 per revenue day during the same period, of which $541 related to labor costs and $241 to supply, repair, maintenance and equipment disposal costs. As a result, average drilling margins per revenue day increased $731 per day to $9,004, or an increase of 9% over the fourth quarter of fiscal 2006. We continued to pursue term drilling contracts during the quarter. Currently, 44 of our 59 rigs, or 75%, are operating under term contracts of six months to two years in duration, of which 15 have remaining terms of six to 12 months, eight have a remaining term of 12 to 18 months and four have a remaining term in excess of 18 months.
"To date, we have completed eight rigs of our 16 rig new-build program and expect to have the eight remaining rigs begin working under contract over the next nine months or so," continued Mr. Locke. "Since April 1, 2006, the beginning of our new fiscal year, we have added four 1000-hp electric rigs: one rig to the Utah division; one rig to the South Texas division; and two rigs to the North Texas division. Each of these rigs is designed to be quick- to-move and rig up, contains modern mud-cleaning equipment and has two independently powered, high-horsepower mud pumps.
"Our investment in new-build rigs and our commitment to upgrade and modernize our existing fleet has allowed Pioneer to expand its customer base. Currently, 59% of the rigs are working for publicly traded independents or major oil and gas companies. In the June quarter, we spent approximately $8,300,000 upgrading six rigs, using over 230 potential revenue days in the upgrade process. We believe that our fleet is well positioned to be highly competitive in any market conditions we encounter."
Time Warner Inc.'s AOL online division on Thursday said about 5,000, or about 26 percent of its 19,000 employees, will not be employed by the company within six months as a result of its retructuring.
The number of workers collecting jobless benefits rose by 11,000 to 2.48 million in the week ending July 22. The four-week average of continuing jobless claims rose by 8,000 to 2.47 million, the most since March. As a reminder, once an individual ceases to collect unemployment benefits, that individual is no longer counted as unemployed.
The audited financial statement — prepared by the Treasury Department — reveals a federal government in far worse financial shape than official budget reports indicate, a USA TODAY analysis found. The government has run a deficit of $2.9 trillion since 1997, according to the audited number. The official deficit since then is just $729 billion. The difference is equal to an entire year's worth of federal spending.
Univision Communications Inc. on Thursday said its second-quarter profit nearly tripled on a 38% revenue increase at its television networks and stations. The company earned $107.4 million, or 32 cents a share, compared with a profit of $36.1 million, or 10 cents a share -- including the writedown of a loss in the fair value of an investment -- in the prior year. Earnings in the latest three months include $16.3 million in charges related to the company's move to put itself up for sale, costs related to its ongoing litigation with Grupo Televisa and stock-based compensation. Excluding those charges, Univision would have earned $116.6 million, or 34 cents a share, in the latest quarter. Revenue rose to $634 million from $508 million. (Corrects profit excluding charges in latest quarter.) Unfortunately, yesterday was not a very good day for Starbucks, Medtronic, St. Jude Medical, Boston Scientific, CBS, Sprint, Transocean Oil, Prudential Financial, MGM Mirage, and Las Vegas Sands, to name a few.
The 2-year Treasury yield is 4.98% and the 10-year is 4.94%. Again, we have an inverted yield curve.
Many economists are suggesting that the nonfarm payrolls for July will increase by 143,000 and that wage inflation will rise slightly. As such, there is an increasing consensus that the Fed will pause next week. Will that help Target's sales or the results from the Gap? Pier I says they see a worsening macro-economic environment. It could be that their merchandise stinks the house out.
General John Abizaid, the top U.S. commander in the Middle East:``The sectarian violence is probably as bad as I've seen it, in Baghdad in particular,'' Abizaid told the Senate Armed Services Committee in Washington. ``If not stopped, Iraq could slide into civil war.'' As I have said for the last 5+ years, Bush will go down as the worst president in our history.
