1/1/2008 Happy New Year
Sales of semiconductors rose 0.7% in November compared to October to $22.5 billion, or 2.3% more than last year, the Semiconductor Industry Association said Monday.
Kirk Kerkorian's Tracinda is going to buy 35% of Delta Petroleum for $684 million, or $19 a share, the companies said Monday. The investment is at 23% premium to Friday's close.
New York City Mayor Michael Bloomberg is moving closer to a run for president, as he schedules bipartisan meetings with major U.S. political figures and his aides study how to mount independent campaigns in the 50 states, The New York Times reported.
Republican presidential candidate Ron Paul may lag behind in public-opinion polls. But after raising about $19 million for the final three months of the year, he is now among his party's front-runners in the race for campaign cash.
Online spending from Nov. 1 through Dec. 27 increased 19 percent to almost $28 billion, from $24 billion a year earlier, Reston, Virginia-based ComScore Inc. said.
"The Brazilian economy is probably at its best moment in 25 years," said Paulo Levy, economist at a Rio de Janeiro-based think tank known by its Portuguese initials IPEA, citing four years of good economic growth.
Exports of manufactured goods and services have given Brazil's economy balance and helped foreign reserves climb to $167 billion, double the figure of September 2006. The country has paid down its debt, lowered interest rates and kept a lid on spending. Economic growth will come in at 5.3% this year, lower than the hemisphere's 5.7%, but quite a feat for a country that over the previous 10 years averaged only 2.5% annual expansion.
Count David Seiders, the chief economist of the National Association of Home Builders: "I'm viewing 2008 as another down year," he told reporters in a recent conference call. He sees new-home sales next year slipping even lower than in 2007: His forecast calls for about 741,000, compared to the 1.2 million seen in the glory days of 2005. "One heck of a contraction," he called it.
Brett Steenbarger: "Continued Weakness in Cumulative TICK - My Cumulative TICK line has been showing notable weakness during the recent bounce and the last couple of days of pullback. This leads me to suspect that we're putting in a lower high in ES and could be testing the lows from earlier in the month. My indicators that treat buying and selling interest as separate variables show significantly below average buying interest all four trading days last week. During the last two sessions of the week, selling interest was pretty average relative to the prior 30 trading sessions. In short, buyers have been on strike. Tough to mount a rally when that happens."
China International United Petroleum & Chemical Corp., or Unipec, hired the tanker Hyundai Banner at a rate of 232.5 Worldscale points, according to a report today from Simpson, Spence & Young Ltd. That's 15 percent below a comparable assessment for voyages to Japan, according to data compiled by Bloomberg. Hyundai Banner is fitted with one steel hull. Tankers fitted with double hulls to cut the risk of an oil spill normally cost more to hire. The London-based Baltic Exchange's last assessment was on Dec. 24 and the next will be on Jan. 2.
BHP Billiton is considering submitting an unchanged US$150 billion bid to Rio Tinto's shareholders ahead of the February 6 deadline set by the UK Takeover Panel for BHP to make a formal offer for Rio, the UK's Sunday Times reported at the weekend, without citing sources. This is one of several options being considered by BHP, along with increasing the cash component of any bid, the newspaper said.
John Hussman: "On the subject of employment, it's useful to recall that the non-farm employment figure for November came in at 138,467,000, up by 94,000 (which is very sluggish to begin with), but the figures for the prior two months were simultaneously revised lower by 48,000, so that the net gain over the number reported in October was only 46,000 jobs. The tendency of the jobs numbers to be subject to major revisions introduces noise into their month-to-month interpretation, but figure that the total non-farm employment number reported in November was 138,467,000. If the December figure comes in below about 138,539,000 (a gain of 72,000 jobs, net of any revisions), that would represent year-over-year employment growth of less than 1%, which is about the level where prior recessions have started. Anything less than 138,663,000 (which is nearly certain) would represent 6-month growth less than 0.5%, which is also a slowing that is typically seen as the economy tips into recession. As for the unemployment rate, the start-date of a recession frequently coincides with the point where the rate moves about 0.4% above its 12-month trough. That trough was 4.4% in March, so a move from the current 4.7% to even 4.8% would be consistent with an economy rolling over."
Earthfiles: NASA: “After a 13.6 year absence, Comet 8P/Tuttle is once again traveling through the inner solar system and on January 1 - 2, 2008, it makes its closest approach to Earth at only 24 million miles away. The emerald-colored comet will brighten to a predicted magnitude of 5.8, visible to the unaided eye from dark-sky sites and will be a fine target for backyard telescopes. Look straight up after sunset on January 1, 2008, and north of the big ‘W’ of Cassiopeia to see the emerald green glow of Comet 8P/Tuttle.”
The Pakistani government is likely to delay elections scheduled for next week because of violent unrest in the wake of the assassination of Benazir Bhutto.
Algeria's hydrocarbons' revenues will total $59 billion in 2007, Energy and Mines Minister Chakib Khelil said in a statement. According to Khelil, $2 billion of this year's income was earned from a windfall tax on the profits of foreign energy firms. Under Algerian law, Sonatrach holds at least a 51% share in every oil and gas exploration contract awarded to foreign companies. Windfall taxes range from 5% to 50% on excess profits when Brent crude averages more than $30 per barrel.
It was the year the residential real estate industry slid from sublime to subprime - "and we still haven't hit bottom," said Miami-based real estate analyst Lewis Goodkin of Goodkin Consulting. Never one to pull his punches, Goodkin said the residential industry went from talk to walk. From "build it and they will come" to a fear of how many buyers will walk from their deposits at the closing table.
ConocoPhillips signed a production-sharing contract with Malaysian national oil company Petronas for the exploration and development of natural gas fields offshore Sabah, Malaysia. Petronas will hold a 40% stake under the contract through its unit Petronas Carigali, while Shell and ConocoPhillips will each hold 30%.
M/I Homes Inc. has sold land located primarily in Florida to various buyers for $82 million and that it is exiting the West Palm Beach housing market. The home builder said as a result of the lot sales, it will book pretax land impairment charges of about $80 million in the fourth quarter, and expects to see a $50 million cash tax refund in the second quarter of 2008. M/I Homes said it is "likely" that further impairment charges will be recorded in the fourth quarter. The company said the land sold represented 3,700 lots; at the end of the third quarter, it owned 16,767 lots.
BHP Billiton Ltd., Woodside Petroleum Ltd. and Santos Ltd. halted more than half of Australia's oil production as the first tropical cyclone of the season struck the northwest coast.
A law taking effect Tuesday makes Missouri just the third state -- behind Minnesota and Hawaii -- to implement a wide-ranging ethanol mandate. Because the corn-based fuel is cheaper than gasoline, most of Missouri's gas stations quietly made the switch months in advance.
Home resales rose to a 5.00 million annual rate, a 0.4% increase from October's revised 4.98 million annual pace, the National Association of Realtors said Monday. October's rate was originally estimated at 4.97 million. The median price of a previously owned home was $210,200 in November, down 3.3% from $217,300 in November 2006. The median price in October this year was $206,900.
United States banks on average borrowed $4.83 billion a day directly from the Federal Reserve in the week ended Dec. 26, up from $4.62 billion a day the previous week, Fed data released Thursday showed.
Chinese iron ore imports in November climbed to 35.5 Mt, the second-highest monthly total, according to preliminary customs data. If confirmed, November imports would be up 5.7 Mt on the previous month, with the year-to-date total of 349.5 Mt running some 17% above last year’s level.
Meanwhile, the preliminary data indicate that soybean imports in November were the highest for 17 months. The YTD total is now 27.9 Mt, up 2 Mt year-on-year.
For the year, the Nasdaq climbed 9.8%, the blue-chip index rose 6.4%, and the broader index gained 3.5%.
The number of insured borrowers falling more than 60 days late on payments jumped to 61,033 last month from 45,325 in November 2006, according to data from members of the Washington- based Mortgage Insurance Companies of America. The missed payments, often a prelude to foreclosure, represented a 2.9 percent increase from October.
Beijing said on Monday that a unit of its new $200bn sovereign wealth fund would inject $20bn into China Development Bank in a move intended to smooth the policy lender's transformation into a commercially-oriented institution.
G.K.Chesterton: “The object of a new year is not that we should have a new year. It is that we should have a new soul”
Monday, December 31, 2007
Sunday, December 30, 2007
2007 Comes To A Close
12/31/07 2007 Comes To A Close
According to Bloomberg, the dollar's share of global foreign-exchange reserves fell to a record low in the third quarter as demand for U.S. assets waned after the subprime- mortgage market collapsed. The dollar accounted for 63.8 percent of reserves at the end of September, down from 65 percent three months earlier, the International Monetary Fund said.
LawyerUCLA.com currently serves as a directory for over 6,000 lawyers across the United States. And when it comes to the 2008 presidential election, the website has decided not to keep quiet -- making a firm case for Ron Paul. Ron Paul, self proclaimed champion of the Constitution, is a 10-term congressman from Texas. According to the statistics provided on their website, 61 percent of the mentions of the Constitution at the 2008 presidential debates were made by Ron Paul himself, despite being a candidate that has not been given a fair amount of time to speak.
Saxo Bank, the Danish online investment bank, issues a cautionary 2008 outlook - warning investors of the end of cheap money, tighter lending conditions, rising inflation and a UK recession ushering in a new mood of "forced savings" for Western consumers.
President Bush on Saturday signed into law legislation that extends a U.S. children's health insurance program after twice vetoing bills to increase funding. The State Children's Health Insurance Program, which covers about 6.6 million children whose families who earn too much to qualify for Medicaid, will maintain coverage at its current funding level through March 31, 2009. The measure, titled the Medicare, Medicaid and SCHIP Extension Act of 2007, also increases Medicare payments to doctors.
Mike Burk: "Historically the 3rd year of the Presidential cycle is the strongest. By the averages 2007 was sub standard...Historically next week has been one of the most volatile. The indices have been up about 2/3 of the time and the average returns are all positive, but the drawdowns have been huge. The largest, 10.4% recorded by the OTC on 1/2/2001...The OTC has been up 68% of the time in January with an average gain of 3.4% making it the strongest month of the year for that index. During the 4th year of the Presidential Cycle it has been up 73% of the time with an average return of 2.5%...Since 1928 SPX has been up 64% of the time in January (second to December at 74%) with an average return of 1.4%, the best of any month. During the 4th year of the Presidential Cycle the SPX has been up 60% of the time with an average gain of 0.5% making it an average month...The secondaries have been underperforming and the breadth indicators have been weak. Seasonally next week has been one of extremes. I expect the major indices to be lower on Friday January 4 than they were on Friday December 28."
"Whether you're shopping for a mortgage or for a home, there probably has not been as challenged a year as this one in years," says Keith Gumbinger, vice president of HSH, a mortgage-information provider. "This year, home is where the anxiety is."
According to Bloomberg, China, the world's biggest grain producer, will tax exports of wheat, corn and rice to increase domestic supply and control rising food prices. Exporters of wheat will start paying a 20 percent tax on Jan. 1, while the tax for corn and rice was set at 5 percent, the Finance Ministry said in a statement on its web site today. The government, concerned that inflation may disrupt social stability, has sought to curb price increases by selling grain from stockpiles and by canceling export tax rebates. Food prices in the world's fastest-growing major economy rose 18.2 percent in November, spurring a jump to an 11-year high of 6.9 percent in the consumer price index.
According to an article in the FT, Qwest Communications in Colorado would like to purchase Sprint’s long distance operations, the only long distance business of scale left in the US. In addition, several weeks ago at a conference, Sprint’s interim CEO Paul Saleh expressed a willingness to spin off or sell spectrum in the 2.3 to 2.5-megahertz range. The first banker said the upcoming government-sponsored 700MHz might erode the spectrum’s value because some consider 700MHZ superior, but the spectrum is the largest of its kind. Tim Horan, analyst at CIBC, noted that Clearwire, with whom Sprint could merge its WiMAX spectrum, is worth USD 2.6bn depsite losses and an annual revenue run-rate of under USD 200m. Horan estimated Sprint has 50% more spectrum than Clearwire.
According to Bloomberg, payrolls rose by 70,000 after increasing 94,000 in November, according to the median forecast in a Bloomberg survey of economists before a Jan. 4 government report. The jobless rate probably rose to 4.8 percent, the highest level in more than a year. The figures may raise concern that wage gains, which have kept American consumers afloat, will weaken in coming months.
Brazil's real advanced the most among major currencies versus the dollar this year.
The Chinese government has said it will allow direct election of Hong Kong's governmental leader, called the chief executive, by 2017, according to a media report.
Iran's first atomic power plant will start operating in mid-2008, Foreign Minister Manouchehr Mottaki said on Sunday, two days after the country received a second delivery of nuclear fuel from Russia.
Oil rose above $96 a barrel on Monday, lifted by mounting political instability in Pakistan and growing tensions between Iran and the United States over Tehran's nuclear ambitions.
According to Bloomberg, the dollar's share of global foreign-exchange reserves fell to a record low in the third quarter as demand for U.S. assets waned after the subprime- mortgage market collapsed. The dollar accounted for 63.8 percent of reserves at the end of September, down from 65 percent three months earlier, the International Monetary Fund said.
LawyerUCLA.com currently serves as a directory for over 6,000 lawyers across the United States. And when it comes to the 2008 presidential election, the website has decided not to keep quiet -- making a firm case for Ron Paul. Ron Paul, self proclaimed champion of the Constitution, is a 10-term congressman from Texas. According to the statistics provided on their website, 61 percent of the mentions of the Constitution at the 2008 presidential debates were made by Ron Paul himself, despite being a candidate that has not been given a fair amount of time to speak.
Saxo Bank, the Danish online investment bank, issues a cautionary 2008 outlook - warning investors of the end of cheap money, tighter lending conditions, rising inflation and a UK recession ushering in a new mood of "forced savings" for Western consumers.
President Bush on Saturday signed into law legislation that extends a U.S. children's health insurance program after twice vetoing bills to increase funding. The State Children's Health Insurance Program, which covers about 6.6 million children whose families who earn too much to qualify for Medicaid, will maintain coverage at its current funding level through March 31, 2009. The measure, titled the Medicare, Medicaid and SCHIP Extension Act of 2007, also increases Medicare payments to doctors.
Mike Burk: "Historically the 3rd year of the Presidential cycle is the strongest. By the averages 2007 was sub standard...Historically next week has been one of the most volatile. The indices have been up about 2/3 of the time and the average returns are all positive, but the drawdowns have been huge. The largest, 10.4% recorded by the OTC on 1/2/2001...The OTC has been up 68% of the time in January with an average gain of 3.4% making it the strongest month of the year for that index. During the 4th year of the Presidential Cycle it has been up 73% of the time with an average return of 2.5%...Since 1928 SPX has been up 64% of the time in January (second to December at 74%) with an average return of 1.4%, the best of any month. During the 4th year of the Presidential Cycle the SPX has been up 60% of the time with an average gain of 0.5% making it an average month...The secondaries have been underperforming and the breadth indicators have been weak. Seasonally next week has been one of extremes. I expect the major indices to be lower on Friday January 4 than they were on Friday December 28."
"Whether you're shopping for a mortgage or for a home, there probably has not been as challenged a year as this one in years," says Keith Gumbinger, vice president of HSH, a mortgage-information provider. "This year, home is where the anxiety is."
According to Bloomberg, China, the world's biggest grain producer, will tax exports of wheat, corn and rice to increase domestic supply and control rising food prices. Exporters of wheat will start paying a 20 percent tax on Jan. 1, while the tax for corn and rice was set at 5 percent, the Finance Ministry said in a statement on its web site today. The government, concerned that inflation may disrupt social stability, has sought to curb price increases by selling grain from stockpiles and by canceling export tax rebates. Food prices in the world's fastest-growing major economy rose 18.2 percent in November, spurring a jump to an 11-year high of 6.9 percent in the consumer price index.
According to an article in the FT, Qwest Communications in Colorado would like to purchase Sprint’s long distance operations, the only long distance business of scale left in the US. In addition, several weeks ago at a conference, Sprint’s interim CEO Paul Saleh expressed a willingness to spin off or sell spectrum in the 2.3 to 2.5-megahertz range. The first banker said the upcoming government-sponsored 700MHz might erode the spectrum’s value because some consider 700MHZ superior, but the spectrum is the largest of its kind. Tim Horan, analyst at CIBC, noted that Clearwire, with whom Sprint could merge its WiMAX spectrum, is worth USD 2.6bn depsite losses and an annual revenue run-rate of under USD 200m. Horan estimated Sprint has 50% more spectrum than Clearwire.
According to Bloomberg, payrolls rose by 70,000 after increasing 94,000 in November, according to the median forecast in a Bloomberg survey of economists before a Jan. 4 government report. The jobless rate probably rose to 4.8 percent, the highest level in more than a year. The figures may raise concern that wage gains, which have kept American consumers afloat, will weaken in coming months.
Brazil's real advanced the most among major currencies versus the dollar this year.
The Chinese government has said it will allow direct election of Hong Kong's governmental leader, called the chief executive, by 2017, according to a media report.
Iran's first atomic power plant will start operating in mid-2008, Foreign Minister Manouchehr Mottaki said on Sunday, two days after the country received a second delivery of nuclear fuel from Russia.
Oil rose above $96 a barrel on Monday, lifted by mounting political instability in Pakistan and growing tensions between Iran and the United States over Tehran's nuclear ambitions.
Saturday, December 29, 2007
Worst Case Scenario
12/30/07 Worst Case Scenario
Former First Republic Bank shareholders sued Merrill Lynch & Co on Friday accusing the Wall Street investment bank and brokerage of hiding billions of dollars of losses related to subprime mortgages while the companies' merger was pending.
Charles Rotblut, senior markets analyst at Zacks.com, said he expects the markets to stay choppy until the fourth-quarter earnings picture becomes clearer.
As of earlier this week, Thomson Financial had pegged earnings to fall 4.5% in the fourth quarter.
On Friday, federal funds futures priced in 98% chance that the central bank will ease the benchmark interest rate by a quarter-point to 4%, according to Action Economics.
Doug Noland: "During the year 2007, it became clear that the Federal Reserve had lost control of inflationary forces. The year ended with Import Prices up 11.4% y-o-y, the Producer Price index up 7.2% y-o-y, and the Consumer Price index up 4.3% y-o-y. Despite a weakened economy and another year of dollar devaluation, the U.S. Current Account Deficit remained in the neighborhood of $800bn. Coupled with huge speculative outflows seeking profits from global inflation, the world was absolutely inundated with dollar liquidity. It was, as well, a year of shattered myths: That astute global central bankers have inflation in check; contemporary finance effectively disburses risk to the marketplace, in the process shielding the banking system from Credit and market risk; “AAA” stands for safety and liquidity; nationwide home prices won’t decline; the Federal Reserve controls marketplace liquidity; commercial paper is safe; CDOs make sense; the financial guarantors face minimal risk. Indeed, the entire bullish notion of contemporary risk modeling, structuring, hedging, and financial guarantees (“Credit insurance”) is now in serious jeopardy. 2007 saw the initial bursting of the Great Credit Bubble. To be sure, the enormous Bubble in Wall Street-backed finance abruptly went from runaway boom to astounding bust. Much of the mortgage origination market collapsed spectacularly. Thirty percent annualized broker/dealer balance sheet growth came to an abrupt halt during this year’s second half. “Private-label” MBS issuance ground to a halt. The booming asset-backed securities and CDO markets faltered badly. The banking system’s off-balance sheet structured “vehicles” collapsed in illiquidity, another factor forcing the major lending institutions to balloon their balance sheets. The global inter-bank lending market seized up. The hedge fund industry waited anxiously for redemption notices. Counter-party risk became a very serious systemic issue. The global financial system ends the year on the precipice. Meantime, U.S. Bank Credit expanded almost 12% during the year, with Commercial & Industrial loans ballooning almost 21%. With Risk Embracement turning to Risk Aversion, the marketplace called upon the Money Fund Complex to Intermediate Risk. Money Fund assets expanded an unprecedented $729bn, or 30.6%. And as liquidity disappeared for Wall Street-backed mortgages, Fannie and Freddie’s Combined Books of Business inflated an unprecedented $600bn (or so). The Federal Home Loan Banking system ballooned its balance sheet by more than $200bn, in the process becoming Lender of Last resort to some very troubled financial institutions. Global central bankers engaged in unparalleled concerted marketplace interventions and liquidity injections. From the Fed’s Q3 “flow of funds,” total (non-financial and financial) U.S. system Credit growth expanded at an annualized $4.99 TN, sustaining the U.S. Bubble Economy but in an Unsustainable Manner – unsustainable in the quantity and structure of Credit and Risk Intermediation as well as the nature of economic activity. Financial sector debt expanded at an alarming 15.6% annualized pace, with Bank Credit, GSE, agency MBS, and Money Funds all expanding at double-digit rates. Of late, the Wall Street Credit crunch and severe tightening in risky debt markets have instigated recessionary forces. Many housing markets have gone from bad to worse – on the way to much worse. Florida is a mess, while California is an unfolding disaster. Some analysts have begun to recognize that U.S. asset and debt markets have not faced such precarious dynamics since The Great Depression. Meanwhile, collapsing U.S. and international interest-rates fuel myriad global Bubbles and inflationary pressures. In short, 2007 has been a continuation of the unfolding “worst-case-scenario.”
