6/3/07 What Else Is New?
Gunmen disguised as riot police have abducted four foreign workers from the residential compound of oil services giant Schlumberger in Nigeria's oil city Port Harcourt, authorities said on Saturday.
The number of civilians killed in Iraq jumped to nearly 2,000 in May, the highest monthly toll since the start of a U.S.-backed security crackdown in February, according to figures released on Saturday.
NASA scientists reading signals from a satellite in orbit, and flying aboard a low-flying plane over Greenland, are finding fresh evidence of melting snows and thinning glaciers in vast areas of Greenland.
Genentech Inc. said adding its Avastin to a chemotherapy combination slowed the growth of lung tumors at both high and low doses in a study.
Google announced that it has purchased Feedburner. This will allow Google to embed its ads in RSS feeds. Feedburner works extensively with blog sites.
Pending Home Sales for April fell -3.2% versus estimates of a .3% gain and a -4.5% decline in March.
Nouriel Roubini: "Today instead we are presumed to believe that $157 jobs were created in May and that employment change in construction was close to zero in spite of the fact that housing starts have fallen over 30% from peak, in spite of the fact that the housing recession is worsening and, in spite of the fact that numerous studies suggest that a good third of all construction jobs are undocumented. Based on the historical correlation between housing starts and construction employment we should be observing now at least 50K job losses per month in construction alone. Add to those the dozens of thousands of workers being fired as about forty sub-prime lenders are closing shop; add to those the dozens of thousands of mortgage brokers, mortgage lenders employees, real estate brokers and agents that are now losing their jobs. Do these job losses appear anywhere in the employment report? Not even the shadow if it: in May the BLS reported that “real estate” related employees in financial institutions were actually up 1.4K? Does anyone believe that? "
International investors own $672 billion of the $835.4 billion Treasuries due in three to 10 years, according to…Lawrence Dyer, strategist at HSBC Securities USA Inc.
Doug Noland: "As I’ve noted in previous analyses, the aggressive financial sector expansion in the face of slowing Non-Financial Debt was the notable 2006 development. From the Fed’s Z.1 report, nominal Non-Financial Debt growth slowed to $2.100 TN from 2005’s $2.279 TN. Yet at the same time Financial Sector Credit Market Borrowings (that exclude some categories of financial sector borrowings, i.e. deposit growth) increased a record $1.200 TN, up significantly from 2005’s $1.040 TN. Remarkably, Broker/Dealer assets surged 29% last year to $2.742 TN.
The slowdown in Non-financial debt growth has been consistent with moderating nominal GDP (as one should expect). What has caught many analysts by surprise, however, is the acceleration of Income Growth and overly abundant marketplace liquidity (with booming global stock markets). In both cases, the rapid expansion of Financial Sector debt has played the prevailing role...It has become rather obvious that financial sector Credit expansion is financing much of the acquisitions boom.
Deals are driving record debt issuance, and each acquisition completed with debt adds additional “liquidity” into the system. Some of this new liquidity flows to the sellers, where it will be used to purchase other assets or financial instruments. Some of this newly created liquidity is enjoyed by the acquirer through the currently popular private-equity “special dividend.” Some of the new financial Credit becomes Revenues and Income for the various financial intermediaries and their accountant and attorneys...Clearly, the massive expansion of Financial Credit is boosting Income, gains on assets sales, foreign flows recycled back into the U.S. economy and confidence generally. As such, it today requires less – and perhaps significantly less – household, corporate and government debt growth to sustain the U.S. Bubble than would normally be the case...I’ve argued for too long that the U.S. Credit Bubble is acutely vulnerable to a spike in interest rates. With the booming U.S. financial sector and global financial and economic Bubbles as a backdrop, we might now be only a growth spurt and a negative inflation surprise from testing this thesis. Deleveraging and the unwinding of speculative positions – and the associated reversal of today’s key sources and flows of liquidity - would be especially debilitating for our unstable financial sector and economy. And that’s, as they say, The Other Side to the Story."
Saturday, June 02, 2007
Friday, June 01, 2007
More Government Data
6/2/07 More Government Data
Here's the data. Believe it at your own risk
Core consumer price inflation increased just 0.1% in April, bringing the year-over-year increase down to 2%, just inside the Federal Reserve's target, the Commerce Department reported Friday. It's the first time in 14 months that core prices have been inside the Fed's unofficial target zone of 1% to 2%. Personal incomes unexpectedly fell 0.1% in April, after hefty bonuses were paid in the first quarter. Real disposable incomes (after accounting for taxes and inflation) fell 0.4%, the first decline in a year. Consumer spending, meanwhile, rose a larger-than-expected 0.5% in April in nominal terms. After adjusting for a 0.3% rise in consumer prices, real spending increased 0.2%.
Nonfarm payrolls expanded by 157,000 in May. The unemployment rate held steady at 4.5%, in line with expectations. Average hourly earnings increased 6 cents, or 0.3% to $17.30. Earnings are up 3.8% in the past year. The average workweek rose slightly to 33.9 hours from 33.8 hours in April.
Basically, the hours worked each week remain at a low level and wages cannot seem to get a push above inflation. Of course, if you eat or fill up your car, you might find that wages trail real inflation by a great deal.
Late Thursday, Dow Jones said it would meet with News Corp. to address Rupert Murdoch's $5 billion bid for Dow Jones. The Bancroft family, which controls 64% of the company's voting power, said it would consider other bidders and options. It appears likely the company will be sold, but at what level above $61? How does one actually get a reasonable return at let's say $67?
The benchmark 10-year Treasury note finished down 16/32 at 96 15/32, yielding 4.956%, up from 4.892% late Thursday. In intraday trade, the yield traded as high as 4.956%; it last was this high on Aug. 15. The 2-year note ended down 3/32 at 99 26/32, with a yield of 4.975%, keeping the yield curve inverted.
July crude closed at $65.08 a barrel Friday, up 1.7%, or $1.07. July reformulated gasoline rose by 1.9% to close at $2.2446 a gallon. Still, July crude finished 12 cents lower for the week and July reformulated gas lost almost 7 cents. July natural gas fell 5.7 cents to close at $7.878 per million British thermal units, though it was up 1.1% for the week.
June gold closed at $671.20 an ounce and August gold closed at $676.90. Both contracts gained $10.20 for the session and ended the week more than 2% higher. July closed at $13.74 an ounce, up 2% for the day and up 5.7% for the week. July copper gained 0.95 cent to end at $3.405 a pound, up 2.5% for the week.
Wal-Mart Stores Inc. announced a new $15 billion stock buyback program and plans to slow the growth of its supercenters in the United States and reduce capital expenditures. The Bentonville, Ark.-based retailing giant now expects to open between 190 and 200 new U.S. supercenters during the current fiscal year and roughly 170 each year for the next three fiscal years. The company had previously said it expected to open 265 to 270 supercenters in the U.S. in the current fiscal year.
The ISM index rose to 55% from 54.7% in April. The new-orders index rose to 59.6% from 58.5% in April. The production index rose to 58.3% from 57.3% in April. The employment index fell to 51.9% from 53.1% in April. The prices-paid index fell to 71% from 73% in April.
I found it particularly interesting that the dollar did not hold a rally with interest rates rising and closing in on 5%. In addition, the despite the stronger ISM, the dollar could not keep even a little strength.
Here's the data. Believe it at your own risk
Core consumer price inflation increased just 0.1% in April, bringing the year-over-year increase down to 2%, just inside the Federal Reserve's target, the Commerce Department reported Friday. It's the first time in 14 months that core prices have been inside the Fed's unofficial target zone of 1% to 2%. Personal incomes unexpectedly fell 0.1% in April, after hefty bonuses were paid in the first quarter. Real disposable incomes (after accounting for taxes and inflation) fell 0.4%, the first decline in a year. Consumer spending, meanwhile, rose a larger-than-expected 0.5% in April in nominal terms. After adjusting for a 0.3% rise in consumer prices, real spending increased 0.2%.
Nonfarm payrolls expanded by 157,000 in May. The unemployment rate held steady at 4.5%, in line with expectations. Average hourly earnings increased 6 cents, or 0.3% to $17.30. Earnings are up 3.8% in the past year. The average workweek rose slightly to 33.9 hours from 33.8 hours in April.
Basically, the hours worked each week remain at a low level and wages cannot seem to get a push above inflation. Of course, if you eat or fill up your car, you might find that wages trail real inflation by a great deal.
Late Thursday, Dow Jones said it would meet with News Corp. to address Rupert Murdoch's $5 billion bid for Dow Jones. The Bancroft family, which controls 64% of the company's voting power, said it would consider other bidders and options. It appears likely the company will be sold, but at what level above $61? How does one actually get a reasonable return at let's say $67?
The benchmark 10-year Treasury note finished down 16/32 at 96 15/32, yielding 4.956%, up from 4.892% late Thursday. In intraday trade, the yield traded as high as 4.956%; it last was this high on Aug. 15. The 2-year note ended down 3/32 at 99 26/32, with a yield of 4.975%, keeping the yield curve inverted.
July crude closed at $65.08 a barrel Friday, up 1.7%, or $1.07. July reformulated gasoline rose by 1.9% to close at $2.2446 a gallon. Still, July crude finished 12 cents lower for the week and July reformulated gas lost almost 7 cents. July natural gas fell 5.7 cents to close at $7.878 per million British thermal units, though it was up 1.1% for the week.
