10/14/07 The Color Of Money
"BEA is worth substantially more," the company's board said in a letter to Oracle.
According to the WSJ, Citigroup Inc. and other big banks are discussing a plan to pool together and financially back as much as $100 billion in shaky mortgage securities and other investments.
When was the last time, Citigroup's management made a good decision for its shareholders?
Richard Daughty: "So it looks like about $15.4 trillion in bank assets and liabilities is being backed up by a minuscule $40.2 billion! That's a microscopic 0.0026%. A quarter of 1%! Hahahaha! Fractional reserve banking at its finest! Hahahaha!"
“China’s foreign exchange reserves reached US$1.43 trillion at the end of September, up 45% from the same period last year, the People's Bank of China said. Meanwhile, bank credit in the U.S. is nearing the $9 trillion mark.
China ordered banks to set aside more money as reserves for the eighth time this year to cool speculation in stocks and real estate and curb the fastest inflation in 10 years. Lenders must park 13 percent of deposits as reserves from Oct. 25, up from 12.5 percent, the People's Bank of China said.
When wondering about the validity of the government's core inflation number, consider that the Goldman Sachs Commodities Index is up 26.7% y-t-d. Not surprisingly, in the 12 months through September, import prices increased 5.2%.
Transportation costs played a role as the Baltic Dry Freight cost index this week increased y-t-d gains to 140%.
Oil futures rose to a new trading high above $84 a barrel on Friday -- and settled at a new record. Energy Secretary Samuel Bodman said oil prices are high because supply is unable to keep up with demand, rather than speculators being at fault.
Doug Noland: "The Flow of Finance will now pose extraordinary challenges and risks. The unfolding mortgage crisis (especially in “private-label” and jumbo) will prove stubbornly immune to “reliquefication” benefits. This dynamic places home prices, the consumer balance sheet, and the general economy in harm’s way. At the same time, there’s the stock market Bubble and an acutely vulnerable dollar. I will presuppose that the Fed is hopeful to ignore equities and currencies, while operating monetary policy with a focus on the Credit market and real economy. Such a policy course, however, implies at this point much greater currency, market stability, and inflationary risks than our central bankers seem to appreciate.
I would furthermore contend that the nature of current Risk Intermediation is seductively problematic. On a short-term basis, enormous bank and money-fund led financial sector expansion has been sufficient to over-inflate non-mortgage Credit. It’s been too easy - and Credit to sustain the boom too risky. Meantime, post-Bubble risk aversion festers in mortgage-related finance that will creep ever-closer to spilling over into an economic downturn and a reemergence of financial turbulence.
Despite current market euphoria, these processes are significantly elevating the systemic risks associated with today’s ballooning financial sector balance sheet. A stock market Bubble beset by destabilizing speculative dynamics only compounds systemic vulnerabilities. Such a backdrop seems to beckon for a currency crisis, a risk that leaves the Federal Reserve with much less flexibility than it or the markets today appreciate. There are major costs associated with Not So Benign Neglect. The Fed had better at least start sounding like they’ve thought through some of the issues."
Henry To: "Again, given the relatively weak rally (both in breadth and in volume) we have witnessed since the mid August lows, and given the non-confirmation of the rally by the major stock markets in Europe and in Japan, there is a good chance we could see a retest in the major indices before we see a sustainable bottom in the U.S. stock market. Also, given that much of the strength in the U.S. stock market has been focused on the Dow Industrials over the last six weeks, there is a good chance that the Dow Industrials could continue to rise over the next couple of weeks, but we believe that any all-time highs will be short-lived. Should this occur, however, chances are that many other major market indices will not confirm this all-time high, such as the Dow Transports, the Dow Utilities, the S&P 400, the Russell 2000, the American Exchange Broker/Dealer, the Value Line Geometric, and the Philadelphia Semiconductor Indices...Copper and aluminum prices have most probably topped out in May 2006, while nickel made a significant top in May 2007 and tin in early August 2007. The only metal of consequence (a metal that is not shown is zinc - an essential ingredient of stainless steel - and which is down about a third from its November 2006 all-time highs) that is still making all-time highs is lead. Given the divergence of all other base metals, and given the continued weakness in silver prices, chances are that:
1) The up cycle in metal prices in general have topped or is in the midst of topping out;
2) Global economic growth will at least slowdown over the next several quarters, as base metal prices have been a great leading indicator of the current global economic cycle.
While the bulls would claim that the new highs in the Baltic Dry Index is still signaling immense growth, subscribers should keep in mind that the Baltic Dry Index is merely a coincident indicator of the global economy at best - as it is just a representation of spot shipping rates of dry, raw materials. That is, it is a representation of shipping rates for dry, raw materials that is being shipped right at this instant - raw materials that were bought as long as a few months ago, when prices were still high. The recent decline in base metal prices suggests that the Baltic Dry Index will also start to reverse and decline over the next several months. Moreover, a better leading indicator of global economic growth - container traffic within the Port of Los Angeles (the busiest port in the US) - is expected to be stagnant on a year-over-year basis for the rest of this year. Given that much of the container traffic within the Port of Los Angeles is in the form of finished goods, this is a much better leading indicator of US (and to a lesser extent, global) economic growth than the Baltic Dry Index."
