10/7/07 Proceed At Your Own Risk
For much of the past year, the hottest housing market has been in King County, Washington on the east side of Seattle. For the last two months, the selling price of homes has fallen two months in a row, and they are now back to where they were last spring. Every month since May, the year over year supply of homes for sale has increased 40% or more for the same month in 2006. The drop in the median price is the first since 2002.
Business Week: "Builders' balance sheets needed a boost, too. Even though the five-largest publicly held residential builders have cut the value of their land and unsold homes from $49.7 billion in 2006 to $41.9 billion today, that inventory as a percentage of sales has soared 33% during the past year, according to Banc of America Securities. Those idle assets have taken a toll on the industry's health. A year ago builders' debt payments were roughly the same as their cash flow. Now debt is 2.5 times cash flow. Profits are disappearing as well, with KB Home, D.R. Horton, and other big builders all reporting losses in the third quarter."
Gary Shilling: "Subprimes leaped to $1.3 trillion, or 73% of all Adjustable Rate Mortgages (ARMs), in the first quarter, a 17 times jump from 2001. And 57% of mortgage broker customers with ARMs were unable to refinance into new loans in August, given their low initial down payments and falling prices that have put their equity in negative territory. Estimates are that the cumulative loss on subprime mortgages will be $164 billion in home equity and cost financial institutions $300 billion."
I find it interesting that, when the homebuilders have taken write downs, their shares decline. When Merrill Lynch and Washington Mutual and other financials
take write downs, their shares rise. Aren't mortgages and debt at the core of the problems for both industries? When a criminal probe is brewing for Bear Stearns, its shares rise sharply. Is this disconnect rational? You believe all the bad news is out for the financials and they have realistically marked to the market or have they managed their earnings like GE did in past years?
Financial Times: "The toll of big bank losses from the credit squeeze topped $18bn after Merrill Lynch and Washington Mutual revealed heavy damage inflicted by financial market turmoil."
Reuters: "Jim O'Shaughnessy, author of the 2005 business bestseller "What works on Wall Street" and star money manager at Bear Stearns, is leaving the investment bank to set up his own asset-management shop -- but he won't leave empty handed. He'll take with him about $8 billion of Bear Stearns Asset Management's $44 billion in assets under management, as well as portfolio and sales staff. Another thing that will depart with him -- the investment strategy that guided him through his six-year run at the No. 5 brokerage."
Financial Times: "Banks have upwards of $200bn - some estimates say as much as $400bn - of unsold loans used to back leveraged buy-outs (LBOs) sitting on their balance sheets, and they are desperate to dump them. But the buyers also have a problem. Private equity and hedge fund groups typically borrow to invest, and the credit squeeze which caused the banks' LBO problems has also made it harder for the funds to secure finance. Now big banks are trying to solve both problems by offering to lend to the funds - as long as they use the money to buy the unwanted LBO loans from the banks. ‘The banks are saying, ‘If you buy my loan above market, we will give you more leverage,’ said one investment banker. ‘They are taking market risk and turning it into counterparty risk."
Greenspan: "People always say it’s the subprime market that created this crisis. It’s the subprime asset-backed market’ which did."
Doug Noland: "The Federal Home Loan Banks (FHLB) expanded assets about $170bn during the two-month period August through September. This was for them an unprecedented market intervention. For perspective, the FHLB expanded about $19bn during 2006 and $73bn in 2005. Even during tumultuous 1998, the FHLB limited asset growth to about $90bn. To my surprise, total GSE third-quarter Credit expansion will most likely approach $250bn. For the entire year 1998, Fannie, Freddie and the FHLB combined for $300bn of growth, at that time a record...Over the past 10 weeks, Money Market Fund assets have surged $308bn, a 60% growth rate. This pool of (of mostly Wall Street controlled) finance has expanded $510bn y-t-d, or 27.8% annualized, to almost $2.891 TN. Despite asset-backed commercial paper and special-purpose vehicle finance residing at the crisis' epicenter, confidence that “money” funds won’t “break the buck” has remained unshaken. “Moneyness” has been sustained, and Wall Street has retained great latitude in deploying readily available and now cheaper funds...Bank Assets have expanded an astounding $425bn over the past 10 weeks, or 21.9% annualized (bank Credit has inflated $280bn, or 16.8% annualized). Over this period, Commercial and Industrial Loans have expanded 36.2% annualized...The combined growth of Fannie and Freddie’s “Books of Business” will approach $500bn this year (nearing $5.0TN). The (also thinly capitalized) FHLB is on track for unprecedented expansion (assets surpassing $1.2TN). The money fund complex is in the midst of unparalleled growth (approaching $3TN). These key interrelated Financial Structures are at once sustaining marketplace liquidity, while laying the groundwork for a much more perilous financial crisis. They are all ballooning exposures today at double-digit rates specifically because the market risk environment has deteriorated markedly while their liabilities (and GSE guaranteed MBS) retain coveted “moneyness.”...today’s commanding Financial Structures virtually ensure a future meltdown. I write this not as some nut-ball but as a diligent analyst that is witnessing a system absolutely incapable of moderating excesses or self-correcting imbalances. Excess begets only and everywhere greater excess. It’s a system of Financial Structures that encourages and subsidizes leveraged speculation. Meanwhile, various contemporary Financial Structures work to embolden market participants to remain fully exposed to highly inflated asset prices, while incorporating derivative insurance and other hedging strategies for protection. The resulting enormity of the hedging programs further destabilizes the system, fostering melt-up and eventual breakdown dynamics. As we’ve witnessed of late (and recalling the last gasp of the NASDAQ Bubble), short covering and the unwind of bearish hedges provide a most powerful catalyst for a flurry of speculative excess – irrespective of unfolding fundamentals. Again, today's Financial Structures promote destabilizing excess...And there’s surely nothing like record global equities prices to embolden. Meanwhile, back in reality, the stage is being set for one or both of the following: an eventual run on today’s (ballooning) perceived “money-like” debt instruments and a run on our currency."
Peter Schiff: "So the dollar is not weak because inflation is under control as the consensus believes, but because the opposite is true. Inflation is completely out of control and the Fed, hiding behind phony government numbers that purport otherwise, has the green light to add additional fuel to inflation's fire. It's the ultimate irony that the lower the official preferred measures of inflation are (core CPI or the core Personal Consumption Expenditure Index,) the worse inflation actually gets." For my money, Doug Noland is the sharpest and most insightful economic analyst to be found.
Kraft Foods Inc. has recalled 288,000 packages of white chocolate baking squares on fears of salmonella contamination, the latest in a wave of U.S. food safety alerts and the third chocolate-related salmonella warning in the past year.
The Northfield-based food giant issued the recall late Wednesday for certain six-ounce packages of Baker's Premium White Chocolate Baking Squares.
When will the voters recall the do nothing Congress and an Administration that stomps and crushes our Constitution?
Barry Ritholtz: "Let's put these data points into some context average monthly job creation:
- In 2006 was 226,000 new jobs created per month
- In 2007, that number fell to 122,000;
- In Q3 2007, that number fell to 74,000.
Even more damning has been the Birth/Death adjustments. In the 1990s, these were relatively insignificant. In 2001-02, it was less than 10% of total NFP each year. After a 2001 change to the format and weighting (effective in 2003), the B/D contribution to NFP went up dramatically. From 2003-06, Birth Death adjustments contributed between 35-41% of the total non-farm payroll job creation.
Then there is 2007. If we take this year's B/D adjustment versus NFP, we get a B/D contribution that is in excess of 76%. (Trailing 12 months B/D versus 2007 NFP data annualized)." Good summary Barry.
Alcoa reports their earnings on Tuesday. I do not expect them to meet expectations.
Bill Bonner: "Americans are going to rediscover the quaint, almost forgotten art of making ends meet. Until recently, ends remained total strangers to each other. They didn't have to meet because there was so much credit available on such forgiving terms. Thanks largely to "Easy" Al Greenspan down at the Fed, they could always stretch one end of their budget - the spending end. "Just put it on the credit card, honey…we'll extend the equity line if we need to." But now the equity line is snapping back and hitting them in the face. The big hump in mortgage resets has just begun…September was a big one. October is even bigger. And then, right up through the spring of 2008, millions of people are going to have to face significantly larger mortgage payments.The effects of these ARM resets are going to be felt all up and down the street. We saw a chart of employment in the construction industry. Ten years ago, there were about 5.2 million people nailing 2 x 4's and installing granite countertops. At the peak, the number rose to about 7.7 million. Now the numbers are coming down again. In September, 20,000 more jobs were lost in construction - the 12th month of losses out of the last 13. And judging from the chart, there is a long way to go - because building permits have fallen to the same level they were 10 years ago. If construction jobs fall a similar amount - which they should - there will be 2.5 million jobs lost."
Meanwhile, the value of all the houses in America is about $21 trillion. Those houses are going down in price; even Easy Al says it wouldn't surprise him to see the average house lose more than 10% of its value. Let's say the average loss is 15%. That's still $3 trillion of "equity" that goes poof.
Ecuador's President Rafael Correa late Thursday signed an executive decree raising the state's share of oil revenues, while the country's top energy official said the government wants to take back full ownership of oil resources and production.
The North Slope accounts for about 14 percent of U.S. domestic output, but its production — which stands at about 740,000 barrels per day — is declining about 6 percent a year.