June gold closed at $671.20 an ounce and August gold closed at $676.90. Both contracts gained $10.20 for the session and ended the week more than 2% higher. July closed at $13.74 an ounce, up 2% for the day and up 5.7% for the week. July copper gained 0.95 cent to end at $3.405 a pound, up 2.5% for the week.
Wal-Mart Stores Inc. announced a new $15 billion stock buyback program and plans to slow the growth of its supercenters in the United States and reduce capital expenditures. The Bentonville, Ark.-based retailing giant now expects to open between 190 and 200 new U.S. supercenters during the current fiscal year and roughly 170 each year for the next three fiscal years. The company had previously said it expected to open 265 to 270 supercenters in the U.S. in the current fiscal year.
The ISM index rose to 55% from 54.7% in April. The new-orders index rose to 59.6% from 58.5% in April. The production index rose to 58.3% from 57.3% in April. The employment index fell to 51.9% from 53.1% in April. The prices-paid index fell to 71% from 73% in April.
I found it particularly interesting that the dollar did not hold a rally with interest rates rising and closing in on 5%. In addition, the despite the stronger ISM, the dollar could not keep even a little strength.
Thursday, May 31, 2007
More Data
6/1/07 More Data
Hovnanian said it has withdrawn its prior estimates for 2007 earnings and will not provide an updated outlook at this time. However, Hovnanian said it expects to deliver between 13,200 and 14,200 homes in fiscal 2007, excluding deliveries from unconsolidated joint ventures. The contract backlog as of April 30, excluding unconsolidated joint ventures, was 7,766 homes with a sales value of $2.7 billion, down 33% by number of homes, compared with a contract backlog of 11,587 homes with a $4 billion sales value, a year ago, the company said.
Dell Inc. reported preliminary fiscal first-quarter earnings of $759 million, or 34 cents a share, down slightly from the $762 million or 33 cents a share, the PC giant reported a year ago. Revenue rose 3% to $14.62 billion from last year's first-quarter sales of $14.22 billion. Dell said it also plans on cutting 10% of its workforce, or about 8,800 jobs, over the next year in an effort to cut costs.
July crude closed at $64.01 a barrel, up 52 cents for the day, but down 4.8% for the month. Crude supplies fell for the first time in six weeks. July natural gas fell 0.06 cent to end at $7.935 per million British thermal units, down 1% for the month.
June gold climbed $7.90 to close at $661 an ounce Thursday, but still suffered a loss of $22.50, or 3.3%, for the month of May. July silver closed at $13.47 an ounce, up 25 cents for the session, down 0.8% for the month. July copper tacked on 9.2 cents, or 2.8%, for the day to close at $3.3955 a pound, down 4.6% for the month.
Tribune said it has accepted for payment 126 million of the 218.1 million shares tendered in the offer, at a price of $34 a share. The shares tendered represent about 90% of shares outstanding, and the shares that Tribune will buy back represent about 52% of shares outstanding, the company said. Following the repurchase, Tribune said it will have about 117 million shares outstanding. The company said it will begin payment for the shares no later than June 5.
The American Petroleum Institute reported a climb of 3.1 million barrels in crude supplies for the week ended May 25. The Energy Department had reported a decline of 2 million barrels for the latest week. Motor gasoline supplies were up 2.3 million barrels, the API said. The government reported a rise of 1.3 million barrels. Distillate supplies climbed 1.9 million barrels, the API said. The government posted a 100,000-barrel rise.
Natural-gas inventories rose by 107 billion cubic feet for the week ended May 25, the Energy Department said Thursday. Total stocks now stand at 2.053 trillion cubic feet, down 179 billion cubic feet from the year-ago level, but 355 billion cubic feet above the five-year average, the government data said.
The volume of help-wanted ads in major U.S. newspapers was unchanged in April, the Conference Board said Thursday. The help-wanted index stayed at 29 in April; it was 34 a year earlier. Data suggests that the labor market may continue to open new jobs at a pace of 120,000 to 130,000 per month this summer, about the same pace as in the spring, according to Ken Goldstein, a labor economist with the Conference Board.
The Chicago purchasing-managers' index rose to 61.7% in May from 52.9% in April, the Chicago NAPM reported. The employment index rose to 57.3% from 50.5%. The prices paid index rose to 70.2% from 64.9% in April. The new orders index rose to 71.1% from 56.5%.
Initial jobless claims fell by 4,000 to a seasonally adjusted 310,000 in the week ending May 26, the Labor Department reported Thursday. The four-week average of initial claims, considered a better gauge of underlying labor market strength because it smoothes out often-volatile data, rose by 1,000 to 304,500, the highest since May 12. The number of people collecting unemployment checks fell by 52,000 to a seasonally adjusted 2.47 million in the week ending May 19. The four-week average of continuing claims fell by 4,500 to 2.50 million.
The economy grew at a 0.6% annualized pace in the quarter, revised down from the initial estimate of 1.3%, the government said in its second estimate of quarterly gross domestic product. It was the slowest growth since late 2002. Economy-wide inflation surged at the fastest pace in 16 years.
Genesco Inc. said its board has authorized the shoe and hat retailer and its advisors to explore strategic alternatives, including the possible sale of the company.
Monster Worldwide Inc. said Thursday that its employment index rose three points in May to 189.
Wachovia Corp. has agreed to acquire A.G. Edwards Inc. for the equivalent of $89.50 a share in cash and stock, the companies said. The deal carries a buyout premium of 16% over the Wednesday closing price on A.G. Edwards shares. Terms call for stockholders of St. Louis-based A.G. Edwards to get 0.9844 of a share of Wachovia common stock and $35.80 in cash for each of their common shares. The merger's expected to close in the fourth quarter.
Dendreon said Thursday the U.S. Food and Drug Administration has decided that positive interim or final survival data from an ongoing trial of its Provenge cancer vaccine will satisfy the agency's earlier request for more data, sending its shares soaring."We anticipate completing enrollment in the ... study this year and anticipate interim survival results in 2008," Dendreon said in a statement. Provenge is a so-called therapeutic vaccine against prostate cancer, meaning it is meant to stimulate the immune system to fight existing tumors.
Hovnanian said it has withdrawn its prior estimates for 2007 earnings and will not provide an updated outlook at this time. However, Hovnanian said it expects to deliver between 13,200 and 14,200 homes in fiscal 2007, excluding deliveries from unconsolidated joint ventures. The contract backlog as of April 30, excluding unconsolidated joint ventures, was 7,766 homes with a sales value of $2.7 billion, down 33% by number of homes, compared with a contract backlog of 11,587 homes with a $4 billion sales value, a year ago, the company said.
Dell Inc. reported preliminary fiscal first-quarter earnings of $759 million, or 34 cents a share, down slightly from the $762 million or 33 cents a share, the PC giant reported a year ago. Revenue rose 3% to $14.62 billion from last year's first-quarter sales of $14.22 billion. Dell said it also plans on cutting 10% of its workforce, or about 8,800 jobs, over the next year in an effort to cut costs.
July crude closed at $64.01 a barrel, up 52 cents for the day, but down 4.8% for the month. Crude supplies fell for the first time in six weeks. July natural gas fell 0.06 cent to end at $7.935 per million British thermal units, down 1% for the month.
June gold climbed $7.90 to close at $661 an ounce Thursday, but still suffered a loss of $22.50, or 3.3%, for the month of May. July silver closed at $13.47 an ounce, up 25 cents for the session, down 0.8% for the month. July copper tacked on 9.2 cents, or 2.8%, for the day to close at $3.3955 a pound, down 4.6% for the month.
Tribune said it has accepted for payment 126 million of the 218.1 million shares tendered in the offer, at a price of $34 a share. The shares tendered represent about 90% of shares outstanding, and the shares that Tribune will buy back represent about 52% of shares outstanding, the company said. Following the repurchase, Tribune said it will have about 117 million shares outstanding. The company said it will begin payment for the shares no later than June 5.
The American Petroleum Institute reported a climb of 3.1 million barrels in crude supplies for the week ended May 25. The Energy Department had reported a decline of 2 million barrels for the latest week. Motor gasoline supplies were up 2.3 million barrels, the API said. The government reported a rise of 1.3 million barrels. Distillate supplies climbed 1.9 million barrels, the API said. The government posted a 100,000-barrel rise.
Natural-gas inventories rose by 107 billion cubic feet for the week ended May 25, the Energy Department said Thursday. Total stocks now stand at 2.053 trillion cubic feet, down 179 billion cubic feet from the year-ago level, but 355 billion cubic feet above the five-year average, the government data said.
The volume of help-wanted ads in major U.S. newspapers was unchanged in April, the Conference Board said Thursday. The help-wanted index stayed at 29 in April; it was 34 a year earlier. Data suggests that the labor market may continue to open new jobs at a pace of 120,000 to 130,000 per month this summer, about the same pace as in the spring, according to Ken Goldstein, a labor economist with the Conference Board.
The Chicago purchasing-managers' index rose to 61.7% in May from 52.9% in April, the Chicago NAPM reported. The employment index rose to 57.3% from 50.5%. The prices paid index rose to 70.2% from 64.9% in April. The new orders index rose to 71.1% from 56.5%.
