8/5/07 Risk Adjustment or Train Wreck?
Jeremy Grantham: "The feeling have today is that of watching a very slow motion train wreck."
Doug Noland: "Today, we are in the throes of a dramatic, broad-based and momentous tightening of mortgage Credit. Importantly, key players and sectors throughout the mortgage risk intermediation process are increasingly impaired and now in full retreat. This includes entities such as the mortgage insurers, MGIC’s and Radian’s faltering C-BASS securitization unit, REITs such as failed American Home Mortgage and others, hedge funds such those that failed at Bears Stearns and many more, the broker/dealer community and the expansive mortgage derivatives market generally. There is also the issue of exposed mutual funds, money market funds, pension funds and the banking system in general. Just like NASDAQ went to unimaginable extremes than then doubled during a fateful “blow-off” – total mortgage Credit doubled subsequent to the Greenspan Fed’s reckless post-tech Bubble “reflation.” Risky mortgage exposure now permeates the (global) system and is highly susceptible to “Ponzi Finance” dynamics... The marketplace is now experiencing forced de-leveraging and a liquidity Dislocation - with major systemic ramifications."
The VIX is trading at a 4-year high and has risen 110% in 2007.
Business Week blog: "Have you checked out Tudou.com, the Chinese video-sharing site? Yeah, yeah, the "Chinese YouTube." It's been around since 2005, but is gaining steam. Currently, 40 million Chinese Internet users are watching more than 1.2 billion videos each month on Tudou (according to Nielsen//NetRatings). And Tudou recently announced that it will also air ads—a future source of revenue."
Brian Pretti: "For those who have read our work over the years, you know that one of the primary macro themes is that the US economy is not running on a traditional business cycle, but rather on a credit cycle. These days that thought can, in a sense, be extended to the global economy in that the growth rate in monetary aggregates among the major industrialized countries across the planet has been running double digits."
Doug Noland: "The currency markets are a derivative accident in waiting. Fed rates cuts risk a dollar dislocation and/or a further destabilizing (for spreads) Treasury melt-up."
Monica Day: "There's a fundamental rule about investing - you've probably heard it before: Be brave when others are fearful, and fearful when others are brave."
Doug Noland: "And, let there be no doubt, the prospective Credit tightening will hit grossly inflated and highly susceptible “Golden State” housing prices hard – a scenario that will force lenders to incorporate significantly higher Credit losses into their loan pricing terms... Furthermore, I expect the pricing and availability of Credit required to refinance millions of rate-reset mortgages in California and elsewhere to turn prohibitive for many. And the home equity well is about to run dry – from a combination of sharply tightened Credit conditions and accelerating home price declines."
Brett Steenbarger: "Writers blithely quote statistics that 80% or more of traders lose money, but rarely do we stop to consider that trading is creating pain for 80% or more of its participants."
Proctor and Gamble warned that rising commodity prices would hit its profit margins in the next quarter. “We expect raw material and energy costs to increase again in fiscal 2008,” said Clayton Daley, chief financial officer. The company said it would raise prices to try to cover increased costs. In the last quarter, coffee sales were up by double digits as the company passed on higher prices to consumers. The impact of higher commodity prices is expected to be 6-7.5 per cent on gross margins, about double the impact the company originally forecast. As a result, operating margins would only improve “modestly”, the company said." Who should we believe- P&G or the Fed's benign core inflation numbers?
First NLC Financial Services LLC, a subprime mortgage lender being sold by Friedman, Billings, Ramsey Group Inc , said on Friday it has laid off nearly half of its 1,350 employees as it combats a slumping housing market.
The current Atlantic hurricane season will show above normal activity, but with two fewer storms and one less hurricane than earlier predicted, widely-watched forecasters at Colorado State University said in a report Friday.
Between The Hedges: "The CBOE total put/call ratio soared to a very elevated 1.76. It has been higher only nine other times in the last decade. The last time it was this high was March 15, a day after the market had already bottomed. Moreover, the 10-day moving average of the CBOE total put/call is a very elevated 1.25. It has only exceeded this level once in history, which was during the March decline. Only time will tell, but I sense that the market has once again priced in the worst-case scenario rather than the most realistic one with regards to the U.S. economy and stocks."
Ford is recalling 3.6 million passenger cars, trucks, sport utility vehicles and vans to address concerns about a cruise control switch that has led to previous recalls based on reports of fires. Ford said the recall covered more than a dozen vehicle models built from 1992-2004.
The U.S. dollar index fell this past week to 80.12.
Doug Noland: "liquidity is evaporating from numerous corners of the financial world, as both investors in hedge funds and the banks that lend to them try to cut and run from recent losses… ‘In many ways, this episode is similar to the LTCM crisis in 1998, as margin calls on leveraged investors are forcing them to sell illiquid assets into unreceptive markets at ever-lower prices,’ says Larry Cantor of Barclays Capital.”
Peter Schiff: "So in effect, any attempt by the Fed to reduce interest rates to bolster housing will backfire, as rising long-term yields will only put additional nails in the housing coffin... When reality sets in, housing prices will collapse...When real estate prices collapse, trillions of dollars of home equity will be wiped out, with disastrous repercussions for an American economy addicted to consumer spending. Though many consumers will see their home equity vanish, their mortgage debt, much of which will become more burdensome once adjustable rates reset much higher, will remain. Flat broke and facing rising mortgage payments, as well as higher gas and food prices, consumers will severely pull back on discretionary spending. As millions lose their jobs as a result of this retrenchment, the recession will kick into high gear, causing even greater damage to the real estate market, the dollar, bonds, and the economy, resulting in even more safe haven flows moving into gold."
John Mauldin: "We have just seen $197 billion of mortgage resets so far this year. That is less than we will see in two months (February and March) of next year. The first six months of next year will see more than the total for 2007 or $521 billion. This suggests to me that the number of foreclosures is due to rise dramatically from the already high current levels, putting more homes into a weak housing environment. These homes that are going to see reset prices are for the most part not going to be able to be rolled over into a traditional 30 year mortgage because there is not going to be enough equity to get a traditional mortgage. While the total increase in payments is an estimated $42 billion, which is not all that large in the grand scheme of things, to the individuals who are paying the increase it is a large increase in their housing costs. My estimate is that this is about one-half of 1% of total consumer spending. Along with inflationary rises in food and energy, this is going to continue to put pressure on consumer spending."
Win Borden: “If you wait to do everything until you're sure it's right, you'll probably never do much of anything.”
Saturday, August 04, 2007
Friday, August 03, 2007
Expectations And Fear
8/4/07 Expectations And Fear
Silver Wheaton's second-quarter net profit slipped to $22.9 million, or 10 cents a share, from $25.2 million, or 12 cents a share, after lower silver sales. Analysts had been expecting earnings of 13 cents a share, according to data compiled by Thomson Financial. The firm said that, although second quarter earnings were affected by a shortfall in production at its Luismin mines in Mexico, it's confident that this shortfall is only temporary and production will be back to normal by the end of the year.
Worldwide sales of semiconductors slipped 1.7% to $20 billion in June against May, the Semiconductor Industry Association said Friday. First-half sales were up 2% to $121 billion, it said.
Hercules Offshore stated a recent deterioration in the outlook for U.S. natural gas prices could delay expected recovery in jackup demand.
Komatsu Ltd. plans to open an assembly plant in Russia around 2010, according to the Nikkei News. Komatsu will open an assembly plant producing hydraulic excavation equipment with an annual capacity of 1,000 units, the Nikkei reported in its Friday edition with citing sources.
Procter & Gamble Co. posted a higher quarterly profit on Friday, driven by cost controls, and also announced an acceleration of its share repurchase plans. Profit was $2.27 billion, or 67 cents per share, in the fiscal fourth quarter ended in June, up from $1.9 billion, or 55 cents per share, a year earlier.
Justice Litle: "Sovereign Wealth Funds, or SWFs for short, are essentially state-owned and state-controlled investment vehicles. They are the blue whales of global finance; in terms of sheer size, Sovereign Wealth Funds are the biggest animals on the planet. For example, the Blackstone Group towers over its private equity peers with $88 billion under management -- and yet the Abu Dhabi Investment authority, the oldest and largest of the SWFs, is reckoned to manage nearly ten times that much ($875 billion). The top five Sovereign Wealth Funds -- run by Abu Dhabi, Singapore, Norway, China, and Kuwait respectively -- collectively manage more than $2 trillion, according to Morgan Stanley and WSJ estimates. That sum alone, representing just five countries, is bigger than the entire hedge fund industry (in terms of assets under management). Many more countries, like Russia, Qatar, Botswana, and so on, have their own SWFs. (Russia has more than $100 billion.) Japan, oddly, does not have a Sovereign Wealth Fund; but could reasonably set aside $500-$700 billion if it did."
Toyota's net profit also soared 32 percent to 491.54 billion yen while revenue grew 15.7 percent to 6.52 trillion yen. Currency gains added 100 billion yen to the growth in operating profit, but Toyota said its own efforts had also contributed to a record quarter for revenue and profits."We have increased our sales volume in all regions excluding Japan," Senior Managing Director Takeshi Suzuki told a news conference. "Our core earnings are growing solidly."
Pharmaceutical company Novo Nordisk A/S, the world's largest producer of insulin, said Friday that second-quarter net profit more than doubled and raised its guidance for the full year. Its shares rose more than 4 percent.
Justice Litle: "As a recent issue of Grant's explains, global commercial banks are only required to set aside 56 cents ($0.56) for every $100 worth of triple-A rated securities they hold. That's roughly 178-to-1 leverage. If that same chunk of securities is downgraded to triple-B, the set-aside requirements jump from $0.56 to $4.80... a margin increase of more than 750 percent. Drop all the way down to double-B-minus, and the requirement skyrockets to $52 per $100 worth of securities held... a margin increase of more than nine thousand percent. The commodity trading equivalent would be buying corn futures at $540 per contract, and receiving notice one day that margins have gone to $49,140 per contract. Think you might sell? There are multiple stops along the way, of course -- it's not a straight shot from the penthouse to the basement -- but each lowered notch requires another hefty whack of the bank's available capital."
American Home Mortgage said that that it would lay off all but 750 of its 7,000 employees "in light of liquidity issues resulting from disruptions" in the secondary mortgage market.
According to the WSJ, jittery home-mortgage lenders are cutting off credit or raising interest rates for a growing portion of Americans, extending well beyond the market for subprime loans for people with the weakest credit records. This worsening credit crunch threatens to put further pressure on the housing market, where prices are flat to declining in much of the country. The market for mortgage-backed securities is "very panicked," Michael Perry, chief executive of IndyMac Bancorp Inc., another big lender, said in a message on the lender's Web site yesterday.
Microsoft Corp. slashed the price on its Windows Vista operating system in China by more than half, in a bid to lure buyers away from pirated versions of the software.
Nouriel Roubini: "Specifically, hundreds of thousands of subprime and near prime households will default on their mortgage and their homes will end up in foreclosure; the ability of the financial and legal system to manage such a surge in bankruptcies is severely limited. Also, over fifty subprime lenders have now gone out of business and now some of the larger lenders – see AHM and Accredited Home Lenders Holdings Co. - are also in trouble and near bankrupt; the mortgage rot is spreading from subprime to near prime and Alt-A (see Countrywide, IndyMac, etc.). Now, there are news of massive losses among major US home builders and rumors that some may be near bankruptcies. There are already half a dozen mid-sized hedge funds – between US, Australia and Europe – that have gone belly up; and every day financial institutions across the world are reporting large subprime-related losses as a lot of the RMBS and CDO were bought by foreign investors. And in a world where most investors in these illiquid instruments (RMBS, CDOs, CLOs, etc.) are marking to model rather than marking to market the extent of the eventual losses is unknown and the number of financial institutions that will go belly up is also unknown and likely to surprise on the upside. Systemic risk episodes often occur with a death through 1000 cuts rather than one single major – a’ la LTCM – blow."
In the face of a growing crisis of confidence in Chinese goods, Bo Xilai, commerce minister, said that “over 99 per cent of China’s export products are good and safe”. In comments published on Thursday on the ministry’s website, he added: “We hope that all parties can treat Chinese products objectively, fairly and rationally. Don’t let this damage the normal development of trade.”
OPEC's daily shipments of crude oil will probably fall 0.4 percent in the four weeks to Aug. 18 from the previous month, Oil Movements predicted.
Nonfarm payrolls expanded by 92,000 in July, lower than the 133,000 expected by economists surveyed by MarketWatch. The unemployment rate ticked higher to 4.6% in July from 4.5% in the previous month. This is the highest unemployment rate since January. Economists forecast the unemployment rate to remain steady at 4.5%. Average hourly earnings increased 6 cents, or 0.3% to $17.45. The increase was in line with expectations. Earnings are up 3.9% in the past year. The average workweek slipped 6 minutes to 33.8 hours. Economists were expecting the workweek to remain steady at 33.9 hours in July.
China's shares rose to a new record high Friday the third time in a week.
IndyMac Bancorp Inc. is joining rival lenders in making ``very major changes'' to home-loan standards and charging higher rates because of a slump in mortgage securities, the company's chief executive officer said. IndyMac Bancorp is the holding company for IndyMac Bank, F.S.B., which bills itself as the seventh largest savings and loan and the second largest independent mortgage lender in the nation.
South Korea's Finance Minister Kwon Okyu said the yen's weakness isn't justified and that carry trades based on the Japanese currency threaten to destabilize global markets.
George Ure: "Only 26,000 of the 92,000 new jobs were from the CES Birth-Death Model, although 537,000 jobs 'created' this year are attributable to the CES model. The U-6 report (a proxy for unemployed engineers flipping burgers) index moved up a tad to 8.6%."
Weyerhaeuser Co. said on Friday its second-quarter earnings fell due to higher costs and a weak U.S. housing market. Excluding items, the company earned 48 cents a share in the latest quarter down from $1.19 a year earlier.
A decision not to renew a major nuclear arms reduction treaty may have dire consequences for U.S. foreign policy and the entire world, Russian experts said Thursday. The Strategic Arms Reduction Treaty (START-I) was signed by the United States and the Soviet Union on July 31, 1991, five months before the union collapsed, and remains in force between the U.S., Russia, and three other ex-Soviet states.
Belarus, Kazakhstan and Ukraine have since disposed of all their nuclear weapons or transferred them to Russia, and the U.S. and Russia have reduced the number of delivery vehicles to 1,600, with no more than 6,000 warheads. The treaty is set to expire on December 5, 2009.
General James E. Cartwright, commander of the U.S. Strategic Command, said Wednesday that the refusal to prolong the START-I Treaty would allow the United States to conduct quick and pinpointed strikes anywhere in the world, which is crucial for an effective fight against global terrorism. I wonder whether this will be reported on the front page to Americans? The story was printed in Moscow.
Yahoo! was the most popular property, with 41.5 million unique visitors, and Yahoo! now reaches 77 percent of the total Japanese online population.
GAO Report: "Despite 4 years of effort and $2.7 billion in U.S. reconstruction funds, Iraqi oil output has consistently fallen below U.S. program goals. In addition, the State Department's data on Iraq's oil production may be overstated since data from the U.S. Department of Energy show lower production levels -- between 100,000 and 300,000 barrels less per day. Inadequate metering, re-injection, corruption, theft and sabotage account for the discrepancy, which amounts to about $1.8 to $5.5 billion per year. Comprehensive metering of Iraq's oil production has been a long-standing problem and continuing need."
Countrywide's credit default swap spreads widened by almost 100 basis points, reaching more than 300 basis points, or $300,000 per year for five years to insure $10 million in debt, from 215 basis points at Thursday's close.
The cost to insure Bear's debt with credit default swaps rose to around 163 basis points, or $163,000 per year for five years to insure $10 million in debt, from about 115 basis points at Thursday's close.
Lehman Brothers and Goldman Sachs credit default swap spreads each widened by around 30 basis points to 130 basis points and 100 basis points, respectively.
Merrill Lynch's swaps were also around 30 basis points wider at around 100 basis points and Morgan Stanley's swaps widened around 20 basis points to the high 90 basis point area.
DaimlerChrysler AG has completed the sale of its majority interest in the Chrysler Group to a subsidiary of private-equity firm Cerberus Capital Management L.P. Cerberus now has an 80.1% stake in the Chrysler Holding LLC, while Daimler retains a 19.9% interest, the automaker said. Both companies will subscribe $2 billion of second lien debt for Chrysler's automotive business, to be drawn within 12 months, the company said. Daimler's portion will be $1.5 billion.
December gold climbed $7.80 to close at a more than one-week high of $684.40 an ounce. September silver rose 1.3% to close at $13.158 an ounce, up 3.5% for the week. September copper fell 2.6% to close at $3.479 a pound, down 2% for the week.
Bear Stearns: "Our franchise is profitable and healthy and our balance sheet is strong and liquid." Bond market turmoil sending investors fleeing from risk may be a worse predicament than the 1980s stock market fall and Internet bubble burst, Bear Stearns Chief Financial Officer Sam Molinaro said on Friday.
"These times are pretty significant in the fixed income market," Molinaro said on a conference call with analysts. "It's as been as bad as I've seen it in 22 years. The fixed income market environment we've seen in the last eight weeks has been pretty extreme."
September crude closed at $75.48 a barrel, down $1.38 for Friday's session and down 2% for the week. September natural gas fell 1.6 cents to close at $6.09 per million British thermal units. It lost 1.9% for the week.
"Banks want to see higher credit scores and more money in the bank and larger down payments," says Melissa Cohn, chief executive of Manhattan Mortgage, a New York mortgage broker. "If lenders can't sell loans they have, there is no choice but to offer mortgages at a higher rate to homeowners," Cohn says. "It has nothing to do with bond market yields right now". As an example, Cohn says that even someone with a high credit score could pay as much as 8.25% for a jumbo 30-year loan. That's well above the conventional 30-year fixed mortgage rate, which currently average 6.26%, according to Bankrate.com.
