8/19/06 The CBO Report
The taxable profits of corporate America will fall 8 per cent next year and remain on a downward slope until 2010, a new study by the Congressional Budget Office predicts. The CBO estimates that total taxable profits will inch up in 2008 but fall again in 2009 and 2010, and will not recover their current level in nominal cash terms for almost a decade. The CBO projects a dramatic decline in the share of corporate profits in national income, with taxable profits falling from a peak of 13.4 per cent of gross domestic product this year to 9 per cent in 2014.
Meanwhile it sees a modest increase in the labor share of national income, with wages and salaries rising from 45.0 per cent of GDP to 45.9 per cent four years from now. This reflects an assumption that employee compensation, broadly measured, will rise more rapidly at about 3.3 per cent annually in the coming years, compared with 2.5 per cent last year and 2.9 per cent this. (At the same time, we need to see how inflation offsets the compensation gains and whether consumer spending creates negative savings. In addition, how much faster might debt created by consumers grow than consumer savings?)
The Univ. of Michigan consumer sentiment index dropped to 78.7 in August from 84.7 in July. The index is at its lowest level since October. The current conditions index dropped to 100.8 in August from 103.5 in July. The expectations index fell from 72.5 in July to 64.5 in August, the lowest since October.
From globeandmail.com: National Bank Financial economists don't buy the idea that the housing market in the United States is coasting to a soft landing. And they aren't the only ones pointing to the increasingly disturbing statistics on that market. Clément Gignac, chief economist and strategist, and Eric Dubé, an economist, noted that U.S. housing starts are already down 20.7 per cent from their January, 2006 peak “and some leading indicators are suggesting more declines are to be expected in the months to come,” they warned in a recent economic comment. They also noted that the National Association of Home Builders reported this week that traffic of prospective buyers had tumbled to its lowest level since 1991, a recession year. Furthermore, U.S. building permits have plummeted 22 per cent from their peak last September. “These indicators combined with the skyrocketing inventory of new homes for sales are more consistent with a hard landing, rather than a soft landing scenario for the U.S. real estate sector,” the economists said. That makes it important to monitor the impact of the weakening real estate market on house prices and on American consumers' wealth, they said. “While baby boomers are likely to be forced to scale down their irrational exuberance about home prices appreciation, they should soon feel the need to restore their savings rate,” they added, and that could set the stage for a prolonged period of sub-par gross domestic product growth around 2 to 2.5 per cent.
In the fourth quarter Ford is planning a 21% reduction in production, and this translates into about 168,000 fewer cars and trucks. That is nearly the production of one assembly plant for an entire year. For full-year 2006, Ford now plans to produce 3.048 million vehicles at its North American assembly plants - 1.134 million cars and 1.914 million trucks - a 9% reduction from 2005.
Bill Ford, the company's chairman and CEO, stated "we know this decision will have a dramatic impact on our employees, as well as our suppliers," Bill Ford told employees. "This is, however, the right call for our customers, our dealers and our long-term future.” The Detroit Free Press opined the production cuts seem like a shrewd move to clean out dealer showrooms in time for Ford's new product assault, which will begin late this year and continue through 2007 and 2008. The revised production plan, Ford said, is expected to sharply reduce the supply of several models and reduce pressure on sales incentives and dealer inventory carrying costs.
This is, in my view, a smart move.
China's central bank raised its benchmark one-year lending and deposit rates by 0.27% Friday, as part of an ongoing effort to curb skyrocketing investment and loan growth. The People's Bank of China said it was raising the one-year lending rate to 6.12%, and the one-year deposit rate to 2.52%, according to reports. It said the hikes will take effect on Aug. 19.
The Nasdaq rose 5% this past week and the S&P and the Dow increased about one-half of that. The stampede into treasuries continues, and this debt market now is figuring in two rate cuts into the mix over the next nine months or so. If that optimism is not translated into reality, there are going to be some big losses on the books.
The market has gotten all exited about the big Microsoft buyback program - about $36 billion. To me, it's a variation on the $30 billion one-time dividend of a a year or two ago. I suggested taking advantage of the strength at $30 and over (pre-dividend pay out) and heavily cutting back positions. I am saying the same thing now at $25+.
In my view, the company will continue to disappoint and make poor use of its research dollars. Management skills are definitely in short supply.
BHP Billiton shut the world's biggest copper mine after striking workers in Chile blocked all roads to the site, cutting off metal supplies at a time of surging demand. Copper prices jumped 3.6 percent after BHP Billiton, the world's largest mining company, said it called off talks with the union following the blockade. A 12-day-old strike by 2,052 miners seeking higher pay at the Escondida mine had already cut production to as little as 40 percent of capacity.
Crude held at the $70 level and rallied back to $71 a barrel.
