6/24/07 Do You Like Pizza?
Pizza makers around the nation — from family-run pizzerias to national delivery chains — are feeling the pinch from escalating costs for an essential ingredient in a hotly competitive, $30 billion-plus industry. Block cheddar cheese — the benchmark for mozzarella and other cheeses — reached $2.08 a pound Thursday on the Chicago Mercantile Exchange, up 78 percent from $1.17 a pound a year ago. Industry observers attribute the price surge to strong demand and higher production prices — from the cost of milk to the cost for dairy farmers to feed their herds.
Chris Sternberg, spokesman for Louisville-based Papa John's, said his company uses about 100 million pounds of cheese each year, and the cheese typically makes up 35 percent to 40 percent of the food cost in making a pizza. Pizza Hut, part of fast-food giant Yum Brands Inc., which is headquartered in Louisville, goes through 300 million pounds of cheese each year, spokesman Chris Fuller said. The higher cheese costs are the result of an economic chain reaction. Prices for milk, a key ingredient in cheese, have gone up — a result of higher feed grain costs for dairy cattle herds, said Rob Hainer, spokesman for the Atlanta-based Southeast United Dairy Industry Association. In particular, corn prices have risen amid growing demand for ethanol fuel, he said. Also fueling higher cheese costs has been strong U.S. and global demand for dairy products, he said. Who will pay for the increased cheese costs? Will it make for lower profit margins and/or will the customer share some of the burden?
Limited Brands Inc. said it will cut about 500 jobs in an effort to save $100 million, as it prepares to dispose of its clothing chains, Express and Limited, to focus on its Victoria's Secret and Bath & Body Works divisions.
The Financial Times reports "Dow Jones’ board of directors on Friday sent News Corp a set of proposals designed to protect the editorial independence of the Wall Street Journal newspaper in the event of a sale, according to people familiar with the matter. The move, just days after Dow Jones’ board took charge of negotiations, marked another step toward the possible sale of the media group to News Corp and its chief executive, Rupert Murdoch."
A lot is made of the yen making multi-year lows against the dollar. I am not pooh
poohing that. Obviously, one must be mindful of the yen carry trade. Let's not forget about U.S. interest rates on the increase, and yet, the dollar index can only tread water at 82.13. If our treasury bonds are a safe haven for investors, then why isn't our dollar viewed as a safe haven? The last time I looked our treasuries were denominated in dollars.
This is what I'm saying but Doug Noland says it much better: " For years, the Credit market has been bolstered by the awareness that any indication of heightened systemic stress would be met with an immediate rally in Treasuries, agencies, MBS and other “top-tier” securities. I’ve always seen this predictable drop in yields (increase in bond prices!) as a key dynamic supporting leveraging and risk-taking generally. A change in this dynamic would be a significant Credit Bubble and market development. Clearly, U.S. markets are coming to the realization that global forces these days play a much more prominent role than ever before. Robust Credit systems globally, general liquidity overabundance, and increasingly determined international central bankers are pressuring global as well as U.S. bond yields. Importantly, this is forcing participants to rethink how quickly (and freely) the Fed might respond to heightened financial stress, especially if it is largely isolated to a particular segment of the U.S. Credit system... For the semblance of order is maintained only as long as speculation and leverage-induced demand for risky debt instruments meets the ever escalating supply... Big down days seem inevitable, the kind that really shake confidence and instill fears that the “wheels are coming off.” But there will almost surely also be days of panicked short covering and euphoric buying. And those days will reinvigorate notions of goldilocks, New Eras and unlimited finance. There will be days when the hedge funds and sovereign wealth funds are perceived as bull market friendly and days when their supporting role is seriously questioned. Uncertainty Reigns Supreme."
Thailand's May trade surplus was $800 million. That's what soaring ag prices can do for exports.
Irwin Kellner: "Over the past three months, the annual rate of inflation has been running anywhere from 7% to 9%."
Peter Schiff: "The truth is that the fundamental lack of appeal of Treasuries on the global market means that rates will rise considerably from here, which is very bearish for stocks indeed. Given the real rate of inflation (not the phony rate implied by the CPI) and the potential for a protracted decline in the value of the dollar, rates must rise significantly in order to convince overseas buyers to stay in the game."
Chinese central bank Governor Zhou Xiaochuan said he can't rule out raising interest rates again to curb inflation and take the steam out of the nation's booming stock market.``We don't rule out further rate increases if necessary,'' Zhou told reporters in Basel, Switzerland, where he's attending a meeting of world central bankers at the Bank for International Settlements. ``We're certainly concerned about inflation'' and ``we're closely watching the stock market,'' he said.
What me worry? Dawna Leitzke, executive director for the South Dakota Petroleum & Propane Marketers Association, said the region has struggled with supply issues since May.Watertown has been out of supply for several weeks, and Fuhrman said suppliers in Minnesota and Sioux City, Iowa, are out as well. "It's worse than usual, but gas stations are not gonna run out of gas," Leitzke said. "It has absolutely nothing to do with price."
AAA of Sioux Falls analyst Mark Madeja said U.S. refineries were operating at 87.6 percent capacity last week, the lowest in 17 years. For summer, he said, refineries should be at least at 95 percent capacity.
Saturday, June 23, 2007
Friday, June 22, 2007
Flight To Quality Liquidity
6/23/07 Flight To Quality Liquidity
The difference in Treasury 10-year and two-year note yields widened to the most since October 2005.Two-year notes were poised for their first weekly gain since April, while 10-year notes were down for a seventh week, widening the yield advantage of the longer-term debt to 21 basis points. The question one might raise is what advantage does an investor have with a two-year treasury note over a six-month treasury bill. It seems to me that an astute investor would go for the shorter maturity in a rising interest rate environment. There is one more element to consider. A foreign government, such as, China, would be better served, in my view, to go for the six-month alternative as the risk of rollover becomes negated. It is also the easiest way to cash out of dollar denominated investments without incurring market risk.
The Blackstone IPO at $31 is the 6th largest IPO in history. Their forte maybe in buyouts; however, they get an A in marketing too. For a deal of this size to trade 100+ million shares and up 20% from the IPO price is truly something else-- especially on a weak day for equities.
The yen dropped to a record low against the euro and fell to the lowest level in more than four years versus the dollar as global investors borrowed the nation's currency to buy higher-yielding assets elsewhere. I believe the yen is grossly undervalued against the dollar.
Oil receipts account for some 80 percent of Nigeria's total government revenue.
Bear Stearns is planning a $3.2 Billion loan to try to rescue a distressed fund.
An increase in dairy costs and slower growth in the number of U.S. sales transactions may make meeting the higher end of Starbucks' 2007 per-share profit estimate of 87 cents to 89 cents difficult, CFO Casey said at a conference hosted by Chicago-based William Blair & Co. He reiterated Starbucks' target of boosting revenue by 20 percent this year.
Nuance Communications announced Thursday that it is purchasing Seattle-based Tegic Communications from Time Warner's AOL subsidiary for $265 million in cash. Tegic develops the commonly used T9 software that predicts what people type into their mobile phone for easier text entry. Last year, the software was shipped on nearly two-thirds of all cellphones.
In the past year there have been a couple of opportunities to make some serious money in the natural gas market. On Friday, natural gas traded at its lowest level since January. As it nears the $7 level, down from a recent move up to $8.15, the valuation becomes compelling. Summer has begun. The heat wave will soon arrive, and air conditioning etc will be in full swing. That ignores the possibility of damage as the hurricane season gets into high gear. The risk reward, in my view, is in your favor at these levels.
BP sold its stake in a $20 billion Russian natural-gas project to state-controlled Gazprom, amid Kremlin pressure. Gazprom agreed to pay between $700 million to $900 million for a 62.9% stake.
The Oil Drum: "The world's major oil companies replaced reserves at levels below 100% for the third straight year in 2006, while costs to find and produce the key asset continued to rise, a new analysis shows. Reserve replacements last year, excluding acquisitions and divestitures, were 91%, slightly below the 92% replaced in 2005, according to a report released Thursday by investment bank Bear Stearns & Co. At the same time, the companies' search and development costs rose to $13.63 per barrel of oil equivalent, up 28% from 2005, the report said."
Chris Gaffney: "What I find amazing is that while Congress and Paulson continue to focus on China and the obviously undervalued renminbi, neither wants to try and address the mortgage mess right here at home. I think it is obvious the Chinese are going to move at their own pace, despite any attempts to force them otherwise. The Chinese renminbi will increase in value as increases in interest rates and economic growth will allow the Chinese government to accelerate the currency's appreciation. I don't look for an overnight revaluation, but gradually faster appreciation."
Paul Saxena: "At the beginning of this decade, if I had told you that 7 years later crude oil would be trading above $60 per barrel, gold would be close to $700 per ounce, food prices would be at multi-year highs and the Dow Jones would be trading around 13,500, you would have pronounced me crazy!"
Nouriel Roubini: "Worries about contagion, concerns about systemic risk, comparisons to the 1998 LTCM near collapse, now widening corporate risk spreads. The picture is pretty ugly."
The low-yielding Swiss franc surged against the euro and dollar after monetary authorities unexpectedly tightened overnight lending rates, sparking some concern that central banks may be trying to disrupt yield-seeking carry trades.
Airbus SAS, the world's largest maker of commercial aircraft, won 425 firm orders valued at $61.7 billion this week as the European plane maker rebounded from losing ground to Boeing Co.
China's implied oil demand growth accelerated in May to 7.3 percent, the fastest pace in nine months, raising the prospect of another summer demand surge fuelled by rising auto travel, construction and warm weather. In May, China's implied demand was 7.04 million barrels per day (bpd), and 6.86 million bpd in the first five months, or 5 percent higher than the year-ago period, Reuters calculations showed. Implied demand is net imports plus refinery output but excludes inventories, which are not reported.
The market maybe focusing on the Nigerian oil stike; however, I think the growing demand in China and India are the engines for higher oil prices today and tomorrow.
The WSJ: "World oil demand is rising twice as fast as a year ago, straining the petroleum industry's ability to keep up with global needs and likely resulting in higher and more-volatile prices for some time to come."
The Indian trade minister blamed the United States on Friday for the collapse of a meeting of the World Trade Organization's four most powerful members, arguing that the U.S. refusal to cut subsidies to American farmers was unfair to developing nations. Indian Trade Minister Kamal Nath called the billions of dollars the U.S. government pays to its farmers a trade distortion that threatens the livelihood of India's farmers and hinders the development of the country's economy.
Talabani said Iraq appreciated China's support to Iraq on economic reconstruction.
Schlumberger traded at a new 52-week high. By comparison, Genentech made a new 52-week low, just as Amgen did a few weeks ago. For those serious about investing in health care on a long-term basis, I strongly suggest you consider Genentech. It is a superior company.
The number of rigs drilling for oil and natural gas in North America fell by 48, or 2.4%, to 1,976, according to a weekly update by Baker Hughes Inc. The U.S. rig count fell by two from last week to 1,771, while the offshore rig count rose by five to 81. The Canadian rig count decreased by 46 to 205. In addition, the number of gas rigs rose by 11 to 1,495, while the oil rig count fell by 14 to 271, Baker Hughes reported.
Visa will float 51 percent of the company in an initial public offering, which is expected to take place later this year. That means about half its 775 million shares outstanding — now owned by the network's member banks — would be sold to the public.
August gold closed at $657 an ounce Friday, up $2.80 for the session. July silver fell 7 cents to close at $13.02 an ounce. July copper fell by 2.1 cents to close at $3.382 a pound.
"People are on the beach having a beach party while you can see a tsunami of spending on the horizon. And you've got people saying, 'party on,' " David M. Walker, U.S. comptroller, said in an interview. "We're headed for very, very rough seas, like we've never seen before in this country."
July natural gas closed at $7.13 per million British thermal units Friday. It was down 3% for the session and down 10% from last Friday's closing level. August crude climbed 49 cents to close at $69.14 a barrel, gaining 60 cents, or 0.9%, for the week with a labor strike in Nigeria in its third day.
The difference in Treasury 10-year and two-year note yields widened to the most since October 2005.Two-year notes were poised for their first weekly gain since April, while 10-year notes were down for a seventh week, widening the yield advantage of the longer-term debt to 21 basis points. The question one might raise is what advantage does an investor have with a two-year treasury note over a six-month treasury bill. It seems to me that an astute investor would go for the shorter maturity in a rising interest rate environment. There is one more element to consider. A foreign government, such as, China, would be better served, in my view, to go for the six-month alternative as the risk of rollover becomes negated. It is also the easiest way to cash out of dollar denominated investments without incurring market risk.
The Blackstone IPO at $31 is the 6th largest IPO in history. Their forte maybe in buyouts; however, they get an A in marketing too. For a deal of this size to trade 100+ million shares and up 20% from the IPO price is truly something else-- especially on a weak day for equities.
The yen dropped to a record low against the euro and fell to the lowest level in more than four years versus the dollar as global investors borrowed the nation's currency to buy higher-yielding assets elsewhere. I believe the yen is grossly undervalued against the dollar.
Oil receipts account for some 80 percent of Nigeria's total government revenue.
Bear Stearns is planning a $3.2 Billion loan to try to rescue a distressed fund.
An increase in dairy costs and slower growth in the number of U.S. sales transactions may make meeting the higher end of Starbucks' 2007 per-share profit estimate of 87 cents to 89 cents difficult, CFO Casey said at a conference hosted by Chicago-based William Blair & Co. He reiterated Starbucks' target of boosting revenue by 20 percent this year.
Nuance Communications announced Thursday that it is purchasing Seattle-based Tegic Communications from Time Warner's AOL subsidiary for $265 million in cash. Tegic develops the commonly used T9 software that predicts what people type into their mobile phone for easier text entry. Last year, the software was shipped on nearly two-thirds of all cellphones.
In the past year there have been a couple of opportunities to make some serious money in the natural gas market. On Friday, natural gas traded at its lowest level since January. As it nears the $7 level, down from a recent move up to $8.15, the valuation becomes compelling. Summer has begun. The heat wave will soon arrive, and air conditioning etc will be in full swing. That ignores the possibility of damage as the hurricane season gets into high gear. The risk reward, in my view, is in your favor at these levels.
BP sold its stake in a $20 billion Russian natural-gas project to state-controlled Gazprom, amid Kremlin pressure. Gazprom agreed to pay between $700 million to $900 million for a 62.9% stake.