Wells Fargo, the second-largest U.S. mortgage lender, said it is curtailing issuance of "Alt-A" home loans through brokers, while Wachovia has stopped entirely. Wachovia also said one lending unit has temporarily halted its Alt-A production.
Lenders are making fewer home loans once thought to be safe because investors now perceive those loans to be risky. The changes could worsen the U.S. housing slump by putting home ownership beyond the reach of a larger number of Americans.
Alt-A loans, short for Alternative-A, fall between prime and subprime in quality. One Alt-A specialist, American Home Mortgage Investment Corp , is closing on Friday.
8/4/07 Expectations And Fear
Silver Wheaton's second-quarter net profit slipped to $22.9 million, or 10 cents a share, from $25.2 million, or 12 cents a share, after lower silver sales. Analysts had been expecting earnings of 13 cents a share, according to data compiled by Thomson Financial. The firm said that, although second quarter earnings were affected by a shortfall in production at its Luismin mines in Mexico, it's confident that this shortfall is only temporary and production will be back to normal by the end of the year.
Worldwide sales of semiconductors slipped 1.7% to $20 billion in June against May, the Semiconductor Industry Association said Friday. First-half sales were up 2% to $121 billion, it said.
Hercules Offshore stated a recent deterioration in the outlook for U.S. natural gas prices could delay expected recovery in jackup demand.
Komatsu Ltd. plans to open an assembly plant in Russia around 2010, according to the Nikkei News. Komatsu will open an assembly plant producing hydraulic excavation equipment with an annual capacity of 1,000 units, the Nikkei reported in its Friday edition with citing sources.
Procter & Gamble Co. posted a higher quarterly profit on Friday, driven by cost controls, and also announced an acceleration of its share repurchase plans. Profit was $2.27 billion, or 67 cents per share, in the fiscal fourth quarter ended in June, up from $1.9 billion, or 55 cents per share, a year earlier.
Justice Litle: "Sovereign Wealth Funds, or SWFs for short, are essentially state-owned and state-controlled investment vehicles. They are the blue whales of global finance; in terms of sheer size, Sovereign Wealth Funds are the biggest animals on the planet. For example, the Blackstone Group towers over its private equity peers with $88 billion under management -- and yet the Abu Dhabi Investment authority, the oldest and largest of the SWFs, is reckoned to manage nearly ten times that much ($875 billion). The top five Sovereign Wealth Funds -- run by Abu Dhabi, Singapore, Norway, China, and Kuwait respectively -- collectively manage more than $2 trillion, according to Morgan Stanley and WSJ estimates. That sum alone, representing just five countries, is bigger than the entire hedge fund industry (in terms of assets under management). Many more countries, like Russia, Qatar, Botswana, and so on, have their own SWFs. (Russia has more than $100 billion.) Japan, oddly, does not have a Sovereign Wealth Fund; but could reasonably set aside $500-$700 billion if it did."
Toyota's net profit also soared 32 percent to 491.54 billion yen while revenue grew 15.7 percent to 6.52 trillion yen. Currency gains added 100 billion yen to the growth in operating profit, but Toyota said its own efforts had also contributed to a record quarter for revenue and profits."We have increased our sales volume in all regions excluding Japan," Senior Managing Director Takeshi Suzuki told a news conference. "Our core earnings are growing solidly."
Pharmaceutical company Novo Nordisk A/S, the world's largest producer of insulin, said Friday that second-quarter net profit more than doubled and raised its guidance for the full year. Its shares rose more than 4 percent.
Justice Litle: "As a recent issue of Grant's explains, global commercial banks are only required to set aside 56 cents ($0.56) for every $100 worth of triple-A rated securities they hold. That's roughly 178-to-1 leverage. If that same chunk of securities is downgraded to triple-B, the set-aside requirements jump from $0.56 to $4.80... a margin increase of more than 750 percent. Drop all the way down to double-B-minus, and the requirement skyrockets to $52 per $100 worth of securities held... a margin increase of more than nine thousand percent. The commodity trading equivalent would be buying corn futures at $540 per contract, and receiving notice one day that margins have gone to $49,140 per contract. Think you might sell? There are multiple stops along the way, of course -- it's not a straight shot from the penthouse to the basement -- but each lowered notch requires another hefty whack of the bank's available capital."
American Home Mortgage said that that it would lay off all but 750 of its 7,000 employees “in light of liquidity issues resulting from disruptions” in the secondary mortgage market.
According to the WSJ, jittery home-mortgage lenders are cutting off credit or raising interest rates for a growing portion of Americans, extending well beyond the market for subprime loans for people with the weakest credit records. This worsening credit crunch threatens to put further pressure on the housing market, where prices are flat to declining in much of the country. The market for mortgage-backed securities is "very panicked," Michael Perry, chief executive of IndyMac Bancorp Inc., another big lender, said in a message on the lender's Web site yesterday.
Microsoft Corp. slashed the price on its Windows Vista operating system in China by more than half, in a bid to lure buyers away from pirated versions of the software.
Nouriel Roubini: "Specifically, hundreds of thousands of subprime and near prime households will default on their mortgage and their homes will end up in foreclosure; the ability of the financial and legal system to manage such a surge in bankruptcies is severely limited. Also, over fifty subprime lenders have now gone out of business and now some of the larger lenders – see AHM and Accredited Home Lenders Holdings Co. - are also in trouble and near bankrupt; the mortgage rot is spreading from subprime to near prime and Alt-A (see Countrywide, IndyMac, etc.). Now, there are news of massive losses among major US home builders and rumors that some may be near bankruptcies. There are already half a dozen mid-sized hedge funds – between US, Australia and Europe – that have gone belly up; and every day financial institutions across the world are reporting large subprime-related losses as a lot of the RMBS and CDO were bought by foreign investors. And in a world where most investors in these illiquid instruments (RMBS, CDOs, CLOs, etc.) are marking to model rather than marking to market the extent of the eventual losses is unknown and the number of financial institutions that will go belly up is also unknown and likely to surprise on the upside. Systemic risk episodes often occur with a death through 1000 cuts rather than one single major – a’ la LTCM – blow."
In the face of a growing crisis of confidence in Chinese goods, Bo Xilai, commerce minister, said that “over 99 per cent of China’s export products are good and safe”. In comments published on Thursday on the ministry’s website, he added: “We hope that all parties can treat Chinese products objectively, fairly and rationally. Don’t let this damage the normal development of trade.”
OPEC's daily shipments of crude oil will probably fall 0.4 percent in the four weeks to Aug. 18 from the previous month, Oil Movements predicted.
Nonfarm payrolls expanded by 92,000 in July, lower than the 133,000 expected by economists surveyed by MarketWatch. The unemployment rate ticked higher to 4.6% in July from 4.5% in the previous month. This is the highest unemployment rate since January. Economists forecast the unemployment rate to remain steady at 4.5%. Average hourly earnings increased 6 cents, or 0.3% to $17.45. The increase was in line with expectations. Earnings are up 3.9% in the past year. The average workweek slipped 6 minutes to 33.8 hours. Economists were expecting the workweek to remain steady at 33.9 hours in July.
China's shares rose to a new record high Friday the third time in a week.
IndyMac Bancorp Inc. is joining rival lenders in making ``very major changes'' to home-loan standards and charging higher rates because of a slump in mortgage securities, the company's chief executive officer said. IndyMac Bancorp is the holding company for IndyMac Bank, F.S.B., which bills itself as the seventh largest savings and loan and the second largest independent mortgage lender in the nation.
South Korea's Finance Minister Kwon Okyu said the yen's weakness isn't justified and that carry trades based on the Japanese currency threaten to destabilize global markets.
George Ure: "Only 26,000 of the 92,000 new jobs were from the CES Birth-Death Model, although 537,000 jobs 'created' this year are attributable to the CES model. The U-6 report (a proxy for unemployed engineers flipping burgers) index moved up a tad to 8.6%."
Weyerhaeuser Co. said on Friday its second-quarter earnings fell due to higher costs and a weak U.S. housing market. Excluding items, the company earned 48 cents a share in the latest quarter down from $1.19 a year earlier.
A decision not to renew a major nuclear arms reduction treaty may have dire consequences for U.S. foreign policy and the entire world, Russian experts said Thursday.
The Strategic Arms Reduction Treaty (START-I) was signed by the United States and the Soviet Union on July 31, 1991, five months before the union collapsed, and remains in force between the U.S., Russia, and three other ex-Soviet states.
Belarus, Kazakhstan and Ukraine have since disposed of all their nuclear weapons or transferred them to Russia, and the U.S. and Russia have reduced the number of delivery vehicles to 1,600, with no more than 6,000 warheads. The treaty is set to expire on December 5, 2009.
General James E. Cartwright, commander of the U.S. Strategic Command, said Wednesday that the refusal to prolong the START-I Treaty would allow the United States to conduct quick and pinpointed strikes anywhere in the world, which is crucial for an effective fight against global terrorism. I wonder whether this will be reported on the front page to Americans? The story was printed in Moscow.
Yahoo! was the most popular property, with 41.5 million unique visitors, and Yahoo! now reaches 77 percent of the total Japanese online population.
GAO Report: "Despite 4 years of effort and $2.7 billion in U.S. reconstruction funds, Iraqi oil output has consistently fallen below U.S. program goals. In addition, the State Department's data on Iraq's oil production may be overstated since data from the U.S. Department of Energy show lower production levels -- between 100,000 and 300,000 barrels less per day. Inadequate metering, re-injection, corruption, theft and sabotage account for the discrepancy, which amounts to about $1.8 to $5.5 billion per year. Comprehensive metering of Iraq's oil production has been a long-standing problem and continuing need."
Countrywide's credit default swap spreads widened by almost 100 basis points, reaching more than 300 basis points, or $300,000 per year for five years to insure $10 million in debt, from 215 basis points at Thursday's close.
The cost to insure Bear's debt with credit default swaps rose to around 163 basis points, or $163,000 per year for five years to insure $10 million in debt, from about 115 basis points at Thursday's close.
Lehman Brothers and Goldman Sachs credit default swap spreads each widened by around 30 basis points to 130 basis points and 100 basis points, respectively.
Merrill Lynch's swaps were also around 30 basis points wider at around 100 basis points and Morgan Stanley's swaps widened around 20 basis points to the high 90 basis point area.
DaimlerChrysler AG has completed the sale of its majority interest in the Chrysler Group to a subsidiary of private-equity firm Cerberus Capital Management L.P. Cerberus now has an 80.1% stake in the Chrysler Holding LLC, while Daimler retains a 19.9% interest, the automaker said. Both companies will subscribe $2 billion of second lien debt for Chrysler's automotive business, to be drawn within 12 months, the company said. Daimler's portion will be $1.5 billion.
December gold climbed $7.80 to close at a more than one-week high of $684.40 an ounce. September silver rose 1.3% to close at $13.158 an ounce, up 3.5% for the week. September copper fell 2.6% to close at $3.479 a pound, down 2% for the week.
Bear Stearns: "Our franchise is profitable and healthy and our balance sheet is strong and liquid." Bond market turmoil sending investors fleeing from risk may be a worse predicament than the 1980s stock market fall and Internet bubble burst, Bear Stearns Chief Financial Officer Sam Molinaro said on Friday.
"These times are pretty significant in the fixed income market," Molinaro said on a conference call with analysts. "It's as been as bad as I've seen it in 22 years. The fixed income market environment we've seen in the last eight weeks has been pretty extreme."
September crude closed at $75.48 a barrel, down $1.38 for Friday's session and down 2% for the week. September natural gas fell 1.6 cents to close at $6.09 per million British thermal units. It lost 1.9% for the week.
"Banks want to see higher credit scores and more money in the bank and larger down payments," says Melissa Cohn, chief executive of Manhattan Mortgage, a New York mortgage broker. "If lenders can't sell loans they have, there is no choice but to offer mortgages at a higher rate to homeowners," Cohn says. "It has nothing to do with bond market yields right now". As an example, Cohn says that even someone with a high credit score could pay as much as 8.25% for a jumbo 30-year loan. That's well above the conventional 30-year fixed mortgage rate, which currently average 6.26%, according to Bankrate.com.
Wells Fargo, the second-largest U.S. mortgage lender, said it is curtailing issuance of "Alt-A" home loans through brokers, while Wachovia has stopped entirely. Wachovia also said one lending unit has temporarily halted its Alt-A production.
Lenders are making fewer home loans once thought to be safe because investors now perceive those loans to be risky. The changes could worsen the U.S. housing slump by putting home ownership beyond the reach of a larger number of Americans.
Alt-A loans, short for Alternative-A, fall between prime and subprime in quality. One Alt-A specialist, American Home Mortgage Investment Corp , is closing on Friday.
Silver Wheaton's second-quarter net profit slipped to $22.9 million, or 10 cents a share, from $25.2 million, or 12 cents a share, after lower silver sales. Analysts had been expecting earnings of 13 cents a share, according to data compiled by Thomson Financial. The firm said that, although second quarter earnings were affected by a shortfall in production at its Luismin mines in Mexico, it's confident that this shortfall is only temporary and production will be back to normal by the end of the year.
Worldwide sales of semiconductors slipped 1.7% to $20 billion in June against May, the Semiconductor Industry Association said Friday. First-half sales were up 2% to $121 billion, it said.
Hercules Offshore stated a recent deterioration in the outlook for U.S. natural gas prices could delay expected recovery in jackup demand.
Komatsu Ltd. plans to open an assembly plant in Russia around 2010, according to the Nikkei News. Komatsu will open an assembly plant producing hydraulic excavation equipment with an annual capacity of 1,000 units, the Nikkei reported in its Friday edition with citing sources.
Procter & Gamble Co. posted a higher quarterly profit on Friday, driven by cost controls, and also announced an acceleration of its share repurchase plans. Profit was $2.27 billion, or 67 cents per share, in the fiscal fourth quarter ended in June, up from $1.9 billion, or 55 cents per share, a year earlier.
Justice Litle: "Sovereign Wealth Funds, or SWFs for short, are essentially state-owned and state-controlled investment vehicles. They are the blue whales of global finance; in terms of sheer size, Sovereign Wealth Funds are the biggest animals on the planet. For example, the Blackstone Group towers over its private equity peers with $88 billion under management -- and yet the Abu Dhabi Investment authority, the oldest and largest of the SWFs, is reckoned to manage nearly ten times that much ($875 billion). The top five Sovereign Wealth Funds -- run by Abu Dhabi, Singapore, Norway, China, and Kuwait respectively -- collectively manage more than $2 trillion, according to Morgan Stanley and WSJ estimates. That sum alone, representing just five countries, is bigger than the entire hedge fund industry (in terms of assets under management). Many more countries, like Russia, Qatar, Botswana, and so on, have their own SWFs. (Russia has more than $100 billion.) Japan, oddly, does not have a Sovereign Wealth Fund; but could reasonably set aside $500-$700 billion if it did."
Toyota's net profit also soared 32 percent to 491.54 billion yen while revenue grew 15.7 percent to 6.52 trillion yen. Currency gains added 100 billion yen to the growth in operating profit, but Toyota said its own efforts had also contributed to a record quarter for revenue and profits."We have increased our sales volume in all regions excluding Japan," Senior Managing Director Takeshi Suzuki told a news conference. "Our core earnings are growing solidly."
Pharmaceutical company Novo Nordisk A/S, the world's largest producer of insulin, said Friday that second-quarter net profit more than doubled and raised its guidance for the full year. Its shares rose more than 4 percent.
Justice Litle: "As a recent issue of Grant's explains, global commercial banks are only required to set aside 56 cents ($0.56) for every $100 worth of triple-A rated securities they hold. That's roughly 178-to-1 leverage. If that same chunk of securities is downgraded to triple-B, the set-aside requirements jump from $0.56 to $4.80... a margin increase of more than 750 percent. Drop all the way down to double-B-minus, and the requirement skyrockets to $52 per $100 worth of securities held... a margin increase of more than nine thousand percent. The commodity trading equivalent would be buying corn futures at $540 per contract, and receiving notice one day that margins have gone to $49,140 per contract. Think you might sell? There are multiple stops along the way, of course -- it's not a straight shot from the penthouse to the basement -- but each lowered notch requires another hefty whack of the bank's available capital."
American Home Mortgage said that that it would lay off all but 750 of its 7,000 employees "in light of liquidity issues resulting from disruptions" in the secondary mortgage market.
According to the WSJ, jittery home-mortgage lenders are cutting off credit or raising interest rates for a growing portion of Americans, extending well beyond the market for subprime loans for people with the weakest credit records. This worsening credit crunch threatens to put further pressure on the housing market, where prices are flat to declining in much of the country. The market for mortgage-backed securities is "very panicked," Michael Perry, chief executive of IndyMac Bancorp Inc., another big lender, said in a message on the lender's Web site yesterday.
Microsoft Corp. slashed the price on its Windows Vista operating system in China by more than half, in a bid to lure buyers away from pirated versions of the software.
Nouriel Roubini: "Specifically, hundreds of thousands of subprime and near prime households will default on their mortgage and their homes will end up in foreclosure; the ability of the financial and legal system to manage such a surge in bankruptcies is severely limited. Also, over fifty subprime lenders have now gone out of business and now some of the larger lenders – see AHM and Accredited Home Lenders Holdings Co. - are also in trouble and near bankrupt; the mortgage rot is spreading from subprime to near prime and Alt-A (see Countrywide, IndyMac, etc.). Now, there are news of massive losses among major US home builders and rumors that some may be near bankruptcies. There are already half a dozen mid-sized hedge funds – between US, Australia and Europe – that have gone belly up; and every day financial institutions across the world are reporting large subprime-related losses as a lot of the RMBS and CDO were bought by foreign investors. And in a world where most investors in these illiquid instruments (RMBS, CDOs, CLOs, etc.) are marking to model rather than marking to market the extent of the eventual losses is unknown and the number of financial institutions that will go belly up is also unknown and likely to surprise on the upside. Systemic risk episodes often occur with a death through 1000 cuts rather than one single major – a’ la LTCM – blow."