George W. Bush intends to veto a $700bn defense spending bill because it includes a provision that would give Americans the right to sue state sponsors of terrorism. The provision threatened to “imperil” billions of dollars of Iraqi assets and undermine US foreign policy and business interests, the president said on Friday.
Herbert Hoover: “The slogan of progress is changing from the full dinner pail to the full garage.”
Jim Jubak: "A 2008 economic slowdown or recession wouldn't need to be one for the record books in order to disappoint Wall Street. It could simply mark a return to the bad old days, from 1959 through 1983, when recessions lasted 50% longer, were nearly twice as severe and took place about twice as often. A September 2007 report from the Federal Reserve Bank of Dallas summarizes the difference between a recession in the bad old days and now: "On average, the five recessions from 1959 to 1983 were 47 months apart, lingered 12 months and were associated with a 2.17 percent peak-to-trough decline in real gross domestic product. By contrast, the 1990 downturn came after 92 months of expansion, lasted eight months and involved a 1.26 percent decline in GDP. The 2001 slump ended a record 120 months of uninterrupted growth, lasted eight months and entailed a GDP decline of only 0.35 percent."
Farmers in India, the world’s second-biggest wheat grower, may harvest more of the crop following early planting and “good weather” in the main growing areas, lowering overseas purchases. The country may harvest more than 75 million tons of wheat during the March-April harvest, the most since 2000, the nation’s agriculture commissioner said.
Industry analysts are predicting a lackluster end to an already dismal year for automakers, likely the worst in nearly a decade. Holiday discounts failed to bring consumers out of their funk, and December sales are expected to fall around 4 percent, which would bring the full-year total for U.S. auto sales to 16.1 million vehicles, the lowest volume since 1998.
Jack Paar: “Poor people have more fun than rich people, they say; and I notice it's the rich people who keep saying it.”
Robert McHugh: "In both cases, whether we see a Bullish and Bearish breakout, intermediate-term stocks should be rising in a Bull market by the second half of 2008. International Central Bank and U.S. liquidity infusions will make sure of that. The rally will not be economic prosperity-driven, but rather hyperinflation driven as stocks are purchased as a means of defense against a deteriorating dollar, as if they were a tangible asset. The open question as we close 2007 is where are prices going between now and then?"
As much as a half-foot of snow may fall in northern New England today as a wave a low pressure and cold air blows in from the U.S. Midwest and Plains. The storm yesterday dumped 8 inches (20 centimeters) of snow in Farwell, Michigan, said AccuWeather, based in State College, Pennsylvania, on its Web site.
U.S. stocks are poised for their first fourth-quarter decline since 2000.
Aristotle: “Learning is not child's play; we cannot learn without pain."
Former First Republic Bank shareholders sued Merrill Lynch & Co on Friday accusing the Wall Street investment bank and brokerage of hiding billions of dollars of losses related to subprime mortgages while the companies' merger was pending.
Charles Rotblut, senior markets analyst at Zacks.com, said he expects the markets to stay choppy until the fourth-quarter earnings picture becomes clearer.
As of earlier this week, Thomson Financial had pegged earnings to fall 4.5% in the fourth quarter.
On Friday, federal funds futures priced in 98% chance that the central bank will ease the benchmark interest rate by a quarter-point to 4%, according to Action Economics.
Doug Noland: "During the year 2007, it became clear that the Federal Reserve had lost control of inflationary forces. The year ended with Import Prices up 11.4% y-o-y, the Producer Price index up 7.2% y-o-y, and the Consumer Price index up 4.3% y-o-y. Despite a weakened economy and another year of dollar devaluation, the U.S. Current Account Deficit remained in the neighborhood of $800bn. Coupled with huge speculative outflows seeking profits from global inflation, the world was absolutely inundated with dollar liquidity. It was, as well, a year of shattered myths: That astute global central bankers have inflation in check; contemporary finance effectively disburses risk to the marketplace, in the process shielding the banking system from Credit and market risk; “AAA” stands for safety and liquidity; nationwide home prices won’t decline; the Federal Reserve controls marketplace liquidity; commercial paper is safe; CDOs make sense; the financial guarantors face minimal risk. Indeed, the entire bullish notion of contemporary risk modeling, structuring, hedging, and financial guarantees (“Credit insurance”) is now in serious jeopardy. 2007 saw the initial bursting of the Great Credit Bubble. To be sure, the enormous Bubble in Wall Street-backed finance abruptly went from runaway boom to astounding bust. Much of the mortgage origination market collapsed spectacularly. Thirty percent annualized broker/dealer balance sheet growth came to an abrupt halt during this year’s second half. “Private-label” MBS issuance ground to a halt. The booming asset-backed securities and CDO markets faltered badly. The banking system’s off-balance sheet structured “vehicles” collapsed in illiquidity, another factor forcing the major lending institutions to balloon their balance sheets. The global inter-bank lending market seized up. The hedge fund industry waited anxiously for redemption notices. Counter-party risk became a very serious systemic issue. The global financial system ends the year on the precipice. Meantime, U.S. Bank Credit expanded almost 12% during the year, with Commercial & Industrial loans ballooning almost 21%. With Risk Embracement turning to Risk Aversion, the marketplace called upon the Money Fund Complex to Intermediate Risk. Money Fund assets expanded an unprecedented $729bn, or 30.6%. And as liquidity disappeared for Wall Street-backed mortgages, Fannie and Freddie’s Combined Books of Business inflated an unprecedented $600bn (or so). The Federal Home Loan Banking system ballooned its balance sheet by more than $200bn, in the process becoming Lender of Last resort to some very troubled financial institutions. Global central bankers engaged in unparalleled concerted marketplace interventions and liquidity injections. From the Fed’s Q3 “flow of funds,” total (non-financial and financial) U.S. system Credit growth expanded at an annualized $4.99 TN, sustaining the U.S. Bubble Economy but in an Unsustainable Manner – unsustainable in the quantity and structure of Credit and Risk Intermediation as well as the nature of economic activity. Financial sector debt expanded at an alarming 15.6% annualized pace, with Bank Credit, GSE, agency MBS, and Money Funds all expanding at double-digit rates. Of late, the Wall Street Credit crunch and severe tightening in risky debt markets have instigated recessionary forces. Many housing markets have gone from bad to worse – on the way to much worse. Florida is a mess, while California is an unfolding disaster. Some analysts have begun to recognize that U.S. asset and debt markets have not faced such precarious dynamics since The Great Depression. Meanwhile, collapsing U.S. and international interest-rates fuel myriad global Bubbles and inflationary pressures. In short, 2007 has been a continuation of the unfolding “worst-case-scenario.”
George W. Bush intends to veto a $700bn defense spending bill because it includes a provision that would give Americans the right to sue state sponsors of terrorism. The provision threatened to “imperil” billions of dollars of Iraqi assets and undermine US foreign policy and business interests, the president said on Friday.
Herbert Hoover: “The slogan of progress is changing from the full dinner pail to the full garage.”
Jim Jubak: "A 2008 economic slowdown or recession wouldn't need to be one for the record books in order to disappoint Wall Street. It could simply mark a return to the bad old days, from 1959 through 1983, when recessions lasted 50% longer, were nearly twice as severe and took place about twice as often. A September 2007 report from the Federal Reserve Bank of Dallas summarizes the difference between a recession in the bad old days and now: "On average, the five recessions from 1959 to 1983 were 47 months apart, lingered 12 months and were associated with a 2.17 percent peak-to-trough decline in real gross domestic product. By contrast, the 1990 downturn came after 92 months of expansion, lasted eight months and involved a 1.26 percent decline in GDP. The 2001 slump ended a record 120 months of uninterrupted growth, lasted eight months and entailed a GDP decline of only 0.35 percent."
Farmers in India, the world’s second-biggest wheat grower, may harvest more of the crop following early planting and “good weather” in the main growing areas, lowering overseas purchases. The country may harvest more than 75 million tons of wheat during the March-April harvest, the most since 2000, the nation’s agriculture commissioner said.
Industry analysts are predicting a lackluster end to an already dismal year for automakers, likely the worst in nearly a decade. Holiday discounts failed to bring consumers out of their funk, and December sales are expected to fall around 4 percent, which would bring the full-year total for U.S. auto sales to 16.1 million vehicles, the lowest volume since 1998.
Jack Paar: “Poor people have more fun than rich people, they say; and I notice it's the rich people who keep saying it.”
Robert McHugh: "In both cases, whether we see a Bullish and Bearish breakout, intermediate-term stocks should be rising in a Bull market by the second half of 2008. International Central Bank and U.S. liquidity infusions will make sure of that. The rally will not be economic prosperity-driven, but rather hyperinflation driven as stocks are purchased as a means of defense against a deteriorating dollar, as if they were a tangible asset. The open question as we close 2007 is where are prices going between now and then?"
As much as a half-foot of snow may fall in northern New England today as a wave a low pressure and cold air blows in from the U.S. Midwest and Plains. The storm yesterday dumped 8 inches (20 centimeters) of snow in Farwell, Michigan, said AccuWeather, based in State College, Pennsylvania, on its Web site.
U.S. stocks are poised for their first fourth-quarter decline since 2000.
Aristotle: “Learning is not child's play; we cannot learn without pain."
Friday, December 28, 2007
The Last Weekend Of 2007
12/29/07 Last Weekend Of 2007
The Wall Street Journal reported Friday, citing analysts and unnamed executives. Citi could sell 80%-held Student Loan Corp, its North American auto-lending unit, its 24% stake in Brazil credit card operation Redecard and the bank's Japanese consumer finance business, the report said. New Citigroup CEO Vikram Pandit is considering laying off as many as 20,000 employees and shedding business lines, the report continued, citing people familiar with the matter. HSBC may sell its auto-finance business, the report added.
Japanese industrial production dipped 1.6% in November from the previous month, easing for the first time in two months, while inventory levels rose 1.6%, marking its fourth month of gains, preliminary data from the Ministry of Economy, Trade and Industry showed Friday.
ING Group said it's going to sell its reinsurance unit NRG N.V. to Warren Buffett's Berkshire Hathaway Group for approximately 300 million euros ($433 million).
U.K. house prices fell by 0.5% in December, the Nationwide Building Society said Friday. Last month, prices fell by 0.8%.
Japan's benchmark Nikkei 225 traded weaker Friday in the final trading session of year, bringing its year-to-date-performance to minus 11.1%, marking its first annual decline in five years.
A judge ordered Finish Line to complete its $1.5 billion acquisition of Genesco.
Berkshire Hathaway has begun a municipal bond insurance operation for NY State.
Further cuts in U.S. interest rates would have a "harmful effect" on the dollar and the international finance system, a Chinese finance official wrote in a commentary Thursday in an official newspaper. The dollar's fall against many currencies has prompted investors to sell dollar-denominated assets, Hu Xiaolian, director of the State Administration of Foreign Exchange, wrote in the Financial News, a newspaper published by the central bank. "If the (U.S.) federal funds rate continues to fall, this will certainly have a harmful effect on the U.S. dollar exchange rate and the international currency system," Hu wrote.
The U.S. dollar index fell further to 76.26.
According to the an article in the FT, at the end of a year in which the dollar has endured a marked decline against other currencies, an unsettling question is beginning to be voiced: can the troubles of the US currency be confined to the financial world or are they set to undermine Washington’s place on the international stage? “This is the neglected dimension of the dollar’s decline,” says Flynt Leverett, a former senior National Security Council official under President George W. Bush. “What has been said about the fall of the dollar is almost all couched in economic terms. But currency politics is very, very powerful and is part of what has made the US a hegemon for so long, like Britain before it.”
"The severity of the subprime debacle may be only a prologue to the main act, a tragedy on the grand stage in the corporate credit markets," wrote Ted Seides, the director of investments at Protégé Partners, a hedge fund of funds, in Economics and Portfolio Strategy. "Over the past decade, the exponential growth of credit derivatives has created unprecedented amounts of financial leverage on corporate credit," he added. "Similar to the growth of subprime mortgages, the rapid rise of credit products required ideal economic conditions and disconnected the assessors of risk from those bearing it."
Peter Schiff: "The subprime mortgage crisis is merely the tip of a very large iceberg. Beneath the surface lies not only a sea of tenuous loans to prime borrowers, but also an assortment of other liabilities backed by auto loans and credit card debit. Now that home equity extractions, "zero percent auto financing" and "zero interest" credit card rollovers are much harder to come by, Americans must do without the credit lifelines that have previously kept them afloat."
More than 10 North American banks and fund managers have collectively injected $3bn into their money market and cash funds since October to stem losses. Janus, the fund manager, this week became the latest to bail out its money market funds. It put in $109m to buy troubled asset-backed securities from its funds. Half a dozen firms have made similar moves.
Nouriel Roubini: "The latest macro and financial news confirm that the US is headed towards a hard landing – specifically a serious recession - as a vicious circle of worsening real fundamentals is perversely interacting with severely worsening financial fundamentals and a severe liquidity and credit crunch."
According to AMG Data Services, Including ETF activity, Equity funds report net cash inflows totaling $12.645 billion in the week ended 12/26/07 with Domestic funds reporting net inflows of $9.970 billion and Non-domestic funds reporting net inflows of $2.675 billion; Excluding ETF activity, Equity funds report net cash inflows totaling $3.587 billion with Domestic funds reporting net inflows of $2.047 billion and Non-domestic funds reporting net inflows totaling $1.540 billion.
Let's look at the difference in pricing for natural gas between the U.S. market and the one in London. Natural gas here is going for $7.20. By comparison, natural gas for within-day delivery dropped 0.55 pence to 47.8 pence a therm, according to prices from ICAP Plc on Bloomberg at 11:14 a.m. London time. They were earlier today as high as 49 pence, the highest since Dec. 24. The latest price is equivalent to $9.56 a million British thermal units. A therm is 100,000 Btus.
Sales of new U.S. homes fell by a more-than-expected 9% in November to a seasonally adjusted annual rate of 647,000, the Commerce Department reported Friday. Meanwhile, October's sales rate was revised downward, to rise by 711,000, or 1.7%. They were previously estimated to have risen to a seasonally adjusted annual rate of 728,000. In the past year, sales of new U.S. homes are down 34.4% nationwide.
The Chicago purchasing-managers' index rose to 56.6% in December from 52.9% in November, according to media reports.
U.S. natural gas inventories fall 165 bcf last week, the lowest level in more than three months. Natural gas inventories have fallen nearly 550 billion cubic feet since the week ending Nov. 16. Natural-gas futures for February delivery was last up 6.6 cents, or 0.9%, at 7.266 per million British thermal units. Natural gas accounts for more than 20% of the U.S.'s total energy consumption, while petroleum products account for 40%.
Brazil said Friday that starting Jan. 1 it will require all diesel oil to contain 2 percent biodiesel in an effort to grow the market for the renewable, clean burning fuel.
Macy's Inc said it would close nine underperforming stores in Indiana, Ohio, Louisiana, Oklahoma, Utah and Texas. Macy's said the closings would affect 899 employees, who would be offered positions in nearby stores where possible.
Gold for February delivery closed up $10.9, or 1.3%, at $842.7 an ounce on the New York Mercantile Exchange.
According to Bloomberg, Legg Mason Inc. pumped $1.12 billion into two non-U.S. cash funds to prevent losses, the biggest bailout by a money manager tied to asset-backed debt sold by structured investment vehicles. The move, along with an earlier cash infusion, will reduce earnings per share by 15 cents in the quarter ending Dec. 31, the Baltimore-based company said today in a statement. Legg Mason has provided $1.47 billion to support money funds and other cash- management portfolios since November.
The Wall Street Journal reported Friday, citing analysts and unnamed executives. Citi could sell 80%-held Student Loan Corp, its North American auto-lending unit, its 24% stake in Brazil credit card operation Redecard and the bank's Japanese consumer finance business, the report said. New Citigroup CEO Vikram Pandit is considering laying off as many as 20,000 employees and shedding business lines, the report continued, citing people familiar with the matter. HSBC may sell its auto-finance business, the report added.
Japanese industrial production dipped 1.6% in November from the previous month, easing for the first time in two months, while inventory levels rose 1.6%, marking its fourth month of gains, preliminary data from the Ministry of Economy, Trade and Industry showed Friday.
ING Group said it's going to sell its reinsurance unit NRG N.V. to Warren Buffett's Berkshire Hathaway Group for approximately 300 million euros ($433 million).
U.K. house prices fell by 0.5% in December, the Nationwide Building Society said Friday. Last month, prices fell by 0.8%.
Japan's benchmark Nikkei 225 traded weaker Friday in the final trading session of year, bringing its year-to-date-performance to minus 11.1%, marking its first annual decline in five years.
A judge ordered Finish Line to complete its $1.5 billion acquisition of Genesco.
Berkshire Hathaway has begun a municipal bond insurance operation for NY State.
Further cuts in U.S. interest rates would have a "harmful effect" on the dollar and the international finance system, a Chinese finance official wrote in a commentary Thursday in an official newspaper. The dollar's fall against many currencies has prompted investors to sell dollar-denominated assets, Hu Xiaolian, director of the State Administration of Foreign Exchange, wrote in the Financial News, a newspaper published by the central bank. "If the (U.S.) federal funds rate continues to fall, this will certainly have a harmful effect on the U.S. dollar exchange rate and the international currency system," Hu wrote.
The U.S. dollar index fell further to 76.26.
According to the an article in the FT, at the end of a year in which the dollar has endured a marked decline against other currencies, an unsettling question is beginning to be voiced: can the troubles of the US currency be confined to the financial world or are they set to undermine Washington’s place on the international stage? “This is the neglected dimension of the dollar’s decline,” says Flynt Leverett, a former senior National Security Council official under President George W. Bush. “What has been said about the fall of the dollar is almost all couched in economic terms. But currency politics is very, very powerful and is part of what has made the US a hegemon for so long, like Britain before it.”
"The severity of the subprime debacle may be only a prologue to the main act, a tragedy on the grand stage in the corporate credit markets," wrote Ted Seides, the director of investments at Protégé Partners, a hedge fund of funds, in Economics and Portfolio Strategy. "Over the past decade, the exponential growth of credit derivatives has created unprecedented amounts of financial leverage on corporate credit," he added. "Similar to the growth of subprime mortgages, the rapid rise of credit products required ideal economic conditions and disconnected the assessors of risk from those bearing it."
Peter Schiff: "The subprime mortgage crisis is merely the tip of a very large iceberg. Beneath the surface lies not only a sea of tenuous loans to prime borrowers, but also an assortment of other liabilities backed by auto loans and credit card debit. Now that home equity extractions, "zero percent auto financing" and "zero interest" credit card rollovers are much harder to come by, Americans must do without the credit lifelines that have previously kept them afloat."
More than 10 North American banks and fund managers have collectively injected $3bn into their money market and cash funds since October to stem losses. Janus, the fund manager, this week became the latest to bail out its money market funds. It put in $109m to buy troubled asset-backed securities from its funds. Half a dozen firms have made similar moves.
Nouriel Roubini: "The latest macro and financial news confirm that the US is headed towards a hard landing – specifically a serious recession - as a vicious circle of worsening real fundamentals is perversely interacting with severely worsening financial fundamentals and a severe liquidity and credit crunch."
According to AMG Data Services, Including ETF activity, Equity funds report net cash inflows totaling $12.645 billion in the week ended 12/26/07 with Domestic funds reporting net inflows of $9.970 billion and Non-domestic funds reporting net inflows of $2.675 billion; Excluding ETF activity, Equity funds report net cash inflows totaling $3.587 billion with Domestic funds reporting net inflows of $2.047 billion and Non-domestic funds reporting net inflows totaling $1.540 billion.
Let's look at the difference in pricing for natural gas between the U.S. market and the one in London. Natural gas here is going for $7.20. By comparison, natural gas for within-day delivery dropped 0.55 pence to 47.8 pence a therm, according to prices from ICAP Plc on Bloomberg at 11:14 a.m. London time. They were earlier today as high as 49 pence, the highest since Dec. 24. The latest price is equivalent to $9.56 a million British thermal units. A therm is 100,000 Btus.