The Oil Drum: "The world's major oil companies replaced reserves at levels below 100% for the third straight year in 2006, while costs to find and produce the key asset continued to rise, a new analysis shows. Reserve replacements last year, excluding acquisitions and divestitures, were 91%, slightly below the 92% replaced in 2005, according to a report released Thursday by investment bank Bear Stearns & Co. At the same time, the companies' search and development costs rose to $13.63 per barrel of oil equivalent, up 28% from 2005, the report said."
Chris Gaffney: "What I find amazing is that while Congress and Paulson continue to focus on China and the obviously undervalued renminbi, neither wants to try and address the mortgage mess right here at home. I think it is obvious the Chinese are going to move at their own pace, despite any attempts to force them otherwise. The Chinese renminbi will increase in value as increases in interest rates and economic growth will allow the Chinese government to accelerate the currency's appreciation. I don't look for an overnight revaluation, but gradually faster appreciation."
Paul Saxena: "At the beginning of this decade, if I had told you that 7 years later crude oil would be trading above $60 per barrel, gold would be close to $700 per ounce, food prices would be at multi-year highs and the Dow Jones would be trading around 13,500, you would have pronounced me crazy!"
Nouriel Roubini: "Worries about contagion, concerns about systemic risk, comparisons to the 1998 LTCM near collapse, now widening corporate risk spreads. The picture is pretty ugly."
The low-yielding Swiss franc surged against the euro and dollar after monetary authorities unexpectedly tightened overnight lending rates, sparking some concern that central banks may be trying to disrupt yield-seeking carry trades.
Airbus SAS, the world's largest maker of commercial aircraft, won 425 firm orders valued at $61.7 billion this week as the European plane maker rebounded from losing ground to Boeing Co.
China's implied oil demand growth accelerated in May to 7.3 percent, the fastest pace in nine months, raising the prospect of another summer demand surge fuelled by rising auto travel, construction and warm weather. In May, China's implied demand was 7.04 million barrels per day (bpd), and 6.86 million bpd in the first five months, or 5 percent higher than the year-ago period, Reuters calculations showed. Implied demand is net imports plus refinery output but excludes inventories, which are not reported.
The market maybe focusing on the Nigerian oil stike; however, I think the growing demand in China and India are the engines for higher oil prices today and tomorrow.
The WSJ: "World oil demand is rising twice as fast as a year ago, straining the petroleum industry's ability to keep up with global needs and likely resulting in higher and more-volatile prices for some time to come."
The Indian trade minister blamed the United States on Friday for the collapse of a meeting of the World Trade Organization's four most powerful members, arguing that the U.S. refusal to cut subsidies to American farmers was unfair to developing nations. Indian Trade Minister Kamal Nath called the billions of dollars the U.S. government pays to its farmers a trade distortion that threatens the livelihood of India's farmers and hinders the development of the country's economy.
Talabani said Iraq appreciated China's support to Iraq on economic reconstruction.
Schlumberger traded at a new 52-week high. By comparison, Genentech made a new 52-week low, just as Amgen did a few weeks ago. For those serious about investing in health care on a long-term basis, I strongly suggest you consider Genentech. It is a superior company.
The number of rigs drilling for oil and natural gas in North America fell by 48, or 2.4%, to 1,976, according to a weekly update by Baker Hughes Inc. The U.S. rig count fell by two from last week to 1,771, while the offshore rig count rose by five to 81. The Canadian rig count decreased by 46 to 205. In addition, the number of gas rigs rose by 11 to 1,495, while the oil rig count fell by 14 to 271, Baker Hughes reported.
Visa will float 51 percent of the company in an initial public offering, which is expected to take place later this year. That means about half its 775 million shares outstanding — now owned by the network's member banks — would be sold to the public.
August gold closed at $657 an ounce Friday, up $2.80 for the session. July silver fell 7 cents to close at $13.02 an ounce. July copper fell by 2.1 cents to close at $3.382 a pound.
"People are on the beach having a beach party while you can see a tsunami of spending on the horizon. And you've got people saying, 'party on,' " David M. Walker, U.S. comptroller, said in an interview. "We're headed for very, very rough seas, like we've never seen before in this country."
July natural gas closed at $7.13 per million British thermal units Friday. It was down 3% for the session and down 10% from last Friday's closing level. August crude climbed 49 cents to close at $69.14 a barrel, gaining 60 cents, or 0.9%, for the week with a labor strike in Nigeria in its third day.
Thursday, June 21, 2007
Summer+1
6/22/07 Summer + 1
The Washington Post points out a "Study Finds 1.8 Million Veterans Are Uninsured."
The U.S. military announced the deaths of 14 American troops, including five killed Thursday in a single roadside bombing that also killed four Iraqis in Baghdad. The U.S. deaths raised to at least 3,545 the number of U.S. troops who have died since the war began in 2003, according to an Associated Press count. You can thank the White House and the do nothing Congress for these deaths.
Just 14% of Americans have a great deal or quite a lot of confidence in Congress.This 14% Congressional confidence rating is the all-time low for this measure, which Gallup initiated in 1973. The previous low point for Congress was 18% at several points in the period of time 1991 to 1994.
The number of newly laid off workers filing claims for unemployment benefits shot up unexpectedly last week, rising to the highest level in two months.The Labor Department reported that unemployment claims totaled 324,000 last week, up 10,000 from the previous week. Don't forget that an individual is not considered as unemployed when the unemployed benefits run out.
Japan's trade surplus rose 9.3% to 389.5 billion yen ($3.15 billion) in May, as strong demand for Japanese goods in Asia and Europe offset relatively flat demand from the U.S. Imports for the month rose 15.5% to 6.18 trillion yen from a year earlier, while exports climbed 15.1% to 6.57 trillion yen, Japan's Ministry of Finance said Thursday in Tokyo. The data showed Japan's surplus with the U.S. declined 12.9% for the month to 543.7 billion yen, the second consecutive monthly decline. Japan's surplus with Asia gained 22.6% to 534.4 billion yen, while the surplus with Europe jumped 23.9% to 300.8 billion yen. Japan had a trade deficit with China of 212 billion yen, a 1.8% contraction on year. May's trade figures mark the seventh straight month of increase in the trade surplus.
Eisuke Sakakibara, Japan's former top currency official, said the central bank must raise interest rates soon because the yen's drop has led to a ``dangerous'' bubble in carry trades.
Taiwan's central bank lifted interest rates by 0.25 percentage point Thursday, brining its discount rate to 3.125%, citing inflation and buoyant domestic liquidity. The Central Bank of the Republic of China (Taiwan) said ahead of its interest-rate announcement its chief monetary-policy goals included stable prices and growing financial markets. The move brings Taiwan's secured loan rate to 3.50%, and the unsecured loans rate to 5.375%. The central bank also lifted the foreign-exchange deposit reserve ratio to 5%, the first such increase since 2000.
Hong Kong's Hang Seng Index Thursday closed at a record, up 1.3% at 21,954.67.
Weir Group of UK said it's agreed to buy SPM Flow Control, a Fort Worth, Tex.-based maker of high-pressure well service pumps and equipment, for $653 million. Weir said the deal will give it an increased presence in the higher-growth upstream oil and gas market, a business model that's more aftermarket-driven, potential to increase sales of both SPM's and Weir's services and products and the opportunity to boost SPM's productivity through Weir's techniques. Many of SPM's customers include large oil services companies such as Halliburton, BJ Services and Schlumberger. The company's anticipated revenues for calendar year 2007 are US$320 million. In the nine months to March 31, 2007, SPM generated revenue of US$209 million and operating profits of US$60.5 million.
Luxottica Group Inc., the Milan retailer producer and retailer of eyewear, definitively agreed to acquire Oakley Inc., the Foothill Ranch, Calif., eyewear producer, for $29.30 a share, or $2.1 billion, the companies said.
Jakarta-based Mandala Airlines is ordering 25 A320 aircraft with options for five more in a deal worth $1.9 billion at catalog prices. Hong Kong Airlines will acquire 30 A320s and 20 A330-200 aircraft, according to a memorandum of understanding being signed Thursday, while Colombia's flag carrier Avianca, converting options, has signed a firm contract for 19 Airbus planes. Airbus also signed a memorandum of understanding with Russian carrier Ural Airlines on the purchase of five single-aisle Airbus A320s.
Hedge-fund manager Ritchie Capital Management Ltd.'s two Irish based funds filed for bankruptcy protection after losses of more than $700 million it blamed on a co-investor's alleged fraud.
The perceived risk of owning corporate bonds soared worldwide on concern over losses at hedge funds run by Bear Stearns Cos. Credit-default swaps based on 10 million euros ($13 million) of debt included in the iTraxx Crossover Series 7 Index of 50 European companies jumped as much as 16,000 euros to 216,000 euros, the biggest one-day rise in three months, according to Deutsche Bank AG. The CDX Crossover index in New York surged as much as $10,000 to a nine-month high of $178,000.
Goldman Sachs Group Inc.'s real- estate investment fund agreed to buy Equity Inns Inc., the third-largest hotel real estate investment trust, for $2.2 billion. Goldman's Whitehall Street Global Real Estate LP 2007 will pay $23 a share in cash.
Inflation is muted? Wheat futures in Chicago advanced for a second day to near the 1996 record high as rain delayed U.S. harvesting, and after Pakistan and Ukraine said they will restrict exports. Corn and soybeans also gained. Heavy rain in the southern Great Plains, especially Oklahoma, prevented farmers from harvesting the mature winter wheat crop, raising the chance of fungal diseases, said Kenji Kobayashi, an analyst at Kanetsu Asset Management Co. in Tokyo. Since May 1, rainfall over much of Illinois has been measured in mere tenths of inches, leaving corn little moisture other than what's stored in the soil. Many areas are three to four inches below normal, National Weather Service meteorologist James Auten said. Urbana is more than 6 inches low. Corn is at a critical stage, said Emerson Nafziger, a crop-production specialist at the University of Illinois. Pollination should begin in most Illinois corn next week and the plants need lots of water for successful pollination, he said. In the past four weeks, the lack of rain has robbed Illinois corn of some of its potential, according to the U.S. Department of Agriculture.
Venezuela has curtailed crude oil output by 195,000 bpd in accordance with a reduction agreed under the Organization of Petroleum Exporting Countries (OPEC), Minister of Energy and Petroleum Rafael Ramírez said on Wednesday.
The official explained that cuts were implemented in heavy-crude oil and extra-heavy crude oil Orinoco belt, east Venezuela, and in Boscán oilfield, west Venezuela, Reuters reported.
The newsstand price for the WSJ is going from $1 to $1.50 and the NY Times from $1 to $1.25. I guess the higher prices may make up for lower volume. Again, muted inflation?
The Oil Drum: "Concerns about a gap in crude oil demand/supply in the 2nd half of 2007 increased in the past months. The International Energy Agency (IEA) and it’s sister organisation, the Energy Information Administration (EIA), have both told the OPEC cartel that OPEC must increase supply to avert rising oil prices. Presently the agencies expect a crude oil demand/supply shortfall of 1 million barrels per day towards the end of the year. However the OPEC cartel is of the opinion that oil markets are well supplied and therefore there is no need to increase supply at the moment. This discussion, as shown below, boils down to the expectation for non-OPEC supply and world demand in the 2nd half. If the IEA and EIA projections are correct, we will soon find out what is going on in Saudi Arabia with the production of the supergiant oilfield Ghawar."
The Financial Times: "The giant market for securities backed by US subprime mortgages was thrown into turmoil on Wednesday as lenders struggled to sell more than $1bn of assets seized from two Bear Stearns hedge funds that suffered heavy losses on subprime bets...The rout highlights the risks investors take when they buy illiquid and hard-to-value securities. Fire sales in times of stress can trigger dramatic changes in pricing in such markets, perhaps leading other holders of assets to mark their values down and triggering demands for additional collateral from lenders."
Natural-gas inventories rose by 89 billion cubic feet for the week ended June 15, the Energy Department said Thursday. Total stocks now stand at 2.344 trillion cubic feet, down 121 billion cubic feet from the year-ago level, but 365 billion cubic feet above the five-year average, the government data said. The current U.S. storage surplus versus the five-year average fell to 18 percent from 19 percent, while the deficit against a year earlier was steady at 5 percent.
What me worry? Consider this from Jes Black: "Consider that the current national debt is $8.4 trillion dollars, which amounts to roughly $30,000 for every man, woman and child in the United States. In 2005 there were approximately 113,146,000 households, which means each household’s share of the national debt is $74,000. In 2005, the median annual household income according to the US Census Bureau was determined to be $46,326, or just 62% of the total owed by each family. While this does not seem daunting, the fact is that because of this ratio current income taxes collected by the IRS pay off only the interest on the debt owed. This is part of the reason that the government continually spends more than it receives – because tax receipts pay only interest owed on the debt. However, if the US government were to follow GAAP accounting rules the net present value of future unfunded liabilities approaches $50 trillion dollars or $441,906 per household. Now consider that the average household income is just 10% of each household’s share of the net present value of future unfunded liabilities. Therefore, at the rate that debt is increasing, eventually we'll reach a point where even if the government takes every penny of its citizens' income through taxation, it will still not collect enough to keep up with the interest payments...the government needs more money and that while there may be willing lenders, the risk premium attached to that lending must be higher. We have harped on this point for a number of years and is the main pillar of our contention that U.S. interest rates will rise, regardless of a “savings glut” or whatever other moniker they ascribe to this imbalance. As such, we think that long term yields are breaking out and after a needed pullback, the next big move in yields is higher. Much higher."
Nigerian workers left the country's export terminals and this threatens shipments from Africa's biggest oil producer. Nigerian unions increased pressure on the government in the second day of the strike protesting increases in taxes and fuel prices.
Leading indicators of U.S. economic activity increased 0.3% in May. The increase reversed a revised 0.3 percent drop in April, down from the original 0.5 percent decline that economists blamed on soaring gas prices and a drop in building permits. With the latest reading, the cumulative change in the index over the past six months has gone up 0.3 percent.
Economonitor: "A sustained shift in Asian monetary and currency policies, allowing for a greater rise in local FX rates, will put upward pressure on Western bond yields, but that impact will be partly neutralized by net inflows from oil exporting countries."
CSX said it will raise prices as much as 7 percent this year.
Manufacturing in the Philadelphia region jumped in June, the Federal Reserve Bank of Philadelphia reported Thursday. The Philly Fed diffusion index rose to 18.0 in June from 4.2 in May.
General Electric Co. and Pearson have decided to pull out of the bidding for Dow Jones & Co., the companies said in a statement Thursday.