Initial jobless claims fell by 4,000 to a seasonally adjusted 310,000 in the week ending May 26, the Labor Department reported Thursday. The four-week average of initial claims, considered a better gauge of underlying labor market strength because it smoothes out often-volatile data, rose by 1,000 to 304,500, the highest since May 12. The number of people collecting unemployment checks fell by 52,000 to a seasonally adjusted 2.47 million in the week ending May 19. The four-week average of continuing claims fell by 4,500 to 2.50 million.
The economy grew at a 0.6% annualized pace in the quarter, revised down from the initial estimate of 1.3%, the government said in its second estimate of quarterly gross domestic product. It was the slowest growth since late 2002. Economy-wide inflation surged at the fastest pace in 16 years.
Genesco Inc. said its board has authorized the shoe and hat retailer and its advisors to explore strategic alternatives, including the possible sale of the company.
Monster Worldwide Inc. said Thursday that its employment index rose three points in May to 189.
Wachovia Corp. has agreed to acquire A.G. Edwards Inc. for the equivalent of $89.50 a share in cash and stock, the companies said. The deal carries a buyout premium of 16% over the Wednesday closing price on A.G. Edwards shares. Terms call for stockholders of St. Louis-based A.G. Edwards to get 0.9844 of a share of Wachovia common stock and $35.80 in cash for each of their common shares. The merger's expected to close in the fourth quarter.
Dendreon said Thursday the U.S. Food and Drug Administration has decided that positive interim or final survival data from an ongoing trial of its Provenge cancer vaccine will satisfy the agency's earlier request for more data, sending its shares soaring."We anticipate completing enrollment in the ... study this year and anticipate interim survival results in 2008," Dendreon said in a statement. Provenge is a so-called therapeutic vaccine against prostate cancer, meaning it is meant to stimulate the immune system to fight existing tumors.
Wednesday, May 30, 2007
Surging
5/31/07 Surging
So far, 112 US soldiers and marines have been killed this month. It is the fourth highest fatality count since the 2003 invasion. April was also unusually bloody, with 104 reported killed. You might call it a killing surge.
Steve Moyer: "Now, as sales have slowed by up to 40% in many markets, foreclosures and contract cancellations have become rampant, lenders are pulling in their horns and values have begun their decline, we have already crossed the threshold into real estate/credit bubble deflation. I expect the average value of real estate to drop at least 70% from peak values in the coming decade."
For the fiscal year, Polo Ralph Lauren expects to earn $3.70 to $3.80 a share, including 27 cents a share in items. Analysts polled by Thomson Financial expect it to earn $4.13 a share for the year, on average.
Qatar Airways Wednesday said it's signed a memorandum of understanding to buy 80 Airbus A350XWBs, beating out Boeing Co.'s 787 Dreamliner.
For the year, Williams-Sonoma expects an adjusted profit of $1.76 to $1.84 versus Thomson's estimate of $1.80.
While Joy Global said the U.S. coal market has been soft, the company said it remains optimistic about its prospects, with revenue of $2.8 billion to $3 billion and earnings of $3.25 a share to $3.50 a share over the next 12 months.
The shareholder-advisory service Institutional Shareholder Services urged Biomet Inc. holders to reject a $10.9 billion private-equity deal for the company, The Wall Street Journal reported.
The World Bank raised its forecast for China's gross domestic product growth in the current year to 10.4% from 9.6%, with the revision based on stronger-than-expected first-quarter economic data. The new estimate suggests China's economy will grow above 10% for the fourth straight year, according to data presented in the World Bank's Quarterly Update.
CDW Corp. will be acquired by Madison Dearborn Partners for $7.3 billion. The deal calls for Madison Dearborn, a private-equity firm, to pay $87.75 a share for CDW, a 16.1% premium over CDW's May 25 closing price of $75.56 a share. CDW said it expects the deal to close early during the fourth quarter of this year.
China's stocks tumbled 6.8%, the most in three months, after the government tripled the tax on securities transactions in an effort to cool a rally that's drawing more than 300,000 new investors a day. Some 22 million accounts have been opened at brokerages so far this year, four times the amount in all of 2006, according to the China Securities Depository & Clearing Corp. Investors on May 28 opened 455,111 accounts, a daily record.
Pulte Homes is cutting about 16% of its workforce, and that amounts to roughly 2000 jobs.
International Business Machines Corp. laid off 1,570 people Wednesday, primarily from an ongoing overhaul of operations in its giant technology services unit. The company carried out a similar level of job cuts at the beginning of the month, for a total of 3,023 in this quarter and 3,720 for the year, according to IBM spokesman Edward Barbini.
Gold supply will exceed demand by 250 metric tons this year, a bigger surplus than forecast in October, as increased prices deter jewelry buyers, London-based research company Virtual Metals said. Jewelry consumption will decline 2.5% to 2,218 tons, a second annual drop, Virtual Metals said.
A new attack on a Nigerian pipeline illustrated the uphill task the new president faces to restore lost output in the world's eighth biggest crude exporter.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ended May 25 dropped 7.3% to 636.4.
A Ford Motor official predicts that his company's overall U.S. sales will drop in May, but its retail sales to individual buyers will show a year-over-year monthly increase for the first time since October of 2006.
"Rather than buying oil companies, we will look for more oil and gas assets, in terms of mergers and acquisitions, in the future," Fu Chengyu, CNOOC's chairman, told China Daily yesterday. By 2010, CNOOC is determined to raise its energy supply to the local market to 100 million tons of oil equivalent, up from the 40 million tons today. CNOOC's China production is estimated to reach 50 million tons of oil equivalent by 2010, while current overseas reserves are expected to contribute 20 to 25 million tons by 2010, depending on engineering capacity and construction speed, Fu said. "We plan to bridge the gap by purchasing more oil and gas reserves from overseas markets and importing more liquified natural gas (LNG)," he added.
Ghassan Abdallah: " Fireworks in a region that possesses 65% of the world�s oil reserves and accounts for 35% of the world�s total exports have in no way been discounted into the price of petroleum products by the global oil markets."
Paul J. Nolte: "Given the markets dependency upon low interest rates (and the anticipation of even lower) any backup toward the 5% level could create a problem for stocks."
Some of the nation's largest farming operations are paying rock-bottom rates for the electricity they use to pump federally subsidized water to their fields. About 7,000 giants of California farming get their water from the Central Valley Project, a vast irrigation system that pumps water from mountain rivers through canals spanning the state's fertile interior. But the system only charges irrigators about a penny per kilowatt-hour to move the water to their fields, a rate subsidized each year by about $100 million in taxpayer funds, according to a study released Wednesday by the Environmental Working Group. In comparison, farmers that rely on a state-run irrigation system paid about 22 cents per kilowatt hour for wholesale electricity last year, Department of Water Resources officials said.
Addison Wiggin: "It takes more dollars to buy the same thing (in other words, prices are higher) but incomes have not risen to meet that price inflation. That's what happens when the value of the dollar declines...The Fed has lent money below inflation. Fed lending rates have been far below inflation (even as measured by the consumer price index, not to mention any real inflationary measurements). In a very real sense, the Fed has lost money on these loans. When inflation is higher than the lending rate, it is a loss. Just as a business cannot stay open when it sells goods below cost, the Fed cannot continue to hold the view that it isn't real money. The point is, the money lent out at bargain rates is real credit, and that is corrupted when it is given away cheaply...The low interest rates have created the mortgage bubble without any corresponding investment...The mortgage bubble has inflated the housing market in an exaggerated fashion, creating the illusion of equity. All of that cheap money has created two troubling changes in housing. First is higher demand for owner-occupied housing based on the low cost of borrowed money rather than on any real market forces. Second is the resulting equity buildup from rapid expansion of market value in residential property. But it is as fake as the low interest rates...As rates on variable mortgages begin to rise right up to their cap rates, we'll see many of those marginal loans go into default...At some point, when the bubble bursts, everyone will realize that too many homes were built too quickly, and the anticipated demand simply isn't there. The result: those skyrocketing market values will disappear...For those who enter into the housing market when prices are inflated, the day arrives when they realize that real equity is below zero...In such a severe condition, marginal buyers are going to simply walk away from their properties. Why stay when there is no equity - or worse, minus equity?"
James Picerno: "Consider the fact that the real yield on the 10-year TIPS, which closed last Friday at 2.51%, is now the highest since last October. We can debate the causes and the consequences, and whether or not the trend has legs, but there's no doubt that interest rates are taking flight once more."
Antal E. Fekete: "Paper wealth in the world is presently being destroyed at the rate greater than that of the annual gold production, approx. $2.8 billion gold dollars (equivalent to about $55 billion paper dollars at today's gold price), but this earthquake-style destruction is allowed to go unnoticed by academia and the financial media. They are satisfied that paper wealth so destroyed will not be missed. The U.S. Federal Reserve banks are dutifully replacing these real assets, and more, by printing paper assets. "See no evil, hear no evil." "What you can't see won't hurt you." Nobody is pointing out that this newly created paper wealth facing, as it is, an equivalent amount of wealth in solid gold, is quite hollow. Nobody asks whether the large quantities of gold vanishing into private hoards could cause a crisis when its size reaches and exceeds critical mass. Be that as it may, thinking people ought to realize that, the official 'propaganda of silence' notwithstanding, the disappearance of such inordinate quantities of gold cannot help but, in the fullness of time, have an untoward effect on their lives, and on their children's lives. Fifty percent of all the gold in existence has been produced since 1960. The same fifty percent has been withdrawn from the public domain during the same period of time and disappeared in private hoards. There is no way to account for this gold. We do not know the location, the identity of owners, nor their intentions what they wanted to do with it. This is a sea change portending a still greater sea change to come. This is a situation comparable to the disappearance of the gold and silver coinage of ancient Rome portending the fall of the Empire. For this sea change the public is totally unprepared. It is left in complete ignorance, due to the deep silence of the media and academia."