Saturday, October 06, 2007
Friday, October 05, 2007
More Government Numbers
10/6/07 More Government Numbers
Fed Vice Chairman Kohn says half-point cut may be enough. That's after the BLS unemployment numbers for September were released. With recent favorable inflation news, Kohn said he believes the Fed could reverse the recent rate cut if it turned out to be larger than needed. If you believe that, I'll tell you another one.
Plato: “Those who are too smart to engage in politics are punished by being governed by those who are dumber.”
The BLS now says 89,000 jobs were created in August, rather than the 4,000 that it reported last month were lost. It also said 93,000 jobs were created in July instead of 68,000 it previously reported -- a total of 118,000 more jobs in the July-August period than it had earlier estimated. The reason cited for the reversal in the department's August hiring estimate: After incorporating these revisions, average monthly job growth for June through September is 90,000, compared with an average of 147,000 for the first 5 months of the year. Nearly all of the August revision reflected an upward adjustment to government employment, particularly local education. The bulk of the gains in September hiring came in service industries, including an addition of 44,000 in education and health services and 37,000 in the government. In September, health care employment continued to grow, rising by 33,000. The food services industry also continued to add jobs, with a gain of 25,000 over the month.Together, these two industries have accounted for about one-half of all nonfarm employment growth in 2007. Over the month, employment rose by 37,000 in professional and technical services; notable job gains occurred in management consulting and in accounting services. Social assistance employment increased by 12,000. In the goods-producing sector, another 18,000 manufacturing jobs were shed and 14,000 construction jobs were lost. Had the Fed known these figures, would it have lowered by 25bps rather than 50? In addition, the Labor Department stated that employers boosted Sept. payrolls by 110,000, the most in one month since last May.The new unemployment rate of 4.7 percent was the highest since the summer of 2006.
Construction firms cut 14,000 jobs in September, Factories slashed 18,000. Retailers got rid of just over 5,000 jobs. Financial services companies eliminated 14,000 slots. The net birth/death model adjustment accounted for an increase of 13,000 jobs in September. Average hourly earnings rose to $17.57 in September, a 0.4 percent increase from August. Over the past 12 months, wages are up 4.1 percent. That was the highest annual gain since since February.
Nabors Industries Ltd warned it expects third-quarter profit to be lower than the consensus analyst forecast due to lower U.S. drilling activity and several cash and non-cash charges. The group said it expects profit for the quarter to be in the range of 73 cents to 76 cents a share, including previously-identified gains from the sale of certain properties. Analysts had forecast earnings of 81 cents a share, according to a survey by Thomson Financial. "Our outlook for the near term has been dampened by the increased potential for persistent weak market conditions throughout 2008 in our North American natural gas directed and U.S. Land Well Servicing businesses," Nabors said. It added it expects fourth-quarter results, however, to be in line with analyst expectations, which are currently for earnings of 89 cents a share.
Baker Hughes Inc. counted 3,166 drilling rigs worldwide in September, up 10 from the 3,156 counted in August 2007 and up 32 from the 3,134 counted last year.
The global credit squeeze will affect the British economy, U.K. Chancellor of the Exchequer Alistair Darling told the Financial Times in an interview published Friday.
Banks said the credit-market turmoil in August and September ``may hamper funding,'' the Frankfurt-based ECB said in its quarterly bank lending survey, which was published a month earlier than usual today. Banks also reported tightened credit standards in the third quarter, the report showed.
In the week ended Oct. 3, AMG Data reported Equity Fund Inflows $4.5 Bil; Taxable Bond Fund Inflows $1.8 Bil xETFs - Equity Fund Outflows -$915 Mil; Taxable Bond Fund Inflows $1.6 Bil.
Homebuilder profits depend on the cost of land, said John Burns, president of John Burns Real Estate Consulting in Irvine, California. Companies can still make money building on land purchased before the 2005 peak of the five-year U.S. housing boom, though price declines of as little as 10 percent might wipe out those profits, he said. ``They are all losing money,'' Burns said. ``They'll talk in terms of gross margin and it sounds like they made money, but they actually lost money because they didn't make their costs.''
Federal prosecutors have launched a criminal investigation into two mortgage-related hedge funds at Wall Street firm Bear Stearns Cos. that collapsed during the summer, according to people familiar with the matter. The U.S. attorney in Brooklyn made a request to Bear Stearns for information related to the hedge funds, whose failure cost investors $1.6 billion, said these people. The probe is in the early stages, the people added, and has not generated subpoenas.
The RBC Cash Index showed a recovery in U.S. consumer confidence in September, from multi-year lows the previous month. The rise in confidence is attributable to the Fed's mid-month 50 bps rate cut, a recovery on Wall Street and stabilizing gas prices. The index rose to 80.6 from 71.1 in August.
Washington Mutual Inc. expects a third-quarter earnings drop of about 75% because of factors related to the weakening housing market. The Seattle-based lender said its loan loss provision for the period will be approximately $975 million, which exceeds net charge-offs for the quarter by approximately $550 million. It'll also book downward adjustments of approximately $150 million related to approximately $17 billion in held-for-sale mortgage loans that were transferred to the company's investment portfolio due to secondary market conditions. It also reported impairment losses of $110 million and another $150 million in securities trading losses.
President Bush watches his approval-ratings tank. A record-low 34 percent approved of his handling of the economy in October, according to an Associated Press-Ipsos poll. The president's overall job-approval rating sank to 31 percent, the lowest ever, the poll said. I'd like to know what idiots comprise the 31%. Maybe they returned from the dead or maybe they are simply dead from the neck up.
Merrill Lynch expects Q3 50c per share mark-to-market loss. It will take almost $5 billion in writedowns. The bulk of the losses will come from marking down the value of complex instruments known as collateralized debt obligations and from declines in subprime mortgages -- loans given to customers with poor credit history. Moody's Investors Service on Friday lowered its outlook on Merrill Lynch and Co.'s Aa3 debt rating to negative from stable because of the investment firm's forecasted third-quarter loss. The outlook covers $200 billion in long-term Merrill Lynch debt.
At least three large shareholders of Sallie Mae are backing the student lender's efforts to block a group led by J.C. Flowers & Co. from reducing its takeover price, the New York Post reported Friday.
BHP Billiton marketing president Tom Schutte said his company would like to decouple the alumina price from the aluminium price given they were separate commodities. "Unfortunately, with our size being where it is in terms of the market, and given that much of that alumina is consumed internally by our own operations, we have not succeeded in pushing that forward," he said.
A CIBC World Markets analyst said late Thursday Bear Stearns Cos. will not be able to curtail expenses as quickly as it loses revenue.
November crude fell 22 cents to close at $81.22 a barrel Friday. November natural gas dropped 4.6% , or 33.9 cents, to end at $7.073 per million British thermal units. It still ended the week with a gain of 3%.
Outstanding U.S. consumer debt rose at an annual rate of 5.9%, or $12.2 billion, in August, pushed higher mostly by a hefty gain in credit-card debt, the Federal Reserve reported Friday. The overall increase was the highest since May, the Fed reported, pushing total outstanding consumer credit to $2.47 trillion in August. Revolving debt such as credit cards climbed by 8.1% in August, or by $6.1 billion. Auto, student, personal and other forms of non-revolving debt climbed at an annual rate of 4.7%, or $6.0 billion, in August. The Fed's data do not include mortgages or other loans backed by real estate.
The Dow industrials climbed 91.7 points to end at 14,066.0, up 1.2% on the week. The S&P 500 settled 14.75 points up, at 1,557.59, after hitting a new all-time high of 1,561.91 during the day. It gained 2% for the week. The Nasdaq Composite rose 46.75 points to close at 2,780.32, up 2.9% for the week.
JPMorgan Chase & Co. and Bank of America Corp., the biggest arrangers of U.S. leveraged loans, may write down the value of their holdings by a combined $3 billion in the third quarter after surging mortgage defaults halted credit markets, analysts at Sanford C. Bernstein & Co. said.
Gold futures for December delivery rose $3.40, or 0.5 percent, to $747.20 an ounce on the Comex division of the New York Mercantile Exchange. Silver futures for December delivery fell 1 cent to $13.49 an ounce on the Comex.
Sophocles: “How dreadful knowledge of the truth can be when there's no help in the truth.”
Fed Vice Chairman Kohn says half-point cut may be enough. That's after the BLS unemployment numbers for September were released. With recent favorable inflation news, Kohn said he believes the Fed could reverse the recent rate cut if it turned out to be larger than needed. If you believe that, I'll tell you another one.
Plato: “Those who are too smart to engage in politics are punished by being governed by those who are dumber.”
The BLS now says 89,000 jobs were created in August, rather than the 4,000 that it reported last month were lost. It also said 93,000 jobs were created in July instead of 68,000 it previously reported -- a total of 118,000 more jobs in the July-August period than it had earlier estimated. The reason cited for the reversal in the department's August hiring estimate: After incorporating these revisions, average monthly job growth for June through September is 90,000, compared with an average of 147,000 for the first 5 months of the year. Nearly all of the August revision reflected an upward adjustment to government employment, particularly local education. The bulk of the gains in September hiring came in service industries, including an addition of 44,000 in education and health services and 37,000 in the government. In September, health care employment continued to grow, rising by 33,000. The food services industry also continued to add jobs, with a gain of 25,000 over the month.Together, these two industries have accounted for about one-half of all nonfarm employment growth in 2007. Over the month, employment rose by 37,000 in professional and technical services; notable job gains occurred in management consulting and in accounting services. Social assistance employment increased by 12,000. In the goods-producing sector, another 18,000 manufacturing jobs were shed and 14,000 construction jobs were lost. Had the Fed known these figures, would it have lowered by 25bps rather than 50? In addition, the Labor Department stated that employers boosted Sept. payrolls by 110,000, the most in one month since last May.The new unemployment rate of 4.7 percent was the highest since the summer of 2006.