Beijing announced that it will forgive debt owed to the Chinese government by Iraq and pledged to help rebuild the country's economy. "China has always been supportive and has participated in the rebuilding of Iraq," Qin Gang, foreign ministry spokesman, said. "We will reduce or forgive Iraq's debt on a large scale, and help it to train people in the fields of economics, electrical power, diplomacy and management."
Bolstered by its blistering economic growth, net imports of crude by the world’s second largest oil consumer rose 11.5 percent to 65.8 million tonnes in the five months, the China Securities Journal reported. However, the country’s own oil production during the period rose only marginally by 1.7 percent to 77.5 million tonnes, the newspaper said. China's reliance on external crude oil supply will exceed 50% in the coming future, deputy chief of the research department of the National Development and Reform Commission (NDRC), Dai Yande, said in an interview to a Chinese financial magazine. If China's double digit growth continues, it is only a matter of time until China consumes more crude on a daily basis than the U.S. does. Long term this places a sound foundation for crude prices, and that does not include the growing consumption of crude in India.
Petrochina has overtaken Royal Dutch Shell to become the world's second largest oil company by market valuation behind Exxon Mobil.
Several years ago I predicted Toyota would overtake GM. Do not be surprised when Petrochina overtakes ExxonMobil's market valuation.
Six Nobel Peace Prize Laureates weighed in on the proposed Iraq oil law, worried Iraq's citizens will lose out, and urging the U.S. to back off.
India expects to finalize an agreement on the tri-nation pipeline that will bring natural gas from Iran via Pakistan by the middle of next month, Petroleum Minister Murli Deora said Thursday.
68-year-old Ray McGovern, who worked under seven presidents during 27 years of service, believes the US government under Bush is the real terrorist organization, and may even be preparing to declare martial law – the end of democratic rule – in the wake of another terrorist attack. (As told to the Pasadena Weekly)
August gold fell $5.80 to close at $654.20 an ounce Thursday. July silver fell 16 cents to end at $13.09 an ounce and July copper closed down 1.2% at $3.403 a pound.
Former Attorney General John Ashcroft confirmed the Bush administration was sharply divided over the legality of President Bush's most controversial eavesdropping work, the chairman of a congressional panel said Thursday.
August crude fell 21 cents to close at $68.65 a barrel Thursday. July natural gas fell by 4.3 cents to close at $7.348 per million British thermal units.
Although the Dow, the Nasdaq, and the S&P rebounded on Thursday, treasury yields backed as the 10-year increased to 5.18% and the 30-year to 5.30%. In sum, the yield curve is steepening once again.
The Washington Post points out a "Study Finds 1.8 Million Veterans Are Uninsured."
The U.S. military announced the deaths of 14 American troops, including five killed Thursday in a single roadside bombing that also killed four Iraqis in Baghdad. The U.S. deaths raised to at least 3,545 the number of U.S. troops who have died since the war began in 2003, according to an Associated Press count. You can thank the White House and the do nothing Congress for these deaths.
Just 14% of Americans have a great deal or quite a lot of confidence in Congress.This 14% Congressional confidence rating is the all-time low for this measure, which Gallup initiated in 1973. The previous low point for Congress was 18% at several points in the period of time 1991 to 1994.
The number of newly laid off workers filing claims for unemployment benefits shot up unexpectedly last week, rising to the highest level in two months.The Labor Department reported that unemployment claims totaled 324,000 last week, up 10,000 from the previous week. Don't forget that an individual is not considered as unemployed when the unemployed benefits run out.
Japan's trade surplus rose 9.3% to 389.5 billion yen ($3.15 billion) in May, as strong demand for Japanese goods in Asia and Europe offset relatively flat demand from the U.S. Imports for the month rose 15.5% to 6.18 trillion yen from a year earlier, while exports climbed 15.1% to 6.57 trillion yen, Japan's Ministry of Finance said Thursday in Tokyo. The data showed Japan's surplus with the U.S. declined 12.9% for the month to 543.7 billion yen, the second consecutive monthly decline. Japan's surplus with Asia gained 22.6% to 534.4 billion yen, while the surplus with Europe jumped 23.9% to 300.8 billion yen. Japan had a trade deficit with China of 212 billion yen, a 1.8% contraction on year. May's trade figures mark the seventh straight month of increase in the trade surplus.
Eisuke Sakakibara, Japan's former top currency official, said the central bank must raise interest rates soon because the yen's drop has led to a ``dangerous'' bubble in carry trades.
Taiwan's central bank lifted interest rates by 0.25 percentage point Thursday, brining its discount rate to 3.125%, citing inflation and buoyant domestic liquidity. The Central Bank of the Republic of China (Taiwan) said ahead of its interest-rate announcement its chief monetary-policy goals included stable prices and growing financial markets. The move brings Taiwan's secured loan rate to 3.50%, and the unsecured loans rate to 5.375%. The central bank also lifted the foreign-exchange deposit reserve ratio to 5%, the first such increase since 2000.
Hong Kong's Hang Seng Index Thursday closed at a record, up 1.3% at 21,954.67.
Weir Group of UK said it's agreed to buy SPM Flow Control, a Fort Worth, Tex.-based maker of high-pressure well service pumps and equipment, for $653 million. Weir said the deal will give it an increased presence in the higher-growth upstream oil and gas market, a business model that's more aftermarket-driven, potential to increase sales of both SPM's and Weir's services and products and the opportunity to boost SPM's productivity through Weir's techniques. Many of SPM's customers include large oil services companies such as Halliburton, BJ Services and Schlumberger. The company's anticipated revenues for calendar year 2007 are US$320 million. In the nine months to March 31, 2007, SPM generated revenue of US$209 million and operating profits of US$60.5 million.
Luxottica Group Inc., the Milan retailer producer and retailer of eyewear, definitively agreed to acquire Oakley Inc., the Foothill Ranch, Calif., eyewear producer, for $29.30 a share, or $2.1 billion, the companies said.
Jakarta-based Mandala Airlines is ordering 25 A320 aircraft with options for five more in a deal worth $1.9 billion at catalog prices. Hong Kong Airlines will acquire 30 A320s and 20 A330-200 aircraft, according to a memorandum of understanding being signed Thursday, while Colombia's flag carrier Avianca, converting options, has signed a firm contract for 19 Airbus planes. Airbus also signed a memorandum of understanding with Russian carrier Ural Airlines on the purchase of five single-aisle Airbus A320s.
Hedge-fund manager Ritchie Capital Management Ltd.'s two Irish based funds filed for bankruptcy protection after losses of more than $700 million it blamed on a co-investor's alleged fraud.
The perceived risk of owning corporate bonds soared worldwide on concern over losses at hedge funds run by Bear Stearns Cos. Credit-default swaps based on 10 million euros ($13 million) of debt included in the iTraxx Crossover Series 7 Index of 50 European companies jumped as much as 16,000 euros to 216,000 euros, the biggest one-day rise in three months, according to Deutsche Bank AG. The CDX Crossover index in New York surged as much as $10,000 to a nine-month high of $178,000.
Goldman Sachs Group Inc.'s real- estate investment fund agreed to buy Equity Inns Inc., the third-largest hotel real estate investment trust, for $2.2 billion. Goldman's Whitehall Street Global Real Estate LP 2007 will pay $23 a share in cash.
Inflation is muted? Wheat futures in Chicago advanced for a second day to near the 1996 record high as rain delayed U.S. harvesting, and after Pakistan and Ukraine said they will restrict exports. Corn and soybeans also gained. Heavy rain in the southern Great Plains, especially Oklahoma, prevented farmers from harvesting the mature winter wheat crop, raising the chance of fungal diseases, said Kenji Kobayashi, an analyst at Kanetsu Asset Management Co. in Tokyo. Since May 1, rainfall over much of Illinois has been measured in mere tenths of inches, leaving corn little moisture other than what's stored in the soil. Many areas are three to four inches below normal, National Weather Service meteorologist James Auten said. Urbana is more than 6 inches low. Corn is at a critical stage, said Emerson Nafziger, a crop-production specialist at the University of Illinois. Pollination should begin in most Illinois corn next week and the plants need lots of water for successful pollination, he said. In the past four weeks, the lack of rain has robbed Illinois corn of some of its potential, according to the U.S. Department of Agriculture.
Venezuela has curtailed crude oil output by 195,000 bpd in accordance with a reduction agreed under the Organization of Petroleum Exporting Countries (OPEC), Minister of Energy and Petroleum Rafael Ramírez said on Wednesday.
The official explained that cuts were implemented in heavy-crude oil and extra-heavy crude oil Orinoco belt, east Venezuela, and in Boscán oilfield, west Venezuela, Reuters reported.
The newsstand price for the WSJ is going from $1 to $1.50 and the NY Times from $1 to $1.25. I guess the higher prices may make up for lower volume. Again, muted inflation?
The Oil Drum: "Concerns about a gap in crude oil demand/supply in the 2nd half of 2007 increased in the past months. The International Energy Agency (IEA) and it’s sister organisation, the Energy Information Administration (EIA), have both told the OPEC cartel that OPEC must increase supply to avert rising oil prices. Presently the agencies expect a crude oil demand/supply shortfall of 1 million barrels per day towards the end of the year. However the OPEC cartel is of the opinion that oil markets are well supplied and therefore there is no need to increase supply at the moment. This discussion, as shown below, boils down to the expectation for non-OPEC supply and world demand in the 2nd half. If the IEA and EIA projections are correct, we will soon find out what is going on in Saudi Arabia with the production of the supergiant oilfield Ghawar."
The Financial Times: "The giant market for securities backed by US subprime mortgages was thrown into turmoil on Wednesday as lenders struggled to sell more than $1bn of assets seized from two Bear Stearns hedge funds that suffered heavy losses on subprime bets...The rout highlights the risks investors take when they buy illiquid and hard-to-value securities. Fire sales in times of stress can trigger dramatic changes in pricing in such markets, perhaps leading other holders of assets to mark their values down and triggering demands for additional collateral from lenders."
Natural-gas inventories rose by 89 billion cubic feet for the week ended June 15, the Energy Department said Thursday. Total stocks now stand at 2.344 trillion cubic feet, down 121 billion cubic feet from the year-ago level, but 365 billion cubic feet above the five-year average, the government data said. The current U.S. storage surplus versus the five-year average fell to 18 percent from 19 percent, while the deficit against a year earlier was steady at 5 percent.
What me worry? Consider this from Jes Black: "Consider that the current national debt is $8.4 trillion dollars, which amounts to roughly $30,000 for every man, woman and child in the United States. In 2005 there were approximately 113,146,000 households, which means each household’s share of the national debt is $74,000. In 2005, the median annual household income according to the US Census Bureau was determined to be $46,326, or just 62% of the total owed by each family. While this does not seem daunting, the fact is that because of this ratio current income taxes collected by the IRS pay off only the interest on the debt owed. This is part of the reason that the government continually spends more than it receives – because tax receipts pay only interest owed on the debt. However, if the US government were to follow GAAP accounting rules the net present value of future unfunded liabilities approaches $50 trillion dollars or $441,906 per household. Now consider that the average household income is just 10% of each household’s share of the net present value of future unfunded liabilities. Therefore, at the rate that debt is increasing, eventually we'll reach a point where even if the government takes every penny of its citizens' income through taxation, it will still not collect enough to keep up with the interest payments...the government needs more money and that while there may be willing lenders, the risk premium attached to that lending must be higher. We have harped on this point for a number of years and is the main pillar of our contention that U.S. interest rates will rise, regardless of a “savings glut” or whatever other moniker they ascribe to this imbalance. As such, we think that long term yields are breaking out and after a needed pullback, the next big move in yields is higher. Much higher."
Nigerian workers left the country's export terminals and this threatens shipments from Africa's biggest oil producer. Nigerian unions increased pressure on the government in the second day of the strike protesting increases in taxes and fuel prices.
Leading indicators of U.S. economic activity increased 0.3% in May. The increase reversed a revised 0.3 percent drop in April, down from the original 0.5 percent decline that economists blamed on soaring gas prices and a drop in building permits. With the latest reading, the cumulative change in the index over the past six months has gone up 0.3 percent.
Economonitor: "A sustained shift in Asian monetary and currency policies, allowing for a greater rise in local FX rates, will put upward pressure on Western bond yields, but that impact will be partly neutralized by net inflows from oil exporting countries."
CSX said it will raise prices as much as 7 percent this year.
Manufacturing in the Philadelphia region jumped in June, the Federal Reserve Bank of Philadelphia reported Thursday. The Philly Fed diffusion index rose to 18.0 in June from 4.2 in May.
General Electric Co. and Pearson have decided to pull out of the bidding for Dow Jones & Co., the companies said in a statement Thursday.
Beijing announced that it will forgive debt owed to the Chinese government by Iraq and pledged to help rebuild the country's economy. "China has always been supportive and has participated in the rebuilding of Iraq," Qin Gang, foreign ministry spokesman, said. "We will reduce or forgive Iraq's debt on a large scale, and help it to train people in the fields of economics, electrical power, diplomacy and management."
Bolstered by its blistering economic growth, net imports of crude by the world’s second largest oil consumer rose 11.5 percent to 65.8 million tonnes in the five months, the China Securities Journal reported. However, the country’s own oil production during the period rose only marginally by 1.7 percent to 77.5 million tonnes, the newspaper said. China's reliance on external crude oil supply will exceed 50% in the coming future, deputy chief of the research department of the National Development and Reform Commission (NDRC), Dai Yande, said in an interview to a Chinese financial magazine. If China's double digit growth continues, it is only a matter of time until China consumes more crude on a daily basis than the U.S. does. Long term this places a sound foundation for crude prices, and that does not include the growing consumption of crude in India.
Petrochina has overtaken Royal Dutch Shell to become the world's second largest oil company by market valuation behind Exxon Mobil.
Several years ago I predicted Toyota would overtake GM. Do not be surprised when Petrochina overtakes ExxonMobil's market valuation.
Six Nobel Peace Prize Laureates weighed in on the proposed Iraq oil law, worried Iraq's citizens will lose out, and urging the U.S. to back off.
India expects to finalize an agreement on the tri-nation pipeline that will bring natural gas from Iran via Pakistan by the middle of next month, Petroleum Minister Murli Deora said Thursday.