In the face of a growing crisis of confidence in Chinese goods, Bo Xilai, commerce minister, said that “over 99 per cent of China’s export products are good and safe”. In comments published on Thursday on the ministry’s website, he added: “We hope that all parties can treat Chinese products objectively, fairly and rationally. Don’t let this damage the normal development of trade.”
OPEC's daily shipments of crude oil will probably fall 0.4 percent in the four weeks to Aug. 18 from the previous month, Oil Movements predicted.
Nonfarm payrolls expanded by 92,000 in July, lower than the 133,000 expected by economists surveyed by MarketWatch. The unemployment rate ticked higher to 4.6% in July from 4.5% in the previous month. This is the highest unemployment rate since January. Economists forecast the unemployment rate to remain steady at 4.5%. Average hourly earnings increased 6 cents, or 0.3% to $17.45. The increase was in line with expectations. Earnings are up 3.9% in the past year. The average workweek slipped 6 minutes to 33.8 hours. Economists were expecting the workweek to remain steady at 33.9 hours in July.
China's shares rose to a new record high Friday the third time in a week.
IndyMac Bancorp Inc. is joining rival lenders in making ``very major changes'' to home-loan standards and charging higher rates because of a slump in mortgage securities, the company's chief executive officer said. IndyMac Bancorp is the holding company for IndyMac Bank, F.S.B., which bills itself as the seventh largest savings and loan and the second largest independent mortgage lender in the nation.
South Korea's Finance Minister Kwon Okyu said the yen's weakness isn't justified and that carry trades based on the Japanese currency threaten to destabilize global markets.
George Ure: "Only 26,000 of the 92,000 new jobs were from the CES Birth-Death Model, although 537,000 jobs 'created' this year are attributable to the CES model. The U-6 report (a proxy for unemployed engineers flipping burgers) index moved up a tad to 8.6%."
Weyerhaeuser Co. said on Friday its second-quarter earnings fell due to higher costs and a weak U.S. housing market. Excluding items, the company earned 48 cents a share in the latest quarter down from $1.19 a year earlier.
A decision not to renew a major nuclear arms reduction treaty may have dire consequences for U.S. foreign policy and the entire world, Russian experts said Thursday. The Strategic Arms Reduction Treaty (START-I) was signed by the United States and the Soviet Union on July 31, 1991, five months before the union collapsed, and remains in force between the U.S., Russia, and three other ex-Soviet states.
Belarus, Kazakhstan and Ukraine have since disposed of all their nuclear weapons or transferred them to Russia, and the U.S. and Russia have reduced the number of delivery vehicles to 1,600, with no more than 6,000 warheads. The treaty is set to expire on December 5, 2009.
General James E. Cartwright, commander of the U.S. Strategic Command, said Wednesday that the refusal to prolong the START-I Treaty would allow the United States to conduct quick and pinpointed strikes anywhere in the world, which is crucial for an effective fight against global terrorism. I wonder whether this will be reported on the front page to Americans? The story was printed in Moscow.
Yahoo! was the most popular property, with 41.5 million unique visitors, and Yahoo! now reaches 77 percent of the total Japanese online population.
GAO Report: "Despite 4 years of effort and $2.7 billion in U.S. reconstruction funds, Iraqi oil output has consistently fallen below U.S. program goals. In addition, the State Department's data on Iraq's oil production may be overstated since data from the U.S. Department of Energy show lower production levels -- between 100,000 and 300,000 barrels less per day. Inadequate metering, re-injection, corruption, theft and sabotage account for the discrepancy, which amounts to about $1.8 to $5.5 billion per year. Comprehensive metering of Iraq's oil production has been a long-standing problem and continuing need."
Countrywide's credit default swap spreads widened by almost 100 basis points, reaching more than 300 basis points, or $300,000 per year for five years to insure $10 million in debt, from 215 basis points at Thursday's close.
The cost to insure Bear's debt with credit default swaps rose to around 163 basis points, or $163,000 per year for five years to insure $10 million in debt, from about 115 basis points at Thursday's close.
Lehman Brothers and Goldman Sachs credit default swap spreads each widened by around 30 basis points to 130 basis points and 100 basis points, respectively.
Merrill Lynch's swaps were also around 30 basis points wider at around 100 basis points and Morgan Stanley's swaps widened around 20 basis points to the high 90 basis point area.
DaimlerChrysler AG has completed the sale of its majority interest in the Chrysler Group to a subsidiary of private-equity firm Cerberus Capital Management L.P. Cerberus now has an 80.1% stake in the Chrysler Holding LLC, while Daimler retains a 19.9% interest, the automaker said. Both companies will subscribe $2 billion of second lien debt for Chrysler's automotive business, to be drawn within 12 months, the company said. Daimler's portion will be $1.5 billion.
December gold climbed $7.80 to close at a more than one-week high of $684.40 an ounce. September silver rose 1.3% to close at $13.158 an ounce, up 3.5% for the week. September copper fell 2.6% to close at $3.479 a pound, down 2% for the week.
Bear Stearns: "Our franchise is profitable and healthy and our balance sheet is strong and liquid." Bond market turmoil sending investors fleeing from risk may be a worse predicament than the 1980s stock market fall and Internet bubble burst, Bear Stearns Chief Financial Officer Sam Molinaro said on Friday.
"These times are pretty significant in the fixed income market," Molinaro said on a conference call with analysts. "It's as been as bad as I've seen it in 22 years. The fixed income market environment we've seen in the last eight weeks has been pretty extreme."
September crude closed at $75.48 a barrel, down $1.38 for Friday's session and down 2% for the week. September natural gas fell 1.6 cents to close at $6.09 per million British thermal units. It lost 1.9% for the week.
"Banks want to see higher credit scores and more money in the bank and larger down payments," says Melissa Cohn, chief executive of Manhattan Mortgage, a New York mortgage broker. "If lenders can't sell loans they have, there is no choice but to offer mortgages at a higher rate to homeowners," Cohn says. "It has nothing to do with bond market yields right now". As an example, Cohn says that even someone with a high credit score could pay as much as 8.25% for a jumbo 30-year loan. That's well above the conventional 30-year fixed mortgage rate, which currently average 6.26%, according to Bankrate.com.
Wells Fargo, the second-largest U.S. mortgage lender, said it is curtailing issuance of "Alt-A" home loans through brokers, while Wachovia has stopped entirely. Wachovia also said one lending unit has temporarily halted its Alt-A production.
Lenders are making fewer home loans once thought to be safe because investors now perceive those loans to be risky. The changes could worsen the U.S. housing slump by putting home ownership beyond the reach of a larger number of Americans.
Alt-A loans, short for Alternative-A, fall between prime and subprime in quality. One Alt-A specialist, American Home Mortgage Investment Corp , is closing on Friday.
8/4/07 Expectations And Fear
Silver Wheaton's second-quarter net profit slipped to $22.9 million, or 10 cents a share, from $25.2 million, or 12 cents a share, after lower silver sales. Analysts had been expecting earnings of 13 cents a share, according to data compiled by Thomson Financial. The firm said that, although second quarter earnings were affected by a shortfall in production at its Luismin mines in Mexico, it's confident that this shortfall is only temporary and production will be back to normal by the end of the year.
Worldwide sales of semiconductors slipped 1.7% to $20 billion in June against May, the Semiconductor Industry Association said Friday. First-half sales were up 2% to $121 billion, it said.
Hercules Offshore stated a recent deterioration in the outlook for U.S. natural gas prices could delay expected recovery in jackup demand.
Komatsu Ltd. plans to open an assembly plant in Russia around 2010, according to the Nikkei News. Komatsu will open an assembly plant producing hydraulic excavation equipment with an annual capacity of 1,000 units, the Nikkei reported in its Friday edition with citing sources.
Procter & Gamble Co. posted a higher quarterly profit on Friday, driven by cost controls, and also announced an acceleration of its share repurchase plans. Profit was $2.27 billion, or 67 cents per share, in the fiscal fourth quarter ended in June, up from $1.9 billion, or 55 cents per share, a year earlier.
Justice Litle: "Sovereign Wealth Funds, or SWFs for short, are essentially state-owned and state-controlled investment vehicles. They are the blue whales of global finance; in terms of sheer size, Sovereign Wealth Funds are the biggest animals on the planet. For example, the Blackstone Group towers over its private equity peers with $88 billion under management -- and yet the Abu Dhabi Investment authority, the oldest and largest of the SWFs, is reckoned to manage nearly ten times that much ($875 billion). The top five Sovereign Wealth Funds -- run by Abu Dhabi, Singapore, Norway, China, and Kuwait respectively -- collectively manage more than $2 trillion, according to Morgan Stanley and WSJ estimates. That sum alone, representing just five countries, is bigger than the entire hedge fund industry (in terms of assets under management). Many more countries, like Russia, Qatar, Botswana, and so on, have their own SWFs. (Russia has more than $100 billion.) Japan, oddly, does not have a Sovereign Wealth Fund; but could reasonably set aside $500-$700 billion if it did."
Toyota's net profit also soared 32 percent to 491.54 billion yen while revenue grew 15.7 percent to 6.52 trillion yen. Currency gains added 100 billion yen to the growth in operating profit, but Toyota said its own efforts had also contributed to a record quarter for revenue and profits."We have increased our sales volume in all regions excluding Japan," Senior Managing Director Takeshi Suzuki told a news conference. "Our core earnings are growing solidly."
Pharmaceutical company Novo Nordisk A/S, the world's largest producer of insulin, said Friday that second-quarter net profit more than doubled and raised its guidance for the full year. Its shares rose more than 4 percent.
Justice Litle: "As a recent issue of Grant's explains, global commercial banks are only required to set aside 56 cents ($0.56) for every $100 worth of triple-A rated securities they hold. That's roughly 178-to-1 leverage. If that same chunk of securities is downgraded to triple-B, the set-aside requirements jump from $0.56 to $4.80... a margin increase of more than 750 percent. Drop all the way down to double-B-minus, and the requirement skyrockets to $52 per $100 worth of securities held... a margin increase of more than nine thousand percent. The commodity trading equivalent would be buying corn futures at $540 per contract, and receiving notice one day that margins have gone to $49,140 per contract. Think you might sell? There are multiple stops along the way, of course -- it's not a straight shot from the penthouse to the basement -- but each lowered notch requires another hefty whack of the bank's available capital."
American Home Mortgage said that that it would lay off all but 750 of its 7,000 employees “in light of liquidity issues resulting from disruptions” in the secondary mortgage market.
According to the WSJ, jittery home-mortgage lenders are cutting off credit or raising interest rates for a growing portion of Americans, extending well beyond the market for subprime loans for people with the weakest credit records. This worsening credit crunch threatens to put further pressure on the housing market, where prices are flat to declining in much of the country. The market for mortgage-backed securities is "very panicked," Michael Perry, chief executive of IndyMac Bancorp Inc., another big lender, said in a message on the lender's Web site yesterday.
Microsoft Corp. slashed the price on its Windows Vista operating system in China by more than half, in a bid to lure buyers away from pirated versions of the software.
Nouriel Roubini: "Specifically, hundreds of thousands of subprime and near prime households will default on their mortgage and their homes will end up in foreclosure; the ability of the financial and legal system to manage such a surge in bankruptcies is severely limited. Also, over fifty subprime lenders have now gone out of business and now some of the larger lenders – see AHM and Accredited Home Lenders Holdings Co. - are also in trouble and near bankrupt; the mortgage rot is spreading from subprime to near prime and Alt-A (see Countrywide, IndyMac, etc.). Now, there are news of massive losses among major US home builders and rumors that some may be near bankruptcies. There are already half a dozen mid-sized hedge funds – between US, Australia and Europe – that have gone belly up; and every day financial institutions across the world are reporting large subprime-related losses as a lot of the RMBS and CDO were bought by foreign investors. And in a world where most investors in these illiquid instruments (RMBS, CDOs, CLOs, etc.) are marking to model rather than marking to market the extent of the eventual losses is unknown and the number of financial institutions that will go belly up is also unknown and likely to surprise on the upside. Systemic risk episodes often occur with a death through 1000 cuts rather than one single major – a’ la LTCM – blow."
In the face of a growing crisis of confidence in Chinese goods, Bo Xilai, commerce minister, said that “over 99 per cent of China’s export products are good and safe”. In comments published on Thursday on the ministry’s website, he added: “We hope that all parties can treat Chinese products objectively, fairly and rationally. Don’t let this damage the normal development of trade.”
OPEC's daily shipments of crude oil will probably fall 0.4 percent in the four weeks to Aug. 18 from the previous month, Oil Movements predicted.
Nonfarm payrolls expanded by 92,000 in July, lower than the 133,000 expected by economists surveyed by MarketWatch. The unemployment rate ticked higher to 4.6% in July from 4.5% in the previous month. This is the highest unemployment rate since January. Economists forecast the unemployment rate to remain steady at 4.5%. Average hourly earnings increased 6 cents, or 0.3% to $17.45. The increase was in line with expectations. Earnings are up 3.9% in the past year. The average workweek slipped 6 minutes to 33.8 hours. Economists were expecting the workweek to remain steady at 33.9 hours in July.
China's shares rose to a new record high Friday the third time in a week.
IndyMac Bancorp Inc. is joining rival lenders in making ``very major changes'' to home-loan standards and charging higher rates because of a slump in mortgage securities, the company's chief executive officer said. IndyMac Bancorp is the holding company for IndyMac Bank, F.S.B., which bills itself as the seventh largest savings and loan and the second largest independent mortgage lender in the nation.
South Korea's Finance Minister Kwon Okyu said the yen's weakness isn't justified and that carry trades based on the Japanese currency threaten to destabilize global markets.
George Ure: "Only 26,000 of the 92,000 new jobs were from the CES Birth-Death Model, although 537,000 jobs 'created' this year are attributable to the CES model. The U-6 report (a proxy for unemployed engineers flipping burgers) index moved up a tad to 8.6%."
Weyerhaeuser Co. said on Friday its second-quarter earnings fell due to higher costs and a weak U.S. housing market. Excluding items, the company earned 48 cents a share in the latest quarter down from $1.19 a year earlier.
A decision not to renew a major nuclear arms reduction treaty may have dire consequences for U.S. foreign policy and the entire world, Russian experts said Thursday.
The Strategic Arms Reduction Treaty (START-I) was signed by the United States and the Soviet Union on July 31, 1991, five months before the union collapsed, and remains in force between the U.S., Russia, and three other ex-Soviet states.
Belarus, Kazakhstan and Ukraine have since disposed of all their nuclear weapons or transferred them to Russia, and the U.S. and Russia have reduced the number of delivery vehicles to 1,600, with no more than 6,000 warheads. The treaty is set to expire on December 5, 2009.
General James E. Cartwright, commander of the U.S. Strategic Command, said Wednesday that the refusal to prolong the START-I Treaty would allow the United States to conduct quick and pinpointed strikes anywhere in the world, which is crucial for an effective fight against global terrorism. I wonder whether this will be reported on the front page to Americans? The story was printed in Moscow.
Yahoo! was the most popular property, with 41.5 million unique visitors, and Yahoo! now reaches 77 percent of the total Japanese online population.
GAO Report: "Despite 4 years of effort and $2.7 billion in U.S. reconstruction funds, Iraqi oil output has consistently fallen below U.S. program goals. In addition, the State Department's data on Iraq's oil production may be overstated since data from the U.S. Department of Energy show lower production levels -- between 100,000 and 300,000 barrels less per day. Inadequate metering, re-injection, corruption, theft and sabotage account for the discrepancy, which amounts to about $1.8 to $5.5 billion per year. Comprehensive metering of Iraq's oil production has been a long-standing problem and continuing need."
Countrywide's credit default swap spreads widened by almost 100 basis points, reaching more than 300 basis points, or $300,000 per year for five years to insure $10 million in debt, from 215 basis points at Thursday's close.
The cost to insure Bear's debt with credit default swaps rose to around 163 basis points, or $163,000 per year for five years to insure $10 million in debt, from about 115 basis points at Thursday's close.
Lehman Brothers and Goldman Sachs credit default swap spreads each widened by around 30 basis points to 130 basis points and 100 basis points, respectively.
Merrill Lynch's swaps were also around 30 basis points wider at around 100 basis points and Morgan Stanley's swaps widened around 20 basis points to the high 90 basis point area.
DaimlerChrysler AG has completed the sale of its majority interest in the Chrysler Group to a subsidiary of private-equity firm Cerberus Capital Management L.P. Cerberus now has an 80.1% stake in the Chrysler Holding LLC, while Daimler retains a 19.9% interest, the automaker said. Both companies will subscribe $2 billion of second lien debt for Chrysler's automotive business, to be drawn within 12 months, the company said. Daimler's portion will be $1.5 billion.
December gold climbed $7.80 to close at a more than one-week high of $684.40 an ounce. September silver rose 1.3% to close at $13.158 an ounce, up 3.5% for the week. September copper fell 2.6% to close at $3.479 a pound, down 2% for the week.
Bear Stearns: "Our franchise is profitable and healthy and our balance sheet is strong and liquid." Bond market turmoil sending investors fleeing from risk may be a worse predicament than the 1980s stock market fall and Internet bubble burst, Bear Stearns Chief Financial Officer Sam Molinaro said on Friday.
"These times are pretty significant in the fixed income market," Molinaro said on a conference call with analysts. "It's as been as bad as I've seen it in 22 years. The fixed income market environment we've seen in the last eight weeks has been pretty extreme."
September crude closed at $75.48 a barrel, down $1.38 for Friday's session and down 2% for the week. September natural gas fell 1.6 cents to close at $6.09 per million British thermal units. It lost 1.9% for the week.