Construction firms cut 14,000 jobs in September, Factories slashed 18,000. Retailers got rid of just over 5,000 jobs. Financial services companies eliminated 14,000 slots. The net birth/death model adjustment accounted for an increase of 13,000 jobs in September. Average hourly earnings rose to $17.57 in September, a 0.4 percent increase from August. Over the past 12 months, wages are up 4.1 percent. That was the highest annual gain since since February.
Nabors Industries Ltd warned it expects third-quarter profit to be lower than the consensus analyst forecast due to lower U.S. drilling activity and several cash and non-cash charges. The group said it expects profit for the quarter to be in the range of 73 cents to 76 cents a share, including previously-identified gains from the sale of certain properties. Analysts had forecast earnings of 81 cents a share, according to a survey by Thomson Financial. "Our outlook for the near term has been dampened by the increased potential for persistent weak market conditions throughout 2008 in our North American natural gas directed and U.S. Land Well Servicing businesses," Nabors said. It added it expects fourth-quarter results, however, to be in line with analyst expectations, which are currently for earnings of 89 cents a share.
Baker Hughes Inc. counted 3,166 drilling rigs worldwide in September, up 10 from the 3,156 counted in August 2007 and up 32 from the 3,134 counted last year.
The global credit squeeze will affect the British economy, U.K. Chancellor of the Exchequer Alistair Darling told the Financial Times in an interview published Friday.
Banks said the credit-market turmoil in August and September ``may hamper funding,'' the Frankfurt-based ECB said in its quarterly bank lending survey, which was published a month earlier than usual today. Banks also reported tightened credit standards in the third quarter, the report showed.
In the week ended Oct. 3, AMG Data reported Equity Fund Inflows $4.5 Bil; Taxable Bond Fund Inflows $1.8 Bil xETFs - Equity Fund Outflows -$915 Mil; Taxable Bond Fund Inflows $1.6 Bil.
Homebuilder profits depend on the cost of land, said John Burns, president of John Burns Real Estate Consulting in Irvine, California. Companies can still make money building on land purchased before the 2005 peak of the five-year U.S. housing boom, though price declines of as little as 10 percent might wipe out those profits, he said. ``They are all losing money,'' Burns said. ``They'll talk in terms of gross margin and it sounds like they made money, but they actually lost money because they didn't make their costs.''
Federal prosecutors have launched a criminal investigation into two mortgage-related hedge funds at Wall Street firm Bear Stearns Cos. that collapsed during the summer, according to people familiar with the matter. The U.S. attorney in Brooklyn made a request to Bear Stearns for information related to the hedge funds, whose failure cost investors $1.6 billion, said these people. The probe is in the early stages, the people added, and has not generated subpoenas.
The RBC Cash Index showed a recovery in U.S. consumer confidence in September, from multi-year lows the previous month. The rise in confidence is attributable to the Fed's mid-month 50 bps rate cut, a recovery on Wall Street and stabilizing gas prices. The index rose to 80.6 from 71.1 in August.
Washington Mutual Inc. expects a third-quarter earnings drop of about 75% because of factors related to the weakening housing market. The Seattle-based lender said its loan loss provision for the period will be approximately $975 million, which exceeds net charge-offs for the quarter by approximately $550 million. It'll also book downward adjustments of approximately $150 million related to approximately $17 billion in held-for-sale mortgage loans that were transferred to the company's investment portfolio due to secondary market conditions. It also reported impairment losses of $110 million and another $150 million in securities trading losses.
President Bush watches his approval-ratings tank. A record-low 34 percent approved of his handling of the economy in October, according to an Associated Press-Ipsos poll. The president's overall job-approval rating sank to 31 percent, the lowest ever, the poll said. I'd like to know what idiots comprise the 31%. Maybe they returned from the dead or maybe they are simply dead from the neck up.
Merrill Lynch expects Q3 50c per share mark-to-market loss. It will take almost $5 billion in writedowns. The bulk of the losses will come from marking down the value of complex instruments known as collateralized debt obligations and from declines in subprime mortgages -- loans given to customers with poor credit history. Moody's Investors Service on Friday lowered its outlook on Merrill Lynch and Co.'s Aa3 debt rating to negative from stable because of the investment firm's forecasted third-quarter loss. The outlook covers $200 billion in long-term Merrill Lynch debt.
At least three large shareholders of Sallie Mae are backing the student lender's efforts to block a group led by J.C. Flowers & Co. from reducing its takeover price, the New York Post reported Friday.
BHP Billiton marketing president Tom Schutte said his company would like to decouple the alumina price from the aluminium price given they were separate commodities. "Unfortunately, with our size being where it is in terms of the market, and given that much of that alumina is consumed internally by our own operations, we have not succeeded in pushing that forward," he said.
A CIBC World Markets analyst said late Thursday Bear Stearns Cos. will not be able to curtail expenses as quickly as it loses revenue.
November crude fell 22 cents to close at $81.22 a barrel Friday. November natural gas dropped 4.6% , or 33.9 cents, to end at $7.073 per million British thermal units. It still ended the week with a gain of 3%.
Outstanding U.S. consumer debt rose at an annual rate of 5.9%, or $12.2 billion, in August, pushed higher mostly by a hefty gain in credit-card debt, the Federal Reserve reported Friday. The overall increase was the highest since May, the Fed reported, pushing total outstanding consumer credit to $2.47 trillion in August. Revolving debt such as credit cards climbed by 8.1% in August, or by $6.1 billion. Auto, student, personal and other forms of non-revolving debt climbed at an annual rate of 4.7%, or $6.0 billion, in August. The Fed's data do not include mortgages or other loans backed by real estate.
The Dow industrials climbed 91.7 points to end at 14,066.0, up 1.2% on the week. The S&P 500 settled 14.75 points up, at 1,557.59, after hitting a new all-time high of 1,561.91 during the day. It gained 2% for the week. The Nasdaq Composite rose 46.75 points to close at 2,780.32, up 2.9% for the week.
JPMorgan Chase & Co. and Bank of America Corp., the biggest arrangers of U.S. leveraged loans, may write down the value of their holdings by a combined $3 billion in the third quarter after surging mortgage defaults halted credit markets, analysts at Sanford C. Bernstein & Co. said.
Gold futures for December delivery rose $3.40, or 0.5 percent, to $747.20 an ounce on the Comex division of the New York Mercantile Exchange. Silver futures for December delivery fell 1 cent to $13.49 an ounce on the Comex.
Sophocles: “How dreadful knowledge of the truth can be when there's no help in the truth.”
Thursday, October 04, 2007
More On Employment
10/5/07 More On Employment
Growth in the euro area economy is expected to remain robust in the second half of 2007, the European Commission said Thursday in its quarterly report on the euro area. The Commission said that economic fundamentals continue to look healthy in the area and, despite recent financial turmoil, growth projections for 2007 have been reduced only marginally. "Overall, tighter credit conditions can be expected to slow economic growth somewhat next year, but the impact is expected to be moderate," the commission said.
Authorities in Kazakhstan said they have slapped a $609 million fine on a Chevron Corp.-led consortium developing the huge Tengiz oil field, a further blow to investment confidence in the oil-rich Central Asian state.
"If homebuilding doesn't drop 25 percent from where it is now, the Texas home market could slow down for a longer period than we would like," said Dr. Mark Dotzour, an economist with Texas A&M's Real Estate Center. "The inventory of unsold homes is rising all over the state," he said in the report released Wednesday. At the end of August, almost a six-month supply of unsold new homes was on the market in Texas. That's about 12 percent more than a year ago. While inventories have risen, the number of new-home sales has been dropping.
Vietnam is planning to cut its purchases of US Treasuries and other dollar bonds, raising fears that Asian central banks with control over two thirds of the world's foreign reserves may soon join the flight from US assets. The Saigon Times said that the State Bank of Vietnam was abandoning the attempt to hold down the Vietnamese currency through heavy purchases of dollars. The policy is causing the economy to overheat, driving up inflation to 8.8pc. Separately, the gas-rich Gulf state of Qatar announced that it had cut the dollar holdings of its $50bn sovereign wealth fund from 99pc to 40pc, switching into investments in China, Japan, and emerging Asia
U.K. house prices fell in September for the first time in nine months as mortgage rates rose and lenders grew more cautious, a report from HBOS Plc showed.
Mike Shedlock: "Just as the housing problem spread from subprime to Alt-A to prime, job losses are highly likely to spread from housing, to commercial real estate, to retail."
Marriott said it expected fourth-quarter earnings, excluding its synthetic fuel business, which it plans to shut down at the end of 2007, to be between 61 cents and 63 cents per share. The fourth-quarter forecast means the company expects its 2007 earnings to be between $1.88 and $1.90 per share, which is lower than a July forecast of $1.88 to $1.96. For 2008, the company forecast earnings of $2.10 to $2.25 per share. Both fourth-quarter and 2008 forecasts were below Wall Street expectations. Analysts, on average, had been expecting Marriott to earn 68 cents per share in the fourth quarter and $2.30 per share in 2008, according to Reuters Estimates.
