7/29/07 Thoughts
Tim Wood: "July 2007 marks the 57th month of the current 4-year cycle and there have only been two other 4-year cycles of this duration. The first such mammoth 4-year cycle was 68 months in duration and advanced 56 months from its low to its high. The last such 4-year cycle was 62 months in duration and advanced for 60 months from low to high. The currently stretched and overdue 4-year cycle has advanced thus far for 57 months from its low of 7,197.49 in October 2002 into the most recent high at 14,021.95 for a total advance of 94.82%... At the same time, the Primary Trend, according to Dow theory, continues to be positive. In the meantime and in addition to the statistics surrounding the 4-year cycle, we also have seen the internals contracting and housing, as I have recently reported on, continuing to get creamed. These are all indications that the 4-year cycle low has not occurred and that the low is likely still ahead. All the while, everyone thinks that the 4-year cycle low is behind and the public has been trained like Pavlov’s dog to buy the dip. Guys, don’t fall for the misconception that business cycles or cycles in the stock market adhere to some fixed periodicity. Unfortunately, the stock market world is just not that orderly. If it were, we could all set our clocks by the cycle and we could then all buy at the exact bottom and sell at the exact top."
Julian Phillips: "
If one, for example cut the use of the $ in global transactions in oil by half $1.177 trillion, where will these dollars go? They will be surplus to global requirements. As we all know this amount of unutilized $s is sufficient to swamp the foreign exchanges looking for a place to go. Their eventual path will be to absorb it back into Treasuries, a burden that will hit both the Treasury yields as well as the $ exchange rate, heavily. This is why the paths we have described that lie ahead will be so pernicious to the U.S.$. We have ignored the effect on all other $ users, which if brought in more than justify short, medium and long-term investments in gold.
We have just been informed that China is now quoting in the € on export contracts. Has the change begun to spread significantly? If this is common practice in China the $ will come under heavy long-term pressure. We will continue to keep you informed of such $-impacting events."
Food prices worldwide have risen 23% in the last 18 months, according to the International Monetary Fund, partly because of soaring demand for corn to make ethanol. Milk in the U.S. costs 10% more than at the start of the year. In China, meat and poultry prices have increased 20% from a year earlier; eggs are up 28%. Quite obviously, core inflation can lose their relevance during these times.
Anglo-Swedish pharmaceutical company AstraZeneca will cut its workforce by 10% in an attempt to cut costs. The company will eliminate 7,600 jobs, an increase from the 3,000 job cuts it announced in February. According to AstraZeneca, the reductions will save the company $900 million per year by 2010. Last year, AstraZeneca announced that it would spend $100 million over three years in China to build the AstraZeneca Innovation Center China. AstraZeneca China has 2900 employees involved in the manufacturing, sales, marketing and clinical research of new products. AstraZeneca China changed its slogan from “In China for China,” to “In China for Global.”
Russia’s foreign currency and gold reserves rose to a record $411.2 billion in the week ended July 13, the central bank said.
Doug Noland: "The unappreciated predicament of 1929 and today is Risk Intermediation. Dr. Bernanke refers to the study of The Great Depression as the “Holy Grail of economics.” He blames the “Bubble Poppers” and the Fed’s subsequent failure to create enough money. Conventional thinking has it that had the Fed only created $5 billion and filled the hole in bank capital the devastating downturn could have been avoided. But the issue at the time wasn’t, as conventional monetary economist believe today, the few billions necessary to recapitalize the banking system - but the ongoing tens of billions that would be required to sustain unsustainable Credit Bubble-induced inflated asset prices, inflated corporate profits, inflated earnings, and myriad worsening economic maladjustments...The bad news is that this Credit deluge is wildly inflating global asset prices and feeding an historic worldwide speculative Bubble in debt and equity instruments, real estate, and assets generally. We are witnessing in real time the dynamics of rapidly escalating late-cycle risk and the dilemma of how to intermediate it... It is wishful thinking that “banks” are today “more resilient” than in 1998. The financial system today has unprecedented exposure to risky mortgage Credit, highly leveraged and speculative financial markets, an M&A Bubble and global asset Bubbles. The entire global Credit system is one vulnerable Minskian “Ponzi Finance Unit.”...today – and going forward – there will be an unrelenting torrent of risk that must be intermediated (risky Credits transformed into palatable debt instruments), and it is not at all clear who is in a position to absorb significant risk. The leveraged speculators are more than likely keen to shed risk. The big “banks” and “brokers” are already fully-loaded. And the general marketplace, well, it’s reeling with the realization that much of structured finance today suffers from pricing and liquidity issues and, worse yet, not even debt ratings can be trusted. “Ponzi Finance” dynamics are in full play and the U.S. Bubble economy is incredibly exposed to a reversal in speculative finance and resulting liquidity crisis. These are very serious issues and indicative of the types of unavoidable risk intermediation problems that will stymie this historic Credit Bubble."
Peter Schiff: "Even with all of this irrefutable evidence that the credit rug is being pulled out from under the feet of American consumers, Wall Street's permabulls nevertheless remain undaunted in their blind optimism. Their one-way views are so myopic that they are blinded by their own arrogance. They are completely clueless regarding the fragility of America's bubble economy or the phony nature of a prosperity based on low cost, no questions asked consumer credit. Now that those doing the lending are rethinking the wisdom of doing so, the party is coming to an end. However, the permabulls have barely noticed that the music has stop playing and will likely be among the last to leave. Unfortunately for them, or anyone foolish enough to have confused their mindless cheerleading with legitimate investment advice, they will be broke by the time they finally do."
Paul Kasriel: "Households have been net sellers of corporate equities (to corporations and private equity entities), the proceeds of which have been helping to fund household deficits. With the mortgage credit market tightening, a significant slowing in de-equitization would be another nail in the coffin of household spending, which accounts for 75% of real GDP. Perhaps the feeble 0.6% quarter-to-quarter annualized growth in real household expenditures (sum of real personal consumption and residential investment expenditures) in Q2:2007 - the weakest since Q1:1995 - is the new reality."
You win some and you lose some. The Russell 2000 is now down for the year. Meanwhile, the Dow and the S&P remain up nicely.
The Virginian-Pilot: "How can America tell the attorney general is lying to Congress? His lips are moving. That comes from a bad joke, and an old one. But unlike Alberto Gonzales’ testimony this week, it has the ring of truth. The attorney general’s session before the Senate Judiciary Committee on Tuesday was a four-hour festival of obfuscation, misdirection and arrogance. Senators, both Republican and Democrat, said they didn’t believe a word of it. Afterwards, documents cited by the Associated Press showed that the nation’s top prosecutor may well have committed perjury, on television, in front of the senators and the nation."
Saturday, July 28, 2007
Friday, July 27, 2007
More Results
7/28/07 More Results
Meritage Homes Corp. reported it swung to a second-quarter net loss of $56.6 million, or $2.16 a share, from net earnings of $77.1 million, or $2.82 a share, during the year-ago period. Excluding certain charges, adjusted earnings were $13 million, compared with $82 million last year. The home builder said revenue for the three months ended June 30 fell to $568.7 million from $914.7 million. Meritage reported net orders for 1,734 homes, down 18% from 2,116 a year ago. The company said it closed 1,858 homes in the quarter, down 32% from 2,722 last year. Meritage said its results reflect deterioration in market conditions, with reduced market valuation of properties in California, Florida, Nevada and Arizona. In a statement, Meritage Chairman and Chief Executive Steven Hilton said, "We expect the remainder of 2007 will be difficult, but take confidence in our sound strategy, strong organization, proven record of success, and solid franchise that includes some of the historically best homebuilding markets in the country."
Brookfield Properties is revising its 2007 FFO estimate to a range of $1.50 to $1.60 a share, up from the company's previous forecast of $1.40 to $1.47 a share. Brookfield cited the impact of its growing residential development operations and "improved fundamentals" in its commercial office operations.
Medtronic Inc. agreed to buy Kyphon Inc. for $3.9 billion, or $71 a share. The price represents a 32% premium to Kyphon's closing price of $53.68 on Thursday and a 35% premium to the 30-day average trading price. Kyphon develops medical devices to restore and preserve spinal function.
Junior debt backing the leveraged buyout of U.K. pharmacy chain Alliance Boots is proceeding as planned, but the sale of 5 billion pounds ($10 billion) of senior debt backing that deal remains on hold, Reuters reported Friday, citing a source familiar with the situation.
Candy and beverage group Cadbury Schweppes decided to extend the sale timetable for its U.S. beverages business. The group said that interest in the business remains strong, but said it took the decision to extend the process following the volatility in the leveraged debt markets in recent days.
Japan's nationwide core consumer prices weakened in June, marking the fifth consecutive month of declines, the Ministry of Internal Affairs and Communications said Friday. The core consumer price index, which excludes fresh food prices, fell 0.1% in June from a year earlier, as declines in home accessories such as flat-panel televisions, and softness in other categories such as overseas travel packages, offset higher gasoline costs.
Microsoft's CEO Ballmer said "We are hell-bent and determined to allocate the talent, the resources, the money, the innovation, to absolutely become a powerhouse in the ad business. The company says more acquisitions are needed to get there. One came the same day, as Microsoft announced the purchase of ad-auction network AdECN. Terms weren't disclosed.
Bill Bonner: "Since the era of cheap oil is coming to a close…Americans will have to stop living in ugly, soul-destroying suburbs; they will have to stop their vulgar consumerism… They'll have to change, whether they like it or not."
The WSJ reported the U.S. government says a handful of Chinese companies have ramped up shipments of sensitive military technologies to Iran, part of a surge in China-Iran trade that is complicating efforts to apply pressure on Tehran to rein in its nuclear program.
Nouriel Roubini: "Even if Q2 growth were to turn out to be around 3% the average for Q1 and Q2 would be a mediocre and weak 1.8%, well below potential growth. But since we are already in Q3 the main issue is now what will growth be in the second half of 2007. I see many elements of economic weakness ahead...Financial Markets Are Signaling a Credit Crunch Ahead."
Brett Steenbarger: "Over the past five trading sessions, declining stocks have constituted over 60% of issues traded on the NYSE. Going back to 1990, we've only had 69 such occasions. The market bias going forward in the S&P 500 Index ($SPX) has been bullish 5 - 20 days out. Indeed, SPX has averaged a gain of 3.21% when we look 20 days out (51 up, 18 down). That's much stronger than the average 20-day gain of .72% (2682 up, 1659 down) for the remainder of the sample. Among the dates with weakness most similar to the current situation have been 9/2001; 5/2004; 8/1998; 5/2006; 7/2002; 10/2002, 3/2007, and 4/1994. All were up 10 days later and most were good longer-term buying opportunities."
Rigzone: "A plunging U.S. dollar gives OPEC's key Middle East members little incentive to pump more crude to ease high prices amid rising concerns about the impact of the weak greenback on their economies."
Led by stronger exports, government spending and inventory building, the U.S. economy accelerated to a 3.4% real annualized growth in the second quarter, the Commerce Department estimated Friday. Growth in the first quarter was revised slightly down to a 0.6% gain compared with previous estimates of a 0.7% increase. Final sales of domestic product increased 3.2% compared with a 1.3% gain in the first quarter. Meanwhile, core consumer prices - which exclude food and energy costs - increased at a 1.4% annual pace, the slowest pace since the second quarter of 2003. Investment in commercial construction rose at the fastest pace in 13 years, helping to offset a slump in home construction.
Rupert Murdoch would allow Dow Jones to continue editorial independence if his bid for the publisher of The Wall Street Journal succeeds, according to the chairman of Ireland's top newspaper publisher. "I think (Murdoch) should (buy Dow Jones)," Sir Anthony O'Reilly told CNBC's Michelle Caruso-Cabrera. "I understand the problems with the Bancroft family…I think he would give them the guarantees of freedom and would allow them to exercise that freedom." O'Reilly is the chairman of Independent News & Media, the publisher of the Irish Independent and other newspapers.
Robert McHugh: "We sit Thursday with eight Hindenburg Omen observations since mid-June....Let's talk about the 809 New Lows Thursday. I could only find 7 instances over the past 20 years when it was worse: July 24th, 2002 had 917; October 8th, 1998 had 930; August 27th through 31st, 1998 saw 991, 813, and 1,183; And October 19th and 20th, at the stock market crash of 1987 saw 1,058 and 1,174. Most of the time, prices continued to drop further over the next two weeks, before rallying back. Even when 9/11 hit, we saw less New Lows than occurred Thursday, July 26th, 2007...Thursday's McClellan Oscillator fell to an extreme oversold negative -332.41, with the Summation Index falling to positive + 623.45...I could only find four instances when the McClellan Oscillator had a worse negative reading: March 23rd, 2005 reached -336.84; May 10th, 2004 saw -363.53; and just after September 11th, 2001's terrorist attack, we saw readings of -362.74 and -385.92. In most of these instances, we saw prices drop a bit more after these readings before a recovery. This is remarkable when we consider that we hit new all-time highs in both the Dow Industrials and the S&P 500 just last week. Of course, this is a sign of an extremely unhealthy market...Major trend reversals are expected, by late summer; Down in equities, and up in precious metals. Also later in 2007, Bonds should rally hard. The confirmed Hindenburg Omen warns of a larger than normal risk of a significant decline in equities by October, which has likely started."
Chevron's net income in the quarter increased to $5.38 billion, or $2.52 a share, from $4.35 billion, or $1.97 a share, last year. Total revenue in the quarter rose to $56.09 billion from $53.54 billion last year.
BG Group Plc, a U.K.-based oil and gas producer, said natural gas and condensate output will fall this quarter after the closure of the North Sea CATS pipeline. The company's output of gas and condensate, a liquid produced in association with natural gas, has been cut by 80,000 barrels of oil equivalent a day by the shut-in of the Central Area Transmission System, BG Chief Financial Officer Ashley Almanza told reporters on a conference call today.
The Reuters/University of Michigan Surveys of Consumers said its final July reading on consumer sentiment was 90.4, a touch below the median forecast of 91.2 and the preliminary July reading of 92.4, a six-month high. But it bounced back from June's final reading of 85.3, a 10-month low, and posted the index's best showing since February, when it stood at 91.3. Consumers were expecting inflation to rise 3.4% in the next year and 3.1% over the next five years, slightly higher than in June.
Vacancy rates for U.S. housing units declined in the second quarter after sharp increases over the previous year, the Commerce Department said Friday. The vacancy rate for owner-occupied units fell to 2.6% from a record 2.8% in the first quarter. The vacancy rate for rental units fell to 9.5% from 10.1% in the first quarter. The number of vacant housing units fell by 175,000 to 17.4 million. The number of vacant homes for sale fell by 142,000 to 2 million. The home ownership rate fell to 68.4% from 68.6%.
Banks have largely stopped offering so-called equity bridges to private equity firms, ending a short-lived practice that facilitated some of the biggest corporate buyouts of all time.
September crude closed at $77.02 a barrel Friday, the contract's highest closing level since mid-August of last year. August natural gas rose 2.8% to end at $6.11 per million British thermal units, down 5.2% for the week. September natural gas, which is now the front-month contract, rose 2.2% to end at $6.208.
The benchmark 10-year Treasury note closed up 1/32 at 97-26/32 with a yield of 4.78%. Despite the sharp drop in yields this week, the U.S. dollar index rose from 80.01 to 80.01; however, the yen, at the same time, rose sharply against the dollar this week and put the yen carry trade in jeopardy.
August gold closed at a three-week low of $660.10 an ounce Friday. September silver fell 1.8% to close at $12.715 an ounce, down 5.1% for the week. September copper was the lone gainer for the session, up 2.45 cents to close at $3.547 a pound, but it still lost 4.3% for the week.
When it was all said and done, the sellers overwhelmed the buyers in the last hour of trading on Friday. In essence, the conviction to buy and hold over the weekend was not there. Interestingly, some of the home builders managed some small fractional gains.
Meritage Homes Corp. reported it swung to a second-quarter net loss of $56.6 million, or $2.16 a share, from net earnings of $77.1 million, or $2.82 a share, during the year-ago period. Excluding certain charges, adjusted earnings were $13 million, compared with $82 million last year. The home builder said revenue for the three months ended June 30 fell to $568.7 million from $914.7 million. Meritage reported net orders for 1,734 homes, down 18% from 2,116 a year ago. The company said it closed 1,858 homes in the quarter, down 32% from 2,722 last year. Meritage said its results reflect deterioration in market conditions, with reduced market valuation of properties in California, Florida, Nevada and Arizona. In a statement, Meritage Chairman and Chief Executive Steven Hilton said, "We expect the remainder of 2007 will be difficult, but take confidence in our sound strategy, strong organization, proven record of success, and solid franchise that includes some of the historically best homebuilding markets in the country."
Brookfield Properties is revising its 2007 FFO estimate to a range of $1.50 to $1.60 a share, up from the company's previous forecast of $1.40 to $1.47 a share. Brookfield cited the impact of its growing residential development operations and "improved fundamentals" in its commercial office operations.