"Banks want to see higher credit scores and more money in the bank and larger down payments," says Melissa Cohn, chief executive of Manhattan Mortgage, a New York mortgage broker. "If lenders can't sell loans they have, there is no choice but to offer mortgages at a higher rate to homeowners," Cohn says. "It has nothing to do with bond market yields right now". As an example, Cohn says that even someone with a high credit score could pay as much as 8.25% for a jumbo 30-year loan. That's well above the conventional 30-year fixed mortgage rate, which currently average 6.26%, according to Bankrate.com.
Wells Fargo, the second-largest U.S. mortgage lender, said it is curtailing issuance of "Alt-A" home loans through brokers, while Wachovia has stopped entirely. Wachovia also said one lending unit has temporarily halted its Alt-A production.
Lenders are making fewer home loans once thought to be safe because investors now perceive those loans to be risky. The changes could worsen the U.S. housing slump by putting home ownership beyond the reach of a larger number of Americans.
Alt-A loans, short for Alternative-A, fall between prime and subprime in quality. One Alt-A specialist, American Home Mortgage Investment Corp , is closing on Friday.
Thursday, August 02, 2007
Volatility
8/3/07 Volatility
The Chicago Board Options Exchange's market-volatility index, or VIX, rose 0.15, or 0.6%, to 23.67. But the VIX climbed to as high as 26.22 yesterday, an increase of 11.5%. And the Nasdaq-100 volatility index, or VXN, gained 0.23, or 1%, to 23.78.
Henry To: "While implied volatility (the VIX closed at 24.17 last Friday) is now at a four-year high, it is still relatively low compared to the readings we witnessed during the period from 1997 to 2002. More importantly, while we did witness a 30% surge in the VIX over the last week, we did not get a daily surge in the VIX of over 25%. The last time we had such a surge was February 27, 2007, and prior to that, May 30, 2006. True, since January 1990, there have only been 14 instances when the daily reading of the VIX surged over 30% - but given the liquidity and sentiment changes we are now witnessing in the LBO market, I would definitely expect more from the VIX before the current panic bottoms out."
Michael Panzer: "Despite reports of falling prices, housing was less affordable in June than in any other month this year, according to the National Association of Realtors. On Monday, the NAR announced that its composite homebuyer index fell to 104.4 from 110.4 in May, and remained below the levels last seen when property prices were on the upswing. Along with tighter lending standards, a change in psychology, and other factors, declining affordability helps explain why new and existing sales have remained under pressure, and signals that there is likely much more downside to come in the months ahead."
TheOilDrum: " While natural gas resources are abundant, North America is experiencing a tight supply/demand balance. With North American production moving towards more remote and unconventional sources, all else being equal, overseas gas supplies will become more competitive...High levels of drilling for gas in recent years have prevented a sharp decline in Alberta’s production and reserves but lower prices since the spring of 2006, followed by a drop in drilling, have prompted the EUB to forecast a 2.2% decline in production this year...In its supply outlook to 2016, the EUB expects Alberta’s gas production will decline by an average of 2.5% a year even though CBM production is expected to rise to some 593 bcf a year by 2016. New pools being found are smaller, show lower initial production rates and steeper decline curves...A recent Ziff Energy Group study predicts that total Canadian gas production will fall by just over 20% in the forecast period to 2015 to 13.1 bcf per day from about 16.6 bcf a day in 2006."
Rio Tinto said that it believes that the outlook for aluminum demand, and other products will remain positive while global economic growth remains strong. "While there are concerns about the state of the credit markets, particularly in the U.S. we do not anticipate that these will have a material short term impact on our markets," the firm stated.
Sunoco Inc. reported second-quarter net earnings rose to $509 million, or $4.20 a share, from $426 million, or $3.22 a share, a year ago. Revenue at the Philadelphia-based oil refiner rose 2% to $10.76 billion from $10.59 billion.
Total SA, Europe's largest oil refiner, has scheduled temporary shutdowns at six of its facilities for maintenance and repairs during the rest of the year, after completing work on five in the second quarter.
Getty Images lowered its profit goals for the year, missed analyst expectations for the quarter and said it was laying off 100 employees, saving $20 million. The cutback represents 5 percent of its 2,000 workers worldwide and less than 10 percent of its 400 employees in Seattle, said Getty spokeswoman Deb Trevino.
China National Petroleum Corporation (CNPC), the country's largest oil producer, is planning to construct a liquefied natural gas (LNG) terminal at a port in Guangxi Zhuang Autonomous Region, southwest China.
Pelosi in a statement said she supported requiring automakers to make more fuel efficient vehicles but that the issue was deferred "in the interest of promoting passage of a consensus energy bill."
Rigzone.com: "During past surges, higher oil prices pinched consumers and the economy but also made a greater amount of untapped oil economical to pump. As a result, new supplies eventually came online, putting downward pressure on prices. That dynamic helped tame the high oil prices of the early 1980s.
But during the current four-year rise in oil prices, inflation for equipment, labor and other crucial oil-field needs has largely kept up with the rise in oil prices. In recent quarters, this has crimped results at the world's oil producers, including Western majors such as Exxon Mobil Corp. as well as the world's biggest state-run oil companies, and has also led to delays and cancellations of major projects. While plenty of activity remains in place, the high prices are nibbling away at other projects that were expected to bring significant new supplies of oil and natural gas to the world. "Supply is going no place, and demand is rising 2.5% to 3% a year," says economist Philip Verleger Jr. of Aspen, Colo."
ContraryInvestor.com: "Of course, directly from Hank Paulson's mouth in the Fortune article we cited to you earlier this year, he hopes "stock price appreciation has more than made up for the decline in residential real estate values". (We continue to suggest you not forget his exact words as we move forward.) Nonetheless, in 1Q of this year, increases in household real estate values and equity holdings accounted for the smallest amount of total household net worth expansion in eight years at least."
Fiserv will buy CheckFree Corp.in a deal valued at $4.4 billion. CheckFree shareholders will recieve $48 a share in cash for each share of common stock.
For Clorox's fiscal year ending in June 2008, the company expects earnings between $3.27 and $3.46 per share including charges, versus previous guidance of earnings between $3.44 and $3.61 per share.
Accredited Home Lenders Holding Co. on Thursday filed its delayed 2006 annual report, and raised concerns about its ability to continue to operate as a going concern.
Accredited Home Lenders, which is caught up in the subprime-mortgage meltdown, said because of adverse conditions in the subprime-mortgage industry it can't be sure that it will be able to continue to operate as a going concern.
The San Diego-based mortgage lender said market conditions may affect the performance of mortgage loans it originated, and could continue to weigh on its stock price, according to a filing with the Securities and Exchange Commission.
Three nitrogen generator units increase BJ PPS’s fleet in the UK and Norway to 37 units, making it one of the largest in the North Sea. “The addition of these units means our customers can rest assured their assets will receive superior commissioning services as and when required,” said Lindsay Link, general manager of BJ PPS. “Already, we are seeing the benefits, given the additional operations we have been able to take on since we acquired them. BJ PPS has the plant and human resources in the UK and Norway to maintain customer schedules, as well as a commendable history of providing competent and capable service,” he added.
Cia. Vale do Rio Doce, the world's largest iron-ore producer, is seeking investments in aluminum smelters outside Brazil and isn't in talks with producer Alcoa Inc., Vale Chief Executive Officer Roger Agnelli said.
Yahoo! India has unveiled a new site advertising.yahoo.co.in, which is a trade engagement initiative. Essentially the site offers a quick look at the latest in the digital industry and how Yahoo! India can help you connect with your target consumers and audience. The site can be accessed at http://in.advertising.yahoo.com
More than 160 million Americans have searched for health information online, a 37% increase from 2005, according to Harris Interactive.
Qatar's oil minister Abdullah al-Attiyah told Dow Jones Newswires Thursday that the rally in oil is not related to supplies, but "refinery bottlenecks and geopolitics."
Natural-gas inventories rose by 77 billion cubic feet for the week ended July 27, the Energy Department said Thursday. Total stocks now stand at 2.840 trillion cubic feet, up 68 billion cubic feet from the year-ago level and 410 billion cubic feet above the five-year average, the government data said.
Unilever will cut 20,000 jobs.
Transportation equipment orders, a volatile category whose monthly performance is heavily influenced by aircraft orders, increased by 7.1 percent in June.
Excluding transportation, factory orders declined 0.5 percent. This was the first outright fall since January, when they shrank by 2.5 percent, with the category's June performance hurt by a 3.6 percent drop in computers and electronic products and a 6.1 percent fall in primary metals.
June durable goods orders were revised to show a 1.3 percent increase, versus a 1.4 percent advance estimated by the government last week. June nondefense capital goods orders excluding aircraft, viewed as a good proxy for business spending, were unchanged, which was slightly better than a 0.7 percent decline seen in an earlier estimate by the government last week.
U.S. boat sales are projected to be off between 7 percent and 10 percent from 2004, according to data from the National Marine Manufacturers Association.
Henry To: "As I have discussed over the last couple of months, we are currently only expecting a correction within a cyclical bull market (albeit a significant correction) - and because of this, we not only are more careful when it comes to shorting, but also are reluctant in shorting in the first place. With the Dow Industrials having decline 4.2% in the latest week, it is now obviously too late to trade on the short side - and therefore, going forward, we will most likely look to get back on the long side instead. Again, at this time, we are still not looking for a new bear market, unless one of the following occurs:
1. The promise of significantly higher income and dividend taxes by whoever wins the next US Presidential election in 2008, along with a Congress willing to implement these higher taxation policies
2. A trade policy mistake by Congress in dealing with China, along with a significant response from China
3. If the Yen carry trade or Swiss carry trade unwinds in a violent way and ends, which we are not looking for at this time. In all likelihood, such an event will most probably collapse the Korean consumer as well as the major Eastern European economies (not including Russia)."
September crude closed at $76.86 a barrel Thursday, up 33 cents for the session. September natural gas dropped 3.9%, or 24.6 cents, to close at $6.106 per million British thermal units.
December gold climbed 70 cents to close at $676.60 an ounce Thursday in New York. September silver gained 4 cents to close at $12.995 an ounce, while September copper finished at $3.573 a pound, down 1.2 cents.
NBC/WSJ Poll: Most Americans Are Worried About a Recession
Network Appliance Inc., whose computers store and distribute data, said profit and sales missed forecasts for the first quarter after big customers cut spending. The shares sank 19 percent..
Leading investment banks on both sides of the Atlantic are saddled with almost $500 billion (£246 billion) in agreed leveraged loans that they are unable to parcel out to other investors. New figures from Dealogic reveal that in Europe the banks are struggling to clear a backlog of $208 billion worth of leveraged loans that they would normally have sold on through syndication. In the United States, the figures also show that investment banks are stuck with $269 billion of agreed loans that they are unable to syndicate.
The Chicago Board Options Exchange's market-volatility index, or VIX, rose 0.15, or 0.6%, to 23.67. But the VIX climbed to as high as 26.22 yesterday, an increase of 11.5%. And the Nasdaq-100 volatility index, or VXN, gained 0.23, or 1%, to 23.78.
Henry To: "While implied volatility (the VIX closed at 24.17 last Friday) is now at a four-year high, it is still relatively low compared to the readings we witnessed during the period from 1997 to 2002. More importantly, while we did witness a 30% surge in the VIX over the last week, we did not get a daily surge in the VIX of over 25%. The last time we had such a surge was February 27, 2007, and prior to that, May 30, 2006. True, since January 1990, there have only been 14 instances when the daily reading of the VIX surged over 30% - but given the liquidity and sentiment changes we are now witnessing in the LBO market, I would definitely expect more from the VIX before the current panic bottoms out."
Michael Panzer: "Despite reports of falling prices, housing was less affordable in June than in any other month this year, according to the National Association of Realtors. On Monday, the NAR announced that its composite homebuyer index fell to 104.4 from 110.4 in May, and remained below the levels last seen when property prices were on the upswing. Along with tighter lending standards, a change in psychology, and other factors, declining affordability helps explain why new and existing sales have remained under pressure, and signals that there is likely much more downside to come in the months ahead."
TheOilDrum: " While natural gas resources are abundant, North America is experiencing a tight supply/demand balance. With North American production moving towards more remote and unconventional sources, all else being equal, overseas gas supplies will become more competitive...High levels of drilling for gas in recent years have prevented a sharp decline in Alberta’s production and reserves but lower prices since the spring of 2006, followed by a drop in drilling, have prompted the EUB to forecast a 2.2% decline in production this year...In its supply outlook to 2016, the EUB expects Alberta’s gas production will decline by an average of 2.5% a year even though CBM production is expected to rise to some 593 bcf a year by 2016. New pools being found are smaller, show lower initial production rates and steeper decline curves...A recent Ziff Energy Group study predicts that total Canadian gas production will fall by just over 20% in the forecast period to 2015 to 13.1 bcf per day from about 16.6 bcf a day in 2006."
Rio Tinto said that it believes that the outlook for aluminum demand, and other products will remain positive while global economic growth remains strong. "While there are concerns about the state of the credit markets, particularly in the U.S. we do not anticipate that these will have a material short term impact on our markets," the firm stated.
Sunoco Inc. reported second-quarter net earnings rose to $509 million, or $4.20 a share, from $426 million, or $3.22 a share, a year ago. Revenue at the Philadelphia-based oil refiner rose 2% to $10.76 billion from $10.59 billion.
Total SA, Europe's largest oil refiner, has scheduled temporary shutdowns at six of its facilities for maintenance and repairs during the rest of the year, after completing work on five in the second quarter.
Getty Images lowered its profit goals for the year, missed analyst expectations for the quarter and said it was laying off 100 employees, saving $20 million. The cutback represents 5 percent of its 2,000 workers worldwide and less than 10 percent of its 400 employees in Seattle, said Getty spokeswoman Deb Trevino.
China National Petroleum Corporation (CNPC), the country's largest oil producer, is planning to construct a liquefied natural gas (LNG) terminal at a port in Guangxi Zhuang Autonomous Region, southwest China.
Pelosi in a statement said she supported requiring automakers to make more fuel efficient vehicles but that the issue was deferred "in the interest of promoting passage of a consensus energy bill."
Rigzone.com: "During past surges, higher oil prices pinched consumers and the economy but also made a greater amount of untapped oil economical to pump. As a result, new supplies eventually came online, putting downward pressure on prices. That dynamic helped tame the high oil prices of the early 1980s.
But during the current four-year rise in oil prices, inflation for equipment, labor and other crucial oil-field needs has largely kept up with the rise in oil prices. In recent quarters, this has crimped results at the world's oil producers, including Western majors such as Exxon Mobil Corp. as well as the world's biggest state-run oil companies, and has also led to delays and cancellations of major projects. While plenty of activity remains in place, the high prices are nibbling away at other projects that were expected to bring significant new supplies of oil and natural gas to the world. "Supply is going no place, and demand is rising 2.5% to 3% a year," says economist Philip Verleger Jr. of Aspen, Colo."
ContraryInvestor.com: "Of course, directly from Hank Paulson's mouth in the Fortune article we cited to you earlier this year, he hopes "stock price appreciation has more than made up for the decline in residential real estate values". (We continue to suggest you not forget his exact words as we move forward.) Nonetheless, in 1Q of this year, increases in household real estate values and equity holdings accounted for the smallest amount of total household net worth expansion in eight years at least."
Fiserv will buy CheckFree Corp.in a deal valued at $4.4 billion. CheckFree shareholders will recieve $48 a share in cash for each share of common stock.
For Clorox's fiscal year ending in June 2008, the company expects earnings between $3.27 and $3.46 per share including charges, versus previous guidance of earnings between $3.44 and $3.61 per share.
Accredited Home Lenders Holding Co. on Thursday filed its delayed 2006 annual report, and raised concerns about its ability to continue to operate as a going concern.
Accredited Home Lenders, which is caught up in the subprime-mortgage meltdown, said because of adverse conditions in the subprime-mortgage industry it can't be sure that it will be able to continue to operate as a going concern.
The San Diego-based mortgage lender said market conditions may affect the performance of mortgage loans it originated, and could continue to weigh on its stock price, according to a filing with the Securities and Exchange Commission.
Three nitrogen generator units increase BJ PPS’s fleet in the UK and Norway to 37 units, making it one of the largest in the North Sea. “The addition of these units means our customers can rest assured their assets will receive superior commissioning services as and when required,” said Lindsay Link, general manager of BJ PPS. “Already, we are seeing the benefits, given the additional operations we have been able to take on since we acquired them. BJ PPS has the plant and human resources in the UK and Norway to maintain customer schedules, as well as a commendable history of providing competent and capable service,” he added.
Cia. Vale do Rio Doce, the world's largest iron-ore producer, is seeking investments in aluminum smelters outside Brazil and isn't in talks with producer Alcoa Inc., Vale Chief Executive Officer Roger Agnelli said.
Yahoo! India has unveiled a new site advertising.yahoo.co.in, which is a trade engagement initiative. Essentially the site offers a quick look at the latest in the digital industry and how Yahoo! India can help you connect with your target consumers and audience. The site can be accessed at http://in.advertising.yahoo.com
More than 160 million Americans have searched for health information online, a 37% increase from 2005, according to Harris Interactive.
Qatar's oil minister Abdullah al-Attiyah told Dow Jones Newswires Thursday that the rally in oil is not related to supplies, but "refinery bottlenecks and geopolitics."
Natural-gas inventories rose by 77 billion cubic feet for the week ended July 27, the Energy Department said Thursday. Total stocks now stand at 2.840 trillion cubic feet, up 68 billion cubic feet from the year-ago level and 410 billion cubic feet above the five-year average, the government data said.
Unilever will cut 20,000 jobs.
Transportation equipment orders, a volatile category whose monthly performance is heavily influenced by aircraft orders, increased by 7.1 percent in June.
Excluding transportation, factory orders declined 0.5 percent. This was the first outright fall since January, when they shrank by 2.5 percent, with the category's June performance hurt by a 3.6 percent drop in computers and electronic products and a 6.1 percent fall in primary metals.