News Corp.'s Fox Interactive Media unit will acquire online photo/video services Photobucket and Flektor, for an undisclosed sum, the media conglomerate said Wednesday. Photobucket is a photo- and video-sharing service while Flektor offers various Web-based tools that help users transform photos and videos into slideshows, postcards and interactive presentations.
Dollar Tree Stores raised its earnings guidance to between $2.00 and $2.12 per share from a previous outlook of earnings between $1.96 and $2.10 per share. Yearly sales are projected at $4.28 billion to $4.38 billion, up from previous guidance of $4.22 billion to $4.33 billion.
Bloomberg reported Kuwait Petroleum Corp., the Middle East's biggest exporter of oil products, cut crude processing at the Shuaiba refinery by 20 percent because of mechanical faults at two units, said four people familiar with the plant's operations. The refiner will halt spot market sales of naphtha and middle distillate fuels including diesel and kerosene, the people said, asking not to be identified because of company policy. Repairs to the units that turn residual fuel into oil products may take as long as five weeks, they said. Kuwait Petroleum may lower exports of liquefied petroleum gas and naphtha to customers with annual supply contracts, the people said.
The extra yield investors demand to own junk bonds instead of Treasuries narrowed to 2.42 percentage points on average yesterday, based on Merrill Lynch & Co.'s high-yield index, which tracks yield premiums since the end of 1996. The spread is half the average of about 5 percentage points over the past five years, and is down from more than 10 percentage points in 2002. For patient investors, one might consider selling this spread. In other words, my belief is that this spread will widen. Part of my thinking is that the yield on Treasury bonds will increase, and higher rates will generate the widening spread.
U.S. stocks rallied on Wednesday, sending both the Dow Jones Industrial Average and the S&P 500 to a record close, as the market bounced back from initial weakness after an overnight sell-off in the Shanghai stock market.
July crude climbed 34 cents to close at $63.49 a barrel and July natural gas gained 21 cents, or 2.7%, to finish at $7.941 per million British thermal units.
The minutes from the Federal Open Market Committee's last interest-rate meeting reiterated that the predominant concern for Fed officials was inflation. Although readings to core inflation had been favorable, nearly all FOMC members were not convinced that price pressures were on a downward trend, the minutes showed. Meanwhile, FOMC members said the slow growth in the first quarter probably exaggerated the weakness in demand, and remained optimistic that growth would pickup as the year unfolds.
June gold fell $4.10 to close at $653.10 an ounce Wednesday. July silver closed at $13.22 an ounce, down 0.3 cent and July copper lost 1.65 cents to end at $3.3035 a pound.
So far, 112 US soldiers and marines have been killed this month. It is the fourth highest fatality count since the 2003 invasion. April was also unusually bloody, with 104 reported killed. You might call it a killing surge.
Steve Moyer: "Now, as sales have slowed by up to 40% in many markets, foreclosures and contract cancellations have become rampant, lenders are pulling in their horns and values have begun their decline, we have already crossed the threshold into real estate/credit bubble deflation. I expect the average value of real estate to drop at least 70% from peak values in the coming decade."
For the fiscal year, Polo Ralph Lauren expects to earn $3.70 to $3.80 a share, including 27 cents a share in items. Analysts polled by Thomson Financial expect it to earn $4.13 a share for the year, on average.
Qatar Airways Wednesday said it's signed a memorandum of understanding to buy 80 Airbus A350XWBs, beating out Boeing Co.'s 787 Dreamliner.
For the year, Williams-Sonoma expects an adjusted profit of $1.76 to $1.84 versus Thomson's estimate of $1.80.
While Joy Global said the U.S. coal market has been soft, the company said it remains optimistic about its prospects, with revenue of $2.8 billion to $3 billion and earnings of $3.25 a share to $3.50 a share over the next 12 months.
The shareholder-advisory service Institutional Shareholder Services urged Biomet Inc. holders to reject a $10.9 billion private-equity deal for the company, The Wall Street Journal reported.
The World Bank raised its forecast for China's gross domestic product growth in the current year to 10.4% from 9.6%, with the revision based on stronger-than-expected first-quarter economic data. The new estimate suggests China's economy will grow above 10% for the fourth straight year, according to data presented in the World Bank's Quarterly Update.
CDW Corp. will be acquired by Madison Dearborn Partners for $7.3 billion. The deal calls for Madison Dearborn, a private-equity firm, to pay $87.75 a share for CDW, a 16.1% premium over CDW's May 25 closing price of $75.56 a share. CDW said it expects the deal to close early during the fourth quarter of this year.
China's stocks tumbled 6.8%, the most in three months, after the government tripled the tax on securities transactions in an effort to cool a rally that's drawing more than 300,000 new investors a day. Some 22 million accounts have been opened at brokerages so far this year, four times the amount in all of 2006, according to the China Securities Depository & Clearing Corp. Investors on May 28 opened 455,111 accounts, a daily record.
Pulte Homes is cutting about 16% of its workforce, and that amounts to roughly 2000 jobs.
International Business Machines Corp. laid off 1,570 people Wednesday, primarily from an ongoing overhaul of operations in its giant technology services unit. The company carried out a similar level of job cuts at the beginning of the month, for a total of 3,023 in this quarter and 3,720 for the year, according to IBM spokesman Edward Barbini.
Gold supply will exceed demand by 250 metric tons this year, a bigger surplus than forecast in October, as increased prices deter jewelry buyers, London-based research company Virtual Metals said. Jewelry consumption will decline 2.5% to 2,218 tons, a second annual drop, Virtual Metals said.
A new attack on a Nigerian pipeline illustrated the uphill task the new president faces to restore lost output in the world's eighth biggest crude exporter.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ended May 25 dropped 7.3% to 636.4.
A Ford Motor official predicts that his company's overall U.S. sales will drop in May, but its retail sales to individual buyers will show a year-over-year monthly increase for the first time since October of 2006.
"Rather than buying oil companies, we will look for more oil and gas assets, in terms of mergers and acquisitions, in the future," Fu Chengyu, CNOOC's chairman, told China Daily yesterday. By 2010, CNOOC is determined to raise its energy supply to the local market to 100 million tons of oil equivalent, up from the 40 million tons today. CNOOC's China production is estimated to reach 50 million tons of oil equivalent by 2010, while current overseas reserves are expected to contribute 20 to 25 million tons by 2010, depending on engineering capacity and construction speed, Fu said. "We plan to bridge the gap by purchasing more oil and gas reserves from overseas markets and importing more liquified natural gas (LNG)," he added.
Ghassan Abdallah: " Fireworks in a region that possesses 65% of the world�s oil reserves and accounts for 35% of the world�s total exports have in no way been discounted into the price of petroleum products by the global oil markets."
Paul J. Nolte: "Given the markets dependency upon low interest rates (and the anticipation of even lower) any backup toward the 5% level could create a problem for stocks."
Some of the nation's largest farming operations are paying rock-bottom rates for the electricity they use to pump federally subsidized water to their fields. About 7,000 giants of California farming get their water from the Central Valley Project, a vast irrigation system that pumps water from mountain rivers through canals spanning the state's fertile interior. But the system only charges irrigators about a penny per kilowatt-hour to move the water to their fields, a rate subsidized each year by about $100 million in taxpayer funds, according to a study released Wednesday by the Environmental Working Group. In comparison, farmers that rely on a state-run irrigation system paid about 22 cents per kilowatt hour for wholesale electricity last year, Department of Water Resources officials said.
Addison Wiggin: "It takes more dollars to buy the same thing (in other words, prices are higher) but incomes have not risen to meet that price inflation. That's what happens when the value of the dollar declines...The Fed has lent money below inflation. Fed lending rates have been far below inflation (even as measured by the consumer price index, not to mention any real inflationary measurements). In a very real sense, the Fed has lost money on these loans. When inflation is higher than the lending rate, it is a loss. Just as a business cannot stay open when it sells goods below cost, the Fed cannot continue to hold the view that it isn't real money. The point is, the money lent out at bargain rates is real credit, and that is corrupted when it is given away cheaply...The low interest rates have created the mortgage bubble without any corresponding investment...The mortgage bubble has inflated the housing market in an exaggerated fashion, creating the illusion of equity. All of that cheap money has created two troubling changes in housing. First is higher demand for owner-occupied housing based on the low cost of borrowed money rather than on any real market forces. Second is the resulting equity buildup from rapid expansion of market value in residential property. But it is as fake as the low interest rates...As rates on variable mortgages begin to rise right up to their cap rates, we'll see many of those marginal loans go into default...At some point, when the bubble bursts, everyone will realize that too many homes were built too quickly, and the anticipated demand simply isn't there. The result: those skyrocketing market values will disappear...For those who enter into the housing market when prices are inflated, the day arrives when they realize that real equity is below zero...In such a severe condition, marginal buyers are going to simply walk away from their properties. Why stay when there is no equity - or worse, minus equity?"