Medtronic Inc. agreed to buy Kyphon Inc. for $3.9 billion, or $71 a share. The price represents a 32% premium to Kyphon's closing price of $53.68 on Thursday and a 35% premium to the 30-day average trading price. Kyphon develops medical devices to restore and preserve spinal function.
Junior debt backing the leveraged buyout of U.K. pharmacy chain Alliance Boots is proceeding as planned, but the sale of 5 billion pounds ($10 billion) of senior debt backing that deal remains on hold, Reuters reported Friday, citing a source familiar with the situation.
Candy and beverage group Cadbury Schweppes decided to extend the sale timetable for its U.S. beverages business. The group said that interest in the business remains strong, but said it took the decision to extend the process following the volatility in the leveraged debt markets in recent days.
Japan's nationwide core consumer prices weakened in June, marking the fifth consecutive month of declines, the Ministry of Internal Affairs and Communications said Friday. The core consumer price index, which excludes fresh food prices, fell 0.1% in June from a year earlier, as declines in home accessories such as flat-panel televisions, and softness in other categories such as overseas travel packages, offset higher gasoline costs.
Microsoft's CEO Ballmer said "We are hell-bent and determined to allocate the talent, the resources, the money, the innovation, to absolutely become a powerhouse in the ad business. The company says more acquisitions are needed to get there. One came the same day, as Microsoft announced the purchase of ad-auction network AdECN. Terms weren't disclosed.
Bill Bonner: "Since the era of cheap oil is coming to a close…Americans will have to stop living in ugly, soul-destroying suburbs; they will have to stop their vulgar consumerism… They'll have to change, whether they like it or not."
The WSJ reported the U.S. government says a handful of Chinese companies have ramped up shipments of sensitive military technologies to Iran, part of a surge in China-Iran trade that is complicating efforts to apply pressure on Tehran to rein in its nuclear program.
Nouriel Roubini: "Even if Q2 growth were to turn out to be around 3% the average for Q1 and Q2 would be a mediocre and weak 1.8%, well below potential growth. But since we are already in Q3 the main issue is now what will growth be in the second half of 2007. I see many elements of economic weakness ahead...Financial Markets Are Signaling a Credit Crunch Ahead."
Brett Steenbarger: "Over the past five trading sessions, declining stocks have constituted over 60% of issues traded on the NYSE. Going back to 1990, we've only had 69 such occasions. The market bias going forward in the S&P 500 Index ($SPX) has been bullish 5 - 20 days out. Indeed, SPX has averaged a gain of 3.21% when we look 20 days out (51 up, 18 down). That's much stronger than the average 20-day gain of .72% (2682 up, 1659 down) for the remainder of the sample. Among the dates with weakness most similar to the current situation have been 9/2001; 5/2004; 8/1998; 5/2006; 7/2002; 10/2002, 3/2007, and 4/1994. All were up 10 days later and most were good longer-term buying opportunities."
Rigzone: "A plunging U.S. dollar gives OPEC's key Middle East members little incentive to pump more crude to ease high prices amid rising concerns about the impact of the weak greenback on their economies."
Led by stronger exports, government spending and inventory building, the U.S. economy accelerated to a 3.4% real annualized growth in the second quarter, the Commerce Department estimated Friday. Growth in the first quarter was revised slightly down to a 0.6% gain compared with previous estimates of a 0.7% increase. Final sales of domestic product increased 3.2% compared with a 1.3% gain in the first quarter. Meanwhile, core consumer prices - which exclude food and energy costs - increased at a 1.4% annual pace, the slowest pace since the second quarter of 2003. Investment in commercial construction rose at the fastest pace in 13 years, helping to offset a slump in home construction.
Rupert Murdoch would allow Dow Jones to continue editorial independence if his bid for the publisher of The Wall Street Journal succeeds, according to the chairman of Ireland's top newspaper publisher. "I think (Murdoch) should (buy Dow Jones)," Sir Anthony O'Reilly told CNBC's Michelle Caruso-Cabrera. "I understand the problems with the Bancroft family…I think he would give them the guarantees of freedom and would allow them to exercise that freedom." O'Reilly is the chairman of Independent News & Media, the publisher of the Irish Independent and other newspapers.
Robert McHugh: "We sit Thursday with eight Hindenburg Omen observations since mid-June....Let's talk about the 809 New Lows Thursday. I could only find 7 instances over the past 20 years when it was worse: July 24th, 2002 had 917; October 8th, 1998 had 930; August 27th through 31st, 1998 saw 991, 813, and 1,183; And October 19th and 20th, at the stock market crash of 1987 saw 1,058 and 1,174. Most of the time, prices continued to drop further over the next two weeks, before rallying back. Even when 9/11 hit, we saw less New Lows than occurred Thursday, July 26th, 2007...Thursday's McClellan Oscillator fell to an extreme oversold negative -332.41, with the Summation Index falling to positive + 623.45...I could only find four instances when the McClellan Oscillator had a worse negative reading: March 23rd, 2005 reached -336.84; May 10th, 2004 saw -363.53; and just after September 11th, 2001's terrorist attack, we saw readings of -362.74 and -385.92. In most of these instances, we saw prices drop a bit more after these readings before a recovery. This is remarkable when we consider that we hit new all-time highs in both the Dow Industrials and the S&P 500 just last week. Of course, this is a sign of an extremely unhealthy market...Major trend reversals are expected, by late summer; Down in equities, and up in precious metals. Also later in 2007, Bonds should rally hard. The confirmed Hindenburg Omen warns of a larger than normal risk of a significant decline in equities by October, which has likely started."
Chevron's net income in the quarter increased to $5.38 billion, or $2.52 a share, from $4.35 billion, or $1.97 a share, last year. Total revenue in the quarter rose to $56.09 billion from $53.54 billion last year.
BG Group Plc, a U.K.-based oil and gas producer, said natural gas and condensate output will fall this quarter after the closure of the North Sea CATS pipeline. The company's output of gas and condensate, a liquid produced in association with natural gas, has been cut by 80,000 barrels of oil equivalent a day by the shut-in of the Central Area Transmission System, BG Chief Financial Officer Ashley Almanza told reporters on a conference call today.
The Reuters/University of Michigan Surveys of Consumers said its final July reading on consumer sentiment was 90.4, a touch below the median forecast of 91.2 and the preliminary July reading of 92.4, a six-month high. But it bounced back from June's final reading of 85.3, a 10-month low, and posted the index's best showing since February, when it stood at 91.3. Consumers were expecting inflation to rise 3.4% in the next year and 3.1% over the next five years, slightly higher than in June.
Vacancy rates for U.S. housing units declined in the second quarter after sharp increases over the previous year, the Commerce Department said Friday. The vacancy rate for owner-occupied units fell to 2.6% from a record 2.8% in the first quarter. The vacancy rate for rental units fell to 9.5% from 10.1% in the first quarter. The number of vacant housing units fell by 175,000 to 17.4 million. The number of vacant homes for sale fell by 142,000 to 2 million. The home ownership rate fell to 68.4% from 68.6%.
Banks have largely stopped offering so-called equity bridges to private equity firms, ending a short-lived practice that facilitated some of the biggest corporate buyouts of all time.
September crude closed at $77.02 a barrel Friday, the contract's highest closing level since mid-August of last year. August natural gas rose 2.8% to end at $6.11 per million British thermal units, down 5.2% for the week. September natural gas, which is now the front-month contract, rose 2.2% to end at $6.208.
The benchmark 10-year Treasury note closed up 1/32 at 97-26/32 with a yield of 4.78%. Despite the sharp drop in yields this week, the U.S. dollar index rose from 80.01 to 80.01; however, the yen, at the same time, rose sharply against the dollar this week and put the yen carry trade in jeopardy.
August gold closed at a three-week low of $660.10 an ounce Friday. September silver fell 1.8% to close at $12.715 an ounce, down 5.1% for the week. September copper was the lone gainer for the session, up 2.45 cents to close at $3.547 a pound, but it still lost 4.3% for the week.
When it was all said and done, the sellers overwhelmed the buyers in the last hour of trading on Friday. In essence, the conviction to buy and hold over the weekend was not there. Interestingly, some of the home builders managed some small fractional gains.
Thursday, July 26, 2007
Alcoa As An Opportunity?
7/27/07 Alcoa As An Opportunity?
For the third quarter, Black & Decker anticipates roughly flat sales, including favorable foreign currency translation. Due to ongoing margin pressure, it expects third-quarter profit in the range of $1.40 to $1.45 a share. For the full year, it now expects to earn $6.35 to $6.50 a share. Analysts polled by Thomson Financial expect it to earn $1.60 a share for the third quarter and $6.51 a share for the year, on average.
Beazer Homes USA Inc. reported a quarterly net loss of $123 million, or $3.20 a share, compared with earnings of $102.6 million, or $2.37 a share the previous year. The builder booked pre-tax charges of $188.5 million related to inventory impairments, abandonment of land options and goodwill impairments. The company said total revenue dropped to $761 million from $1.2 billion a year earlier.
Diamond Offshore Drilling Inc. said its second-quarter net income rose 43% to $251.9 million, or $1.81 a share, up from $175.7 million, or $1.27 a share, a year ago. Revenues, meanwhile, rose 27% to $648.9 million from $512.2 million a year ago.
Bristol-Myers Squibb Co. raised its 2007 profit forecast to $1.35 to $1.45 a share from a previous estimate of as much as $1.34.
MMM raised its 2007 earnings forecast to a range of $5.40 to $5.60 a share vs. a prior estimate of $5.20 to $5.45 a share. The new guidance includes an estimated full year 2007 gain, net of costs from special items, of about 60 cents to 70 cents a share, primarily due to the completed sale of the company's branded pharmaceuticals business in Europe. 3M also expects full-year, local-currency sales growth, adjusted for the divestiture of its branded pharmaceuticals business, to be within a range of 7% to 10%, from its prior expected range of 6% to 10%.
Rockwell Collins raised its sales forecast for the fiscal year to $4.35 billion from $4.3 billion and said earnings per share are expected to be about $3.40, compared to its previous guidance for earnings of $3.30 to $3.40 a share.
National City Corp. said its provision for credit losses was $143 million in the second quarter, compared with $107 million in the previous quarter and $60 million in the year-earlier quarter. "The higher provision for credit losses in the first half of 2007 was mainly concentrated among mortgage and home equity loans, reflecting weakness in the housing market," it said.
Raytheon raised its outlook for earnings from continuing operations in 2007 to $3.05-$3.20 from a previous estimate of $2.85-$3.00.
D.R. Horton Inc. said it swung to a loss of $823.8 million, or $2.62 a share, from net income of $292.8 million, or 93 cents a share in the year-ago quarter. The home builder said its fiscal third-quarter results for the period ended June 30 included pre-tax charges of $835.8 million for inventory impairments and $16.2 million related to write-offs on land options it's abandoning.
Bunge upped its 2007 profit view to a range by $40 million to $630 million to $650 million, or $4.86 to $5.02 a share, which includes a $30 million gain on sale of assets.
Aetna on an operating basis now expects to generate earnings of 90 cents to 92 cents a share for the third quarter and $3.40 to $3.42 a share for the year.
Sony left its May forecast of net profit and sales unchanged despite the positive impact on its profitability from the weaker yen, as it's "more cautious about the business environment for the remainder of the fiscal year for the electronics and game segments compared to our May forecast".
New Zealand's central bank lifted interest rates 0.25 percentage points to a record 8.25% Thursday. The increase marks the fourth time this year the central bank has raised its benchmark lending rates. Reserve Bank of New Zealand Governor Alan Bollard said the economy was running near capacity and a rate hike was necessary to curb rising inflationary pressures.
Grant Prideco said it has raised its 2007 outlook, and now sees per-share earnings of $4.20 to $4.25 a share, despite softer-than-expected Canadian drilling activity.
Pulte Homes Inc. said it swung to a second-quarter net loss of $507.6 million, or $2.01 a share, from net earnings of $243 million, or 94 cents a share, during the year-ago period. The home builder said revenue in the three months ended June 30 fell 40% to $2.02 billion from $3.36 billion. Net new home orders for the second quarter fell 20% from last year to 7,532 units, while the company's backlog as of June 30 was valued at $5.2 billion, compared with a backlog of $6.9 billion at the end of last year's second quarter. Pulte expects third-quarter income from continuing operations of 10 cents to 20 cents a share, excluding any additional impairments or land-related charges. "Due to the lack of longer-term earnings visibility and the difficult market conditions that persist, we are not at this time providing guidance for any period beyond the third quarter of this year," said Richard Dugas, Jr., president and chief executive, in a statement.
Murphy Oil Co. said second-quarter earnings of $250.2 million, or $1.32 a share, compared with $216.2 million, or $1.14 a share, a year ago. Revenue rose 21% to $4.61 billion from $3.8 billion. The company said lower oil and gas sales volume was offset by higher prices while its refining operations swung from a year-ago loss to yield $124 million in income.
Baidu.com Inc. reported second-quarter net earnings of 141.9 million yuan ($18.6 million), or 4.09 yuan per share (54 cents), up from 58.5 million yuan, or 1.69 yuan a share, in the year-ago period. Excluding items, the company earned 57 cents a share. The Beijing-based Internet search provider said revenue for the three months ended June 30 rose to 401.3 million yuan ($52.7 million) from 191.6 million yuan last year. Baidu expects third-quarter revenue of 492 million to 506 million yuan ($64.6 million to $66.5 million).
Apple Inc. reported a fiscal third-quarter profit of $818 million, or 92 cents a share, compared to $472 million, or 54 cents a share during the same period a year ago. Revenue rose almost 24% to $5.41 billion from last-year's $4.37 billion. The results topped the estimates of analysts. Apple said that it sold 1.76 million Macintosh computers and 9.8 million iPods during the quarter. In a statement, Chief Executive Steve Jobs said the company expects to have sold 1 million iPhones by the end of its fiscal fourth quarter. The company booked just $5 million in iPhone sales for the quarter, most of it for accessories.
Pharmacy benefit manager Express Scripts Inc. said that net income was $152.7 million, or 57 cents a share, compared with $1.07.8 million, or 38 cents a share, for the same period a year ago. Sales for the St. Louis-based company were $4.6 billion vs. last year's $4.42 billion.
Ryland Group Inc. said it swung to a second-quarter net loss of $52.4 million, or $1.25 a share, from net earnings of $94.8 million, or $2.03 a share, in the year-ago period. Excluding inventory valuation adjustments and write-offs, earnings for the quarter ended June 30 would have been 80 cents a share, the company said. Revenue in the quarter fell 38.2% to $739.7 million from $1.2 billion in the comparable period last year. Closings for the quarter totaled 2,461 units, down 35.3%, while new order units declined 16.6% from last year to 2,521 units. In a market where the Dow closed down over 300 points, Ryland was up a fraction.
Boeing reported that the first flight for the new 787 is now pushed back a month until the end of September and the company's CEO conceded it could slip into October, and that would leave 8 months or less to complete the tests before the first scheduled delivery.
"The acceptance of the rights of the Iranian nation, by the West, is the only solution for the nuclear issue," Ahmadinejad said during a live talk show on state television.
A presidential panel on military and veterans health care concluded that the system was insufficient for the demands of two modern wars.
TheOilDrum: "In 2006, 92% of the primary energy consumed in the UK was derived from fossil solar fuels - oil, natural gas and coal. Not so long ago the UK was self sufficient in these energy resources but now we are importing increasing amounts of all three. Dependency upon imported energy undermines UK national security and will have potentially dire consequences for the balance of trade."
Despite the positive latest quarterly earnings, Ford said it still doesn't expect to post an annual profit until 2009, although it is burning cash at a slower rate than the $17 billion through 2009 that the company had predicted.
Even without the positive special items, the company still made money in the quarter, posting a profit of $258 million, or 13 cents per share. That compares with a loss of $118 million, or 6 cents per share, in the year-ago quarter.
Brett Steenbarger: "I notice that we made over 1500 fresh 65-day lows across the NYSE, NASDAQ, and ASE on Tuesday. Since 2004 (N = 858 trading days), that's been a pretty rare occurrence. Interestingly, following the 10 occasions in which we've exceeded 1500 new 65-day lows, the S&P 500 Index (SPY) has been up five days later all 10 times, by an average of 1.00%. By contrast, the average five-day gain for the remainder of the sample has been .17% (473 up, 346 down)...In short, declines such as the recent pullback have been excellent opportunities to step up to the plate and buy stocks. It's been when no one has wanted a broad range of issues--pushing many of them to multi-month lows--that investors have found relative value."
Russia must strengthen its military and step up spying on the west in response to US plans to site parts of a missile defense shield in eastern Europe, President Vladimir Putin warned on Wednesday.
The Financial Times: "As the US comes to recognize it needs Iran to stabilize Iraq, moreover, it may conclude that the Middle East as a whole would be a lot safer if it could get Tehran invested in its stability."
Crude stockpiles in Cushing, Oklahoma, where New York's West Texas Intermediate benchmark, or WTI, crude is priced, fell by 1.4 million barrels last week, the lowest since February, according to Department of Energy data. U.S. refineries increased runs to 91.7 percent of capacity for the same week, the highest this year.