June durable goods orders were revised to show a 1.3 percent increase, versus a 1.4 percent advance estimated by the government last week. June nondefense capital goods orders excluding aircraft, viewed as a good proxy for business spending, were unchanged, which was slightly better than a 0.7 percent decline seen in an earlier estimate by the government last week.
U.S. boat sales are projected to be off between 7 percent and 10 percent from 2004, according to data from the National Marine Manufacturers Association.
Henry To: "As I have discussed over the last couple of months, we are currently only expecting a correction within a cyclical bull market (albeit a significant correction) - and because of this, we not only are more careful when it comes to shorting, but also are reluctant in shorting in the first place. With the Dow Industrials having decline 4.2% in the latest week, it is now obviously too late to trade on the short side - and therefore, going forward, we will most likely look to get back on the long side instead. Again, at this time, we are still not looking for a new bear market, unless one of the following occurs:
1. The promise of significantly higher income and dividend taxes by whoever wins the next US Presidential election in 2008, along with a Congress willing to implement these higher taxation policies
2. A trade policy mistake by Congress in dealing with China, along with a significant response from China
3. If the Yen carry trade or Swiss carry trade unwinds in a violent way and ends, which we are not looking for at this time. In all likelihood, such an event will most probably collapse the Korean consumer as well as the major Eastern European economies (not including Russia)."
September crude closed at $76.86 a barrel Thursday, up 33 cents for the session. September natural gas dropped 3.9%, or 24.6 cents, to close at $6.106 per million British thermal units.
December gold climbed 70 cents to close at $676.60 an ounce Thursday in New York. September silver gained 4 cents to close at $12.995 an ounce, while September copper finished at $3.573 a pound, down 1.2 cents.
NBC/WSJ Poll: Most Americans Are Worried About a Recession
Network Appliance Inc., whose computers store and distribute data, said profit and sales missed forecasts for the first quarter after big customers cut spending. The shares sank 19 percent..
Leading investment banks on both sides of the Atlantic are saddled with almost $500 billion (£246 billion) in agreed leveraged loans that they are unable to parcel out to other investors. New figures from Dealogic reveal that in Europe the banks are struggling to clear a backlog of $208 billion worth of leveraged loans that they would normally have sold on through syndication. In the United States, the figures also show that investment banks are stuck with $269 billion of agreed loans that they are unable to syndicate.
Wednesday, August 01, 2007
The Elevator
8/2/07 The Elevator
Kate Incontrera: "What exactly is the point of having a debt ceiling if we can just raise it whenever things start to get a little tight? It's like having a 10 o'clock curfew for your son but letting him stay out until midnight every time there's a 'supercool party.'"
Addison Wiggin: "What an amazing country we live in. In order to keep up appearances, the man we all “trust” to run the nation’s Treasury would rather sink the nation deeper in debt than dare rattle the world’s cage by questioning the true worth of our Treasury notes, the real purchasing power of our economy and the actual “value” of the dollar. Finding a way to pay U.S. bills without indebting this country more “would create unnecessary uncertainty for the financial markets and result in costs to the government," said Paulson. Right. So it’s better to go deeper into debt than pay your bills. Where did this idea come from? Oh, yeah, we figured that out in our book Empire of Debt. Such actions, he said, "should be reserved only for extraordinary circumstances, and should be avoided." Of course, owing the world $8.9 TRILLION dollars is not extraordinary."
The Economonitor: "Australia: Basis Capital – billion-dollar Australian Hedge Fund of the Year 2006 defaulted on loans and suspended withdrawals after 2 of its 5-star rated hedge funds, one of which invested in risky portions of CDOs and the other invested mostly in that fund, suffered sharp losses in June. The funds managed A$675mn of largely retail investments funneled from Australia’s biggest banks, according to Australian Financial Review.
Absolute Capital – Australian fund that invests in structured credit suspended withdrawals from 2 of its funds, explaining “demand for the assets has not dried up because the assets are in bad shape but rather due to a lack of market liquidity.” The funds maintain less than 5% exposure to U.S. subprime markets and use little leverage.
Macquarie Bank – announced 2 of its Fortress funds, which invest in senior secured U.S. corporate loans, could lose a quarter of their value due to price volatility in U.S. markets.
EUROPE:
Oddo & Cie - French asset manager shut down 3 funds with a combined $1.37bn in assets due to the plunge in prices of CDOs.
IKB Deutsche Industriebank - German small business lender met a funding shortfall from exposure to U.S. subprime real estate loans. Shareholder and state-owned development bank, KfW Bankengruppe, stepped in to assume $11.1bn in financial obligations from IKB.
Commerzbank – German bank set aside 80mn EUR in provisions to cover its exposure to the U.S. subprime market.
UBS - Swiss bank shut down its Dillon Read Capital Management LLC hedge fund in May after incurring $122mn in losses during Q1 primarily from the subprime market.
Cambridge Place - British fund shut down its $908mn Caliber Global Investment fund after suffering a net loss of $8.8mn in the first quarter of this year. Caliber had about 60% of its investments in the U.S., mostly in mortgage debts rated BBB or below
Cheyne Capital Management - British fund lost $91mn for the year to March 31 on its mortgage debt fund, Queen's Walk Investment.
MIDDLE EAST:
GCC firms defer bond issues
USA (most recently):
Sowood Capital Management – Boston-based hedge fund manager, which invests a portion of Harvard's endowment, shut down after losing nearly $1.5 billion in July."
Brett Steenbarger: "Sixty days following a sharp market drop from multi-year highs, the Dow was up by an average of 4.16% (39 up, 14 down). That is considerably stronger than the average 60-day gain of 1.59% for the remainder of the sample...On Tues, we had 310 new 20-day highs; 1360 new lows. Demand was 58; Supply 23...Since 1990, when we've made multi-year highs and then dropped sharply, the market was higher 10 times and lower 5 times after 60 days for an average gain of 2.27%. Drawdowns, however, have been the norm: eleven of the fifteen occasions were down after 10 trading sessions.
Now here's an interesting finding: There were three periods in which the drop from multi-year highs turned into full-fledged bear moves (declines of more than 10%): Jan., 2000; July, 1998; and September, 1987. All three of those times, the market had moved sharply lower in the next ten trading sessions (over 1.5%) and continued lower thereafter.
Conversely, when the market was up 10 days following the sharp drop from multi-year highs (N = 27), it remained higher over the 60 day period 23 of those times. In fact, on 22 of those occasions, it added to its 10-day gains."
Employment in the U.S. private sector grew by 48,000 in July, according to the ADP employment report released Wednesday suggesting nonfarm payrolls may have grown much slower than the 133,000 anticipated by economists. Adding in some 25,000 government jobs, the ADP report suggests nonfarm payrolls grew by about 73,000 in July.
Noble Energy Inc. posted a second-quarter profit of $209.1 million, or $1.21 a share, compared with a loss of $30.7 million, or 17 cents a share in the year-earlier quarter. Total revenue rose 3% to $794.2 million, while total costs and expenses dropped to $501.1 million from $817.4 million, the company said.
Trans Ocean said second-quarter net income rose to $549 million, or $1.84 a share, compared to $249 million, or 75 cents a share in the year-ago period. Revenue rose to $1.4 billion from $854 million. The second quarter 2007 average dayrate reached a record high $202,400, up 2% compared to $198,000 during the first quarter. For the first time in Transocean's history, the fleet-wide quarterly average dayrate exceeded $200,000.
Devon Energy said second-quarter net income rose 5% to $904 million, or $2 a share, with revenue up 25% to $2.93 billion. Adjusted for 13 cents a share in benefits, it would've earned $1.87 a share, compared to Thomson Financial-compiled earnings estimates of $1.46 a share. Production rose 16% to 56.2 million barrels of oil equivalent.
Over the last seven years alone, China's trade with ASEAN's 10 member countries has more than doubled.
Helmerich & Payne Inc. said second-quarter net income rose to $115.2 million, or $1.09 a share( $0.88 cents without the gain on sale of stock and insurance settlement.), from $80 million, or 75 cents a share in the year-ago period. Revenue grew to $421.3 million from $320 million.
The ISM index fell to 53.8% in July from 56.0% in June. New orders fell to 57.5% in July from 60.3% in June. Inventories rebounded a bit to 48.5% from 45.3% in the previous month. The employment index inched lower to 50.2% from 51.1%. The price index fell to 65.0% from 68.0%.
Contract signings on existing homes climbed by 5% in June, the most in more than three years, the National Association of Realtors reported Wednesday. But pending sales are still down 8.6% below June 2006.
The American Petroleum Institute reported a fall of 3.8 million barrels in crude supplies for the week ended July 27. The Energy Department had reported a decline of 6.5 million barrels for the latest week. Motor gasoline supplies were up 2.3 million barrels, the API said. The government reported that supplies were up 600,000 barrels. Distillate supplies fell 582,000 barrels, the API said. The government posted a 2.8 million-barrel increase.
Gonzales has until the end of this week to review his congressional testimony and correct any misstatements.
Advanced Medical Optics Inc. has withdrawn its bid to purchase rival eye care product company Bausch & Lomb Inc., clearing the way for a rival bid from private-equity group Warburg Pincus, according to a filing Wednesday with the Securities & Exchange Commission.
Domestic vehicle sales are down 11% in the past year. Domestic auto sales plunged to 4.79 million, the lowest since the data were first collected in 1990. Domestic truck sales rose 3.3% to 6.76 million.
Starbucks backed its fiscal 2007 profit forecast in the range of 87 cents to 89 cents a share and net revenue growth of about 20%. It also still sees fiscal 2007 new store openings of at least 2,400, and same-store sales growth in the range of 3% to 7%. For fiscal 2008, it also said it expects revenue growth of about 18% and earnings per share growth of about 20% to 22%. It is also targeting new store openings of about 2,600, accelerating international openings by 200 stores, and same-store sales growth in the range of 3% to 7%.
September crude dropped $2.2%, or $1.68, to close at $76.53 a barrel Wednesday. September natural gas gained 2.6% to close at $6.352 per million British thermal units.
December gold fell $3.40 to close at $675.90 an ounce Wednesday. September silver fell 6.2 cents to close at $12.955 an ounce, and September copper finished at $3.585 a pound, down 6.35 cents, or 1.7%.
American International Group Inc., the world's biggest insurer, may be sitting on losses of as much as $2.3 billion from securities backed by subprime mortgages, analysts said.
In a ``worst-case scenario,'' AIG may lose $2.3 billion from its investments in subprime mortgage bonds as well as loans given to borrowers with poor or limited credit, A.G. Edwards Inc. analysts in St. Louis said today in a report. Analysts at Goldman Sachs Group Inc. issued a report today estimating losses of as much as $1.4 billion.
The VIX again traded today at the high of the year or about 24.
U.N. inspectors visited a nuclear reactor Monday being built in central Iran, a facility that has been off-limits since April, state media reported.
"The team visited the 40-megawatt research reactor in Arak," the official Islamic Republic News Agency quoted an unnamed official as saying. "The inspection took some 5 hours."
Interestingly, the news media hardly reported on this event and an IAEA official, who demanded anonymity because he was not authorized to comment, confirmed that agency experts had visited the site. He said they were given full access and encountered no obstacles from Iranian officials. A nail in the Bush/Cheney terror coffin.
Kate Incontrera: "What exactly is the point of having a debt ceiling if we can just raise it whenever things start to get a little tight? It's like having a 10 o'clock curfew for your son but letting him stay out until midnight every time there's a 'supercool party.'"
Addison Wiggin: "What an amazing country we live in. In order to keep up appearances, the man we all “trust” to run the nation’s Treasury would rather sink the nation deeper in debt than dare rattle the world’s cage by questioning the true worth of our Treasury notes, the real purchasing power of our economy and the actual “value” of the dollar. Finding a way to pay U.S. bills without indebting this country more “would create unnecessary uncertainty for the financial markets and result in costs to the government," said Paulson. Right. So it’s better to go deeper into debt than pay your bills. Where did this idea come from? Oh, yeah, we figured that out in our book Empire of Debt. Such actions, he said, "should be reserved only for extraordinary circumstances, and should be avoided." Of course, owing the world $8.9 TRILLION dollars is not extraordinary."
The Economonitor: "Australia: Basis Capital – billion-dollar Australian Hedge Fund of the Year 2006 defaulted on loans and suspended withdrawals after 2 of its 5-star rated hedge funds, one of which invested in risky portions of CDOs and the other invested mostly in that fund, suffered sharp losses in June. The funds managed A$675mn of largely retail investments funneled from Australia’s biggest banks, according to Australian Financial Review.
Absolute Capital – Australian fund that invests in structured credit suspended withdrawals from 2 of its funds, explaining “demand for the assets has not dried up because the assets are in bad shape but rather due to a lack of market liquidity.” The funds maintain less than 5% exposure to U.S. subprime markets and use little leverage.
Macquarie Bank – announced 2 of its Fortress funds, which invest in senior secured U.S. corporate loans, could lose a quarter of their value due to price volatility in U.S. markets.
EUROPE:
Oddo & Cie - French asset manager shut down 3 funds with a combined $1.37bn in assets due to the plunge in prices of CDOs.
IKB Deutsche Industriebank - German small business lender met a funding shortfall from exposure to U.S. subprime real estate loans. Shareholder and state-owned development bank, KfW Bankengruppe, stepped in to assume $11.1bn in financial obligations from IKB.
Commerzbank – German bank set aside 80mn EUR in provisions to cover its exposure to the U.S. subprime market.
UBS - Swiss bank shut down its Dillon Read Capital Management LLC hedge fund in May after incurring $122mn in losses during Q1 primarily from the subprime market.
Cambridge Place - British fund shut down its $908mn Caliber Global Investment fund after suffering a net loss of $8.8mn in the first quarter of this year. Caliber had about 60% of its investments in the U.S., mostly in mortgage debts rated BBB or below
Cheyne Capital Management - British fund lost $91mn for the year to March 31 on its mortgage debt fund, Queen's Walk Investment.
MIDDLE EAST:
GCC firms defer bond issues
USA (most recently):
Sowood Capital Management – Boston-based hedge fund manager, which invests a portion of Harvard's endowment, shut down after losing nearly $1.5 billion in July."
Brett Steenbarger: "Sixty days following a sharp market drop from multi-year highs, the Dow was up by an average of 4.16% (39 up, 14 down). That is considerably stronger than the average 60-day gain of 1.59% for the remainder of the sample...On Tues, we had 310 new 20-day highs; 1360 new lows. Demand was 58; Supply 23...Since 1990, when we've made multi-year highs and then dropped sharply, the market was higher 10 times and lower 5 times after 60 days for an average gain of 2.27%. Drawdowns, however, have been the norm: eleven of the fifteen occasions were down after 10 trading sessions.
Now here's an interesting finding: There were three periods in which the drop from multi-year highs turned into full-fledged bear moves (declines of more than 10%): Jan., 2000; July, 1998; and September, 1987. All three of those times, the market had moved sharply lower in the next ten trading sessions (over 1.5%) and continued lower thereafter.
Conversely, when the market was up 10 days following the sharp drop from multi-year highs (N = 27), it remained higher over the 60 day period 23 of those times. In fact, on 22 of those occasions, it added to its 10-day gains."
Employment in the U.S. private sector grew by 48,000 in July, according to the ADP employment report released Wednesday suggesting nonfarm payrolls may have grown much slower than the 133,000 anticipated by economists. Adding in some 25,000 government jobs, the ADP report suggests nonfarm payrolls grew by about 73,000 in July.
Noble Energy Inc. posted a second-quarter profit of $209.1 million, or $1.21 a share, compared with a loss of $30.7 million, or 17 cents a share in the year-earlier quarter. Total revenue rose 3% to $794.2 million, while total costs and expenses dropped to $501.1 million from $817.4 million, the company said.
Trans Ocean said second-quarter net income rose to $549 million, or $1.84 a share, compared to $249 million, or 75 cents a share in the year-ago period. Revenue rose to $1.4 billion from $854 million. The second quarter 2007 average dayrate reached a record high $202,400, up 2% compared to $198,000 during the first quarter. For the first time in Transocean's history, the fleet-wide quarterly average dayrate exceeded $200,000.
Devon Energy said second-quarter net income rose 5% to $904 million, or $2 a share, with revenue up 25% to $2.93 billion. Adjusted for 13 cents a share in benefits, it would've earned $1.87 a share, compared to Thomson Financial-compiled earnings estimates of $1.46 a share. Production rose 16% to 56.2 million barrels of oil equivalent.
Over the last seven years alone, China's trade with ASEAN's 10 member countries has more than doubled.
Helmerich & Payne Inc. said second-quarter net income rose to $115.2 million, or $1.09 a share( $0.88 cents without the gain on sale of stock and insurance settlement.), from $80 million, or 75 cents a share in the year-ago period. Revenue grew to $421.3 million from $320 million.
The ISM index fell to 53.8% in July from 56.0% in June. New orders fell to 57.5% in July from 60.3% in June. Inventories rebounded a bit to 48.5% from 45.3% in the previous month. The employment index inched lower to 50.2% from 51.1%. The price index fell to 65.0% from 68.0%.
Contract signings on existing homes climbed by 5% in June, the most in more than three years, the National Association of Realtors reported Wednesday. But pending sales are still down 8.6% below June 2006.
The American Petroleum Institute reported a fall of 3.8 million barrels in crude supplies for the week ended July 27. The Energy Department had reported a decline of 6.5 million barrels for the latest week. Motor gasoline supplies were up 2.3 million barrels, the API said. The government reported that supplies were up 600,000 barrels. Distillate supplies fell 582,000 barrels, the API said. The government posted a 2.8 million-barrel increase.
Gonzales has until the end of this week to review his congressional testimony and correct any misstatements.