68-year-old Ray McGovern, who worked under seven presidents during 27 years of service, believes the US government under Bush is the real terrorist organization, and may even be preparing to declare martial law – the end of democratic rule – in the wake of another terrorist attack. (As told to the Pasadena Weekly)
August gold fell $5.80 to close at $654.20 an ounce Thursday. July silver fell 16 cents to end at $13.09 an ounce and July copper closed down 1.2% at $3.403 a pound.
Former Attorney General John Ashcroft confirmed the Bush administration was sharply divided over the legality of President Bush's most controversial eavesdropping work, the chairman of a congressional panel said Thursday.
August crude fell 21 cents to close at $68.65 a barrel Thursday. July natural gas fell by 4.3 cents to close at $7.348 per million British thermal units.
Although the Dow, the Nasdaq, and the S&P rebounded on Thursday, treasury yields backed as the 10-year increased to 5.18% and the 30-year to 5.30%. In sum, the yield curve is steepening once again.
Wednesday, June 20, 2007
The Summer Season
6/21/07 The Summer Season
MGM Mirage said that its majority stockholder, Tracinda Corp., advised the board at yesterday's regular meeting that it had determined not to pursue negotiations to acquire the company's Bellagio and CityCenter properties.
Wal-Mart Stores Inc. said it will open 1,000 Wal-Mart MoneyCenters -- covering a quarter of its stores -- by the end of 2008. The company will also expand its menu of financial products and services, beginning with the launch of the Wal-Mart MoneyCard, a reloadable prepaid Visa rolling out nationally with GE Money and Green Dot.
Nassim Nicholas Taleb: "The best description of my lifelong business in the market is "skewed bets," that is, I try to benefit from rare events, events that do not tend to repeat themselves frequently, but, accordingly, present a large payoff when they occur. I try to make money infrequently, as infrequently as possible, simply because I believe that rare events are not fairly valued, and that the rarer the event, the more undervalued it will be in price. In addition to my own empiricism, I think that the counterintuitive aspect of the trade (and the fact that our emotional wiring does not accommodate it) gives me some form of advantage."
India's Kingfisher Airlines has signed a memorandum of understanding to order 50 planes from Airbus. The agreement is for 15 A350-800 XWBs in addition to the five converted from their original order for the A350, 10 A330-200s, five A340-500s and 20 A320 family aircraft.
The Bank of England's Monetary Policy Committee came within a single vote of hiking rates again in June, with the decision to hold its key rate at 5.5% passing on a five-to-four majority, the central bank revealed Wednesday.
If the Bank of China should raise rates by either 0.27% or 0.52%, what impact might that have on our markets?
PetroChina said it plans to sell up 4 billion shares in Shanghai, raising up to $5.6 billion.
Microsoft has agreed to make changes to its Windows Vista operating system in response to a complaint by Google that a feature of Vista is anticompetitive, lawyers involved in the case said on Tuesday.
Sweden's central bank lifted its benchmark interest rate for the eighth time in 18 months and said it will raise it twice more this year as rising employment and slowing productivity growth threaten to fuel inflation. The krona surged the most in almost five years. The repurchase rate was raised a quarter-point to 3.5 percent, the highest in more than four years, the Stockholm-based bank said in an e-mail today. The rate may be raised to ``around'' 4 percent by year-end, up from an earlier forecast of 3.5 percent, and to 4.4 percent in two years, the bank said.
China’s annual inflation rate may climb to about 3.3% in 2007 from a year earlier, citing a government agency.
Iraq will ask China to invest in the Middle East nation’s oil fields in a visit by Iraqi President Jalal Talabani to Beijing.
Senate tax writers Tuesday proposed slamming the oil and gas industry with nearly $29 billion in new taxes to pay for alternative energy and "clean coal" pro- jects.
Nuveen Investments Inc., the largest U.S. manager of closed-end funds, agreed to be bought by Madison Dearborn Partners LLC for $5.75 billion in the latest example of leveraged-buyout firms pushing further into financial services. Madison Dearborn, which manages more than $14 billion in private-equity funds, will pay $65 a share in cash for Chicago- based Nuveen, 20 percent more than the stock's closing price yesterday, according to a Business Wire statement.
Bank of America Corp. Chief Executive Officer Kenneth Lewis said private-equity firms will enjoy ``unprecedented'' access to financing for at least a few more years before a deal ``goes bad.''
Circuit City CEO said "Combined with an uncertain macroeconomic environment, for the time being, it is difficult to project sales and earnings performance for the balance of the fiscal year. As a result, we are withdrawing financial guidance at this time.
Barron's reports that investment bank Cowen has cut back its Q2 earnings forecasts for Motorola.
Iran is ready to help the US stabilize Iraq and Afghanistan – for a price, writes Selig Harrison, of the Center for International Policy, in the Financial Times.
Brad Setser: "I strongly suspect that central bank funds that previously were flowing into long-dated Treasuries and Agencies are now flowing into the T-bill market. At the right rate, I also suspect central banks will once again be willing to snap up longer-term bonds once again." I mentioned recently that, with the T-bill returning close to 5%, it is truly foolish to go long at 10 years or at 30-years for a pick up in yield that is not commensurate with the risk.
U.K. natural gas for delivery a day ahead rebounded from a six-week low after demand forecasts increased and a pipe connecting England with Belgium prepared to reverse flow direction.
YouTube will make sites available in Brazil, France, Ireland, Italy, Japan, Netherlands, Poland, Spain, and the UK.
According to research firm IDC, only 10% of those surveyed said they may buy an iPhone at full price when it goes on sale June 29.
The American Petroleum Institute reported a climb of 465,000 barrels in crude supplies for the week ended June 15. The Energy Department had reported a jump of 6.9 million barrels for the latest week. Motor gasoline supplies were up 933,000 barrels, the API said. The government reported that supplies of the fuel were up 1.8 million barrels. Distillate supplies climbed 1 million barrels, the API said. The government posted a 100,000-barrel rise.
The jump in 30-year mortgage rates by more than a half a percentage point to 6.74 percent in the past five weeks is putting a crimp on borrowers with the best credit just as a crackdown in subprime lending standards limits the pool of qualified buyers. The national median home price is poised for its first annual decline since the Great Depression, and the supply of unsold homes is at a record 4.2 million, according to the National Association of Realtors.``It's a blood bath,'' said Mark Kiesel, executive vice president of Newport Beach, California-based Pacific Investment Management Co., the manager of $668 billion in bond funds. ``We're talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit.''
The German DAX 30 ended Wednesday up 0.8% at 8,096.62, to reach at all-time closing high.
"Between now and 12 midnight, we will withdraw our members from all DPR locations, including oil export terminals," Mohammed Saidu, branch chairman of the PENGASSAN union in the DPR, told Reuters.The unions have pressed on with the strike despite a series of concessions offered by President Umaru Yar'Adua, who faces the first major test of his government three weeks after taking office.
PACCAR traded at a new 52-week high.
On Tuesday it was GE powering the Dow. On Wednesday it was Home Depot. There always seems to be at least one Dow stock saving the day.
The current U.S. storage surplus for natural gas versus the five-year average is 19 percent, while the deficit against a year earlier stands at 5 percent.
UBS analyst Glyn Lawcock thinks Billiton and and Rio are more likely to bid for Alcan than for Alcoa. That may be but right now only Alcoa has a bid on the table.
Jim Rogers: "I don't buy options. Buying options is another way to go to the poorhouse. Someone did a study for the SEC and discovered that 90 percent of all options expire as losses. Well, I figured out that if 90 percent of all long option positions lost money, that meant that 90 percent of all short option positions make money. If I want to use options to be bearish, I sell calls."
Richard Daughty: "You and your money, and the money of your little goon squad storm troopers here, is what is dying, and is going to die! And you will follow it into the grave as inflation kills you all!"
August gold fell $4.70, or 0.7%, to end the session at $660 an ounce Wednesday. July silver declined by 7.5 cents to close at $13.25 an ounce, but July copper gained 1.4%, or 4.8 cents, to finish at $3.4425 a pound.
Refineries operated at 87.6 percent of capacity last week, the lowest since the week ended March 30, according to the energy department. It was the lowest utilization rate for the period in 16 years. If refinery utilization remains anywhere near that level, gasoline supplies will tighten and prices will rise.
In March 2006, speaking before the Senate armed services committee, General James Jones, the then head of Eucom, said: "Africa currently provides over 15 per cent of US oil imports, and recent explorations in the Gulf of Guinea region indicate potential reserves that could account for 25-35 per cent of US imports within the next decade."
These high-quality reserves - West African oil is typically low in sulphur and thus ideal for refining - are easily accessible by sea to western Europe and the US. In 2005, the US imported more oil from the Gulf of Guinea than it did from Saudi Arabia and Kuwait combined. Within the next ten years it will import more oil from Africa than from the entire Middle East. Western oil giants such as ExxonMobil, Chevron, France's Total and Britain's BP and Shell plan to invest tens of billions of dollars in sub-Saharan Africa (far in excess of "aid" inflows to the region). At present, the US has 1,500 troops stationed in Africa, principally at its military base in Djibouti, in the eastern horn.
Angola is now China's main supplier of crude oil, supplanting Saudi Arabia last year. Africa supplies one-third of China's oil, with Angola, Sudan and Nigeria being major suppliers. China also gets bauxite from Guinea, copper from Zambia, uranium from Namibia and rare metals from Congo. Looking at the options Uganda has to fast track investment in exploitation including pipelines, refineries etc, the only one that comes to mind is China. The People's Republic of China (PRC) is heavily invested in nearby Sudan and the opportunity to develop exploitation in Uganda will allow it to consolidate its regional influence for oil resources.
PRC investments in Sudan are valued at 3-4 billion dollars (out of a 10 billion dollar commitment). In Angola, PRC offered credit of US$ 2 billion through the Import-Export Bank of China.
African Oil: the Numbers
22% of US crude oil imports came from Nigeria in the first quarter of 2007
25% of US crude imports came from Saudi Arabia in the same period
75% of the Nigerian government's income is oil-related
800,000 Nigerian estimate for barrels of oil lost each day through leaks, stoppages or theft by rebels
$2.3bn cost of building Chevron's Benguela Belize platform off the coast of Angola.
Maybe the next conflict will occur over oil in Africa. That will pit the U.S. against China.
What inflation? Indium, for example, was sold at prices 8.5 times as high this March as in March 2002. Indium is used in such products as LCD (liquid crystal display) televisions. Prices for platinum, which is used as a catalyst in fuel cells and catalytic converters for automobiles, also increased 2.4-fold during the same five-year period. Prices for tungsten, which is used to make light-bulb filaments and increase the hardness and strength of steel, rose 4.7-fold during the same period. Among other rare metals, prices for nickel, cobalt, vanadium, molybdenum and manganese also surged 7.1-fold, 4.4-fold, 6.2-fold, 6.0-fold and 2.1-fold, respectively.
China produces about 90% of tungsten and rare earth. China is also the world’s largest producer of indium, accounting for more than 30% of global total. South Africa produces about 80% of platinum.
Japan is a major consumer of rare metals. The world's second-biggest economy accounts for about 60% of global indium consumption. Japan's share of global consumption is high for other rare metals as well, at 20% for platinum, 14% for nickel and tungsten, 25% for cobalt, 17% for molybdenum, 11% for vanadium and 24% for rare earth.
According to Nielsen/Netratings, MSN/Windows Live had an 8.4% share of all May searches, with a total of 605 million queries. As they continue to lose share to Google and Yahoo, Microsoft becomes a non-event in the search market.
Canadian wholesale sales unexpectedly fell 3.1% in April, the biggest decline in almost four years, as car shipments plunged.
Eurex AG, Europe's biggest futures exchange, plans to offer commodity derivatives this year after record prices for energy, metals and agriculture spurred trading of the contracts.
July crude fell 91 cents to close at $68.19 a barrel Wednesday. August crude became the front-month contract at the session close. It closed at $68.86, down 68 cents. July reformulated gasoline fell 0.65 cent to close at $2.2281 a gallon. Natural gas continued its downward slide and was down .14 to $7.38.
Andersons now sees full-year earnings of $2.80 to $3.05, up from $2.35 to $2.60.
The Dow Jones Industrial Average was down 147.38 points at 13,488.04 at its unofficial close. The S&P 500 dropped 21.02 points to 1,512.68 and the Nasdaq Composite gave up almost 27 points to 2,599.
The former chief executive of the parent company of social-networking site MySpace says he will seek a non-controlling stake in Dow Jones & Co. through a $60-per-share "Dutch auction." An investment group led by Internet entrepreneur Brad Greenspan sent a letter to the board of directors at Dow Jones stating that it would buy about 25% of Dow Jones common stock at $60 per share.
Henry Ford: "It is not the employer who pays the wages. Employers only handle the money. It is the customer who pays the wages. "
MGM Mirage said that its majority stockholder, Tracinda Corp., advised the board at yesterday's regular meeting that it had determined not to pursue negotiations to acquire the company's Bellagio and CityCenter properties.
Wal-Mart Stores Inc. said it will open 1,000 Wal-Mart MoneyCenters -- covering a quarter of its stores -- by the end of 2008. The company will also expand its menu of financial products and services, beginning with the launch of the Wal-Mart MoneyCard, a reloadable prepaid Visa rolling out nationally with GE Money and Green Dot.
Nassim Nicholas Taleb: "The best description of my lifelong business in the market is "skewed bets," that is, I try to benefit from rare events, events that do not tend to repeat themselves frequently, but, accordingly, present a large payoff when they occur. I try to make money infrequently, as infrequently as possible, simply because I believe that rare events are not fairly valued, and that the rarer the event, the more undervalued it will be in price. In addition to my own empiricism, I think that the counterintuitive aspect of the trade (and the fact that our emotional wiring does not accommodate it) gives me some form of advantage."
India's Kingfisher Airlines has signed a memorandum of understanding to order 50 planes from Airbus. The agreement is for 15 A350-800 XWBs in addition to the five converted from their original order for the A350, 10 A330-200s, five A340-500s and 20 A320 family aircraft.
The Bank of England's Monetary Policy Committee came within a single vote of hiking rates again in June, with the decision to hold its key rate at 5.5% passing on a five-to-four majority, the central bank revealed Wednesday.
If the Bank of China should raise rates by either 0.27% or 0.52%, what impact might that have on our markets?
PetroChina said it plans to sell up 4 billion shares in Shanghai, raising up to $5.6 billion.
Microsoft has agreed to make changes to its Windows Vista operating system in response to a complaint by Google that a feature of Vista is anticompetitive, lawyers involved in the case said on Tuesday.