Leahy (D-Vt.) told reporters he is giving Gonzales until late next week to revise his testimony about the surveillance program or he will ask Justice Department Inspector General Glenn A. Fine to conduct a perjury inquiry: "I'll ask the inspector general to determine who's telling the truth."
Capital spending by U.S. businesses weakened for a second straight month in June, while strong demand for airplanes pushed total orders for U.S.-made durable goods up by 1.4%, the Commerce Department reported Thursday. Except for the red-hot aerospace sector, demand was tepid in June. Excluding transportation goods, orders fell 0.5%.
The four-week average of initial claims fell 4,000 to 308,500. Meanwhile, the number of Americans receiving state jobless benefits fell 19,000 to 2.55 million in the week ending July 14. This is the lowest level since the week ended June 16. The four-week moving average of continuing claims rose 15,000 to 2.56 million, the highest since the week ended March 10. This indicates fewer Americans were laid off but the ones who've been let go are finding it harder to get work again.
ExxonMobil distributed $9 billion to shareholders during the quarter through $2 billion in dividends and $7 billion in share repurchases. Earnings of $1.83 were below Wall St. forecasts of $1.96. Revenue fell to $98.3 billion from $99.03 billion.
Royal Dutch Shell PLC said that 195,000 barrels of oil equivalent a day remained shut-in in Nigeria due to the security situation mainly in the WesternNiger Delta.
In the first six months of 2007 China turned out 93.31 million tons of crude oil, up 1.7 percent year on year, and 95.972 million tons of finished oil, up 7.2 percent.
Compared with the same period of last year, although the growth rate of crude oil production dropped 0.4 percentage points, the absolute volume hit another historical high. Finished oil grew at a pace 1.6 percentage points faster over last year, also creating a record. During this period China had a net import of 79.72 million tons of crude oil, up 13.4 percent, and 10.14 million tons of finished oil, down 15.7 percent, according to latest customs statistics.
A crowd of 100 stunned stargazers brought a town center to a standstill when five mysterious UFOs were spotted hovering in the sky. The unidentified flying objects lit up the otherwise clear night sky above Shakespeare's birthplace in Warwickshire on Saturday.
China's stock markets surged to a new high Thursday, boosted by expectations of stronger corporate profits despite government efforts to cool the sizzling economy. The benchmark Shanghai Composite Index rose 22.49 points, or 0.52 percent, to close at 4,346.46, breaking its previous record set May 29. The Shenzhen Composite Index for the country's second, smaller market rose 1.5 percent to 1,231.65. The Shanghai index has risen more than 62 percent so far this year and 14 percent since the start of July after more than doubling in 2006.
Bloomberg reported credit-default swaps on $10 million of Goldman Sachs Group Inc. bonds jumped as much as $18,000 to a record $85,000, according to broker Phoenix Partners Group in New York. Bear Stearns Cos. credit swaps surged as much as $29,000 to $110,000, also a new high. Lehman Brothers Holdings Inc. climbed as much as $24,000 to $104,000. Meanwhile, China received its highest-ever debt rating from Moody's Investors Service, buoyed by $1.3 trillion of foreign reserves that shield the economy from overseas slumps.
Henry To: "Liquidity within the world's financial markets is continuing to decline...The Yen carry trade is going to get more overstretched by the day, while the Swiss carry trade has most probably ended already. In other words, the Yen carry trade is now definitely one of the primary pillars or liquidity in the world today - so that any reversal in the Yen to the upside will most probably cause dramatic problems not only for the world's financial markets, but in funding private takeovers and infrastructure deals as well...Given that the flood of earnings reports is in the midst of peaking, this means starting in early to mid August, there is a strong likelihood that insider selling will flood the market, especially if the stock market continues to hold at current levels or rally into August. Should the stock market rally further this week, there is a high probability that we will then initiate a short position in our DJIA Timing System." Let me repeat something I have said previously. On a market trend basis, I have found Henry's thoughts to be of superior value. In addition, he puts his money where his mouth is.
WCI Communities on Thursday said the home builder has not received a definitive proposal for the purchase of the company after the firm previously announced it was exploring strategic alternatives, including a potential sale of the company. "While initially several companies expressed an interest in acquiring WCI, deteriorating conditions and uncertainty in the home-building and debt markets have made the sale process more challenging," WCI said in a statement. "The board intends to continue the sale process and also will explore other potential strategic and financial alternatives, including asset sales, strategic partnerships, minority investments, and recapitalization transactions to enhance shareholder value." The company had been resisting efforts by billionaire investor Carl Icahn to run his own slate of directors. Icahn had made a $22-a-share tender offer for the company that expired without the purchase of any WCI shares.
The U.S. dollar weakened further against the yen Thursday, with worries about financing restrictions denting carry trade of the Japanese currency.
Sales of new homes declined 6.6% in June to a seasonally adjusted annual rate of 834,000, the Commerce Department estimated Thursday. Sales are now down 22.3% compared with June 2006. The sales pace in June was the lowest since March's 830,000, which was the lowest since 1999. Economists were expecting sales to fall to an 890,000 annualized pace in June. Sales dropped in three of four regions. Sales in the West fell 22.5% to the lowest level in 12 years. Inventories of unsold homes were unchanged at 537,000. The median sales price was $237,900, down 2.2% compared with June 2006.
China has become a major aluminum producer and is increasing production at a rapid rate. According to the International Aluminum Institute, 4.8 metric tons of aluminum were produced in China during the first five months of the year compared with 3.5 million metric tons in the same period in 2006. Worldwide production during that time was just over 10 million metric tons.
Unlike many other sectors, China has only one advantage when it comes to making aluminum: its low capital requirements. A new smelter can be built in China for about the third the cost of a facility in North America.
Once the smelter is up and running, however, everything changes. China relies mainly on high-cost, coal-burning power stations for its smelters' electricity.
Now that Alcoa has dropped to $38, the risk reward has become more favorable. With this year's earnings estimated at about $3.20 per share, and the possibility of a takeover still alive, one might consider putting your foot in the water at this stage. China's appetite for aluminum is not going away. One might note that
according to the 2000 European Aluminium Association Auto Report, every 1,000 kilogram weight reduction saves approximately 4,800 litres of fuel, lowers exhaust emissions by 11.2 tonnes and reduces maintenance costs.
Alcoa is currently looking to promote aluminum solutions for the domestic transport industry through its new operations in China, which include an automotive brazing sheet plant in the city of Kunshan, Jiangsu Province, a research center in Beijing and a coil-coating line owned by Alcoa's wholly owned subsidiary, Alcoa (Shanghai) Aluminium Products Co. Ltd.
In the days before the bid deadline, Alcan had multiple meetings with management and advisers from both Rio Tinto and a party referred to in the filings as "company C," which sources have identified as Brazilian iron ore heavyweight Companhia Vale do Rio Doce. The negotiations between Alcan and the dueling bidders covered all terms and conditions of an offer for Alcan other than the final per share price for Alcan shares, the documents said.
On July 11, a committee of Alcan's board of directors met to review the final offers submitted by CVRD and Rio Tinto. Sources have said that CVRD's bid was well above $90 a share. It was not, however, enough to beat Rio Tinto's $101-a-share bid, valuing Alcan at more than $38-billion, the largest foreign takeover offer in Canadian history.
In addition to Rio Tinto, Norsk and CVRD, Alcan discussed possible deals with three other parties, according to the documents. Sources have said Australia's BHP Billiton Ltd. showed interest, but never submitted a takeover proposal. Now that Alcan has been purchased, don't you think there is a reasonable chance that a bidder for Alcoa will surface? A price of $46 would not surprise me.
Natural-gas inventories rose by 71 billion cubic feet for the week ended July 20, the Energy Department said Thursday. Total stocks now stand at 2.763 trillion cubic feet, up 6 billion cubic feet from the year-ago level and 384 billion cubic feet above the five-year average, the government data said.
Excluding items, Amgen earned $1.12 per share, beating analysts' average forecast of $1.07 per share, according to Reuters Estimates. Without a $1.1 billion acquisition charge, Amgen earned $1.05 a share in the year-ago quarter. Amgen said it now expects 2007 adjusted earnings, excluding items, of $4.28 per share, above analysts' average estimate of $4.19 per share for the year.
September crude closed at $74.95 a barrel Thursday, down 93 cents for the session.
August gold closed down $11 for the session. September silver fell 20 cents to close at $12.95 an ounce and September copper lost 3.3 cents to finish at $3.5225 a pound.
Wells Fargo & Co.'s Wells Fargo Home Mortgage said Thursday it will close its nonprime wholesale lending business, which processes and funds subprime loans for third-party mortgage brokers
For the third quarter, Black & Decker anticipates roughly flat sales, including favorable foreign currency translation. Due to ongoing margin pressure, it expects third-quarter profit in the range of $1.40 to $1.45 a share. For the full year, it now expects to earn $6.35 to $6.50 a share. Analysts polled by Thomson Financial expect it to earn $1.60 a share for the third quarter and $6.51 a share for the year, on average.
Beazer Homes USA Inc. reported a quarterly net loss of $123 million, or $3.20 a share, compared with earnings of $102.6 million, or $2.37 a share the previous year. The builder booked pre-tax charges of $188.5 million related to inventory impairments, abandonment of land options and goodwill impairments. The company said total revenue dropped to $761 million from $1.2 billion a year earlier.
Diamond Offshore Drilling Inc. said its second-quarter net income rose 43% to $251.9 million, or $1.81 a share, up from $175.7 million, or $1.27 a share, a year ago. Revenues, meanwhile, rose 27% to $648.9 million from $512.2 million a year ago.
Bristol-Myers Squibb Co. raised its 2007 profit forecast to $1.35 to $1.45 a share from a previous estimate of as much as $1.34.
MMM raised its 2007 earnings forecast to a range of $5.40 to $5.60 a share vs. a prior estimate of $5.20 to $5.45 a share. The new guidance includes an estimated full year 2007 gain, net of costs from special items, of about 60 cents to 70 cents a share, primarily due to the completed sale of the company's branded pharmaceuticals business in Europe. 3M also expects full-year, local-currency sales growth, adjusted for the divestiture of its branded pharmaceuticals business, to be within a range of 7% to 10%, from its prior expected range of 6% to 10%.
Rockwell Collins raised its sales forecast for the fiscal year to $4.35 billion from $4.3 billion and said earnings per share are expected to be about $3.40, compared to its previous guidance for earnings of $3.30 to $3.40 a share.
National City Corp. said its provision for credit losses was $143 million in the second quarter, compared with $107 million in the previous quarter and $60 million in the year-earlier quarter. "The higher provision for credit losses in the first half of 2007 was mainly concentrated among mortgage and home equity loans, reflecting weakness in the housing market," it said.
Raytheon raised its outlook for earnings from continuing operations in 2007 to $3.05-$3.20 from a previous estimate of $2.85-$3.00.
D.R. Horton Inc. said it swung to a loss of $823.8 million, or $2.62 a share, from net income of $292.8 million, or 93 cents a share in the year-ago quarter. The home builder said its fiscal third-quarter results for the period ended June 30 included pre-tax charges of $835.8 million for inventory impairments and $16.2 million related to write-offs on land options it's abandoning.
Bunge upped its 2007 profit view to a range by $40 million to $630 million to $650 million, or $4.86 to $5.02 a share, which includes a $30 million gain on sale of assets.
Aetna on an operating basis now expects to generate earnings of 90 cents to 92 cents a share for the third quarter and $3.40 to $3.42 a share for the year.
Sony left its May forecast of net profit and sales unchanged despite the positive impact on its profitability from the weaker yen, as it's "more cautious about the business environment for the remainder of the fiscal year for the electronics and game segments compared to our May forecast".
New Zealand's central bank lifted interest rates 0.25 percentage points to a record 8.25% Thursday. The increase marks the fourth time this year the central bank has raised its benchmark lending rates. Reserve Bank of New Zealand Governor Alan Bollard said the economy was running near capacity and a rate hike was necessary to curb rising inflationary pressures.
Grant Prideco said it has raised its 2007 outlook, and now sees per-share earnings of $4.20 to $4.25 a share, despite softer-than-expected Canadian drilling activity.
Pulte Homes Inc. said it swung to a second-quarter net loss of $507.6 million, or $2.01 a share, from net earnings of $243 million, or 94 cents a share, during the year-ago period. The home builder said revenue in the three months ended June 30 fell 40% to $2.02 billion from $3.36 billion. Net new home orders for the second quarter fell 20% from last year to 7,532 units, while the company's backlog as of June 30 was valued at $5.2 billion, compared with a backlog of $6.9 billion at the end of last year's second quarter. Pulte expects third-quarter income from continuing operations of 10 cents to 20 cents a share, excluding any additional impairments or land-related charges. "Due to the lack of longer-term earnings visibility and the difficult market conditions that persist, we are not at this time providing guidance for any period beyond the third quarter of this year," said Richard Dugas, Jr., president and chief executive, in a statement.
Murphy Oil Co. said second-quarter earnings of $250.2 million, or $1.32 a share, compared with $216.2 million, or $1.14 a share, a year ago. Revenue rose 21% to $4.61 billion from $3.8 billion. The company said lower oil and gas sales volume was offset by higher prices while its refining operations swung from a year-ago loss to yield $124 million in income.
Baidu.com Inc. reported second-quarter net earnings of 141.9 million yuan ($18.6 million), or 4.09 yuan per share (54 cents), up from 58.5 million yuan, or 1.69 yuan a share, in the year-ago period. Excluding items, the company earned 57 cents a share. The Beijing-based Internet search provider said revenue for the three months ended June 30 rose to 401.3 million yuan ($52.7 million) from 191.6 million yuan last year. Baidu expects third-quarter revenue of 492 million to 506 million yuan ($64.6 million to $66.5 million).
Apple Inc. reported a fiscal third-quarter profit of $818 million, or 92 cents a share, compared to $472 million, or 54 cents a share during the same period a year ago. Revenue rose almost 24% to $5.41 billion from last-year's $4.37 billion. The results topped the estimates of analysts. Apple said that it sold 1.76 million Macintosh computers and 9.8 million iPods during the quarter. In a statement, Chief Executive Steve Jobs said the company expects to have sold 1 million iPhones by the end of its fiscal fourth quarter. The company booked just $5 million in iPhone sales for the quarter, most of it for accessories.
Pharmacy benefit manager Express Scripts Inc. said that net income was $152.7 million, or 57 cents a share, compared with $1.07.8 million, or 38 cents a share, for the same period a year ago. Sales for the St. Louis-based company were $4.6 billion vs. last year's $4.42 billion.
Ryland Group Inc. said it swung to a second-quarter net loss of $52.4 million, or $1.25 a share, from net earnings of $94.8 million, or $2.03 a share, in the year-ago period. Excluding inventory valuation adjustments and write-offs, earnings for the quarter ended June 30 would have been 80 cents a share, the company said. Revenue in the quarter fell 38.2% to $739.7 million from $1.2 billion in the comparable period last year. Closings for the quarter totaled 2,461 units, down 35.3%, while new order units declined 16.6% from last year to 2,521 units. In a market where the Dow closed down over 300 points, Ryland was up a fraction.
Boeing reported that the first flight for the new 787 is now pushed back a month until the end of September and the company's CEO conceded it could slip into October, and that would leave 8 months or less to complete the tests before the first scheduled delivery.
"The acceptance of the rights of the Iranian nation, by the West, is the only solution for the nuclear issue," Ahmadinejad said during a live talk show on state television.
A presidential panel on military and veterans health care concluded that the system was insufficient for the demands of two modern wars.
TheOilDrum: "In 2006, 92% of the primary energy consumed in the UK was derived from fossil solar fuels - oil, natural gas and coal. Not so long ago the UK was self sufficient in these energy resources but now we are importing increasing amounts of all three. Dependency upon imported energy undermines UK national security and will have potentially dire consequences for the balance of trade."
Despite the positive latest quarterly earnings, Ford said it still doesn't expect to post an annual profit until 2009, although it is burning cash at a slower rate than the $17 billion through 2009 that the company had predicted.
Even without the positive special items, the company still made money in the quarter, posting a profit of $258 million, or 13 cents per share. That compares with a loss of $118 million, or 6 cents per share, in the year-ago quarter.
Brett Steenbarger: "I notice that we made over 1500 fresh 65-day lows across the NYSE, NASDAQ, and ASE on Tuesday. Since 2004 (N = 858 trading days), that's been a pretty rare occurrence. Interestingly, following the 10 occasions in which we've exceeded 1500 new 65-day lows, the S&P 500 Index (SPY) has been up five days later all 10 times, by an average of 1.00%. By contrast, the average five-day gain for the remainder of the sample has been .17% (473 up, 346 down)...In short, declines such as the recent pullback have been excellent opportunities to step up to the plate and buy stocks. It's been when no one has wanted a broad range of issues--pushing many of them to multi-month lows--that investors have found relative value."