According to AMG Data, "including ETF activity, Equity funds report net cash outflows totaling -$812 million in the week ended 10/10/07 with Domestic funds reporting net outflows of -$3.768 billion and Non-domestic funds reporting net inflows of $2.956 billion; Excluding ETF activity, Equity funds report net cash inflows totaling $462 million with Domestic funds reporting net outflows of -$101 million and Non-domestic funds reporting net inflows totaling $562 million;
Exchange Traded (Equity) funds report net outflows of -$1.274 billion with the largest flows:
-$2.372 Bil from the SPDR Tr Series I fund;
-$1.809 Bil from the iShares Russell 2000 Index fund;
-$1.098 Bil from the DIAMONDS fund;
$874 Mil to the iShares MSCI Emerg Mkt Index fund;
Excluding ETF activity International funds report net inflows of $582 million as inflows are reported in all Emerging Markets regions while net outflows are reported in Japan (-$92 Mil) and Europe (-$32 Mil);
Excluding ETF activity Taxable Bond funds report net inflows totaling $1.247 billion as inflows are reported in all sectors;
Money Market funds report net cash inflows totaling $20.802 billion;
Municipal Bond funds report net cash outflows of -$30 million."
Fulton Oursler: “Many of us crucify ourselves between two thieves - regret for the past and fear of the future.”
Saturday, October 13, 2007
Friday, October 12, 2007
More Writedowns
10/13/07 More Writedowns
Home builder Centex Corp. expects to take around $1 billion in charges for its fiscal second-quarter and said sales have fallen 13% due to "extremely difficult" housing market conditions. The company said it will record an impairment of around $850 million for neighbourhood and land inventory as well as a $40 million write-off for land holdings in joint ventures. Other charges include $40 million for option deposits and pre-acquisition costs, $65 million of goodwill impairment and $60 million of losses related to a subsidiary's mortgage market and credit exposure. The company closed 7,350 units in the quarter, down 14% and sales net sales were 5,953 units. Backlog slumped 38% to 9,633 units. Centex also cut its cash flow forecast for the year to $500 million from $750 million.
Beazer reported that 68% of its prospective home buyers canceled their orders in the company's fiscal fourth quarter, which ended Sept. 30. The cancellation rate was almost double the 36% of customers who canceled orders and gave up deposits in the prior quarter.
Dan Amoss: "But 'kitchen sink' quarters have an inconvenient way of recurring. It is improbable to believe, for example, that banks will be able to cram five years of reckless lending into a single quarter of writeoffs. More likely, this quarter's write-offs will begin a long-running trend."
GE: US housing still "tough" with no signs of a turnaround.
Oracle Corporation said Friday that it has proposed to buy BEA Systems Inc. for $17 a share in cash.
GE's profit from continuing operations came to 50 cents per share, in line with analysts' expectations, according to Reuters Estimates.
Virgin Group is in talks about a possible acquisition of U.K. mortgage lender Northern Rock.
Federal Reserve data released on Friday showed U.S. consumer borrowing rising by $12.18 billion in August, more than 20 percent more than economists had forecast.
China's trade surplus jumped 56 percent in September to $23.9 billion, up from $15.3 billion a year earlier, the customs bureau said on its Web site today, after gaining 33 percent in August. China’s trade surplus jumped 69 per cent to $185.65bn for the first nine months of the year, surpassing the amount for the whole of 2006
Production at factories, utilities and mines jumped 10.7 percent from a year earlier after gaining a revised 7.5 percent in July, the statistics bureau said in New Delhi.
Clif Droke: "The 20-day oscillator is exceptionally overbought and has hit its highest reading of the year, all the more reason to exercise greater caution in the next few days."
Michael W. Hodges: "FY 2006 Federal Govt. Spending of $2.8 Trillion Consumed 26% of the Economy, or $9,223 per man, woman and child,or 36% of the economy counting regulatory compliance. The Social Spending portion consumed 56% of total spending, and has increased 14 Times Faster Than The Economy and - individual incomes pay 82% of all federal revenue compared to a 51% share in 1950...Today's economy is 8 TIMES more federal government spending dependent, compared to prior generations...Total federal spending as a share of the economy - growing from 3% of the economic pie prior to the New Deal, to 26% of today's economy." It's no wonder making ends meet is a chore for most Americans. It's no wonder our dollar is in the toilet.
Turkish Prime Minister Tayyip Erdogan told reporters his country would pursue the Kurdistan Workers Party, or PKK, regardless of diplomatic costs, according to a report by Agence France-Presse. The northern region of Kurdistan holds some of Iraq's largest oil fields.
Allegheny Technologies Incorporated expects full-year 2007 earnings per share to be in the range of $7.00 to $7.25 per diluted share versus street estimates of $7.95. This may be another triple digit stock to dip to double digits like Boeing.