James Picerno: "Consider the fact that the real yield on the 10-year TIPS, which closed last Friday at 2.51%, is now the highest since last October. We can debate the causes and the consequences, and whether or not the trend has legs, but there's no doubt that interest rates are taking flight once more."
Antal E. Fekete: "Paper wealth in the world is presently being destroyed at the rate greater than that of the annual gold production, approx. $2.8 billion gold dollars (equivalent to about $55 billion paper dollars at today's gold price), but this earthquake-style destruction is allowed to go unnoticed by academia and the financial media. They are satisfied that paper wealth so destroyed will not be missed. The U.S. Federal Reserve banks are dutifully replacing these real assets, and more, by printing paper assets. "See no evil, hear no evil." "What you can't see won't hurt you." Nobody is pointing out that this newly created paper wealth facing, as it is, an equivalent amount of wealth in solid gold, is quite hollow. Nobody asks whether the large quantities of gold vanishing into private hoards could cause a crisis when its size reaches and exceeds critical mass. Be that as it may, thinking people ought to realize that, the official 'propaganda of silence' notwithstanding, the disappearance of such inordinate quantities of gold cannot help but, in the fullness of time, have an untoward effect on their lives, and on their children's lives. Fifty percent of all the gold in existence has been produced since 1960. The same fifty percent has been withdrawn from the public domain during the same period of time and disappeared in private hoards. There is no way to account for this gold. We do not know the location, the identity of owners, nor their intentions what they wanted to do with it. This is a sea change portending a still greater sea change to come. This is a situation comparable to the disappearance of the gold and silver coinage of ancient Rome portending the fall of the Empire. For this sea change the public is totally unprepared. It is left in complete ignorance, due to the deep silence of the media and academia."
News Corp.'s Fox Interactive Media unit will acquire online photo/video services Photobucket and Flektor, for an undisclosed sum, the media conglomerate said Wednesday. Photobucket is a photo- and video-sharing service while Flektor offers various Web-based tools that help users transform photos and videos into slideshows, postcards and interactive presentations.
Dollar Tree Stores raised its earnings guidance to between $2.00 and $2.12 per share from a previous outlook of earnings between $1.96 and $2.10 per share. Yearly sales are projected at $4.28 billion to $4.38 billion, up from previous guidance of $4.22 billion to $4.33 billion.
Bloomberg reported Kuwait Petroleum Corp., the Middle East's biggest exporter of oil products, cut crude processing at the Shuaiba refinery by 20 percent because of mechanical faults at two units, said four people familiar with the plant's operations. The refiner will halt spot market sales of naphtha and middle distillate fuels including diesel and kerosene, the people said, asking not to be identified because of company policy. Repairs to the units that turn residual fuel into oil products may take as long as five weeks, they said. Kuwait Petroleum may lower exports of liquefied petroleum gas and naphtha to customers with annual supply contracts, the people said.
The extra yield investors demand to own junk bonds instead of Treasuries narrowed to 2.42 percentage points on average yesterday, based on Merrill Lynch & Co.'s high-yield index, which tracks yield premiums since the end of 1996. The spread is half the average of about 5 percentage points over the past five years, and is down from more than 10 percentage points in 2002. For patient investors, one might consider selling this spread. In other words, my belief is that this spread will widen. Part of my thinking is that the yield on Treasury bonds will increase, and higher rates will generate the widening spread.
U.S. stocks rallied on Wednesday, sending both the Dow Jones Industrial Average and the S&P 500 to a record close, as the market bounced back from initial weakness after an overnight sell-off in the Shanghai stock market.
July crude climbed 34 cents to close at $63.49 a barrel and July natural gas gained 21 cents, or 2.7%, to finish at $7.941 per million British thermal units.
The minutes from the Federal Open Market Committee's last interest-rate meeting reiterated that the predominant concern for Fed officials was inflation. Although readings to core inflation had been favorable, nearly all FOMC members were not convinced that price pressures were on a downward trend, the minutes showed. Meanwhile, FOMC members said the slow growth in the first quarter probably exaggerated the weakness in demand, and remained optimistic that growth would pickup as the year unfolds.
June gold fell $4.10 to close at $653.10 an ounce Wednesday. July silver closed at $13.22 an ounce, down 0.3 cent and July copper lost 1.65 cents to end at $3.3035 a pound.
Tuesday, May 29, 2007
More And More
5/30/07 More And More
At least eight U.S. soldiers were killed in Diyala province north of Baghdad on Memorial Day. Also, a parked minibus packed with explosives blew up Tuesday in a busy section of central Baghdad, killing 23 people and injuring 68, police said. A second car bombing in the western part of the capital killed 15 others.
Liz Claiborne may announce in the next few weeks that it's going to cut 10% of its 17,000-person workforce, according to a report in The New York Post.
Tuesday's data showed a drop in Japan's jobless rate and a 1.1% increase in household spending there.
Israel stocks rose to records. In addition, there was a quarter-point interest-rate cut from the Bank of Israel on Monday evening. That put the country's benchmark interest rate at 3.5% for June, 1.75 percentage points below the U.S. federal-funds rate.
LionOre Mining said Tuesday that an increased offer from Russia's Norilsk Nickel constitutes a "superior proposal" compared to Swiss mining firm Xstrata's last offer.
The Financial Times and the Swedish daily Goteborgs Posten both reported BMW's interest in purchasing Volvo from Ford.
A group led by Royal Bank of Scotland published a long-awaited takeover proposal for ABN Amro, with the deal valued at 38.4 euros ($51.59) a share, or 71.1 billion euros ($95.52 billion).
URS Corp. signed an agreement to acquire Washington Group in a stock-and-cash deal valued at $2.6 billion. Two two engineering and construction companies' combined 2006 revenues would have been $7.6 billion, the fourth highest among U.S. publicly-traded engineering and construction companies, according to a joint statement. Based on previously issued forecasts, the companies would have combined 2007 revenues of approximately $8.6 billion. The combined company would have projects in more than 50 countries and more than 54,000 employees. Under the terms of the deal, which has been unanimously approved by the boards of directors of both companies, Washington Group stockholders will receive $43.80 in cash and 0.772 shares of URS common stock for each Washington Group share. Based on the closing price of URS' stock on May 25, the consideration is valued at $80 per Washington Group share, with an implied consideration mix of 55% in cash and 45% in stock.
New federal statistics show that food prices rose 3.9 percent nationally in April.Food prices in 2007 are increasing at their highest rate in years. "We are going to see grocery store prices to show one of the most rapid increases in the last 15 years or so," said Patrick Jackman, an economist at the U.S. Bureau of Labor Statistics. Michael Swanson, an agricultural economist at Wells Fargo & Co., said corn is the culprit for his estimate that food inflation will reach the 4 to 4.5 percent range this year, the highest since 1990. That's because corn is the building block for much of the American food supply.
The N.Y. Times reported Tishman Speyer Properties has joined with Lehman Brothers buy Archstone-Smith Trust, the second-largest public apartment owner in terms of market cap and asset value. The partnership will acquire the shares of the apartment real estate investment trust for $60.75 a share in cash.
The N.Y.Times also reported Avaya is in negotiations to sell a part or all of itself, in what may be the latest round of deal making in its industry, executives briefed on the negotiations said last night. The company, based in Basking Ridge, N.J. and valued at $6.1 billion, has retained the investment bank Credit Suisse as an adviser, the executives said. Among those interested are two rivals — Cisco Systems and Nortel Networks — and the equity buyout firm Silver Lake Partners.
In 2005, almost one-quarter of mortgages in the Vallejo-Fairfield metropolitan area were subprime loans, according to the Center for Responsible Lending's analysis of Home Mortgage Disclosure Act data. The Center's report predicted "that 23.8 percent of subprimes there will end in foreclosure," said Paul Leonard, director of the center's office in Oakland.
Vallejo home prices fell 8.5 percent from November to March, according to DataQuick Information Services.
Rio Tinto, the world's second-largest mining group, on Tuesday dismissed talk that it was lining up a bid for Canadian aluminum maker Alcan as speculation, but did not to deny the rumor outright.
Private equity firms are in talks for a buyout of CDW, a technology retailer with a market capitalization of about $6 billion, The Wall Street Journal reported on its Web site Tuesday. Madison Dearborn Partners is considered in the lead to buy the company, the Journal reported, citing unnamed sources.
Nouriel Roubini: "An increase of 16% in new home sales looks huge until you notice the following points: new home sales are still 29% down from their July 2005 peak; the inventory figures for new homes exclude cancellations. We know that cancellations are massive, in the 20 to 30% range based on data provided by the two largest home builders in the US (DR Horton and Toll Brothers). Therefore, the actual stock of unsold new homes is much larger, at least 20% higher than the reported figures.