Sales of new U.S. homes fell by a more-than-expected 9% in November to a seasonally adjusted annual rate of 647,000, the Commerce Department reported Friday. Meanwhile, October's sales rate was revised downward, to rise by 711,000, or 1.7%. They were previously estimated to have risen to a seasonally adjusted annual rate of 728,000. In the past year, sales of new U.S. homes are down 34.4% nationwide.
The Chicago purchasing-managers' index rose to 56.6% in December from 52.9% in November, according to media reports.
U.S. natural gas inventories fall 165 bcf last week, the lowest level in more than three months. Natural gas inventories have fallen nearly 550 billion cubic feet since the week ending Nov. 16. Natural-gas futures for February delivery was last up 6.6 cents, or 0.9%, at 7.266 per million British thermal units. Natural gas accounts for more than 20% of the U.S.'s total energy consumption, while petroleum products account for 40%.
Brazil said Friday that starting Jan. 1 it will require all diesel oil to contain 2 percent biodiesel in an effort to grow the market for the renewable, clean burning fuel.
Macy's Inc said it would close nine underperforming stores in Indiana, Ohio, Louisiana, Oklahoma, Utah and Texas. Macy's said the closings would affect 899 employees, who would be offered positions in nearby stores where possible.
Gold for February delivery closed up $10.9, or 1.3%, at $842.7 an ounce on the New York Mercantile Exchange.
According to Bloomberg, Legg Mason Inc. pumped $1.12 billion into two non-U.S. cash funds to prevent losses, the biggest bailout by a money manager tied to asset-backed debt sold by structured investment vehicles. The move, along with an earlier cash infusion, will reduce earnings per share by 15 cents in the quarter ending Dec. 31, the Baltimore-based company said today in a statement. Legg Mason has provided $1.47 billion to support money funds and other cash- management portfolios since November.
Thursday, December 27, 2007
More Hard Data
12/27/07 More Hard Data
Citigroup may need to cut its dividend by 40% due to CDO-related write-downs of $18.7 billion in the fourth quarter, Goldman Sachs estimated. The broker previously estimated an $11 billion write-down. Merrill Lynch have to take an $11.5 billion write-off, compared to Goldman's earlier estimate of $6 billion, and it now sees J.P. Morgan Chase write-downs of $3.4 billion, up from an earlier estimate of $1.7 billion.
EMC Corp.said that it will acquire Document Sciences Corporation for around $85 million in cash. Document Sciences stockholders will receive $14.75 in cash for each share of common stock, and is expected to be completed in the first quarter of 2008.
New homes construction in Japan fell 27% in November to 84,252 units from a year earlier, declining for the fifth straight month, according to data released by the Ministry of Land, Infrastructure and Transport Thursday.
Japan's economy accounted for less than 10% of nominal global gross domestic product in 2006, the first time it has fallen below the 10% threshold in 24 years, according to reports. Japan's economy contracted 4% in nominal terms to 4.37 trillion yen from a year earlier, accounting for 9.1% of the world gross domestic product in 2006, the Nikkei business daily reported, citing figures released by the Cabinet Office Thursday.
U.S. overall consumer confidence fell last week, according to an ABC News/Washington Post poll released Wednesday.
The consumer comfort index fell 6 points to -23 in the week ended Dec. 23, from -17 a week earlier.
According to the NY Times, a new regulation lets employers establish two classes of retirees, with more benefits for those under 65 and fewer, or none at all, for those older.
The yuan rose the most since China ended a fixed exchange rate to the dollar in 2005 as the central bank sought to curb inflation.
According to Rigzone, the largest energy contract in Iran was signed when the country inked a deal with Malaysia to develop two gas fields, Golshan and Ferdows, in southern Iran, as well as offshore fields.
French natural-gas reserves fell to 75.9 percent full in the week to Dec. 23 as traders pumped the fuel out of underground storage to meet demand.
Michelle Leder: "A quick skim of recent 10-Ds turns up this fascinating exhibit filed last week by BMW Vehicle Lease Trust 2007-1. Because this is a relatively new trust, there’s not enough history to go back a year. But going back one month shows a small, but potentially dangerous trend: at the end of October, there was only 1 loan in this trust that was 90 days or more late. But by the end of November, that had risen to 30. Granted, it’s a small number, but it’s still a 30-fold increase from one month to the next. And it’s presumably in a segment of the economy that’s about as far removed from sub-prime mortgages as you can get."
Richard Daughty: "Central banks believe that death by inflation is preferable to death by deflation. And now you know why I cry myself to sleep muttering "We're freaking doomed! We're freaking doomed!"
The European Central Bank drained 145.64 billion euros from euro-zone money markets on Thursday, within its upper limit of 150 billion euros, aiming to keep short term interest rates in line with benchmark lending rates.
U.S. mortgage applications sank last week to the lowest level since the end of last year despite falling borrowing costs, an industry trade group said Thursday.
The Mortgage Bankers Association's seasonally adjusted mortgage application index fell 7.6 percent in the week ending Dec. 21 to 603.8, its lowest reading since falling to 575.6 in the Dec. 29, 2006 week.
Seasonally adjusted initial jobless claims rose 1,000 to 349,000 in the week ended Dec. 22, the government reported Thursday. The four-week moving average for initial jobless claims fell 1,000 to 342,500, according to the Labor Department. The prior week's initial jobless claims level was revised to 348,000 from an earlier estimate of 346,000. Continuing jobless claims gained 75,000, reaching 2.71 million for the week ended Dec. 15. The four-week moving average for continuing jobless claims rose 13,500 to 2.64 million. Continuing jobless claims and the four-week moving average for those claims both reached their highest levels in more than two years.
A big jump in demand for civilian aircraft pushed durable goods orders up for the first time in four months in November, the Commerce Department reported Thursday. Excluding transportation orders, however, durable goods orders fell by 0.7% in November. New orders for non-defense aircraft and parts shot up by 20.9% in November, the data show. However, new orders for defense aircraft and parts dropped by 20.1% in the same month. Demand for capital goods also softened, suggesting business investment will be a drag on economic growth.
Boeing Co. orders more than tripled in November, to 177 planes, from the prior month. Bookings at the world's second- largest commercial plane maker have averaged 122 a month over the last three months.
Rio Tinto Ltd/Plc on Thursday hit back at rival BHP Billiton's hostile approach, playing up its independent growth prospects amid renewed speculation of a Chinese-backed counter bid. Beijing has sanctioned major state-owned corporates to look into three strategies for mounting counter-bids for Rio, including forming a domestic consortium; local players working in concert with foreign companies; or buying shares on the open market, according to a December 24 report in the South China Morning Post.
There are media reports of the assassination of Pakistani opposition leader Benazir Bhutto. Bhutto was seen as the front-runner to become Pakistan's next prime minister in elections scheduled for next month.
U.S. consumer confidence rose in December due to an increase in short-term expectations, though consumers "remain far from optimistic," the Conference Board reported Thursday. The consumer confidence index rose to 88.6 from a revised reading of 87.8 in November. However, December's reading is below last year's level of 110.0, as consumers have been concerned about higher energy prices and falling home prices.
Crude inventories fell by 3.3 million barrels to 293.6 million barrels in the week ending Dec. 21, U.S. Energy Information Administration reported on Thursday. Gasoline supplies rose by 700,000 barrels in the latest week, while distillate stocks fell by 2.8 million barrels, EIA reported. Crude for February delivery closed up 65 cents, or 0.7%, at $96.62 a barrel on the New York Mercantile Exchange.
The dollar is down 9.9 percent this year to $1.4502 per euro, after weakening 10 percent in 2006. The U.S. dollar index closed down at 76.76. "Americans will certainly find global hegemony a lot more expensive if the dollar falls off its perch," adds Kenneth Rogoff, former chief economist of the International Monetary Fund, in an article published this month. He maintains that the US has been fortunate to be able to use the huge low-interest dollar holdings of the central banks of China and Japan to finance higher return investments elsewhere, "but between the sub-prime US mortgage crisis and the dollar's ongoing decline, America's exorbitant privilege now looks a bit shaky . . . American voters, who are famously loath to increase taxes, might start thinking a lot harder about the real economic costs of their country's superpower status."
The Dow Jones Industrial Average fell 192 points, or 1.4%, at 13,359.61 points at the unofficial 4 p.m. close. The S&P 500 Index dropped 21.36 points, or 1.4%, at 1,476 and the Nasdaq Composite declined 47 points, or 1.8%, at 2,676.
Google Inc. increased its lead in the U.S. Internet search market in November at the expense of both Yahoo Inc. and Microsoft Corp., according to data released Thursday by Nielsen Online. Google's share of the market grew to 57.7% in November from 55.5% in October, according to Nielsen. Google rival Yahoo, meanwhile, saw its share of market dwindle to 17.9% from 18.8%. Microsoft also saw its share of the search market fall, to 12% in November from 13.8% in the previous month, according to Nielsen.
Gold for February delivery ended the session up $2.3, or 0.3%, at $831 .8 an ounce on the New York Mercantile Exchange.
Merrill Lynch & Co plans to announce about 1,600 layoffs after disclosing fourth-quarter write-downs, CNBC reported on Thursday.
More than three million people will have to wait until February to get their tax refunds because of Congress's late fix to the alternative minimum tax, the IRS said Thursday.
Citigroup may need to cut its dividend by 40% due to CDO-related write-downs of $18.7 billion in the fourth quarter, Goldman Sachs estimated. The broker previously estimated an $11 billion write-down. Merrill Lynch have to take an $11.5 billion write-off, compared to Goldman's earlier estimate of $6 billion, and it now sees J.P. Morgan Chase write-downs of $3.4 billion, up from an earlier estimate of $1.7 billion.
EMC Corp.said that it will acquire Document Sciences Corporation for around $85 million in cash. Document Sciences stockholders will receive $14.75 in cash for each share of common stock, and is expected to be completed in the first quarter of 2008.
New homes construction in Japan fell 27% in November to 84,252 units from a year earlier, declining for the fifth straight month, according to data released by the Ministry of Land, Infrastructure and Transport Thursday.
Japan's economy accounted for less than 10% of nominal global gross domestic product in 2006, the first time it has fallen below the 10% threshold in 24 years, according to reports. Japan's economy contracted 4% in nominal terms to 4.37 trillion yen from a year earlier, accounting for 9.1% of the world gross domestic product in 2006, the Nikkei business daily reported, citing figures released by the Cabinet Office Thursday.
U.S. overall consumer confidence fell last week, according to an ABC News/Washington Post poll released Wednesday.
The consumer comfort index fell 6 points to -23 in the week ended Dec. 23, from -17 a week earlier.
According to the NY Times, a new regulation lets employers establish two classes of retirees, with more benefits for those under 65 and fewer, or none at all, for those older.
The yuan rose the most since China ended a fixed exchange rate to the dollar in 2005 as the central bank sought to curb inflation.
According to Rigzone, the largest energy contract in Iran was signed when the country inked a deal with Malaysia to develop two gas fields, Golshan and Ferdows, in southern Iran, as well as offshore fields.
French natural-gas reserves fell to 75.9 percent full in the week to Dec. 23 as traders pumped the fuel out of underground storage to meet demand.
Michelle Leder: "A quick skim of recent 10-Ds turns up this fascinating exhibit filed last week by BMW Vehicle Lease Trust 2007-1. Because this is a relatively new trust, there’s not enough history to go back a year. But going back one month shows a small, but potentially dangerous trend: at the end of October, there was only 1 loan in this trust that was 90 days or more late. But by the end of November, that had risen to 30. Granted, it’s a small number, but it’s still a 30-fold increase from one month to the next. And it’s presumably in a segment of the economy that’s about as far removed from sub-prime mortgages as you can get."
Richard Daughty: "Central banks believe that death by inflation is preferable to death by deflation. And now you know why I cry myself to sleep muttering "We're freaking doomed! We're freaking doomed!"
The European Central Bank drained 145.64 billion euros from euro-zone money markets on Thursday, within its upper limit of 150 billion euros, aiming to keep short term interest rates in line with benchmark lending rates.
U.S. mortgage applications sank last week to the lowest level since the end of last year despite falling borrowing costs, an industry trade group said Thursday.
The Mortgage Bankers Association's seasonally adjusted mortgage application index fell 7.6 percent in the week ending Dec. 21 to 603.8, its lowest reading since falling to 575.6 in the Dec. 29, 2006 week.
Seasonally adjusted initial jobless claims rose 1,000 to 349,000 in the week ended Dec. 22, the government reported Thursday. The four-week moving average for initial jobless claims fell 1,000 to 342,500, according to the Labor Department. The prior week's initial jobless claims level was revised to 348,000 from an earlier estimate of 346,000. Continuing jobless claims gained 75,000, reaching 2.71 million for the week ended Dec. 15. The four-week moving average for continuing jobless claims rose 13,500 to 2.64 million. Continuing jobless claims and the four-week moving average for those claims both reached their highest levels in more than two years.
A big jump in demand for civilian aircraft pushed durable goods orders up for the first time in four months in November, the Commerce Department reported Thursday. Excluding transportation orders, however, durable goods orders fell by 0.7% in November. New orders for non-defense aircraft and parts shot up by 20.9% in November, the data show. However, new orders for defense aircraft and parts dropped by 20.1% in the same month. Demand for capital goods also softened, suggesting business investment will be a drag on economic growth.
Boeing Co. orders more than tripled in November, to 177 planes, from the prior month. Bookings at the world's second- largest commercial plane maker have averaged 122 a month over the last three months.
Rio Tinto Ltd/Plc on Thursday hit back at rival BHP Billiton's hostile approach, playing up its independent growth prospects amid renewed speculation of a Chinese-backed counter bid. Beijing has sanctioned major state-owned corporates to look into three strategies for mounting counter-bids for Rio, including forming a domestic consortium; local players working in concert with foreign companies; or buying shares on the open market, according to a December 24 report in the South China Morning Post.
There are media reports of the assassination of Pakistani opposition leader Benazir Bhutto. Bhutto was seen as the front-runner to become Pakistan's next prime minister in elections scheduled for next month.
U.S. consumer confidence rose in December due to an increase in short-term expectations, though consumers "remain far from optimistic," the Conference Board reported Thursday. The consumer confidence index rose to 88.6 from a revised reading of 87.8 in November. However, December's reading is below last year's level of 110.0, as consumers have been concerned about higher energy prices and falling home prices.
Crude inventories fell by 3.3 million barrels to 293.6 million barrels in the week ending Dec. 21, U.S. Energy Information Administration reported on Thursday. Gasoline supplies rose by 700,000 barrels in the latest week, while distillate stocks fell by 2.8 million barrels, EIA reported. Crude for February delivery closed up 65 cents, or 0.7%, at $96.62 a barrel on the New York Mercantile Exchange.
The dollar is down 9.9 percent this year to $1.4502 per euro, after weakening 10 percent in 2006. The U.S. dollar index closed down at 76.76. "Americans will certainly find global hegemony a lot more expensive if the dollar falls off its perch," adds Kenneth Rogoff, former chief economist of the International Monetary Fund, in an article published this month. He maintains that the US has been fortunate to be able to use the huge low-interest dollar holdings of the central banks of China and Japan to finance higher return investments elsewhere, "but between the sub-prime US mortgage crisis and the dollar's ongoing decline, America's exorbitant privilege now looks a bit shaky . . . American voters, who are famously loath to increase taxes, might start thinking a lot harder about the real economic costs of their country's superpower status."
The Dow Jones Industrial Average fell 192 points, or 1.4%, at 13,359.61 points at the unofficial 4 p.m. close. The S&P 500 Index dropped 21.36 points, or 1.4%, at 1,476 and the Nasdaq Composite declined 47 points, or 1.8%, at 2,676.
Google Inc. increased its lead in the U.S. Internet search market in November at the expense of both Yahoo Inc. and Microsoft Corp., according to data released Thursday by Nielsen Online. Google's share of the market grew to 57.7% in November from 55.5% in October, according to Nielsen. Google rival Yahoo, meanwhile, saw its share of market dwindle to 17.9% from 18.8%. Microsoft also saw its share of the search market fall, to 12% in November from 13.8% in the previous month, according to Nielsen.
Gold for February delivery ended the session up $2.3, or 0.3%, at $831 .8 an ounce on the New York Mercantile Exchange.
Merrill Lynch & Co plans to announce about 1,600 layoffs after disclosing fourth-quarter write-downs, CNBC reported on Thursday.
More than three million people will have to wait until February to get their tax refunds because of Congress's late fix to the alternative minimum tax, the IRS said Thursday.
Wednesday, December 26, 2007
Hard Data
12/27/07 Hard Data
Nouriel Roubini: "The first hard data on the retail sales during the holiday season (going from Black Friday until December 24th) are in: excluding spending on gasoline retail sales were up a mediocre 2.4% relative to a year ago; including gasoline they were up 3.6% on the lowest end of forecasters’ expectations."
Holiday retail spending rose 3.6% from a year earlier, led by luxury goods and electronic-commerce purchases, MasterCard Advisors LLC said on Wednesday. Sales "came in just above the lower end of the range we were expecting, maintaining the slower, modest growth we've been seeing throughout the year," said Michael McNamara, vice president of research and analysis for MasterCard Advisors, in a statement. Apparel lagged and electronics sales rose "a very moderate 2.7%," the firm said. Gasoline prices were 30% to 35% higher than they were a year earlier, while the e-commerce segment may have been boosted by inclement weather, the firm said.
Kansai Electric Power Co. and Sumitomo Corp. will join forces with Kazakhstan's state-owned Kazatomprom to process uranium ore into nuclear fuel for power generation, according to reports. Japanese firm Nuclear Fuel Industries Ltd. will also be involved in the project, which is due to be formally announced in Kazakhstan later Wednesday, the Nikkei business daily reported.
Berkshire Hathaway and Marmon Holdings announced that Berkshire will purchase 60% of Marmon Holdings, a private company owned by trusts benefiting members of the Pritzker Family of Chicago. Berkshire will put up $4.5 bln for the stake and will acquire the remaining 40% through staged acquisitions over a five to six year period, to be based on future earnings. Marmon will make a substantial distribution of cash and assets to shareholders prior to the expected closing in the first quarter of 2008. The Marmon Group is an international association of more than 125 manufacturing and service businesses. Marmon, owned by trusts for the benefit of members of the Pritzker family, was an ailing manufacturing operation in Ohio when it was acquired by Jay and Robert Pritzker in 1953. It has collective revenue of about $7 billion and includes business interests ranging from construction and railroad and intermodal tank cars to specialty pipes, metal fasteners, crane leasing, store fixtures and food-preparation equipment. It employs about 21,000. Marmon has more than tripled its operating income and improved operating margins from 4.9 percent to 12.4 percent in the past five years.
China will scrap import duties on copper, coal and aluminum, and halve tax on oil products from the beginning of next year. Export taxes on semi-finished steel products will be raised to as much as 25 per cent and a 15 per cent export tax will be imposed on some stainless steel, welded pipes and other steel products in an effort to cool investment in the steel sector, the ministry added.
China, the world's second-biggest energy consumer, plans to increase crude oil imports through long-term contracts and cut spot purchases to cushion against price and supply fluctuations.
According to the WSJ, the credit crunch triggered by the downturn in the housing market is creating problems in commercial real estate, driving down prices of office buildings, shopping malls and apartment complexes, and leaving some owners scrambling for cash.
Crude oil rose for a third day in New York on concern shipments from Iraq may be disrupted after the Turkish military attacked bases of Kurdish rebels in northern Iraq.
Sentiment among Japan's small and midsize companies, especially in the housing sector, fell to its most pessimistic level in nearly three years in December, a government-affiliated lender said Wednesday. The sales outlook index, which measures the percentage of companies predicting that sales will improve over the next three months minus those saying it will worsen, stood at 6.4 in December from November's 8.9 reading, according to a business sentiment survey by the Japan Finance Corporation for Small and Medium Enterprise. That's the lowest since January in 2005 when the index had also fallen to 6.4.
According to Bloomberg, Kazuo Mizuno, chief economist at Mitsubishi UFJ Securities, the brokerage arm of Japan's largest bank (Mitsubishi UFJ Financial Group, predicts the dollar may fall 20% against the yen to ¥95/$1 in 2008.
Amazon.com Inc. said Wednesday its 2007 holiday season was its strongest to date, with Nintendo Wii game systems and the "Harry Potter and the Order of the Phoenix" DVD among its top-selling products. The online retailer said it sold about 17 Nintendo Wiis per second when the product was available. The fifth Harry Potter movie led DVD sales, followed by "Planet Earth: The Complete BBC Series" and "Pirates of the Caribbean: At World's End."
Mike Shedlock: "Wal-Mart Stores Inc. and other big-box retailers — buffeted by sagging sales and the housing slump — are pulling the plug on new-store plans in and around Chicago. The pullback is another sign of the darkening outlook for 2008, as retailers turn cautious on expansion."