Wholesale prices surged 1.1% in September, led by rising energy and food prices, the Labor Department reported Friday. This is the largest increase since February.
UMich Oct. consumer sentiment 82.0 vs 83.4 in Sept.
Coldwater Creek is now expecting a loss per share of $0.11-0.13 for Q3, a steep drop from its $0.34 profit forecast in August, on revenue of $260-265 million. For Q4, Coldwater Creek is estimating break-even earnings on sales of $360-$365 million, well shy of analysts' prior expectations of $0.20 EPS on sales of $425.3 million. For H2, the company forecasts revenue of $620-630 million and a loss per share of $0.10-0.12.
McDonald's said it now expects third-quarter earnings to come in at 89 cents a share. Analysts polled by Thomson Financial expected the company's earnings to come in at 77 cents a share.
Salesforce.com made a new 52-week high as well as an all-time high. It's like 2000 over over again with the stock selling at 200 times Jan 2009 earnings projections.
Biogen Idec Inc. said its board of directors has authorized managers to explore a sale of the company, possibly to Carl Icahn, who recently bought a stake in the company.
Home builder Centex Corp. expects to take around $1 billion in charges for its fiscal second-quarter and said sales have fallen 13% due to "extremely difficult" housing market conditions. The company said it will record an impairment of around $850 million for neighbourhood and land inventory as well as a $40 million write-off for land holdings in joint ventures. Other charges include $40 million for option deposits and pre-acquisition costs, $65 million of goodwill impairment and $60 million of losses related to a subsidiary's mortgage market and credit exposure. The company closed 7,350 units in the quarter, down 14% and sales net sales were 5,953 units. Backlog slumped 38% to 9,633 units. Centex also cut its cash flow forecast for the year to $500 million from $750 million.
Beazer reported that 68% of its prospective home buyers canceled their orders in the company's fiscal fourth quarter, which ended Sept. 30. The cancellation rate was almost double the 36% of customers who canceled orders and gave up deposits in the prior quarter.
Dan Amoss: "But 'kitchen sink' quarters have an inconvenient way of recurring. It is improbable to believe, for example, that banks will be able to cram five years of reckless lending into a single quarter of writeoffs. More likely, this quarter's write-offs will begin a long-running trend."
GE: US housing still "tough" with no signs of a turnaround.
Oracle Corporation said Friday that it has proposed to buy BEA Systems Inc. for $17 a share in cash.
GE's profit from continuing operations came to 50 cents per share, in line with analysts' expectations, according to Reuters Estimates.
Virgin Group is in talks about a possible acquisition of U.K. mortgage lender Northern Rock.
Federal Reserve data released on Friday showed U.S. consumer borrowing rising by $12.18 billion in August, more than 20 percent more than economists had forecast.
China's trade surplus jumped 56 percent in September to $23.9 billion, up from $15.3 billion a year earlier, the customs bureau said on its Web site today, after gaining 33 percent in August. China’s trade surplus jumped 69 per cent to $185.65bn for the first nine months of the year, surpassing the amount for the whole of 2006
Production at factories, utilities and mines jumped 10.7 percent from a year earlier after gaining a revised 7.5 percent in July, the statistics bureau said in New Delhi.
Clif Droke: "The 20-day oscillator is exceptionally overbought and has hit its highest reading of the year, all the more reason to exercise greater caution in the next few days."
Michael W. Hodges: "FY 2006 Federal Govt. Spending of $2.8 Trillion Consumed 26% of the Economy, or $9,223 per man, woman and child,or 36% of the economy counting regulatory compliance. The Social Spending portion consumed 56% of total spending, and has increased 14 Times Faster Than The Economy and - individual incomes pay 82% of all federal revenue compared to a 51% share in 1950...Today's economy is 8 TIMES more federal government spending dependent, compared to prior generations...Total federal spending as a share of the economy - growing from 3% of the economic pie prior to the New Deal, to 26% of today's economy." It's no wonder making ends meet is a chore for most Americans. It's no wonder our dollar is in the toilet.
Turkish Prime Minister Tayyip Erdogan told reporters his country would pursue the Kurdistan Workers Party, or PKK, regardless of diplomatic costs, according to a report by Agence France-Presse. The northern region of Kurdistan holds some of Iraq's largest oil fields.
Allegheny Technologies Incorporated expects full-year 2007 earnings per share to be in the range of $7.00 to $7.25 per diluted share versus street estimates of $7.95. This may be another triple digit stock to dip to double digits like Boeing.
Wholesale prices surged 1.1% in September, led by rising energy and food prices, the Labor Department reported Friday. This is the largest increase since February.
UMich Oct. consumer sentiment 82.0 vs 83.4 in Sept.
Coldwater Creek is now expecting a loss per share of $0.11-0.13 for Q3, a steep drop from its $0.34 profit forecast in August, on revenue of $260-265 million. For Q4, Coldwater Creek is estimating break-even earnings on sales of $360-$365 million, well shy of analysts' prior expectations of $0.20 EPS on sales of $425.3 million. For H2, the company forecasts revenue of $620-630 million and a loss per share of $0.10-0.12.