Sweden's central bank lifted its benchmark interest rate for the eighth time in 18 months and said it will raise it twice more this year as rising employment and slowing productivity growth threaten to fuel inflation. The krona surged the most in almost five years. The repurchase rate was raised a quarter-point to 3.5 percent, the highest in more than four years, the Stockholm-based bank said in an e-mail today. The rate may be raised to ``around'' 4 percent by year-end, up from an earlier forecast of 3.5 percent, and to 4.4 percent in two years, the bank said.
China’s annual inflation rate may climb to about 3.3% in 2007 from a year earlier, citing a government agency.
Iraq will ask China to invest in the Middle East nation’s oil fields in a visit by Iraqi President Jalal Talabani to Beijing.
Senate tax writers Tuesday proposed slamming the oil and gas industry with nearly $29 billion in new taxes to pay for alternative energy and "clean coal" pro- jects.
Nuveen Investments Inc., the largest U.S. manager of closed-end funds, agreed to be bought by Madison Dearborn Partners LLC for $5.75 billion in the latest example of leveraged-buyout firms pushing further into financial services. Madison Dearborn, which manages more than $14 billion in private-equity funds, will pay $65 a share in cash for Chicago- based Nuveen, 20 percent more than the stock's closing price yesterday, according to a Business Wire statement.
Bank of America Corp. Chief Executive Officer Kenneth Lewis said private-equity firms will enjoy ``unprecedented'' access to financing for at least a few more years before a deal ``goes bad.''
Circuit City CEO said "Combined with an uncertain macroeconomic environment, for the time being, it is difficult to project sales and earnings performance for the balance of the fiscal year. As a result, we are withdrawing financial guidance at this time.
Barron's reports that investment bank Cowen has cut back its Q2 earnings forecasts for Motorola.
Iran is ready to help the US stabilize Iraq and Afghanistan – for a price, writes Selig Harrison, of the Center for International Policy, in the Financial Times.
Brad Setser: "I strongly suspect that central bank funds that previously were flowing into long-dated Treasuries and Agencies are now flowing into the T-bill market. At the right rate, I also suspect central banks will once again be willing to snap up longer-term bonds once again." I mentioned recently that, with the T-bill returning close to 5%, it is truly foolish to go long at 10 years or at 30-years for a pick up in yield that is not commensurate with the risk.
U.K. natural gas for delivery a day ahead rebounded from a six-week low after demand forecasts increased and a pipe connecting England with Belgium prepared to reverse flow direction.
YouTube will make sites available in Brazil, France, Ireland, Italy, Japan, Netherlands, Poland, Spain, and the UK.
According to research firm IDC, only 10% of those surveyed said they may buy an iPhone at full price when it goes on sale June 29.
The American Petroleum Institute reported a climb of 465,000 barrels in crude supplies for the week ended June 15. The Energy Department had reported a jump of 6.9 million barrels for the latest week. Motor gasoline supplies were up 933,000 barrels, the API said. The government reported that supplies of the fuel were up 1.8 million barrels. Distillate supplies climbed 1 million barrels, the API said. The government posted a 100,000-barrel rise.
The jump in 30-year mortgage rates by more than a half a percentage point to 6.74 percent in the past five weeks is putting a crimp on borrowers with the best credit just as a crackdown in subprime lending standards limits the pool of qualified buyers. The national median home price is poised for its first annual decline since the Great Depression, and the supply of unsold homes is at a record 4.2 million, according to the National Association of Realtors.``It's a blood bath,'' said Mark Kiesel, executive vice president of Newport Beach, California-based Pacific Investment Management Co., the manager of $668 billion in bond funds. ``We're talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit.''
The German DAX 30 ended Wednesday up 0.8% at 8,096.62, to reach at all-time closing high.
"Between now and 12 midnight, we will withdraw our members from all DPR locations, including oil export terminals," Mohammed Saidu, branch chairman of the PENGASSAN union in the DPR, told Reuters.The unions have pressed on with the strike despite a series of concessions offered by President Umaru Yar'Adua, who faces the first major test of his government three weeks after taking office.
PACCAR traded at a new 52-week high.
On Tuesday it was GE powering the Dow. On Wednesday it was Home Depot. There always seems to be at least one Dow stock saving the day.
The current U.S. storage surplus for natural gas versus the five-year average is 19 percent, while the deficit against a year earlier stands at 5 percent.
UBS analyst Glyn Lawcock thinks Billiton and and Rio are more likely to bid for Alcan than for Alcoa. That may be but right now only Alcoa has a bid on the table.
Jim Rogers: "I don't buy options. Buying options is another way to go to the poorhouse. Someone did a study for the SEC and discovered that 90 percent of all options expire as losses. Well, I figured out that if 90 percent of all long option positions lost money, that meant that 90 percent of all short option positions make money. If I want to use options to be bearish, I sell calls."
Richard Daughty: "You and your money, and the money of your little goon squad storm troopers here, is what is dying, and is going to die! And you will follow it into the grave as inflation kills you all!"
August gold fell $4.70, or 0.7%, to end the session at $660 an ounce Wednesday. July silver declined by 7.5 cents to close at $13.25 an ounce, but July copper gained 1.4%, or 4.8 cents, to finish at $3.4425 a pound.
Refineries operated at 87.6 percent of capacity last week, the lowest since the week ended March 30, according to the energy department. It was the lowest utilization rate for the period in 16 years. If refinery utilization remains anywhere near that level, gasoline supplies will tighten and prices will rise.
In March 2006, speaking before the Senate armed services committee, General James Jones, the then head of Eucom, said: "Africa currently provides over 15 per cent of US oil imports, and recent explorations in the Gulf of Guinea region indicate potential reserves that could account for 25-35 per cent of US imports within the next decade."
These high-quality reserves - West African oil is typically low in sulphur and thus ideal for refining - are easily accessible by sea to western Europe and the US. In 2005, the US imported more oil from the Gulf of Guinea than it did from Saudi Arabia and Kuwait combined. Within the next ten years it will import more oil from Africa than from the entire Middle East. Western oil giants such as ExxonMobil, Chevron, France's Total and Britain's BP and Shell plan to invest tens of billions of dollars in sub-Saharan Africa (far in excess of "aid" inflows to the region). At present, the US has 1,500 troops stationed in Africa, principally at its military base in Djibouti, in the eastern horn.
Angola is now China's main supplier of crude oil, supplanting Saudi Arabia last year. Africa supplies one-third of China's oil, with Angola, Sudan and Nigeria being major suppliers. China also gets bauxite from Guinea, copper from Zambia, uranium from Namibia and rare metals from Congo. Looking at the options Uganda has to fast track investment in exploitation including pipelines, refineries etc, the only one that comes to mind is China. The People's Republic of China (PRC) is heavily invested in nearby Sudan and the opportunity to develop exploitation in Uganda will allow it to consolidate its regional influence for oil resources.
PRC investments in Sudan are valued at 3-4 billion dollars (out of a 10 billion dollar commitment). In Angola, PRC offered credit of US$ 2 billion through the Import-Export Bank of China.
African Oil: the Numbers
22% of US crude oil imports came from Nigeria in the first quarter of 2007
25% of US crude imports came from Saudi Arabia in the same period
75% of the Nigerian government's income is oil-related
800,000 Nigerian estimate for barrels of oil lost each day through leaks, stoppages or theft by rebels
$2.3bn cost of building Chevron's Benguela Belize platform off the coast of Angola.
Maybe the next conflict will occur over oil in Africa. That will pit the U.S. against China.
What inflation? Indium, for example, was sold at prices 8.5 times as high this March as in March 2002. Indium is used in such products as LCD (liquid crystal display) televisions. Prices for platinum, which is used as a catalyst in fuel cells and catalytic converters for automobiles, also increased 2.4-fold during the same five-year period. Prices for tungsten, which is used to make light-bulb filaments and increase the hardness and strength of steel, rose 4.7-fold during the same period. Among other rare metals, prices for nickel, cobalt, vanadium, molybdenum and manganese also surged 7.1-fold, 4.4-fold, 6.2-fold, 6.0-fold and 2.1-fold, respectively.
China produces about 90% of tungsten and rare earth. China is also the world’s largest producer of indium, accounting for more than 30% of global total. South Africa produces about 80% of platinum.
Japan is a major consumer of rare metals. The world's second-biggest economy accounts for about 60% of global indium consumption. Japan's share of global consumption is high for other rare metals as well, at 20% for platinum, 14% for nickel and tungsten, 25% for cobalt, 17% for molybdenum, 11% for vanadium and 24% for rare earth.
According to Nielsen/Netratings, MSN/Windows Live had an 8.4% share of all May searches, with a total of 605 million queries. As they continue to lose share to Google and Yahoo, Microsoft becomes a non-event in the search market.
Canadian wholesale sales unexpectedly fell 3.1% in April, the biggest decline in almost four years, as car shipments plunged.
Eurex AG, Europe's biggest futures exchange, plans to offer commodity derivatives this year after record prices for energy, metals and agriculture spurred trading of the contracts.
July crude fell 91 cents to close at $68.19 a barrel Wednesday. August crude became the front-month contract at the session close. It closed at $68.86, down 68 cents. July reformulated gasoline fell 0.65 cent to close at $2.2281 a gallon. Natural gas continued its downward slide and was down .14 to $7.38.
Andersons now sees full-year earnings of $2.80 to $3.05, up from $2.35 to $2.60.
The Dow Jones Industrial Average was down 147.38 points at 13,488.04 at its unofficial close. The S&P 500 dropped 21.02 points to 1,512.68 and the Nasdaq Composite gave up almost 27 points to 2,599.
The former chief executive of the parent company of social-networking site MySpace says he will seek a non-controlling stake in Dow Jones & Co. through a $60-per-share "Dutch auction." An investment group led by Internet entrepreneur Brad Greenspan sent a letter to the board of directors at Dow Jones stating that it would buy about 25% of Dow Jones common stock at $60 per share.
Henry Ford: "It is not the employer who pays the wages. Employers only handle the money. It is the customer who pays the wages. "
Tuesday, June 19, 2007
Newsworthy
6/20/07 Newsworthy
Starts of new homes in the United States fell by 2.1% to a seasonally adjusted annual pace of 1.47 million in May. However, building permits for new construction rose 3% to 1.50 million. Completions of housing units fell 0.5% to a seasonally adjusted annual rate of 1.534 million, the lowest total in six years. Construction of single-family homes weakened further in May, while building of multifamily buildings strengthened.
Chain store sales for the week ended June 16 rose 1.9% from the year-ago period, according to a survey released Tuesday by the International Council of Shopping Centers and UBS Securities. On a week-over-week basis, sales slipped 0.1%.
Expedia said it would buy back $3.5 billion of its shares in a tender offer, representing 42% of the number of shares of common stock currently outstanding and approximately 38% of the total number of shares of common stock and Class B common stock currently outstanding. Expedia will buy the stock at not less than $27.50 and no more than $30 a share.
For 2007, UCLA forecasters say payrolls will increase by 1.4 percent -- a notch above their earlier 1.3 percent prediction -- but decline to 0.9 percent in 2008 before bouncing up to 1.6 percent in 2009. One of the biggest hits will come in construction jobs, which accounted for 27 percent of all job creation in California from 2003 through 2005. Sector payrolls will drop by 1.9 percent this year and 5 percent next year (46,000 jobs), before returning to 1 percent growth in 2009.
The average US pump price for regular gasoline fell 6.7 cents to $3.00 a gallon in the week ended Monday, the government said.
Best Buy Co. on Tuesday said first-quarter earnings fell 18 percent, hurt by weak profits in China and increased sales of lower-margin products such as notebook computers. Profit for the quarter ended June 2 dropped to $192 million, or 39 cents per share, from $234 million, or 47 cents per share, in the same period a year ago. Looking ahead, the company said it expects consumer spending to be difficult to predict this year, with flat-panel televisions and portable computers staying strong. But it sees sales in lower-margin categories accelerating. Best Buy said it sees earnings per share for the year at $2.95 to $3.15, short of analysts average view of $3.16, according to Reuters Estimates.
Kansas Agricultural Statistics Service reported Monday that 37 percent of the wheat crop was in poor to very poor condition. About 29 percent was rated in fair condition, 25 percent was in good condition and only 9 percent rated as excellent.
Cadbury Schweppes PLC said Tuesday it plans to close 15 percent of its confectionary factories by 2011, cutting about 7,500 jobs, and will likely sell the U.S. unit that makes 7-Up, Dr Pepper and Snapple as it focuses on its candy and gum businesses.
Home Depot has agreed to sell its supply division for more than $10 billion, sources close to the deal said on Tuesday. Bain Capital, Carlyle Group and Clayton, Dubilier & Rice won the auction and were finalizing the deal early on Tuesday sources said. The company plans to buy back up to $22.5 billion in stock "as soon as practicable." The company said it will fund the buyback with the proceeds from the sale of HD Supply, existing cash on hand and the proceeds from an expected $12 billion issuance of senior unsecured notes.
Yahoo's Semel was replaced by co-founder Jerry Yang, effective immediately. Susan Decker, Yahoo's head of advertising and former chief financial officer, was also named president. In my view, the company should get its house in order before exploring alternatives at this time. "I'm ready to dig in and make sure we can take Yahoo to the next level,'' Yang, 38, said in an interview. "I'm absolutely not interim. We want someone for the long haul.''
Barron's writes that Yahoo! sees revenue for Q2 at the mid to low end of its projections.
BHP Billiton Ltd., the world's largest mining group, is considering a bid to rival a $28.7 billion offer for aluminum producer Alcan Inc. , and has hired investment bank Merrill Lynch & Co. , sources familiar with the matter said.
China announced Tuesday it will cut tax rebates on exports of clothes, shoes and other goods in an effort to slow the growth of its huge trade surplus amid rising threats of punitive action by U.S. lawmakers. The move also is meant to slow exports of cement and other goods deemed too energy-intensive or polluting, the Finance Ministry said on its Web site. Rebates of value-added taxes will be eliminated on July 1 on 553 categories of goods including salt, cement and fertilizers, the ministry said. It said rebates will be cut on 2,268 types of products including shoes, clothing and plastic goods.
Chevron Corp. has cut oil output from Nigeria by 42,000 barrels a day following an invasion of its Abiteye flow station, Reuters news agency said Monday. Eni SpA declared force majeure after one of its flow stations in Nigeria was attacked by militants on June 17. Meanwhile, Nigerian oil-worker unions rejected a government offer aimed at avoiding a strike, according to Dow Jones Newswires
Rio Tinto traded at a new 52-week high of $312 per share and its market value has now reached $114 billion. They certainly have the currency to make a move on either Alcoa or Alcan.