Russia must strengthen its military and step up spying on the west in response to US plans to site parts of a missile defense shield in eastern Europe, President Vladimir Putin warned on Wednesday.
The Financial Times: "As the US comes to recognize it needs Iran to stabilize Iraq, moreover, it may conclude that the Middle East as a whole would be a lot safer if it could get Tehran invested in its stability."
Crude stockpiles in Cushing, Oklahoma, where New York's West Texas Intermediate benchmark, or WTI, crude is priced, fell by 1.4 million barrels last week, the lowest since February, according to Department of Energy data. U.S. refineries increased runs to 91.7 percent of capacity for the same week, the highest this year.
Leahy (D-Vt.) told reporters he is giving Gonzales until late next week to revise his testimony about the surveillance program or he will ask Justice Department Inspector General Glenn A. Fine to conduct a perjury inquiry: "I'll ask the inspector general to determine who's telling the truth."
Capital spending by U.S. businesses weakened for a second straight month in June, while strong demand for airplanes pushed total orders for U.S.-made durable goods up by 1.4%, the Commerce Department reported Thursday. Except for the red-hot aerospace sector, demand was tepid in June. Excluding transportation goods, orders fell 0.5%.
The four-week average of initial claims fell 4,000 to 308,500. Meanwhile, the number of Americans receiving state jobless benefits fell 19,000 to 2.55 million in the week ending July 14. This is the lowest level since the week ended June 16. The four-week moving average of continuing claims rose 15,000 to 2.56 million, the highest since the week ended March 10. This indicates fewer Americans were laid off but the ones who've been let go are finding it harder to get work again.
ExxonMobil distributed $9 billion to shareholders during the quarter through $2 billion in dividends and $7 billion in share repurchases. Earnings of $1.83 were below Wall St. forecasts of $1.96. Revenue fell to $98.3 billion from $99.03 billion.
Royal Dutch Shell PLC said that 195,000 barrels of oil equivalent a day remained shut-in in Nigeria due to the security situation mainly in the WesternNiger Delta.
In the first six months of 2007 China turned out 93.31 million tons of crude oil, up 1.7 percent year on year, and 95.972 million tons of finished oil, up 7.2 percent.
Compared with the same period of last year, although the growth rate of crude oil production dropped 0.4 percentage points, the absolute volume hit another historical high. Finished oil grew at a pace 1.6 percentage points faster over last year, also creating a record. During this period China had a net import of 79.72 million tons of crude oil, up 13.4 percent, and 10.14 million tons of finished oil, down 15.7 percent, according to latest customs statistics.
A crowd of 100 stunned stargazers brought a town center to a standstill when five mysterious UFOs were spotted hovering in the sky. The unidentified flying objects lit up the otherwise clear night sky above Shakespeare's birthplace in Warwickshire on Saturday.
China's stock markets surged to a new high Thursday, boosted by expectations of stronger corporate profits despite government efforts to cool the sizzling economy. The benchmark Shanghai Composite Index rose 22.49 points, or 0.52 percent, to close at 4,346.46, breaking its previous record set May 29. The Shenzhen Composite Index for the country's second, smaller market rose 1.5 percent to 1,231.65. The Shanghai index has risen more than 62 percent so far this year and 14 percent since the start of July after more than doubling in 2006.
Bloomberg reported credit-default swaps on $10 million of Goldman Sachs Group Inc. bonds jumped as much as $18,000 to a record $85,000, according to broker Phoenix Partners Group in New York. Bear Stearns Cos. credit swaps surged as much as $29,000 to $110,000, also a new high. Lehman Brothers Holdings Inc. climbed as much as $24,000 to $104,000. Meanwhile, China received its highest-ever debt rating from Moody's Investors Service, buoyed by $1.3 trillion of foreign reserves that shield the economy from overseas slumps.
Henry To: "Liquidity within the world's financial markets is continuing to decline...The Yen carry trade is going to get more overstretched by the day, while the Swiss carry trade has most probably ended already. In other words, the Yen carry trade is now definitely one of the primary pillars or liquidity in the world today - so that any reversal in the Yen to the upside will most probably cause dramatic problems not only for the world's financial markets, but in funding private takeovers and infrastructure deals as well...Given that the flood of earnings reports is in the midst of peaking, this means starting in early to mid August, there is a strong likelihood that insider selling will flood the market, especially if the stock market continues to hold at current levels or rally into August. Should the stock market rally further this week, there is a high probability that we will then initiate a short position in our DJIA Timing System." Let me repeat something I have said previously. On a market trend basis, I have found Henry's thoughts to be of superior value. In addition, he puts his money where his mouth is.
WCI Communities on Thursday said the home builder has not received a definitive proposal for the purchase of the company after the firm previously announced it was exploring strategic alternatives, including a potential sale of the company. "While initially several companies expressed an interest in acquiring WCI, deteriorating conditions and uncertainty in the home-building and debt markets have made the sale process more challenging," WCI said in a statement. "The board intends to continue the sale process and also will explore other potential strategic and financial alternatives, including asset sales, strategic partnerships, minority investments, and recapitalization transactions to enhance shareholder value." The company had been resisting efforts by billionaire investor Carl Icahn to run his own slate of directors. Icahn had made a $22-a-share tender offer for the company that expired without the purchase of any WCI shares.
The U.S. dollar weakened further against the yen Thursday, with worries about financing restrictions denting carry trade of the Japanese currency.
Sales of new homes declined 6.6% in June to a seasonally adjusted annual rate of 834,000, the Commerce Department estimated Thursday. Sales are now down 22.3% compared with June 2006. The sales pace in June was the lowest since March's 830,000, which was the lowest since 1999. Economists were expecting sales to fall to an 890,000 annualized pace in June. Sales dropped in three of four regions. Sales in the West fell 22.5% to the lowest level in 12 years. Inventories of unsold homes were unchanged at 537,000. The median sales price was $237,900, down 2.2% compared with June 2006.
China has become a major aluminum producer and is increasing production at a rapid rate. According to the International Aluminum Institute, 4.8 metric tons of aluminum were produced in China during the first five months of the year compared with 3.5 million metric tons in the same period in 2006. Worldwide production during that time was just over 10 million metric tons.
Unlike many other sectors, China has only one advantage when it comes to making aluminum: its low capital requirements. A new smelter can be built in China for about the third the cost of a facility in North America.
Once the smelter is up and running, however, everything changes. China relies mainly on high-cost, coal-burning power stations for its smelters' electricity.
Now that Alcoa has dropped to $38, the risk reward has become more favorable. With this year's earnings estimated at about $3.20 per share, and the possibility of a takeover still alive, one might consider putting your foot in the water at this stage. China's appetite for aluminum is not going away. One might note that
according to the 2000 European Aluminium Association Auto Report, every 1,000 kilogram weight reduction saves approximately 4,800 litres of fuel, lowers exhaust emissions by 11.2 tonnes and reduces maintenance costs.
Alcoa is currently looking to promote aluminum solutions for the domestic transport industry through its new operations in China, which include an automotive brazing sheet plant in the city of Kunshan, Jiangsu Province, a research center in Beijing and a coil-coating line owned by Alcoa's wholly owned subsidiary, Alcoa (Shanghai) Aluminium Products Co. Ltd.
In the days before the bid deadline, Alcan had multiple meetings with management and advisers from both Rio Tinto and a party referred to in the filings as "company C," which sources have identified as Brazilian iron ore heavyweight Companhia Vale do Rio Doce. The negotiations between Alcan and the dueling bidders covered all terms and conditions of an offer for Alcan other than the final per share price for Alcan shares, the documents said.
On July 11, a committee of Alcan's board of directors met to review the final offers submitted by CVRD and Rio Tinto. Sources have said that CVRD's bid was well above $90 a share. It was not, however, enough to beat Rio Tinto's $101-a-share bid, valuing Alcan at more than $38-billion, the largest foreign takeover offer in Canadian history.
In addition to Rio Tinto, Norsk and CVRD, Alcan discussed possible deals with three other parties, according to the documents. Sources have said Australia's BHP Billiton Ltd. showed interest, but never submitted a takeover proposal. Now that Alcan has been purchased, don't you think there is a reasonable chance that a bidder for Alcoa will surface? A price of $46 would not surprise me.
Natural-gas inventories rose by 71 billion cubic feet for the week ended July 20, the Energy Department said Thursday. Total stocks now stand at 2.763 trillion cubic feet, up 6 billion cubic feet from the year-ago level and 384 billion cubic feet above the five-year average, the government data said.
Excluding items, Amgen earned $1.12 per share, beating analysts' average forecast of $1.07 per share, according to Reuters Estimates. Without a $1.1 billion acquisition charge, Amgen earned $1.05 a share in the year-ago quarter. Amgen said it now expects 2007 adjusted earnings, excluding items, of $4.28 per share, above analysts' average estimate of $4.19 per share for the year.
September crude closed at $74.95 a barrel Thursday, down 93 cents for the session.
August gold closed down $11 for the session. September silver fell 20 cents to close at $12.95 an ounce and September copper lost 3.3 cents to finish at $3.5225 a pound.
Wells Fargo & Co.'s Wells Fargo Home Mortgage said Thursday it will close its nonprime wholesale lending business, which processes and funds subprime loans for third-party mortgage brokers
Wednesday, July 25, 2007
Housing
7/26/07 Housing
Centex said it suffered a net FQ1 2008 loss of $131 million ($0.10/share after items), reversing earnings of $172M ($1.37) a year ago -- and worse than the $0.04 loss analysts were expecting. Revenue fell 41% to $1.94 billion, $31 million short of analyst estimates. Centex took a loss of $193 million ($0.98/share) for impairments and other land charges. Cancellations were down 1.5% to 31.2%. Centex also reduced its unsold-home inventory by 17% to 4,815. Orders for new homes fell 22% to 6,474. CEO Tim Eller commented, "In the quarter, we reduced overhead expenses and unsold homes. We remain focused on the fundamentals: selling homes, minimizing inventory, generating cash and attacking costs."
Tribune Co. reported a second-quarter net profit of $36.3 million, or 18 cents a share, compared with $87.8 million, or 28 cents a share, a year previously. The Chicago-based media company also reported operating revenue of $1.31 billion against $1.41 billion in the same quarter of 2006. The company said the results "reflect the difficult advertising environment," but added that revenue declines were partially offset by "strong cost controls." Earnings include a charge of 8 cents per share related to 450 job cuts across publishing and corporate operations, and a charge of 7 cents per share for the write-off of Los Angeles Times plant equipment related to a closed San Fernando Valley facility. The company said the $8 billion deal for Tribune to be acquired by Sam Zell is on track and the financing for it is "fully committed."
GlaxoSmithKline lifted its stock buyback authorization to 12 billion pounds ($24.7 billion) an increase of 7.7 billion pounds. The company still sees annual earnings per share growth between 8% and 10% at constant exchange rates.
WellPoint raised its earnings guidance for the year to $5.55 a share.
PRA International agreed to be acquired by private-equity firm Genstar Capital in an all-cash transaction valued at $790 million. Terms call for Genstar to pay $30.50 for PRA International's shares.
Shanghai's economy grew 13% in the first six months from a year ago, according to media reports.
Bill Bonner: "According to Ben Bernanke, the mountain we are standing on is one where inflation poses no problem. Our suspicion is that he is wrong. Inflation is very much a problem. Independent analysts tell us that M3 is increasing at 12% per year. M3 is the inconvenient truth that the Labor Department no longer reports. It is the fullest measure of the U.S. money supply…and it is going up three to four times faster than the GDP itself. That is old-fashioned monetary inflation…typically followed by old-fashioned consumer price inflation...But our guess is that Bernanke is not completely on the level. He may be worried about inflation; but he may also be worried about problems in the lending industry. The pain of subprime mortgage lending doesn't seem to be as well contained as people thought. No one knows how bad many derivative positions are mispriced. No one knows how many speculators are in over their heads. And no one knows how bad the damage might be if a lot of this CDO debt were to suddenly collapse. One thing is sure. No one wants to find out…including Ben Bernanke. Unfortunately, we all may be staring down the barrel of this housing crisis sooner, rather than later. Some unlucky Americans are already knee-deep in you-know-what…and they don't even know it."
David Galland: "The whole matter of trade deficits is, unfortunately for investors not paying attention, just one of far too many aerosol cans now roasting in the fire. When they start exploding, you'll want to be safely hiding behind a wall of gold and silver."
According to Bloomberg, Kuwait revalued the dinar against the dollar for a second time in a month as a slump in the U.S. currency threatened to boost inflation in the Persian Gulf state. The move may push other Gulf countries to follow suit. Kuwait's central bank strengthened its currency 1.7 percent after it dropped a peg to the dollar on May 20 and switched to managing the dinar against a basket of currencies. The dinar appreciated by 0.4 percent when Kuwait broke the dollar peg and was revalued by a further 0.4 percent on July 12.
Nouriel Roubini: "Indeed, the housing recession is getting worse, the credit crunch in mortgage markets is spreading from subprime to other mortgages, the contagion to other credit markets is spreading as corporate spreads are significantly rising, and the negative effects of the housing recession on other parts of the economy (private consumption, autos and other sectors related to housing) are increasing. So much for the consensus view that the subprime problem are a "niche problem that is contained". These problems are not contained: they are rather spreading to other financial and credit markets and to real side of the economy."
A 420-page report has been produced by the National Petroleum Council, a body of 175 authorities that reports to the US government. The report concludes that "the global supply of oil and natural gas from the conventional sources ... is unlikely to meet ... growth in demand over the next 25 years". It says that "many observers think that 80 per cent of existing oil production will need to be replaced by 2030" to keep up present supplies "in addition to volumes required to meet existing demand." But, it adds, there are "accumulating risks to replacing current production and increasing supplies".
A sagging real estate market and tighter lending standards are exacting a growing toll on Californians, forcing them from their homes in record numbers, figures released Tuesday show. Foreclosures soared to 17,408 for the three months ended June 30, an increase of 799% from the same period last year. The current rate handily exceeds the previous foreclosure peak set in 1996, when the state was in the final throes of a six-year slump.
Wisconsin as a whole had 9,229 foreclosure filings in the first half of 2007, up nearly 23 percent compared with 2006, a year in which foreclosures jumped 34 percent, according to newly released data compiled by ForeclosuresWI.com, a provider of Wisconsin foreclosure resources and statistics.
Boeing lifted its 2007 profit outlook on a stronger commercial planes business to $4.80 to $4.95 per share, up from $4.55 to $4.75 per share, compared to the latest Wall Street estimate of $4.91 a share. Guidance for 2008 EPS is reaffirmed at $5.55 per share to $5.75 per share.
Xcel Energy issued a forecast $1.20-$1.32 range for 2007 earnings per share, based on assumptions of normal weather patterns and energy rates for the rest of the year.
Targeted Genetics put its leading clinical trial on hold yesterday after one of the enrolled patients became seriously ill. The Seattle biotechnology company said Tuesday that the decision to halt the testing of its inflammatory arthritis drug followed recent discussions with the U.S. Food and Drug Administration. The program will be suspended while additional data is gathered, the company said in a statement.
The Organization of Petroleum Exporting Countries doesn't yet see any indication of heightened demand for its oil, a top Iranian oil official said Tuesday, with other officials and analysts pouring cold water on the prospect of an impending change in the producer group's current "do-nothing" policy.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, widely considered a timely gauge of U.S. home sales, for the week ended July 20 decreased 3.6 percent to 609.0, the lowest level since the week ended Feb. 16 when it stood at 606.6.
The latest quarter for ConocoPhillips includes an expected impairment of its entire interest in oil projects in Venezuela of about $4.51 billion. Excluding this charge, earnings were $4.81 billion, or $2.90 a share. Analysts polled by Thomson Financial, on average, expected earnings of $2.68 a share. The Houston company said revenue inched up to $47.4 billion from $47.1 billion a year ago.
Countrywide CEO: "The Company is seeing home price depreciation at levels not seen since the Great Depression."
I would like to comment on the BJ Services conference call on Tuesday morning. Some analysts thought it could have gone better and some even bought August 27.50 puts for a trade, such as, Zman. Over the past 9 months the stock has been more than disappointing; however, it was obvious to me from the conference call that overall business is improving in various regions of the world. At current prices, you are in essence buying a company for $8 billion with little debt, net margins approaching 17%, and sales approximating $5 billion in the fiscal year beginning Oct. 1. With an ROE over 30%, patience will in my view be rewarded. The risk/reward is in your favor. In addition, I continue to believe that there will be ongoing consolidation in the oil and gas industry. This week we saw the merger of Transocean and GlobalSantaFe. BJ Services would make an excellent acquisition for Baker Hughes, Hallburton, Schlumberger, Weatherford, or even GE. There is a big short interest in BJ Services, and being short is not prudent in my view. You could wake up one day with a $8 to $10 loss on your hands or a good deal worse in a bidding war.
Japan's trade surplus surged in June as a weaker yen and higher overseas demand for electronics and cars helped exports rise at the fastest pace in five months. The surplus expanded 53.4 percent to 1.23 trillion yen ($10.2 billion) from a year earlier, the Ministry of Finance said in Tokyo.