Doug Noland: "With acute vulnerability pervading some key housing markets - as well as the general risk to the Mortgage Finance Bubble - in the spotlight, the Fed is poised to accommodate the ongoing profligate financing environment. I find it astounding that our policymakers have absolutely no inclination – or demonstrate any sensitivity to their responsibility - to discipline or subdue “Wall Street finance.” Instead, they are determined to safeguard a highly improvident and destabilizing financial backdrop and incentive structure. This may very well perpetuate the current aged boom somewhat, but their will be no avoiding the painful aftermath. Today’s Menacing Financial Structure has decisively sealed such a fate. "
Despite a loss of 3.8% in the past week, the Goldman Sachs Commodities Index is still up 10.1% for 2006.
India's July exports increased 35% from one year ago.
Would you rather invest in a Schwab short-term money market fund at 4.93% or a 10-year treasury at 4.84%?
Jennifer Barry: "Silver's supply picture is especially tight. After peaking near 130 million ounces in February, the COMEX warehouse stocks plummeted this month to 98.47 million ounces. That is the lowest level reached this decade."
Lost in the Fog has two cancerous tumors and they cannot be surgically removed. This 4-year old is an Eclipse Award winner. That is only part of the story. There is a loving bond between the horse's owner, Harry Aleo, its trainer, Greg Gilchrist, and its Hall of Fame jockey, Russell Baze. Cancer is rare in a horse, and this horse is a rare once-in-a-lifetime animal.
Pilgrim's Pride Corporation announced that it has sent a proposal to Gold
Kist, Inc. offering to purchase all of the outstanding
shares of Gold Kist common stock for $20.00 per share in cash. The
transaction is valued at approximately $1 billion, plus the assumption of
Gold Kist's debt of $144 million. Pilgrim's Pride's offer represents a
premium of approximately 55% over Gold Kist's closing stock price of $12.93
on Friday, August 18, 2006.
Using consensus earnings estimates for fiscal 2007, Pilgrim's Pride
expects that the transaction will be accretive to earnings per share in the
first full year after the completion of the transaction, including
approximately $50 million of anticipated synergies expected to come
primarily from the optimization of production and distribution facilities
and cost savings in purchasing, production, logistics and SG&A.
"We believe the combination of Pilgrim's Pride and Gold Kist will
create the world's leading chicken producer and result in substantial value
creation for our respective shareholders, employees, business partners and
other constituencies," said O.B. Goolsby, Jr., President and Chief
Executive Officer of Pilgrim's Pride. "The combined company will maintain a
balanced portfolio of fresh chicken and value-added products and expand its
geographic reach and customer base, enabling it to compete more efficiently
in the industry and provide even better service to its customers.
"Our proposal provides Gold Kist's shareholders with a substantial
approximately 55% premium for their shares in cash. We look forward to
sitting down with the members of Gold Kist's Board of Directors as soon as
possible to work jointly with them to quickly close this transaction,"
added Mr. Goolsby.
It is interesting to note that conversations began back in 2004 and there has been
correspondence since February 2006. In addition, to place more pressure on Gold Kist's board, Pilgrim submitted a slate of nine nominees for election to Gold Kist's board at the upcoming annual meeting of shareholders.
Friday, August 18, 2006
Thursday, August 17, 2006
Is The Economy Simply Pausing?
8/18/06 Is The Economy Pausing?
The Philly Fed index rose to 18.5 in August from 6.0 in July. The new orders index rose to 15.7 in August from 10.1 in July. The shipments index rose to 22.3 from 10.2 in July. The prices paid index fell to 45.3 from 50.3 in July. The prices received index stayed at 17.1. The future activity gauge dipped to 7.4 in August from 15.4 in July.
The CBO projects a federal deficit of $260 billion and $286 billion in 2007. You think interest rates will decline with greater twin tower deficits?
The Conference Board announced that the U.S. leading index decreased 0.1 percent, the coincident indexincreased 0.2 percent and the lagging index decreased 0.1 percent in July.
The leading index has decreased in four of the last six months and the
leading index has fallen below its most recent high reached in January.
At the same time, real GDP grew at a 2.5 percent annual rate in the
second quarter, following a 5.6 percent gain in the first quarter. The
behavior of the leading index so far suggests that slow to moderate
economic growth should continue in the second half of the year.
LEADING INDICATORS. Five of the ten indicators that make up the leading
index increased in July. The positive contributors - beginning with the
largest positive contributor - were average weekly manufacturing hours,
vendor performance, stock prices, index of consumer expectations, and
manufacturers' new orders for consumer goods and materials*. The negative
contributors - beginning with the largest negative contributor - were
building permits, average weekly initial claims for unemployment insurance
(inverted), interest rate spread, manufacturers' new orders for nondefense
capital goods*, and real money supply*.
Weekly jobless claims dropped 10,000 to 312,000.