Advanced Medical Optics Inc. has withdrawn its bid to purchase rival eye care product company Bausch & Lomb Inc., clearing the way for a rival bid from private-equity group Warburg Pincus, according to a filing Wednesday with the Securities & Exchange Commission.
Domestic vehicle sales are down 11% in the past year. Domestic auto sales plunged to 4.79 million, the lowest since the data were first collected in 1990. Domestic truck sales rose 3.3% to 6.76 million.
Starbucks backed its fiscal 2007 profit forecast in the range of 87 cents to 89 cents a share and net revenue growth of about 20%. It also still sees fiscal 2007 new store openings of at least 2,400, and same-store sales growth in the range of 3% to 7%. For fiscal 2008, it also said it expects revenue growth of about 18% and earnings per share growth of about 20% to 22%. It is also targeting new store openings of about 2,600, accelerating international openings by 200 stores, and same-store sales growth in the range of 3% to 7%.
September crude dropped $2.2%, or $1.68, to close at $76.53 a barrel Wednesday. September natural gas gained 2.6% to close at $6.352 per million British thermal units.
December gold fell $3.40 to close at $675.90 an ounce Wednesday. September silver fell 6.2 cents to close at $12.955 an ounce, and September copper finished at $3.585 a pound, down 6.35 cents, or 1.7%.
American International Group Inc., the world's biggest insurer, may be sitting on losses of as much as $2.3 billion from securities backed by subprime mortgages, analysts said.
In a ``worst-case scenario,'' AIG may lose $2.3 billion from its investments in subprime mortgage bonds as well as loans given to borrowers with poor or limited credit, A.G. Edwards Inc. analysts in St. Louis said today in a report. Analysts at Goldman Sachs Group Inc. issued a report today estimating losses of as much as $1.4 billion.
The VIX again traded today at the high of the year or about 24.
U.N. inspectors visited a nuclear reactor Monday being built in central Iran, a facility that has been off-limits since April, state media reported.
"The team visited the 40-megawatt research reactor in Arak," the official Islamic Republic News Agency quoted an unnamed official as saying. "The inspection took some 5 hours."
Interestingly, the news media hardly reported on this event and an IAEA official, who demanded anonymity because he was not authorized to comment, confirmed that agency experts had visited the site. He said they were given full access and encountered no obstacles from Iranian officials. A nail in the Bush/Cheney terror coffin.
Tuesday, July 31, 2007
August Is With Us and July Was Not Pretty
8/1/07 August Is With Us And July Was Not Pretty
Johnson & Johnson unveiled a restructuring plan designed to improve costs that includes a global work force reduction of up to 4 percent and pretax charges totaling $550 million to $750 million in the second half of 2007. Excluding the charges, the health care company still expects to meet its 2007 profit targets.
General Motors Corp. reported a second-quarter profit of $891 million on Tuesday, a huge reversal from the $3.4 billion loss it posted in the same period last year. In its home market, North America, it reported a net loss from continuing operations of $39 million.
Mazda reported a 62 percent drop in April-June profit on Tuesday, but Japan's No. 4 automaker stuck with its forecast for a record profit for the full year on growing global sales.
Mazda, which makes the Miata convertible and RX-8 sports, said it's headed for its fourth straight year of record earnings for the fiscal year ending March 2008, with 85 billion yen (US$715.5 million; euro523.8 million) in profit, up 15 percent from fiscal 2006. Mazda, 33.4 percent owned by Ford, is projecting fiscal year sales to edge up 2 percent to 3.320 trillion yen (US$27.95 billion; euro20.46 billion). Global vehicle sales are expected to climb 4 percent to 1.35 million vehicles for the fiscal year ending March 2008, up from about 1.30 million the previous fiscal year, it said in a statement.
Richard Daughty: "The next time somebody says that prices are going up and that they are having a hard time making ends meet, carefully observe their reaction when you politely and respectfully go up to them and, by way of education for their benefit, say, "Shut your damned stupid mouth, you ugly little troll! Your problems are all self-inflicted, as you are the same drooling 'I Love Big Government Creating Perpetual Entitlements' moron that elected the Congressional morons that have spent us into the Hell Of Crushing Debt (HOCD) and who conveniently looked the other way while the damnable Federal Reserve created the money and credit to make that stupid, bankrupting spending possible! It's your own fault, you ignorant little commie creep! You committed economic suicide, and in doing so have economically murdered the rest of us, you filthy piece of stupid, greedy, Leftist crap!" Meanwhile, core consumer prices rose a less-than-expected 0.1 percent in June, showing stable prices that have eased the year-on-year rate of nonfood, nonenergy inflation to 1.9 percent, the lowest in more than three years, the Commerce Department said on Tuesday. As I have said over and over again, core prices are irrelevant at the supermarket or the gas station.
Addison Wiggin: " U.S. securities firms now employ a record number of full-time employees. Firms added 10,000 employees in June, bringing the grand total to at least 848,300 souls hitching their wagon to this bubble of bubbles."
Prime Minister Nouri al-Maliki faces a revolt within his party by factions that want him out as Iraqi leader, according to officials in his office and the political party he leads. Ibrahim al-Jaafari, al-Maliki's predecessor, leads the challenge and already has approached leaders of the country's two main Kurdish parties, parliament's two Sunni Arab blocs and lawmakers loyal to powerful Shiite cleric Muqtada al-Sadr. Some 160,000 U.S. troops are in Iraq, and more than 3,640 Americans have been killed.
Nouriel Roubini: "We are clearly now observing a significant worsening in US financial conditions and a peaking of the Minsky Credit Cycle in a variety of markets:
- a housing recession that is getting worse by the day and home prices now falling (for the first time since the Great Depression) as the housing asset bubble has now burst.
- a credit crunch in subprime that is now spreading to near prime (Alt-A) and prime mortgages (see the Countrywide financial results) and to subprime credit cards and subprime auto loans;
- massive losses - at least $100b in subprime alone and most likely to end up higher – in the mortgage markets;
- a significant recent increase in corporate yield spreads (by 100 to 150 bps);
- the beginning of a liquidity crunch in capital markets that starts to look like the one experienced during the LTCM crisis (10 year swap spreads are - at 70bps - at their highest levels since 2002 and close to the levels that triggered the 1998 LTCM crisis);
- the effective shut down of the CDO and CLO markets as investors risk aversion towards complex derivative instruments - whose official ratings are clearly bogus given the subprime ratings debacle - is sharply up;
- up to 40 LBO deals now in serious trouble (restructured, postponed or cancelled) as the credit crunch is spreading to the leveraged loans and LBO market;
- the overall increasing stresses in a variety of credit markets ("a constipated owl" where "absolutely nothing is moving" is how Bill Gross of Pimco described the effective recent shutdown of the CDO market);
- credit default swap spreads being sharply up;
- the ABX, TABX, LDCX, CMBX, CDX, iTraxx indices all showing rising risk aversion of investors, sharply rising credit default spreads and significant concerns about credit risk in a variety of credit markets (US, Europe and Japan corporate, high yield corporate, commercial real estate, leveraged loans), not just in subprime or in mortgage markets.
Note also that, as Minsky - as well as more recently the BIS – have warned the deflation of such credit-driven asset bubbles is historically painful and associated with economic downturns and recessions. So “Have we reached a Minsky moment?” It certainly looks like it."
TheOilDrum: "Quite a few of analysts are saying that peak oil is here now. Suppose they are right -- what kind of changes can we expect to see in the years ahead? In this section, we will look at projections of oil supply, and discuss what of the consequences of this declining supply might be. While it is possible that peak oil is not for a few years, this analysis will assume the peak year is 2006, with decline starting in 2007. If this assumption turns out to be a little early, the worst that will happen is that we will be a little ahead in our planning...The first of the projections we call the "symmetric" projection. It simply assumes that oil production will decrease in the future in a manner similar to the way that it increased in the past. This method assumes that 2006 is the peak year; 2007 production will be equal to 2005 production; 2008 production will be equal to 2004; and so on. Thus, the future is expected to be a mirror image of the past. The second projection is what we call the "analyst average" method. Here, we average five projections assuming peak in the 2005 to 2007 period - two made by Ace, one made by Bakhtiari, and two made by Robelius. We have adjusted all of the projections to a "total liquids" basis for this comparison (that is, including ethanol and other liquid fuels that are similar to oil), so that they are comparable to each other and to the historical data...Figure 1 shows that the projection methods produce fairly similar results. Both methods show production declining fairly rapidly:• At 2010 - Symmetric: Minus 9%; Analysts Average: Minus 1%• At 2020 - Symmetric: Minus 21%; Analysts Average: Minus 23%• At 2030 - Symmetric: Minus 31%; Analysts Average; Minus 42%...It seems like it is really the amount of oil per person that makes a difference. What kind of change in oil production is expected on a per capita basis? The number of people in the world has been rising at between 1% and 2% per year...On a per capita basis, the amount of oil produced has been approximately level, at about 4.6 barrels per person, between 1982 and 2006. The forecasts show that the amount of oil per person is expected to decrease to approximately 2.0 to 2.5 barrels per person, by 2030...There is a surprisingly close relationship between the amount of oil consumed and a country's standard of living...Of the countries shown, the United States has the highest consumption, at approximately 25 barrels per person per year. Canada is close behind, with about 24 barrels. Germany and the United Kingdom are at a level roughly half of that of the United States, partly because they use more public transportation and partly because they drive smaller cars. Mexico and Russia both have per capita consumption of about 7. Note that this is still above the world-wide average per capita consumption of 4.6, from Figure 3. China and India have the lowest per capita consumption of the countries shown - approximately 2 barrels a day for China and 1 barrel a day for India...The US currently imports about 60% of its oil supply. The big question with respect to future US oil supply is how much oil we will continue to import in the future, when world supply begins to decline...we show a a hypothetical situation in which US oil imports drop about 10% by 2010, then drop to about half of the current level by 2020 and disappear all together by 2030. These estimates are not much more than guesses. There are a lot of uncertainties about future imports...A shortage of natural gas in North America starting in a few years appears to be a significant possibility.Natural gas from conventional sources is in increasingly short supply. Gas from shale, which is a major "unconventional" source, is looking increasingly non-economic. Liquified natural gas (LNG) from overseas is sometimes thought to be a substitute, but a lack of investment in overseas facilities to process LNG is likely to limit its availability.• World food supply World food supply is coming under increasing pressure, with competition from biofuels, shortages of fresh water for irrigation, crop failures due to climate change, increasing soil degradation and growing world population."
India's central bank unexpectedly ordered banks to curb lending and investment for the third time this year to soak up cash and keep a lid on inflation. Lenders must put aside 7 percent of deposits as reserves starting Aug. 4, up from 6.5 percent, the Reserve Bank of India said in a statement in Mumbai today. The central bank also held its benchmark interest rate at a five-year high of 7.75 percent.
Russia plans to sell 250 advanced long-range Sukhoi-30 fighter jets to Iran in an unprecedented billion-dollar deal. According to reports, in addition to the fighter jets, Teheran also plans to purchase a number of aerial fuel tankers that are compatible with the Sukhoi and capable of extending its range by thousands of kilometers. Defense officials said the Sukhoi sale would grant Iran long-range offensive capabilities.
Over the past year, employment costs have increased 3.3%, down from 3.5% in the first quarter. Wages and salary costs have increased 3.4% in the past year, while benefit costs increased 2.6%.
Japan's jobless rate edged 0.1% lower in June from the previous month on a seasonal-adjusted basis, hitting its lowest level in nine years, the government said Tuesday. Japan's jobless rate declined to 3.7% in June from 3.8% a month earlier, the Ministry of Internal Affairs and Communications said in statement published on its Web site Tuesday. The jobless rate was the lowest recorded since Feb 1998. Japanese wages declined for a seventh straight month in June while household spending rose slightly, marking its sixth straight monthly increase, government data showed Tuesday. Japanese monthly wages, including overtime and other bonuses, declined 1.1% to 465,174 yen ($3,909) from the same month a year earlier, Japan's health and labor ministry said in a statement on its Web site Tuesday.
In an interview with Austrian financial daily Wirtschaftsblatt published as U.S. oil prices hovered close to their record high, OPEC Secretary General Abdalla Salem el-Badri said: "There is no official price band, but I think I can safely say we would not feel comfortable if the oil price sank to $50 a barrel.
"A price above $80 also wouldn't make us particularly pleased," he added.
Bear Stearns analyst Robin Shoemaker said Monday to expect more deals making among oilfield services and equipment companies. He said a shortage of skilled labor, competition for a technological edge and overcapitalization will push further consolidation.
The recurring dead zone off the Louisiana and Texas coasts isn't quite as big as predicted earlier this year, but at 7,900 square miles, it is still the third-biggest ever mapped.Nancy Rabalais, a scientist who has been studying the phenomenon since 1985, said crabs, eels and other creatures usually found on the bottom were swimming in crowds on the surface because there was too little oxygen to survive in their usual habitat. The area with almost no oxygen, a condition called hypoxia, was about the size of Connecticut and Delaware together. It would be big enough to hold New Jersey if only land area was counted.Rabalais said the Louisiana-Texas dead zone is the world's second-largest hypoxic area. This year's is about 7.5 percent smaller than predicted by Eugene Turner, a professor of oceanography and coastal sciences at Louisiana State University and Rabalais' husband.
The S&P/Case-Shiller index of home prices in 20 metropolitan areas dropped 2.8 percent in May from a year ago, led by declines in Detroit and San Diego, according to the report issued today by Standard & Poor's and MacroMarkets LLC.
Consumer spending in the U.S. increased in June at the slowest pace in nine months as near- record gasoline prices and falling home values forced Americans to cut back. The 0.1 percent rise in spending followed a 0.6 percent increase in May.
Rep. Ron Paul: "To calm fears, Americans accepted the patriot act and the doctrine of pre-emptive war. We tolerated new laws that allow the government to snoop on us, listen to our phone calls, track our financial dealings, make us strip down at airports and even limited the rights of habeas corpus and trial by jury. Like some dysfunctional episode of the twilight zone, we allowed the summit of our imagination to be linked up with the pit of our fears. Paranoia can be treated, but the loss of liberty resulting from the social psychology to which we continue to subject ourselves is not easily reversed. People who would have previously battled against encroachments on civil liberties now explain the "necessity" of those "temporary security measures" Franklin is said to have railed against. Americans must reflect on their irrational fears if we are to turn the tide against the steady erosion of our freedoms. Fear is the enemy. The logically confusing admonition to "fear only fear" does not help, instead we must battle against irrational fear and the fear-mongers who promote it. It is incumbent on a great nation to remain confident, if it wishes to remain free. We need not be ignorant to real threats to our safety, against which we must remain vigilant. We need only to banish to the ash heap of history the notion that we ought to be ruled by our fears and those who use them to enhance their own power."
U.S. consumers were more positive about the economy and their own finances in July than at any time since 9/11, the Conference Board reported Tuesday. The consumer confidence index rose to 112.6 from a revised 105.3, ahead of expectations of a gain to 106.0. The present situation index rose to 139.2 (also the highest since August 2001) from 129.9 in June, while the expectations index rose to 94.8 from 88.8. The improvement was largely due to fewer consumers expressing pessimism, but the number of optimists also grew. The percentage of consumers saying jobs are plentiful rose to 30.5% from 27.6%, while the number saying jobs are hard to get fell to 18.4% from 20.5%.
Spending on U.S. construction projects fell 0.3% in June, the first decline in the past five months, the Commerce Department estimated Tuesday. Private residential construction fell 0.7% in June, the 16th consecutive monthly decline.
Edwards, of Texas A&M, says Bush has exhausted his ability to persuade voters to change their minds. Said Edwards: ``His ability to sway public opinion is zero.''
Dow Jones & Co. Inc.'s controlling Bancroft family "has accepted" News Corp.'s $5 billion offer to buy the publisher of the Wall Street Journal, an executive of a Dow Jones unit said on Tuesday."The Bancroft family has accepted," John Prestbo, editor and executive director of Dow Jones Indexes, told reporters on Tuesday in Chicago. Dow Jones "will be part of News Corp," he said.
Marathon Oil Corp. said it agreed to acquire Canada's Western Oil Sands Inc. for $5.56 billion plus assumed debt of $650 million, gaining access to Western's 20% stake in the Athabasca Oil Sands Project, one of the world's largest crude oil reservoirs. Upon completion of the transaction, oil producer and refiner Marathon will gain access to more than 300,000 gross acres of oil sands, of which more than 200,000 acres are expected to be developed by mining.
August gold rose $2.80 to close at $666.90 an ounce, while December gold gained $2.70 to end at $679.30 an ounce. The December contract finished the month of July with a gain of more than $16, or 2.4%. September silver rose 11.4 cents to end at $13.017 an ounce, and September copper climbed 6 cents to close at $3.6485 a pound.
After surging more than 120 points on strong earnings from General Motors Corp, the Dow ended 146.3 points lower, at 13,212. The S&P 500 was 18.72 points lower, at 1,455.19, and the Nasdaq 100 dropped 37.01 points to end at 2,546.27.
American Home Mortgage said it is considering a variety of options, including liquidation. Analysts noted that if a bankruptcy takes place, it would be significant as the lender does not do subprime loans.
September crude closed at $78.21 a barrel Tuesday. Natural gas ended the day at $6.22.
Home builder NVR Inc. said its board has authorized the repurchase of $300 million of outstanding stock.
Shares of Amgen Inc. fell substantially Tuesday, the day after the Centers for Medicare and Medicaid Services announced new reimbursement guidelines for Amgen's top-selling anemia-fighting drugs Epogen and Aranesp. Although the new guidelines were less stringent than had been feared by some industry watchers, they did place tighter constraints on reimbursement when the drugs are used to maintain certain hemoglobin levels.