More importantly, new home sales surged in April but the median price of a home fell – in one month – by 11% to $229k. Now think about Economics 101: higher equilibrium sales and lower equilibrium prices. How can you get that? The answer is simple: the increase in sales cannot be driven by an exogenous increase in the demand for homes as such increase would have led to higher sales and higher prices. The only way you get higher sales and lower prices is if the home supply function – at any price level – has increased so that in equilibrium the excess of unsold homes leads to more demand at a lower price. I.e. the April data are consistent with only with the view that home builders – desperate with a massive and record stock of unsold new homes – decided to start slashing prices to reduce this overhang."
Brad Setser: "Russia’s reserves just topped $394b – and that is for the middle of May. On current trends, Russia’s reserves will top $400b by the end of the month.That is an increase of almost $100b from the $304b Russia had in the bank at the end of 2006."
U.S. home prices fell 1.4% in the first quarter compared with a year earlier, the first year-over-year decline since 1991, according to the S&P/Case-Shiller home price index released Tuesday. A year ago, home prices were rising at an 11.5% pace. The 10-city price index fell 1.9% year-on-year through March, while the 20-city index dropped 1.4%. Thirteen of 20 cities have seen falling prices in the past year, led by Detroit and San Diego. Home prices rose 10% in Seattle.
Genzyme and Bioenvision, Inc. have reached an agreement under which Genzyme will acquire Bioenvision in an all cash transaction valued at $5.60 per outstanding
common share, or approximately $345 million, representing a premium of
approximately 50 percent over the last twenty trading day average. The
transaction is expected to be approximately six cents dilutive in 2007,
slightly dilutive to break-even in 2008, and accretive in 2009.
According to Bloomberg,Iran expects to sign a multi-billion dollar agreement with a foreign partner next month to produce liquefied natural gas, or LNG, from the South Pars field, the world's biggest gas reservoir.
Zman: "I don’t see a serious break of $7.50 in the near future unless: 1) Canadian imports pick up to the extent that someone in the press takes notice, 2) the recent rising heat moderates considerably, and/or 3) Congress passes a bill outlawing storms in the Gulf."
The Conference Board said its index of consumer sentiment climbed toll to 108.0 in May versus April's upwardly adjusted 106.3. Consumers' expectations for the inflation rate for 12 months were 5.5 percent in May versus a downwardly revised 5.1 percent in April and 5.6 percent a year ago. The present situation index rose to 136.1 in May from an upwardly revised 133.5 in April, while its expectations index increased to 89.2 in May from an upwardly adjusted 88.2 in April.
July natural gas will become the front-month contract at the Tuesday session close.
New home construction in the U.S. may take until 2011 to return to last year's level, said David Seiders, chief economist for the National Association of Home Builders in Washington.
CT Communications agreed to be acquired by Windstream Corp. for $585 million in cash.
Crude oil prices are 12 percent lower than a year ago.
John Hussman: "On normalized earnings, the S&P 500 continues to be priced at the highest multiple in history except for the late 1990's bubble and the beginning of the subsequent plunge...Presently, the year-over-year average of core and overall CPI inflation remains higher than it was 6 months ago, as are Treasury bond yields. Given rich valuations, these trends produce fairly pointed risks."
IBM said it repurchased 118.8 million shares, or 8% of its outstanding stock, for an initial price of $105.18 each, under the company's $15 billion share repurchase authorization. The shares were acquired from three banks using $1 billion in cash and $11.5 billion borrowed through a loan agreement with a number of financial institutions, the company said. IBM also said it expects 2007 earnings per share growth of 13% to 14%, up from its previous estimate of 11%. The new forecast reflects the benefit of two to three points of growth, or roughly 14 cents to 17 cents of a share, from the accelerated share repurchases.
July crude dropped 3.1%, or $2.05, to close at $63.15 a barrel. June reformulated gasoline fell 4.4% to end at near a 3-week low of $2.2979 a gallon. June natural gas fell 4.9 cents to close at $7.591 per million British thermal units. July natural gas, which became the front-month contract at the close, closed down 6.4 cents at $7.731.
China will triple its stamp tax on equity trading to 0.3% from 0.1%, effective Wednesday.
June gold climbed $1.90 to close at $657.20 an ounce Tuesday. July silver gained 22.3 cents to close at $13.223 an ounce, but July copper closed nearly flat, down 0.05 cent at $3.32 a pound.
InfoSpace Inc.shares jumped 20% to $24.81 in Tuesday afternoon trade after a Spanish newspaper reported that LaNetro Zed SA is preparing an offer to buy the company for 800 million euros ($1.08 billion).
At least eight U.S. soldiers were killed in Diyala province north of Baghdad on Memorial Day. Also, a parked minibus packed with explosives blew up Tuesday in a busy section of central Baghdad, killing 23 people and injuring 68, police said. A second car bombing in the western part of the capital killed 15 others.
Liz Claiborne may announce in the next few weeks that it's going to cut 10% of its 17,000-person workforce, according to a report in The New York Post.
Tuesday's data showed a drop in Japan's jobless rate and a 1.1% increase in household spending there.
Israel stocks rose to records. In addition, there was a quarter-point interest-rate cut from the Bank of Israel on Monday evening. That put the country's benchmark interest rate at 3.5% for June, 1.75 percentage points below the U.S. federal-funds rate.
LionOre Mining said Tuesday that an increased offer from Russia's Norilsk Nickel constitutes a "superior proposal" compared to Swiss mining firm Xstrata's last offer.
The Financial Times and the Swedish daily Goteborgs Posten both reported BMW's interest in purchasing Volvo from Ford.
A group led by Royal Bank of Scotland published a long-awaited takeover proposal for ABN Amro, with the deal valued at 38.4 euros ($51.59) a share, or 71.1 billion euros ($95.52 billion).
URS Corp. signed an agreement to acquire Washington Group in a stock-and-cash deal valued at $2.6 billion. Two two engineering and construction companies' combined 2006 revenues would have been $7.6 billion, the fourth highest among U.S. publicly-traded engineering and construction companies, according to a joint statement. Based on previously issued forecasts, the companies would have combined 2007 revenues of approximately $8.6 billion. The combined company would have projects in more than 50 countries and more than 54,000 employees. Under the terms of the deal, which has been unanimously approved by the boards of directors of both companies, Washington Group stockholders will receive $43.80 in cash and 0.772 shares of URS common stock for each Washington Group share. Based on the closing price of URS' stock on May 25, the consideration is valued at $80 per Washington Group share, with an implied consideration mix of 55% in cash and 45% in stock.
New federal statistics show that food prices rose 3.9 percent nationally in April.Food prices in 2007 are increasing at their highest rate in years. "We are going to see grocery store prices to show one of the most rapid increases in the last 15 years or so," said Patrick Jackman, an economist at the U.S. Bureau of Labor Statistics. Michael Swanson, an agricultural economist at Wells Fargo & Co., said corn is the culprit for his estimate that food inflation will reach the 4 to 4.5 percent range this year, the highest since 1990. That's because corn is the building block for much of the American food supply.
The N.Y. Times reported Tishman Speyer Properties has joined with Lehman Brothers buy Archstone-Smith Trust, the second-largest public apartment owner in terms of market cap and asset value. The partnership will acquire the shares of the apartment real estate investment trust for $60.75 a share in cash.
The N.Y.Times also reported Avaya is in negotiations to sell a part or all of itself, in what may be the latest round of deal making in its industry, executives briefed on the negotiations said last night. The company, based in Basking Ridge, N.J. and valued at $6.1 billion, has retained the investment bank Credit Suisse as an adviser, the executives said. Among those interested are two rivals — Cisco Systems and Nortel Networks — and the equity buyout firm Silver Lake Partners.
In 2005, almost one-quarter of mortgages in the Vallejo-Fairfield metropolitan area were subprime loans, according to the Center for Responsible Lending's analysis of Home Mortgage Disclosure Act data. The Center's report predicted "that 23.8 percent of subprimes there will end in foreclosure," said Paul Leonard, director of the center's office in Oakland.
Vallejo home prices fell 8.5 percent from November to March, according to DataQuick Information Services.
Rio Tinto, the world's second-largest mining group, on Tuesday dismissed talk that it was lining up a bid for Canadian aluminum maker Alcan as speculation, but did not to deny the rumor outright.
Private equity firms are in talks for a buyout of CDW, a technology retailer with a market capitalization of about $6 billion, The Wall Street Journal reported on its Web site Tuesday. Madison Dearborn Partners is considered in the lead to buy the company, the Journal reported, citing unnamed sources.
Nouriel Roubini: "An increase of 16% in new home sales looks huge until you notice the following points: new home sales are still 29% down from their July 2005 peak; the inventory figures for new homes exclude cancellations. We know that cancellations are massive, in the 20 to 30% range based on data provided by the two largest home builders in the US (DR Horton and Toll Brothers). Therefore, the actual stock of unsold new homes is much larger, at least 20% higher than the reported figures.
More importantly, new home sales surged in April but the median price of a home fell – in one month – by 11% to $229k. Now think about Economics 101: higher equilibrium sales and lower equilibrium prices. How can you get that? The answer is simple: the increase in sales cannot be driven by an exogenous increase in the demand for homes as such increase would have led to higher sales and higher prices. The only way you get higher sales and lower prices is if the home supply function – at any price level – has increased so that in equilibrium the excess of unsold homes leads to more demand at a lower price. I.e. the April data are consistent with only with the view that home builders – desperate with a massive and record stock of unsold new homes – decided to start slashing prices to reduce this overhang."