Wednesday, August 02, 2006
The New Reality
8/3/06 The New Reality
Looking at the various markets, we are to believe the new reality is for declining interest rates to co-exist with a weaker dollar, a rising inflationary environment, and a consumer-based economy that will not falter even though the consumer is saddled with paychecks chipped away by rising federal, state, and local taxes and by higher energy expenses.
Dietrich Bonhoeffer: "To understand reality is not the same as to know about outward events. It is to perceive the essential nature of things. The best-informed man is not necessarily the wisest. Indeed there is a danger that precisely in the multiplicity of his knowledge he will lose sight of what is essential. But on the other hand, knowledge of an apparently trivial detail quite often makes it possible to see into the depth of things. And so the wise man will seek to acquire the best possible knowledge about events, but always without becoming dependent upon this knowledge. To recognize the significant in the factual is wisdom."
Ford Motor Co. said Wednesday it's lowered the suggested retail price sfor its F-150 pick-up truck product line by as much as $1,400. The company said the average price reductions, by cab style, are $720 for its Regular Cab models, $830 for its SuperCabs and $949 for its SuperCrews. Including destination charges, it said pricing for its F-150 XL Regular Cab 4X2 will begin at $19,120 and that the product line's pricing will range up to $39,565 for the F-150 Lariat King Ranch SuperCrew 4X4. Ford stated "Based on the recent trend in sales, we now expect our Premier Automotive Group operating segment to be unprofitable for 2006."
Saks Inc. said it's selling its Parisian specialty department store business to Belk Inc. for $285 million in cash. The company said it will distribute a large part of the price to shareholders, either through a share buyback, special dividend or combination of the two.
The ADP report looks for nonfarm payrolls to grow by about 114,000 in July vs. the 143,000 expected by economists.
Walgreen Co. on Wednesday said July sales at stores open at least one year rose 9.7%.
Returning to Ford, the company hired Kenneth Leet, a former M&A banker with Goldman Sachs and B of A, to act as an advisor to the CEO of Ford. Leet will look at the divisions of the company and recommend which should be sold. There was a mention in the WSJ of possibly looking at alliances. I doubt this. The company has had many alliances over the years. That would not be a new direction. I continue to believe that the company will be sold in whole or in parts.
Salman Rushdie: "Reality is a question of perspective; the further you get from the past, the more concrete and plausible it seems -- but as you approach the present, it inevitably seems incredible."
Crude for September delivery rose 90 cents to $75.81 a barrel. Natural-gas prices rose 22.5 cents to end at $7.799 per million British Thermal Units. Gasoline futures rose 6.15 cents to $2.338 a gallon while heating oil futures ended up 4.9 cents at $2.129 a gallon. The 10-year Treasury ignored the rise in energy prices and the yield dropped to 4.96%.
Gold for October delivery closed up $5.20 at $657.60. Silver rose 50.5 cents to $12.245 an ounce. Platinum added $2.10 to $1,260.60, palladium added $7 to $328.95 an ounce, and copper lost 0.2 cent to $3.591 a pound.
In the first quarter, Medtronic said pacemaker sales grew 3 percent to $460 million, and ICD sales fell 6 percent to $675 million from last year. Spinal revenue rose 14 percent to $598 million from a year ago. Overall, sales and earnings rose but fell short of analyst expectations. Medtronic shares fell $3.18, or 6.2 percent, to $47.75 in after-hours trading on the INET electronic exchange.
Starbucks said sales at coffee shops open at least 13 months rose 4 percent in July. Three analysts' forecasts ranged from a rise of 6 percent to 7 percent in comparable-store sales, according to research reports.
"This is the first time we've seen comp-store sales drop this low, so concerns about overall consumer spending and its effect on Starbucks will now be affecting the shares," said Don Gher, chief investment officer with Bellevue, Washington-based investment firm Coldstream Capital Management. In after-hours trading the shares declined 7% to $31.