Alcan's operating earnings of $1.62 per share or $603 million compared with $1.48 or $556 million a year earlier, while cash flow from operating activities in continuing operations slipped to $738 million from $771 million. The company said it was negatively affected by a weakened U.S. dollar, which put pressure on operating costs. Total sales, however, were $6.6 billion, up 8.2 percent from the second quarter of 2006 despite a slightly lower aluminum volume.
Base Partners Inc. has agreed to buy 70 acres in Quincy, Wash., to build a 400,000-square-foot data center, the company announced.The San Francisco-based company said the project will be developed on a build-to-suit basis with individual buildings of between 50,000 square feet and 20,000 square feet. Nearly 2 million square feet of data centers have already been built or are planned in Quincy for companies that include Microsoft, Yahoo, Ask.com and Intuit. According to Base Partners, electricity in Quincy costs 1.8 cents per kilowatt hour -- making it the cheapest in the nation. That compares to 12 cents per kilowatt hour in San Francisco. The national average is 6.2 cents per kilowatt hour.
The WSJ reported Bear Stearns is facing big losses in another hedge fund that has roughly $900 million in mortgage investments, following its shuttering of two other funds that bet heavily on subprime loans.
Johnson & Johnson unveiled a restructuring plan designed to improve costs that includes a global work force reduction of up to 4 percent and pretax charges totaling $550 million to $750 million in the second half of 2007. Excluding the charges, the health care company still expects to meet its 2007 profit targets.
General Motors Corp. reported a second-quarter profit of $891 million on Tuesday, a huge reversal from the $3.4 billion loss it posted in the same period last year. In its home market, North America, it reported a net loss from continuing operations of $39 million.
Mazda reported a 62 percent drop in April-June profit on Tuesday, but Japan's No. 4 automaker stuck with its forecast for a record profit for the full year on growing global sales.
Mazda, which makes the Miata convertible and RX-8 sports, said it's headed for its fourth straight year of record earnings for the fiscal year ending March 2008, with 85 billion yen (US$715.5 million; euro523.8 million) in profit, up 15 percent from fiscal 2006. Mazda, 33.4 percent owned by Ford, is projecting fiscal year sales to edge up 2 percent to 3.320 trillion yen (US$27.95 billion; euro20.46 billion). Global vehicle sales are expected to climb 4 percent to 1.35 million vehicles for the fiscal year ending March 2008, up from about 1.30 million the previous fiscal year, it said in a statement.
Richard Daughty: "The next time somebody says that prices are going up and that they are having a hard time making ends meet, carefully observe their reaction when you politely and respectfully go up to them and, by way of education for their benefit, say, "Shut your damned stupid mouth, you ugly little troll! Your problems are all self-inflicted, as you are the same drooling 'I Love Big Government Creating Perpetual Entitlements' moron that elected the Congressional morons that have spent us into the Hell Of Crushing Debt (HOCD) and who conveniently looked the other way while the damnable Federal Reserve created the money and credit to make that stupid, bankrupting spending possible! It's your own fault, you ignorant little commie creep! You committed economic suicide, and in doing so have economically murdered the rest of us, you filthy piece of stupid, greedy, Leftist crap!" Meanwhile, core consumer prices rose a less-than-expected 0.1 percent in June, showing stable prices that have eased the year-on-year rate of nonfood, nonenergy inflation to 1.9 percent, the lowest in more than three years, the Commerce Department said on Tuesday. As I have said over and over again, core prices are irrelevant at the supermarket or the gas station.
Addison Wiggin: " U.S. securities firms now employ a record number of full-time employees. Firms added 10,000 employees in June, bringing the grand total to at least 848,300 souls hitching their wagon to this bubble of bubbles."
Prime Minister Nouri al-Maliki faces a revolt within his party by factions that want him out as Iraqi leader, according to officials in his office and the political party he leads. Ibrahim al-Jaafari, al-Maliki's predecessor, leads the challenge and already has approached leaders of the country's two main Kurdish parties, parliament's two Sunni Arab blocs and lawmakers loyal to powerful Shiite cleric Muqtada al-Sadr. Some 160,000 U.S. troops are in Iraq, and more than 3,640 Americans have been killed.
Nouriel Roubini: "We are clearly now observing a significant worsening in US financial conditions and a peaking of the Minsky Credit Cycle in a variety of markets:
- a housing recession that is getting worse by the day and home prices now falling (for the first time since the Great Depression) as the housing asset bubble has now burst.
- a credit crunch in subprime that is now spreading to near prime (Alt-A) and prime mortgages (see the Countrywide financial results) and to subprime credit cards and subprime auto loans;
- massive losses - at least $100b in subprime alone and most likely to end up higher – in the mortgage markets;
- a significant recent increase in corporate yield spreads (by 100 to 150 bps);
- the beginning of a liquidity crunch in capital markets that starts to look like the one experienced during the LTCM crisis (10 year swap spreads are - at 70bps - at their highest levels since 2002 and close to the levels that triggered the 1998 LTCM crisis);
- the effective shut down of the CDO and CLO markets as investors risk aversion towards complex derivative instruments - whose official ratings are clearly bogus given the subprime ratings debacle - is sharply up;
- up to 40 LBO deals now in serious trouble (restructured, postponed or cancelled) as the credit crunch is spreading to the leveraged loans and LBO market;
- the overall increasing stresses in a variety of credit markets ("a constipated owl" where "absolutely nothing is moving" is how Bill Gross of Pimco described the effective recent shutdown of the CDO market);
- credit default swap spreads being sharply up;
- the ABX, TABX, LDCX, CMBX, CDX, iTraxx indices all showing rising risk aversion of investors, sharply rising credit default spreads and significant concerns about credit risk in a variety of credit markets (US, Europe and Japan corporate, high yield corporate, commercial real estate, leveraged loans), not just in subprime or in mortgage markets.
Note also that, as Minsky - as well as more recently the BIS – have warned the deflation of such credit-driven asset bubbles is historically painful and associated with economic downturns and recessions. So “Have we reached a Minsky moment?” It certainly looks like it."
TheOilDrum: "Quite a few of analysts are saying that peak oil is here now. Suppose they are right -- what kind of changes can we expect to see in the years ahead? In this section, we will look at projections of oil supply, and discuss what of the consequences of this declining supply might be. While it is possible that peak oil is not for a few years, this analysis will assume the peak year is 2006, with decline starting in 2007. If this assumption turns out to be a little early, the worst that will happen is that we will be a little ahead in our planning...The first of the projections we call the "symmetric" projection. It simply assumes that oil production will decrease in the future in a manner similar to the way that it increased in the past. This method assumes that 2006 is the peak year; 2007 production will be equal to 2005 production; 2008 production will be equal to 2004; and so on. Thus, the future is expected to be a mirror image of the past. The second projection is what we call the "analyst average" method. Here, we average five projections assuming peak in the 2005 to 2007 period - two made by Ace, one made by Bakhtiari, and two made by Robelius. We have adjusted all of the projections to a "total liquids" basis for this comparison (that is, including ethanol and other liquid fuels that are similar to oil), so that they are comparable to each other and to the historical data...Figure 1 shows that the projection methods produce fairly similar results. Both methods show production declining fairly rapidly:• At 2010 - Symmetric: Minus 9%; Analysts Average: Minus 1%• At 2020 - Symmetric: Minus 21%; Analysts Average: Minus 23%• At 2030 - Symmetric: Minus 31%; Analysts Average; Minus 42%...It seems like it is really the amount of oil per person that makes a difference. What kind of change in oil production is expected on a per capita basis? The number of people in the world has been rising at between 1% and 2% per year...On a per capita basis, the amount of oil produced has been approximately level, at about 4.6 barrels per person, between 1982 and 2006. The forecasts show that the amount of oil per person is expected to decrease to approximately 2.0 to 2.5 barrels per person, by 2030...There is a surprisingly close relationship between the amount of oil consumed and a country's standard of living...Of the countries shown, the United States has the highest consumption, at approximately 25 barrels per person per year. Canada is close behind, with about 24 barrels. Germany and the United Kingdom are at a level roughly half of that of the United States, partly because they use more public transportation and partly because they drive smaller cars. Mexico and Russia both have per capita consumption of about 7. Note that this is still above the world-wide average per capita consumption of 4.6, from Figure 3. China and India have the lowest per capita consumption of the countries shown - approximately 2 barrels a day for China and 1 barrel a day for India...The US currently imports about 60% of its oil supply. The big question with respect to future US oil supply is how much oil we will continue to import in the future, when world supply begins to decline...we show a a hypothetical situation in which US oil imports drop about 10% by 2010, then drop to about half of the current level by 2020 and disappear all together by 2030. These estimates are not much more than guesses. There are a lot of uncertainties about future imports...A shortage of natural gas in North America starting in a few years appears to be a significant possibility.Natural gas from conventional sources is in increasingly short supply. Gas from shale, which is a major "unconventional" source, is looking increasingly non-economic. Liquified natural gas (LNG) from overseas is sometimes thought to be a substitute, but a lack of investment in overseas facilities to process LNG is likely to limit its availability.• World food supply World food supply is coming under increasing pressure, with competition from biofuels, shortages of fresh water for irrigation, crop failures due to climate change, increasing soil degradation and growing world population."
India's central bank unexpectedly ordered banks to curb lending and investment for the third time this year to soak up cash and keep a lid on inflation. Lenders must put aside 7 percent of deposits as reserves starting Aug. 4, up from 6.5 percent, the Reserve Bank of India said in a statement in Mumbai today. The central bank also held its benchmark interest rate at a five-year high of 7.75 percent.
Russia plans to sell 250 advanced long-range Sukhoi-30 fighter jets to Iran in an unprecedented billion-dollar deal. According to reports, in addition to the fighter jets, Teheran also plans to purchase a number of aerial fuel tankers that are compatible with the Sukhoi and capable of extending its range by thousands of kilometers. Defense officials said the Sukhoi sale would grant Iran long-range offensive capabilities.
Over the past year, employment costs have increased 3.3%, down from 3.5% in the first quarter. Wages and salary costs have increased 3.4% in the past year, while benefit costs increased 2.6%.
Japan's jobless rate edged 0.1% lower in June from the previous month on a seasonal-adjusted basis, hitting its lowest level in nine years, the government said Tuesday. Japan's jobless rate declined to 3.7% in June from 3.8% a month earlier, the Ministry of Internal Affairs and Communications said in statement published on its Web site Tuesday. The jobless rate was the lowest recorded since Feb 1998. Japanese wages declined for a seventh straight month in June while household spending rose slightly, marking its sixth straight monthly increase, government data showed Tuesday. Japanese monthly wages, including overtime and other bonuses, declined 1.1% to 465,174 yen ($3,909) from the same month a year earlier, Japan's health and labor ministry said in a statement on its Web site Tuesday.
In an interview with Austrian financial daily Wirtschaftsblatt published as U.S. oil prices hovered close to their record high, OPEC Secretary General Abdalla Salem el-Badri said: "There is no official price band, but I think I can safely say we would not feel comfortable if the oil price sank to $50 a barrel.
"A price above $80 also wouldn't make us particularly pleased," he added.
Bear Stearns analyst Robin Shoemaker said Monday to expect more deals making among oilfield services and equipment companies. He said a shortage of skilled labor, competition for a technological edge and overcapitalization will push further consolidation.
The recurring dead zone off the Louisiana and Texas coasts isn't quite as big as predicted earlier this year, but at 7,900 square miles, it is still the third-biggest ever mapped.Nancy Rabalais, a scientist who has been studying the phenomenon since 1985, said crabs, eels and other creatures usually found on the bottom were swimming in crowds on the surface because there was too little oxygen to survive in their usual habitat. The area with almost no oxygen, a condition called hypoxia, was about the size of Connecticut and Delaware together. It would be big enough to hold New Jersey if only land area was counted.Rabalais said the Louisiana-Texas dead zone is the world's second-largest hypoxic area. This year's is about 7.5 percent smaller than predicted by Eugene Turner, a professor of oceanography and coastal sciences at Louisiana State University and Rabalais' husband.
The S&P/Case-Shiller index of home prices in 20 metropolitan areas dropped 2.8 percent in May from a year ago, led by declines in Detroit and San Diego, according to the report issued today by Standard & Poor's and MacroMarkets LLC.
Consumer spending in the U.S. increased in June at the slowest pace in nine months as near- record gasoline prices and falling home values forced Americans to cut back. The 0.1 percent rise in spending followed a 0.6 percent increase in May.
Rep. Ron Paul: "To calm fears, Americans accepted the patriot act and the doctrine of pre-emptive war. We tolerated new laws that allow the government to snoop on us, listen to our phone calls, track our financial dealings, make us strip down at airports and even limited the rights of habeas corpus and trial by jury. Like some dysfunctional episode of the twilight zone, we allowed the summit of our imagination to be linked up with the pit of our fears. Paranoia can be treated, but the loss of liberty resulting from the social psychology to which we continue to subject ourselves is not easily reversed. People who would have previously battled against encroachments on civil liberties now explain the "necessity" of those "temporary security measures" Franklin is said to have railed against. Americans must reflect on their irrational fears if we are to turn the tide against the steady erosion of our freedoms. Fear is the enemy. The logically confusing admonition to "fear only fear" does not help, instead we must battle against irrational fear and the fear-mongers who promote it. It is incumbent on a great nation to remain confident, if it wishes to remain free. We need not be ignorant to real threats to our safety, against which we must remain vigilant. We need only to banish to the ash heap of history the notion that we ought to be ruled by our fears and those who use them to enhance their own power."
U.S. consumers were more positive about the economy and their own finances in July than at any time since 9/11, the Conference Board reported Tuesday. The consumer confidence index rose to 112.6 from a revised 105.3, ahead of expectations of a gain to 106.0. The present situation index rose to 139.2 (also the highest since August 2001) from 129.9 in June, while the expectations index rose to 94.8 from 88.8. The improvement was largely due to fewer consumers expressing pessimism, but the number of optimists also grew. The percentage of consumers saying jobs are plentiful rose to 30.5% from 27.6%, while the number saying jobs are hard to get fell to 18.4% from 20.5%.
Spending on U.S. construction projects fell 0.3% in June, the first decline in the past five months, the Commerce Department estimated Tuesday. Private residential construction fell 0.7% in June, the 16th consecutive monthly decline.
Edwards, of Texas A&M, says Bush has exhausted his ability to persuade voters to change their minds. Said Edwards: ``His ability to sway public opinion is zero.''
Dow Jones & Co. Inc.'s controlling Bancroft family "has accepted" News Corp.'s $5 billion offer to buy the publisher of the Wall Street Journal, an executive of a Dow Jones unit said on Tuesday."The Bancroft family has accepted," John Prestbo, editor and executive director of Dow Jones Indexes, told reporters on Tuesday in Chicago. Dow Jones "will be part of News Corp," he said.
Marathon Oil Corp. said it agreed to acquire Canada's Western Oil Sands Inc. for $5.56 billion plus assumed debt of $650 million, gaining access to Western's 20% stake in the Athabasca Oil Sands Project, one of the world's largest crude oil reservoirs. Upon completion of the transaction, oil producer and refiner Marathon will gain access to more than 300,000 gross acres of oil sands, of which more than 200,000 acres are expected to be developed by mining.
August gold rose $2.80 to close at $666.90 an ounce, while December gold gained $2.70 to end at $679.30 an ounce. The December contract finished the month of July with a gain of more than $16, or 2.4%. September silver rose 11.4 cents to end at $13.017 an ounce, and September copper climbed 6 cents to close at $3.6485 a pound.
After surging more than 120 points on strong earnings from General Motors Corp, the Dow ended 146.3 points lower, at 13,212. The S&P 500 was 18.72 points lower, at 1,455.19, and the Nasdaq 100 dropped 37.01 points to end at 2,546.27.
American Home Mortgage said it is considering a variety of options, including liquidation. Analysts noted that if a bankruptcy takes place, it would be significant as the lender does not do subprime loans.
September crude closed at $78.21 a barrel Tuesday. Natural gas ended the day at $6.22.
Home builder NVR Inc. said its board has authorized the repurchase of $300 million of outstanding stock.
Shares of Amgen Inc. fell substantially Tuesday, the day after the Centers for Medicare and Medicaid Services announced new reimbursement guidelines for Amgen's top-selling anemia-fighting drugs Epogen and Aranesp. Although the new guidelines were less stringent than had been feared by some industry watchers, they did place tighter constraints on reimbursement when the drugs are used to maintain certain hemoglobin levels.
Alcan's operating earnings of $1.62 per share or $603 million compared with $1.48 or $556 million a year earlier, while cash flow from operating activities in continuing operations slipped to $738 million from $771 million. The company said it was negatively affected by a weakened U.S. dollar, which put pressure on operating costs. Total sales, however, were $6.6 billion, up 8.2 percent from the second quarter of 2006 despite a slightly lower aluminum volume.
Base Partners Inc. has agreed to buy 70 acres in Quincy, Wash., to build a 400,000-square-foot data center, the company announced.The San Francisco-based company said the project will be developed on a build-to-suit basis with individual buildings of between 50,000 square feet and 20,000 square feet. Nearly 2 million square feet of data centers have already been built or are planned in Quincy for companies that include Microsoft, Yahoo, Ask.com and Intuit. According to Base Partners, electricity in Quincy costs 1.8 cents per kilowatt hour -- making it the cheapest in the nation. That compares to 12 cents per kilowatt hour in San Francisco. The national average is 6.2 cents per kilowatt hour.
The WSJ reported Bear Stearns is facing big losses in another hedge fund that has roughly $900 million in mortgage investments, following its shuttering of two other funds that bet heavily on subprime loans.
Monday, July 30, 2007
July Comes To A Close
7/31/07 July Comes To A Close
China will raise banks' reserve requirement ratio by 0.5 percentage point, its ninth such move since June 2006, to rein in surplus liquidity, according to reports. The hike, which will be effective August 15, raises the ratio for most banks to 11%, reported Dow Jones Newswires, citing a People's Bank of China statement. The move has come barely 10 days after China raised its interest rates by 0.27 percentage points, and cut the tax on interest from bank deposits to 5% from 20% earlier, to cool its economy. Meanwhile, the Chinese Shanghai market closed at an all time record high. The benchmark CSI 300 index has tripled in the past 12 months, the biggest gain of 89 national equity benchmarks tracked by Bloomberg.