U.S. home prices fell in October for the 10th consecutive month, declining a record 6.7 percent compared with a year ago, according to the Standard & Poor's/Case-Shiller home price index. "No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," said Robert Shiller, who helped create the index, in a statement Wednesday. The S&P/Case-Shiller home price index tracks prices of existing single-family homes in 10 metropolitan areas compared with a year earlier. A broader index of 20 metropolitan areas fell 6.1 percent.
DemocracyNow.org: "We speak with a reporter from the Army Times who gives an inside account of how an army unit committed mutiny and refused to carry out orders in Iraq. After an IED attack killed five more members of Charlie 1-26, members of 2nd Platoon gathered for a meeting and determined they could no longer function professionally. Several platoon members were afraid their anger could set loose a massacre."
The Managing Director of the Management Bureau for Iran Electricity Network Mas'oud Hojjat said Iran is ready to commence the export of 600 million kilowatt electricity to Turkey, according to Fars News Agency.
FedEx Corp. said its freight segment will implement a 5.5% general rate increase, effective Jan. 14, and its long-haul less-than-truckload company will implement a similar increase for its general rates.
The dollar dropped as much as 0.6 percent against the euro after gaining 1.6 percent in the past two weeks.
Platinum futures for April delivery rose $11.10, or 0.7 percent, to $1,541.20 an ounce at 9:35 a.m. on the New York Mercantile Exchange, the highest ever.
President Bush on Wednesday signed a $555 billion bill that funds the Iraq war well into next year and keeps government agencies running through September.
Apple Inc. shares on Wednesday hit $200 for the first time in the company's history.
Crude futures for February delivery closed up $1.84, or 2%, at $95.97 a barrel on the New York Mercantile Exchange.
Gold futures for February delivery closed up $13, or 1.6%, at $829.5 an ounce on the New York Mercantile Exchange. The dollar index, which tracks the value of the greenback against a basket of other major currencies, fell for a third day, down 0.6% to 77.14, the lowest level since Dec. 17.
Cerberus Capital Management paid a $100 million termination fee to United Rentals Inc. Wednesday.
Nouriel Roubini: "The first hard data on the retail sales during the holiday season (going from Black Friday until December 24th) are in: excluding spending on gasoline retail sales were up a mediocre 2.4% relative to a year ago; including gasoline they were up 3.6% on the lowest end of forecasters’ expectations."
Holiday retail spending rose 3.6% from a year earlier, led by luxury goods and electronic-commerce purchases, MasterCard Advisors LLC said on Wednesday. Sales "came in just above the lower end of the range we were expecting, maintaining the slower, modest growth we've been seeing throughout the year," said Michael McNamara, vice president of research and analysis for MasterCard Advisors, in a statement. Apparel lagged and electronics sales rose "a very moderate 2.7%," the firm said. Gasoline prices were 30% to 35% higher than they were a year earlier, while the e-commerce segment may have been boosted by inclement weather, the firm said.
Kansai Electric Power Co. and Sumitomo Corp. will join forces with Kazakhstan's state-owned Kazatomprom to process uranium ore into nuclear fuel for power generation, according to reports. Japanese firm Nuclear Fuel Industries Ltd. will also be involved in the project, which is due to be formally announced in Kazakhstan later Wednesday, the Nikkei business daily reported.
Berkshire Hathaway and Marmon Holdings announced that Berkshire will purchase 60% of Marmon Holdings, a private company owned by trusts benefiting members of the Pritzker Family of Chicago. Berkshire will put up $4.5 bln for the stake and will acquire the remaining 40% through staged acquisitions over a five to six year period, to be based on future earnings. Marmon will make a substantial distribution of cash and assets to shareholders prior to the expected closing in the first quarter of 2008. The Marmon Group is an international association of more than 125 manufacturing and service businesses. Marmon, owned by trusts for the benefit of members of the Pritzker family, was an ailing manufacturing operation in Ohio when it was acquired by Jay and Robert Pritzker in 1953. It has collective revenue of about $7 billion and includes business interests ranging from construction and railroad and intermodal tank cars to specialty pipes, metal fasteners, crane leasing, store fixtures and food-preparation equipment. It employs about 21,000. Marmon has more than tripled its operating income and improved operating margins from 4.9 percent to 12.4 percent in the past five years.
China will scrap import duties on copper, coal and aluminum, and halve tax on oil products from the beginning of next year. Export taxes on semi-finished steel products will be raised to as much as 25 per cent and a 15 per cent export tax will be imposed on some stainless steel, welded pipes and other steel products in an effort to cool investment in the steel sector, the ministry added.
China, the world's second-biggest energy consumer, plans to increase crude oil imports through long-term contracts and cut spot purchases to cushion against price and supply fluctuations.
According to the WSJ, the credit crunch triggered by the downturn in the housing market is creating problems in commercial real estate, driving down prices of office buildings, shopping malls and apartment complexes, and leaving some owners scrambling for cash.
Crude oil rose for a third day in New York on concern shipments from Iraq may be disrupted after the Turkish military attacked bases of Kurdish rebels in northern Iraq.
Sentiment among Japan's small and midsize companies, especially in the housing sector, fell to its most pessimistic level in nearly three years in December, a government-affiliated lender said Wednesday. The sales outlook index, which measures the percentage of companies predicting that sales will improve over the next three months minus those saying it will worsen, stood at 6.4 in December from November's 8.9 reading, according to a business sentiment survey by the Japan Finance Corporation for Small and Medium Enterprise. That's the lowest since January in 2005 when the index had also fallen to 6.4.
According to Bloomberg, Kazuo Mizuno, chief economist at Mitsubishi UFJ Securities, the brokerage arm of Japan's largest bank (Mitsubishi UFJ Financial Group, predicts the dollar may fall 20% against the yen to ¥95/$1 in 2008.
Amazon.com Inc. said Wednesday its 2007 holiday season was its strongest to date, with Nintendo Wii game systems and the "Harry Potter and the Order of the Phoenix" DVD among its top-selling products. The online retailer said it sold about 17 Nintendo Wiis per second when the product was available. The fifth Harry Potter movie led DVD sales, followed by "Planet Earth: The Complete BBC Series" and "Pirates of the Caribbean: At World's End."
Mike Shedlock: "Wal-Mart Stores Inc. and other big-box retailers — buffeted by sagging sales and the housing slump — are pulling the plug on new-store plans in and around Chicago. The pullback is another sign of the darkening outlook for 2008, as retailers turn cautious on expansion."
U.S. home prices fell in October for the 10th consecutive month, declining a record 6.7 percent compared with a year ago, according to the Standard & Poor's/Case-Shiller home price index. "No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," said Robert Shiller, who helped create the index, in a statement Wednesday. The S&P/Case-Shiller home price index tracks prices of existing single-family homes in 10 metropolitan areas compared with a year earlier. A broader index of 20 metropolitan areas fell 6.1 percent.
DemocracyNow.org: "We speak with a reporter from the Army Times who gives an inside account of how an army unit committed mutiny and refused to carry out orders in Iraq. After an IED attack killed five more members of Charlie 1-26, members of 2nd Platoon gathered for a meeting and determined they could no longer function professionally. Several platoon members were afraid their anger could set loose a massacre."
The Managing Director of the Management Bureau for Iran Electricity Network Mas'oud Hojjat said Iran is ready to commence the export of 600 million kilowatt electricity to Turkey, according to Fars News Agency.
FedEx Corp. said its freight segment will implement a 5.5% general rate increase, effective Jan. 14, and its long-haul less-than-truckload company will implement a similar increase for its general rates.
The dollar dropped as much as 0.6 percent against the euro after gaining 1.6 percent in the past two weeks.
Platinum futures for April delivery rose $11.10, or 0.7 percent, to $1,541.20 an ounce at 9:35 a.m. on the New York Mercantile Exchange, the highest ever.
President Bush on Wednesday signed a $555 billion bill that funds the Iraq war well into next year and keeps government agencies running through September.
Apple Inc. shares on Wednesday hit $200 for the first time in the company's history.
Crude futures for February delivery closed up $1.84, or 2%, at $95.97 a barrel on the New York Mercantile Exchange.
Gold futures for February delivery closed up $13, or 1.6%, at $829.5 an ounce on the New York Mercantile Exchange. The dollar index, which tracks the value of the greenback against a basket of other major currencies, fell for a third day, down 0.6% to 77.14, the lowest level since Dec. 17.
Cerberus Capital Management paid a $100 million termination fee to United Rentals Inc. Wednesday.
Tuesday, December 25, 2007
The Day After
12/26/07 The Day After
Post-Christmas sales have become even more important to retailers amid the rising popularity of gift cards, analysts said. Any help to ring in additional sales in a season that's expected to grow at their slowest pace in five years would also be welcome relief, they said.
According to ShopperTrak, Wednesday is expected to rank as the No. 6 holiday shopping day this year, after this past weekend and Black Friday -- the day after Thanksgiving that typically marks the start of the holiday shopping season, retailers' biggest selling period.
Costco Wholesale Corp. has had "pretty good" holiday sales and has kept inventories under control to avoid markdowns, Chief Financial Officer Richard Galanti told The Wall Street Journal. Selling well were more expensive gift packs with healthy and beauty items and those with chocolate and nuts. Also selling well, the executive told the paper, were women's outerwear and DVDs, while jewelry sales lagged.
Confidence among large Japanese companies declined in the three months to December, according to a government survey. An index tracking confidence among large manufacturers came in at 5.2 in the December-ended quarter compared with 7.7 in the preceding quarter, while confidence among large non-manufacturers fell to minus 2.2 from 5.3 in the preceding quarter, according to the Ministry of Finance's Business Outlook Survey.
Copper has risen more than 10% since Dec. 19.
The Treasury awarded $20 billion in 3-month bills at 3.28%, compared with last week's 3.0%. The bid-to-cover -- which measures bids received to bids tendered -- was 2.32, unchanged from last week. The indirect bid, a carefully watched category that includes foreign buyers, was 26.4%, up from 16.0% the week before. The Treasury also awarded $19 billion in 6-month bills at 3.49% compared with 3.28% last week. The indirect bid rose to 37.1% from 30.5% and the bid-to-cover rose to 2.61 from 2.34 last week. The auction "was well-bid, helped by the $2 billion cut in offering size to $39 billion, though light trading conditions limited demand," wrote analysts at Action Economics.
Target Corp warned on Monday that its December same-store sales were below expectations and said it now expects sales at stores open at least a year in the range of down 1 percent to up 1 percent, adjusted for a calendar shift.
Allan Sloan: "Am I really saying that the Fed, which to many people still seems omniscient and omnipotent, has lost much of its mojo? I am. Why should you care? Because if the Fed continues to lose clout, it will be even harder than it is now to rescue the world's financial system when the next disaster strikes the markets. And there's always a next disaster."
"Liquidity doesn't do anything in this situation," says Anna Schwartz, the doyenne of US monetarism and life-time student (with Milton Friedman) of the Great Depression. "It cannot deal with the underlying fear that lots of firms are going bankrupt. The banks and the hedge funds have not fully acknowledged who is in trouble. That is the critical issue," she adds.
Bill Bonner: "Hear that noise? It's not sleigh bells ringing. It's not children singing. No, that's the sound of pumps working night and day. In addition to cutting rates, the Fed and the European Central bank are pushing up and down on their pumps as hard as they can - lending extra money as fast as borrowers will take it. The idea is to replace the liquidity that the markets are destroying…and prevent the free market from working. That is, the feds try to artificially increase the supply of cash and credit…so as to avoid correcting mistakes. As we explained on Friday, it's almost impossible for an economy to correct mistakes when the price of money is going down. Instead, mistakes are typically made worse. A guy who is deeply in debt, for example, finds that the easiest thing to do is to borrow more! Already, the feds have practically sunk the entire economy with too much debt; now they're trying to put more debt into the system.
After previously rebuffing an earlier buyout bid from rival CommScope, Westchester-based Andrew agreed six months ago to a $15-a-share offer from the North Carolina company. Under terms of the agreement, Andrew stockholders would receive $13.50 a share in cash, and an additional $1.50 in either cash or CommScope common stock, or a combination of the two.
On Monday, Commscope said the $1.50-a-share element will be in the form of CommScope stock, and said that based on the formula spelled out in the agreement, Andrew holders will now receive each of their shares $13.50 in cash and 0. 03154 CommScope shares.
Capital infusion comes at a price. In the case of Merrill Lynch, the discount was a stiff 17%.
According to Rigzone, Kazakh Energy Minister Saouat Mynbaiev said the state is poised to double its stake in the giant Kashagan oil field project to around 16% in a bid to settle a dispute with consortium partners over delays and cost overruns.
Cosmopolitan cities like New York and Miami have long served as second homes for affluent and accomplished foreigners. But the trend is growing. One in five American realtors has sold a home to a foreign investor in the past year, according to the National Association of Realtors. The events of 2007 have made the U.S. much more affordable for international home buyers. Severe dollar declines against the euro and pound have made U.S. homes much cheaper for Europeans. But even foreign buyers without that sort of currency advantage are benefiting from sharp drops in housing prices at a time when problems in mortgage lending are keeping many Americans out of the market.
Spending fell 2.2% for the week through Dec. 22 from a year earlier, Chicago-based ShopperTrak RCT Corp. said.
According to the WSJ, iSuppli Corp has cut its 2008 expectations of global semiconductor sales from 9.3% to 7.5% due to a slowing economy.
According to DSL Reports, "the newest Sprint Connection utility is installed on my notebook. Low and behold, it has GPS capability. An interesting feature, and probably a very useful one as well."
Mike Shedlock: "The Army had been given presidential approval to expand its forces by 74,000 over all by 2010, including the reserve component, to meet the stress of Iraq and Afghanistan and to prepare for future threats...This is not a "support the troops" agenda but rather a "keep more troops in harm's way" agenda. The altered plans are not "to meet the stress of Iraq and Afghanistan and to prepare for future threats" but rather an admission that there are simply no jobs no jobs available for returning troops. Bush would rather waste $70 billion and another 10,000 lives than admit his programs are a complete failures."
Post-Christmas sales have become even more important to retailers amid the rising popularity of gift cards, analysts said. Any help to ring in additional sales in a season that's expected to grow at their slowest pace in five years would also be welcome relief, they said.
According to ShopperTrak, Wednesday is expected to rank as the No. 6 holiday shopping day this year, after this past weekend and Black Friday -- the day after Thanksgiving that typically marks the start of the holiday shopping season, retailers' biggest selling period.
Costco Wholesale Corp. has had "pretty good" holiday sales and has kept inventories under control to avoid markdowns, Chief Financial Officer Richard Galanti told The Wall Street Journal. Selling well were more expensive gift packs with healthy and beauty items and those with chocolate and nuts. Also selling well, the executive told the paper, were women's outerwear and DVDs, while jewelry sales lagged.
Confidence among large Japanese companies declined in the three months to December, according to a government survey. An index tracking confidence among large manufacturers came in at 5.2 in the December-ended quarter compared with 7.7 in the preceding quarter, while confidence among large non-manufacturers fell to minus 2.2 from 5.3 in the preceding quarter, according to the Ministry of Finance's Business Outlook Survey.
Copper has risen more than 10% since Dec. 19.
The Treasury awarded $20 billion in 3-month bills at 3.28%, compared with last week's 3.0%. The bid-to-cover -- which measures bids received to bids tendered -- was 2.32, unchanged from last week. The indirect bid, a carefully watched category that includes foreign buyers, was 26.4%, up from 16.0% the week before. The Treasury also awarded $19 billion in 6-month bills at 3.49% compared with 3.28% last week. The indirect bid rose to 37.1% from 30.5% and the bid-to-cover rose to 2.61 from 2.34 last week. The auction "was well-bid, helped by the $2 billion cut in offering size to $39 billion, though light trading conditions limited demand," wrote analysts at Action Economics.
Target Corp warned on Monday that its December same-store sales were below expectations and said it now expects sales at stores open at least a year in the range of down 1 percent to up 1 percent, adjusted for a calendar shift.
Allan Sloan: "Am I really saying that the Fed, which to many people still seems omniscient and omnipotent, has lost much of its mojo? I am. Why should you care? Because if the Fed continues to lose clout, it will be even harder than it is now to rescue the world's financial system when the next disaster strikes the markets. And there's always a next disaster."
"Liquidity doesn't do anything in this situation," says Anna Schwartz, the doyenne of US monetarism and life-time student (with Milton Friedman) of the Great Depression. "It cannot deal with the underlying fear that lots of firms are going bankrupt. The banks and the hedge funds have not fully acknowledged who is in trouble. That is the critical issue," she adds.
Bill Bonner: "Hear that noise? It's not sleigh bells ringing. It's not children singing. No, that's the sound of pumps working night and day. In addition to cutting rates, the Fed and the European Central bank are pushing up and down on their pumps as hard as they can - lending extra money as fast as borrowers will take it. The idea is to replace the liquidity that the markets are destroying…and prevent the free market from working. That is, the feds try to artificially increase the supply of cash and credit…so as to avoid correcting mistakes. As we explained on Friday, it's almost impossible for an economy to correct mistakes when the price of money is going down. Instead, mistakes are typically made worse. A guy who is deeply in debt, for example, finds that the easiest thing to do is to borrow more! Already, the feds have practically sunk the entire economy with too much debt; now they're trying to put more debt into the system.
After previously rebuffing an earlier buyout bid from rival CommScope, Westchester-based Andrew agreed six months ago to a $15-a-share offer from the North Carolina company. Under terms of the agreement, Andrew stockholders would receive $13.50 a share in cash, and an additional $1.50 in either cash or CommScope common stock, or a combination of the two.
On Monday, Commscope said the $1.50-a-share element will be in the form of CommScope stock, and said that based on the formula spelled out in the agreement, Andrew holders will now receive each of their shares $13.50 in cash and 0. 03154 CommScope shares.
Capital infusion comes at a price. In the case of Merrill Lynch, the discount was a stiff 17%.
According to Rigzone, Kazakh Energy Minister Saouat Mynbaiev said the state is poised to double its stake in the giant Kashagan oil field project to around 16% in a bid to settle a dispute with consortium partners over delays and cost overruns.
Cosmopolitan cities like New York and Miami have long served as second homes for affluent and accomplished foreigners. But the trend is growing. One in five American realtors has sold a home to a foreign investor in the past year, according to the National Association of Realtors. The events of 2007 have made the U.S. much more affordable for international home buyers. Severe dollar declines against the euro and pound have made U.S. homes much cheaper for Europeans. But even foreign buyers without that sort of currency advantage are benefiting from sharp drops in housing prices at a time when problems in mortgage lending are keeping many Americans out of the market.
Spending fell 2.2% for the week through Dec. 22 from a year earlier, Chicago-based ShopperTrak RCT Corp. said.
According to the WSJ, iSuppli Corp has cut its 2008 expectations of global semiconductor sales from 9.3% to 7.5% due to a slowing economy.
According to DSL Reports, "the newest Sprint Connection utility is installed on my notebook. Low and behold, it has GPS capability. An interesting feature, and probably a very useful one as well."
Mike Shedlock: "The Army had been given presidential approval to expand its forces by 74,000 over all by 2010, including the reserve component, to meet the stress of Iraq and Afghanistan and to prepare for future threats...This is not a "support the troops" agenda but rather a "keep more troops in harm's way" agenda. The altered plans are not "to meet the stress of Iraq and Afghanistan and to prepare for future threats" but rather an admission that there are simply no jobs no jobs available for returning troops. Bush would rather waste $70 billion and another 10,000 lives than admit his programs are a complete failures."