Teddy Roosevelt: "It is not the critic who counts, not the man who points out how the strong man stumbled, or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes short again and again, who knows the great enthusiasms, the great devotions, and spends himself in a worthy cause, who at best knows achievement and who at the worst if he fails at least fails while daring greatly so that his place shall never be with those cold and timid souls who know neither victory nor defeat."
The dollar sold at a one week low versus the euro, yen, and Swiss Franc. Gold sold at a 7-week low at $625 an ounce. Natural gas futures hit a 3-week low at 6.69 per million BTUs. Crude closed at an 8-week low of $70.10 a barrel.
Nickel fell for the first session in seven after the London Metal Exchange imposed trading restrictions to ease a shortage of the metal.
The LME, the world's largest metals exchange, yesterday limited the cost at which short-position holders can borrow the metal. The intervention came as plunging stockpiles helped push prices for the metal, which is used in stainless-steel making, to a record. It was the first time the exchange imposed such restriction on nickel since 1988.
Stockpiles of nickel tracked by the LME dropped 42 tons, or 0.7 percent, to 6,120 tons, the exchange said today in a daily report. The inventory has plunged 83 percent this year.
United States District Judge Anna Diggs Taylor in Detroit is the first federal judge to strike down the National Security Agency's monitoring of American computer, phone and other electronic communications. Judge Taylor ruled that the NSA program violates Constitutional rights to free speech and privacy.
The Gap scaled down their expectations for the remainder of 2006 and now project yearly earnings between $1.08 and $1.12. Maybe the stock has, at $16+, some speculative merit as a takeover candidate. Beyond that, I think the company has little going for it.
Nordstrom said it expects to earn $2.31 to $2.39 a share for its full fiscal year, including 6 cents worth of stock option expenses. Analysts currently expect earnings of $2.34. The stock does not seem like a bargain at $35+.
Much has been said that this week's rally has taken place on light volume. Some have opined that it is August and that volume is normally light at this time of the year.
My view is the following: in 1974 many days volume did not get to 10 million shares. In sum, millions were lost on light volume. Conversely, millions can be made on light volume. I don't give a hoot about the volume. I just want to make money and take as small a risk as possible in achieving the gain.
I received many emails about the crappy call I made on Jones Apparel. I don't like losing money and I did lose $1.25 on each share. No excuses. I stunk the house out.
There have been other lousy calls over the past year or so. The absolute worst was going long Dell and shorting HP when the market caps were the same. I got reamed but good. It's interesting. I've made more mistakes in the past year than I have in any year in the last 10, and yet my gains are twice the average for the past 10 years. You can laugh but I would rather make my average yearly return and not make the mistakes.
James Joyce: "A man's errors are his portals of discovery."
The Philly Fed index rose to 18.5 in August from 6.0 in July. The new orders index rose to 15.7 in August from 10.1 in July. The shipments index rose to 22.3 from 10.2 in July. The prices paid index fell to 45.3 from 50.3 in July. The prices received index stayed at 17.1. The future activity gauge dipped to 7.4 in August from 15.4 in July.
The CBO projects a federal deficit of $260 billion and $286 billion in 2007. You think interest rates will decline with greater twin tower deficits?
The Conference Board announced that the U.S. leading index decreased 0.1 percent, the coincident indexincreased 0.2 percent and the lagging index decreased 0.1 percent in July.
The leading index has decreased in four of the last six months and the
leading index has fallen below its most recent high reached in January.
At the same time, real GDP grew at a 2.5 percent annual rate in the
second quarter, following a 5.6 percent gain in the first quarter. The
behavior of the leading index so far suggests that slow to moderate
economic growth should continue in the second half of the year.
LEADING INDICATORS. Five of the ten indicators that make up the leading
index increased in July. The positive contributors - beginning with the
largest positive contributor - were average weekly manufacturing hours,
vendor performance, stock prices, index of consumer expectations, and
manufacturers' new orders for consumer goods and materials*. The negative
contributors - beginning with the largest negative contributor - were
building permits, average weekly initial claims for unemployment insurance
(inverted), interest rate spread, manufacturers' new orders for nondefense
capital goods*, and real money supply*.
Weekly jobless claims dropped 10,000 to 312,000.
Teddy Roosevelt: "It is not the critic who counts, not the man who points out how the strong man stumbled, or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes short again and again, who knows the great enthusiasms, the great devotions, and spends himself in a worthy cause, who at best knows achievement and who at the worst if he fails at least fails while daring greatly so that his place shall never be with those cold and timid souls who know neither victory nor defeat."
The dollar sold at a one week low versus the euro, yen, and Swiss Franc. Gold sold at a 7-week low at $625 an ounce. Natural gas futures hit a 3-week low at 6.69 per million BTUs. Crude closed at an 8-week low of $70.10 a barrel.