McDonald's said it now expects third-quarter earnings to come in at 89 cents a share. Analysts polled by Thomson Financial expected the company's earnings to come in at 77 cents a share.
Salesforce.com made a new 52-week high as well as an all-time high. It's like 2000 over over again with the stock selling at 200 times Jan 2009 earnings projections.
Biogen Idec Inc. said its board of directors has authorized managers to explore a sale of the company, possibly to Carl Icahn, who recently bought a stake in the company.
Thursday, October 11, 2007
Very Very Thin Air
10/12/07 Very Very Thin Air
Not surprisingly, foreclosure filings across the U.S. nearly doubled last month compared with September 2006.
Scott Carson, president and CEO of Boeing’s aircraft unit: One month ago he said “a 1-3-month delay scenario would have minimal financial implications for 2008." Now the delay is six months and it won't impact earnings estimates, the company said. Airbus paid $6 million to Quantas per plane for every late delivery. In my view, the delay will create an earnings shortfall at Boeing and it may be much greater than anyone can predict.
Wal-Mart Stores Inc on Thursday reported a 1.4 percent rise in September sales at U.S. stores open at least a year, toward the low end of its forecast, but raised its third-quarter earnings estimate and said it now expects third-quarter earnings from continuing operations of 66 cents to 69 cents per share, up from a previous forecast of 62 cents to 65 cents. Wal-Mart sees Oct. same-store sales flat to up 2%.
Baidu is selling at about 100 times earnings estimates for 2008. Maybe I'm old fashioned, but the good times in China aren't that good. Meanwhile, back in the U.S., Advent Software is selling at over 100 times earnings estimates for 2008. Much of their work for hedge funds is in html-- not exactly cutting edge.
After I wrote the above, JPMorgan analysts lowered their revenue estimate for Baidu.com, the Chinese Internet search engine. After trading near $360, the shares closed at $308.
Infosys raised its earnings-per-share growth forecast for the financial year ending March 31, 2008, to a minimum of 15% from its July forecast of at least 13%, as per Indian accounting standards.
China's 800 richest individuals have net wealth of $459.3 billion, equivalent to 16% of China's gross domestic product last year.
Alcoa, Inc. said late Wednesday its efforts to divest less profitable business lines may result in "severance and other exit costs" beyond the third-quarter charges it disclosed in its earnings release late Tuesday
Doug Wakefield and Ben Hill: "On July 25, 2007, the commercial paper market diverged from the trend line it had followed over the last several years. On that date, the Federal Reserve reported the commercial paper market stood at $2,224 billion in assets. On October 3, 2007, this market stood at $1,859 billion. So this short-term debt instrument, stuffed in money market funds across the country and used for short-term liquidity needs by hundreds of highly leveraged hedge funds, has declined more than $364 billion dollars in ten weeks...We need to remember that “thinking positive,” while a necessity to keep our sanity at this time, will not make our mammoth financial issues disappear. We need to stop ourselves and question what the crowd is doing. We should look for solutions that are not popular and consider actually getting ahead of this credit contraction, which will most assuredly continue."
The level of outstanding asset-backed commercial paper fell for the ninth straight week, dropping by $6.8 billion, or 0.8%, to $899 billion in the latest week, the Federal Reserve reported Thursday. Asset-backed paper consists of short-term loans backed by assets such as mortgages. The market for such paper has fallen by $284 billion, or 24%, since the credit crunch hit in early August.
From IBD: "When the 17th National Congress of the Communist Party of China convenes Monday, President Hu Jintao will be confronted with some serious challenges. Foremost will be to ensure steady economic growth and price stability. Inflation is now at a 10-year high, reaching 6.5% (year over year) in August as measured by the consumer price index. Actual inflation is probably much higher given the defects of the CPI, which does not accurately reflect the consumption pattern of the present market-oriented system."
The Daily Reckoning: "Food prices are rising fast. They're moving up at a 12% rate in the United States. In China, they're soaring at an 18% rate. The Chinese are poorer than Americans. So food is a bigger part of family expenses. According to the people who figure out the inflation rate in China, food is 37% of the total."
On Aug. 14, VMware went public at $29. Now it's approaching $110 a share. Microsoft is planning to launch its own virtualization platform called Viridian, in late 2008.
According tot the FT, Morgan Stanley disclosed that its quantitative strategies traders lost $390m (£195m) in a single day in August because of what the bank on Wednesday said was widespread selling by investors. Goldman Sachs said it lost more than $100m on six trading days during the quarter but earned more than $100m on 23 days.
Jeffrey Garten: "At a time when the US needs to borrow $2bn (€1.4m) (£979m) a day to finance its current account deficits, a depreciating dollar will act as a disincentive to foreign investment in US government securities unless American interest rates are raised. A weakened greenback will also expose US industries to foreign takeovers at bargain basement prices."