Richard Daughty: "My Sensitive Mogambo Nose For Danger (SMNFD) catches a whiff of the overpowering stench of a looming disaster writ large, as inflation in the price of energy is, if I may lapse into official theoretical economist-speak, the "Revenge Of Stark Reality" theory, which, if you are even passingly familiar with the term "revenge", is all you need to know to be afraid and paranoid, as you should be. Ugh.
****Mogambo sez: Gold, silver and oil have been a winner for the last three years, and they will surely be a winner for the next three, too. And almost certainly more.
So keep loading up with them. One day you will be very, very glad (VVG) you did."
Looking at the various markets, we are to believe the new reality is for declining interest rates to co-exist with a weaker dollar, a rising inflationary environment, and a consumer-based economy that will not falter even though the consumer is saddled with paychecks chipped away by rising federal, state, and local taxes and by higher energy expenses.
Dietrich Bonhoeffer: "To understand reality is not the same as to know about outward events. It is to perceive the essential nature of things. The best-informed man is not necessarily the wisest. Indeed there is a danger that precisely in the multiplicity of his knowledge he will lose sight of what is essential. But on the other hand, knowledge of an apparently trivial detail quite often makes it possible to see into the depth of things. And so the wise man will seek to acquire the best possible knowledge about events, but always without becoming dependent upon this knowledge. To recognize the significant in the factual is wisdom."
Ford Motor Co. said Wednesday it's lowered the suggested retail price sfor its F-150 pick-up truck product line by as much as $1,400. The company said the average price reductions, by cab style, are $720 for its Regular Cab models, $830 for its SuperCabs and $949 for its SuperCrews. Including destination charges, it said pricing for its F-150 XL Regular Cab 4X2 will begin at $19,120 and that the product line's pricing will range up to $39,565 for the F-150 Lariat King Ranch SuperCrew 4X4. Ford stated "Based on the recent trend in sales, we now expect our Premier Automotive Group operating segment to be unprofitable for 2006."
Saks Inc. said it's selling its Parisian specialty department store business to Belk Inc. for $285 million in cash. The company said it will distribute a large part of the price to shareholders, either through a share buyback, special dividend or combination of the two.
The ADP report looks for nonfarm payrolls to grow by about 114,000 in July vs. the 143,000 expected by economists.
Walgreen Co. on Wednesday said July sales at stores open at least one year rose 9.7%.
Returning to Ford, the company hired Kenneth Leet, a former M&A banker with Goldman Sachs and B of A, to act as an advisor to the CEO of Ford. Leet will look at the divisions of the company and recommend which should be sold. There was a mention in the WSJ of possibly looking at alliances. I doubt this. The company has had many alliances over the years. That would not be a new direction. I continue to believe that the company will be sold in whole or in parts.
Salman Rushdie: "Reality is a question of perspective; the further you get from the past, the more concrete and plausible it seems -- but as you approach the present, it inevitably seems incredible."
Crude for September delivery rose 90 cents to $75.81 a barrel. Natural-gas prices rose 22.5 cents to end at $7.799 per million British Thermal Units. Gasoline futures rose 6.15 cents to $2.338 a gallon while heating oil futures ended up 4.9 cents at $2.129 a gallon. The 10-year Treasury ignored the rise in energy prices and the yield dropped to 4.96%.
Gold for October delivery closed up $5.20 at $657.60. Silver rose 50.5 cents to $12.245 an ounce. Platinum added $2.10 to $1,260.60, palladium added $7 to $328.95 an ounce, and copper lost 0.2 cent to $3.591 a pound.
In the first quarter, Medtronic said pacemaker sales grew 3 percent to $460 million, and ICD sales fell 6 percent to $675 million from last year. Spinal revenue rose 14 percent to $598 million from a year ago. Overall, sales and earnings rose but fell short of analyst expectations. Medtronic shares fell $3.18, or 6.2 percent, to $47.75 in after-hours trading on the INET electronic exchange.
Starbucks said sales at coffee shops open at least 13 months rose 4 percent in July. Three analysts' forecasts ranged from a rise of 6 percent to 7 percent in comparable-store sales, according to research reports.