Nickel fell for the first session in seven after the London Metal Exchange imposed trading restrictions to ease a shortage of the metal.
The LME, the world's largest metals exchange, yesterday limited the cost at which short-position holders can borrow the metal. The intervention came as plunging stockpiles helped push prices for the metal, which is used in stainless-steel making, to a record. It was the first time the exchange imposed such restriction on nickel since 1988.
Stockpiles of nickel tracked by the LME dropped 42 tons, or 0.7 percent, to 6,120 tons, the exchange said today in a daily report. The inventory has plunged 83 percent this year.
United States District Judge Anna Diggs Taylor in Detroit is the first federal judge to strike down the National Security Agency's monitoring of American computer, phone and other electronic communications. Judge Taylor ruled that the NSA program violates Constitutional rights to free speech and privacy.
The Gap scaled down their expectations for the remainder of 2006 and now project yearly earnings between $1.08 and $1.12. Maybe the stock has, at $16+, some speculative merit as a takeover candidate. Beyond that, I think the company has little going for it.
Nordstrom said it expects to earn $2.31 to $2.39 a share for its full fiscal year, including 6 cents worth of stock option expenses. Analysts currently expect earnings of $2.34. The stock does not seem like a bargain at $35+.
Much has been said that this week's rally has taken place on light volume. Some have opined that it is August and that volume is normally light at this time of the year.
My view is the following: in 1974 many days volume did not get to 10 million shares. In sum, millions were lost on light volume. Conversely, millions can be made on light volume. I don't give a hoot about the volume. I just want to make money and take as small a risk as possible in achieving the gain.
I received many emails about the crappy call I made on Jones Apparel. I don't like losing money and I did lose $1.25 on each share. No excuses. I stunk the house out.
There have been other lousy calls over the past year or so. The absolute worst was going long Dell and shorting HP when the market caps were the same. I got reamed but good. It's interesting. I've made more mistakes in the past year than I have in any year in the last 10, and yet my gains are twice the average for the past 10 years. You can laugh but I would rather make my average yearly return and not make the mistakes.
James Joyce: "A man's errors are his portals of discovery."
Wednesday, August 16, 2006
The Consumer And The Economy
8/17/06 The Consumer And The Economy
When you cut thru all the data points and the Fed pausing or stopping, in the end, what matters is the consumer. Why? The consumer accounts for 70% of the economy.
So consider this.
Real average weekly earnings decreased by 0.1 percent from June to July
after seasonal adjustment, according to preliminary data released by the
Bureau of Labor Statistics of the U.S. Department of Labor. A 0.4 percent
increase in average hourly earnings was more than offset by a 0.5 percent
increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W). Average weekly hours were unchanged.
Data on average weekly earnings are collected from the payroll reports of
private nonfarm establishments. Earnings of both full-time and part-time
workers holding production or nonsupervisory jobs are included. Real average
weekly earnings are calculated by adjusting earnings in current dollars for
changes in the CPI-W.
Average weekly earnings rose by 4.1 percent, seasonally adjusted, from July
2005 to July 2006. After deflation by the CPI-W, average weekly earnings
decreased by 0.1 percent. Before adjustment for seasonal change and inflation,
average weekly earnings were $571.48 in July 2006, compared with $542.49 a year
earlier.
During the first seven months of 2006, the CPI-U rose at a 4.8 percent
seasonally adjusted annual rate(SAAR). This compares with an increase of 3.4 percent for all of 2005. For those independently wealthy, inflation is not a problem. For the majority of Americans, it is a problem, and that combined with a weakening housing market, creates an atmosphere of uneasiness. Wall Street professionals may be able to ignore the problems. Their incomes average well into the 6 figures. For them, the glass is definitely half full. Of course, they are mostly investing other people's money and, in the vast majority of circumstances, getting paid to do a crappy job.
September crude fell $1.16 to close at $71.89 a barrel, an almost eight-week low. September natural gas fell 9.5 cents to close at $6.766 per million British thermal units. Meanwhile equities scored another big rally and closed at their best levels in several months. On the other hand, the dollar index broke decidedly under 85 while Treasury bond yields dropped significantly with the 30-year even dipping under 5%. I never would have imagined this scenario.
December gold closed at $639 an ounce in New York, up $6.10 Wednesday after losing more than $29 in the last four sessions. September silver rose 20 cents to close at $12.285 an ounce, while September copper fell 5.75 cents to end at $3.47 a pound.
Dallas Fed President Richard Fisher: "If anybody tells you with absolute conviction that the Fed is done raising interest rates or with equal conviction that they have only paused and will raise rates more starting in September or October, remind yourself that at best - and I'm being generous here - they are only guessing."