Brad Setser: "Russia’s reserves just topped $394b – and that is for the middle of May. On current trends, Russia’s reserves will top $400b by the end of the month.That is an increase of almost $100b from the $304b Russia had in the bank at the end of 2006."
U.S. home prices fell 1.4% in the first quarter compared with a year earlier, the first year-over-year decline since 1991, according to the S&P/Case-Shiller home price index released Tuesday. A year ago, home prices were rising at an 11.5% pace. The 10-city price index fell 1.9% year-on-year through March, while the 20-city index dropped 1.4%. Thirteen of 20 cities have seen falling prices in the past year, led by Detroit and San Diego. Home prices rose 10% in Seattle.
Genzyme and Bioenvision, Inc. have reached an agreement under which Genzyme will acquire Bioenvision in an all cash transaction valued at $5.60 per outstanding
common share, or approximately $345 million, representing a premium of
approximately 50 percent over the last twenty trading day average. The
transaction is expected to be approximately six cents dilutive in 2007,
slightly dilutive to break-even in 2008, and accretive in 2009.
According to Bloomberg,Iran expects to sign a multi-billion dollar agreement with a foreign partner next month to produce liquefied natural gas, or LNG, from the South Pars field, the world's biggest gas reservoir.
Zman: "I don’t see a serious break of $7.50 in the near future unless: 1) Canadian imports pick up to the extent that someone in the press takes notice, 2) the recent rising heat moderates considerably, and/or 3) Congress passes a bill outlawing storms in the Gulf."
The Conference Board said its index of consumer sentiment climbed toll to 108.0 in May versus April's upwardly adjusted 106.3. Consumers' expectations for the inflation rate for 12 months were 5.5 percent in May versus a downwardly revised 5.1 percent in April and 5.6 percent a year ago. The present situation index rose to 136.1 in May from an upwardly revised 133.5 in April, while its expectations index increased to 89.2 in May from an upwardly adjusted 88.2 in April.
July natural gas will become the front-month contract at the Tuesday session close.
New home construction in the U.S. may take until 2011 to return to last year's level, said David Seiders, chief economist for the National Association of Home Builders in Washington.
CT Communications agreed to be acquired by Windstream Corp. for $585 million in cash.
Crude oil prices are 12 percent lower than a year ago.
John Hussman: "On normalized earnings, the S&P 500 continues to be priced at the highest multiple in history except for the late 1990's bubble and the beginning of the subsequent plunge...Presently, the year-over-year average of core and overall CPI inflation remains higher than it was 6 months ago, as are Treasury bond yields. Given rich valuations, these trends produce fairly pointed risks."
IBM said it repurchased 118.8 million shares, or 8% of its outstanding stock, for an initial price of $105.18 each, under the company's $15 billion share repurchase authorization. The shares were acquired from three banks using $1 billion in cash and $11.5 billion borrowed through a loan agreement with a number of financial institutions, the company said. IBM also said it expects 2007 earnings per share growth of 13% to 14%, up from its previous estimate of 11%. The new forecast reflects the benefit of two to three points of growth, or roughly 14 cents to 17 cents of a share, from the accelerated share repurchases.
July crude dropped 3.1%, or $2.05, to close at $63.15 a barrel. June reformulated gasoline fell 4.4% to end at near a 3-week low of $2.2979 a gallon. June natural gas fell 4.9 cents to close at $7.591 per million British thermal units. July natural gas, which became the front-month contract at the close, closed down 6.4 cents at $7.731.
China will triple its stamp tax on equity trading to 0.3% from 0.1%, effective Wednesday.
June gold climbed $1.90 to close at $657.20 an ounce Tuesday. July silver gained 22.3 cents to close at $13.223 an ounce, but July copper closed nearly flat, down 0.05 cent at $3.32 a pound.
InfoSpace Inc.shares jumped 20% to $24.81 in Tuesday afternoon trade after a Spanish newspaper reported that LaNetro Zed SA is preparing an offer to buy the company for 800 million euros ($1.08 billion).
Monday, May 28, 2007
More Bids For Alcan?
5/29/07 More Bids For Alcan?
Rio Tinto Ltd. Plc has hired Deutsche Bank to advise it on a possible bid for Canadian aluminum producer Alcan Inc., the Sydney Morning Herald newspaper reported on Monday. Separately, Canada's Globe and Mail newspaper, citing a banker close to Alcan, said on Monday that Norway's Norsk Hydro was also gearing up for a run at Alcan.
24/7WallSt: "If Rio Tinto does buy Alcan, investors may have a problem. A merger of two companies with shares that are sky high is often a prelude to a disaster."
The Nigerian oil workers ended their strike, and that placed some pressure on the price of crude.
China's market surged to an all-time high and South Korea also hit a record, as a rally in metals prices lifted miners and a stronger dollar boosted shares in Japanese exporters.
Jas Jain: Headline: "C.A.R. [California Association of Realtors] reports sales decrease 27.8 percent in April, median price of a home in California at $597,640, up 6.2 percent from year ago." Then we also read, "Throughout the state inventory levels have increased to their highest levels in recent years..." Price increase in the climate of declining sales and rising inventory? Something doesn't add up.The report does provide some clue: "Although the median price of a home in California continues to rise, this reflects the fall-off in sales in the lower-priced markets of the state..." I will endeavor to show that there are three factors that result in overstatement of the median price of resale homes because the characteristics of the median priced home are not the same as the median priced home sold a year, or two years, ago:
1. The size of the homes being sold recently is larger compared to those sold last year.
2. The area mixture of the homes sold recently is significantly different from those of the year ago whether we look within the state or within the counties where the median price shows YoY gains. The rapidly increasing gap between the Haves and Have-nots in the US shows up very clearly in the latest California home sales data.
3. The modernization (or home improvements in layman's term) of the homes sold recently is significantly greater than that of year, or two years, ago.
This conclusion does not preclude the probability that there are some zip codes where there is some real home price appreciation. I would estimate the number of these zip codes to be no more than 50 for the state, or to less than 5% of the zip codes."
Brett Steenbarger: "The Energy, Industrials, and Materials stocks continue to lead the inflows; the two sectors with below average inflows are Financials and Consumer Staples. In short, I don't think this rally will be derailed until we see investors give up on these large cap/physical capital sectors.
What would derail such a rally? My hunch is that it might be a firming dollar that dampens ardor for physical assets. That, in turn, might result from higher U.S. interest rates. Note that ten-year rates have been on a tear lately, rising from a low around 4.61% to over 4.8% in the past two weeks. As long as there is lots of liquidity around and an implicit weak dollar policy by the Fed, I see no reason for capital to not seek "things" that will appreciate relative to the dollar and companies that stand to benefit from the trade benefits of a weak dollar...In the big picture, I view this market as most like the post 1994 market, in which a low volatility market made a relatively flat correction and then took off to the upside. Our four-year flat correction ended in mid-2006, and we now see a fresh bull market in the broad buying of global equities. Interest rate, currency, and money flow trends will need to shift markedly to put an end to this market strength."
Iraq has the third-largest proven oil reserves after Saudi Arabia and Iran but only 10% of the country has been explored, according to the U.S. Energy Information Administration.
George Ure: "The president's recent seizure of power "Executive Order" in event of a "national emergency" is nothing more than icing on the cake after stealing the election, packing the Supreme Court with corporate-friendly justices, (need I mention the corporate wars here?) and CONgress going along with the corporate agenda for whatever they can charge in the way of campaign contributions, votes, and favors. Corporations and lobbyists live on "access" and all the talk about lobbying reform has faded into the background since the Abramoff scandal and more recently, the DC Madam list of 10,000+ people on the take (any way you want to interpret that) are all being quietly pushed under the rug. We have a single part in America: democorp/republicorp and all supported by corpmedia."
Rio Tinto Ltd. Plc has hired Deutsche Bank to advise it on a possible bid for Canadian aluminum producer Alcan Inc., the Sydney Morning Herald newspaper reported on Monday. Separately, Canada's Globe and Mail newspaper, citing a banker close to Alcan, said on Monday that Norway's Norsk Hydro was also gearing up for a run at Alcan.
24/7WallSt: "If Rio Tinto does buy Alcan, investors may have a problem. A merger of two companies with shares that are sky high is often a prelude to a disaster."
The Nigerian oil workers ended their strike, and that placed some pressure on the price of crude.
China's market surged to an all-time high and South Korea also hit a record, as a rally in metals prices lifted miners and a stronger dollar boosted shares in Japanese exporters.
Jas Jain: Headline: "C.A.R. [California Association of Realtors] reports sales decrease 27.8 percent in April, median price of a home in California at $597,640, up 6.2 percent from year ago." Then we also read, "Throughout the state inventory levels have increased to their highest levels in recent years..." Price increase in the climate of declining sales and rising inventory? Something doesn't add up.The report does provide some clue: "Although the median price of a home in California continues to rise, this reflects the fall-off in sales in the lower-priced markets of the state..." I will endeavor to show that there are three factors that result in overstatement of the median price of resale homes because the characteristics of the median priced home are not the same as the median priced home sold a year, or two years, ago:
1. The size of the homes being sold recently is larger compared to those sold last year.
2. The area mixture of the homes sold recently is significantly different from those of the year ago whether we look within the state or within the counties where the median price shows YoY gains. The rapidly increasing gap between the Haves and Have-nots in the US shows up very clearly in the latest California home sales data.