"This is the first time we've seen comp-store sales drop this low, so concerns about overall consumer spending and its effect on Starbucks will now be affecting the shares," said Don Gher, chief investment officer with Bellevue, Washington-based investment firm Coldstream Capital Management. In after-hours trading the shares declined 7% to $31.
Richard Daughty: "My Sensitive Mogambo Nose For Danger (SMNFD) catches a whiff of the overpowering stench of a looming disaster writ large, as inflation in the price of energy is, if I may lapse into official theoretical economist-speak, the "Revenge Of Stark Reality" theory, which, if you are even passingly familiar with the term "revenge", is all you need to know to be afraid and paranoid, as you should be. Ugh.
****Mogambo sez: Gold, silver and oil have been a winner for the last three years, and they will surely be a winner for the next three, too. And almost certainly more.
So keep loading up with them. One day you will be very, very glad (VVG) you did."
Tuesday, August 01, 2006
Relieving Stress
8/2/06 Relieving Stress
The top 10 ways to relieve Stress:
1. Mad TV Show
2. Watching the Fed print money
3. Listening to Mel Gibson explain he is not an anti-Semite
4. The Daily Show
5. Watching the Fed fight inflation
6. Watching Bush salute
7. Dave Chappelle
8. The Geico ad with Little Richard
9. The Colbert Report
10.Bush struggling to tell the truth, and losing the battle
The Commerce Department said construction spending rose 0.3% in June. The National Association of Realtors said the pending home sales index rose 0.4% in June, its second month of gains, it is down 9.6% in the past 12 months.
The ISM Manufacturing index rose to 54.7% in July from 53.8% in June. New orders fell to 56.1% in July from 57.9% in June; however, production picked up to 57.6% from 55.1% in the previous month. The employment index rose to 50.7% from 48.7%. The price index jumped to 78.5% from 76.5%. This is the highest level since October.
A U.S. Department of Commerce report showed personal consumption dropped in June by .2%.
Some high P/E stocks are taking it on the chin, such as, Whole Foods down 6 points and Expeditors down
5 points.
Challenger Gray and Christmas said there were 37,168 job cuts in July, down 50% from June. This was the lowest in six years.
Eastman Kodak's report was from hunger and the stock dropped under 20.
The dollar index has been holding at or above the 85 level. If the Friday employment report surprises on the upside, I do not believe the 85 level will hold.
The core personal consumption expenditure price index (excluding food and energy) increased 0.2% for the third straight month in June, the U.S. Commerce Department said, and has risen 2.4% in the past 12 months, matching the largest year-over-year gain since April 1995.
Personal incomes rose 0.6% in June, outpacing the 0.4% increase in consumer spending. The personal savings rate rose to negative 1.5% from negative 1.6%.
Crude for September delivery rose 51 cents to $74.91. Gasoline futures closed up 6.32 cents, or 2.9% to $2.28 a barrel. Natural-gas futures fell 63.70 cents to $7.57 per million British thermal units. Heating oil futures rose 4.28 cents to $2.08 a barrel.
Gold for Oct. delivery closed up $12 at $652.40. Platinum added $16.90 to $1,258.50. Copper rose 2.3 cents to $3.593 a pound. Silver added 27 cents to $11.74 an ounce.
Vehicle sales for GM, Ford, and Chrysler were so lousy I almost puked. Nissan should be a perfect match for GM. Their sales stunk the house out too.
ContraryInvestor.com: "Residential real estate affordability depends on two key components - cost of capital and price. As of the most recent readings (June of this year), the housing affordability composite index rests at a low not seen since mid-1989. The National Association of Realtors also breaks down affordability between fixed and ARM buyers. The ARM affordability component of the composite fell to a low not seen for 20 years. We have the very strong feeling that looking ahead, the character of residential real estate is not going to be primarily dependent on cost of capital, but perhaps more driven by price sensitivity than at any time in decades given the leverage already built up at the household level...Can this current dollar volume "inventory" situation in residential real estate resolve itself without further ruffling a few price feathers? Although the final hard versus soft landing verdict on housing, and by extension the US economy, remains to be delivered, storm clouds have clearly gathered and continue to grow just a bit darker by the day. If we were you, we'd take a few steps back from the proverbial housing cycle landing pad...just in case. We're not so sure we want to be too close to this thing when it lands."