Nordstrom Inc. said on Thursday September sales at stores open at least a year rose 3.2 percent but missed expectations, hurt by lower sales and higher inventory levels. Analysts, on average, were expecting same-store sales to rise 4.9 percent, according to Reuters Estimates. The company expects to post a third-quarter profit of 50 cents to 53 cents, below its previous outlook of 61 cents to 64 cents per share.
Abercrombie & Fitch September same-store sales down 4%.
JC Penney reduced its estimate of third quarter earnings to a range of $1 to $1.04 a share, from its prior view of $1.28 a share.
Kohl's sees third-quarter earnings at the low end of its previous earnings view of 67 cents to 71 cents a share.
Macy's expects October same-store sales in the range of minus 1 percent to up 2 percent, and third-quarter same-store sales of minus 1 percent to 1 percent.
Countrywide Financial Corp funded 44.3 percent fewer mortgage loans in September as it eliminated nearly 5,000 jobs to cope with lower lending volume and increasing delinquencies and defaults, the company said on Thursday. Delinquencies as a percentage of loans serviced rose to 5.87 percent in September from 5.05 percent in August and 4.50 percent in September 2006.
Natural-gas inventories rose by 73 billion cubic feet for the week ended Oct. 5, the Energy Department said Thursday.Total stocks now stand at 3.336 trillion cubic feet, down 44 billion cubic feet from the year-ago level, but 237 billion cubic feet above the five-year average, the government data said.
EIA data showed a draw down in crude oil inventories in the week ended Oct. 5 of 1.7 million barrels compared to the previous week. The data also showed motor gasoline inventories rose by 1.7 million barrels last week.
U.S. banks tapped the Federal Reserve's discount window for $40 million on Wednesday, the Fed said Thursday, indicating that borrowing from the Fed remains very rare. On Wednesday, primary credit borrowing from the Fed (also known as the discount window) totaled $40 million, up from $26 million the previous Wednesday, and far below the $7.2 billion borrowed on Sept. 12. The daily average for the week was $113 million, up from $27 million in the previous week.
JPMorgan Chase & Co., the third- largest U.S. bank, is eliminating as much as 10 percent of the jobs in groups that financed leveraged buyouts and packaged debt into securities, a person familiar with the situation said. The two units are part of the New York-based firm's investment banking division, which employed 25,356 people as of June 30, according to the company's quarterly report.
A Chinese Proverb: “Only the man who crosses the river at night knows the value of the light of day."
Not surprisingly, foreclosure filings across the U.S. nearly doubled last month compared with September 2006.
Scott Carson, president and CEO of Boeing’s aircraft unit: One month ago he said “a 1-3-month delay scenario would have minimal financial implications for 2008." Now the delay is six months and it won't impact earnings estimates, the company said. Airbus paid $6 million to Quantas per plane for every late delivery. In my view, the delay will create an earnings shortfall at Boeing and it may be much greater than anyone can predict.
Wal-Mart Stores Inc on Thursday reported a 1.4 percent rise in September sales at U.S. stores open at least a year, toward the low end of its forecast, but raised its third-quarter earnings estimate and said it now expects third-quarter earnings from continuing operations of 66 cents to 69 cents per share, up from a previous forecast of 62 cents to 65 cents. Wal-Mart sees Oct. same-store sales flat to up 2%.
Baidu is selling at about 100 times earnings estimates for 2008. Maybe I'm old fashioned, but the good times in China aren't that good. Meanwhile, back in the U.S., Advent Software is selling at over 100 times earnings estimates for 2008. Much of their work for hedge funds is in html-- not exactly cutting edge.
After I wrote the above, JPMorgan analysts lowered their revenue estimate for Baidu.com, the Chinese Internet search engine. After trading near $360, the shares closed at $308.
Infosys raised its earnings-per-share growth forecast for the financial year ending March 31, 2008, to a minimum of 15% from its July forecast of at least 13%, as per Indian accounting standards.
China's 800 richest individuals have net wealth of $459.3 billion, equivalent to 16% of China's gross domestic product last year.
Alcoa, Inc. said late Wednesday its efforts to divest less profitable business lines may result in "severance and other exit costs" beyond the third-quarter charges it disclosed in its earnings release late Tuesday
Doug Wakefield and Ben Hill: "On July 25, 2007, the commercial paper market diverged from the trend line it had followed over the last several years. On that date, the Federal Reserve reported the commercial paper market stood at $2,224 billion in assets. On October 3, 2007, this market stood at $1,859 billion. So this short-term debt instrument, stuffed in money market funds across the country and used for short-term liquidity needs by hundreds of highly leveraged hedge funds, has declined more than $364 billion dollars in ten weeks...We need to remember that “thinking positive,” while a necessity to keep our sanity at this time, will not make our mammoth financial issues disappear. We need to stop ourselves and question what the crowd is doing. We should look for solutions that are not popular and consider actually getting ahead of this credit contraction, which will most assuredly continue."
The level of outstanding asset-backed commercial paper fell for the ninth straight week, dropping by $6.8 billion, or 0.8%, to $899 billion in the latest week, the Federal Reserve reported Thursday. Asset-backed paper consists of short-term loans backed by assets such as mortgages. The market for such paper has fallen by $284 billion, or 24%, since the credit crunch hit in early August.