In a statement issued Wednesday on its Web site, the Kurdistan Regional Government said it had approved four new production sharing contracts with international companies and had sanctioned the construction of two new refineries. If exploration leads to oil production, 85 percent of the profits would go to the government and the remainder would go to the companies. Kurdistan officials said the four contracts are worth about $500 million, while the new refineries are worth about $300 million.
Initial claims rose by 16,000 to 317,000 in the week ending Sept. 29, marking their highest level since Sept. 8. The four-week moving average of new claims for the week ended Sept. 29, meanwhile, rose by 500 to 312,750, the highest since Sept. 15. Continuing jobless claims fell in the week ending Sept. 22 by 10,000 to 2.54 million. The four-week average of continuing claims fell by 12,750 to 2.56 million, the lowest since Aug. 11, the Labor Department said.
Marsoft: "The dry bulk market just keeps on booming! From late August through the middle of September, new records were set in the Baltic Dry Index virtually every day. And following a brief pause in mid-September, the market returned to its record-setting path, with the BDI soaring above 9,000 by late September, up by 25% from its level a month earlier."
Driven by weakness in the transportation sector, orders for U.S.-made factory goods fell 3.3% in August, the Commerce Department estimated. It was the biggest drop in factory orders in seven months. Orders for core capital goods fell 0.5%. Shipments of factory goods fell 1.6% in August. Inventories slipped 0.1%, while unfilled orders rose 1.2%. Orders for durable goods decreased 4.9% in August while orders for nondurable goods fell 1.6%.
Stockpiles of natural gas rose 57 billion cubic feet to 3.263 trillion cubic feet in the week ended Sept. 28, the U.S. Energy Department report showed. Supplies were 3.327 trillion cubic feet in the same week a year earlier.
Jon Markman: "The stats vary by region, but the national inventory of homes is at an all-time high, with an eight-month supply. One in 7 1/2 houses is actually vacant. Prices are tumbling. And there is little relief on the horizon, even from the Federal Reserve."
The latest weekly figures from the Bank of England show the central bank may have lent a further 2.9 billion pounds ($5.9 billion) to Northern Rock. The "other assets" line of the central bank's weekly balance sheet rose to 23.81 billion pounds from 20.9 billion pounds. Economists have said loans to the troubled mortgage bank would likely appear in the other assets line, which normally holds relatively steady but had grown by close to 8 billion pounds over the previous two weeks.
Richard Fisher, the president of the Dallas Federal Reserve Bank: "We are subject to agri-inflation that may be more sustained than we would like."
Subprime mortgage bonds created in the first half of 2007 contain loans that are going delinquent at the fastest rate ever, according to Moody's Investors Service.
Crude for November delivery gained $1.50, or 1.9%, to close at $81.44 a barrel. November reformulated gasoline gained 5.64 cents to $2.0522 a gallon and November heating oil rose 5.26 cents to $2.2313 a gallon. Natural gas for November delivery rose 13.5 cents to $7.412.
The Citizens Banking Company of Sandusky, Ohio, got federal approval to take over the insured deposits of the failed Miami Valley Bank on Thursday, a U.S. banking regulator announced.
The Ohio Superintendent of Financial Institutions' closure of Miami Valley, which had $86.7 million in total assets and $76 million in total deposits, marks the third FDIC-insured bank to fail this year.
Banks took only minimal advantage of the Federal Reserve's discount-window lending facility in the week ending Wednesday, the Fed reported Thursday. Total outstanding loans of primary credit (also known as the discount window) were $26 million on Wednesday. Loans averaged $27 million a day for the week, down from $88 million the prior week.
According to the WSJ, Alcoa will take an $845 million charge as it moves closer to selling its consumer packaging and automotive-related divisions.
GE said the company will close seven of the 54 plants that serve its incandescent-bulb business by November 2008 and lay off 1,400 workers.
Growth in the euro area economy is expected to remain robust in the second half of 2007, the European Commission said Thursday in its quarterly report on the euro area. The Commission said that economic fundamentals continue to look healthy in the area and, despite recent financial turmoil, growth projections for 2007 have been reduced only marginally. "Overall, tighter credit conditions can be expected to slow economic growth somewhat next year, but the impact is expected to be moderate," the commission said.
Authorities in Kazakhstan said they have slapped a $609 million fine on a Chevron Corp.-led consortium developing the huge Tengiz oil field, a further blow to investment confidence in the oil-rich Central Asian state.
"If homebuilding doesn't drop 25 percent from where it is now, the Texas home market could slow down for a longer period than we would like," said Dr. Mark Dotzour, an economist with Texas A&M's Real Estate Center. "The inventory of unsold homes is rising all over the state," he said in the report released Wednesday. At the end of August, almost a six-month supply of unsold new homes was on the market in Texas. That's about 12 percent more than a year ago. While inventories have risen, the number of new-home sales has been dropping.
Vietnam is planning to cut its purchases of US Treasuries and other dollar bonds, raising fears that Asian central banks with control over two thirds of the world's foreign reserves may soon join the flight from US assets. The Saigon Times said that the State Bank of Vietnam was abandoning the attempt to hold down the Vietnamese currency through heavy purchases of dollars. The policy is causing the economy to overheat, driving up inflation to 8.8pc. Separately, the gas-rich Gulf state of Qatar announced that it had cut the dollar holdings of its $50bn sovereign wealth fund from 99pc to 40pc, switching into investments in China, Japan, and emerging Asia
U.K. house prices fell in September for the first time in nine months as mortgage rates rose and lenders grew more cautious, a report from HBOS Plc showed.
Mike Shedlock: "Just as the housing problem spread from subprime to Alt-A to prime, job losses are highly likely to spread from housing, to commercial real estate, to retail."
Marriott said it expected fourth-quarter earnings, excluding its synthetic fuel business, which it plans to shut down at the end of 2007, to be between 61 cents and 63 cents per share. The fourth-quarter forecast means the company expects its 2007 earnings to be between $1.88 and $1.90 per share, which is lower than a July forecast of $1.88 to $1.96. For 2008, the company forecast earnings of $2.10 to $2.25 per share. Both fourth-quarter and 2008 forecasts were below Wall Street expectations. Analysts, on average, had been expecting Marriott to earn 68 cents per share in the fourth quarter and $2.30 per share in 2008, according to Reuters Estimates.
In a statement issued Wednesday on its Web site, the Kurdistan Regional Government said it had approved four new production sharing contracts with international companies and had sanctioned the construction of two new refineries. If exploration leads to oil production, 85 percent of the profits would go to the government and the remainder would go to the companies. Kurdistan officials said the four contracts are worth about $500 million, while the new refineries are worth about $300 million.
Initial claims rose by 16,000 to 317,000 in the week ending Sept. 29, marking their highest level since Sept. 8. The four-week moving average of new claims for the week ended Sept. 29, meanwhile, rose by 500 to 312,750, the highest since Sept. 15. Continuing jobless claims fell in the week ending Sept. 22 by 10,000 to 2.54 million. The four-week average of continuing claims fell by 12,750 to 2.56 million, the lowest since Aug. 11, the Labor Department said.
Marsoft: "The dry bulk market just keeps on booming! From late August through the middle of September, new records were set in the Baltic Dry Index virtually every day. And following a brief pause in mid-September, the market returned to its record-setting path, with the BDI soaring above 9,000 by late September, up by 25% from its level a month earlier."
Driven by weakness in the transportation sector, orders for U.S.-made factory goods fell 3.3% in August, the Commerce Department estimated. It was the biggest drop in factory orders in seven months. Orders for core capital goods fell 0.5%. Shipments of factory goods fell 1.6% in August. Inventories slipped 0.1%, while unfilled orders rose 1.2%. Orders for durable goods decreased 4.9% in August while orders for nondurable goods fell 1.6%.
Stockpiles of natural gas rose 57 billion cubic feet to 3.263 trillion cubic feet in the week ended Sept. 28, the U.S. Energy Department report showed. Supplies were 3.327 trillion cubic feet in the same week a year earlier.
Jon Markman: "The stats vary by region, but the national inventory of homes is at an all-time high, with an eight-month supply. One in 7 1/2 houses is actually vacant. Prices are tumbling. And there is little relief on the horizon, even from the Federal Reserve."
The latest weekly figures from the Bank of England show the central bank may have lent a further 2.9 billion pounds ($5.9 billion) to Northern Rock. The "other assets" line of the central bank's weekly balance sheet rose to 23.81 billion pounds from 20.9 billion pounds. Economists have said loans to the troubled mortgage bank would likely appear in the other assets line, which normally holds relatively steady but had grown by close to 8 billion pounds over the previous two weeks.
Richard Fisher, the president of the Dallas Federal Reserve Bank: "We are subject to agri-inflation that may be more sustained than we would like."
Subprime mortgage bonds created in the first half of 2007 contain loans that are going delinquent at the fastest rate ever, according to Moody's Investors Service.
Crude for November delivery gained $1.50, or 1.9%, to close at $81.44 a barrel. November reformulated gasoline gained 5.64 cents to $2.0522 a gallon and November heating oil rose 5.26 cents to $2.2313 a gallon. Natural gas for November delivery rose 13.5 cents to $7.412.
The Citizens Banking Company of Sandusky, Ohio, got federal approval to take over the insured deposits of the failed Miami Valley Bank on Thursday, a U.S. banking regulator announced.
The Ohio Superintendent of Financial Institutions' closure of Miami Valley, which had $86.7 million in total assets and $76 million in total deposits, marks the third FDIC-insured bank to fail this year.