Monday, December 24, 2007
Eroding Credit Card Quality
12/25/07 Eroding Credit Card Quality
Americans are falling behind on their credit card payments at an alarming rate, sending delinquencies and defaults surging by double-digit percentages in the last year and prompting warnings of worse to come. An Associated Press analysis of financial data from the country's largest card issuers also found that the greatest rise was among accounts more than 90 days in arrears. Experts say these signs of the deterioration of finances of many households are partly a byproduct of the subprime mortgage crisis and could spell more trouble ahead for an already sputtering economy. "Debt eventually leaks into other areas, whether it starts with the mortgage and goes to the credit card or vice versa," said Cliff Tan, a visiting scholar at Stanford University and an expert on credit risk. "We're starting to see leaks now." The value of credit card accounts at least 30 days late jumped 26 percent to $17.3 billion in October from a year earlier at 17 large credit card trusts examined by the AP. That represented more than 4 percent of the total outstanding principal balances owed to the trusts on credit cards that were issued by banks such as Bank of America and Capital One and for retailers like Home Depot and Wal-Mart. At the same time, defaults -- when lenders essentially give up hope of ever being repaid and write off the debt -- rose 18 percent to almost $961 million in October, according to filings made by the trusts with the Securities and Exchange Commission. Serious delinquencies also are up sharply: Some of the nation's biggest lenders -- including Advanta, GE Money Bank and HSBC -- reported increases of 50 percent or more in the value of accounts that were at least 90 days delinquent when compared with the same period a year ago. The AP analyzed data representing about 325 million individual accounts held in trusts that were created by credit card issuers in order to sell the debt to investors -- similar to how many banks packaged and sold subprime mortgage loans. Together, they represent about 45 percent of the $920 billion the Federal Reserve counts as credit card debt owed by Americans. The trend carried into November. As of Friday, all of the trusts that filed reports for the month show increases in both delinquencies and defaults over November 2006, and many show sequential increases from October. Discover accounts 30 days or more delinquent jumped 25,716 from November 2006 and had increased 6,000 between October and November this year. Many economists expect delinquencies and defaults to rise further after the holiday shopping season. Mark Zandi, chief economist and co-founder of Moody's Economy.com Inc., cited mounting mortgage problems that began after this summer's subprime financial shock as one of the culprits, as well as a weakening job market in the Midwest, South and parts of the West, where real-estate markets have been particularly hard hit. "Credit card quality will continue to erode throughout next year," Zandi said.
GE Capital said it agreed to purchase most of Merrill Lynch Capital, Merrill Lynch's wholly-owned middle-market commercial finance business. Financial terms were not disclosed. The acquisition, expected to close in the first quarter of 2008, will add more than $10 billion in assets and $5 billion in commitments to GE Capital Commercial Finance's base of $260 billion.
Merrill Lynch & Co. will receive a $6.2 billion cash infusion from Singapore's sovereign wealth fund Temasek Holdings Pte. and Davis Selected Advisors LP. Temasek will invest as much as $5 billion and New York- based Davis will buy $1.2 billion of Merrill stock, the brokerage firm said in a statement.
Online shopping revenue is up 19% in the pre-Christmas period of 2007 holiday season, according to ComScore Inc. [v: scor]. The online data monitoring group said online shoppers spent $26.29 billion for the first 51 days of the holiday season, from Nov. 21 -Dec 21, compared to $22.04 billion in the same period last year. The busiest spending day so far this year was Dec. 10, dubbed "Green Monday," when shoppers spent $881 million, ComScore said.
Aggressive discounting paid off for the period's stalwarts -- Costco Wholesale Corp , J.C. Penney Co Inc , Wal-Mart Stores Inc and Barnes & Noble Inc , consumer marketing firm America's Research Group said. Retailers who failed to discount -- such as Macy's Inc , Circuit City Stores Inc and Borders Group Inc -- were the season's worst performers, the survey found.
Not so long ago, Mexico succeeded as a low-cost producer to the auto parts world. But now its niche is threatened by global competitors who can trump it with lower salaries or superior quality and productivity.
MTC Technologies, Inc. has signed a definitive merger agreement to be acquired by BAE Systems, Inc. The transaction is valued at roughly $450 million for a cash price of $24.00 per share.
The New York Times writes that Target is having an especially rough holiday season.
John Hussman: "Currently, the combination of valuations and market action (not to mention recession probability) is one that has historically been associated with negative average returns. That doesn't mean that investors who keep riding the unicycle can't make a few more small bills, but it does mean that repeated risk-taking in conditions like the present has not been rewarding, on average, and has frequently involved significant and abrupt losses...neither the Fed nor the ECB have "injected" material amounts of "liquidity" into the international banking system in recent months. This is not a call for them to do so - to some extent their hands are tied by inflation pressures, currency risks, and profigate government spending (particularly in the U.S.). The problem is that by creating the illusion that they are doing something material - when the problem in the global financial system is not confidence, but solvency - the Fed and the ECB misdirect the attention of investors, provide false hope, and ultimately do a great disservice to investors...At present, the Fed has injected less than $20 billion in total “liquidity” since March – nearly all of which has been withdrawn from the banking system as currency in circulation. Normally, the Fed would have done a “permanent” open market operation by now, to finance this increase in currency demand (which predictably grows by $30-50 billion annually). But by constantly rolling over temporary repos every week or two instead, the Fed can act as if it is “doing more.”
Capgemini shares rose on Monday after a newspaper said Wipro, India's third-biggest software exporter, was expected to bid for the French computer consultancy firm.
United Rentals Inc. said it's terminating a merger agreement with Cerberus Capital Management's acquisition vehicles RAM Holdings Inc. and RAM Acquisition Corp. The equipment rental company said it's also requesting Cerberus to pay it $100 million in termination fee as part of the original merger agreement.
Singapore's inflation rate hit a 25-year high of 4.2% in November from a year earlier, reflecting higher food and housing prices, according to reports.
Will Rogers: “If we ever pass out as a great nation we ought to put on our tombstone 'America died from a delusion that she had moral leadership'.”
Bruce Collins: "Could we experience the horrifying effects of a K-wave depressionary cycle soon? Ian Gordon, a long wave analyst and expert on the Kondratieff effect, believes we are already there.
He writes:
“This is it. The Kondratieff winter is now underway in earnest and nothing can stop it. The huge credit expansion initiated by the Maestro, the past Federal Reserve Chairman, Alan Greenspan, has now reversed. The ensuing credit contraction will be devastating. It will take down creditor and debtor alike and will result in a destructive and frightening deflationary depression.”
“While the crash only took place six months ago, I am convinced we have now passed through the worst, and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger too is safely behind us.” – Herbert Hoover, President of the United States of America, May 1, 1930
“Gentlemen, you have come sixty days too late. The depression is over.” – Herbert Hoover, President of the United States of America, responding to a delegation requesting a public works program (stimulus) to help speed US economic recovery, June 1930
MAXjet Airways PLC said Monday it has filed for Chapter 11 Bankruptcy, blaming rising fuel costs and an increase in competition for business-class travelers for its inability to raise necessary funding. The trans-Atlantic business-class only airline listed just six months ago on AIM, London's alternative market.
Bob Rodriguez, the hugely successful manager of FPA Capitaland FPA New Income, recently announced he put a halt to purchases of stocks and high-yield bonds at both portfolios on Dec. 14. His decision is a reaction to the subprime mortgage-induced credit crunch, which he expects to worsen in coming months. Rodriguez says he'll review his actions weekly, but he doesn't anticipate any change in course until February or March 2008. In his September 2007 letter to FPA Capital shareholders, he wrote that the odds of a recession were 50% or greater. But in a conversation with Morningstar, he noted that as recently as a month ago, he would have placed the odds at 70%. Now he says the odds are closer to 100%.
The British pound hit record lows against the euro on Monday for the second straight day, weighed down by falling home prices and expectations that the Bank of England will keep cutting interest rates.
Charles E. Wilson: "No one should suffer from the great delusion that any form of communism or socialism which promotes the dictatorship of the few instead of the initiative of the millions can produce a happier or more prosperous society."
Americans are falling behind on their credit card payments at an alarming rate, sending delinquencies and defaults surging by double-digit percentages in the last year and prompting warnings of worse to come. An Associated Press analysis of financial data from the country's largest card issuers also found that the greatest rise was among accounts more than 90 days in arrears. Experts say these signs of the deterioration of finances of many households are partly a byproduct of the subprime mortgage crisis and could spell more trouble ahead for an already sputtering economy. "Debt eventually leaks into other areas, whether it starts with the mortgage and goes to the credit card or vice versa," said Cliff Tan, a visiting scholar at Stanford University and an expert on credit risk. "We're starting to see leaks now." The value of credit card accounts at least 30 days late jumped 26 percent to $17.3 billion in October from a year earlier at 17 large credit card trusts examined by the AP. That represented more than 4 percent of the total outstanding principal balances owed to the trusts on credit cards that were issued by banks such as Bank of America and Capital One and for retailers like Home Depot and Wal-Mart. At the same time, defaults -- when lenders essentially give up hope of ever being repaid and write off the debt -- rose 18 percent to almost $961 million in October, according to filings made by the trusts with the Securities and Exchange Commission. Serious delinquencies also are up sharply: Some of the nation's biggest lenders -- including Advanta, GE Money Bank and HSBC -- reported increases of 50 percent or more in the value of accounts that were at least 90 days delinquent when compared with the same period a year ago. The AP analyzed data representing about 325 million individual accounts held in trusts that were created by credit card issuers in order to sell the debt to investors -- similar to how many banks packaged and sold subprime mortgage loans. Together, they represent about 45 percent of the $920 billion the Federal Reserve counts as credit card debt owed by Americans. The trend carried into November. As of Friday, all of the trusts that filed reports for the month show increases in both delinquencies and defaults over November 2006, and many show sequential increases from October. Discover accounts 30 days or more delinquent jumped 25,716 from November 2006 and had increased 6,000 between October and November this year. Many economists expect delinquencies and defaults to rise further after the holiday shopping season. Mark Zandi, chief economist and co-founder of Moody's Economy.com Inc., cited mounting mortgage problems that began after this summer's subprime financial shock as one of the culprits, as well as a weakening job market in the Midwest, South and parts of the West, where real-estate markets have been particularly hard hit. "Credit card quality will continue to erode throughout next year," Zandi said.
GE Capital said it agreed to purchase most of Merrill Lynch Capital, Merrill Lynch's wholly-owned middle-market commercial finance business. Financial terms were not disclosed. The acquisition, expected to close in the first quarter of 2008, will add more than $10 billion in assets and $5 billion in commitments to GE Capital Commercial Finance's base of $260 billion.
Merrill Lynch & Co. will receive a $6.2 billion cash infusion from Singapore's sovereign wealth fund Temasek Holdings Pte. and Davis Selected Advisors LP. Temasek will invest as much as $5 billion and New York- based Davis will buy $1.2 billion of Merrill stock, the brokerage firm said in a statement.
Online shopping revenue is up 19% in the pre-Christmas period of 2007 holiday season, according to ComScore Inc. [v: scor]. The online data monitoring group said online shoppers spent $26.29 billion for the first 51 days of the holiday season, from Nov. 21 -Dec 21, compared to $22.04 billion in the same period last year. The busiest spending day so far this year was Dec. 10, dubbed "Green Monday," when shoppers spent $881 million, ComScore said.
Aggressive discounting paid off for the period's stalwarts -- Costco Wholesale Corp , J.C. Penney Co Inc , Wal-Mart Stores Inc and Barnes & Noble Inc , consumer marketing firm America's Research Group said. Retailers who failed to discount -- such as Macy's Inc , Circuit City Stores Inc and Borders Group Inc -- were the season's worst performers, the survey found.
Not so long ago, Mexico succeeded as a low-cost producer to the auto parts world. But now its niche is threatened by global competitors who can trump it with lower salaries or superior quality and productivity.
MTC Technologies, Inc. has signed a definitive merger agreement to be acquired by BAE Systems, Inc. The transaction is valued at roughly $450 million for a cash price of $24.00 per share.
The New York Times writes that Target is having an especially rough holiday season.
John Hussman: "Currently, the combination of valuations and market action (not to mention recession probability) is one that has historically been associated with negative average returns. That doesn't mean that investors who keep riding the unicycle can't make a few more small bills, but it does mean that repeated risk-taking in conditions like the present has not been rewarding, on average, and has frequently involved significant and abrupt losses...neither the Fed nor the ECB have "injected" material amounts of "liquidity" into the international banking system in recent months. This is not a call for them to do so - to some extent their hands are tied by inflation pressures, currency risks, and profigate government spending (particularly in the U.S.). The problem is that by creating the illusion that they are doing something material - when the problem in the global financial system is not confidence, but solvency - the Fed and the ECB misdirect the attention of investors, provide false hope, and ultimately do a great disservice to investors...At present, the Fed has injected less than $20 billion in total “liquidity” since March – nearly all of which has been withdrawn from the banking system as currency in circulation. Normally, the Fed would have done a “permanent” open market operation by now, to finance this increase in currency demand (which predictably grows by $30-50 billion annually). But by constantly rolling over temporary repos every week or two instead, the Fed can act as if it is “doing more.”
Capgemini shares rose on Monday after a newspaper said Wipro, India's third-biggest software exporter, was expected to bid for the French computer consultancy firm.
United Rentals Inc. said it's terminating a merger agreement with Cerberus Capital Management's acquisition vehicles RAM Holdings Inc. and RAM Acquisition Corp. The equipment rental company said it's also requesting Cerberus to pay it $100 million in termination fee as part of the original merger agreement.
Singapore's inflation rate hit a 25-year high of 4.2% in November from a year earlier, reflecting higher food and housing prices, according to reports.
Will Rogers: “If we ever pass out as a great nation we ought to put on our tombstone 'America died from a delusion that she had moral leadership'.”
Bruce Collins: "Could we experience the horrifying effects of a K-wave depressionary cycle soon? Ian Gordon, a long wave analyst and expert on the Kondratieff effect, believes we are already there.
He writes:
“This is it. The Kondratieff winter is now underway in earnest and nothing can stop it. The huge credit expansion initiated by the Maestro, the past Federal Reserve Chairman, Alan Greenspan, has now reversed. The ensuing credit contraction will be devastating. It will take down creditor and debtor alike and will result in a destructive and frightening deflationary depression.”
“While the crash only took place six months ago, I am convinced we have now passed through the worst, and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger too is safely behind us.” – Herbert Hoover, President of the United States of America, May 1, 1930
“Gentlemen, you have come sixty days too late. The depression is over.” – Herbert Hoover, President of the United States of America, responding to a delegation requesting a public works program (stimulus) to help speed US economic recovery, June 1930
MAXjet Airways PLC said Monday it has filed for Chapter 11 Bankruptcy, blaming rising fuel costs and an increase in competition for business-class travelers for its inability to raise necessary funding. The trans-Atlantic business-class only airline listed just six months ago on AIM, London's alternative market.
Bob Rodriguez, the hugely successful manager of FPA Capitaland FPA New Income, recently announced he put a halt to purchases of stocks and high-yield bonds at both portfolios on Dec. 14. His decision is a reaction to the subprime mortgage-induced credit crunch, which he expects to worsen in coming months. Rodriguez says he'll review his actions weekly, but he doesn't anticipate any change in course until February or March 2008. In his September 2007 letter to FPA Capital shareholders, he wrote that the odds of a recession were 50% or greater. But in a conversation with Morningstar, he noted that as recently as a month ago, he would have placed the odds at 70%. Now he says the odds are closer to 100%.
The British pound hit record lows against the euro on Monday for the second straight day, weighed down by falling home prices and expectations that the Bank of England will keep cutting interest rates.
Charles E. Wilson: "No one should suffer from the great delusion that any form of communism or socialism which promotes the dictatorship of the few instead of the initiative of the millions can produce a happier or more prosperous society."
Sunday, December 23, 2007
Cycles
12/24/07 Cycles
Mike Burk: "Since 1928, during the last 5 trading days of the year, the S&P 500 (SPX) has been up 82% of the time with an average gain of 1.11%. During the 3rd year of the Presidential Cycle it has been up 95% of the time. 1987 was the only down year...Next year is the 4th year of the Presidential Cycle. The charts show an average of all years and an average of the 4th year of the Presidential Cycle. Calculations for the charts assume 21 trading days in a month and are calculated by averaging the return of each of the 1st 11 trading days of the month and each of the last 10. When there have been more than 21 trading days some days in the middle of the month have not been counted. When there have been less than 21 trading days some of the days in the middle of the month have been counted twice. All moves, either way, greater than 2% have been reduced to 2% so they do not distort the patterns.
Since 1888 the Dow Jones Industrial Average (DJIA) has been up 70% of the time during the 4th year of the Presidential Cycle with an average gain of 8.3%. Over all years it has been up 64% of the time with an average gain of 7.3%...I expect the major indices to be higher on Friday December 28 than they were on Friday December 21."
Congress passed a temporary fix for the alternative minimum tax last week. With the patch, the AMT will strike about 4.2 million tax returns - roughly the same as last year. Bottom line: If you paid AMT for tax year 2006, you probably will pay it for 2007 unless your income or family circumstances have changed.
The Seattle Times: "Even if you're not in danger of paying the AMT, make sure you don't squander deductions. That's a distinct possibility if you don't think through your bunching strategy. By bunching, a taxpayer pulls some deductions into the current tax year or pushes them into the next. The goal is to consolidate them in the tax year where they will exceed the standard amounts. For 2007 taxes, that's $5,350 for single filers and married individuals filing separately; $7,850 for heads of household; and $10,700 for married couples filing jointly. In 2008, the standard deduction amounts are $5,450 for singles and married taxpayers filing separately; $8,000 for heads of household; and $10,900 for married couples filing a joint return.
The Oil Drum: "Putin wields gas as a weapon. But the reality is that Russia can barely meet its own growing demand."
Mexican authorities announced on Friday that the country's daily minimum wage will get a small increase in 2008, with urban wages to rise about 4 percent to 52.59 pesos, or about US$4.85 (euro3.37) a day, roughly the same as the current rate of inflation. Workers in the Mexican countryside -- where lower wages prevail -- will see minimum wages rise by about the same rate, to between 49.50 and 50.96 pesos, or US$4.57 to US$4.70 (euro3.18 to euro3.27), a day, according to a minimum-wage commission representing the government, labor and industry. The increases will take effect Jan. 1.
24/7WallSt.com: "As a huge consumer of metals, China does not want to see a merger between Rio Tinto (RTP) and BHP Billiton (BHP). The new company might have too much leverage in raising prices. So, China political machine is working overtime to look at ways to lobby against the deal. And, it has brought in investment bankers to see if there are financial options for keeping the two big miners apart. According to The Telegraph, "The political and market-led interventions that China is considering include submissions to the UK and Australian competition authorities, a Chinese-backed white knight bid for Rio and a government-backed stake being acquired in Rio to block BHP's proposal". China's sovereign fund has the capital to put money into US companies, so why no buy a piece of Rio?"
According to the FT, Saudi Arabia plans to establish a sovereign wealth fund that is expected to dwarf Abu Dhabi’s $900bn and become the largest in the world.
Bill Bonner: "The trouble is that the government's solution to one problem is the cause of two more. The feds man the pumps 24/7 to try to keep the consumer economy from drying up. But the extra liquidity drives up consumer prices!"
During the 2006 and 2007 time period, Sprint invested more than $13 billion to enhance its networks. There is a market cap of $39 billion with revenues of $40 billion. The debt structure is not overbearing. Selling at a 52-week low, the stock could be an interesting year end investment.
Venezuelan President Hugo Chavez bolstered his cooperation with Cuba on Saturday by signing energy, farming and finance accords, including a deal to expand of one of his socialist ally's oil refineries. The Venezuelan leader, a strident foe of Washington's "imperialist" policies, is Havana's closest ally and the petroleum deals have helped Cuba's economy stay afloat.
Petraeus says U.S. may draw down Iraq forces during 2008. That will be offset by an increase in troops in Afghanistan.
Marsoft: "Although the market remains extremely strong as the new year approaches, freight rates have dipped a bit over the past month. After peaking in mid-November at $190,000 per day, Cape spot rates fell back to $170,000 per day by the middle of December. Likewise, the Baltic Panamax TC index has also declined over the past month, from $90,000 per day to $75,000 per day. However, rates on our benchmark USG/Japan grain route have held up much better, rising from $118 per tonne, or $80,000 per day, to $123 per tonne, or $85,000 per day. Meanwhile, rates for the smaller bulkers have seen a relatively mild decline over the past month, with Supramax rates dipping from $70,000 per day in mid-November to $63,000 per day by mid-December.
As spot rates have eased over the past month, dry bulk period charter activity has also slowed a bit, and period charter rates have followed suit. One-year time charter rates for a modern Panamax fell back from $78,000 per day in mid-November to $71,000 per day during the first half of December.
The dry bulk market continues to be buoyed by strong trade demand, with Chinese iron ore imports and U.S. grain exports especially high recently. In November, Chinese iron ore imports topped 35 million tonnes for the first time since March, and preliminary estimates show imports from Brazil continuing to grow much faster than from other sources. The latest figures show Brazilian shipments to China soaring to a record-high, up an astounding 75% compared to a year ago!"
Robert Hunter: “At the top of the cycle you write [policies for] everybody, no matter how bad, and at the bottom you cancel everybody, no matter how good. It's a manic-depressive cycle.”
Mike Burk: "Since 1928, during the last 5 trading days of the year, the S&P 500 (SPX) has been up 82% of the time with an average gain of 1.11%. During the 3rd year of the Presidential Cycle it has been up 95% of the time. 1987 was the only down year...Next year is the 4th year of the Presidential Cycle. The charts show an average of all years and an average of the 4th year of the Presidential Cycle. Calculations for the charts assume 21 trading days in a month and are calculated by averaging the return of each of the 1st 11 trading days of the month and each of the last 10. When there have been more than 21 trading days some days in the middle of the month have not been counted. When there have been less than 21 trading days some of the days in the middle of the month have been counted twice. All moves, either way, greater than 2% have been reduced to 2% so they do not distort the patterns.