Building permits, a leading indicator of housing construction, plunged 6.5% to a seasonally adjusted annual rate of 1.75 million. This is the biggest monthly decline since September 1999. Permits are at their lowest level since August 2002.
China permitted the biggest gain in the yuan since ending a peg to the dollar in July last year, a day after allowing the largest decline, suggesting the central bank is easing controls over the exchange rate.
The yuan rose as much as 0.24 percent against the dollar today, as 13 of 15 leading Asian currencies climbed. The central bank on Aug. 9 said it would allow more ``flexibility'' in the new system, which allows the yuan to float with reference to currencies of leading trading partners.
The yuan climbed 0.16 percent to 7.9875 to the dollar as of 5:20 p.m. in Shanghai, according to data Bloomberg compiled.
When you cut thru all the data points and the Fed pausing or stopping, in the end, what matters is the consumer. Why? The consumer accounts for 70% of the economy.
So consider this.
Real average weekly earnings decreased by 0.1 percent from June to July
after seasonal adjustment, according to preliminary data released by the
Bureau of Labor Statistics of the U.S. Department of Labor. A 0.4 percent
increase in average hourly earnings was more than offset by a 0.5 percent
increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W). Average weekly hours were unchanged.
Data on average weekly earnings are collected from the payroll reports of
private nonfarm establishments. Earnings of both full-time and part-time
workers holding production or nonsupervisory jobs are included. Real average
weekly earnings are calculated by adjusting earnings in current dollars for
changes in the CPI-W.
Average weekly earnings rose by 4.1 percent, seasonally adjusted, from July
2005 to July 2006. After deflation by the CPI-W, average weekly earnings
decreased by 0.1 percent. Before adjustment for seasonal change and inflation,
average weekly earnings were $571.48 in July 2006, compared with $542.49 a year
earlier.
During the first seven months of 2006, the CPI-U rose at a 4.8 percent
seasonally adjusted annual rate(SAAR). This compares with an increase of 3.4 percent for all of 2005. For those independently wealthy, inflation is not a problem. For the majority of Americans, it is a problem, and that combined with a weakening housing market, creates an atmosphere of uneasiness. Wall Street professionals may be able to ignore the problems. Their incomes average well into the 6 figures. For them, the glass is definitely half full. Of course, they are mostly investing other people's money and, in the vast majority of circumstances, getting paid to do a crappy job.
September crude fell $1.16 to close at $71.89 a barrel, an almost eight-week low. September natural gas fell 9.5 cents to close at $6.766 per million British thermal units. Meanwhile equities scored another big rally and closed at their best levels in several months. On the other hand, the dollar index broke decidedly under 85 while Treasury bond yields dropped significantly with the 30-year even dipping under 5%. I never would have imagined this scenario.
December gold closed at $639 an ounce in New York, up $6.10 Wednesday after losing more than $29 in the last four sessions. September silver rose 20 cents to close at $12.285 an ounce, while September copper fell 5.75 cents to end at $3.47 a pound.
Dallas Fed President Richard Fisher: "If anybody tells you with absolute conviction that the Fed is done raising interest rates or with equal conviction that they have only paused and will raise rates more starting in September or October, remind yourself that at best - and I'm being generous here - they are only guessing."
Building permits, a leading indicator of housing construction, plunged 6.5% to a seasonally adjusted annual rate of 1.75 million. This is the biggest monthly decline since September 1999. Permits are at their lowest level since August 2002.
China permitted the biggest gain in the yuan since ending a peg to the dollar in July last year, a day after allowing the largest decline, suggesting the central bank is easing controls over the exchange rate.
The yuan rose as much as 0.24 percent against the dollar today, as 13 of 15 leading Asian currencies climbed. The central bank on Aug. 9 said it would allow more ``flexibility'' in the new system, which allows the yuan to float with reference to currencies of leading trading partners.
The yuan climbed 0.16 percent to 7.9875 to the dollar as of 5:20 p.m. in Shanghai, according to data Bloomberg compiled.
Tuesday, August 15, 2006
Business As Usual?
8/16/06 Business As Usual?
It's nothing personal. Monday I mentioned that Jones Apparel traded at $30.38, the highest price in many weeks, and in a straight line, in minutes, promptly sold down $1 in price. I mentioned the top executives of the company where all out of the office at a charity effort hosted by the corporation. In Tuesday's online edition of the WSJ the paper stated Bain Capital and Jones Apparel could not agree on price and that the auction of the company was finito. Do you think the entity or entities selling the shares on Monday had been tipped about the WSJ article? Do you think the WSJ had their information confirmed by Jones management? On Tuesday morning the stock sold down to $27.30 before inching back to $29.06. I spoke with the CFO and he was very clear. When the company has something to report they will do so. Maybe the company will be sold and maybe it will not happen. In either event, the SEC should investigate this incident. For me, it's just business.