U.S. sales of existing homes fell 3.8% in June to a seasonally adjusted annual rate of 5.75 million, the lowest rate since November 2002, the National Association of Realtors reported Wednesday. Sales in June were down 11.4% from June 2006. Inventories of unsold homes on the market fell by 180,000, or 4.2%, to 4.20 million, representing a 8.8-month supply at the June sales rate. The months' supply was also 8.8 months in May, the highest since 1992. The median sales price was $230,100, up 0.3% since June 2006. It's the first time in 11 months that median sales prices did not fall compared with a year earlier.
Joy Global Inc. cut its fiscal 2007 financial forecast.The company now expects 2007 revenue to come in $150 million to $200 million lower than its previous view and earnings to come in 15 cents to 20 cents below its prior forecast. Analysts polled by Thomson Financial, on average, are expecting earnings of $2.97 on revenue of $2.71 billion. Joy Global said sustained weakness in the U.S. coal market is adversely affecting its fiscal third quarter and is expected to continue into the fourth quarter.
The ABX "BBB" 7-02 index, which gauges risk in the subprime mortgage lending industry, reached a record low of 40 in morning trade Wednesday.
The American Petroleum Institute reported a climb of 2.1 million barrels in crude supplies for the week ended July 20. The Energy Department had reported a decline of 1.1 million barrels for the latest week. Motor gasoline supplies were up 1.2 million barrels, the API said. The government reported that supplies were up 800,000 barrels. Distillate supplies rose 2.4 million barrels, the API said. The government posted a 1.5 million-barrel increase.
The IMF has raised its forecast for global growth to a 5.2% pace in 2007 and 2008. This is up from the already-torrid 4.9% growth rate forecast in April. Inflation risks have edged up, increasing the likelihood that central banks will need to further tighten monetary policy, the IMF said.
Chrysler scrapped a planned sale of $12 billion of loans for its automotive business after failing to find demand, according to investors who were briefed on the decision today. Chrysler, seeking the financing to help fund its buyout by Cerberus Capital Management LP, will proceed with plans to sell $8 billion of loans for its financing division, said the investors, who declined to be named because the terms aren't public.
Iran will continue to ration gasoline until ``at least'' 2009 because the program launched last month has already cut consumption by a quarter, an oil official said.
The chief economist for the National Association of Home Builders on Wednesday in a mid-year housing outlook lowered his forecasts for new construction as the market has weakened further on subprime-mortgage problems and tighter lending standards.
"It's fair to say the performance of the housing market during the first half [of 2007] and the outlook for the second half and next year are a lot weaker than six months ago," said David Seiders, referring to his last semi-year forecast.
His outlook for 2007 single-family housing starts is now 9% lower than it was at the beginning of the year, while his 2008 forecast has been slashed by 15%, Seiders said on a conference call. His forecast is for housing starts of 1.42 million this year and 1.45 million in 2008.
September crude gained 3.2%, or $2.32, to close at $75.88 a barrel Wednesday. Natural gas gained 6 cents to end the day at $5.92.
August gold fell $11, or 1.6%, to close at $673.80 an ounce Wednesday. September silver fell 2.2%, or 29.3 cents, to close at $13.15 an ounce and September copper closed at $3.5555 a pound, down 1.8%, or 6.4 cents.
Banks arranging financing for Kohlberg Kravis Roberts' leveraged buyout of Alliance Boots Plc failed to sell five billion pounds ($10.3 billion) of senior loans backing the deal, a person familiar with the situation said on Wednesday. The banks are going ahead with the sale of 1.75 billion pounds of junior loans to back the Boots buyout, the person noted, adding that the deal is still on course to be completed.
South Korea's Kospi index closed above 2,000 for the first time after Moody's Investors Service raised the nation's debt rating and the central bank reported the fastest economic growth in 18 months.
New account openings at China's brokerages totaled 125,000 on July 23, 30 percent more than the average for July, according to the latest figures from the China Securities Depository & Clearing Corp.
Aluminum in London has gained 12 percent in the past year driven by rising demand from China, the world's biggest user of the lightweight metal used in autos, aircraft and beverage cans. Aluminum is currently priced at $2781 per metric ton.
Two leveraged-buyout groups vying to acquire Cadbury Schweppes Plc's U.S. beverage unit may offer less than initially planned as debt investors balk at financing takeovers, four people with knowledge of the bidding said.
Centex said it suffered a net FQ1 2008 loss of $131 million ($0.10/share after items), reversing earnings of $172M ($1.37) a year ago -- and worse than the $0.04 loss analysts were expecting. Revenue fell 41% to $1.94 billion, $31 million short of analyst estimates. Centex took a loss of $193 million ($0.98/share) for impairments and other land charges. Cancellations were down 1.5% to 31.2%. Centex also reduced its unsold-home inventory by 17% to 4,815. Orders for new homes fell 22% to 6,474. CEO Tim Eller commented, "In the quarter, we reduced overhead expenses and unsold homes. We remain focused on the fundamentals: selling homes, minimizing inventory, generating cash and attacking costs."
Tribune Co. reported a second-quarter net profit of $36.3 million, or 18 cents a share, compared with $87.8 million, or 28 cents a share, a year previously. The Chicago-based media company also reported operating revenue of $1.31 billion against $1.41 billion in the same quarter of 2006. The company said the results "reflect the difficult advertising environment," but added that revenue declines were partially offset by "strong cost controls." Earnings include a charge of 8 cents per share related to 450 job cuts across publishing and corporate operations, and a charge of 7 cents per share for the write-off of Los Angeles Times plant equipment related to a closed San Fernando Valley facility. The company said the $8 billion deal for Tribune to be acquired by Sam Zell is on track and the financing for it is "fully committed."
GlaxoSmithKline lifted its stock buyback authorization to 12 billion pounds ($24.7 billion) an increase of 7.7 billion pounds. The company still sees annual earnings per share growth between 8% and 10% at constant exchange rates.
WellPoint raised its earnings guidance for the year to $5.55 a share.
PRA International agreed to be acquired by private-equity firm Genstar Capital in an all-cash transaction valued at $790 million. Terms call for Genstar to pay $30.50 for PRA International's shares.
Shanghai's economy grew 13% in the first six months from a year ago, according to media reports.
Bill Bonner: "According to Ben Bernanke, the mountain we are standing on is one where inflation poses no problem. Our suspicion is that he is wrong. Inflation is very much a problem. Independent analysts tell us that M3 is increasing at 12% per year. M3 is the inconvenient truth that the Labor Department no longer reports. It is the fullest measure of the U.S. money supply…and it is going up three to four times faster than the GDP itself. That is old-fashioned monetary inflation…typically followed by old-fashioned consumer price inflation...But our guess is that Bernanke is not completely on the level. He may be worried about inflation; but he may also be worried about problems in the lending industry. The pain of subprime mortgage lending doesn't seem to be as well contained as people thought. No one knows how bad many derivative positions are mispriced. No one knows how many speculators are in over their heads. And no one knows how bad the damage might be if a lot of this CDO debt were to suddenly collapse. One thing is sure. No one wants to find out…including Ben Bernanke. Unfortunately, we all may be staring down the barrel of this housing crisis sooner, rather than later. Some unlucky Americans are already knee-deep in you-know-what…and they don't even know it."
David Galland: "The whole matter of trade deficits is, unfortunately for investors not paying attention, just one of far too many aerosol cans now roasting in the fire. When they start exploding, you'll want to be safely hiding behind a wall of gold and silver."
According to Bloomberg, Kuwait revalued the dinar against the dollar for a second time in a month as a slump in the U.S. currency threatened to boost inflation in the Persian Gulf state. The move may push other Gulf countries to follow suit. Kuwait's central bank strengthened its currency 1.7 percent after it dropped a peg to the dollar on May 20 and switched to managing the dinar against a basket of currencies. The dinar appreciated by 0.4 percent when Kuwait broke the dollar peg and was revalued by a further 0.4 percent on July 12.
Nouriel Roubini: "Indeed, the housing recession is getting worse, the credit crunch in mortgage markets is spreading from subprime to other mortgages, the contagion to other credit markets is spreading as corporate spreads are significantly rising, and the negative effects of the housing recession on other parts of the economy (private consumption, autos and other sectors related to housing) are increasing. So much for the consensus view that the subprime problem are a "niche problem that is contained". These problems are not contained: they are rather spreading to other financial and credit markets and to real side of the economy."
A 420-page report has been produced by the National Petroleum Council, a body of 175 authorities that reports to the US government. The report concludes that "the global supply of oil and natural gas from the conventional sources ... is unlikely to meet ... growth in demand over the next 25 years". It says that "many observers think that 80 per cent of existing oil production will need to be replaced by 2030" to keep up present supplies "in addition to volumes required to meet existing demand." But, it adds, there are "accumulating risks to replacing current production and increasing supplies".
A sagging real estate market and tighter lending standards are exacting a growing toll on Californians, forcing them from their homes in record numbers, figures released Tuesday show. Foreclosures soared to 17,408 for the three months ended June 30, an increase of 799% from the same period last year. The current rate handily exceeds the previous foreclosure peak set in 1996, when the state was in the final throes of a six-year slump.
Wisconsin as a whole had 9,229 foreclosure filings in the first half of 2007, up nearly 23 percent compared with 2006, a year in which foreclosures jumped 34 percent, according to newly released data compiled by ForeclosuresWI.com, a provider of Wisconsin foreclosure resources and statistics.
Boeing lifted its 2007 profit outlook on a stronger commercial planes business to $4.80 to $4.95 per share, up from $4.55 to $4.75 per share, compared to the latest Wall Street estimate of $4.91 a share. Guidance for 2008 EPS is reaffirmed at $5.55 per share to $5.75 per share.
Xcel Energy issued a forecast $1.20-$1.32 range for 2007 earnings per share, based on assumptions of normal weather patterns and energy rates for the rest of the year.
Targeted Genetics put its leading clinical trial on hold yesterday after one of the enrolled patients became seriously ill. The Seattle biotechnology company said Tuesday that the decision to halt the testing of its inflammatory arthritis drug followed recent discussions with the U.S. Food and Drug Administration. The program will be suspended while additional data is gathered, the company said in a statement.
The Organization of Petroleum Exporting Countries doesn't yet see any indication of heightened demand for its oil, a top Iranian oil official said Tuesday, with other officials and analysts pouring cold water on the prospect of an impending change in the producer group's current "do-nothing" policy.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, widely considered a timely gauge of U.S. home sales, for the week ended July 20 decreased 3.6 percent to 609.0, the lowest level since the week ended Feb. 16 when it stood at 606.6.
The latest quarter for ConocoPhillips includes an expected impairment of its entire interest in oil projects in Venezuela of about $4.51 billion. Excluding this charge, earnings were $4.81 billion, or $2.90 a share. Analysts polled by Thomson Financial, on average, expected earnings of $2.68 a share. The Houston company said revenue inched up to $47.4 billion from $47.1 billion a year ago.
Countrywide CEO: "The Company is seeing home price depreciation at levels not seen since the Great Depression."
I would like to comment on the BJ Services conference call on Tuesday morning. Some analysts thought it could have gone better and some even bought August 27.50 puts for a trade, such as, Zman. Over the past 9 months the stock has been more than disappointing; however, it was obvious to me from the conference call that overall business is improving in various regions of the world. At current prices, you are in essence buying a company for $8 billion with little debt, net margins approaching 17%, and sales approximating $5 billion in the fiscal year beginning Oct. 1. With an ROE over 30%, patience will in my view be rewarded. The risk/reward is in your favor. In addition, I continue to believe that there will be ongoing consolidation in the oil and gas industry. This week we saw the merger of Transocean and GlobalSantaFe. BJ Services would make an excellent acquisition for Baker Hughes, Hallburton, Schlumberger, Weatherford, or even GE. There is a big short interest in BJ Services, and being short is not prudent in my view. You could wake up one day with a $8 to $10 loss on your hands or a good deal worse in a bidding war.
Japan's trade surplus surged in June as a weaker yen and higher overseas demand for electronics and cars helped exports rise at the fastest pace in five months. The surplus expanded 53.4 percent to 1.23 trillion yen ($10.2 billion) from a year earlier, the Ministry of Finance said in Tokyo.
U.S. sales of existing homes fell 3.8% in June to a seasonally adjusted annual rate of 5.75 million, the lowest rate since November 2002, the National Association of Realtors reported Wednesday. Sales in June were down 11.4% from June 2006. Inventories of unsold homes on the market fell by 180,000, or 4.2%, to 4.20 million, representing a 8.8-month supply at the June sales rate. The months' supply was also 8.8 months in May, the highest since 1992. The median sales price was $230,100, up 0.3% since June 2006. It's the first time in 11 months that median sales prices did not fall compared with a year earlier.
Joy Global Inc. cut its fiscal 2007 financial forecast.The company now expects 2007 revenue to come in $150 million to $200 million lower than its previous view and earnings to come in 15 cents to 20 cents below its prior forecast. Analysts polled by Thomson Financial, on average, are expecting earnings of $2.97 on revenue of $2.71 billion. Joy Global said sustained weakness in the U.S. coal market is adversely affecting its fiscal third quarter and is expected to continue into the fourth quarter.
The ABX "BBB" 7-02 index, which gauges risk in the subprime mortgage lending industry, reached a record low of 40 in morning trade Wednesday.
The American Petroleum Institute reported a climb of 2.1 million barrels in crude supplies for the week ended July 20. The Energy Department had reported a decline of 1.1 million barrels for the latest week. Motor gasoline supplies were up 1.2 million barrels, the API said. The government reported that supplies were up 800,000 barrels. Distillate supplies rose 2.4 million barrels, the API said. The government posted a 1.5 million-barrel increase.
The IMF has raised its forecast for global growth to a 5.2% pace in 2007 and 2008. This is up from the already-torrid 4.9% growth rate forecast in April. Inflation risks have edged up, increasing the likelihood that central banks will need to further tighten monetary policy, the IMF said.
Chrysler scrapped a planned sale of $12 billion of loans for its automotive business after failing to find demand, according to investors who were briefed on the decision today. Chrysler, seeking the financing to help fund its buyout by Cerberus Capital Management LP, will proceed with plans to sell $8 billion of loans for its financing division, said the investors, who declined to be named because the terms aren't public.
Iran will continue to ration gasoline until ``at least'' 2009 because the program launched last month has already cut consumption by a quarter, an oil official said.
The chief economist for the National Association of Home Builders on Wednesday in a mid-year housing outlook lowered his forecasts for new construction as the market has weakened further on subprime-mortgage problems and tighter lending standards.
"It's fair to say the performance of the housing market during the first half [of 2007] and the outlook for the second half and next year are a lot weaker than six months ago," said David Seiders, referring to his last semi-year forecast.
His outlook for 2007 single-family housing starts is now 9% lower than it was at the beginning of the year, while his 2008 forecast has been slashed by 15%, Seiders said on a conference call. His forecast is for housing starts of 1.42 million this year and 1.45 million in 2008.
September crude gained 3.2%, or $2.32, to close at $75.88 a barrel Wednesday. Natural gas gained 6 cents to end the day at $5.92.
August gold fell $11, or 1.6%, to close at $673.80 an ounce Wednesday. September silver fell 2.2%, or 29.3 cents, to close at $13.15 an ounce and September copper closed at $3.5555 a pound, down 1.8%, or 6.4 cents.
Banks arranging financing for Kohlberg Kravis Roberts' leveraged buyout of Alliance Boots Plc failed to sell five billion pounds ($10.3 billion) of senior loans backing the deal, a person familiar with the situation said on Wednesday. The banks are going ahead with the sale of 1.75 billion pounds of junior loans to back the Boots buyout, the person noted, adding that the deal is still on course to be completed.
South Korea's Kospi index closed above 2,000 for the first time after Moody's Investors Service raised the nation's debt rating and the central bank reported the fastest economic growth in 18 months.
New account openings at China's brokerages totaled 125,000 on July 23, 30 percent more than the average for July, according to the latest figures from the China Securities Depository & Clearing Corp.
Aluminum in London has gained 12 percent in the past year driven by rising demand from China, the world's biggest user of the lightweight metal used in autos, aircraft and beverage cans. Aluminum is currently priced at $2781 per metric ton.
Two leveraged-buyout groups vying to acquire Cadbury Schweppes Plc's U.S. beverage unit may offer less than initially planned as debt investors balk at financing takeovers, four people with knowledge of the bidding said.
Tuesday, July 24, 2007
Results
7/25/07 Results
BJ Services Company reported net income of $168.3 million for the third fiscal quarter ended June 30, 2007, or $0.57 per diluted share. The quarter's diluted earnings per share decreased 11% compared to the $0.64 per diluted share reported in the previous quarter and decreased 15% compared to the $0.67 per diluted share for the third quarter of fiscal 2006. Consolidated revenue in the third quarter of fiscal 2007 was $1,152.5 million, down 3% compared to $1,186.6 million in the previous quarter and up 3% compared to $1,116.9 million reported in the prior year's June quarter. Consolidated operating income for the quarter was $257.8 million, an 11% decrease compared to $290.2 million in the previous quarter and a 16% decrease compared to $306.9 million reported in the same quarter last year.