Since 1888 the Dow Jones Industrial Average (DJIA) has been up 70% of the time during the 4th year of the Presidential Cycle with an average gain of 8.3%. Over all years it has been up 64% of the time with an average gain of 7.3%...I expect the major indices to be higher on Friday December 28 than they were on Friday December 21."
Congress passed a temporary fix for the alternative minimum tax last week. With the patch, the AMT will strike about 4.2 million tax returns - roughly the same as last year. Bottom line: If you paid AMT for tax year 2006, you probably will pay it for 2007 unless your income or family circumstances have changed.
The Seattle Times: "Even if you're not in danger of paying the AMT, make sure you don't squander deductions. That's a distinct possibility if you don't think through your bunching strategy. By bunching, a taxpayer pulls some deductions into the current tax year or pushes them into the next. The goal is to consolidate them in the tax year where they will exceed the standard amounts. For 2007 taxes, that's $5,350 for single filers and married individuals filing separately; $7,850 for heads of household; and $10,700 for married couples filing jointly. In 2008, the standard deduction amounts are $5,450 for singles and married taxpayers filing separately; $8,000 for heads of household; and $10,900 for married couples filing a joint return.
The Oil Drum: "Putin wields gas as a weapon. But the reality is that Russia can barely meet its own growing demand."
Mexican authorities announced on Friday that the country's daily minimum wage will get a small increase in 2008, with urban wages to rise about 4 percent to 52.59 pesos, or about US$4.85 (euro3.37) a day, roughly the same as the current rate of inflation. Workers in the Mexican countryside -- where lower wages prevail -- will see minimum wages rise by about the same rate, to between 49.50 and 50.96 pesos, or US$4.57 to US$4.70 (euro3.18 to euro3.27), a day, according to a minimum-wage commission representing the government, labor and industry. The increases will take effect Jan. 1.
24/7WallSt.com: "As a huge consumer of metals, China does not want to see a merger between Rio Tinto (RTP) and BHP Billiton (BHP). The new company might have too much leverage in raising prices. So, China political machine is working overtime to look at ways to lobby against the deal. And, it has brought in investment bankers to see if there are financial options for keeping the two big miners apart. According to The Telegraph, "The political and market-led interventions that China is considering include submissions to the UK and Australian competition authorities, a Chinese-backed white knight bid for Rio and a government-backed stake being acquired in Rio to block BHP's proposal". China's sovereign fund has the capital to put money into US companies, so why no buy a piece of Rio?"
According to the FT, Saudi Arabia plans to establish a sovereign wealth fund that is expected to dwarf Abu Dhabi’s $900bn and become the largest in the world.
Bill Bonner: "The trouble is that the government's solution to one problem is the cause of two more. The feds man the pumps 24/7 to try to keep the consumer economy from drying up. But the extra liquidity drives up consumer prices!"
During the 2006 and 2007 time period, Sprint invested more than $13 billion to enhance its networks. There is a market cap of $39 billion with revenues of $40 billion. The debt structure is not overbearing. Selling at a 52-week low, the stock could be an interesting year end investment.
Venezuelan President Hugo Chavez bolstered his cooperation with Cuba on Saturday by signing energy, farming and finance accords, including a deal to expand of one of his socialist ally's oil refineries. The Venezuelan leader, a strident foe of Washington's "imperialist" policies, is Havana's closest ally and the petroleum deals have helped Cuba's economy stay afloat.
Petraeus says U.S. may draw down Iraq forces during 2008. That will be offset by an increase in troops in Afghanistan.
Marsoft: "Although the market remains extremely strong as the new year approaches, freight rates have dipped a bit over the past month. After peaking in mid-November at $190,000 per day, Cape spot rates fell back to $170,000 per day by the middle of December. Likewise, the Baltic Panamax TC index has also declined over the past month, from $90,000 per day to $75,000 per day. However, rates on our benchmark USG/Japan grain route have held up much better, rising from $118 per tonne, or $80,000 per day, to $123 per tonne, or $85,000 per day. Meanwhile, rates for the smaller bulkers have seen a relatively mild decline over the past month, with Supramax rates dipping from $70,000 per day in mid-November to $63,000 per day by mid-December.
As spot rates have eased over the past month, dry bulk period charter activity has also slowed a bit, and period charter rates have followed suit. One-year time charter rates for a modern Panamax fell back from $78,000 per day in mid-November to $71,000 per day during the first half of December.
The dry bulk market continues to be buoyed by strong trade demand, with Chinese iron ore imports and U.S. grain exports especially high recently. In November, Chinese iron ore imports topped 35 million tonnes for the first time since March, and preliminary estimates show imports from Brazil continuing to grow much faster than from other sources. The latest figures show Brazilian shipments to China soaring to a record-high, up an astounding 75% compared to a year ago!"
Robert Hunter: “At the top of the cycle you write [policies for] everybody, no matter how bad, and at the bottom you cancel everybody, no matter how good. It's a manic-depressive cycle.”
Saturday, December 22, 2007
Impaired Wall Street Securities
12/23/07 Impaired Wall Street Securities
In November, Google had a 58.6% share of the search market, compared to a 58.4% share the previous month, according to ComScore data. Meanwhile Yahoo Inc. continued a downward trend in the month, falling to a 22.4% share in November from a 22.8% share the previous month, according to the data. Microsoft Corp. held steady from month to month, according to the data, with a 9.8% share. Time Warner, which owns AOL, saw a jump in its share of the search market in November, to 4.5% from 4.2% in the previous month.
News Corp. agreed to sell eight TV stations for $1.1 billion to investment firm Oak Hill Capital Partners.
Alcoa announced late Friday it has agreed to sell its packaging and consumer businesses, which include Reynolds Wrap, to New Zealand's Rank Group Ltd. for $2.7 billion in cash.
Doug Noland: "The financial guarantors suffer today from a confluence of terminal forces. First of all, current and future Credit Insurer losses are unknowable. And it’s not that loss estimates are difficult to reasonably quantify – it’s much more a case of requiring a series of assumptions with respect to the Credit cycle, market environment and economic performance on top of a bunch of guesses as to how various interrelated risk exposures will react to myriad possible scenarios. Such an exercise would require sophisticated models based on various other models, when we know full well today that even basic securities valuation modeling has broken down. Moreover, it is likely that prospects for writing profitable new business will be dismal for years to come. The market has lost trust in the insurance. At this point only a massive and highly-complex multi-government-orchestrated industry bailout would avert a collapse...Broker/Dealer assets ballooned 140% in just four and one-half years to $3.2 TN. During this same period, the asset-backed securities market (including “private-label” MBS) inflated 120% to almost $4.3 TN. Myriad sophisticated structures, financial guarantees, liquidity agreements, and leveraging strategies were implemented to perpetuate the greatest financial Bubble in history. As with all great schemes of leveraged speculation, the minute the music stops collapse ensues. Underlying Acute Fragility is exposed with the inevitable reversal of speculative and leverage-based market liquidity. To keep the music playing required increasingly egregious excesses – ever greater quantities of increasingly risky loans, structures and leveraging. The Credit Insurers came to play a critical role in perpetuating the Bubble. They could not resist the allure of easy “profits” insuring Wall Street’s creative “structured Credit products,” while at the same time aggressively expanding their traditional guarantee business at the top of a Historic Credit Cycle. The Credit insurers destroyed themselves...We expect further significant and imminent weakness in “structured Credit products” – certainly in the illiquid markets for CDOs and Credit default swaps (CDS). Keep in mind that the economy is only now succumbing to recessionary forces, and we’ve yet to experience the failure of a major financial institution in the U.S. There will be many, and it’s worth noting that Rescap’s CDS prices surged again this week. It’s amazing to watch the massive central bank liquidity injections inflate the value of government and quasi-government backed securities, while having minimal impact on the imploding market for Wall Street-backed securities. It’s impossible to rectify the damage from the bursting Bubble, and there’s today literally trillions of increasingly impaired Wall Street securities overhanging the debt markets."
According to the LA Times, Schwarzenegger's remedy for a $14.5-billion deficit includes cutting school funds and freeing inmates.
Gerald Celente, Editor and Publisher, The Trends Journal, Rhinebeck, New York: “Economic 9/11, we believe is going to hit the United States in 2008. And just as the World Trade Centers toppled from the top down, we’re going to see the crash happen from the top down as well. This talk about the sub-prime market. Yes, that’s a problem, but nothing compared to when the big firms start failing, when banks go bust, brokerages go out of business. In 2008, we’re going to see some major, giant firms fall and get hit by an economic 9/11. We don’t know what the fuse will look like, but we know that the bomb is set already. And when it’s lit, we believe it’s going to happen before June of 2008...The central banks have already pumped in more than half a trillion dollars already! They have been pumping money in ... actually, if you go back to our Trends Journal, the Summer 2007 edition’s mid-year report – we said two weeks before the Dow hit 14000, and the Chinese markets hit their highest level ever – to get ready because we saw a financial crisis hitting. The financial crisis hit exactly on July 24, 2007, when the Dow lost well over 200 points. That was the beginning of the crack. And they (Feds) have been pumping money into the banking system since that time. They’ve had bigger bailouts than even happened after 9/11. It’s out of control! All of the currencies are going to be worth dimes on the dollars in the future, and the first one to go is going to be the American dollar.
That’s why one of our big trends for 2008 is ‘Bye, Bye Bucks!’"
Brett Steenbarger: "With Friday's strong up move, we saw a surge in short-term new highs among the issues in the 40-stock basket... It thus appears that, after a surge in new highs, we've tended to see some consolidation of those gains in the near term, which has led to under performance over the next five trading sessions. This consolidation has, however, been a buying opportunity on average over the next three weeks as the burst of strength has been followed by further strength."
According to Bloomberg, Wal-Mart Stores Inc., Macy's Inc. and other U.S. retailers are extending hours and deepening discounts to entice procrastinating shoppers in the final weekend before Christmas.
Cleaning up old legal problems saddled Visa Inc. with an $861 million loss in its latest fiscal year, according to documents the credit card network filed Friday in preparation for its initial public offering of stock. The loss for the fiscal year ending Sept. 30 stemmed mostly from a $2.25 billion settlement that Visa reached in November with American Express Co. to rid itself of a potential albatross before its highly anticipated IPO, expected early next year. The IPO will be the second largest in U.S. history, based on Visa's preliminary fundraising target of $10 billion. Visa still hasn't specified a price range for its stock or how many shares it will issue, so the amount of money the San Francisco-based company actually raises will likely be different.
United Rentals lost a court battle to force Cerberus Capital Managment to complete its proposed $4 billion buyout of the equipment rental company. Cerberus withdrew its $34.50-per-share takeover offer for United Rentals in November, one of several leveraged buyouts that fizzled when the credit crunch made financing a deal more difficult. United Rentals sued Cerberus in a Delaware court in a bid to force the buyout firm to complete deal. In a statement, United Rentals said: "While we are disappointed by Chancellor Chandler's decision, we respect it and thank the Court for its prompt review of this matter. The Board of Directors and management team of United Rentals will consider its alternatives under the circumstances and they continue to believe strongly in United Rentals' future prospects."
According to naplesnews.com, "WCI Communities Inc. may have struck a megamillion-dollar deal to sell its luxury, Italian-inspired Tuscany Reserve community off Livingston Road near the Lee-Collier line to another developer.The possible sale has created a buzz among residents. In recent days, it has been a hot topic on the public company’s online message board, stirring speculation about the selling price and the closing date. Some say it’s a deal that’s already done, though it hasn’t been formally announced...Realtors, brokers and others say they know the buyer to be Anthony Salce, with Gulf Coast Development Group LLC in Naples. He’s also developing Naples Reserve Golf Club off Collier Boulevard, which has been approved for up to 1,154 units. Salce couldn’t be reached for comment."
According to a survey last week for Discover Financial Services , 42 percent of those questioned said they had either not started their holiday shopping, or had completed some -- but not much -- gift buying. According to ShopperTrak, December 21-24 last year accounted for 13.6 percent of holiday sales.
In November, Google had a 58.6% share of the search market, compared to a 58.4% share the previous month, according to ComScore data. Meanwhile Yahoo Inc. continued a downward trend in the month, falling to a 22.4% share in November from a 22.8% share the previous month, according to the data. Microsoft Corp. held steady from month to month, according to the data, with a 9.8% share. Time Warner, which owns AOL, saw a jump in its share of the search market in November, to 4.5% from 4.2% in the previous month.
News Corp. agreed to sell eight TV stations for $1.1 billion to investment firm Oak Hill Capital Partners.
Alcoa announced late Friday it has agreed to sell its packaging and consumer businesses, which include Reynolds Wrap, to New Zealand's Rank Group Ltd. for $2.7 billion in cash.
Doug Noland: "The financial guarantors suffer today from a confluence of terminal forces. First of all, current and future Credit Insurer losses are unknowable. And it’s not that loss estimates are difficult to reasonably quantify – it’s much more a case of requiring a series of assumptions with respect to the Credit cycle, market environment and economic performance on top of a bunch of guesses as to how various interrelated risk exposures will react to myriad possible scenarios. Such an exercise would require sophisticated models based on various other models, when we know full well today that even basic securities valuation modeling has broken down. Moreover, it is likely that prospects for writing profitable new business will be dismal for years to come. The market has lost trust in the insurance. At this point only a massive and highly-complex multi-government-orchestrated industry bailout would avert a collapse...Broker/Dealer assets ballooned 140% in just four and one-half years to $3.2 TN. During this same period, the asset-backed securities market (including “private-label” MBS) inflated 120% to almost $4.3 TN. Myriad sophisticated structures, financial guarantees, liquidity agreements, and leveraging strategies were implemented to perpetuate the greatest financial Bubble in history. As with all great schemes of leveraged speculation, the minute the music stops collapse ensues. Underlying Acute Fragility is exposed with the inevitable reversal of speculative and leverage-based market liquidity. To keep the music playing required increasingly egregious excesses – ever greater quantities of increasingly risky loans, structures and leveraging. The Credit Insurers came to play a critical role in perpetuating the Bubble. They could not resist the allure of easy “profits” insuring Wall Street’s creative “structured Credit products,” while at the same time aggressively expanding their traditional guarantee business at the top of a Historic Credit Cycle. The Credit insurers destroyed themselves...We expect further significant and imminent weakness in “structured Credit products” – certainly in the illiquid markets for CDOs and Credit default swaps (CDS). Keep in mind that the economy is only now succumbing to recessionary forces, and we’ve yet to experience the failure of a major financial institution in the U.S. There will be many, and it’s worth noting that Rescap’s CDS prices surged again this week. It’s amazing to watch the massive central bank liquidity injections inflate the value of government and quasi-government backed securities, while having minimal impact on the imploding market for Wall Street-backed securities. It’s impossible to rectify the damage from the bursting Bubble, and there’s today literally trillions of increasingly impaired Wall Street securities overhanging the debt markets."
According to the LA Times, Schwarzenegger's remedy for a $14.5-billion deficit includes cutting school funds and freeing inmates.
Gerald Celente, Editor and Publisher, The Trends Journal, Rhinebeck, New York: “Economic 9/11, we believe is going to hit the United States in 2008. And just as the World Trade Centers toppled from the top down, we’re going to see the crash happen from the top down as well. This talk about the sub-prime market. Yes, that’s a problem, but nothing compared to when the big firms start failing, when banks go bust, brokerages go out of business. In 2008, we’re going to see some major, giant firms fall and get hit by an economic 9/11. We don’t know what the fuse will look like, but we know that the bomb is set already. And when it’s lit, we believe it’s going to happen before June of 2008...The central banks have already pumped in more than half a trillion dollars already! They have been pumping money in ... actually, if you go back to our Trends Journal, the Summer 2007 edition’s mid-year report – we said two weeks before the Dow hit 14000, and the Chinese markets hit their highest level ever – to get ready because we saw a financial crisis hitting. The financial crisis hit exactly on July 24, 2007, when the Dow lost well over 200 points. That was the beginning of the crack. And they (Feds) have been pumping money into the banking system since that time. They’ve had bigger bailouts than even happened after 9/11. It’s out of control! All of the currencies are going to be worth dimes on the dollars in the future, and the first one to go is going to be the American dollar.
That’s why one of our big trends for 2008 is ‘Bye, Bye Bucks!’"
Brett Steenbarger: "With Friday's strong up move, we saw a surge in short-term new highs among the issues in the 40-stock basket... It thus appears that, after a surge in new highs, we've tended to see some consolidation of those gains in the near term, which has led to under performance over the next five trading sessions. This consolidation has, however, been a buying opportunity on average over the next three weeks as the burst of strength has been followed by further strength."
According to Bloomberg, Wal-Mart Stores Inc., Macy's Inc. and other U.S. retailers are extending hours and deepening discounts to entice procrastinating shoppers in the final weekend before Christmas.
Cleaning up old legal problems saddled Visa Inc. with an $861 million loss in its latest fiscal year, according to documents the credit card network filed Friday in preparation for its initial public offering of stock. The loss for the fiscal year ending Sept. 30 stemmed mostly from a $2.25 billion settlement that Visa reached in November with American Express Co. to rid itself of a potential albatross before its highly anticipated IPO, expected early next year. The IPO will be the second largest in U.S. history, based on Visa's preliminary fundraising target of $10 billion. Visa still hasn't specified a price range for its stock or how many shares it will issue, so the amount of money the San Francisco-based company actually raises will likely be different.
United Rentals lost a court battle to force Cerberus Capital Managment to complete its proposed $4 billion buyout of the equipment rental company. Cerberus withdrew its $34.50-per-share takeover offer for United Rentals in November, one of several leveraged buyouts that fizzled when the credit crunch made financing a deal more difficult. United Rentals sued Cerberus in a Delaware court in a bid to force the buyout firm to complete deal. In a statement, United Rentals said: "While we are disappointed by Chancellor Chandler's decision, we respect it and thank the Court for its prompt review of this matter. The Board of Directors and management team of United Rentals will consider its alternatives under the circumstances and they continue to believe strongly in United Rentals' future prospects."
According to naplesnews.com, "WCI Communities Inc. may have struck a megamillion-dollar deal to sell its luxury, Italian-inspired Tuscany Reserve community off Livingston Road near the Lee-Collier line to another developer.The possible sale has created a buzz among residents. In recent days, it has been a hot topic on the public company’s online message board, stirring speculation about the selling price and the closing date. Some say it’s a deal that’s already done, though it hasn’t been formally announced...Realtors, brokers and others say they know the buyer to be Anthony Salce, with Gulf Coast Development Group LLC in Naples. He’s also developing Naples Reserve Golf Club off Collier Boulevard, which has been approved for up to 1,154 units. Salce couldn’t be reached for comment."
According to a survey last week for Discover Financial Services , 42 percent of those questioned said they had either not started their holiday shopping, or had completed some -- but not much -- gift buying. According to ShopperTrak, December 21-24 last year accounted for 13.6 percent of holiday sales.
Friday, December 21, 2007
Doings
12/22/07 Doings
Russia's OAO Vimpel Communications agreed to buy broadband and fixed-line operator Golden Telecom Inc. for about $4.3 billion. Under the deal announced Friday, VimpelCom will pay $105 for each Golden Telecom share, a 5% premium to where the shares closed Thursday. Golden Telecom is listed on the Nasdaq Stock Market, but its business is located in Russia.
General Motors has sold more than 1 million vehicles in China this year, becoming the first international automaker to nudge the seven-figure sales mark in a single year.
Switzerland's UBS is facing a shareholder revolt over its plans for a cash injection from Singapore and the Middle East, according to a report in the Financial Times Friday.
Philips Electronics is buying Respironics, a Murrysville, Pa.-based provider of sleep apnea and home respiratory care, for $5.1 billion, or $66 a share.
Merrill Lynch & Co. Inc. is in advanced talks with Temasek Holdings Pte. Ltd., the Singaporean state-owned investment company, for a cash infusion of as much as $5 billion, according to a media report Thursday.
KeyCorp will eliminate about 1,040 jobs as a part of its cost reduction effort.
Insurance broker Marsh & McLennan Cos. said Friday its board, responding to shareholders' concerns over the company's recent financial performance, has begun a search for a chief executive to replace Michael G. Cherkasky.
According to the WSJ, Chrysler is in a serious financial crunch and trying to sell assets just months after Cerberus and new CEO Robert Nardelli stepped in to save the auto maker. The acquisition is turning into a case study of how deals made during the boom are going sour.