Banks took only minimal advantage of the Federal Reserve's discount-window lending facility in the week ending Wednesday, the Fed reported Thursday. Total outstanding loans of primary credit (also known as the discount window) were $26 million on Wednesday. Loans averaged $27 million a day for the week, down from $88 million the prior week.
According to the WSJ, Alcoa will take an $845 million charge as it moves closer to selling its consumer packaging and automotive-related divisions.
GE said the company will close seven of the 54 plants that serve its incandescent-bulb business by November 2008 and lay off 1,400 workers.
Wednesday, October 03, 2007
Employment
10/4/07 Employment
Planned U.S. layoffs fell nearly 10 percent in September as the slump in housing continued to hurt payrolls, an independent report showed on Wednesday. More than a third of last month's 71,739 announced job cuts came from mortgage lenders, construction companies and real estate firms, according to employment consulting firm Challenger, Gray & Christmas Inc. So far this year, about one job cut in six is directly related to the struggling housing market, it said. Announced layoffs totaled 71,739 in September, down 9.7 percent from 79,459 in August, when it hit a six-month high. They were 28.5 percent lower than September 2006, when employers announced 100,315 job cuts, one of only two times last year when monthly job cuts exceeded 100,000.
Twenty-seven percent of hiring managers said they planned to increase their staffs in the last three months of the year, down from 32% who said they expanded their payrolls in the third quarter and 41% in the second quarter, according to an online survey for USA TODAY and CareerBuilder.com by Harris Interactive. "The job market has weakened measurably since the spring and will weaken further through the end of the year," says Mark Zandi of Moody's Economy.com.
U.S. private employers likely added 58,000 jobs in September a report by a private employment service said on Wednesday. ADP Employer Services, whose employment report was jointly developed with Macroeconomic Advisers LLC, said it revised down to 27,000 from 38,000 the number of jobs created in August.
Deutsche Bank will take up to $3.09 billion in charges on leveraged loans and other writedowns, although tax credits and capital gains will lead to a higher net profit than a year ago.
"I don't think the worst is over," said Robert Arnott, chairman of Research Affiliates LLC, a Pasadena, California-based investment management firm. "We are coming off the greatest lending bubble -- not housing bubble! -- in U.S. history. We will feel its impact for a very long time."
Credit Suisse Group Chief Executive Officer Brady Dougan said the market for mortgage credit will be ``problematic'' for as long as 18 months. Credit Suisse Group will cut 170 jobs in its investment banking division, or nearly 1% of the unit's employees.
Iran has slashed the use of the dollar in payment for its oil exports to 15 percent, an official said on Tuesday, amid growing pressure from arch-foe the United States on its financial system.
The vast majority of transactions for oil from OPEC's number two producer are now being carried out in euros, said Mohammad-Ali Khatibi, deputy head of the National Iranian Oil Company in charge of marketing.
"Iran is selling about 85 percent of its oil in the non-dollar currencies," Khatibi was quoted as saying by state television.
"Currently, about 65 percent of the oil sale income is in euros and 20 percent in yen," Khatibi added.
Morgan Stanley said it would cut 600 jobs as it restructured its mortgage business to reflect lower loan origination levels.
Bear Stearns Cos Inc is laying off 300 mortgage workers, cable news channel CNBC reported on Wednesday. In August, Bear cut 240 subprime jobs.
Dean Foods plans to cut 600 to 700 jobs.
U.S. mortgage applications fell for a second straight week, largely reflecting a drop in demand for home refinancing loans, an industry group said Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Sept. 28 decreased 2.7% to 636.7.
Brad Setser: " The central banks of the world's emerging economies accounted for $320 of the world's $340b in (valuation-adjusted) reserve growth in the second quarter, and $283 of the $303b (valuation-adjusted) increase in the first quarter...estimate that the world's emerging economies -- if those emerging economies that don't report detailed data on the currency composition of their reserves acted like those who do report -- are now adding about $200b to their dollar reserves a quarter. That is a pace sufficient to finance the entire US current account deficit."
ConocoPhillips said worldwide refining margins for the third quarter are expected to be "significantly lower" than the second quarter, the company said. ConocoPhillips said it anticipates third-quarter purchases under the share repurchase program to be approximately $2.5 billion.
The Institute for Supply Management's services index fell to 54.8 last month from 55.8 in August, the slowest pace in six months. The services sector represents about 80 percent of U.S. economic activity, including businesses such as restaurants, hotels, banks and airlines. The closely-watched employment index rose to 52.7% from 47.9%. New orders rose to 53.4% from 57.0%. Inflation pressures increased. The price index rose to 66.1% from 58.6%in the previous month.
Crude oil for November delivery finished down 8 cents at $79.97 a barrel on the New York Mercantile Exchange. In contrast, November reformulated gasoline gained 1.31 cents to end at $1.9959 a gallon and November heating oil gained 1.64 cents to end at $2.1787 a gallon.
Gold for December delivery ended down 60 cents at $735.70 an ounce on the New York Mercantile Exchange. Also on Nymex, December silver rose 2 cents at $13.470 an ounce, January platinum surged $13.90 to end at $1,368.90 an ounce and December palladium gained $8.05 at $361.65 an ounce. December copper rose 5.25 cents at $3.7635 a pound.
Planned U.S. layoffs fell nearly 10 percent in September as the slump in housing continued to hurt payrolls, an independent report showed on Wednesday. More than a third of last month's 71,739 announced job cuts came from mortgage lenders, construction companies and real estate firms, according to employment consulting firm Challenger, Gray & Christmas Inc. So far this year, about one job cut in six is directly related to the struggling housing market, it said. Announced layoffs totaled 71,739 in September, down 9.7 percent from 79,459 in August, when it hit a six-month high. They were 28.5 percent lower than September 2006, when employers announced 100,315 job cuts, one of only two times last year when monthly job cuts exceeded 100,000.
Twenty-seven percent of hiring managers said they planned to increase their staffs in the last three months of the year, down from 32% who said they expanded their payrolls in the third quarter and 41% in the second quarter, according to an online survey for USA TODAY and CareerBuilder.com by Harris Interactive. "The job market has weakened measurably since the spring and will weaken further through the end of the year," says Mark Zandi of Moody's Economy.com.
U.S. private employers likely added 58,000 jobs in September a report by a private employment service said on Wednesday. ADP Employer Services, whose employment report was jointly developed with Macroeconomic Advisers LLC, said it revised down to 27,000 from 38,000 the number of jobs created in August.
Deutsche Bank will take up to $3.09 billion in charges on leveraged loans and other writedowns, although tax credits and capital gains will lead to a higher net profit than a year ago.
"I don't think the worst is over," said Robert Arnott, chairman of Research Affiliates LLC, a Pasadena, California-based investment management firm. "We are coming off the greatest lending bubble -- not housing bubble! -- in U.S. history. We will feel its impact for a very long time."
Credit Suisse Group Chief Executive Officer Brady Dougan said the market for mortgage credit will be ``problematic'' for as long as 18 months. Credit Suisse Group will cut 170 jobs in its investment banking division, or nearly 1% of the unit's employees.
Iran has slashed the use of the dollar in payment for its oil exports to 15 percent, an official said on Tuesday, amid growing pressure from arch-foe the United States on its financial system.
The vast majority of transactions for oil from OPEC's number two producer are now being carried out in euros, said Mohammad-Ali Khatibi, deputy head of the National Iranian Oil Company in charge of marketing.
"Iran is selling about 85 percent of its oil in the non-dollar currencies," Khatibi was quoted as saying by state television.
"Currently, about 65 percent of the oil sale income is in euros and 20 percent in yen," Khatibi added.
Morgan Stanley said it would cut 600 jobs as it restructured its mortgage business to reflect lower loan origination levels.
Bear Stearns Cos Inc is laying off 300 mortgage workers, cable news channel CNBC reported on Wednesday. In August, Bear cut 240 subprime jobs.
Dean Foods plans to cut 600 to 700 jobs.
U.S. mortgage applications fell for a second straight week, largely reflecting a drop in demand for home refinancing loans, an industry group said Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Sept. 28 decreased 2.7% to 636.7.
Brad Setser: " The central banks of the world's emerging economies accounted for $320 of the world's $340b in (valuation-adjusted) reserve growth in the second quarter, and $283 of the $303b (valuation-adjusted) increase in the first quarter...estimate that the world's emerging economies -- if those emerging economies that don't report detailed data on the currency composition of their reserves acted like those who do report -- are now adding about $200b to their dollar reserves a quarter. That is a pace sufficient to finance the entire US current account deficit."
ConocoPhillips said worldwide refining margins for the third quarter are expected to be "significantly lower" than the second quarter, the company said. ConocoPhillips said it anticipates third-quarter purchases under the share repurchase program to be approximately $2.5 billion.
The Institute for Supply Management's services index fell to 54.8 last month from 55.8 in August, the slowest pace in six months. The services sector represents about 80 percent of U.S. economic activity, including businesses such as restaurants, hotels, banks and airlines. The closely-watched employment index rose to 52.7% from 47.9%. New orders rose to 53.4% from 57.0%. Inflation pressures increased. The price index rose to 66.1% from 58.6%in the previous month.
Crude oil for November delivery finished down 8 cents at $79.97 a barrel on the New York Mercantile Exchange. In contrast, November reformulated gasoline gained 1.31 cents to end at $1.9959 a gallon and November heating oil gained 1.64 cents to end at $2.1787 a gallon.