Commenting on the results, Chairman and CEO Bill Stewart said, "Our U.S./Mexico and International pressure pumping operations were in line with our projections for the quarter. However, our consolidated results were slightly below expectations due primarily to lower than forecasted activity in Canada. The Canadian Spring break up extended longer than normal and drilling activity was 50% below last year, negatively impacting the results of our Canadian pressure pumping and Canadian pipeline operations.
"Looking at our fourth fiscal quarter, we expect drilling activity to recover from the depressed Spring breakup levels in Canada. In the U.S., drilling activity is projected to be up slightly with pricing pressures expected to continue in this market. In addition, we expect revenue from our International Pressure Pumping segment to increase modestly as a result of recently deployed assets that will begin operations during the current quarter. Our Oilfield Services Group is projected to achieve double digit revenue growth for this quarter. As such, we expect earnings for our fourth fiscal quarter to be $0.60 to $0.62 per diluted share." This would result in fiscal year results to approximate $2.52 on a fully diluted per share basis, and that would equal current estimates. The forecast for the year beginning Oct.1 is $2.65 per share, and therefore the stock is selling for only 10 times 2008 estimates and for 10 1/2 times the estimate for the year ending this September 30.
Knocking out the extraordinary charge, McDonald's would have earned 71 cents a share on a continuing operations basis. Revenue came in up 12% to just over $6 billion while sales at restaurants open more than a year were up 7.4%.
For the month, ICSC continues to expect same-store sales for the retail industry to post a gain of about 3%.
Lockheed Martin raised its projected earnings per share for 2007 to $6.65-$6.80 from $6.20-$6.35 tipped previously.
September crude fell 1.8%, or $1.33, to close at $73.56 a barrel Tuesday. August reformulated gasoline led the decline among the oil futures, losing 2.7% to close at $2.0477 a gallon. August natural gas lost 2.9% to close at $5.863 per million British thermal units.
Supervalu raised the bottom end of its fiscal 2008 profit forecast by 5 cents to a range of $2.93 to $3.03 a share, excluding acquisition related costs.
PepsiCo said that its strong performance in the first half demonstrates the health of its business and supports its balance-of-year outlook and raised its full year earnings guidance to at least $3.35 a share.
DuPont affirmed that it expects to earn an adjusted $3.15 a share in 2007. The figure excludes a 6-cent charge for special items taken in first-quarter 2007. Thomson's survey is looking for $3.18 a share.
Eli Lilly raised its 2007 sales and earnings guidance and now expects 2007 proforma adjusted earnings per share of between $3.40 to $3.50 a share, or $2.75 to $2.85 on a reported basis. Sales are expected to show mid-teens growth, while pro forma sales are expected to show low-double digit growth.
Smith International said 2007 earnings are expected to be in the range of $3.15 to $3.25 a share.
Sterling touched another 26-year high -- this time of $2.0653 -- against the dollar early Tuesday. The dollar fell to a 15-year low against a basket of major currencies and a record low against the euro on Tuesday, stung by the potential impact on the U.S. economy from the weakening housing sector.The dollar index dropped to a low of 80.016, down around 0.5%.
The composite flash estimate of euro-zone purchasing managers index in July slipped to 57.3 from 57.8 in June, with the manufacturing subcomponent falling to 54.8 from 55.6 in June and the services subcomponent dropping to 58.1 from 58.3. Both manufacturing and services gauges came in below economist forecasts.
Wall Street firms postponed a sale of $3.1 billion in loans that would pay for the leveraged buyout of General Motors' Allison Transmission by private-equity firms, The Wall Street Journal reported Tuesday, citing a person familiar with the matter. The report said the sale of the unit to Carlyle and Onex is "highly likely" to proceed but the delay on difficult conditions in the market for risky corporate loans and bonds.
Norsk Hydro said that for the year global aluminum production growth in 2007 is estimated to reach 12% to 13%, while global aluminium consumption is expected to show slightly lower growth rates. Reported inventories remain at relatively low levels, supporting high metal prices, it said. These strong results reflect well on the prospects for Alcoa and the potential acquisition of the company.
BP said that exploration and production adjusted pretax profit decreased 12% to $6.9 billion, impacted by lower volumes and higher costs. Full year production in 2007 is expected to be in the range of 3.8 to 3.9 million barrels of oil equivalent a day, in line with previous guidance, BP said.
BHP Billiton reported record annual output of alumina, copper, iron ore, aluminum, manganese ore, nickel and coking coal. Among the industrial metals, output for copper climbed 17% for the three month period ending in June from a year earlier. Quarterly production of lead climbed 12%, zinc rose 42%, uranium oxide gained 14%, silver rose 23%, iron ore climbed 6% and nickel jumped 15%. Production of crude oil and natural gas fell 1% in the June-ending quarter and was unchanged from the previous year at 116 million barrels of oil equivalent. Aluminum output for the fourth quarter was unchanged from a year earlier, but output climbed 2% for the year. Output of alumina climbed 7% on quarter and 7% for the year.
UPS reported second-quarter net income of $1.10 billion, or $1.04 a share, compared with $1.06 billion, or 97 cents a share, a year earlier. Wall Street analysts, on average, had expected earnings per share of $1.03, according to Reuters estimates. UPS said that in the third quarter it expects earnings per share in a range from 99 cents to $1.04.
Northrop raised the lower end of its full-year profit from continuing operations target to $4.90 per share from $4.80 per share. The top end remains at $5.05 per share. The company pinpointed its sales forecast at $31.5 billion, the midpoint of its prior range of $31 billion to $32 billion.
Bill Bonner: "And here's another reason not to buy stocks: The dollar is falling. So far this year, investors have lost about 4.5% in dollar-based assets, compared to the euro. That effectively wipes out an entire year's worth of earnings for Treasury bond investors, for example. The typical American barely notices; but the overseas speculator feels every slight drop in the dollar like a bee sting. And the risk to the world financial bubble is that he might go into shock."
Richard Daughty: " I was yanked back to cruel reality when Mr. Grant said. "Specifically, under Basel II, a broker-dealer must set aside just 56 cents in capital to hold US$100 of triple-A-rated securitizations." Yow! Fifty-six lousy cents? Shocked, I am too, too, too nonplussed to comment, so I turn to Junior Mogambo Ranger (JMR) Phil S., who says that only putting up 56 cents to hold $100 in assets seems a bit much, as "That is 1/18th of the 10% stock margin equity required in 1929"!! Hahaha! The exclamation points were added by me...And the stock market may be going up because there is a huge, towering overhang of short interest, and if there is one trick that the sharks of Wall Street reliably pull to eat their fill when short interest expands like this, it is by suddenly running the market sharply up and squeezing the shorts, who buy in a panic to cover their enormous short positions and to keep from losing more money if the stock price continues to rise, making prices go up even more, spooking more shorts, who then buy to cover, making prices go up some more, spooking more shorts."
Countrywide cut its full-year earnings forecast to a range of $2.70 to $3.30 per share from a previous range of $3.50 to $4.30 per share. Countrywide Financial Corp. Chief Executive Angelo Mozilo said the U.S. housing market is unlikely to recover before 2009, as lenders and homeowners work through oversupply, stagnating home prices, and the excesses of recent lax lending standards in much of the mortgage industry.
AT&T reported a 61% rise in quarterly net amid recent acquisitions. The phone giant said it activated 146,000 iPhone subscribers in the last two days of the quarter, 40% of whom were new AT&T Wireless customers.
The WSJ reported Jane MacElree, a family trustee who votes shares totaling about 15% of Dow Jones's total shareholder power, made it clear to the family she was in the anti-Murdoch camp, people familiar said. Ms. MacElree, a member of the Cox branch, is one of the most senior Bancrofts and has been viewed as a swing vote. Her decision could put her at odds with some of her seven children, who support the deal.
Cindy Sheehan and 45 others were arrested by Capitol Police Monday for refusing to leave the office of the chairman of the House Judiciary Committee after demanding President Bush's impeachment. Sheehan said the chairman -- Rep. John Conyers, D-Mich. -- told her he did not have the votes for impeachment.
Four U.S. troops were killed when their vehicle struck a roadside bomb in eastern Afghanistan, a NATO forces spokesman said. Another soldier was injured in the attack.
American Express is setting aside almost $1 Billion for customers who were missing payments.
The Financial Times reported volatility in credit markets has caused the annual cost of insuring €10m of debt for five years to more than double to €366,000 since February, when it stood at about €170,000. The Crossover is an important indicator of credit market sentiment and its steady widening suggests that investors are increasingly concerned about the US subprime crisis and the state of the leveraged loan market. The US version, the CDX Crossover, was about 15bp higher at approximately 299.5bp in early trade.
USG Corp. turned in a sharply lower profit Tuesday as its struggles to adjust to the housing market's dive that it believes will be a multiyear event. The company said it made $56 million, or 56 cents a share, compared with last year's profit of $176 million, or $3.03 a share.
Paccar's earnings for the quarter were $298.3 million, or $1.19 per share, compared to $369.9 million, or $1.47 per share, in the year-ago period. Revenue of $3.43 billion, fell 13 percent from $3.94 billion in the same quarter last year. Analysts expected profit of $1.12 per share on revenue of $3.25 billion. The company said the truck market softened in the U.S. and Canada because of new, tougher emissions regulations.
China's five southern provinces are experiencing a power shortage of as much as 5,000 megawatts this summer as the pace of economic growth spurs demand for electricity to run factories, particularly in Guangdong. "Power demand is growing very fast and the region is faced with high temperatures and low precipitation," China Electricity Council said in a statement on its Web site Monday. "Guangdong power grid faces unprecedented pressure."
Alberta's energy prices continue on the rise as electricity costs have skyrocked to their highest in 10 years. The average price of electricity for the month of June was five cents a kilowatt hour in the wholesale market. On Monday, that average spiked to 53.5 cents a kilowatt hour, Enmax spokesman Peter Hunt said. That rate includes a daytime peak of $1 a kilowatt hour, he said.
Burlington Northern Santa Fe Corp. said Tuesday its second-quarter earnings fell 8 percent, missing Wall Street's estimates, on flat coal volumes and rising fuel expenses.
Canadian Pacific said revenue growth reflected strong global demand for bulk commodities, with double-digit percentage growth in movements of sulphur, fertilizers and coal. Grain revenue improved 9 percent, while industrial and consumer products increased 6 percent and intermodal revenue was up 3 percent. Revenue from moving automobiles fell 4 percent and forest-products revenue declined 2 percent. "We still face some significant challenges through the rest of 2007 with rising fuel refining margins and the strengthening Canadian dollar," said Fred Green, president and CEO.
Bill Gross, managing director of Pacific Investment Management Co. LLC: "Those that assert that this is merely an isolated subprime crisis should observe very closely the price and terms that lenders are willing to accept with Chrysler finance this week," Gross wrote. "That more than anything may wake them, shake them, and tell them that their world has suddenly changed."
August gold climbed $3.30 to close at $684.80 an ounce. September silver climbed 11.3 cents to close at $13.443 an ounce, but September copper fell by 3.7 cents to close at $3.6195 a pound. Meanwhile, the U.S. dollar index rests at a 15-year low of about 80.
For the period ended June 30, Amazon reported earnings of $78 million, or 19 cents a share, compared to earnings of $22 million, or 5 cents a share, for last year's second quarter. Revenue grew 35% to $2.89 billion for the quarter compared with $2.14 billion last year. Analysts were looking for the company to earn 16 cents a share on revenue of $2.81 billion for the June quarter, according to consensus estimates from Thomson First Call.
The Dow Jones Industrial Average lost 223.5 points to 13,720 with 28 of its 30 stocks down. The S&P 500 index dropped 30.4 points, to 1,511, while the Nasdaq Composite lost 50.7 points to end at 2,639.
Nabors Industries Ltd.reported second-quarter net earnings of $228.3 million, or 79 cents a share, little-changed from $233.4 million, or 77 cents, a year ago. Revenue for the quarter rose to $1.17 billion from $1.13 billion. The company said overseas operations helped offset weakness in its North American business.
Iran warned yesterday that it would consider taking "illegal" steps, including possible abrogation of the non-proliferation treaty, if further UN sanctions are imposed because of its nuclear program. -
U.N. inspectors will return next week to a reactor being built in central Iran. The team will visit the heavy-water reactor under construction outside the central industrial city of Arak on July 30 or 31, International Atomic Energy Agency Deputy Director-General Olli Heinonen said after meeting with a senior Iranian envoy.
Neale Donald Walsch: “FEAR is an acronym in the English language for "False Evidence Appearing Real"
BJ Services Company reported net income of $168.3 million for the third fiscal quarter ended June 30, 2007, or $0.57 per diluted share. The quarter's diluted earnings per share decreased 11% compared to the $0.64 per diluted share reported in the previous quarter and decreased 15% compared to the $0.67 per diluted share for the third quarter of fiscal 2006. Consolidated revenue in the third quarter of fiscal 2007 was $1,152.5 million, down 3% compared to $1,186.6 million in the previous quarter and up 3% compared to $1,116.9 million reported in the prior year's June quarter. Consolidated operating income for the quarter was $257.8 million, an 11% decrease compared to $290.2 million in the previous quarter and a 16% decrease compared to $306.9 million reported in the same quarter last year.
Commenting on the results, Chairman and CEO Bill Stewart said, "Our U.S./Mexico and International pressure pumping operations were in line with our projections for the quarter. However, our consolidated results were slightly below expectations due primarily to lower than forecasted activity in Canada. The Canadian Spring break up extended longer than normal and drilling activity was 50% below last year, negatively impacting the results of our Canadian pressure pumping and Canadian pipeline operations.
"Looking at our fourth fiscal quarter, we expect drilling activity to recover from the depressed Spring breakup levels in Canada. In the U.S., drilling activity is projected to be up slightly with pricing pressures expected to continue in this market. In addition, we expect revenue from our International Pressure Pumping segment to increase modestly as a result of recently deployed assets that will begin operations during the current quarter. Our Oilfield Services Group is projected to achieve double digit revenue growth for this quarter. As such, we expect earnings for our fourth fiscal quarter to be $0.60 to $0.62 per diluted share." This would result in fiscal year results to approximate $2.52 on a fully diluted per share basis, and that would equal current estimates. The forecast for the year beginning Oct.1 is $2.65 per share, and therefore the stock is selling for only 10 times 2008 estimates and for 10 1/2 times the estimate for the year ending this September 30.
Knocking out the extraordinary charge, McDonald's would have earned 71 cents a share on a continuing operations basis. Revenue came in up 12% to just over $6 billion while sales at restaurants open more than a year were up 7.4%.
For the month, ICSC continues to expect same-store sales for the retail industry to post a gain of about 3%.
Lockheed Martin raised its projected earnings per share for 2007 to $6.65-$6.80 from $6.20-$6.35 tipped previously.
September crude fell 1.8%, or $1.33, to close at $73.56 a barrel Tuesday. August reformulated gasoline led the decline among the oil futures, losing 2.7% to close at $2.0477 a gallon. August natural gas lost 2.9% to close at $5.863 per million British thermal units.
Supervalu raised the bottom end of its fiscal 2008 profit forecast by 5 cents to a range of $2.93 to $3.03 a share, excluding acquisition related costs.
PepsiCo said that its strong performance in the first half demonstrates the health of its business and supports its balance-of-year outlook and raised its full year earnings guidance to at least $3.35 a share.
DuPont affirmed that it expects to earn an adjusted $3.15 a share in 2007. The figure excludes a 6-cent charge for special items taken in first-quarter 2007. Thomson's survey is looking for $3.18 a share.
Eli Lilly raised its 2007 sales and earnings guidance and now expects 2007 proforma adjusted earnings per share of between $3.40 to $3.50 a share, or $2.75 to $2.85 on a reported basis. Sales are expected to show mid-teens growth, while pro forma sales are expected to show low-double digit growth.
Smith International said 2007 earnings are expected to be in the range of $3.15 to $3.25 a share.
Sterling touched another 26-year high -- this time of $2.0653 -- against the dollar early Tuesday. The dollar fell to a 15-year low against a basket of major currencies and a record low against the euro on Tuesday, stung by the potential impact on the U.S. economy from the weakening housing sector.The dollar index dropped to a low of 80.016, down around 0.5%.
The composite flash estimate of euro-zone purchasing managers index in July slipped to 57.3 from 57.8 in June, with the manufacturing subcomponent falling to 54.8 from 55.6 in June and the services subcomponent dropping to 58.1 from 58.3. Both manufacturing and services gauges came in below economist forecasts.
Wall Street firms postponed a sale of $3.1 billion in loans that would pay for the leveraged buyout of General Motors' Allison Transmission by private-equity firms, The Wall Street Journal reported Tuesday, citing a person familiar with the matter. The report said the sale of the unit to Carlyle and Onex is "highly likely" to proceed but the delay on difficult conditions in the market for risky corporate loans and bonds.