The Bay Area housing market showed no signs of recovery in November, as sales fell to a nearly two-decade low and buyers still struggled to find mortgages. A total of 5,127 new and existing houses and condos traded hands last month, free-falling 36.2 percent from the 8,042 sold in November 2006, according to a report released Thursday by DataQuick Information Systems. That's the lowest sales count for the month since at least 1988, when the research company began tracking the market, and represents the 34th consecutive month of declines.
A day after Target delayed a decision about whether to sell its credit-card receivables, the company said Thursday that net "charge-offs" -- loans written off as not being repaid -- rose to 7.05 percent of receivables in November, up from 6.42 percent in October. Charge-offs have increased 25 percent since the end of August. Another potentially risky sign is that customers are paying off their debts more slowly, which often leads to higher defaults, financial analysts said. In November, the sum of all customer payments totaled 13.95 percent of the discount retailer's receivables, down from 15.86 percent a year earlier.
“When borrowers cannot afford to meet their payment obligations, they and their communities suffer significant injury,” the Fed writes in explaining its proposal. “If a neighborhood has a concentration of unaffordable loans, then the entire neighborhood may endure a decline in homeowner equity. Moreover, if disregard for repayment ability contributes to a rise in delinquencies and foreclosures, as appears to have happened recently, then the credit tightening that may follow can injure all consumers who are potentially in the market for a mortgage loan.”
Japanese Prime Minister Yasuo Fukuda will make his first visit to China next week.
Mayer Brown plans to announce Friday an agreement to join forces with a large Hong Kong firm in a deal that would dramatically expand the Chicago law firm's Asian presence, the Chicago Tribune has learned.
Mayer Brown is teaming up with Johnson, Stokes & Master, one of Hong Kong's oldest law firms known for its stellar reputation in banking and finance, also a strength of Mayer's.
Brett Steenbarger: "One measure I'll be following is the Cumulative Adjusted NYSE TICK, which has actually been negative during this recent market bounce. That bias in selling sentiment has shown up in other measures as well, including tepid advance-decline numbers and persistent high levels in the number of stocks making fresh 20-day lows. On Thursday we saw 480 stocks make 20-day highs, but also 1262 register new 20-day lows. Momentum figures were good for Thursday (Demand was 101, Supply 48) and that seems to be carrying forward this AM. We need to be seeing rising numbers of stocks making new highs, but also fewer stocks making new lows. If we just look at common stocks traded on the NYSE, new lows actually increased on Thursday over Wednesday."
China’s economy may expand 10.9% next year and inflation may rise 4.5%, the central bank’s research bureau forecast.
Jim Rogers: "Cotton is a good way to buy oil-- hear me out. Much apparel has been made from synthetics. Synthetics come from oil. So many textile makers are converting back to natural fibers because oil is at an all-time high. So if you want to buy oil, buy sugar [because it is easy to turn into ethanol], or buy cotton. What I'm buying right now is agriculture."
There are "major uncertainties" swirling around the economic outlook for the euro zone in 2008, the president of the European Central Bank said. In an interview with EuroNews that aired Friday, Jean-Claude Trichet said that the bank's governing council, which sets interest rates for the 13-nation euro zone, are worried about the risk of weaker growth."It is true there are major uncertainties with regard to the economic situation," he said. "The council of governors of the ECB feels that there is a greater risk of weaker growth, with it going below around 2 percent."
Campbell sold Godiva chocolates for $850 million.
Boeing has tentatively agreed to send as much as $1 billion in aerospace manufacturing work to state-owned Hindustan Aeronautics in India over the next 10 years. Under the deal announced Thursday, Boeing will help the Indian company in developing manufacturing processes and capabilities needed for the production of military hardware for Boeing and its subcontractors.
Mexican oil production fell for a second month in a row in November as output at the country's largest field declined by 3.5% in the month.
According to Rigzone, Russia, Kazakhstan and Turkmenistan signed a landmark agreement Thursday to build a natural gas pipeline along the Caspian Sea coast that would strengthen Moscow's monopoly on energy exports from the resource-rich region.The deal, which follows a preliminary agreement reached in May, ended months of tense arguments over the price of gas supplies. It reaffirms Russia's monopoly on gas supplies from Central Asia and deals a strong blow to Western hopes of securing alternate energy export routes. "We have just signed an extremely important agreement between Russia, Kazakhstan and Turkmenistan on building the Caspian pipeline," President Vladimir Putin said. "It will become a new important contribution of our nations into strengthening the European energy security."
According to AMG Data Services, "including ETF activity, Equity funds report net cash outflows totaling -$204 million in the week ended 12/19/07 with Domestic funds reporting net inflows of $5.184 billion and Non-domestic funds reporting net outflows of -$5.388 billion; Excluding ETF activity, Equity funds report net cash outflows totaling -$15.171 billion with Domestic funds reporting net outflows of -$9.062 billion and Non-domestic funds reporting net outflows totaling -$6.109 billion; Many investors opted for cash redemptions of large capital gain distributions this week significantly reducing assets because of net outflows. These are \'seasonal\' and exacerbate an inference of active negative sentiment."
According to Bloomberg, declines in the cost of shipping Middle East crude to Asia may slow after falling the most in eight months yesterday because of a shortage of vessels. Hire rates for very large crude carriers fell as owners tried to secure near-record tariffs before year-end holidays, said Halvor Ellefsen, a tanker broker at SeaLeague AS in Oslo.The decline ``was bound to happen,'' after ``a few quiet days,'' Ellefsen wrote in an e-mailed note today. ``But there are still lots of cargoes to be lifted, so I can't see this tumbling.''
Walgreen reported net earnings of $455.5 million, or 46 cents a share, for the fiscal first quarter ended Nov. 30, compared with $431.7 million, or 43 cents a share, a year earlier. Sales rose 10.4 percent to $14.03 billion, with sales at stores open at least a year up 5.4 percent.
U.S. consumers spent more than they earned in November, driving the personal savings rate negative for the first time in 15 months but giving a boost to a sagging economy, the Commerce Department reported Friday. After taking out taxes and adjusting for the highest inflation since September 2005, real disposable incomes fell 0.3%. Nominal consumer spending increased 1.1%, the most in three and a half years. After adjusting for inflation of 0.6% in November, real consumer spending increased 0.5%.
Circuit City Stores Inc.'s third-quarter loss widened to $207.3 million, or $1.26 a share, from $20.4 million, or 12 cents, a year earlier. Sales fell to $2.94 billion from $3.06 billion. Sales in stores open at least 12 months fell 5.6 percent in the third quarter, compared with a gain for Best Buy Co. Warranties, typically the most profitable items electronics retailers sell, were 2.4 percent of U.S. sales in the third quarter, down from 3.6 percent a year ago. Gross margin, or the share of sales after subtracting the cost of goods sold, narrowed by 3 percentage points to 19.1 percent of sales.
The Lakota Sioux Indians, whose ancestors include Sitting Bull, Red Cloud and Crazy Horse, have withdrawn from all treaties their forefathers signed with the U.S. government and have declared their independence. A delegation delivered the news to the State Department earlier this week.Portions of Nebraska, South Dakota, North Dakota, Montana and Wyoming comprise Lakota country, and the tribe says that if the federal government doesn't begin diplomatic discussions promptly, liens will be filed on property in the five-state region.
The Federal Reserve announced Friday it had auctioned another $20 billion in funds to commercial banks at an interest rate of 4.67 percent.
"I came back from a trip to Israel in November convinced that Israel would attack Iran," Bruce Riedel, a former CIA official and senior adviser to three US presidents, George W. Bush among them, told the American Newsweek magazine in an article published Friday. Citing conversations he had in Israel with officials in Mossad and the Israeli defense establishment, Riedel concluded that "Israel is not going to allow its nuclear monopoly to be threatened."
Student lender First Marblehead is selling a 19.99% stake in itself to Goldman Sachs' GS Capital Partners for up to $260.5 million. Under the deal, Goldman will also provide a warehouse facility of $1 billion to provide cash for the firm to lend.
AMR Corp expects overall fourth quarter passenger unit revenue to increase between 3.6 percent and 4.6 percent over the year-earlier quarter. It said cargo and other revenue is expected to be about flat compared with the fourth quarter of 2006.
Barry Ritholtz: "Net net, all these liquidity injections are merely moderating the collapsing credit facilities, and not actually injecting much in the way of credit into the economy."
In November, employers took 1,300 mass layoff actions, seasonally
adjusted, as measured by new filings for unemployment insurance benefits
during the month, the Bureau of Labor Statistics of the U.S. Department
of Labor reported today. Each action involved at least 50 persons from a
single employer; the number of workers involved totaled 136,924, on a
seasonally adjusted basis. The number of mass layoff events in November
decreased by 20 from the prior month, while the number of associated
initial claims rose by 5,144. Over the month, 402 mass layoff events were
reported in the manufacturing sector, seasonally adjusted, resulting in
55,926 initial claims. Compared with October, mass layoff activity in
manufacturing decreased by 22 events, and initial claims decreased by 367.
From January through November 2007, the total number of events (seasonally
adjusted), at 13,734, and initial claims (seasonally adjusted), at 1,408,852,
were higher than in January-November 2006 when the totals were 12,627 and
1,328,251, respectively.
Gold for February delivery rose $12.20, or 1.6%, to end at $815.40 an ounce on
the New York Mercantile Exchange.
Banks planning on bailing out investment vehicles hurt in the subprime mortgage crisis, known as SIVs, will not proceed with the bailout plan, The Wall Street Journal reported Friday on its Web site, citing sources close to the matter.
Crude oil for February delivery ended the session up $2.25, or 2.5%, at $93.31 a barrel on the New York Mercantile Exchange.
Russia's OAO Vimpel Communications agreed to buy broadband and fixed-line operator Golden Telecom Inc. for about $4.3 billion. Under the deal announced Friday, VimpelCom will pay $105 for each Golden Telecom share, a 5% premium to where the shares closed Thursday. Golden Telecom is listed on the Nasdaq Stock Market, but its business is located in Russia.
General Motors has sold more than 1 million vehicles in China this year, becoming the first international automaker to nudge the seven-figure sales mark in a single year.
Switzerland's UBS is facing a shareholder revolt over its plans for a cash injection from Singapore and the Middle East, according to a report in the Financial Times Friday.
Philips Electronics is buying Respironics, a Murrysville, Pa.-based provider of sleep apnea and home respiratory care, for $5.1 billion, or $66 a share.
Merrill Lynch & Co. Inc. is in advanced talks with Temasek Holdings Pte. Ltd., the Singaporean state-owned investment company, for a cash infusion of as much as $5 billion, according to a media report Thursday.
KeyCorp will eliminate about 1,040 jobs as a part of its cost reduction effort.
Insurance broker Marsh & McLennan Cos. said Friday its board, responding to shareholders' concerns over the company's recent financial performance, has begun a search for a chief executive to replace Michael G. Cherkasky.
According to the WSJ, Chrysler is in a serious financial crunch and trying to sell assets just months after Cerberus and new CEO Robert Nardelli stepped in to save the auto maker. The acquisition is turning into a case study of how deals made during the boom are going sour.
The Bay Area housing market showed no signs of recovery in November, as sales fell to a nearly two-decade low and buyers still struggled to find mortgages. A total of 5,127 new and existing houses and condos traded hands last month, free-falling 36.2 percent from the 8,042 sold in November 2006, according to a report released Thursday by DataQuick Information Systems. That's the lowest sales count for the month since at least 1988, when the research company began tracking the market, and represents the 34th consecutive month of declines.
A day after Target delayed a decision about whether to sell its credit-card receivables, the company said Thursday that net "charge-offs" -- loans written off as not being repaid -- rose to 7.05 percent of receivables in November, up from 6.42 percent in October. Charge-offs have increased 25 percent since the end of August. Another potentially risky sign is that customers are paying off their debts more slowly, which often leads to higher defaults, financial analysts said. In November, the sum of all customer payments totaled 13.95 percent of the discount retailer's receivables, down from 15.86 percent a year earlier.
“When borrowers cannot afford to meet their payment obligations, they and their communities suffer significant injury,” the Fed writes in explaining its proposal. “If a neighborhood has a concentration of unaffordable loans, then the entire neighborhood may endure a decline in homeowner equity. Moreover, if disregard for repayment ability contributes to a rise in delinquencies and foreclosures, as appears to have happened recently, then the credit tightening that may follow can injure all consumers who are potentially in the market for a mortgage loan.”
Japanese Prime Minister Yasuo Fukuda will make his first visit to China next week.
Mayer Brown plans to announce Friday an agreement to join forces with a large Hong Kong firm in a deal that would dramatically expand the Chicago law firm's Asian presence, the Chicago Tribune has learned.
Mayer Brown is teaming up with Johnson, Stokes & Master, one of Hong Kong's oldest law firms known for its stellar reputation in banking and finance, also a strength of Mayer's.
Brett Steenbarger: "One measure I'll be following is the Cumulative Adjusted NYSE TICK, which has actually been negative during this recent market bounce. That bias in selling sentiment has shown up in other measures as well, including tepid advance-decline numbers and persistent high levels in the number of stocks making fresh 20-day lows. On Thursday we saw 480 stocks make 20-day highs, but also 1262 register new 20-day lows. Momentum figures were good for Thursday (Demand was 101, Supply 48) and that seems to be carrying forward this AM. We need to be seeing rising numbers of stocks making new highs, but also fewer stocks making new lows. If we just look at common stocks traded on the NYSE, new lows actually increased on Thursday over Wednesday."
China’s economy may expand 10.9% next year and inflation may rise 4.5%, the central bank’s research bureau forecast.
Jim Rogers: "Cotton is a good way to buy oil-- hear me out. Much apparel has been made from synthetics. Synthetics come from oil. So many textile makers are converting back to natural fibers because oil is at an all-time high. So if you want to buy oil, buy sugar [because it is easy to turn into ethanol], or buy cotton. What I'm buying right now is agriculture."
There are "major uncertainties" swirling around the economic outlook for the euro zone in 2008, the president of the European Central Bank said. In an interview with EuroNews that aired Friday, Jean-Claude Trichet said that the bank's governing council, which sets interest rates for the 13-nation euro zone, are worried about the risk of weaker growth."It is true there are major uncertainties with regard to the economic situation," he said. "The council of governors of the ECB feels that there is a greater risk of weaker growth, with it going below around 2 percent."
Campbell sold Godiva chocolates for $850 million.
Boeing has tentatively agreed to send as much as $1 billion in aerospace manufacturing work to state-owned Hindustan Aeronautics in India over the next 10 years. Under the deal announced Thursday, Boeing will help the Indian company in developing manufacturing processes and capabilities needed for the production of military hardware for Boeing and its subcontractors.
Mexican oil production fell for a second month in a row in November as output at the country's largest field declined by 3.5% in the month.
According to Rigzone, Russia, Kazakhstan and Turkmenistan signed a landmark agreement Thursday to build a natural gas pipeline along the Caspian Sea coast that would strengthen Moscow's monopoly on energy exports from the resource-rich region.The deal, which follows a preliminary agreement reached in May, ended months of tense arguments over the price of gas supplies. It reaffirms Russia's monopoly on gas supplies from Central Asia and deals a strong blow to Western hopes of securing alternate energy export routes. "We have just signed an extremely important agreement between Russia, Kazakhstan and Turkmenistan on building the Caspian pipeline," President Vladimir Putin said. "It will become a new important contribution of our nations into strengthening the European energy security."
According to AMG Data Services, "including ETF activity, Equity funds report net cash outflows totaling -$204 million in the week ended 12/19/07 with Domestic funds reporting net inflows of $5.184 billion and Non-domestic funds reporting net outflows of -$5.388 billion; Excluding ETF activity, Equity funds report net cash outflows totaling -$15.171 billion with Domestic funds reporting net outflows of -$9.062 billion and Non-domestic funds reporting net outflows totaling -$6.109 billion; Many investors opted for cash redemptions of large capital gain distributions this week significantly reducing assets because of net outflows. These are \'seasonal\' and exacerbate an inference of active negative sentiment."
According to Bloomberg, declines in the cost of shipping Middle East crude to Asia may slow after falling the most in eight months yesterday because of a shortage of vessels. Hire rates for very large crude carriers fell as owners tried to secure near-record tariffs before year-end holidays, said Halvor Ellefsen, a tanker broker at SeaLeague AS in Oslo.The decline ``was bound to happen,'' after ``a few quiet days,'' Ellefsen wrote in an e-mailed note today. ``But there are still lots of cargoes to be lifted, so I can't see this tumbling.''
Walgreen reported net earnings of $455.5 million, or 46 cents a share, for the fiscal first quarter ended Nov. 30, compared with $431.7 million, or 43 cents a share, a year earlier. Sales rose 10.4 percent to $14.03 billion, with sales at stores open at least a year up 5.4 percent.
U.S. consumers spent more than they earned in November, driving the personal savings rate negative for the first time in 15 months but giving a boost to a sagging economy, the Commerce Department reported Friday. After taking out taxes and adjusting for the highest inflation since September 2005, real disposable incomes fell 0.3%. Nominal consumer spending increased 1.1%, the most in three and a half years. After adjusting for inflation of 0.6% in November, real consumer spending increased 0.5%.
Circuit City Stores Inc.'s third-quarter loss widened to $207.3 million, or $1.26 a share, from $20.4 million, or 12 cents, a year earlier. Sales fell to $2.94 billion from $3.06 billion. Sales in stores open at least 12 months fell 5.6 percent in the third quarter, compared with a gain for Best Buy Co. Warranties, typically the most profitable items electronics retailers sell, were 2.4 percent of U.S. sales in the third quarter, down from 3.6 percent a year ago. Gross margin, or the share of sales after subtracting the cost of goods sold, narrowed by 3 percentage points to 19.1 percent of sales.
The Lakota Sioux Indians, whose ancestors include Sitting Bull, Red Cloud and Crazy Horse, have withdrawn from all treaties their forefathers signed with the U.S. government and have declared their independence. A delegation delivered the news to the State Department earlier this week.Portions of Nebraska, South Dakota, North Dakota, Montana and Wyoming comprise Lakota country, and the tribe says that if the federal government doesn't begin diplomatic discussions promptly, liens will be filed on property in the five-state region.
The Federal Reserve announced Friday it had auctioned another $20 billion in funds to commercial banks at an interest rate of 4.67 percent.
"I came back from a trip to Israel in November convinced that Israel would attack Iran," Bruce Riedel, a former CIA official and senior adviser to three US presidents, George W. Bush among them, told the American Newsweek magazine in an article published Friday. Citing conversations he had in Israel with officials in Mossad and the Israeli defense establishment, Riedel concluded that "Israel is not going to allow its nuclear monopoly to be threatened."
Student lender First Marblehead is selling a 19.99% stake in itself to Goldman Sachs' GS Capital Partners for up to $260.5 million. Under the deal, Goldman will also provide a warehouse facility of $1 billion to provide cash for the firm to lend.
AMR Corp expects overall fourth quarter passenger unit revenue to increase between 3.6 percent and 4.6 percent over the year-earlier quarter. It said cargo and other revenue is expected to be about flat compared with the fourth quarter of 2006.
Barry Ritholtz: "Net net, all these liquidity injections are merely moderating the collapsing credit facilities, and not actually injecting much in the way of credit into the economy."
In November, employers took 1,300 mass layoff actions, seasonally
adjusted, as measured by new filings for unemployment insurance benefits
during the month, the Bureau of Labor Statistics of the U.S. Department
of Labor reported today. Each action involved at least 50 persons from a
single employer; the number of workers involved totaled 136,924, on a
seasonally adjusted basis. The number of mass layoff events in November
decreased by 20 from the prior month, while the number of associated
initial claims rose by 5,144. Over the month, 402 mass layoff events were
reported in the manufacturing sector, seasonally adjusted, resulting in
55,926 initial claims. Compared with October, mass layoff activity in
manufacturing decreased by 22 events, and initial claims decreased by 367.
From January through November 2007, the total number of events (seasonally
adjusted), at 13,734, and initial claims (seasonally adjusted), at 1,408,852,
were higher than in January-November 2006 when the totals were 12,627 and
1,328,251, respectively.
Gold for February delivery rose $12.20, or 1.6%, to end at $815.40 an ounce on
the New York Mercantile Exchange.
Banks planning on bailing out investment vehicles hurt in the subprime mortgage crisis, known as SIVs, will not proceed with the bailout plan, The Wall Street Journal reported Friday on its Web site, citing sources close to the matter.
Crude oil for February delivery ended the session up $2.25, or 2.5%, at $93.31 a barrel on the New York Mercantile Exchange.