Traders are now pricing in a 43% chance that the Fed will raise its target on overnight rates to 5.50% from 5.25% after its Aug. 8 meeting, up from a 32% chance late Monday.
Libor is the highest since the start of 2001.The premium banks now charge over the Libor rate is the widest in 13 months.
Bertrand Russell: "One of the symptoms of an approaching nervous breakdown is the belief that one's work is terribly important."
The top 10 ways to relieve Stress:
1. Mad TV Show
2. Watching the Fed print money
3. Listening to Mel Gibson explain he is not an anti-Semite
4. The Daily Show
5. Watching the Fed fight inflation
6. Watching Bush salute
7. Dave Chappelle
8. The Geico ad with Little Richard
9. The Colbert Report
10.Bush struggling to tell the truth, and losing the battle
The Commerce Department said construction spending rose 0.3% in June. The National Association of Realtors said the pending home sales index rose 0.4% in June, its second month of gains, it is down 9.6% in the past 12 months.
The ISM Manufacturing index rose to 54.7% in July from 53.8% in June. New orders fell to 56.1% in July from 57.9% in June; however, production picked up to 57.6% from 55.1% in the previous month. The employment index rose to 50.7% from 48.7%. The price index jumped to 78.5% from 76.5%. This is the highest level since October.
A U.S. Department of Commerce report showed personal consumption dropped in June by .2%.
Some high P/E stocks are taking it on the chin, such as, Whole Foods down 6 points and Expeditors down
5 points.
Challenger Gray and Christmas said there were 37,168 job cuts in July, down 50% from June. This was the lowest in six years.
Eastman Kodak's report was from hunger and the stock dropped under 20.
The dollar index has been holding at or above the 85 level. If the Friday employment report surprises on the upside, I do not believe the 85 level will hold.
The core personal consumption expenditure price index (excluding food and energy) increased 0.2% for the third straight month in June, the U.S. Commerce Department said, and has risen 2.4% in the past 12 months, matching the largest year-over-year gain since April 1995.
Personal incomes rose 0.6% in June, outpacing the 0.4% increase in consumer spending. The personal savings rate rose to negative 1.5% from negative 1.6%.
Crude for September delivery rose 51 cents to $74.91. Gasoline futures closed up 6.32 cents, or 2.9% to $2.28 a barrel. Natural-gas futures fell 63.70 cents to $7.57 per million British thermal units. Heating oil futures rose 4.28 cents to $2.08 a barrel.
Gold for Oct. delivery closed up $12 at $652.40. Platinum added $16.90 to $1,258.50. Copper rose 2.3 cents to $3.593 a pound. Silver added 27 cents to $11.74 an ounce.
Vehicle sales for GM, Ford, and Chrysler were so lousy I almost puked. Nissan should be a perfect match for GM. Their sales stunk the house out too.
ContraryInvestor.com: "Residential real estate affordability depends on two key components - cost of capital and price. As of the most recent readings (June of this year), the housing affordability composite index rests at a low not seen since mid-1989. The National Association of Realtors also breaks down affordability between fixed and ARM buyers. The ARM affordability component of the composite fell to a low not seen for 20 years. We have the very strong feeling that looking ahead, the character of residential real estate is not going to be primarily dependent on cost of capital, but perhaps more driven by price sensitivity than at any time in decades given the leverage already built up at the household level...Can this current dollar volume "inventory" situation in residential real estate resolve itself without further ruffling a few price feathers? Although the final hard versus soft landing verdict on housing, and by extension the US economy, remains to be delivered, storm clouds have clearly gathered and continue to grow just a bit darker by the day. If we were you, we'd take a few steps back from the proverbial housing cycle landing pad...just in case. We're not so sure we want to be too close to this thing when it lands."