From IBD: "When the 17th National Congress of the Communist Party of China convenes Monday, President Hu Jintao will be confronted with some serious challenges. Foremost will be to ensure steady economic growth and price stability. Inflation is now at a 10-year high, reaching 6.5% (year over year) in August as measured by the consumer price index. Actual inflation is probably much higher given the defects of the CPI, which does not accurately reflect the consumption pattern of the present market-oriented system."
The Daily Reckoning: "Food prices are rising fast. They're moving up at a 12% rate in the United States. In China, they're soaring at an 18% rate. The Chinese are poorer than Americans. So food is a bigger part of family expenses. According to the people who figure out the inflation rate in China, food is 37% of the total."
On Aug. 14, VMware went public at $29. Now it's approaching $110 a share. Microsoft is planning to launch its own virtualization platform called Viridian, in late 2008.
According tot the FT, Morgan Stanley disclosed that its quantitative strategies traders lost $390m (£195m) in a single day in August because of what the bank on Wednesday said was widespread selling by investors. Goldman Sachs said it lost more than $100m on six trading days during the quarter but earned more than $100m on 23 days.
Jeffrey Garten: "At a time when the US needs to borrow $2bn (€1.4m) (£979m) a day to finance its current account deficits, a depreciating dollar will act as a disincentive to foreign investment in US government securities unless American interest rates are raised. A weakened greenback will also expose US industries to foreign takeovers at bargain basement prices."
Nordstrom Inc. said on Thursday September sales at stores open at least a year rose 3.2 percent but missed expectations, hurt by lower sales and higher inventory levels. Analysts, on average, were expecting same-store sales to rise 4.9 percent, according to Reuters Estimates. The company expects to post a third-quarter profit of 50 cents to 53 cents, below its previous outlook of 61 cents to 64 cents per share.
Abercrombie & Fitch September same-store sales down 4%.
JC Penney reduced its estimate of third quarter earnings to a range of $1 to $1.04 a share, from its prior view of $1.28 a share.
Kohl's sees third-quarter earnings at the low end of its previous earnings view of 67 cents to 71 cents a share.
Macy's expects October same-store sales in the range of minus 1 percent to up 2 percent, and third-quarter same-store sales of minus 1 percent to 1 percent.
Countrywide Financial Corp funded 44.3 percent fewer mortgage loans in September as it eliminated nearly 5,000 jobs to cope with lower lending volume and increasing delinquencies and defaults, the company said on Thursday. Delinquencies as a percentage of loans serviced rose to 5.87 percent in September from 5.05 percent in August and 4.50 percent in September 2006.
Natural-gas inventories rose by 73 billion cubic feet for the week ended Oct. 5, the Energy Department said Thursday.Total stocks now stand at 3.336 trillion cubic feet, down 44 billion cubic feet from the year-ago level, but 237 billion cubic feet above the five-year average, the government data said.
EIA data showed a draw down in crude oil inventories in the week ended Oct. 5 of 1.7 million barrels compared to the previous week. The data also showed motor gasoline inventories rose by 1.7 million barrels last week.
U.S. banks tapped the Federal Reserve's discount window for $40 million on Wednesday, the Fed said Thursday, indicating that borrowing from the Fed remains very rare. On Wednesday, primary credit borrowing from the Fed (also known as the discount window) totaled $40 million, up from $26 million the previous Wednesday, and far below the $7.2 billion borrowed on Sept. 12. The daily average for the week was $113 million, up from $27 million in the previous week.
JPMorgan Chase & Co., the third- largest U.S. bank, is eliminating as much as 10 percent of the jobs in groups that financed leveraged buyouts and packaged debt into securities, a person familiar with the situation said. The two units are part of the New York-based firm's investment banking division, which employed 25,356 people as of June 30, according to the company's quarterly report.
A Chinese Proverb: “Only the man who crosses the river at night knows the value of the light of day."
Wednesday, October 10, 2007
The Air Is Getting Thin
10/11/07 The Air Is Getting Thin
PetSmart Inc. has downgraded forecasts for third-quarter sales and earnings per share and fiscal-year earnings per share due to an uncertain economic environment. The specialty pet retailer now expects comparable store sales growth to be below its original low-to-mid single digit forecast for the third quarter and earnings per share in a range of 17 cents to 20 cents a share. Analysts had been forecasting earnings per share in a range of 21 cents to 23 cents in the quarter. For fiscal 2007, the firm is expecting to post earnings per share in a range of $2.02 to $2.07, down from a prior forecast of $2.08 to $2.10 a share. "We're clearly operating in an uncertain economic environment, and we believe recent consumer weakness may be impacting our business.