3. The modernization (or home improvements in layman's term) of the homes sold recently is significantly greater than that of year, or two years, ago.
This conclusion does not preclude the probability that there are some zip codes where there is some real home price appreciation. I would estimate the number of these zip codes to be no more than 50 for the state, or to less than 5% of the zip codes."
Brett Steenbarger: "The Energy, Industrials, and Materials stocks continue to lead the inflows; the two sectors with below average inflows are Financials and Consumer Staples. In short, I don't think this rally will be derailed until we see investors give up on these large cap/physical capital sectors.
What would derail such a rally? My hunch is that it might be a firming dollar that dampens ardor for physical assets. That, in turn, might result from higher U.S. interest rates. Note that ten-year rates have been on a tear lately, rising from a low around 4.61% to over 4.8% in the past two weeks. As long as there is lots of liquidity around and an implicit weak dollar policy by the Fed, I see no reason for capital to not seek "things" that will appreciate relative to the dollar and companies that stand to benefit from the trade benefits of a weak dollar...In the big picture, I view this market as most like the post 1994 market, in which a low volatility market made a relatively flat correction and then took off to the upside. Our four-year flat correction ended in mid-2006, and we now see a fresh bull market in the broad buying of global equities. Interest rate, currency, and money flow trends will need to shift markedly to put an end to this market strength."
Iraq has the third-largest proven oil reserves after Saudi Arabia and Iran but only 10% of the country has been explored, according to the U.S. Energy Information Administration.
George Ure: "The president's recent seizure of power "Executive Order" in event of a "national emergency" is nothing more than icing on the cake after stealing the election, packing the Supreme Court with corporate-friendly justices, (need I mention the corporate wars here?) and CONgress going along with the corporate agenda for whatever they can charge in the way of campaign contributions, votes, and favors. Corporations and lobbyists live on "access" and all the talk about lobbying reform has faded into the background since the Abramoff scandal and more recently, the DC Madam list of 10,000+ people on the take (any way you want to interpret that) are all being quietly pushed under the rug. We have a single part in America: democorp/republicorp and all supported by corpmedia."
Sunday, May 27, 2007
Statistics
5/27/07 Statistics
Chris Mayer: "The official numbers tell us inflation is less than 3%. Yet, when calculating inflation using the same methods that were used before Clinton took office, Williams (Shadow Government Statistics) gets inflation closer to 6%!"
Williams maintains "We are in an inflationary recession now."
Fitzgerald asked U.S. District Judge Reggie Walton to send Libby to prison for between 30 and 37 months. Sentencing is due on June 5.
Thucydides: "The bravest are surely those who have the clearest vision of what is before them, glory and danger alike, and yet notwithstanding, go out to meet it."
George Ure: "By the way, I wasn't particularly angry this week - just frustrated, I guess. Millions of patriotic Americans voted for change in the last election, and yet the war goes on, same as before, government is still selling off prime real estate (like highways) to private interests, and private militaries are on the rise. And more power is being seized by the elites."
Now that Cleveland Cliffs has risen 100% in price over the past 11 months, the rumor of Rio Tinto buying the company surfaced this week.
N.Y. Times: "Never mind how badly the war is going in Iraq. President Bush has been swaggering around like a victorious general because he cowed a wobbly coalition of Democrats into dropping their attempt to impose a time limit on his disastrous misadventure. By week’s end, Mr. Bush was acting as though that bit of parliamentary strong-arming had left him free to ignore not just the Democrats, but also the vast majority of Americans, who want him to stop chasing illusions of victory and concentrate on how to stop the sacrifice of young Americans’ lives. And, ever faithful to his illusions, Mr. Bush was insisting that he was the only person who understood the true enemy."
The U.S. military on Saturday announced the deaths of eight U.S. troops: Five died earlier in the day; one died Friday and two were killed Wednesday. Since the start of the war, 3,445 U.S. military personnel and seven military contract employees have died in Iraq. The total for May is 101.
Avaya Inc. delayed a meeting with analysts scheduled for next week amid speculation the world's largest maker of corporate phone equipment will be bought. Avaya competes with San Jose, California-based Cisco Systems Inc. in the $5 billion market for Internet-based phone equipment. The company is debt free, making it a ``perfect'' candidate for a leveraged buyout, according to a May 21 note from Merrill analyst Tal Liani. He said Avaya may fetch a 20 percent premium to its current stock price.
Bill Gates' investment firm reported its first sale of shares in Pacific Ethanol since the Microsoft chairman invested $84 million in the California company in April 2006. His original purchase was priced at a discounted $8 per common share (though the stock he actually bought was Cumulative Redeemable Convertible Preferred. By spring 2006 Pacific Ethanol shares had spiked to $42, only to quickly plummet into the teens. When Gates' Cascade Investment sold 1,000 shares last week, the price was $14.28 each.
The Oil Drum: "In order for nuclear power to replace the burning of natural gas to power the extraction of oil from the oilsands involves about 4.4 GW of nuclear power per million barrels per day of oil extracted (according to Wayne Henuset,director of Energy Alberta Corporation. estimate of a 2.2 GW reactor separating 500,000 bpd). 10 million bpd would take about twenty 2.2 GW twin reactors. A detailed analysis is provided from the Nuclear Energy journal. It was written by Atomic Energy Canada and Canadian Energy Research Institute scientists."
Mike Burk: "The small cap indices gained modestly last week breaking their relative underperformance to the blue chips and seasonally next week has been modestly positive. I expect the major indices to be higher on Friday June 1 than they were on Friday May 25."
Jeremy Grantham: “The more leverage you take, the better you do; the better you do, the more leverage you take. A critical part of a bubble is the reinforcement you get for your very optimistic view from those around you.”
Chris Mayer: "The official numbers tell us inflation is less than 3%. Yet, when calculating inflation using the same methods that were used before Clinton took office, Williams (Shadow Government Statistics) gets inflation closer to 6%!"
Williams maintains "We are in an inflationary recession now."
Fitzgerald asked U.S. District Judge Reggie Walton to send Libby to prison for between 30 and 37 months. Sentencing is due on June 5.
Thucydides: "The bravest are surely those who have the clearest vision of what is before them, glory and danger alike, and yet notwithstanding, go out to meet it."
George Ure: "By the way, I wasn't particularly angry this week - just frustrated, I guess. Millions of patriotic Americans voted for change in the last election, and yet the war goes on, same as before, government is still selling off prime real estate (like highways) to private interests, and private militaries are on the rise. And more power is being seized by the elites."
Now that Cleveland Cliffs has risen 100% in price over the past 11 months, the rumor of Rio Tinto buying the company surfaced this week.
N.Y. Times: "Never mind how badly the war is going in Iraq. President Bush has been swaggering around like a victorious general because he cowed a wobbly coalition of Democrats into dropping their attempt to impose a time limit on his disastrous misadventure. By week’s end, Mr. Bush was acting as though that bit of parliamentary strong-arming had left him free to ignore not just the Democrats, but also the vast majority of Americans, who want him to stop chasing illusions of victory and concentrate on how to stop the sacrifice of young Americans’ lives. And, ever faithful to his illusions, Mr. Bush was insisting that he was the only person who understood the true enemy."
The U.S. military on Saturday announced the deaths of eight U.S. troops: Five died earlier in the day; one died Friday and two were killed Wednesday. Since the start of the war, 3,445 U.S. military personnel and seven military contract employees have died in Iraq. The total for May is 101.
Avaya Inc. delayed a meeting with analysts scheduled for next week amid speculation the world's largest maker of corporate phone equipment will be bought. Avaya competes with San Jose, California-based Cisco Systems Inc. in the $5 billion market for Internet-based phone equipment. The company is debt free, making it a ``perfect'' candidate for a leveraged buyout, according to a May 21 note from Merrill analyst Tal Liani. He said Avaya may fetch a 20 percent premium to its current stock price.
Bill Gates' investment firm reported its first sale of shares in Pacific Ethanol since the Microsoft chairman invested $84 million in the California company in April 2006. His original purchase was priced at a discounted $8 per common share (though the stock he actually bought was Cumulative Redeemable Convertible Preferred. By spring 2006 Pacific Ethanol shares had spiked to $42, only to quickly plummet into the teens. When Gates' Cascade Investment sold 1,000 shares last week, the price was $14.28 each.
The Oil Drum: "In order for nuclear power to replace the burning of natural gas to power the extraction of oil from the oilsands involves about 4.4 GW of nuclear power per million barrels per day of oil extracted (according to Wayne Henuset,director of Energy Alberta Corporation. estimate of a 2.2 GW reactor separating 500,000 bpd). 10 million bpd would take about twenty 2.2 GW twin reactors. A detailed analysis is provided from the Nuclear Energy journal. It was written by Atomic Energy Canada and Canadian Energy Research Institute scientists."
Mike Burk: "The small cap indices gained modestly last week breaking their relative underperformance to the blue chips and seasonally next week has been modestly positive. I expect the major indices to be higher on Friday June 1 than they were on Friday May 25."
Jeremy Grantham: “The more leverage you take, the better you do; the better you do, the more leverage you take. A critical part of a bubble is the reinforcement you get for your very optimistic view from those around you.”
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