Molex expects fourth-quarter revenue to come in below the lower end of past guidance.
The $60-a-share purchase of student lender SLM Corp., commonly known as Sallie Mae, proceeded a step further Tuesday after the company said the deal has cleared an antitrust hurdle.
Microchip shares fell $2.50, or 6%, to $39.13 after the chip maker lowered its first-quarter earnings forecast to 36 cents a share.
Actuant Corp., a maker of industrial tools and supplies, lifted its 2007 earnings per share guidance on Tuesday, partly due to expected acquisition-fueled growth. The company lifted its 2007 earnings growth forecast to a range of 17 percent to 18 percent, up from previous guidance for earnings growth of 9 percent to 14 percent. The guidance calls for earnings of $3.38 to $3.43 per share.
The Chandler Trusts' sale of their last 20.3 million shares, representing a 17.2 percent stake in Chicago-based Tribune, took place June 7 and was disclosed in a regulatory filing Monday. The stock sale, underwritten by Goldman Sachs & Co., netted the Chandler Trusts $31.19 per share.
IRAQ now ranks as the second most unstable country in the world, marginally behind Sudan but ahead of war-ravaged or poverty-stricken countries such as Somalia, Zimbabwe, Ivory Coast, Congo, Afghanistan, Haiti and North Korea, according to the 2007 failed state index.
Presidential candidate Bill Richardson on Tuesday accused his Democratic rivals of creating too many escape clauses for President Bush to leave U.S. troops in Iraq indefinitely."We need to bring them all home," the New Mexico governor said. Richardson would leave a small Marine contingent behind in Iraq to protect the U.S. Embassy. But, he said, "if the embassy is not safe, then they're all coming home too."
Iran Tuesday refused to rule out using oil supplies as a weapon in the standoff over its nuclear program, saying Washington had never excluded attacking the Islamic republic. ‘When the Americans say that using the military option against Iran regarding its nuclear issue is not off the table then Iran can say that it will not put aside the instrument of oil,’ Iran’s representative to OPEC, Hossein Kazempour Ardebili, said in an interview with the Shargh newspaper.
Ghana's President John Kufuor says the discovery of the country's first major oil deposit could turn the West African country into an "African tiger". "Even without oil, we are doing so well... With oil as a shot in the arm, we're going to fly," he told the BBC. "My joy is that I'll go down in history as the president under whose watch oil was found to turn the economy of Ghana around for the better," he said. The discovery of 600m barrels of light oil offshore was announced on Monday.
General Electric's Energy Financial Services unit said Tuesday it would pay $603 million to buy interests in Regency Energy Partners.
The CBOT is raising the margin requirements on wheat, treasury bonds, 10-year treasuries, and treasury swaps.
Bloomberg: "The United Arab Emirates may be the next Middle Eastern country to stop pegging its exchange rate to the U.S. dollar."
Rob Portman is set to leave his post as White House budget director and will be replaced by former Iowa congressman Jim Nussle, news reports said Tuesday.
Bear Stearns Cos., the biggest broker for U.S. hedge funds, offered to provide $1.5 billion in loans to help rescue a money-losing fund run by its asset- management unit, a person familiar with the situation said.
The Oil Drum: "Demand for thermal coal in Russia, the world's fifth-largest coal miner, could more than triple by 2020 as the country invests billions of dollars to expand its power network, industry officials said on Monday. Thermal coal supply would rise by more than 50 percent and the proportion of exports in overall output from the world's third-biggest coal exporter would fall, said Vladimir Shchadov, deputy director of Rosenergo, an agency within the Energy Ministry."
Paul Kasriel: "As mortgage defaults continue to rise and regulators issue new more restrictive mortgage lending "guidelines," bank credit growth is likely to slow still more. And goodness knows what will happen if a few of the private equity loan deals sour."
August gold climbed $4.80 to close at $664.70 an ounce Tuesday. July silver added 9 cents to close at $13.325 an ounce, but July copper continued lower losing 2.35 cents to close at $3.3945 a pound.
July crude closed at $69.10 a barrel Tuesday, up 1 cent for the session. July reformulated gas fell 1.3% to end at $2.2346 a gallon. July natural gas fell 2.2% to close at $7.519 per million British thermal units -- its lowest level since late March.
Starts of new homes in the United States fell by 2.1% to a seasonally adjusted annual pace of 1.47 million in May. However, building permits for new construction rose 3% to 1.50 million. Completions of housing units fell 0.5% to a seasonally adjusted annual rate of 1.534 million, the lowest total in six years. Construction of single-family homes weakened further in May, while building of multifamily buildings strengthened.
Chain store sales for the week ended June 16 rose 1.9% from the year-ago period, according to a survey released Tuesday by the International Council of Shopping Centers and UBS Securities. On a week-over-week basis, sales slipped 0.1%.
Expedia said it would buy back $3.5 billion of its shares in a tender offer, representing 42% of the number of shares of common stock currently outstanding and approximately 38% of the total number of shares of common stock and Class B common stock currently outstanding. Expedia will buy the stock at not less than $27.50 and no more than $30 a share.
For 2007, UCLA forecasters say payrolls will increase by 1.4 percent -- a notch above their earlier 1.3 percent prediction -- but decline to 0.9 percent in 2008 before bouncing up to 1.6 percent in 2009. One of the biggest hits will come in construction jobs, which accounted for 27 percent of all job creation in California from 2003 through 2005. Sector payrolls will drop by 1.9 percent this year and 5 percent next year (46,000 jobs), before returning to 1 percent growth in 2009.
The average US pump price for regular gasoline fell 6.7 cents to $3.00 a gallon in the week ended Monday, the government said.
Best Buy Co. on Tuesday said first-quarter earnings fell 18 percent, hurt by weak profits in China and increased sales of lower-margin products such as notebook computers. Profit for the quarter ended June 2 dropped to $192 million, or 39 cents per share, from $234 million, or 47 cents per share, in the same period a year ago. Looking ahead, the company said it expects consumer spending to be difficult to predict this year, with flat-panel televisions and portable computers staying strong. But it sees sales in lower-margin categories accelerating. Best Buy said it sees earnings per share for the year at $2.95 to $3.15, short of analysts average view of $3.16, according to Reuters Estimates.
Kansas Agricultural Statistics Service reported Monday that 37 percent of the wheat crop was in poor to very poor condition. About 29 percent was rated in fair condition, 25 percent was in good condition and only 9 percent rated as excellent.
Cadbury Schweppes PLC said Tuesday it plans to close 15 percent of its confectionary factories by 2011, cutting about 7,500 jobs, and will likely sell the U.S. unit that makes 7-Up, Dr Pepper and Snapple as it focuses on its candy and gum businesses.
Home Depot has agreed to sell its supply division for more than $10 billion, sources close to the deal said on Tuesday. Bain Capital, Carlyle Group and Clayton, Dubilier & Rice won the auction and were finalizing the deal early on Tuesday sources said. The company plans to buy back up to $22.5 billion in stock "as soon as practicable." The company said it will fund the buyback with the proceeds from the sale of HD Supply, existing cash on hand and the proceeds from an expected $12 billion issuance of senior unsecured notes.
Yahoo's Semel was replaced by co-founder Jerry Yang, effective immediately. Susan Decker, Yahoo's head of advertising and former chief financial officer, was also named president. In my view, the company should get its house in order before exploring alternatives at this time. "I'm ready to dig in and make sure we can take Yahoo to the next level,'' Yang, 38, said in an interview. "I'm absolutely not interim. We want someone for the long haul.''
Barron's writes that Yahoo! sees revenue for Q2 at the mid to low end of its projections.
BHP Billiton Ltd., the world's largest mining group, is considering a bid to rival a $28.7 billion offer for aluminum producer Alcan Inc. , and has hired investment bank Merrill Lynch & Co. , sources familiar with the matter said.
China announced Tuesday it will cut tax rebates on exports of clothes, shoes and other goods in an effort to slow the growth of its huge trade surplus amid rising threats of punitive action by U.S. lawmakers. The move also is meant to slow exports of cement and other goods deemed too energy-intensive or polluting, the Finance Ministry said on its Web site. Rebates of value-added taxes will be eliminated on July 1 on 553 categories of goods including salt, cement and fertilizers, the ministry said. It said rebates will be cut on 2,268 types of products including shoes, clothing and plastic goods.
Chevron Corp. has cut oil output from Nigeria by 42,000 barrels a day following an invasion of its Abiteye flow station, Reuters news agency said Monday. Eni SpA declared force majeure after one of its flow stations in Nigeria was attacked by militants on June 17. Meanwhile, Nigerian oil-worker unions rejected a government offer aimed at avoiding a strike, according to Dow Jones Newswires
Rio Tinto traded at a new 52-week high of $312 per share and its market value has now reached $114 billion. They certainly have the currency to make a move on either Alcoa or Alcan.
Molex expects fourth-quarter revenue to come in below the lower end of past guidance.
The $60-a-share purchase of student lender SLM Corp., commonly known as Sallie Mae, proceeded a step further Tuesday after the company said the deal has cleared an antitrust hurdle.
Microchip shares fell $2.50, or 6%, to $39.13 after the chip maker lowered its first-quarter earnings forecast to 36 cents a share.
Actuant Corp., a maker of industrial tools and supplies, lifted its 2007 earnings per share guidance on Tuesday, partly due to expected acquisition-fueled growth. The company lifted its 2007 earnings growth forecast to a range of 17 percent to 18 percent, up from previous guidance for earnings growth of 9 percent to 14 percent. The guidance calls for earnings of $3.38 to $3.43 per share.
The Chandler Trusts' sale of their last 20.3 million shares, representing a 17.2 percent stake in Chicago-based Tribune, took place June 7 and was disclosed in a regulatory filing Monday. The stock sale, underwritten by Goldman Sachs & Co., netted the Chandler Trusts $31.19 per share.
IRAQ now ranks as the second most unstable country in the world, marginally behind Sudan but ahead of war-ravaged or poverty-stricken countries such as Somalia, Zimbabwe, Ivory Coast, Congo, Afghanistan, Haiti and North Korea, according to the 2007 failed state index.
Presidential candidate Bill Richardson on Tuesday accused his Democratic rivals of creating too many escape clauses for President Bush to leave U.S. troops in Iraq indefinitely."We need to bring them all home," the New Mexico governor said. Richardson would leave a small Marine contingent behind in Iraq to protect the U.S. Embassy. But, he said, "if the embassy is not safe, then they're all coming home too."
Iran Tuesday refused to rule out using oil supplies as a weapon in the standoff over its nuclear program, saying Washington had never excluded attacking the Islamic republic. ‘When the Americans say that using the military option against Iran regarding its nuclear issue is not off the table then Iran can say that it will not put aside the instrument of oil,’ Iran’s representative to OPEC, Hossein Kazempour Ardebili, said in an interview with the Shargh newspaper.
Ghana's President John Kufuor says the discovery of the country's first major oil deposit could turn the West African country into an "African tiger". "Even without oil, we are doing so well... With oil as a shot in the arm, we're going to fly," he told the BBC. "My joy is that I'll go down in history as the president under whose watch oil was found to turn the economy of Ghana around for the better," he said. The discovery of 600m barrels of light oil offshore was announced on Monday.
General Electric's Energy Financial Services unit said Tuesday it would pay $603 million to buy interests in Regency Energy Partners.
The CBOT is raising the margin requirements on wheat, treasury bonds, 10-year treasuries, and treasury swaps.
Bloomberg: "The United Arab Emirates may be the next Middle Eastern country to stop pegging its exchange rate to the U.S. dollar."
Rob Portman is set to leave his post as White House budget director and will be replaced by former Iowa congressman Jim Nussle, news reports said Tuesday.
Bear Stearns Cos., the biggest broker for U.S. hedge funds, offered to provide $1.5 billion in loans to help rescue a money-losing fund run by its asset- management unit, a person familiar with the situation said.
The Oil Drum: "Demand for thermal coal in Russia, the world's fifth-largest coal miner, could more than triple by 2020 as the country invests billions of dollars to expand its power network, industry officials said on Monday. Thermal coal supply would rise by more than 50 percent and the proportion of exports in overall output from the world's third-biggest coal exporter would fall, said Vladimir Shchadov, deputy director of Rosenergo, an agency within the Energy Ministry."
Paul Kasriel: "As mortgage defaults continue to rise and regulators issue new more restrictive mortgage lending "guidelines," bank credit growth is likely to slow still more. And goodness knows what will happen if a few of the private equity loan deals sour."
August gold climbed $4.80 to close at $664.70 an ounce Tuesday. July silver added 9 cents to close at $13.325 an ounce, but July copper continued lower losing 2.35 cents to close at $3.3945 a pound.
July crude closed at $69.10 a barrel Tuesday, up 1 cent for the session. July reformulated gas fell 1.3% to end at $2.2346 a gallon. July natural gas fell 2.2% to close at $7.519 per million British thermal units -- its lowest level since late March.
Monday, June 18, 2007
Another Variety Of The Yen Carry Trade
6/19/07 Another Variety Of The Yen Carry Trade
Ticker Sense: "This week's Poll is a new Ticker Sense record! The Blogger Sentiment Poll has never been this bullish." There are more than 2 bulls for 1 bear.
According to the WSJ, General Electric and Pearson PLC, publisher of the Financial Times, may offer a joint bid for Dow Jones that would allow the controlling family to retain a minority interest.
According to the London Times, BHP Billiton may consider a $40 billion takeover of US aluminum producer Alcoa Inc. As an aside, Alcan has signed a new long-term agreement to supply Airbus with a variety of high-performance aluminum products, including plate, sheet, stringer, and small extrusions and tubes, for the full range of Airbus' aircraft programs, including the A380 and the new A350 XWB. Specific terms of the contract were not disclosed.
Iggys House, Inc. announced that in less than three months since its launch, sellers have posted more than $1.5 billion of homes for sale on IggysHouse.com and have used its free service to list more than one half a billion dollars of homes on the MLS. Over 70% of homes sold in the United States are sold through the MLS, so a free MLS listing is highly valued by home sellers, especially in a slowing real estate market.
Food and beverage costs rose 3.9% in May from a year earlier, outpacing the overall inflation rate by more than a full percentage point and is the biggest increase in three years, the Labor Department said Friday. Costs for a variety of goods, including meat, milk, soft drinks and fresh fruit all rose from April. Higher prices are being seen not only at grocery stores, but also at restaurants. The cost of dining out has risen 3.3% in the last year.