Thursday, December 20, 2007
Banking
12/21/07 Banking
China's central bank boosted its benchmark lending rate by 0.18-percentage point Thursday, marking its sixth rate tightening this year as Beijing struggles to cool its overheating asset markets and rein in surging inflation. The People's Bank of China will lift the one-year lending rate to 7.47% from 7.29% effective Friday, according to reports which cited a statement on the central bank's Web site. The central bank will also reportedly reduce the deposit rate on deposit accounts by 0.09-percentage point to 0.72%.
Citigroup analysts upped their oil price forecast for the third time this year, moving 2008 Brent crude estimates by $10 a barrel to $80 a barrel, 2009 by $10 a barrel to $75 a barrel and "mid-cycle" estimates by $15 to $75 a barrel. "Risks to non-OPEC supply, and OPEC signalling a willingness to defend a higher price appear to us to be dominant factors in sustaining a higher near-term and long-term oil price," analysts said.
Britain's current account deficit widened to 20 billin pounds in the third quarter, up from 13.7 billion pound deficit in the second quarter, the National Statistics Office said. The deficit is equivalent to 5.7% of GDP, compared with 4% the prior quarter.
The Bank of Japan said the Japanese economy is decelerating as a result of slowing housing investment following the introduction of new building standards that slowed the approval of building permits. "The pace of growth seems to be slowing mainly due to the drop in housing investment," the central bank said in its monthly economic report released Thursday. The report followed the central bank's decision to hold interest rates steady at 0.5% earlier in the day. The central bank also said business investment and consumption spending are likely to rise, helped by robust corporate profits and moderately rising household income.
Navistar International Corp. is buying General Motors Corp.'s medium-duty truck unit for an undisclosed amount, The Wall Street Journal reported in its online edition.
According to the Financial Times, nearly one in six Americans did not have basic coverage last year, and recent census data show the uninsured problem is getting worse. Last year the number of uninsured rose by more than 2m, to 47m. A prime driver of that trend was a decrease in people receiving health insurance from their employer – the main channel for coverage. The percentage covered by employer insurance fell to 59.7 per cent last year, from 60.2 per cent in 2005. Rising healthcare costs have forced some companies to stop or trim benefits, while employees more often refuse coverage as employers pass on more of the costs through measures such as higher insurance premiums.
China, which produces one third of the world’s steel, may reduce net exports of the alloy by 20 million metric tons next year, an official from the China Iron and Steel Association said.
The Oil Drum: "For perhaps as many as 27 million American adults, keeping warm this winter will mean borrowing money and 20 million will use credit cards to be able to afford their heating bills, according to a CreditCards.com poll. Nearly 12 percent of Americans say they will need to borrow money to pay winter heating bills; 9 percent will need to use credit cards to be able to afford their heating bills. The poll, commissioned by CreditCards.com and conducted by GfK Roper Public Affairs & Media, surveyed 1,004 randomly selected American adults by telephone Dec. 7-9, 2007 to gauge their attitudes about energy costs in 2008. A majority say they expect oil and gasoline prices to get worse in 2008."
Nouriel Roubini: "Thus, at this point the debate is less on whether the US will experience a soft landing or hard landing but rather on how hard the landing will be, i.e. whether the coming recession will be "mild" or "severe". That is a radical change of the macro debate relative to a few months ago. The combination of a worsening housing recession, a severe liquidity and credit crunch, oil prices well above $90, a retrenchment of capex by the corporate sector, and a saving-less and debt-burdened US consumers being buffeted by a variety of negative shocks is making the recession as the leading scenario for the US economy."
Footnoted.org: "Hewlett-Packard filed its 10-K late yesterday and there were so many interesting details in the 182-page filing that it’s hard to know where to begin. But the thing that really seemed to resonate throughout was growing concerns about the economy and what impact that was likely to have on HP. The K comes on the heels of the analyst’s meeting last week where HP predicted its estimates would meet, rather than outperform analysts expectations. (Of course, footnoted regulars know that the whole analyst prediction thing remains a giant game, but that doesn’t seem to stop these sorts of events from happening). While HP didn’t mention the sub-prime crisis by name, it did note that it could experience weakness, particularly in its consumer and financial services businesses due to “conditions in the residential real estate and mortgage markets, access to credit and other macroeconomic factors affecting spending behavior”. It also noted in the filing that the “inability of suppliers to borrow funds in the credit markets” could also have a negative impact on the company. Both are new disclosures and while it’s true that companies tend to put anything (and everything) into their risk factors, it’s usually because some attorney is making that call."
Marc Faber: "Cost-of-living increases vastly exceed the reported inflation figures and are squeezing the consumer, which leads to revenue pressure for the corporate sector. (According to the Kaiser Family Foundation, health insurance premiums have risen 78% since 2001, while wages have gained only 19% and "the government's inflation measure during that stretch was 17%".) At the same time, corporations are faced with a squeeze on margins due to rising costs. Pressure on revenues and cost increases contributed to the dismal performance of earnings in the third quarter of 2007...we believe inflation-adjusted U.S. GDP contracted at about a 10% annual rate in Q3 2007. This rate of economic contraction would seem to be consistent with the analysis of the corporate profit slump discussed above, and with the observations made in earlier reports that the US economy is already in recession."
Seasonally adjusted initial jobless claims rose 12,000 to 346,000 in the week ended Dec. 15, the government reported Thursday. The four-week moving average for initial jobless claims rose 4,250 to 343,000, according to the Labor Department. Continuing jobless claims also gained 12,000, reaching 2.65 million for the week ended Dec. 8. The four-week moving average for continuing jobless claims rose 23,000 to 2.63 million -- reaching the highest level in almost two years.
Bear Stearns Cos. said for the quarter ended Nov. 30, total mortgage-related write-downs totaled $1.9 billion, up from its earlier estimate of $1.2 billion. The company said fixed-income net revenue was negative $1.5 billion in the fourth quarter. "The continued repricing of credit risk and the severe dislocation in the structured products market led to illiquidity in the fixed-income markets, lower levels of client activity across the fixed-income sector and a significant revaluation of mortgage inventory," Bear Stearns said. After the writedowns, Bear Stearns Cos. reported a fourth-quarter loss of $854 million, or $6.90 a share, compared with net income of $563 million, or $4 a share, in the year-ago period.
Bear Stearns Cos. holds $43.6 billion of mortgage and other asset-backed securities, down 5% from the end of November, Chief Financial Officer Sam Molinaro said during a conference call with analysts on Thursday. The bank had roughly $500 million of exposure to subprime mortgage loans originated in 2007 and about $750 million of exposure to collateralized debt obligations at the end of November. However, hedging has reduced the bank's mortgage-related exposures significantly, he added.
Fedex Corp. said its second-quarter earnings slipped to $479 million, or $1.54 a share, from $511 million, or $1.64 a share in the year ago period due to the rising cost of fuel.
According to Jacques Diouf, head of the UN Food and Agriculture Organization, the agency's food price index rose by more than 40 percent this year, compared with 9 percent the year before - a rate that was already unacceptable, he said. New figures show that the total cost of foodstuffs imported by the neediest countries rose 25 percent, to $107 million, in the last year.
Qualcomm sees 1Q EPS of 52c-$53c vs 43c a year ago.
Yahoo and Latin America's top mobile phone company America Movil said on Thursday they have struck a deal to provide mobile Web services to 16 countries in Latin America and the Caribbean. The agreement calls for Yahoo's oneSearch service to be the default on America Movil's wireless carriers' portals. Yahoo plans to offer localized versions of oneSearch for each region, and said other Yahoo services may be added in coming months.
The Conference Board reported a decline of 0.4% for the index of leading economic indicators. Only three of the 10 leading economic indicators rose in November, with the largest positive contribution from vendor performance. Stocks prices were the largest negative contributor. Also, the coincident indicator index, which measures where the economy is at present, has shown some signs of yielding to "unrelenting pressure" from factors such as the housing slump and energy prices, according to Ken Goldstein, labor economist at the Conference Board. He added that the future gauge could show some "consistent declines" after the new year.
Rite Aid posted a wider-than-expected quarterly net loss Thursday and cut its full-year estimates, citing a slow flu season and a more cautious consumer.
The National Oceanic and Atmospheric Administration's Climate Prediction Center said in its three-month forecast that temperatures from the Pacific Northwest east through the Great Lakes region are expected to be cooler than the average of recent years, the report said. The rest of the nation will have higher-than-normal temperatures.
Chad Hudson: "Inflation is not a threat anymore, its here. Corporate margins are at a record high level and will be under pressure from rising cost, but from lower sales volumes as economic growth slides and likely heads into recession. Stagflation has started to be discussed recently as economic growth has slowed as prices have accelerating. While the inflation levels of the late 70s are not anticipated, it’s likely that asset prices, namely real estate, will decline while the price of goods and services rise."
The daily newsstand price of The Washington Post will increase to 50 cents from 35 cents on Dec. 31 in the Washington metropolitan area, the paper's owner said Thursday. The last time the Washington Post Co. raised the newsstand price of its flagship paper was in 2001, from 25 cents. The Sunday newsstand price of $1.50 and the home delivery price of 35 cents per day remains unchanged, the company said.
U.S. Energy Information Administration reported U.S. natural gas inventories dropped 121 billion cubic feet to 3,173 billion cubic feet in the week ending Dec. 14.
Antitrust regulators approved Google Inc.'s $3.1 billion purchase of DoubleClick Inc.
For the quarter ended Dec. 1, Research In Motion reported earnings of $370.5 million, or 65 cents a share, compared to earnings of $175.2 million, or 31 cents a share, for the same period last year. The company said earnings for the recent quarter got a $10.7 million boost from the resolution of a tax issue. Revenue grew 100% to $$1.67 billion. Analysts were expecting earnings of 62 cents a share on revenue of $1.65 billion, according to estimates from Thomson Financial.
Tribune Co. said Thursday it completed its move to go private by merging with an acquisition unit of the Tribune Employee Stock Ownership Plan. Sam Zell, who financed the $8.2 billion transaction, will serve as chairman and chief executive of the company. Under the agreement, public Tribune shares, except for those owned by the employee stock ownership plan and those held by shareholders who validly exercise appraisal rights, will be cashed out at $34 a share.
Due to further deterioration in mortgage markets and write-downs at other investment banks, Merrill Lynch & Co. could take a fourth-quarter mark-down as high as $8.6 billion on collateralized debt obligations and subprime exposure, according to analysts at Fox-Pitt Kelton.
Cisco Systems Inc. development chief Charles Giancarlo, often mentioned as a successor to Chief Executive Officer John Chambers, plans to resign to join private equity firm Silver Lake.
China's central bank boosted its benchmark lending rate by 0.18-percentage point Thursday, marking its sixth rate tightening this year as Beijing struggles to cool its overheating asset markets and rein in surging inflation. The People's Bank of China will lift the one-year lending rate to 7.47% from 7.29% effective Friday, according to reports which cited a statement on the central bank's Web site. The central bank will also reportedly reduce the deposit rate on deposit accounts by 0.09-percentage point to 0.72%.
Citigroup analysts upped their oil price forecast for the third time this year, moving 2008 Brent crude estimates by $10 a barrel to $80 a barrel, 2009 by $10 a barrel to $75 a barrel and "mid-cycle" estimates by $15 to $75 a barrel. "Risks to non-OPEC supply, and OPEC signalling a willingness to defend a higher price appear to us to be dominant factors in sustaining a higher near-term and long-term oil price," analysts said.
Britain's current account deficit widened to 20 billin pounds in the third quarter, up from 13.7 billion pound deficit in the second quarter, the National Statistics Office said. The deficit is equivalent to 5.7% of GDP, compared with 4% the prior quarter.
The Bank of Japan said the Japanese economy is decelerating as a result of slowing housing investment following the introduction of new building standards that slowed the approval of building permits. "The pace of growth seems to be slowing mainly due to the drop in housing investment," the central bank said in its monthly economic report released Thursday. The report followed the central bank's decision to hold interest rates steady at 0.5% earlier in the day. The central bank also said business investment and consumption spending are likely to rise, helped by robust corporate profits and moderately rising household income.
Navistar International Corp. is buying General Motors Corp.'s medium-duty truck unit for an undisclosed amount, The Wall Street Journal reported in its online edition.
According to the Financial Times, nearly one in six Americans did not have basic coverage last year, and recent census data show the uninsured problem is getting worse. Last year the number of uninsured rose by more than 2m, to 47m. A prime driver of that trend was a decrease in people receiving health insurance from their employer – the main channel for coverage. The percentage covered by employer insurance fell to 59.7 per cent last year, from 60.2 per cent in 2005. Rising healthcare costs have forced some companies to stop or trim benefits, while employees more often refuse coverage as employers pass on more of the costs through measures such as higher insurance premiums.
China, which produces one third of the world’s steel, may reduce net exports of the alloy by 20 million metric tons next year, an official from the China Iron and Steel Association said.
The Oil Drum: "For perhaps as many as 27 million American adults, keeping warm this winter will mean borrowing money and 20 million will use credit cards to be able to afford their heating bills, according to a CreditCards.com poll. Nearly 12 percent of Americans say they will need to borrow money to pay winter heating bills; 9 percent will need to use credit cards to be able to afford their heating bills. The poll, commissioned by CreditCards.com and conducted by GfK Roper Public Affairs & Media, surveyed 1,004 randomly selected American adults by telephone Dec. 7-9, 2007 to gauge their attitudes about energy costs in 2008. A majority say they expect oil and gasoline prices to get worse in 2008."
Nouriel Roubini: "Thus, at this point the debate is less on whether the US will experience a soft landing or hard landing but rather on how hard the landing will be, i.e. whether the coming recession will be "mild" or "severe". That is a radical change of the macro debate relative to a few months ago. The combination of a worsening housing recession, a severe liquidity and credit crunch, oil prices well above $90, a retrenchment of capex by the corporate sector, and a saving-less and debt-burdened US consumers being buffeted by a variety of negative shocks is making the recession as the leading scenario for the US economy."
Footnoted.org: "Hewlett-Packard filed its 10-K late yesterday and there were so many interesting details in the 182-page filing that it’s hard to know where to begin. But the thing that really seemed to resonate throughout was growing concerns about the economy and what impact that was likely to have on HP. The K comes on the heels of the analyst’s meeting last week where HP predicted its estimates would meet, rather than outperform analysts expectations. (Of course, footnoted regulars know that the whole analyst prediction thing remains a giant game, but that doesn’t seem to stop these sorts of events from happening). While HP didn’t mention the sub-prime crisis by name, it did note that it could experience weakness, particularly in its consumer and financial services businesses due to “conditions in the residential real estate and mortgage markets, access to credit and other macroeconomic factors affecting spending behavior”. It also noted in the filing that the “inability of suppliers to borrow funds in the credit markets” could also have a negative impact on the company. Both are new disclosures and while it’s true that companies tend to put anything (and everything) into their risk factors, it’s usually because some attorney is making that call."
Marc Faber: "Cost-of-living increases vastly exceed the reported inflation figures and are squeezing the consumer, which leads to revenue pressure for the corporate sector. (According to the Kaiser Family Foundation, health insurance premiums have risen 78% since 2001, while wages have gained only 19% and "the government's inflation measure during that stretch was 17%".) At the same time, corporations are faced with a squeeze on margins due to rising costs. Pressure on revenues and cost increases contributed to the dismal performance of earnings in the third quarter of 2007...we believe inflation-adjusted U.S. GDP contracted at about a 10% annual rate in Q3 2007. This rate of economic contraction would seem to be consistent with the analysis of the corporate profit slump discussed above, and with the observations made in earlier reports that the US economy is already in recession."
Seasonally adjusted initial jobless claims rose 12,000 to 346,000 in the week ended Dec. 15, the government reported Thursday. The four-week moving average for initial jobless claims rose 4,250 to 343,000, according to the Labor Department. Continuing jobless claims also gained 12,000, reaching 2.65 million for the week ended Dec. 8. The four-week moving average for continuing jobless claims rose 23,000 to 2.63 million -- reaching the highest level in almost two years.
Bear Stearns Cos. said for the quarter ended Nov. 30, total mortgage-related write-downs totaled $1.9 billion, up from its earlier estimate of $1.2 billion. The company said fixed-income net revenue was negative $1.5 billion in the fourth quarter. "The continued repricing of credit risk and the severe dislocation in the structured products market led to illiquidity in the fixed-income markets, lower levels of client activity across the fixed-income sector and a significant revaluation of mortgage inventory," Bear Stearns said. After the writedowns, Bear Stearns Cos. reported a fourth-quarter loss of $854 million, or $6.90 a share, compared with net income of $563 million, or $4 a share, in the year-ago period.
Bear Stearns Cos. holds $43.6 billion of mortgage and other asset-backed securities, down 5% from the end of November, Chief Financial Officer Sam Molinaro said during a conference call with analysts on Thursday. The bank had roughly $500 million of exposure to subprime mortgage loans originated in 2007 and about $750 million of exposure to collateralized debt obligations at the end of November. However, hedging has reduced the bank's mortgage-related exposures significantly, he added.
Fedex Corp. said its second-quarter earnings slipped to $479 million, or $1.54 a share, from $511 million, or $1.64 a share in the year ago period due to the rising cost of fuel.
According to Jacques Diouf, head of the UN Food and Agriculture Organization, the agency's food price index rose by more than 40 percent this year, compared with 9 percent the year before - a rate that was already unacceptable, he said. New figures show that the total cost of foodstuffs imported by the neediest countries rose 25 percent, to $107 million, in the last year.
Qualcomm sees 1Q EPS of 52c-$53c vs 43c a year ago.
Yahoo and Latin America's top mobile phone company America Movil said on Thursday they have struck a deal to provide mobile Web services to 16 countries in Latin America and the Caribbean. The agreement calls for Yahoo's oneSearch service to be the default on America Movil's wireless carriers' portals. Yahoo plans to offer localized versions of oneSearch for each region, and said other Yahoo services may be added in coming months.
The Conference Board reported a decline of 0.4% for the index of leading economic indicators. Only three of the 10 leading economic indicators rose in November, with the largest positive contribution from vendor performance. Stocks prices were the largest negative contributor. Also, the coincident indicator index, which measures where the economy is at present, has shown some signs of yielding to "unrelenting pressure" from factors such as the housing slump and energy prices, according to Ken Goldstein, labor economist at the Conference Board. He added that the future gauge could show some "consistent declines" after the new year.
Rite Aid posted a wider-than-expected quarterly net loss Thursday and cut its full-year estimates, citing a slow flu season and a more cautious consumer.
The National Oceanic and Atmospheric Administration's Climate Prediction Center said in its three-month forecast that temperatures from the Pacific Northwest east through the Great Lakes region are expected to be cooler than the average of recent years, the report said. The rest of the nation will have higher-than-normal temperatures.
Chad Hudson: "Inflation is not a threat anymore, its here. Corporate margins are at a record high level and will be under pressure from rising cost, but from lower sales volumes as economic growth slides and likely heads into recession. Stagflation has started to be discussed recently as economic growth has slowed as prices have accelerating. While the inflation levels of the late 70s are not anticipated, it’s likely that asset prices, namely real estate, will decline while the price of goods and services rise."
The daily newsstand price of The Washington Post will increase to 50 cents from 35 cents on Dec. 31 in the Washington metropolitan area, the paper's owner said Thursday. The last time the Washington Post Co. raised the newsstand price of its flagship paper was in 2001, from 25 cents. The Sunday newsstand price of $1.50 and the home delivery price of 35 cents per day remains unchanged, the company said.
U.S. Energy Information Administration reported U.S. natural gas inventories dropped 121 billion cubic feet to 3,173 billion cubic feet in the week ending Dec. 14.
Antitrust regulators approved Google Inc.'s $3.1 billion purchase of DoubleClick Inc.
For the quarter ended Dec. 1, Research In Motion reported earnings of $370.5 million, or 65 cents a share, compared to earnings of $175.2 million, or 31 cents a share, for the same period last year. The company said earnings for the recent quarter got a $10.7 million boost from the resolution of a tax issue. Revenue grew 100% to $$1.67 billion. Analysts were expecting earnings of 62 cents a share on revenue of $1.65 billion, according to estimates from Thomson Financial.
Tribune Co. said Thursday it completed its move to go private by merging with an acquisition unit of the Tribune Employee Stock Ownership Plan. Sam Zell, who financed the $8.2 billion transaction, will serve as chairman and chief executive of the company. Under the agreement, public Tribune shares, except for those owned by the employee stock ownership plan and those held by shareholders who validly exercise appraisal rights, will be cashed out at $34 a share.
Due to further deterioration in mortgage markets and write-downs at other investment banks, Merrill Lynch & Co. could take a fourth-quarter mark-down as high as $8.6 billion on collateralized debt obligations and subprime exposure, according to analysts at Fox-Pitt Kelton.
Cisco Systems Inc. development chief Charles Giancarlo, often mentioned as a successor to Chief Executive Officer John Chambers, plans to resign to join private equity firm Silver Lake.
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