Traders are now pricing in a 43% chance that the Fed will raise its target on overnight rates to 5.50% from 5.25% after its Aug. 8 meeting, up from a 32% chance late Monday.
Libor is the highest since the start of 2001.The premium banks now charge over the Libor rate is the widest in 13 months.
Bertrand Russell: "One of the symptoms of an approaching nervous breakdown is the belief that one's work is terribly important."
Monday, July 31, 2006
Stressed
8/1/06 Stressed
Factory activity in the Chicago region accelerated in July, the National Association for Supply Managment-Chicago said Monday. The Chicago purchasing managers index rose to 57.9% from 56.5% in June. The new orders index rose to 60.0% from 57.2%. The prices paid index dipped to 86.8% from 89.0%. The employment index was steady at 50.5%.
St. Louis Fed president William Poole said he hasn't made up his mind whether the Fed should raise rates at its next meeting on Aug. 8. "I am still 50-50, we still have important data yet to come," Poole told reporters after a speech.
John Hussman: "Investors are tenuously sticking to the first story line – moderating growth with no risk of recession, moderating inflation, beliefs that stocks are reasonably valued, and hopes for an end to the tightening cycle. Yet the data are actually consistent with a second story line – emerging (though not imminent) recession risks, persistent “structural” inflation, rich valuations, probable contraction of profit margins, and an incoherent Fed policy that is likely to become even more incoherent in attempting to battle weaker economic growth and persistent inflation simultaneously (not that I believe Fed actions will be effective in any event)."
Yesterday morning the VIX opened up on a gap by about one-half a point at 14.86. For the next four hours or so the VIX barely moved and traded up slightly to 15.13, and finally closed at 14.95. In essence, there was little range on the day. However, my gut tells me that volatility has a chance to spike once again.
A few weeks ago I suggested you consider purchasing natural gas at 6.50 per million cubic feet and adding as it dropped quickly to 5.75. With this heat wave natural gas has had a nice move up to 8.21 and is up 35% for July (certainly not chopped liver), and I believe we should take our profits.
It was over a year ago that I suggested selling one share of Citigroup, one share of B of A, and one share of JP Morgan and buying 3 shares of Wells Fargo. Obviously, the trade could be done in varying amounts but the idea was to keep the ratio the same. After accounting for dividends, the trade is now 13 points in our favor and I suggest we take our profits.
100 degree heat without rain day after day can stress the crops in the field. Now let's consider stress on Main Street. First we'll examine crude and gas at the pump. Let's say gas remains near $3 a gallon for a period of time, for example, in July, August, and September. Over that period there has not been inflation in gasoline because prices have remained the same. However, the pockets of the consumer continue to be stressed and stretched. Now let's combine that with the price of a house. Nationally, on average, prices remain close to the same they were one year ago and let's say that continues between July and September. Within that timeframe some parts of the country are experiencing declines but some, such as in King County, Washington are seeing prices continue to rise. On balance, on average, although nationally the prices are roughly the same, there is an impact on the mindset of the consumer. The individual homeowner begins to question the wealth effect from the home. Why? Houses are sitting on the market longer, there are more homes on the market, and the increases, when they occur, are more nickel and dime rather than in large increments. That change in the mindset creates stress and decreases the propensity to spend freely on non-essential items.
Shell Canada plans to proceed with the first expansion of its Athabasca oilsands project, even though the company says it could cost as much as $12.8 billion.
Teck Cominco Ltd. increased its takeover offer for Inco Ltd. to $82.50 a share, adding $2.7-billion of cash to the bid for the world's second-largest nickel miner.
Doug Casey: “If you invest wisely now, the emerging paper bear market will eventually prove in your favor. As foreign governments look to avail themselves of more gold for their reserves, you should do the same.”