Nouriel Roubini: "The US needs to borrow every year almost another trillion US dollars – on top of all the previous stock of past borrowing - to finance its still increasing external deficit. Thus, the risks that things will get out of hand and trigger a financial meltdown of the scale that was experienced in 1987 are serious."
Foreign central banks unloaded Treasurys for the second consecutive month, selling $4.4 billion.
The core PPI -- which excludes food and energy prices - fell 0.3%, the first decline since October. However, core intermediate goods prices rose 0.7%, bringing the year-over-year increase to 7.9%, the most since February 2005. Separately, the New York Federal Reserve Bank said the bank's Empire State Manufacturing index fell to 10.3 in August from a revised 16.6 in July. This is the slowest growth pace since June 2005. As a result, we witnessed another triple digit rally but this one held. The S&P closed at a 2 1/2 month high and the Nasdaq at a one month high. I think the inflation data for the CPI, which comes out on the 16th, will show a very different picture.(The CPI has averaged 4.3% over the past 12 months.) Treasuries had a big rally and the energy sector and metals took another hit. The dollar dipped again to just above the 85 level for the index.
The EU's second quarter GDP rose 0.9%, the strongest gain in 6 years.
The latest monthly retail sales in China rose 13.7%.
The National Association of Home Builders said its index of sentiment among homebuilders plunged 7 points to 32 -- its lowest since February 1991 -- and less than half the level of a year ago.
Data made available at the Intenational Rubber Study Group (IRGS) indicated that with the average annual growth of rubber consumption by 4.7 percent, world rubber consumption by 2010 would reach 10.988 million tons.
In the meantime, world natural rubber production would only reach 10.677 million tons, assuming that growth rate stood at 3.6 percent.
The VIX closed at 13.42, off .84 on the day, and is back down to the low volatility
region. That's what the price would indicate. Maybe the smart thing to do would be to go long volatility. We're approaching Sept/Oct.
It's nothing personal. Monday I mentioned that Jones Apparel traded at $30.38, the highest price in many weeks, and in a straight line, in minutes, promptly sold down $1 in price. I mentioned the top executives of the company where all out of the office at a charity effort hosted by the corporation. In Tuesday's online edition of the WSJ the paper stated Bain Capital and Jones Apparel could not agree on price and that the auction of the company was finito. Do you think the entity or entities selling the shares on Monday had been tipped about the WSJ article? Do you think the WSJ had their information confirmed by Jones management? On Tuesday morning the stock sold down to $27.30 before inching back to $29.06. I spoke with the CFO and he was very clear. When the company has something to report they will do so. Maybe the company will be sold and maybe it will not happen. In either event, the SEC should investigate this incident. For me, it's just business.
Nouriel Roubini: "The US needs to borrow every year almost another trillion US dollars – on top of all the previous stock of past borrowing - to finance its still increasing external deficit. Thus, the risks that things will get out of hand and trigger a financial meltdown of the scale that was experienced in 1987 are serious."
Foreign central banks unloaded Treasurys for the second consecutive month, selling $4.4 billion.
The core PPI -- which excludes food and energy prices - fell 0.3%, the first decline since October. However, core intermediate goods prices rose 0.7%, bringing the year-over-year increase to 7.9%, the most since February 2005. Separately, the New York Federal Reserve Bank said the bank's Empire State Manufacturing index fell to 10.3 in August from a revised 16.6 in July. This is the slowest growth pace since June 2005. As a result, we witnessed another triple digit rally but this one held. The S&P closed at a 2 1/2 month high and the Nasdaq at a one month high. I think the inflation data for the CPI, which comes out on the 16th, will show a very different picture.(The CPI has averaged 4.3% over the past 12 months.) Treasuries had a big rally and the energy sector and metals took another hit. The dollar dipped again to just above the 85 level for the index.
The EU's second quarter GDP rose 0.9%, the strongest gain in 6 years.
The latest monthly retail sales in China rose 13.7%.
The National Association of Home Builders said its index of sentiment among homebuilders plunged 7 points to 32 -- its lowest since February 1991 -- and less than half the level of a year ago.
Data made available at the Intenational Rubber Study Group (IRGS) indicated that with the average annual growth of rubber consumption by 4.7 percent, world rubber consumption by 2010 would reach 10.988 million tons.
In the meantime, world natural rubber production would only reach 10.677 million tons, assuming that growth rate stood at 3.6 percent.
The VIX closed at 13.42, off .84 on the day, and is back down to the low volatility
region. That's what the price would indicate. Maybe the smart thing to do would be to go long volatility. We're approaching Sept/Oct.