On its outlook HSBC said there is growing evidence of economic decoupling, with U.S. weakness not constraining economic activity elsewhere. Even in the U.S., which faces considerable housing and sub-prime-related difficulties, consumer spending has remained encouragingly robust and the labor market has been firm, it said.
ABN Amro dropped its support of the takeover bid launched by Barclays though it said the offer from the U.K. bank is within "its previously articulated strategic vision." Barclays immediately dropped the requirement that its offer needed the support of ABN Amro.
Sales of new homes in Australia declined 0.8% in June from a year earlier, owing to shrinking affordability, according to a survey of home builders by the Housing Industry Association.
Akzo Nobel said a second all-cash indicative offer, this time of 650 pence per share, has been rejected by Imperial Chemical Industries.
Verizon Wireless, a venture of Verizon Communications and Vodafone Group Plc , said Rural Cellular shareholders would receive $45 per share in cash for a total equity price of $757 million. It said the deal would increase its customer base by more than 700,000 subscribers.
South Korea's Doosan Infracore Co. agreed to acquire the Bobcat construction-vehicle business from Ingersoll-Rand Co. for $4.9 billion.
The Federal Trade Commission contends Whole Foods and Wild Oats operate in a distinct market for premium natural and organic groceries and the $565 million deal would curtail competition and raise prices in that segment
Brad Setser: "At least in my view, there is a difference between the dollar serving as a "safe haven" for US investors in times of stress and the dollar serving as a "safe haven" for foreign investors in times of stress. The reporting that I have seen is telling "a US money coming home" story (or an unwinding of dollar-funded trades story) more than "a foreign money coming to the US" story."
John Hussman: "The market currently exhibits neither favorable investment merit (based on valuations) nor favorable speculative merit (based on the quality of internal market action). The potential for a snap-back rally aside, we simply have no basis on which to accept an unhedged exposure to market risk."
Brett Steenbarger: "The market is currently trading at 60% above the level of the 50-day VIX average. That has occurred on only 20 occasions since 2000 (N = 4350). All of those occasions have been up 30 days later in OEX by a whopping average of 6.43%. The track record was much more mixed from 1990-1999 (16 occurrences; 9 up, 7 down)."
Acccording to the Financial Times, American Home Mortgage, described the disruption in the credit markets over the past few weeks as “unprecedented,” and said this had caused “major write-downs of its loan and security portfolios and consequently has caused significant margin calls with respect to its credit facilities.” The company s delaying paying dividends on its common stock and may delay payments on its preferred shares because banks demanded it put up more cash after the Melville, New York-based mortgage lender wrote down the value of its loan and security portfolios significantly.
Japan's industrial production increased in June, ending the worst manufacturing slump in almost two years.
The N.Y. Times reported a senior member of the Bancroft family, which controls Dow Jones, has changed his mind and now supports selling the company to News Corp.
The price of gasoline dropped about 17 cents over the last two weeks, according to a national survey released Sunday. The average price for regular was $2.88 a gallon, mid-grade was $3.01 and premium was $3.12, said oil industry analyst Trilby Lundberg.
The Central Area Transmission System (CATS) which carries gas from North Sea will remain off line for repairs until at least September (it’s been down since July 1).
ValueClick lowered its 2007 EPS estimate from $0.79-0.81/share to $0.74-0.76.
Monster plans to cut 800 jobs, roughly 15% of its workforce.
The U.S. will hit its debt limit of nearly $9 trillion in early October, Treasury Secretary Henry Paulson told Congress on Monday, and asked lawmakers to raise the limit "as soon as possible." The debt limit is currently $8.965 billion.
The U.S. Treasury expects to borrow $73 billion of net marketable debt in the fourth quarter of fiscal 2007, $31 billion more than it announced in April.
September crude fell 19 cents to close at $76.83 a barrel Monday. September natural gas, however, rallied 4.7%, or 29.1 cents, to close at a more than one-week high of $6.499 per million British thermal units.
August gold climbed $4 to close at $664.10 an ounce Monday. September silver climbed 1.5%, or 18.8 cents, to finish at $12.903 an ounce and September copper rose 1.2%, or 4.15 cents, to end at $3.5885 a pound.
Nelson Peltz's Trian Partners said it was prepared to offer a takeover bid of $37 to $41 a share for Wendy's International, according to documents filed with the U.S. Securities and Exchange Commission on Monday.
Sowood Capital Management LP, a hedge fund firm that once had over $3 billion in assets, told investors on Monday that its Alpha funds lost more than half their value this month amid turmoil in the credit market. The Sowood Alpha Fund Ltd. and the Sowood Alpha Fund LP are down roughly 57% and 53% in July, respectively, and about 56% and 51% so far this year, the firm said in a letter to clients.
Analysts expect Alcan to say it earned $1.71 per share in the quarter, on $6.46 billion in revenue, according to a poll conducted by Thomson Financial.
China will raise banks' reserve requirement ratio by 0.5 percentage point, its ninth such move since June 2006, to rein in surplus liquidity, according to reports. The hike, which will be effective August 15, raises the ratio for most banks to 11%, reported Dow Jones Newswires, citing a People's Bank of China statement. The move has come barely 10 days after China raised its interest rates by 0.27 percentage points, and cut the tax on interest from bank deposits to 5% from 20% earlier, to cool its economy. Meanwhile, the Chinese Shanghai market closed at an all time record high. The benchmark CSI 300 index has tripled in the past 12 months, the biggest gain of 89 national equity benchmarks tracked by Bloomberg.
On its outlook HSBC said there is growing evidence of economic decoupling, with U.S. weakness not constraining economic activity elsewhere. Even in the U.S., which faces considerable housing and sub-prime-related difficulties, consumer spending has remained encouragingly robust and the labor market has been firm, it said.
ABN Amro dropped its support of the takeover bid launched by Barclays though it said the offer from the U.K. bank is within "its previously articulated strategic vision." Barclays immediately dropped the requirement that its offer needed the support of ABN Amro.
Sales of new homes in Australia declined 0.8% in June from a year earlier, owing to shrinking affordability, according to a survey of home builders by the Housing Industry Association.
Akzo Nobel said a second all-cash indicative offer, this time of 650 pence per share, has been rejected by Imperial Chemical Industries.
Verizon Wireless, a venture of Verizon Communications and Vodafone Group Plc , said Rural Cellular shareholders would receive $45 per share in cash for a total equity price of $757 million. It said the deal would increase its customer base by more than 700,000 subscribers.
South Korea's Doosan Infracore Co. agreed to acquire the Bobcat construction-vehicle business from Ingersoll-Rand Co. for $4.9 billion.
The Federal Trade Commission contends Whole Foods and Wild Oats operate in a distinct market for premium natural and organic groceries and the $565 million deal would curtail competition and raise prices in that segment
Brad Setser: "At least in my view, there is a difference between the dollar serving as a "safe haven" for US investors in times of stress and the dollar serving as a "safe haven" for foreign investors in times of stress. The reporting that I have seen is telling "a US money coming home" story (or an unwinding of dollar-funded trades story) more than "a foreign money coming to the US" story."
John Hussman: "The market currently exhibits neither favorable investment merit (based on valuations) nor favorable speculative merit (based on the quality of internal market action). The potential for a snap-back rally aside, we simply have no basis on which to accept an unhedged exposure to market risk."
Brett Steenbarger: "The market is currently trading at 60% above the level of the 50-day VIX average. That has occurred on only 20 occasions since 2000 (N = 4350). All of those occasions have been up 30 days later in OEX by a whopping average of 6.43%. The track record was much more mixed from 1990-1999 (16 occurrences; 9 up, 7 down)."
Acccording to the Financial Times, American Home Mortgage, described the disruption in the credit markets over the past few weeks as “unprecedented,” and said this had caused “major write-downs of its loan and security portfolios and consequently has caused significant margin calls with respect to its credit facilities.” The company s delaying paying dividends on its common stock and may delay payments on its preferred shares because banks demanded it put up more cash after the Melville, New York-based mortgage lender wrote down the value of its loan and security portfolios significantly.
Japan's industrial production increased in June, ending the worst manufacturing slump in almost two years.
The N.Y. Times reported a senior member of the Bancroft family, which controls Dow Jones, has changed his mind and now supports selling the company to News Corp.
The price of gasoline dropped about 17 cents over the last two weeks, according to a national survey released Sunday. The average price for regular was $2.88 a gallon, mid-grade was $3.01 and premium was $3.12, said oil industry analyst Trilby Lundberg.
The Central Area Transmission System (CATS) which carries gas from North Sea will remain off line for repairs until at least September (it’s been down since July 1).
ValueClick lowered its 2007 EPS estimate from $0.79-0.81/share to $0.74-0.76.
Monster plans to cut 800 jobs, roughly 15% of its workforce.
The U.S. will hit its debt limit of nearly $9 trillion in early October, Treasury Secretary Henry Paulson told Congress on Monday, and asked lawmakers to raise the limit "as soon as possible." The debt limit is currently $8.965 billion.
The U.S. Treasury expects to borrow $73 billion of net marketable debt in the fourth quarter of fiscal 2007, $31 billion more than it announced in April.
September crude fell 19 cents to close at $76.83 a barrel Monday. September natural gas, however, rallied 4.7%, or 29.1 cents, to close at a more than one-week high of $6.499 per million British thermal units.
August gold climbed $4 to close at $664.10 an ounce Monday. September silver climbed 1.5%, or 18.8 cents, to finish at $12.903 an ounce and September copper rose 1.2%, or 4.15 cents, to end at $3.5885 a pound.
Nelson Peltz's Trian Partners said it was prepared to offer a takeover bid of $37 to $41 a share for Wendy's International, according to documents filed with the U.S. Securities and Exchange Commission on Monday.
Sowood Capital Management LP, a hedge fund firm that once had over $3 billion in assets, told investors on Monday that its Alpha funds lost more than half their value this month amid turmoil in the credit market. The Sowood Alpha Fund Ltd. and the Sowood Alpha Fund LP are down roughly 57% and 53% in July, respectively, and about 56% and 51% so far this year, the firm said in a letter to clients.
Analysts expect Alcan to say it earned $1.71 per share in the quarter, on $6.46 billion in revenue, according to a poll conducted by Thomson Financial.
Sunday, July 29, 2007
Going Into Next Wek
7/30/07 Going Into Next Week
Brett Steenbarger: "Only 16% of NYSE stocks above their 50 day MA; 17% of SPX stocks. 175 common stocks on NYSE made 52 wk lows vs 231 on Thurs... 3047 new 20-day lows on Fri.; weak, but above the 4392 new lows on Thurs. Demand was 26; Supply 41. Losing downside momentum? " Oversold markets can stay oversold as can overbought markets can continue. They don't ring a bell; however, the risk rewards are now more favorable for long term investors, and that despite increasing volatility. Buying on a scale down is something to consider.
American exports to China soared by 240 percent in 2000-06, far ahead of the 10-40 percent rate for other key markets, according to the U.S.-China Business Council. The group represents some 250 companies, including major American exporters.
Donald Dony: " Long standing fundamental evidence has pointed to weakness with the American currency since 2000. Technical data now suggests that the last key price support line of 80 cents is likely to be broken soon. As there are no established price support levels below 80 cents, the percentage of decline maybe unpredictable."
Mike Burk: "809 new lows on the NYSE a week after an all time high in the DJIA is a first (the black swan thing). In one week we have gone from looking at a developing top to looking at a developing bottom. Tops usually take a while to develop with the blue chips making new highs while the secondaries deteriorate. So it would not surprise me to see another all time high in the DJIA before a final collapse. Short term the market is very oversold and I expect it to rally. I expect the major indices to be higher on Friday August 3 than they were on Friday July 27."
Sen. Patrick Leahy: "The White House has asserted blanket claims of executive privilege, despite officials' contentions that the president was not involved. They refuse to provide a factual basis for their blanket claims, have instructed former White House officials not to testify about what they know, and then instructed Harriet Miers to refuse even to appear as required by a House Judiciary Committee subpoena. Now, anonymous officials are claiming that the statutory mechanism to test White House assertions of executive privilege no longer governs. In essence, this White House asserts that its claim of privilege is the final word, that Congress may not review it and that no court can review it. Here, again, this White House claims to be above the law.
My oath, unlike those who have apparently sworn their allegiance to this president, is to the U.S. Constitution. I believe in checks and balances and in the rule of law."
Barron's Editorial: "From 2000 to 2006, the workforce of the largest 500 American companies rose by a mere 3.6%, while revenue increased by 39%. Profits rose by 80% -- demonstrating that more output, revenue and sales were from essentially the same resources."
Dutch bank ABN AMRO is likely to drop its formal recommendation for suitor Barclays' 65.6 billion euro ($89.6 billion) takeover offer on Monday, sources familiar with the situation said on Sunday.
Iran does not expect OPEC to discuss changing output levels at its next regular meeting in Vienna in September, Oil Minister Kazem Vaziri-Hamaneh was quoted as saying on Sunday.
"Some of the key drivers of liquidity, the subprime and new debt issuance markets, have effectively shut down," said Richard Gilhooly, senior fixed-income strategist at BNP Paribas.
Mark Kiesel, portfolio manager at Pimco, said debt underwriters might be forced to cut prices to attract buyers – a development that would hit profits at Wall Street banks.
Alumina production rose seven per cent to 4.46 million tons and aluminum output gained two per cent to 1.34 million tons — both annual records, BHP Billiton said. The company will report record earnings of over $14.25 billion on August 22.
One should note that Alumina is Alcoa's 40 percent partner in the Alcoa World Alumina & Chemical joint venture, and operates some of the world's lowest cost alumina refineries, including refineries in Western Australia. BHP Billiton is headquartered in Melbourne. I continue to believe that either BHP Billiton or CVRD will end up buying Alcoa and the share price drop in the last 2 weeks for Alcoa from over $48 to under $38 makes Alcoa especially vulnerable to an all cash tender offer in the $46 price range. I fully expect that offer to be forthcoming.
Brett Steenbarger: "Only 16% of NYSE stocks above their 50 day MA; 17% of SPX stocks. 175 common stocks on NYSE made 52 wk lows vs 231 on Thurs... 3047 new 20-day lows on Fri.; weak, but above the 4392 new lows on Thurs. Demand was 26; Supply 41. Losing downside momentum? " Oversold markets can stay oversold as can overbought markets can continue. They don't ring a bell; however, the risk rewards are now more favorable for long term investors, and that despite increasing volatility. Buying on a scale down is something to consider.
American exports to China soared by 240 percent in 2000-06, far ahead of the 10-40 percent rate for other key markets, according to the U.S.-China Business Council. The group represents some 250 companies, including major American exporters.
Donald Dony: " Long standing fundamental evidence has pointed to weakness with the American currency since 2000. Technical data now suggests that the last key price support line of 80 cents is likely to be broken soon. As there are no established price support levels below 80 cents, the percentage of decline maybe unpredictable."
Mike Burk: "809 new lows on the NYSE a week after an all time high in the DJIA is a first (the black swan thing). In one week we have gone from looking at a developing top to looking at a developing bottom. Tops usually take a while to develop with the blue chips making new highs while the secondaries deteriorate. So it would not surprise me to see another all time high in the DJIA before a final collapse. Short term the market is very oversold and I expect it to rally. I expect the major indices to be higher on Friday August 3 than they were on Friday July 27."
Sen. Patrick Leahy: "The White House has asserted blanket claims of executive privilege, despite officials' contentions that the president was not involved. They refuse to provide a factual basis for their blanket claims, have instructed former White House officials not to testify about what they know, and then instructed Harriet Miers to refuse even to appear as required by a House Judiciary Committee subpoena. Now, anonymous officials are claiming that the statutory mechanism to test White House assertions of executive privilege no longer governs. In essence, this White House asserts that its claim of privilege is the final word, that Congress may not review it and that no court can review it. Here, again, this White House claims to be above the law.
My oath, unlike those who have apparently sworn their allegiance to this president, is to the U.S. Constitution. I believe in checks and balances and in the rule of law."
Barron's Editorial: "From 2000 to 2006, the workforce of the largest 500 American companies rose by a mere 3.6%, while revenue increased by 39%. Profits rose by 80% -- demonstrating that more output, revenue and sales were from essentially the same resources."
Dutch bank ABN AMRO is likely to drop its formal recommendation for suitor Barclays' 65.6 billion euro ($89.6 billion) takeover offer on Monday, sources familiar with the situation said on Sunday.
Iran does not expect OPEC to discuss changing output levels at its next regular meeting in Vienna in September, Oil Minister Kazem Vaziri-Hamaneh was quoted as saying on Sunday.
"Some of the key drivers of liquidity, the subprime and new debt issuance markets, have effectively shut down," said Richard Gilhooly, senior fixed-income strategist at BNP Paribas.
Mark Kiesel, portfolio manager at Pimco, said debt underwriters might be forced to cut prices to attract buyers – a development that would hit profits at Wall Street banks.
Alumina production rose seven per cent to 4.46 million tons and aluminum output gained two per cent to 1.34 million tons — both annual records, BHP Billiton said. The company will report record earnings of over $14.25 billion on August 22.
One should note that Alumina is Alcoa's 40 percent partner in the Alcoa World Alumina & Chemical joint venture, and operates some of the world's lowest cost alumina refineries, including refineries in Western Australia. BHP Billiton is headquartered in Melbourne. I continue to believe that either BHP Billiton or CVRD will end up buying Alcoa and the share price drop in the last 2 weeks for Alcoa from over $48 to under $38 makes Alcoa especially vulnerable to an all cash tender offer in the $46 price range. I fully expect that offer to be forthcoming.
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