Norsk Hydro said that for the year global aluminum production growth in 2007 is estimated to reach 12% to 13%, while global aluminium consumption is expected to show slightly lower growth rates. Reported inventories remain at relatively low levels, supporting high metal prices, it said. These strong results reflect well on the prospects for Alcoa and the potential acquisition of the company.
BP said that exploration and production adjusted pretax profit decreased 12% to $6.9 billion, impacted by lower volumes and higher costs. Full year production in 2007 is expected to be in the range of 3.8 to 3.9 million barrels of oil equivalent a day, in line with previous guidance, BP said.
BHP Billiton reported record annual output of alumina, copper, iron ore, aluminum, manganese ore, nickel and coking coal. Among the industrial metals, output for copper climbed 17% for the three month period ending in June from a year earlier. Quarterly production of lead climbed 12%, zinc rose 42%, uranium oxide gained 14%, silver rose 23%, iron ore climbed 6% and nickel jumped 15%. Production of crude oil and natural gas fell 1% in the June-ending quarter and was unchanged from the previous year at 116 million barrels of oil equivalent. Aluminum output for the fourth quarter was unchanged from a year earlier, but output climbed 2% for the year. Output of alumina climbed 7% on quarter and 7% for the year.
UPS reported second-quarter net income of $1.10 billion, or $1.04 a share, compared with $1.06 billion, or 97 cents a share, a year earlier. Wall Street analysts, on average, had expected earnings per share of $1.03, according to Reuters estimates. UPS said that in the third quarter it expects earnings per share in a range from 99 cents to $1.04.
Northrop raised the lower end of its full-year profit from continuing operations target to $4.90 per share from $4.80 per share. The top end remains at $5.05 per share. The company pinpointed its sales forecast at $31.5 billion, the midpoint of its prior range of $31 billion to $32 billion.
Bill Bonner: "And here's another reason not to buy stocks: The dollar is falling. So far this year, investors have lost about 4.5% in dollar-based assets, compared to the euro. That effectively wipes out an entire year's worth of earnings for Treasury bond investors, for example. The typical American barely notices; but the overseas speculator feels every slight drop in the dollar like a bee sting. And the risk to the world financial bubble is that he might go into shock."
Richard Daughty: " I was yanked back to cruel reality when Mr. Grant said. "Specifically, under Basel II, a broker-dealer must set aside just 56 cents in capital to hold US$100 of triple-A-rated securitizations." Yow! Fifty-six lousy cents? Shocked, I am too, too, too nonplussed to comment, so I turn to Junior Mogambo Ranger (JMR) Phil S., who says that only putting up 56 cents to hold $100 in assets seems a bit much, as "That is 1/18th of the 10% stock margin equity required in 1929"!! Hahaha! The exclamation points were added by me...And the stock market may be going up because there is a huge, towering overhang of short interest, and if there is one trick that the sharks of Wall Street reliably pull to eat their fill when short interest expands like this, it is by suddenly running the market sharply up and squeezing the shorts, who buy in a panic to cover their enormous short positions and to keep from losing more money if the stock price continues to rise, making prices go up even more, spooking more shorts, who then buy to cover, making prices go up some more, spooking more shorts."
Countrywide cut its full-year earnings forecast to a range of $2.70 to $3.30 per share from a previous range of $3.50 to $4.30 per share. Countrywide Financial Corp. Chief Executive Angelo Mozilo said the U.S. housing market is unlikely to recover before 2009, as lenders and homeowners work through oversupply, stagnating home prices, and the excesses of recent lax lending standards in much of the mortgage industry.
AT&T reported a 61% rise in quarterly net amid recent acquisitions. The phone giant said it activated 146,000 iPhone subscribers in the last two days of the quarter, 40% of whom were new AT&T Wireless customers.
The WSJ reported Jane MacElree, a family trustee who votes shares totaling about 15% of Dow Jones's total shareholder power, made it clear to the family she was in the anti-Murdoch camp, people familiar said. Ms. MacElree, a member of the Cox branch, is one of the most senior Bancrofts and has been viewed as a swing vote. Her decision could put her at odds with some of her seven children, who support the deal.
Cindy Sheehan and 45 others were arrested by Capitol Police Monday for refusing to leave the office of the chairman of the House Judiciary Committee after demanding President Bush's impeachment. Sheehan said the chairman -- Rep. John Conyers, D-Mich. -- told her he did not have the votes for impeachment.
Four U.S. troops were killed when their vehicle struck a roadside bomb in eastern Afghanistan, a NATO forces spokesman said. Another soldier was injured in the attack.
American Express is setting aside almost $1 Billion for customers who were missing payments.
The Financial Times reported volatility in credit markets has caused the annual cost of insuring €10m of debt for five years to more than double to €366,000 since February, when it stood at about €170,000. The Crossover is an important indicator of credit market sentiment and its steady widening suggests that investors are increasingly concerned about the US subprime crisis and the state of the leveraged loan market. The US version, the CDX Crossover, was about 15bp higher at approximately 299.5bp in early trade.
USG Corp. turned in a sharply lower profit Tuesday as its struggles to adjust to the housing market's dive that it believes will be a multiyear event. The company said it made $56 million, or 56 cents a share, compared with last year's profit of $176 million, or $3.03 a share.
Paccar's earnings for the quarter were $298.3 million, or $1.19 per share, compared to $369.9 million, or $1.47 per share, in the year-ago period. Revenue of $3.43 billion, fell 13 percent from $3.94 billion in the same quarter last year. Analysts expected profit of $1.12 per share on revenue of $3.25 billion. The company said the truck market softened in the U.S. and Canada because of new, tougher emissions regulations.
China's five southern provinces are experiencing a power shortage of as much as 5,000 megawatts this summer as the pace of economic growth spurs demand for electricity to run factories, particularly in Guangdong. "Power demand is growing very fast and the region is faced with high temperatures and low precipitation," China Electricity Council said in a statement on its Web site Monday. "Guangdong power grid faces unprecedented pressure."
Alberta's energy prices continue on the rise as electricity costs have skyrocked to their highest in 10 years. The average price of electricity for the month of June was five cents a kilowatt hour in the wholesale market. On Monday, that average spiked to 53.5 cents a kilowatt hour, Enmax spokesman Peter Hunt said. That rate includes a daytime peak of $1 a kilowatt hour, he said.
Burlington Northern Santa Fe Corp. said Tuesday its second-quarter earnings fell 8 percent, missing Wall Street's estimates, on flat coal volumes and rising fuel expenses.
Canadian Pacific said revenue growth reflected strong global demand for bulk commodities, with double-digit percentage growth in movements of sulphur, fertilizers and coal. Grain revenue improved 9 percent, while industrial and consumer products increased 6 percent and intermodal revenue was up 3 percent. Revenue from moving automobiles fell 4 percent and forest-products revenue declined 2 percent. "We still face some significant challenges through the rest of 2007 with rising fuel refining margins and the strengthening Canadian dollar," said Fred Green, president and CEO.
Bill Gross, managing director of Pacific Investment Management Co. LLC: "Those that assert that this is merely an isolated subprime crisis should observe very closely the price and terms that lenders are willing to accept with Chrysler finance this week," Gross wrote. "That more than anything may wake them, shake them, and tell them that their world has suddenly changed."
August gold climbed $3.30 to close at $684.80 an ounce. September silver climbed 11.3 cents to close at $13.443 an ounce, but September copper fell by 3.7 cents to close at $3.6195 a pound. Meanwhile, the U.S. dollar index rests at a 15-year low of about 80.
For the period ended June 30, Amazon reported earnings of $78 million, or 19 cents a share, compared to earnings of $22 million, or 5 cents a share, for last year's second quarter. Revenue grew 35% to $2.89 billion for the quarter compared with $2.14 billion last year. Analysts were looking for the company to earn 16 cents a share on revenue of $2.81 billion for the June quarter, according to consensus estimates from Thomson First Call.
The Dow Jones Industrial Average lost 223.5 points to 13,720 with 28 of its 30 stocks down. The S&P 500 index dropped 30.4 points, to 1,511, while the Nasdaq Composite lost 50.7 points to end at 2,639.
Nabors Industries Ltd.reported second-quarter net earnings of $228.3 million, or 79 cents a share, little-changed from $233.4 million, or 77 cents, a year ago. Revenue for the quarter rose to $1.17 billion from $1.13 billion. The company said overseas operations helped offset weakness in its North American business.
Iran warned yesterday that it would consider taking "illegal" steps, including possible abrogation of the non-proliferation treaty, if further UN sanctions are imposed because of its nuclear program. -
U.N. inspectors will return next week to a reactor being built in central Iran. The team will visit the heavy-water reactor under construction outside the central industrial city of Arak on July 30 or 31, International Atomic Energy Agency Deputy Director-General Olli Heinonen said after meeting with a senior Iranian envoy.
Neale Donald Walsch: “FEAR is an acronym in the English language for "False Evidence Appearing Real"
Monday, July 23, 2007
Big Mergers Continue
7/24/07 Big Mergers Continue
Transocean, Inc. and GlobalSantaFe Corp. said they have agreed to merge to form a $53 billion drilling contractor. Under the deal, which the companies called a "merger of equals," Transocean shareholders will get $33.03 in cash and 0.6996 shares of the combined company for each Transocean share they hold while GlobalSantaFe stockholders will get $22.46 in cash and 0.4757 shares of the combined company for each GlobalSantaFe share they hold.
Wal-Mart Stores Inc. said it will slash prices on 16,000 items this week, much of the discounted merchandise is back-to-school related. Also this week, Wal-Mart said it was launching an advertising campaign to address the importance of saving money as gas prices remain high during the critical shopping season. Families with school-age children are expected to spend on average $563 this year on back to school, Wal-Mart said, citing BIGresearch.
Teleflex Inc. has agreed to acquire Arrow International Inc. in a $2 billion transaction, the companies said. Terms call for Limerick, Pa.-based Teleflex to pay $45.50 a share in cash for Arrow.
Halliburton's earnings from continuing operations were 63 cents against 47 cents. A survey of analysts by Thomson Financial produced a consensus estimate of 56 cents for the quarter. Revenue reached $3.74 billion from $3.12 billion. Thomson's survey was looking for $3.51 billion. The quarter was driven by increased energy-services business, particularly in the Eastern Hemisphere, Halliburton said in a statement. President and CEO Dave Lesar said: "We are pleased with this quarter's results in the Eastern Hemisphere, where we posted 14% revenue and 21% operating income growth as compared to the first quarter of 2007. Our operating income margins in the Eastern Hemisphere increased to nearly 22%... In addition, we have seen a strong recovery in the United States well stimulation market from the slowdown we experienced last winter." Additionally, Halliburton's board of directors increased the company's share repurchase program by an additional $2 billion to a total of $5 billion.
United Rentals Inc. definitively agreed to be acquired by affiliates of Cerberus Capital Management LP, the New York investment firm, for $34.50 a share.
Life insurance group Resolution said Monday that it is in advanced talks with Friends Provident over an all-share deal which would give Resolution shareholders a 50.9% stake in the combined company.
China Oilfield Services Ltd. reported a 20% rise in drill rig activity in the first half. Operating days for jack-up rigs rose 19.7% while semi-sub rigs rose 18.9%, the company said. Both type of rigs operated at 100% of their available capacity, the statement said.
Barclays has raised its bid for Dutch group ABN AMRO to 67.5 billion euros ($93 billion), helped by some of the biggest ever overseas investments by China and Singapore. Barclays said its new bid was 42.7 billion euros in shares and 24.8 billion euros in cash, up from its previous all-stock offer of 65 billion euros but still below a rival 71 billion euro offer from a group of European banks led by Royal Bank of Scotland .
Merck raised its 2007 profit forecast amid continuing strong demand for the medicines. Merck said it earned $1.68 billion, or 77 cents per share, compared with $1.50 billion, or 69 cents per share, a year earlier.
John Hussman: "Are the index profits earned over the most recent 12 months a true measure of the earnings power of the index? Or are the average earnings – earned throughout the ups and downs of the business cycle – a better measure? Arriving at the true measure of earnings power is important, Graham counsels, because that's the figure to use when calculating a proper P/E ratio. The answers to these questions are more important today than at any time in at least 60 years. That's because the difference between the P/E ratio based on trailing earnings and the P/E ratio based on average earnings is wider than at any time during this period. There are two other reasons that make the question timely. The first is that this earnings cycle is one of the longest on record. If we count a profit cycle from the point that year-over-year earnings growth turns positive to when it first turns negative, this is the third-longest cycle since 1950. The longest cycle took place during the mid to late 90's, lasting 5 ½ years. A cycle of 4 ¾ years ended in 1981. The current cycle is just 3 months shy of that record.But that also makes the current cycle more than twice as long as the average cycle of just over 2 years...The length of the current earnings cycle and the extent to which earnings have grown above trend is now creating a major divergence between traditional P/E ratios and those that adjust for the profits cycle. These adjusted P/E ratios have also moved noticeably higher over the last few months, indicating additional risk over what the traditional P/E ratio already implies...When the adjusted P/E ratio has been below 10, the total return on the S&P 500 has averaged 18.3% annually over the next five years. In contrast, ratios above 25 have led to negative 5-year returns... It takes a number of aggressive assumptions to believe that current earnings represent true sustainable earnings, and that P/E multiples based on those earnings should be taken at face value. The most important of those assumptions is that the profit cycle no longer exists."
Vodafone's board is expected to meet on Monday to discuss the future of its minority stake in Verizon Wireless, a leading US mobile operator. The board is set to discuss Vodafone’s 45 per cent stake in Verizon Wireless in preparation for Tuesday’s annual meeting, because a rebel shareholder is calling for it to be spun off. Last week, Vodafone’s management admitted it was “extremely uncertain” whether the UK group could secure an estimated $21.5bn by selling part of the stake.
Analysts on Monday greeted a report that European telecoms equipment giant Nokia Siemens Networks has offered $7 billion for Tellabs, according to an article published Friday on TheStreet.com. The report said the joint venture of Nokia Corp. and Siemens AG is offering in the range of $16 to $17 a share for the U.S. company, but noted that the deal could take a while to complete because Tellabs' decision is not imminent, according to a source familiar with the matter.
Crude oil fell Monday morning after Reuters reported the Organization of Petroleum Exporting Countries was concerned about high oil prices and their impact on the world economy. The group may pump more oil to increase supplies, though it's unclear whether extra production will be needed this year, OPEC President Mohamed al-Hamli said, according to Reuters. Reports that Chevron Corp. started its refinery in El Segundo, California, last week helped pull oil prices lower.
Schering-Plough Corp.'s second-quarter net income more than doubled, as results continued to be boosted by the drug maker's cholesterol joint venture and sales of its allergy and arthritis drugs.
President Bush is threatening to veto federal legislation that would renew the same partnership — the State Children's Health Insurance Program — and expand it to cover more of the nation's nearly 9 million uninsured children.
If he follows through on that threat, Bush could face a first in his presidency: a veto override.
According to an analyst at Thomas Weisel Partners, William Sonoma may be a takeover target.
Ev3 Inc., a maker of catheter-based devices to treat vascular diseases, agreed to buy FoxHollow Technologies, the maker of a device to treat arterial blockage, for $780 million in cash and stock.
Weatherford International Ltd. reported second quarter 2007 net income of $235.0 million from continuing operations, or $0.68 per diluted share, before non-recurring items, and 2 cents less than analyst estimates. Second quarter diluted earnings per share from continuing operations reflect an improvement of 28 percent over the second quarter of 2006 diluted earnings per share from continuing operations of $0.53, before non-recurring items. The non-recurring items in the second quarter of 2007 results include severance associated with the company's second quarter restructuring activities of $8.6 million, after tax, and $50.0 million of expense for withholding taxes on a distribution made by the company to one of its foreign subsidiaries. Second quarter revenues were $1,815.9 million, or 18 percent higher than the same period last year, against a backdrop of a two percent increase in rig activity. Growth in the U.S. rig count was more than offset by a 51% drop in the Canadian rig count. Sequentially, revenues decreased 12 percent, as compared to a 16 percent decline in rig count, driven by a 72% sequential decline in the Canadian rig count. In Canada, all product lines declined. In the U.S., artificial lift, completion, wireline, drilling services and chemicals & stimulation performed exceptionally well. Meanwhile, on Monday, the stock traded at a new 52-week high!
Hewlett-Packard will buy data center automation software company Opsware for $14.25 a share and combine it with its enterprise IT management software unit.
Barry Ritholtz: "New figures released by the Russian Central Bank indicate the amount of U.S. dollars held by private Russian citizens has dropped since 2002 from $35 billion to less than $12 billion as of July 1."
Cumulus Media Inc. has agreed to a merger agreement under which an investor group led by Cumulus chief executive Lew Dickey and an affiliate of Merrill Lynch Global Private Equity would acquire it for $1.3 billion, or $11.75 a share. Atlanta-based Cumulus Media is the second-largest radio company in the U.S. based on station count.