Monday, August 14, 2006
The Peace Rally
8/15/06 The Peace Rally
The pre-opening indicated a big day for equities. After a strong start it built to a triple digit gain for the Dow, a double digit gain for the S&P, and a big move for Intel, Cisco, Oracle, and the like. Conversely, the energy sector took a hit and so did the metals. The 2-year Treasury once again traded at a 5.01% yield and the 10-year was close behind at 5.00%. The dollar index bravely held onto to the 85 level. This tune has been played many times in the last few months -- except for the peace part. Not to be confusing, the killing continues at high levels in Iraq.
This week we can view the latest PPI and CPI numbers. The impulse from the Fed and the media will be to downplay and disappointing data. They will clearly have the opportunity to do plenty of downplaying. Then on Friday we have option expiration. In sum, there is plenty of room for shenanigans this week. I will continue to sell into rallies.
Martin Huchinson: "The Federal budget is likely to remain a problem for many years. The long term difficulties involving Medicare and social security will combine with military and homeland security expenditures to create continued upward pressure on public spending as a percentage of Gross Domestic Product. Since Congress has shown repeatedly that it lacks the will either to raise taxes or to economize in other areas, the federal budget deficit will grow further. This will tend to push up real interest rates – the decade long holiday from real interest rates above 1-2% will come definitively to an end. Nominal rates will depend on inflation, which the government and the Fed will attempt to fudge, but in the end the sheer volume of long term financing to cover the Federal budget deficit will make the reported rate of inflation almost irrelevant. Thus if inflation is reported as 4% per annum and is really 5% per annum, as today (while the Fed, by leaving out whichever items are rising in price, persists in claiming a 2-3% rate) the 30 year Treasury bond rate will be around 8%, and home mortgages will be unobtainable below 9%."
The Fed said banks were more willing to make loans to consumers as demand got "moderately stronger" in the last three months. The Fed surveyed 56 domestic banks and 17 foreign banks. Meanwhile, standards for approving commercial and industrial loans also eased, the Fed reported. About 14% of survey respondents said they loosened credit terms for business loans.
This is a difficult market. I never take anything for granted and do my very best to minimize risks while achieving rewards. Monday was a day to double check reality. Remember about that triple digit gain for Dow. Well, the Dow, Nasdaq, and S&P gave up almost all their gains by the close of trading.
I had mentioned I have recently concentrated on four stocks - Jones Apparel, Univision, Ford, and Ingersoll Rand. On Monday, Ford was the beneficiary of a Bear Stearns recommendation. It rose over 40 cents and topped $7.80. Univision managed a gain of a few pennies. Ingersoll Rand was lousy all day and finished just above $36, and that reperesented a loss of over 80 cents. It's a good thing I like to buy stocks on the downside. Jones Apparel was the strange one. It rallied in the morning to $30.38, the highest price in well over a month. Then it traded down $1 in a straight line before closing down about 30 cents. It should be noted that once a year the company holds a charity golf event for back to school. All the top management is there. That event was Monday. If the company had an announcement to make, it would have been done, in my view, over the weekend, and not when management was unavailable to field inquiries. Nothing can be taken for granted in this environment. One needs to have a wide field of vision and stay alert.
Previously, income grew more or less in step with household wealth. From 1962 to 1966, a period of low inflation and robust economic growth, real private sector wages rose 27.5 percent while real net worth increased 23.6 percent, according to Bloomberg News calculations based on government data. In the five-year period ending in 1996, real net worth gained 15.6 percent while private wages grew 11.3 percent.
More recently, the gap between household net worth and wage growth has widened. From 2001 to 2005, the value of household assets minus liabilities rose 16.6 percent after inflation. Private sector wages rose just 2.7 percent.
Nearly 7,000 Alaskans will lose their earthquake insurance as their policies come up for renewal in the coming months.
Allstate Insurance Co. is cutting its optional earthquake coverage nationwide, and will drop this plan as policies come up for renewal, said Caitlin Gorand, spokeswoman for Allstate's Northwest region.
"It's part of a larger catastrophic management strategy," Gorand said. "The insurance industry is in the business of managing risk. We're trying to manage our exposure to mega-catastrophes." You can count on Allstate!
Recent earthquakes have taken plave in Mexico City and New Zealand. Suppose the hurricane season is mild but world-wide earthquakes are 6.0 and higher and occur much more frequently than history would suggest?
Computer Associates is cutting 1,700 jobs.
Target Corp. said it still expects its August sales at stores open at least one year to rise between 2% and 4%. This is compared to a 6.3% rise in August same-store sales in the year-ago period.
The Philly Fed now think CPI inflation will average an annual 3.6 percent in the third quarter, up a full percentage point from their previous estimate of 2.6 percent. Smaller upward revisions marked subsequent quarters: to 2.8 percent in the fourth quarter from an earlier 2.4 percent, and from 2.7 percent in the first quarter of 2007 from 2.3 percent.