Excluding an 8-cent charge to increase deferred-membership revenue liability and reduce membership-fee revenue, the latest net for Costco was 91 cents a share. Shares outstanding shrank 5.4% to 448.7 million. Net sales increased 3% to $20.09 billion from $19.5 billion. Same-store sales rose 5%, reflecting rises of 4% in the U.S. and 9% overseas. A survey of analysts by Thomson Financial produced consensus estimates of 83 cents of profit on $20.73 billion of sales.
Stock buybacks are having a greater impact on EPS increase comparisons. We've seen this with Alcoa and now Costco. This will be true of many companies going forward. It's been so with IBM for years.
Confectionery and beverage company Cadbury Schweppes said that, due to a difficult debt market, it has decided to demerge its Americas beverages operation rather that selling the division and list it on the New York Stock Exchange. According to the WSJ, the company held some merger discussions with Hershey.
International Paper lowered its third-quarter land-sales earnings outlook to about $100 million, from its previous expectation for land-sales earnings between $110 million and $140 million.
SABMiller and Molson Coors plan to combine their U.S. operations.
According to the WSJ, Wall Street banks such as Citigroup Inc., Credit Suisse Group and J.P. Morgan Chase & Co. are holding some $400 billion in debt they had promised as financing for purchases private-equity firms had in the works globally. Unless the pace of sales quickens in the coming weeks, banks could be stuck holding these hundreds of billions of dollars of loans for months to come -- a big risk if the economy slows and corporate profits weaken.
Ten-year notes yield about 2.31 percentage points more than similar-maturity Treasury inflation-protected securities, representing the pace of inflation traders expect over the life of the debt. The difference was 2.19 percentage points Sept. 10.
About 1 in 5 Americans in working families can't afford basic needs, and many are scraping to get by on insufficient income and government aid, policy researchers conclude in a report released by the Center for Economic and Policy Research and the Center for Social Policy at the University of Massachusetts.
"We no longer live in a world where having a job means you're automatically able to make ends meet," said Heather Boushey, co-author of the report. "Our work-support policies need to be updated to support the millions of families with earners in bad jobs."
Home starts fell almost 30 percent in the Dallas-Fort Worth area during the third quarter. And sales of new houses were off 20 percent from the same period of 2006, according to statistics released Tuesday by housing analyst Metrostudy Inc.
Alvin Toffler: “Future shock [is] the shattering stress and disorientation that we induce in individuals by subjecting them to too much change in too short a time.”
Ron Paul: "With our country's finances stretched thin, our credit limit fast approaching, and our currency inflated to the breaking point, there is no indication yet of any urgency on the part of Congress to rein in spending. The predictable answer to the government's voracious spending habits is this week’s proposal by some Democratic Congressional leaders for tax increases to pay for operations in Iraq . Here at home, however, there are promises our seniors heavily rely upon. We must keep these promises...Official reports show the trust fund having assets of $2.1 trillion. In reality, those dollars are just IOUs the government is writing to itself when it borrows from the fund to spend on unrelated programs. There are no real assets in the Social Security Trust Fund. This is similar to taking money out of your savings account, spending it, then replacing it with an IOU to yourself, and calling that IOU an asset. In addition, this money we owe to our seniors is not even included in official budget deficit figures. In fiscal year 2006 alone, $185 billion was borrowed from Social Security. The official deficit was reported to be $248 billion. The actual deficit for 2006 would be $433 billion when combining the two. This sort of accounting would land private sector executives in prison for fraud."
Due to lower refining margins, Chevron Corp. said third-quarter net income was “significantly below” the record $5.4 billion the company earned in the April-June period.
Valero Energy Corp., the nation's largest independent oil refiner, said it expects to report third-quarter earnings far short of Wall Street estimates because of tighter refining margins. Earnings from continuing operations, excluding special items, are now expected to be $1.30 to $1.40 per share.Analysts polled by Thomson Financial had been expecting earnings of $1.91 per share, on average.
President Vladimir Putin said that there was no “objective data” showing that Iran is developing nuclear weapons. Iranian negotiators said they will answer questions about their country's uranium enrichment work raised by United Nations nuclear inspectors.
Monsanto sees FY 2008 EPS $2.20 to $2.40. On Tuesday the stock closed at $89+, up from the low 60's just 2 months ago. The air is mighty thin at these valuations.
Blue Chip Economic Indicators newsletter stated economists surveyed now see the economy expanding 2.4% for the year, down from a 2.6% forecast in September and a 2.8% estimate in August. They believe troubles in the housing sector will likely spill over into consumer spending and business investment.
Google has bought Finnish startup Jaiku, which makes a mobile phone application people can use to send short messages about where they are and what they're doing.
The Indian rupee rose to a new nine and half-year high Wednesday. The rupee rose to 39.32 per U.S. dollar in early trade, its strongest level since March 1998.
Nouriel Roubini: "With consumption being 72%, with residential investment still falling at a 15-20% rate in Q3 and with capex spending by the corporate sector being flat in Q3 (after two months of falling durable goods orders) and the credit crunch in financial markets still serious in spire of a modest and tentative mending of the liquidity crunch, the most likely outlook for the US economy is still one of a hard landing." With the Dow and the S&P at record levels (not taking into account inflation and the falling dollar, I would suggest hedging your equity positions to guard against the thin air.