According to earthfiles, the San Andreas Fault is so stressed, the next quake could be magnitude 8.
Alvin Toffler: “Future shock [is] the shattering stress and disorientation that we induce in individuals by subjecting them to too much change in too short a time.”
Factory activity in the Chicago region accelerated in July, the National Association for Supply Managment-Chicago said Monday. The Chicago purchasing managers index rose to 57.9% from 56.5% in June. The new orders index rose to 60.0% from 57.2%. The prices paid index dipped to 86.8% from 89.0%. The employment index was steady at 50.5%.
St. Louis Fed president William Poole said he hasn't made up his mind whether the Fed should raise rates at its next meeting on Aug. 8. "I am still 50-50, we still have important data yet to come," Poole told reporters after a speech.
John Hussman: "Investors are tenuously sticking to the first story line – moderating growth with no risk of recession, moderating inflation, beliefs that stocks are reasonably valued, and hopes for an end to the tightening cycle. Yet the data are actually consistent with a second story line – emerging (though not imminent) recession risks, persistent “structural” inflation, rich valuations, probable contraction of profit margins, and an incoherent Fed policy that is likely to become even more incoherent in attempting to battle weaker economic growth and persistent inflation simultaneously (not that I believe Fed actions will be effective in any event)."
Yesterday morning the VIX opened up on a gap by about one-half a point at 14.86. For the next four hours or so the VIX barely moved and traded up slightly to 15.13, and finally closed at 14.95. In essence, there was little range on the day. However, my gut tells me that volatility has a chance to spike once again.
A few weeks ago I suggested you consider purchasing natural gas at 6.50 per million cubic feet and adding as it dropped quickly to 5.75. With this heat wave natural gas has had a nice move up to 8.21 and is up 35% for July (certainly not chopped liver), and I believe we should take our profits.
It was over a year ago that I suggested selling one share of Citigroup, one share of B of A, and one share of JP Morgan and buying 3 shares of Wells Fargo. Obviously, the trade could be done in varying amounts but the idea was to keep the ratio the same. After accounting for dividends, the trade is now 13 points in our favor and I suggest we take our profits.
100 degree heat without rain day after day can stress the crops in the field. Now let's consider stress on Main Street. First we'll examine crude and gas at the pump. Let's say gas remains near $3 a gallon for a period of time, for example, in July, August, and September. Over that period there has not been inflation in gasoline because prices have remained the same. However, the pockets of the consumer continue to be stressed and stretched. Now let's combine that with the price of a house. Nationally, on average, prices remain close to the same they were one year ago and let's say that continues between July and September. Within that timeframe some parts of the country are experiencing declines but some, such as in King County, Washington are seeing prices continue to rise. On balance, on average, although nationally the prices are roughly the same, there is an impact on the mindset of the consumer. The individual homeowner begins to question the wealth effect from the home. Why? Houses are sitting on the market longer, there are more homes on the market, and the increases, when they occur, are more nickel and dime rather than in large increments. That change in the mindset creates stress and decreases the propensity to spend freely on non-essential items.
Shell Canada plans to proceed with the first expansion of its Athabasca oilsands project, even though the company says it could cost as much as $12.8 billion.
Teck Cominco Ltd. increased its takeover offer for Inco Ltd. to $82.50 a share, adding $2.7-billion of cash to the bid for the world's second-largest nickel miner.
Doug Casey: “If you invest wisely now, the emerging paper bear market will eventually prove in your favor. As foreign governments look to avail themselves of more gold for their reserves, you should do the same.”
According to earthfiles, the San Andreas Fault is so stressed, the next quake could be magnitude 8.
Alvin Toffler: “Future shock [is] the shattering stress and disorientation that we induce in individuals by subjecting them to too much change in too short a time.”
Sunday, July 30, 2006
Facts
7/31/06 Facts
Wal-Mart estimated that July sales rose 2.4 percent at its U.S. stores open at least a year, toward the high end of its forecast. Some discounting probably helped back-to-school sales. One should recall that Target lowered its monthly sales forecast on July 17, and is now expecting a 3 percent to 4 percent same-store sales gain, down from its original forecast for 4 percent to 6 percent growth.