Airbus booked orders from US Airways, Qatar Airlines, Emirates and Jazeera Airways for a raft of planes, including its problem-plagued A350 and superjumbo A380 models.
US Airways Group Inc. ordered 60 A320 single-aisle aircraft and 32 widebody aircraft. It also increased its previously announced order of 20 A350s by two to 22 A350 XWBs in both the 800 and larger 900 series configuration.
The A320s will replace Boeing 737-300/400s, which will be eliminated from the fleet, the carrier said. It added that it expects to take delivery of the first A350-800 in 2014, becoming the North American launch customer for the fleet type.
Qatar ordered 80 A350 XWBs, three A380s and three A320 family aircraft. The A350 order was a confirmation of Qatar's' earlier commitments to buy the 80 jets. Qatar Airways Chief Executive Akbar Al Baker said the order for the A350s is worth $16 billion.
Two of the orders for the A380, Airbus's flagship double-decker plane, are conversions of earlier options into firm orders, he said, and the airline is taking one new order, bringing its total order for A380s to five. The three firm orders together are worth about $750 million, he said.
Emirates is by far the biggest single customer for the A380. It initially ordered 43 A380s and took another four in May. Emirates is believed to have obtained significantly improved financial terms for these aircraft and the latest batch of eight.
Jazeera Airways signed an order for 30 single-aisle A320 jets worth between $2.1 billion and $2.4 billion at list prices.
Emirates ordered an additional A380, boosting to 55 the number of A380s ordered by the Dubai-based airline.
Finish Line said it agreed to acquire larger rival Genesco for $54.50 per share, or about $1.5 billion, to enhance its footwear and apparel portfolio.
Imperial Chemical Industries Plc, the U.K. maker of Dulux and Glidden paints, rejected a 7.2 billion-pound ($14.2 billion) bid from Akzo Nobel NV of the Netherlands as too low.
Friendly Ice Cream is being acquired for $15.50.
Wendy's International Inc. said the special committee of its board, which is reviewing the company's strategic options, has decided to explore a potential sale of the company. The company's revised range for EBITDA is $295 million to $315 million, compared to previous guidance of $330 million to $340 million. The company said it now expects to earn $1.09 to 1.23 per share, compared to the company's previous guidance of $1.26 to $1.32 a share issued on March 20. Wendy's cited lower-than-planned same-store sales and higher-than-expected commodity costs for the new view.
John Hussman: "Suffice it to say that the only reason to buy stocks here is a) the belief that one can sell them to a greater fool at higher prices despite already overvalued, overbought, overbullish and rising yield conditions, or b) the belief that the stock market will soar 30-50% from these levels, without experiencing even a minimal bear market in the next 4-5 years."
Nouriel Roubini: "In my recent paper with Menegatti (The Direct Link Between Housing and Consumption: Wealth Effect and Home Equity Withdrawal) we estimated that such wealth effect could be quite significant: with home equity withdrawal (HEW) now down below $200 billion from its peak of $700 billion in 2005 even a 25% of HEW on consumption (half the estimated of Greenspan and Kennedy) gives a reduction in consumption of $125 billion or about 1.5% of disposable income. If this effect is even larger - as Bernanke now seems to suggest - because of a credit crunch the impact on consumption would be even larger. Note also that, while home equity is on the aggregate a large fraction of home values (55% based on Census data) average figure are distorted by a very skewed distribution of housing equity. Indeed for many households home equity is 100% of house values as they paid their mortgages or do not have one; while for many other households with little mortgages left home equity is a very large percent of home values. But, conversely, a third of households have very little equity in their homes.Thus, even a 10 to 15% fall in the value of their home could completely wipe out such equity (also considering that selling a home implies selling costs close to 10% of the value of the home). These households with little equity in their homes are highy vulnerable to end up in negative equity conditions even if home values fall only moderately. Thus the 55% aggregate equity figure is misleading: many households have very little equity in their homes."
On Friday, Moody's downgraded 131 bonds backed by pools of subprime loans. The reporters were careful to point out that the downgrade affects only $3 billion worth of bonds out of the roughly $400 billion in subprime mortgage-backed bonds issued in 2006.
China's key stock index rose to a record, having taken less than two weeks to rebound from a rout that erased more than $400 billion of market value.
Soybeans are close to $9 a bushel. Combine that with $6.15 a bushel wheat and $4.30 corn, and you have the makings for some heated food pricing.
European power prices may jump this summer because of limits on how much hot water utilities can return to rivers and seas when the weather is warm, Merrill Lynch & Co. said. Utilities in Germany, including E.ON AG and Vattenfall AB, have been forced to reduce capacity in at least one nuclear plant in Europe's biggest power market because of environmental restrictions on the water used to cool facilities. How many nuclear plant operators factored this is in their usage calculations?
Once again, there is a threatened strike by Nigerian labor unions. Nigeria's two main oil unions plan to participate, said Lumumba Okugbawa, deputy general secretary of the Petroleum & Natural Gas Senior Staff Association of Nigeria, or Pengassan. Nigeria produces low-sulfur, or sweet, crude oil, prized by U.S. refiners because of the high proportion of gasoline it yields.
The yen has slumped 4.6 percent to a 4 1/2-year low against the dollar this quarter. In my view, the yen is significantly undervalued against the dollar; however, the slide continues. In addition, fhe yen fell to a fresh record low against the euro and dipped to multi-year troughs against sterling and the New Zealand dollar as investors ramped up carry trades that involve borrowing yen to buy higher-yield, higher-risk assets such as equities.
Brazil's real rose to near the strongest since October 2000 on speculation benign inflation and faster growth will lure more foreign investment to local stock and bond markets.
The PHLX Oil Service Index hit another all time high on Monday, and stocks like Baker Hughes also hit another all-time high while BJ Services is 14 points below an all-time high or close to 50%. At some point, the disparity will be noticed by value investors. Just to put things in further perspective, from Monday June 11 to Monday June 18, Schlumberger's market cap rose by $9 billion and that exceeds the entire market cap of $8.5 billion for BJ Services.
S&P Equity Research: "We believe foreign investors have been withdrawing funds from intermediate-term Treasuries in search of better yields outside the U.S." Is this simply another variety of the yen carry trade?
"The industry has changed: you're not anathematized if you come out with a negative opinion,'' said Robert Stovall, whose work on Wall Street the past five decades included stints as a strategist at the securities unit of Newark, New Jersey-based Prudential Financial Inc. and research director at Nuveen Corp. in New York. "It used to be that sell recommendations were frowned upon. I even worked at firms where the CEO said, `I never want to see a bearish word on my stationery.'''
The outlook for U.S. home building is the worst in 16 years, the National Association of Home Builders reported Monday. The builders' housing market index fell by two points to 28 in June, the lowest since February 1991. The market probably won't turn around until next year, said David Seiders, chief economist for the builders. "We expect housing to exert a drag on economic growth during the balance of 2007." The index for single-family home sales dropped from 31 to 29, also the lowest since 1991. The index for expected sales fell by two points to 39, the lowest since September. The index for buyers' traffic dropped by one point to 21, the lowest since January 1991.
August gold rose $1.20 to close at $659.90 an ounce. July silver fell by 2.5 cents to close at $13.235 an ounce, while July copper retreated from a more than one-month high of $3.515 a pound to finish the session down 0.4 cent at $3.418.
Apple announced on Monday improvements to the battery life and the the top surface of the iPhone's display.
With a few minutes left in the trading day for energy, July crude hit $69.15, the highest level since Sept. 18, 2006. Yet, the U.S. Oil Fund ETF is $22 from the high or roughly 40%.
Crude closed up $1.09 at $69.09 and natural gas closed down 2.9% at $7.69 per million BTUs.
Ticker Sense: "This week's Poll is a new Ticker Sense record! The Blogger Sentiment Poll has never been this bullish." There are more than 2 bulls for 1 bear.
According to the WSJ, General Electric and Pearson PLC, publisher of the Financial Times, may offer a joint bid for Dow Jones that would allow the controlling family to retain a minority interest.
According to the London Times, BHP Billiton may consider a $40 billion takeover of US aluminum producer Alcoa Inc. As an aside, Alcan has signed a new long-term agreement to supply Airbus with a variety of high-performance aluminum products, including plate, sheet, stringer, and small extrusions and tubes, for the full range of Airbus' aircraft programs, including the A380 and the new A350 XWB. Specific terms of the contract were not disclosed.
Iggys House, Inc. announced that in less than three months since its launch, sellers have posted more than $1.5 billion of homes for sale on IggysHouse.com and have used its free service to list more than one half a billion dollars of homes on the MLS. Over 70% of homes sold in the United States are sold through the MLS, so a free MLS listing is highly valued by home sellers, especially in a slowing real estate market.
Food and beverage costs rose 3.9% in May from a year earlier, outpacing the overall inflation rate by more than a full percentage point and is the biggest increase in three years, the Labor Department said Friday. Costs for a variety of goods, including meat, milk, soft drinks and fresh fruit all rose from April. Higher prices are being seen not only at grocery stores, but also at restaurants. The cost of dining out has risen 3.3% in the last year.
Airbus booked orders from US Airways, Qatar Airlines, Emirates and Jazeera Airways for a raft of planes, including its problem-plagued A350 and superjumbo A380 models.
US Airways Group Inc. ordered 60 A320 single-aisle aircraft and 32 widebody aircraft. It also increased its previously announced order of 20 A350s by two to 22 A350 XWBs in both the 800 and larger 900 series configuration.
The A320s will replace Boeing 737-300/400s, which will be eliminated from the fleet, the carrier said. It added that it expects to take delivery of the first A350-800 in 2014, becoming the North American launch customer for the fleet type.
Qatar ordered 80 A350 XWBs, three A380s and three A320 family aircraft. The A350 order was a confirmation of Qatar's' earlier commitments to buy the 80 jets. Qatar Airways Chief Executive Akbar Al Baker said the order for the A350s is worth $16 billion.
Two of the orders for the A380, Airbus's flagship double-decker plane, are conversions of earlier options into firm orders, he said, and the airline is taking one new order, bringing its total order for A380s to five. The three firm orders together are worth about $750 million, he said.
Emirates is by far the biggest single customer for the A380. It initially ordered 43 A380s and took another four in May. Emirates is believed to have obtained significantly improved financial terms for these aircraft and the latest batch of eight.
Jazeera Airways signed an order for 30 single-aisle A320 jets worth between $2.1 billion and $2.4 billion at list prices.
Emirates ordered an additional A380, boosting to 55 the number of A380s ordered by the Dubai-based airline.
Finish Line said it agreed to acquire larger rival Genesco for $54.50 per share, or about $1.5 billion, to enhance its footwear and apparel portfolio.
Imperial Chemical Industries Plc, the U.K. maker of Dulux and Glidden paints, rejected a 7.2 billion-pound ($14.2 billion) bid from Akzo Nobel NV of the Netherlands as too low.
Friendly Ice Cream is being acquired for $15.50.
Wendy's International Inc. said the special committee of its board, which is reviewing the company's strategic options, has decided to explore a potential sale of the company. The company's revised range for EBITDA is $295 million to $315 million, compared to previous guidance of $330 million to $340 million. The company said it now expects to earn $1.09 to 1.23 per share, compared to the company's previous guidance of $1.26 to $1.32 a share issued on March 20. Wendy's cited lower-than-planned same-store sales and higher-than-expected commodity costs for the new view.
John Hussman: "Suffice it to say that the only reason to buy stocks here is a) the belief that one can sell them to a greater fool at higher prices despite already overvalued, overbought, overbullish and rising yield conditions, or b) the belief that the stock market will soar 30-50% from these levels, without experiencing even a minimal bear market in the next 4-5 years."
Nouriel Roubini: "In my recent paper with Menegatti (The Direct Link Between Housing and Consumption: Wealth Effect and Home Equity Withdrawal) we estimated that such wealth effect could be quite significant: with home equity withdrawal (HEW) now down below $200 billion from its peak of $700 billion in 2005 even a 25% of HEW on consumption (half the estimated of Greenspan and Kennedy) gives a reduction in consumption of $125 billion or about 1.5% of disposable income. If this effect is even larger - as Bernanke now seems to suggest - because of a credit crunch the impact on consumption would be even larger. Note also that, while home equity is on the aggregate a large fraction of home values (55% based on Census data) average figure are distorted by a very skewed distribution of housing equity. Indeed for many households home equity is 100% of house values as they paid their mortgages or do not have one; while for many other households with little mortgages left home equity is a very large percent of home values. But, conversely, a third of households have very little equity in their homes.Thus, even a 10 to 15% fall in the value of their home could completely wipe out such equity (also considering that selling a home implies selling costs close to 10% of the value of the home). These households with little equity in their homes are highy vulnerable to end up in negative equity conditions even if home values fall only moderately. Thus the 55% aggregate equity figure is misleading: many households have very little equity in their homes."
On Friday, Moody's downgraded 131 bonds backed by pools of subprime loans. The reporters were careful to point out that the downgrade affects only $3 billion worth of bonds out of the roughly $400 billion in subprime mortgage-backed bonds issued in 2006.
China's key stock index rose to a record, having taken less than two weeks to rebound from a rout that erased more than $400 billion of market value.
Soybeans are close to $9 a bushel. Combine that with $6.15 a bushel wheat and $4.30 corn, and you have the makings for some heated food pricing.
European power prices may jump this summer because of limits on how much hot water utilities can return to rivers and seas when the weather is warm, Merrill Lynch & Co. said. Utilities in Germany, including E.ON AG and Vattenfall AB, have been forced to reduce capacity in at least one nuclear plant in Europe's biggest power market because of environmental restrictions on the water used to cool facilities. How many nuclear plant operators factored this is in their usage calculations?
Once again, there is a threatened strike by Nigerian labor unions. Nigeria's two main oil unions plan to participate, said Lumumba Okugbawa, deputy general secretary of the Petroleum & Natural Gas Senior Staff Association of Nigeria, or Pengassan. Nigeria produces low-sulfur, or sweet, crude oil, prized by U.S. refiners because of the high proportion of gasoline it yields.
The yen has slumped 4.6 percent to a 4 1/2-year low against the dollar this quarter. In my view, the yen is significantly undervalued against the dollar; however, the slide continues. In addition, fhe yen fell to a fresh record low against the euro and dipped to multi-year troughs against sterling and the New Zealand dollar as investors ramped up carry trades that involve borrowing yen to buy higher-yield, higher-risk assets such as equities.