U.K. natural gas for next-month delivery climbed to a record as day-ahead contracts rose, prompting traders to buy forward contracts to protect against possible price jumps. Gas for August advanced for a third day, rising as much as 1.3 pence, or 4.3 percent, to 31.50 pence a therm, according to prices on Bloomberg from the broker Spectron Group Plc. It traded at 31.15 pence at 12:31 p.m. London time. That's equivalent to $6.40 a million British thermal units. A therm is 100,000 Btus.
American Standard Companies Inc is selling its bath and kitchen businesses to a Bain Capital Partners fund for $1.76 billion in cash.
Wells Fargo & Co., the fifth-largest U.S. bank, on Monday said it stopped offering a popular subprime mortgage product in response to market and regulatory pressure.
September crude fell 90 cents, or 1.2%, to close at $74.89 a barrel Monday. August natural gas was the biggest loser among energy futures, declining 6.3%, or 40.7 cents, to close at $6.039 per million British thermal units.
August gold closed at $681.50 an ounce Monday, down $3.20 for the session. September copper led the losses among the metals, losing 1.3%, or 4.98 cents, to close at $3.6565 a pound. September silver fell 7.3 cents to close at $13.33 an ounce.
Starbucks Corp. will raise prices at its U.S. coffee shops by about 9 cents a drink next week to help offset rising costs for commodities such as milk and energy, a spokesman said on Monday. Starbucks' last price increase of about 5 cents per drink went into effect in October.
Texas Instruments Q2 EPS was $.42 compared to $1.50 in the period a year ago. Q2 revenue dropped to $3.42 billion compared to $3.7 billion last year. New orders dropped $455 million year-over-year to $3.45 billion. TI expects revenue for the next quarter to be $3.49 billion to $3.79 billion and EPS to in the range of $0.46 to $0.52.
U.S. retail gasoline prices fell by about 9 cents last week to an average of $3 per gallon, the Energy Department reported Monday.
Transocean, Inc. and GlobalSantaFe Corp. said they have agreed to merge to form a $53 billion drilling contractor. Under the deal, which the companies called a "merger of equals," Transocean shareholders will get $33.03 in cash and 0.6996 shares of the combined company for each Transocean share they hold while GlobalSantaFe stockholders will get $22.46 in cash and 0.4757 shares of the combined company for each GlobalSantaFe share they hold.
Wal-Mart Stores Inc. said it will slash prices on 16,000 items this week, much of the discounted merchandise is back-to-school related. Also this week, Wal-Mart said it was launching an advertising campaign to address the importance of saving money as gas prices remain high during the critical shopping season. Families with school-age children are expected to spend on average $563 this year on back to school, Wal-Mart said, citing BIGresearch.
Teleflex Inc. has agreed to acquire Arrow International Inc. in a $2 billion transaction, the companies said. Terms call for Limerick, Pa.-based Teleflex to pay $45.50 a share in cash for Arrow.
Halliburton's earnings from continuing operations were 63 cents against 47 cents. A survey of analysts by Thomson Financial produced a consensus estimate of 56 cents for the quarter. Revenue reached $3.74 billion from $3.12 billion. Thomson's survey was looking for $3.51 billion. The quarter was driven by increased energy-services business, particularly in the Eastern Hemisphere, Halliburton said in a statement. President and CEO Dave Lesar said: "We are pleased with this quarter's results in the Eastern Hemisphere, where we posted 14% revenue and 21% operating income growth as compared to the first quarter of 2007. Our operating income margins in the Eastern Hemisphere increased to nearly 22%... In addition, we have seen a strong recovery in the United States well stimulation market from the slowdown we experienced last winter." Additionally, Halliburton's board of directors increased the company's share repurchase program by an additional $2 billion to a total of $5 billion.
United Rentals Inc. definitively agreed to be acquired by affiliates of Cerberus Capital Management LP, the New York investment firm, for $34.50 a share.
Life insurance group Resolution said Monday that it is in advanced talks with Friends Provident over an all-share deal which would give Resolution shareholders a 50.9% stake in the combined company.
China Oilfield Services Ltd. reported a 20% rise in drill rig activity in the first half. Operating days for jack-up rigs rose 19.7% while semi-sub rigs rose 18.9%, the company said. Both type of rigs operated at 100% of their available capacity, the statement said.
Barclays has raised its bid for Dutch group ABN AMRO to 67.5 billion euros ($93 billion), helped by some of the biggest ever overseas investments by China and Singapore. Barclays said its new bid was 42.7 billion euros in shares and 24.8 billion euros in cash, up from its previous all-stock offer of 65 billion euros but still below a rival 71 billion euro offer from a group of European banks led by Royal Bank of Scotland .
Merck raised its 2007 profit forecast amid continuing strong demand for the medicines. Merck said it earned $1.68 billion, or 77 cents per share, compared with $1.50 billion, or 69 cents per share, a year earlier.
John Hussman: "Are the index profits earned over the most recent 12 months a true measure of the earnings power of the index? Or are the average earnings – earned throughout the ups and downs of the business cycle – a better measure? Arriving at the true measure of earnings power is important, Graham counsels, because that's the figure to use when calculating a proper P/E ratio. The answers to these questions are more important today than at any time in at least 60 years. That's because the difference between the P/E ratio based on trailing earnings and the P/E ratio based on average earnings is wider than at any time during this period. There are two other reasons that make the question timely. The first is that this earnings cycle is one of the longest on record. If we count a profit cycle from the point that year-over-year earnings growth turns positive to when it first turns negative, this is the third-longest cycle since 1950. The longest cycle took place during the mid to late 90's, lasting 5 ½ years. A cycle of 4 ¾ years ended in 1981. The current cycle is just 3 months shy of that record.But that also makes the current cycle more than twice as long as the average cycle of just over 2 years...The length of the current earnings cycle and the extent to which earnings have grown above trend is now creating a major divergence between traditional P/E ratios and those that adjust for the profits cycle. These adjusted P/E ratios have also moved noticeably higher over the last few months, indicating additional risk over what the traditional P/E ratio already implies...When the adjusted P/E ratio has been below 10, the total return on the S&P 500 has averaged 18.3% annually over the next five years. In contrast, ratios above 25 have led to negative 5-year returns... It takes a number of aggressive assumptions to believe that current earnings represent true sustainable earnings, and that P/E multiples based on those earnings should be taken at face value. The most important of those assumptions is that the profit cycle no longer exists."
Vodafone's board is expected to meet on Monday to discuss the future of its minority stake in Verizon Wireless, a leading US mobile operator. The board is set to discuss Vodafone’s 45 per cent stake in Verizon Wireless in preparation for Tuesday’s annual meeting, because a rebel shareholder is calling for it to be spun off. Last week, Vodafone’s management admitted it was “extremely uncertain” whether the UK group could secure an estimated $21.5bn by selling part of the stake.
Analysts on Monday greeted a report that European telecoms equipment giant Nokia Siemens Networks has offered $7 billion for Tellabs, according to an article published Friday on TheStreet.com. The report said the joint venture of Nokia Corp. and Siemens AG is offering in the range of $16 to $17 a share for the U.S. company, but noted that the deal could take a while to complete because Tellabs' decision is not imminent, according to a source familiar with the matter.
Crude oil fell Monday morning after Reuters reported the Organization of Petroleum Exporting Countries was concerned about high oil prices and their impact on the world economy. The group may pump more oil to increase supplies, though it's unclear whether extra production will be needed this year, OPEC President Mohamed al-Hamli said, according to Reuters. Reports that Chevron Corp. started its refinery in El Segundo, California, last week helped pull oil prices lower.
Schering-Plough Corp.'s second-quarter net income more than doubled, as results continued to be boosted by the drug maker's cholesterol joint venture and sales of its allergy and arthritis drugs.
President Bush is threatening to veto federal legislation that would renew the same partnership — the State Children's Health Insurance Program — and expand it to cover more of the nation's nearly 9 million uninsured children.
If he follows through on that threat, Bush could face a first in his presidency: a veto override.
According to an analyst at Thomas Weisel Partners, William Sonoma may be a takeover target.
Ev3 Inc., a maker of catheter-based devices to treat vascular diseases, agreed to buy FoxHollow Technologies, the maker of a device to treat arterial blockage, for $780 million in cash and stock.
Weatherford International Ltd. reported second quarter 2007 net income of $235.0 million from continuing operations, or $0.68 per diluted share, before non-recurring items, and 2 cents less than analyst estimates. Second quarter diluted earnings per share from continuing operations reflect an improvement of 28 percent over the second quarter of 2006 diluted earnings per share from continuing operations of $0.53, before non-recurring items. The non-recurring items in the second quarter of 2007 results include severance associated with the company's second quarter restructuring activities of $8.6 million, after tax, and $50.0 million of expense for withholding taxes on a distribution made by the company to one of its foreign subsidiaries. Second quarter revenues were $1,815.9 million, or 18 percent higher than the same period last year, against a backdrop of a two percent increase in rig activity. Growth in the U.S. rig count was more than offset by a 51% drop in the Canadian rig count. Sequentially, revenues decreased 12 percent, as compared to a 16 percent decline in rig count, driven by a 72% sequential decline in the Canadian rig count. In Canada, all product lines declined. In the U.S., artificial lift, completion, wireline, drilling services and chemicals & stimulation performed exceptionally well. Meanwhile, on Monday, the stock traded at a new 52-week high!
Hewlett-Packard will buy data center automation software company Opsware for $14.25 a share and combine it with its enterprise IT management software unit.
Barry Ritholtz: "New figures released by the Russian Central Bank indicate the amount of U.S. dollars held by private Russian citizens has dropped since 2002 from $35 billion to less than $12 billion as of July 1."
Cumulus Media Inc. has agreed to a merger agreement under which an investor group led by Cumulus chief executive Lew Dickey and an affiliate of Merrill Lynch Global Private Equity would acquire it for $1.3 billion, or $11.75 a share. Atlanta-based Cumulus Media is the second-largest radio company in the U.S. based on station count.
U.K. natural gas for next-month delivery climbed to a record as day-ahead contracts rose, prompting traders to buy forward contracts to protect against possible price jumps. Gas for August advanced for a third day, rising as much as 1.3 pence, or 4.3 percent, to 31.50 pence a therm, according to prices on Bloomberg from the broker Spectron Group Plc. It traded at 31.15 pence at 12:31 p.m. London time. That's equivalent to $6.40 a million British thermal units. A therm is 100,000 Btus.
American Standard Companies Inc is selling its bath and kitchen businesses to a Bain Capital Partners fund for $1.76 billion in cash.
Wells Fargo & Co., the fifth-largest U.S. bank, on Monday said it stopped offering a popular subprime mortgage product in response to market and regulatory pressure.
September crude fell 90 cents, or 1.2%, to close at $74.89 a barrel Monday. August natural gas was the biggest loser among energy futures, declining 6.3%, or 40.7 cents, to close at $6.039 per million British thermal units.
August gold closed at $681.50 an ounce Monday, down $3.20 for the session. September copper led the losses among the metals, losing 1.3%, or 4.98 cents, to close at $3.6565 a pound. September silver fell 7.3 cents to close at $13.33 an ounce.
Starbucks Corp. will raise prices at its U.S. coffee shops by about 9 cents a drink next week to help offset rising costs for commodities such as milk and energy, a spokesman said on Monday. Starbucks' last price increase of about 5 cents per drink went into effect in October.
Texas Instruments Q2 EPS was $.42 compared to $1.50 in the period a year ago. Q2 revenue dropped to $3.42 billion compared to $3.7 billion last year. New orders dropped $455 million year-over-year to $3.45 billion. TI expects revenue for the next quarter to be $3.49 billion to $3.79 billion and EPS to in the range of $0.46 to $0.52.
U.S. retail gasoline prices fell by about 9 cents last week to an average of $3 per gallon, the Energy Department reported Monday.
Sunday, July 22, 2007
The New Week
7/23/07 The New Week
State-run Saudi Arabian Oil Co., or Saudi Aramco, said Saturday that four of its foreign employees died in a fire this week at the Ras Tanura terminal on the country's east coast.
TheOilDrum: "It looks as though Tata's Rs.100,000 car will be a reality next year. It is now being praised all over the world as India's shining moment ushering in a new automobile era. When seen in the background of India's energy crisis, it shows India's total lack of preparedness and long-term planning failure."
TheOilDrum asks whether a natural gas crisis is coming? With significant short positions, and storage at high levels in the U.S., most analysts question whether natural gas can hold at the present $6.44 level. I suggest their thinking does not consider the big picture. In my view, natural gas is the energy source for the future and possibly for just around the bend.
Mike Burk: "When the market is rising new lows are usually low or declining while new highs are rising. Recently we have been witnessing an unusual condition where both new highs and new lows have been increasing...On Friday there were 180 new lows on the NASDAQ while the high for the week on the NYSE was 174 on Wednesday. These were the highest numbers of new lows on the NASDAQ since July 21, 2006 when there were 240 and 180 on the NYSE July 18, 2006 near the lows for the cycle...I have often said the small caps lead both up and down and they are deteriorating relative to the blue chips. Tops can take a long time to develop, but, that development appears to be underway...A significant top appears to be developing, however, seasonal factors are likely to prolong that development. Short term the sell off has a way to go but end of month seasonal influences are likely to arrest the decline in a few days. I expect the major indices to be higher on Friday July 27 than they were on Friday July 20."
Barry Ritholtz writes "Energy Shock: Sector's Shares Still a Bargain: The average price-to-earnings ratio for shares in the Philadelphia Stock Exchange's oil equipment and services index, based on expectations for earnings over the next 12 months, is 15. That's below the 10-year average of 21 times, according to RBC Capital Markets. The overall price-to-earnings multiple for stocks in the S&P 500 index is 16. (Wall Street Journal)"
The big banks and the big brokers have been taking it on the chin. No one can tell what the bottom might be. However, in my view, for long term investors, should Wells Fargo dip further to the $32.50 area and Lehman to the $62 area, it would be something for you to consider.
Army Maj. Gen. Benjamin Mixon told The Associated Press that if current trends hold, he would like to begin this troop reduction and change in mission in Nineva province, where he said Iraqi army forces already are operating nearly independently. He has proposed shifting the province to Iraqi government control as early as August. Nineva's capital is Mosul, the country's third largest city.
The Sunday Times report said Chicago-based Harris Associates had built a stake representing about 1 percent of UBS over the past three months. Britain's Lansdowne Partners has also built a significant stake, the paper added.
State-run Saudi Arabian Oil Co., or Saudi Aramco, said Saturday that four of its foreign employees died in a fire this week at the Ras Tanura terminal on the country's east coast.
TheOilDrum: "It looks as though Tata's Rs.100,000 car will be a reality next year. It is now being praised all over the world as India's shining moment ushering in a new automobile era. When seen in the background of India's energy crisis, it shows India's total lack of preparedness and long-term planning failure."
TheOilDrum asks whether a natural gas crisis is coming? With significant short positions, and storage at high levels in the U.S., most analysts question whether natural gas can hold at the present $6.44 level. I suggest their thinking does not consider the big picture. In my view, natural gas is the energy source for the future and possibly for just around the bend.
Mike Burk: "When the market is rising new lows are usually low or declining while new highs are rising. Recently we have been witnessing an unusual condition where both new highs and new lows have been increasing...On Friday there were 180 new lows on the NASDAQ while the high for the week on the NYSE was 174 on Wednesday. These were the highest numbers of new lows on the NASDAQ since July 21, 2006 when there were 240 and 180 on the NYSE July 18, 2006 near the lows for the cycle...I have often said the small caps lead both up and down and they are deteriorating relative to the blue chips. Tops can take a long time to develop, but, that development appears to be underway...A significant top appears to be developing, however, seasonal factors are likely to prolong that development. Short term the sell off has a way to go but end of month seasonal influences are likely to arrest the decline in a few days. I expect the major indices to be higher on Friday July 27 than they were on Friday July 20."
Barry Ritholtz writes "Energy Shock: Sector's Shares Still a Bargain: The average price-to-earnings ratio for shares in the Philadelphia Stock Exchange's oil equipment and services index, based on expectations for earnings over the next 12 months, is 15. That's below the 10-year average of 21 times, according to RBC Capital Markets. The overall price-to-earnings multiple for stocks in the S&P 500 index is 16. (Wall Street Journal)"
The big banks and the big brokers have been taking it on the chin. No one can tell what the bottom might be. However, in my view, for long term investors, should Wells Fargo dip further to the $32.50 area and Lehman to the $62 area, it would be something for you to consider.
Army Maj. Gen. Benjamin Mixon told The Associated Press that if current trends hold, he would like to begin this troop reduction and change in mission in Nineva province, where he said Iraqi army forces already are operating nearly independently. He has proposed shifting the province to Iraqi government control as early as August. Nineva's capital is Mosul, the country's third largest city.
The Sunday Times report said Chicago-based Harris Associates had built a stake representing about 1 percent of UBS over the past three months. Britain's Lansdowne Partners has also built a significant stake, the paper added.
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