The pre-opening indicated a big day for equities. After a strong start it built to a triple digit gain for the Dow, a double digit gain for the S&P, and a big move for Intel, Cisco, Oracle, and the like. Conversely, the energy sector took a hit and so did the metals. The 2-year Treasury once again traded at a 5.01% yield and the 10-year was close behind at 5.00%. The dollar index bravely held onto to the 85 level. This tune has been played many times in the last few months -- except for the peace part. Not to be confusing, the killing continues at high levels in Iraq.
This week we can view the latest PPI and CPI numbers. The impulse from the Fed and the media will be to downplay and disappointing data. They will clearly have the opportunity to do plenty of downplaying. Then on Friday we have option expiration. In sum, there is plenty of room for shenanigans this week. I will continue to sell into rallies.
Martin Huchinson: "The Federal budget is likely to remain a problem for many years. The long term difficulties involving Medicare and social security will combine with military and homeland security expenditures to create continued upward pressure on public spending as a percentage of Gross Domestic Product. Since Congress has shown repeatedly that it lacks the will either to raise taxes or to economize in other areas, the federal budget deficit will grow further. This will tend to push up real interest rates – the decade long holiday from real interest rates above 1-2% will come definitively to an end. Nominal rates will depend on inflation, which the government and the Fed will attempt to fudge, but in the end the sheer volume of long term financing to cover the Federal budget deficit will make the reported rate of inflation almost irrelevant. Thus if inflation is reported as 4% per annum and is really 5% per annum, as today (while the Fed, by leaving out whichever items are rising in price, persists in claiming a 2-3% rate) the 30 year Treasury bond rate will be around 8%, and home mortgages will be unobtainable below 9%."
The Fed said banks were more willing to make loans to consumers as demand got "moderately stronger" in the last three months. The Fed surveyed 56 domestic banks and 17 foreign banks. Meanwhile, standards for approving commercial and industrial loans also eased, the Fed reported. About 14% of survey respondents said they loosened credit terms for business loans.
This is a difficult market. I never take anything for granted and do my very best to minimize risks while achieving rewards. Monday was a day to double check reality. Remember about that triple digit gain for Dow. Well, the Dow, Nasdaq, and S&P gave up almost all their gains by the close of trading.
I had mentioned I have recently concentrated on four stocks - Jones Apparel, Univision, Ford, and Ingersoll Rand. On Monday, Ford was the beneficiary of a Bear Stearns recommendation. It rose over 40 cents and topped $7.80. Univision managed a gain of a few pennies. Ingersoll Rand was lousy all day and finished just above $36, and that reperesented a loss of over 80 cents. It's a good thing I like to buy stocks on the downside. Jones Apparel was the strange one. It rallied in the morning to $30.38, the highest price in well over a month. Then it traded down $1 in a straight line before closing down about 30 cents. It should be noted that once a year the company holds a charity golf event for back to school. All the top management is there. That event was Monday. If the company had an announcement to make, it would have been done, in my view, over the weekend, and not when management was unavailable to field inquiries. Nothing can be taken for granted in this environment. One needs to have a wide field of vision and stay alert.
Previously, income grew more or less in step with household wealth. From 1962 to 1966, a period of low inflation and robust economic growth, real private sector wages rose 27.5 percent while real net worth increased 23.6 percent, according to Bloomberg News calculations based on government data. In the five-year period ending in 1996, real net worth gained 15.6 percent while private wages grew 11.3 percent.
More recently, the gap between household net worth and wage growth has widened. From 2001 to 2005, the value of household assets minus liabilities rose 16.6 percent after inflation. Private sector wages rose just 2.7 percent.
Nearly 7,000 Alaskans will lose their earthquake insurance as their policies come up for renewal in the coming months.
Allstate Insurance Co. is cutting its optional earthquake coverage nationwide, and will drop this plan as policies come up for renewal, said Caitlin Gorand, spokeswoman for Allstate's Northwest region.
"It's part of a larger catastrophic management strategy," Gorand said. "The insurance industry is in the business of managing risk. We're trying to manage our exposure to mega-catastrophes." You can count on Allstate!
Recent earthquakes have taken plave in Mexico City and New Zealand. Suppose the hurricane season is mild but world-wide earthquakes are 6.0 and higher and occur much more frequently than history would suggest?
Computer Associates is cutting 1,700 jobs.
Target Corp. said it still expects its August sales at stores open at least one year to rise between 2% and 4%. This is compared to a 6.3% rise in August same-store sales in the year-ago period.
The Philly Fed now think CPI inflation will average an annual 3.6 percent in the third quarter, up a full percentage point from their previous estimate of 2.6 percent. Smaller upward revisions marked subsequent quarters: to 2.8 percent in the fourth quarter from an earlier 2.4 percent, and from 2.7 percent in the first quarter of 2007 from 2.3 percent.
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