Brazil's real rose to near the strongest since October 2000 on speculation benign inflation and faster growth will lure more foreign investment to local stock and bond markets.
The PHLX Oil Service Index hit another all time high on Monday, and stocks like Baker Hughes also hit another all-time high while BJ Services is 14 points below an all-time high or close to 50%. At some point, the disparity will be noticed by value investors. Just to put things in further perspective, from Monday June 11 to Monday June 18, Schlumberger's market cap rose by $9 billion and that exceeds the entire market cap of $8.5 billion for BJ Services.
S&P Equity Research: "We believe foreign investors have been withdrawing funds from intermediate-term Treasuries in search of better yields outside the U.S." Is this simply another variety of the yen carry trade?
"The industry has changed: you're not anathematized if you come out with a negative opinion,'' said Robert Stovall, whose work on Wall Street the past five decades included stints as a strategist at the securities unit of Newark, New Jersey-based Prudential Financial Inc. and research director at Nuveen Corp. in New York. "It used to be that sell recommendations were frowned upon. I even worked at firms where the CEO said, `I never want to see a bearish word on my stationery.'''
The outlook for U.S. home building is the worst in 16 years, the National Association of Home Builders reported Monday. The builders' housing market index fell by two points to 28 in June, the lowest since February 1991. The market probably won't turn around until next year, said David Seiders, chief economist for the builders. "We expect housing to exert a drag on economic growth during the balance of 2007." The index for single-family home sales dropped from 31 to 29, also the lowest since 1991. The index for expected sales fell by two points to 39, the lowest since September. The index for buyers' traffic dropped by one point to 21, the lowest since January 1991.
August gold rose $1.20 to close at $659.90 an ounce. July silver fell by 2.5 cents to close at $13.235 an ounce, while July copper retreated from a more than one-month high of $3.515 a pound to finish the session down 0.4 cent at $3.418.
Apple announced on Monday improvements to the battery life and the the top surface of the iPhone's display.
With a few minutes left in the trading day for energy, July crude hit $69.15, the highest level since Sept. 18, 2006. Yet, the U.S. Oil Fund ETF is $22 from the high or roughly 40%.
Crude closed up $1.09 at $69.09 and natural gas closed down 2.9% at $7.69 per million BTUs.
Sunday, June 17, 2007
Careful As You Go
6/18/07 Careful As You Go
ECI Telecom Ltd., the Israeli producer of telecommunications-network solutions, said it was in talks under which it could be acquired for $10 a share with an investor group led by a firm controlled by Shaul Shani.
Washington Mutual Inc. is closing its fulfillment office in Dublin, Calif., in the San Francisco Bay Area. The move will affect 120 workers, who were notified of the layoffs on June 1, according to WaMu spokesman Tim McGarry. The layoffs do not affect WaMu's larger operations in Pleasanton, Calif. "We are reducing overall staff in response to overall demand," McGarry said. The work will be transferred to a similar facility in Anaheim, Calif.
Randall W. Forsyth: "Before the breakdown of the Bretton Woods exchange-rate system, it took 360 yen to buy a dollar. Now, it takes a bit more than 120 yen to buy a dollar. For Japanese consumers, the yen buys three times as much; conversely, Americans' purchasing power in yen is one-third as much as when President Nixon severed the dollar's value from gold in 1971. And what's happened with the U.S. trade deficit with Japan? It's only gotten bigger. Then, we bought $2,000 Toyotas; now we buy $20,000 Toyotas. No nation ever devalued itself to prosperity, and a strengthening currency increases the wealth of a nation. As Asian currencies rise, as Sens. Baucus, Grassley, Graham and Schumer want, those countries will get richer. Asia remembers how they suffered when their currencies plunged after the crisis of a decade ago. America, be careful what you wish for."
Robert Zoellick, the U.S. choice to head the World Bank, warned Saturday that Venezuela's economic and political troubles were growing under President Hugo Chavez's leftist government. "It's a country where economic problems are mounting and we are seeing (that) on the political and press side it's not moving in a healthy direction," Zoellick told a news conference in Mexico City. Zoellick could have been just easily been describing conditions in the U.S. with mounting government spending accompanied by rising government deficits. Stay long WD 40 as the Fed cranks up the printing presses to ever excessive levels.
Merrill Lynch seized $400 million in assets of a Bear Stearns hedge fund to which it had lent money and is preparing to auction them off, a move that could end the fund. As the Great One would say, it's a mere bag of shells.
Gillian Tett: "The important point to grasp about bond yields is that they have been so extraordinarily low in recent years that this week's swing has merely brought them back to more "normal" levels. But while this may be reassuring news, in one sense, there is another crucial aspect that may have more unsettling implications: volatility has blown back into the picture. This is significant because, in recent years, bond yields have not only been unusually low but also relatively stable. That has helped to promote low volatility across many other asset classes. Indeed, the climate has been so calm that some central bankers have dubbed this decade the era of the "Great Moderation."...Nevertheless, it would be naive to expect the dust to settle too easily from this squall. For it is a fair bet that behind the scenes thousands of investors around the world are now furtively reassessing their strategies- not merely in relation to structured finance, but numerous other asset classes as well. Some of these may even be nursing significant losses from Treasuries. That, in turn, could potentially create all manner of subtle changes in investment flows in the coming weeks. For one thing, investors may start to scale back their use of ultra-risky instruments. AsMr Batcharov says, the financial weather is indeed changing; better hang on to your investment umbrella."
One might revisit the yield spread in lower quality bonds and U.S. treasuries. It's not that I believe the latter are without risk. Just the contrary; however, the lesser quality should, in my view, yield had a larger yield differential than is presently the case. By contrast, Andrew Feltus, who runs the fund at Pioneer Investment Management in Boston, said policymakers will hold their target interest rate at 5.25 percent for the next 12 months, encouraging economic growth and keeping risk premiums on speculative-grade debt close to record lows.
From the N.Y. Times: "Sales on the Internet are expected to reach $116 billion this year, or 5 percent of all retail sales, making it harder to maintain the same high growth rates. At the same time, consumers seem to be experiencing Internet fatigue and are changing their buying habits."
Kazakhstan plans to extend its Chinese oil pipeline all the way to the Caspian Sea to give China direct access to fast-growing energy supplies, President Nursultan Nazarbayev said. The Atasu-Alashankou pipeline, built in 2005, can send China five million tonnes of Kazakh oil a year (100,000 barrels per day) and could be expanded to supply four times as much. "We have laid the pipeline to China and there remains 700km to build to link it to the Caspian Sea, and we plan to do that," Nazarbayev told foreign investors at a twice-yearly forum. Planned links to China might include more than pipelines. "We and the Chinese are seriously considering the possibility of building a direct railway from Western China to the Caspian Sea," he said. Reflect on this development and the chilly reception Cheney received in Kazakhstan.
Boris Sobolev :"The world's currency reserves of around $5 trillion are being slowly reallocated away from the dollar. We know that China, Russia, and a score of oil exporters have expressed their intentions to reduce U.S. dollar exposure, and some have already done so. Although bond prices have thus far moved substantially lower, they are still heftily priced. A persistent but orderly downtrend would be reasonable and far from cataclysmic."
Two Katyusha rockets fired from Lebanon landed near the northern Israeli town of Kiryat Shmona on Sunday, Israeli police said.
International Monetary Fund Governor Rodrigo Rato said that interest rates have reached levels that can undermine the business mergers and acquisitions that have been leveraged to an extended degree.
China is considering allocating 30 pct of its strategic oil reserves for the use of private companies, with government institutions taking up the rest, the Economic Observer reported.
"The US dollar is akin to the promissory note of a defunct finance company", says M.R. Venkatesh, a charted accountant from Chennai, India.
In mid May the US national debt stood at about US$8.85 trillion, or US$28,000 for every man, woman and child. The current account deficit -- that which is financed by foreign rather than domestic reserves -- stood at $850 billion or 7% of GDP at the end of 2006.
India's government Sunday issued a second security advisory asking Indians to leave the oil-rich Southern Niger Delta in Nigeria after a fresh kidnapping incident was reported, news reports said Sunday. The latest Ministry of External Affairs advisory was released after the Indian High Commission in Nigeria learned that two Indians were kidnapped Saturday in separate incidents, even as 10 other Indians who were kidnapped on June 1 were released late Friday, reported The Times of India.
Leonardo da Vinci: "Many have made a trade of delusions and false miracles, deceiving the stupid multitude."
ECI Telecom Ltd., the Israeli producer of telecommunications-network solutions, said it was in talks under which it could be acquired for $10 a share with an investor group led by a firm controlled by Shaul Shani.
Washington Mutual Inc. is closing its fulfillment office in Dublin, Calif., in the San Francisco Bay Area. The move will affect 120 workers, who were notified of the layoffs on June 1, according to WaMu spokesman Tim McGarry. The layoffs do not affect WaMu's larger operations in Pleasanton, Calif. "We are reducing overall staff in response to overall demand," McGarry said. The work will be transferred to a similar facility in Anaheim, Calif.
Randall W. Forsyth: "Before the breakdown of the Bretton Woods exchange-rate system, it took 360 yen to buy a dollar. Now, it takes a bit more than 120 yen to buy a dollar. For Japanese consumers, the yen buys three times as much; conversely, Americans' purchasing power in yen is one-third as much as when President Nixon severed the dollar's value from gold in 1971. And what's happened with the U.S. trade deficit with Japan? It's only gotten bigger. Then, we bought $2,000 Toyotas; now we buy $20,000 Toyotas. No nation ever devalued itself to prosperity, and a strengthening currency increases the wealth of a nation. As Asian currencies rise, as Sens. Baucus, Grassley, Graham and Schumer want, those countries will get richer. Asia remembers how they suffered when their currencies plunged after the crisis of a decade ago. America, be careful what you wish for."
Robert Zoellick, the U.S. choice to head the World Bank, warned Saturday that Venezuela's economic and political troubles were growing under President Hugo Chavez's leftist government. "It's a country where economic problems are mounting and we are seeing (that) on the political and press side it's not moving in a healthy direction," Zoellick told a news conference in Mexico City. Zoellick could have been just easily been describing conditions in the U.S. with mounting government spending accompanied by rising government deficits. Stay long WD 40 as the Fed cranks up the printing presses to ever excessive levels.
Merrill Lynch seized $400 million in assets of a Bear Stearns hedge fund to which it had lent money and is preparing to auction them off, a move that could end the fund. As the Great One would say, it's a mere bag of shells.
Gillian Tett: "The important point to grasp about bond yields is that they have been so extraordinarily low in recent years that this week's swing has merely brought them back to more "normal" levels. But while this may be reassuring news, in one sense, there is another crucial aspect that may have more unsettling implications: volatility has blown back into the picture. This is significant because, in recent years, bond yields have not only been unusually low but also relatively stable. That has helped to promote low volatility across many other asset classes. Indeed, the climate has been so calm that some central bankers have dubbed this decade the era of the "Great Moderation."...Nevertheless, it would be naive to expect the dust to settle too easily from this squall. For it is a fair bet that behind the scenes thousands of investors around the world are now furtively reassessing their strategies- not merely in relation to structured finance, but numerous other asset classes as well. Some of these may even be nursing significant losses from Treasuries. That, in turn, could potentially create all manner of subtle changes in investment flows in the coming weeks. For one thing, investors may start to scale back their use of ultra-risky instruments. AsMr Batcharov says, the financial weather is indeed changing; better hang on to your investment umbrella."
One might revisit the yield spread in lower quality bonds and U.S. treasuries. It's not that I believe the latter are without risk. Just the contrary; however, the lesser quality should, in my view, yield had a larger yield differential than is presently the case. By contrast, Andrew Feltus, who runs the fund at Pioneer Investment Management in Boston, said policymakers will hold their target interest rate at 5.25 percent for the next 12 months, encouraging economic growth and keeping risk premiums on speculative-grade debt close to record lows.
From the N.Y. Times: "Sales on the Internet are expected to reach $116 billion this year, or 5 percent of all retail sales, making it harder to maintain the same high growth rates. At the same time, consumers seem to be experiencing Internet fatigue and are changing their buying habits."
Kazakhstan plans to extend its Chinese oil pipeline all the way to the Caspian Sea to give China direct access to fast-growing energy supplies, President Nursultan Nazarbayev said. The Atasu-Alashankou pipeline, built in 2005, can send China five million tonnes of Kazakh oil a year (100,000 barrels per day) and could be expanded to supply four times as much. "We have laid the pipeline to China and there remains 700km to build to link it to the Caspian Sea, and we plan to do that," Nazarbayev told foreign investors at a twice-yearly forum. Planned links to China might include more than pipelines. "We and the Chinese are seriously considering the possibility of building a direct railway from Western China to the Caspian Sea," he said. Reflect on this development and the chilly reception Cheney received in Kazakhstan.
Boris Sobolev :"The world's currency reserves of around $5 trillion are being slowly reallocated away from the dollar. We know that China, Russia, and a score of oil exporters have expressed their intentions to reduce U.S. dollar exposure, and some have already done so. Although bond prices have thus far moved substantially lower, they are still heftily priced. A persistent but orderly downtrend would be reasonable and far from cataclysmic."
Two Katyusha rockets fired from Lebanon landed near the northern Israeli town of Kiryat Shmona on Sunday, Israeli police said.
International Monetary Fund Governor Rodrigo Rato said that interest rates have reached levels that can undermine the business mergers and acquisitions that have been leveraged to an extended degree.
China is considering allocating 30 pct of its strategic oil reserves for the use of private companies, with government institutions taking up the rest, the Economic Observer reported.
"The US dollar is akin to the promissory note of a defunct finance company", says M.R. Venkatesh, a charted accountant from Chennai, India.
In mid May the US national debt stood at about US$8.85 trillion, or US$28,000 for every man, woman and child. The current account deficit -- that which is financed by foreign rather than domestic reserves -- stood at $850 billion or 7% of GDP at the end of 2006.
India's government Sunday issued a second security advisory asking Indians to leave the oil-rich Southern Niger Delta in Nigeria after a fresh kidnapping incident was reported, news reports said Sunday. The latest Ministry of External Affairs advisory was released after the Indian High Commission in Nigeria learned that two Indians were kidnapped Saturday in separate incidents, even as 10 other Indians who were kidnapped on June 1 were released late Friday, reported The Times of India.
Leonardo da Vinci: "Many have made a trade of delusions and false miracles, deceiving the stupid multitude."
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