Gold for December delivery ended down 60 cents at $735.70 an ounce on the New York Mercantile Exchange. Also on Nymex, December silver rose 2 cents at $13.470 an ounce, January platinum surged $13.90 to end at $1,368.90 an ounce and December palladium gained $8.05 at $361.65 an ounce. December copper rose 5.25 cents at $3.7635 a pound.
Tuesday, October 02, 2007
The New Reality
0/3/07 The New Reality
The International Council of Shopping Centers and UBS Securities said in a survey that, on a week-over-week basis, sales were flat. "Sales were unchanged over the last week with weather a potential help in the West, but a drag on sales in the rest of the nation," said Michael Niemira, chief economist for the ICSC. "Overall, the month is shaping up on the soft side of recent monthly sales trends." The ICSC expects the monthly sales performance to increase by 2% to 2.5%.
TD Bank Financial Group will acquire Commerce Bancorp Inc. in a stock-and-cash deal valued at $8.5 billion. Under terms of the agreement, Commerce shareholders will receive 0.4142 shares of a TD common share and $10.50 in cash in exchange for each share of Commerce Bancorp.
Hong Kong shares extended gains in the afternoon trading, with the 41-issue Hang Seng China Enterprises Index soaring 1,088.28 points, or 6.5%, to a record 18,161.40. The benchmark Hang Seng Index rose 3.9%, or 1,065.48 to a record 28,203.72.
Australia's S&P/ASX 200 rose to a record high while Japan's Nikkei 225 Average crossed the 17,000 level for the first time since Aug 9.
Medicare beneficiaries will pay 3.1 percent more in premiums for physician services next year, the smallest increase since 2001. Medicare officials said Monday that the lower-than-expected increase was partly a result of correcting an accounting error from previous years.
Mike Burk: "I think we are in a developing top that is in its final stages. In the next week or two there is likely to be an all time high in the Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX), and a multi year high in the NASDAQ composite (OTC). If my interpretation is correct there will not be a new high in the Russell 2000 (R2K)...The first 5 trading days in October are fairly strong and, during the 3rd year of the Presidential cycle they are a little stronger than the average for all years."
Banks have once again shunned a £10bn Bank of England money auction. Analysts have suggested the 6.75% interest rates offered by the Bank were too high and as such turned off buyers.
As far as the world's biggest bond investors are concerned, the Federal Reserve is failing to restore confidence in the U.S. credit markets. Pacific Investment Management Co., TIAA-CREF and Insight Investment Management say the central bank's decision to lower the overnight lending rate between banks by half a percentage point last month won't prevent the economy from slowing or corporate defaults from increasing. Lehman Brothers Holdings Inc. strategists say last month's rally in high-yield corporate bonds, the biggest since 2003, may fizzle by year-end.
The pending home sales index fell 6.5% in August after dropping a revised 10.7% in July, the National Association of Realtors reported. The index is at its lowest level since its inception in 2001. Pending home sales are down 21.5% compared with a year ago and is down 22% compared with six months ago.
CIBC World Markets on Tuesday said Canada's oil sands represent "one of the last great deposits open to private investment" in a world in which six of the largest oil suppliers to the U.S. are poised to cut their global exports by nearly 2 million barrels a day by 2012. The projected cut, amounting to 7%, by Mexico, Saudi Arabia, Venezuela, Nigeria, Algeria and Russia, "reflect the growing struggle in these countries to grow production and manage their own soaring rates of oil consumption, CIBC chief economist Jeff Rubin said. Rubin says diminished global supplies and resulting higher prices will lead the markets to rely more on higher cost unconventional deposits, like the Canadian oil sands which he believes will surpass deep water wells as the single largest source of new oil exports by decade end.
Banks will likely be reluctant to make new business loans if tight credit conditions persist, hampering capital spending and the economy in the coming months, according to Goldman Sachs.
The Oil Drum: "International banks and analysts have hinted at the possibility that Opec will switch the pricing of oil from the dollar to a basket of currencies as the greenback sank to a record low against the euro yesterday."
Britain's prime minister announced plans to withdraw more than 1,000 troops from Iraq by year's end, and Iraq said it will take over security from British forces in the southern Basra province within two months.
Forecasters at Colorado State University on Tuesday reduced their hurricane forecast for October and November to four named storms from five, although the overall rating for big storms continues to be above normal. Of the four named storms predicted in October-November, two are expected to become hurricanes and one is expected to become a major hurricane with sustained winds of 111 miles per hour or greater.
November crude finished with a loss of 19 cents at $80.05 a barrel. But November natural gas rallied 5.4% to close at $7.427 per million British thermal units.
December gold fell $17.80, or 2.4%, to close at $736.30 an ounce. December silver dropped 2.9%, or 40.5 cents, to end at $13.45 an ounce.
The International Council of Shopping Centers and UBS Securities said in a survey that, on a week-over-week basis, sales were flat. "Sales were unchanged over the last week with weather a potential help in the West, but a drag on sales in the rest of the nation," said Michael Niemira, chief economist for the ICSC. "Overall, the month is shaping up on the soft side of recent monthly sales trends." The ICSC expects the monthly sales performance to increase by 2% to 2.5%.
TD Bank Financial Group will acquire Commerce Bancorp Inc. in a stock-and-cash deal valued at $8.5 billion. Under terms of the agreement, Commerce shareholders will receive 0.4142 shares of a TD common share and $10.50 in cash in exchange for each share of Commerce Bancorp.
Hong Kong shares extended gains in the afternoon trading, with the 41-issue Hang Seng China Enterprises Index soaring 1,088.28 points, or 6.5%, to a record 18,161.40. The benchmark Hang Seng Index rose 3.9%, or 1,065.48 to a record 28,203.72.
Australia's S&P/ASX 200 rose to a record high while Japan's Nikkei 225 Average crossed the 17,000 level for the first time since Aug 9.
Medicare beneficiaries will pay 3.1 percent more in premiums for physician services next year, the smallest increase since 2001. Medicare officials said Monday that the lower-than-expected increase was partly a result of correcting an accounting error from previous years.
Mike Burk: "I think we are in a developing top that is in its final stages. In the next week or two there is likely to be an all time high in the Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX), and a multi year high in the NASDAQ composite (OTC). If my interpretation is correct there will not be a new high in the Russell 2000 (R2K)...The first 5 trading days in October are fairly strong and, during the 3rd year of the Presidential cycle they are a little stronger than the average for all years."
Banks have once again shunned a £10bn Bank of England money auction. Analysts have suggested the 6.75% interest rates offered by the Bank were too high and as such turned off buyers.
As far as the world's biggest bond investors are concerned, the Federal Reserve is failing to restore confidence in the U.S. credit markets. Pacific Investment Management Co., TIAA-CREF and Insight Investment Management say the central bank's decision to lower the overnight lending rate between banks by half a percentage point last month won't prevent the economy from slowing or corporate defaults from increasing. Lehman Brothers Holdings Inc. strategists say last month's rally in high-yield corporate bonds, the biggest since 2003, may fizzle by year-end.
The pending home sales index fell 6.5% in August after dropping a revised 10.7% in July, the National Association of Realtors reported. The index is at its lowest level since its inception in 2001. Pending home sales are down 21.5% compared with a year ago and is down 22% compared with six months ago.
CIBC World Markets on Tuesday said Canada's oil sands represent "one of the last great deposits open to private investment" in a world in which six of the largest oil suppliers to the U.S. are poised to cut their global exports by nearly 2 million barrels a day by 2012. The projected cut, amounting to 7%, by Mexico, Saudi Arabia, Venezuela, Nigeria, Algeria and Russia, "reflect the growing struggle in these countries to grow production and manage their own soaring rates of oil consumption, CIBC chief economist Jeff Rubin said. Rubin says diminished global supplies and resulting higher prices will lead the markets to rely more on higher cost unconventional deposits, like the Canadian oil sands which he believes will surpass deep water wells as the single largest source of new oil exports by decade end.
Banks will likely be reluctant to make new business loans if tight credit conditions persist, hampering capital spending and the economy in the coming months, according to Goldman Sachs.
The Oil Drum: "International banks and analysts have hinted at the possibility that Opec will switch the pricing of oil from the dollar to a basket of currencies as the greenback sank to a record low against the euro yesterday."
Britain's prime minister announced plans to withdraw more than 1,000 troops from Iraq by year's end, and Iraq said it will take over security from British forces in the southern Basra province within two months.
Forecasters at Colorado State University on Tuesday reduced their hurricane forecast for October and November to four named storms from five, although the overall rating for big storms continues to be above normal. Of the four named storms predicted in October-November, two are expected to become hurricanes and one is expected to become a major hurricane with sustained winds of 111 miles per hour or greater.
November crude finished with a loss of 19 cents at $80.05 a barrel. But November natural gas rallied 5.4% to close at $7.427 per million British thermal units.
December gold fell $17.80, or 2.4%, to close at $736.30 an ounce. December silver dropped 2.9%, or 40.5 cents, to end at $13.45 an ounce.
Monday, October 01, 2007
Fall Out
10/2/07 Fall Out
Citigroup Inc said Monday it expects third-quarter profit to fall 60% from last year after huge writedowns for unsold debt it issued to finance corporate takeovers and big losses on the value of subprime mortgage-backed securities.
The decline "was driven primarily by weak performance in fixed-income credit-market activities, writedowns in leveraged loan commitments, and increases in consumer-credit costs," Chairman and Chief Executive Charles Prince said in a statement.