Bill Bonner: "ARMs are in fact diabolical devices intended to speed marginal buyers on the glittering road to hell. ARMs give the weakest buyer the luxury of pretending to buy what he really can’t afford."
Mike Burk: "During the 2nd year of the Presidential Cycle the coming week has had an average negative return of over 2% as measured by the OTC and a modest negative return as measured by SPX. Measuring the week over all years since 1928 the SPX has had a very modest positive bias while the OTC since 1963 has been slightly negative and both have been up about 50% of the time. All of the largest drawdowns for the period have occurred since 1990."
John Howard has agreed to consider a West Australian plan to put aside some of the nation's offshore gas reserves for domestic use. Premier Alan Carpenter wants up to 20 per cent of the reserves to be held back to meet future domestic demand rather than being exported as liquefied natural gas to markets in Asia and North America.
He has warned that, under current contracts, natural gas supplies for West Australian households and industry could run out within 10 to 15 years.
PetroChina has announced that a first batch of crude oil has been successfully piped from Kazakhstan to its oil tank field in northwestern Xinjiang Uygur Autonomous Region via the China-Kazakhstan Pipeline. The oil reached the refinery at 5 p.m. Saturday. The arrival of the first crude oil imports signals full commercial operation for China's first cross-country crude oil pipeline.
It will be interesting to note June's personal income and its comparison with personal spending.
If manufacturing jobs increased in July, what impact might that have on overall onfarm payrolls for the month?
U.S. oil demand in May averaged 20.463 million barrels a day - the highest-ever for the month - and 1.6% above a year earlier, the Energy Information Administration said Friday.
Interest rate rises are expected this week for the Eurozone, Australia and South Africa. The question mark is for the UK.
Wal-Mart estimated that July sales rose 2.4 percent at its U.S. stores open at least a year, toward the high end of its forecast. Some discounting probably helped back-to-school sales. One should recall that Target lowered its monthly sales forecast on July 17, and is now expecting a 3 percent to 4 percent same-store sales gain, down from its original forecast for 4 percent to 6 percent growth.
Bill Bonner: "ARMs are in fact diabolical devices intended to speed marginal buyers on the glittering road to hell. ARMs give the weakest buyer the luxury of pretending to buy what he really can’t afford."
Mike Burk: "During the 2nd year of the Presidential Cycle the coming week has had an average negative return of over 2% as measured by the OTC and a modest negative return as measured by SPX. Measuring the week over all years since 1928 the SPX has had a very modest positive bias while the OTC since 1963 has been slightly negative and both have been up about 50% of the time. All of the largest drawdowns for the period have occurred since 1990."
John Howard has agreed to consider a West Australian plan to put aside some of the nation's offshore gas reserves for domestic use. Premier Alan Carpenter wants up to 20 per cent of the reserves to be held back to meet future domestic demand rather than being exported as liquefied natural gas to markets in Asia and North America.
He has warned that, under current contracts, natural gas supplies for West Australian households and industry could run out within 10 to 15 years.
PetroChina has announced that a first batch of crude oil has been successfully piped from Kazakhstan to its oil tank field in northwestern Xinjiang Uygur Autonomous Region via the China-Kazakhstan Pipeline. The oil reached the refinery at 5 p.m. Saturday. The arrival of the first crude oil imports signals full commercial operation for China's first cross-country crude oil pipeline.
It will be interesting to note June's personal income and its comparison with personal spending.
If manufacturing jobs increased in July, what impact might that have on overall onfarm payrolls for the month?
U.S. oil demand in May averaged 20.463 million barrels a day - the highest-ever for the month - and 1.6% above a year earlier, the Energy Information Administration said Friday.
Interest rate rises are expected this week for the Eurozone, Australia and South Africa. The question mark is for the UK.
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