Citi sees a writedown of $1.4 billion pretax, net of underwriting fees, on funded and unfunded highly leveraged finance commitments.
It also expects losses of $1.3 billion pretax, net of hedges, on the value of subprime mortgage-backed securities warehoused for certain securitizations, and $600 million pretax in fixed-income credit trading due to significant market volatility and the disruption of historical pricing relationships.
Fannie Mae to reinstate $79.6 million in loans to Tarragon.
The euro zone manufacturing purchasing managers index fell to 53.2 in September, down from from 54.3 in August.
Swiss banking group Credit Suisse remained profitable in the third quarter, though its investment banking result has been impacted by recent market turmoil. The bank said there is no indication that its net profit from continuing operations will be outside of a 20% range above or below 1.3 billion Swiss francs.
UBS said it will post a loss of between 600 million francs and 800 million francs mainly due to losses related to the subprime mortgage market. UBS said on Monday it would write down a net 4 billion Swiss francs ($3.42 billion) in its fixed-income portfolio and elsewhere. UBS will cut 1,500 jobs.
Nokia is in talks to buy Navteq Corp., the Chicago producer of electronic mapping solutions, people familiar with the matter told The Wall Street Journal. Nokia said on Monday it would offer $8.1 billion in cash for all shares in digital map supplier Navteq.
The private equity groups that agreed to buy data-management company Acxiom Corp. have reportedly developed cold feet and may be throwing a wrench into the works.
The housing market has a long way to go before stabilizing after the subprime crisis, spelling bad news for consumers in the world's biggest economy, former Federal Reserve chief Alan Greenspan said on Monday.
The U.S. currency fell to a low of $1.4283 versus the euro.
John Hussman: "As of last week, the total amount of Fed repurchases outstanding is $44.75 billion. This is close to the total quantity of reserves in the U.S. banking system (which includes these repo proceeds). Meanwhile, total borrowings of depository institutions from the Fed – the much vaunted “liquidity” lent by the Fed at the Discount Rate – dropped from $2.4 billion to just $306 million last week, which is about the norm of recent years. In short, next to nothing is actually lent through the discount window. Meanwhile, the Fed's open market operations are not injections of new liquidity, but a continuous rollover that finances a stable level of reserves, at a level that is negligible in relation to $6.3 trillion in total bank loans. If investors want to believe the superstition that Fed actions have anything but psychological effect, they should at least be prepared to demonstrate a specific mechanism by which observable FOMC operations exert that effect. It certainly is not through meaningful “injections of liquidity” into the banking system...The current price to forward operating earnings multiple is as high as it was at the 1987 peak, higher than it was before the 1990 bear market, and is in fact at the highest level that would have been observed in history except for the late 1990's. Most of the points prior to 1965 featured interest rates that were lower than they are presently. Again, current multiples also implicitly assume that profit margins will permanently remain at the highest levels in history. Current stock prices are at far higher multiples to normalized earnings."
Walgreen's Chairman Jeffrey Rein. "Our expenses weren't in line with the level of reimbursements we were receiving. Managing both expenses and lower reimbursements on some generic drugs is my top priority. We're going to fix this, and at the same time continue our aggressive growth plan."
The ISM index fell to 52.0% in September from 52.9% in August. This is the lowest level in six months. New orders fell to 53.4% in September from 55.3% in August. Production fell to 54.6% from 56.1% in the previous month. The price index fell to 59.0% from 63.0%. This is the lowest price level since February.
Despite the UBS, Citi, and ISM news, the Dow rallied 100 points in the first half hour of trading on Monday to the 14,000 level.
Crude oil for November delivery dropped $1.42, or 1.8%, to end at $80.24 a barrel on the New York Mercantile Exchange. November reformulated gasoline fell 5.98 cents, or 3%, at $1.9813 a gallon and November heating oil dropped 4.49 cents, or 2%, to end at $2.1807 a gallon. Bucking the trend in energy trading, November natural gas rose 18 cents at $7.05 per million British thermal units.
The Dow Jones Industrial Average gained 191 points, or 1.4%, to 14,087, a new record close. The S&P 500 index rose 1.3% to close at 1,547, while the Nasdaq Composite gained 1.5% to close at 2,741. Meanwhile, gold for December delivery rose $4.10 to finish at $754.10 an ounce on the New York Mercantile Exchange, and that was about a 28 year high.
Citigroup Inc said Monday it expects third-quarter profit to fall 60% from last year after huge writedowns for unsold debt it issued to finance corporate takeovers and big losses on the value of subprime mortgage-backed securities.
The decline "was driven primarily by weak performance in fixed-income credit-market activities, writedowns in leveraged loan commitments, and increases in consumer-credit costs," Chairman and Chief Executive Charles Prince said in a statement.
Citi sees a writedown of $1.4 billion pretax, net of underwriting fees, on funded and unfunded highly leveraged finance commitments.
It also expects losses of $1.3 billion pretax, net of hedges, on the value of subprime mortgage-backed securities warehoused for certain securitizations, and $600 million pretax in fixed-income credit trading due to significant market volatility and the disruption of historical pricing relationships.
Fannie Mae to reinstate $79.6 million in loans to Tarragon.
The euro zone manufacturing purchasing managers index fell to 53.2 in September, down from from 54.3 in August.
Swiss banking group Credit Suisse remained profitable in the third quarter, though its investment banking result has been impacted by recent market turmoil. The bank said there is no indication that its net profit from continuing operations will be outside of a 20% range above or below 1.3 billion Swiss francs.
UBS said it will post a loss of between 600 million francs and 800 million francs mainly due to losses related to the subprime mortgage market. UBS said on Monday it would write down a net 4 billion Swiss francs ($3.42 billion) in its fixed-income portfolio and elsewhere. UBS will cut 1,500 jobs.
Nokia is in talks to buy Navteq Corp., the Chicago producer of electronic mapping solutions, people familiar with the matter told The Wall Street Journal. Nokia said on Monday it would offer $8.1 billion in cash for all shares in digital map supplier Navteq.
The private equity groups that agreed to buy data-management company Acxiom Corp. have reportedly developed cold feet and may be throwing a wrench into the works.
The housing market has a long way to go before stabilizing after the subprime crisis, spelling bad news for consumers in the world's biggest economy, former Federal Reserve chief Alan Greenspan said on Monday.
The U.S. currency fell to a low of $1.4283 versus the euro.
John Hussman: "As of last week, the total amount of Fed repurchases outstanding is $44.75 billion. This is close to the total quantity of reserves in the U.S. banking system (which includes these repo proceeds). Meanwhile, total borrowings of depository institutions from the Fed – the much vaunted “liquidity” lent by the Fed at the Discount Rate – dropped from $2.4 billion to just $306 million last week, which is about the norm of recent years. In short, next to nothing is actually lent through the discount window. Meanwhile, the Fed's open market operations are not injections of new liquidity, but a continuous rollover that finances a stable level of reserves, at a level that is negligible in relation to $6.3 trillion in total bank loans. If investors want to believe the superstition that Fed actions have anything but psychological effect, they should at least be prepared to demonstrate a specific mechanism by which observable FOMC operations exert that effect. It certainly is not through meaningful “injections of liquidity” into the banking system...The current price to forward operating earnings multiple is as high as it was at the 1987 peak, higher than it was before the 1990 bear market, and is in fact at the highest level that would have been observed in history except for the late 1990's. Most of the points prior to 1965 featured interest rates that were lower than they are presently. Again, current multiples also implicitly assume that profit margins will permanently remain at the highest levels in history. Current stock prices are at far higher multiples to normalized earnings."
Walgreen's Chairman Jeffrey Rein. "Our expenses weren't in line with the level of reimbursements we were receiving. Managing both expenses and lower reimbursements on some generic drugs is my top priority. We're going to fix this, and at the same time continue our aggressive growth plan."
The ISM index fell to 52.0% in September from 52.9% in August. This is the lowest level in six months. New orders fell to 53.4% in September from 55.3% in August. Production fell to 54.6% from 56.1% in the previous month. The price index fell to 59.0% from 63.0%. This is the lowest price level since February.
Despite the UBS, Citi, and ISM news, the Dow rallied 100 points in the first half hour of trading on Monday to the 14,000 level.
Crude oil for November delivery dropped $1.42, or 1.8%, to end at $80.24 a barrel on the New York Mercantile Exchange. November reformulated gasoline fell 5.98 cents, or 3%, at $1.9813 a gallon and November heating oil dropped 4.49 cents, or 2%, to end at $2.1807 a gallon. Bucking the trend in energy trading, November natural gas rose 18 cents at $7.05 per million British thermal units.
The Dow Jones Industrial Average gained 191 points, or 1.4%, to 14,087, a new record close. The S&P 500 index rose 1.3% to close at 1,547, while the Nasdaq Composite gained 1.5% to close at 2,741. Meanwhile, gold for December delivery rose $4.10 to finish at $754.10 an ounce on the New York Mercantile Exchange, and that was about a 28 year high.
Sunday, September 30, 2007
The Fourth Quarter Begins
10/1/07 The Fourth Quarter Begins
The Financial Times said BHP Billiton may not be interested in bidding for Alcoa as it focuses on mining. Alcoa owns many so-called downstream assets including packaging plants, the newspaper said. Meanwhile, BHP Billiton Ltd., the world's largest mining company, said economic growth in China and India will support demand for commodities, keeping prices high. Oil, copper, iron ore and coal are ``very attractive'' because demand outstrips supplies, while aluminum and nickel ``are not quite as tight,'' said Kloppers, the company's CEO.
EnCana Corp., Canada's largest natural-gas producer, said it will cut its 2008 investment in Alberta by about C$1 billion ($1 billion) if proposed increases in oil and gas royalties are adopted in full.
China Investment Corp., the nation's $200 billion sovereign wealth fund, started operations on Saturday.
China's central bank said it will maintain a ``moderately tight'' monetary policy in the last quarter of 2007 to curb inflation, limit asset prices and prevent the economy from overheating.
Japan's industrial output surged at the fastest pace in almost four years and household spending rebounded, signaling the economy may weather a U.S. slowdown.
The rupee gained 2.5 percent to 39.8425 per dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. The currency rose as high as 39.62, the strongest since April 1998, on Sept. 26. Its 11.2 percent gain this year is the second-highest among 18 Asia-Pacific currencies tracked by Bloomberg. The Australian dollar has climbed 11.6 percent.
Goldman Sachs: "Much has changed since mid-July, when we wrote that 'the global economy continues to enjoy one of the strongest sustained expansion in modern history'. The mood in financial markets is clearly darker, and the economic data in the developed world is showing signs of wear," it said. "Japan's recovery is tottering, with the chance of an outright recession having risen to nearly two in three," said the report, authored by chief economist Jim O'Neill.
John Mauldin: "Greg (Weldon)also spotted something which I suspected and hinted about in previous letters. The number of homes above $750,000 which are selling is down by over 35% from last year. Sales of home from $500,000 to $749,000 is down by 25%. Jumbo mortgages are just hard to find at rates that make sense. I think it is likely that Congress will allow Fannie and Freddie to take larger loans onto their books. I would not be shocked to see the number at $600,000, at least temporarily. Right now they are limited to taking $417,000 loans. With a 20% down payment that means about $525,000 for the sales price of the home."
Taiwan's central bank may raise its key interest rate further to contain increasing inflation risk, Governor Perng Fai-nan indicated.
Daniel Gross: "In the first eight months of 2007, the consumer price index—the main gauge of inflation—rose at a 3.7 percent annual rate. That's more than 50 percent higher than the mild 2.3 percent core rate. The prices of energy and food are soaring, at 12.7 percent and 5.6 percent annual rates, respectively, and have been doing so for years. As a result, the CPI—including food and energy—has risen 12.6 percent since July 2003, for a compound rate of about 3 percent."
Microsoft has bowed to pressure from customers and will allow large manufacturers to continue selling PCs with Windows XP preloaded until June 30, 2008. How much did they spend on developing and marketing Vista?
In a blog post, Microsoft employee David Gainer said that when computer users tried to get Excel 2007 to multiply some pairs of numbers and the result was 65,535, Excel would incorrectly display 100,000 as the answer. Gainer said Excel makes mistakes multiplying 77.1 by 850, 10.2 by 6,425 and 20.4 by 3,212.5, but the program appears to be able to handle 16,383.75 times 4. "Further testing showed a similar phenomenon with 65,536 as well," Gainer wrote Tuesday. He said Excel was actually performing the calculations correctly, but when it comes time to show the answer on the screen, it messes up. Gainer said the bug is limited to six numbers from 65,534.99999999995 to 65,535, and six numbers from 65,535.99999999995 to 65,536, and that Microsoft is working hard to fix the problem. This is but another example of destroying their brand value.
Google Inc. has acquired a mobile social networking start-up called Zingku Inc., the search company's latest move to provide more services through mobile phones. Zingku aims to make it easier for people to share photos, send invitations or conduct polls among friends via mobile phone. It also provides a way for businesses to send "mobile flyers" to customers advertising products and services. Zingku was started in 2005 and the service has been in testing with a limited number of users in the U.S.
The Oil Drum: "Ghawar is hence crucial to continued Saudi production and meeting the galloping global requirements. People like Matthew Simmons have been arguing for years now that Ghawar is on decline. That is a cause of major concern to the energy fraternity...And with water level rising by about 18.4 feet per year, (Stuart)Staniford extrapolates that the northern part of Ghawar by now is quite depleted."
The Baltic Exchange's dry freight Index, which gauges the strength of seaborne dry commodities trade, hit a new high on Thursday, continuing its record-breaking trend of recent months. The London Baltic Exchange's chief price index, which monitors major trade routes for coal, iron ore, cement and soft commodities like grains and sugar, climbed 111 points to 9,370 after breaking through the 9,000 barrier on Monday. It means the index has now risen almost 2,000 points in a month
The Financial Times said BHP Billiton may not be interested in bidding for Alcoa as it focuses on mining. Alcoa owns many so-called downstream assets including packaging plants, the newspaper said. Meanwhile, BHP Billiton Ltd., the world's largest mining company, said economic growth in China and India will support demand for commodities, keeping prices high. Oil, copper, iron ore and coal are ``very attractive'' because demand outstrips supplies, while aluminum and nickel ``are not quite as tight,'' said Kloppers, the company's CEO.
EnCana Corp., Canada's largest natural-gas producer, said it will cut its 2008 investment in Alberta by about C$1 billion ($1 billion) if proposed increases in oil and gas royalties are adopted in full.
China Investment Corp., the nation's $200 billion sovereign wealth fund, started operations on Saturday.
China's central bank said it will maintain a ``moderately tight'' monetary policy in the last quarter of 2007 to curb inflation, limit asset prices and prevent the economy from overheating.
Japan's industrial output surged at the fastest pace in almost four years and household spending rebounded, signaling the economy may weather a U.S. slowdown.
The rupee gained 2.5 percent to 39.8425 per dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. The currency rose as high as 39.62, the strongest since April 1998, on Sept. 26. Its 11.2 percent gain this year is the second-highest among 18 Asia-Pacific currencies tracked by Bloomberg. The Australian dollar has climbed 11.6 percent.
Goldman Sachs: "Much has changed since mid-July, when we wrote that 'the global economy continues to enjoy one of the strongest sustained expansion in modern history'. The mood in financial markets is clearly darker, and the economic data in the developed world is showing signs of wear," it said. "Japan's recovery is tottering, with the chance of an outright recession having risen to nearly two in three," said the report, authored by chief economist Jim O'Neill.
John Mauldin: "Greg (Weldon)also spotted something which I suspected and hinted about in previous letters. The number of homes above $750,000 which are selling is down by over 35% from last year. Sales of home from $500,000 to $749,000 is down by 25%. Jumbo mortgages are just hard to find at rates that make sense. I think it is likely that Congress will allow Fannie and Freddie to take larger loans onto their books. I would not be shocked to see the number at $600,000, at least temporarily. Right now they are limited to taking $417,000 loans. With a 20% down payment that means about $525,000 for the sales price of the home."
Taiwan's central bank may raise its key interest rate further to contain increasing inflation risk, Governor Perng Fai-nan indicated.
Daniel Gross: "In the first eight months of 2007, the consumer price index—the main gauge of inflation—rose at a 3.7 percent annual rate. That's more than 50 percent higher than the mild 2.3 percent core rate. The prices of energy and food are soaring, at 12.7 percent and 5.6 percent annual rates, respectively, and have been doing so for years. As a result, the CPI—including food and energy—has risen 12.6 percent since July 2003, for a compound rate of about 3 percent."
Microsoft has bowed to pressure from customers and will allow large manufacturers to continue selling PCs with Windows XP preloaded until June 30, 2008. How much did they spend on developing and marketing Vista?
In a blog post, Microsoft employee David Gainer said that when computer users tried to get Excel 2007 to multiply some pairs of numbers and the result was 65,535, Excel would incorrectly display 100,000 as the answer. Gainer said Excel makes mistakes multiplying 77.1 by 850, 10.2 by 6,425 and 20.4 by 3,212.5, but the program appears to be able to handle 16,383.75 times 4. "Further testing showed a similar phenomenon with 65,536 as well," Gainer wrote Tuesday. He said Excel was actually performing the calculations correctly, but when it comes time to show the answer on the screen, it messes up. Gainer said the bug is limited to six numbers from 65,534.99999999995 to 65,535, and six numbers from 65,535.99999999995 to 65,536, and that Microsoft is working hard to fix the problem. This is but another example of destroying their brand value.
Google Inc. has acquired a mobile social networking start-up called Zingku Inc., the search company's latest move to provide more services through mobile phones. Zingku aims to make it easier for people to share photos, send invitations or conduct polls among friends via mobile phone. It also provides a way for businesses to send "mobile flyers" to customers advertising products and services. Zingku was started in 2005 and the service has been in testing with a limited number of users in the U.S.
The Oil Drum: "Ghawar is hence crucial to continued Saudi production and meeting the galloping global requirements. People like Matthew Simmons have been arguing for years now that Ghawar is on decline. That is a cause of major concern to the energy fraternity...And with water level rising by about 18.4 feet per year, (Stuart)Staniford extrapolates that the northern part of Ghawar by now is quite depleted."
The Baltic Exchange's dry freight Index, which gauges the strength of seaborne dry commodities trade, hit a new high on Thursday, continuing its record-breaking trend of recent months. The London Baltic Exchange's chief price index, which monitors major trade routes for coal, iron ore, cement and soft commodities like grains and sugar, climbed 111 points to 9,370 after breaking through the 9,000 barrier on Monday. It means the index has now risen almost 2,000 points in a month
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