Sam Zell predicted the residential housing market would begin stabilizing next year but the economy would tumble into a recession in 2009.
"When you get house prices flattening out, you begin to get pressures on consumption," Greenspan said.
Bank of England Governor Mervyn King suggested he's reluctant to cut interest rates to shield lenders from increased credit costs and predicted more ``turmoil'' in financial markets.
UTStarcom Inc., the biggest supplier of wireless-telephone systems in China, said it plans to cut 700 jobs, or 11 percent of its workforce.
The eighth straight downwardly revised forecast from the National Association of Realtors calls for U.S. existing home sales to be 10.8 percent lower than last year as housing market struggles persist. Last month, the association predicted an 8.6 percent drop from a year ago.
Both water quality and the availability of water could be threatened by sharply increasing crops such as corn, said Jerald L. Schnoor, professor of environmental engineering and co-director of the Center for Global and Regional Environmental Research at the University of Iowa.
A stated goal is to increase biofuel production about six times, to 35 billion gallons by 2017, Schnoor said.
"That would mean a lot more fertilizers and pesticides" running into rivers and flowing into the oceans, he said in a telephone interview.
Saudi Aramco plans to increase oil exports to China by at least 9 percent this year to meet rising demand from refiners in the world's fastest-growing major economy, said two company officials. Shipments to China may climb to more than 26 million metric tons of crude this year, according to the officials from Saudi Aramco.
Third-quarter earnings of S&P 500 companies have "a good chance" of turning negative for the first time in five years on Thursday, after factoring in Wednesday's profit warnings from a slew of energy stocks, Thomson Financial said.
Boeing said the deliveries for the 787 have been delayed six months. In my view, company officials have not been forthright about the delivery time of this plane. For months I have discussed the problem with getting fasteners for the plane and the shortages involved. Now the company should discuss the cost of the penalties for the delay. I would not consider remaining a shareholder in this company.
American Eagle Outfitters Inc. said late Wednesday September same-store sales fell 2% because of lower store traffic, and cut its outlook for the third quarter.
PetSmart Inc. has downgraded forecasts for third-quarter sales and earnings per share and fiscal-year earnings per share due to an uncertain economic environment. The specialty pet retailer now expects comparable store sales growth to be below its original low-to-mid single digit forecast for the third quarter and earnings per share in a range of 17 cents to 20 cents a share. Analysts had been forecasting earnings per share in a range of 21 cents to 23 cents in the quarter. For fiscal 2007, the firm is expecting to post earnings per share in a range of $2.02 to $2.07, down from a prior forecast of $2.08 to $2.10 a share. "We're clearly operating in an uncertain economic environment, and we believe recent consumer weakness may be impacting our business.
Excluding an 8-cent charge to increase deferred-membership revenue liability and reduce membership-fee revenue, the latest net for Costco was 91 cents a share. Shares outstanding shrank 5.4% to 448.7 million. Net sales increased 3% to $20.09 billion from $19.5 billion. Same-store sales rose 5%, reflecting rises of 4% in the U.S. and 9% overseas. A survey of analysts by Thomson Financial produced consensus estimates of 83 cents of profit on $20.73 billion of sales.
Stock buybacks are having a greater impact on EPS increase comparisons. We've seen this with Alcoa and now Costco. This will be true of many companies going forward. It's been so with IBM for years.
Confectionery and beverage company Cadbury Schweppes said that, due to a difficult debt market, it has decided to demerge its Americas beverages operation rather that selling the division and list it on the New York Stock Exchange. According to the WSJ, the company held some merger discussions with Hershey.
International Paper lowered its third-quarter land-sales earnings outlook to about $100 million, from its previous expectation for land-sales earnings between $110 million and $140 million.
SABMiller and Molson Coors plan to combine their U.S. operations.
According to the WSJ, Wall Street banks such as Citigroup Inc., Credit Suisse Group and J.P. Morgan Chase & Co. are holding some $400 billion in debt they had promised as financing for purchases private-equity firms had in the works globally. Unless the pace of sales quickens in the coming weeks, banks could be stuck holding these hundreds of billions of dollars of loans for months to come -- a big risk if the economy slows and corporate profits weaken.
Ten-year notes yield about 2.31 percentage points more than similar-maturity Treasury inflation-protected securities, representing the pace of inflation traders expect over the life of the debt. The difference was 2.19 percentage points Sept. 10.
About 1 in 5 Americans in working families can't afford basic needs, and many are scraping to get by on insufficient income and government aid, policy researchers conclude in a report released by the Center for Economic and Policy Research and the Center for Social Policy at the University of Massachusetts.
"We no longer live in a world where having a job means you're automatically able to make ends meet," said Heather Boushey, co-author of the report. "Our work-support policies need to be updated to support the millions of families with earners in bad jobs."
Home starts fell almost 30 percent in the Dallas-Fort Worth area during the third quarter. And sales of new houses were off 20 percent from the same period of 2006, according to statistics released Tuesday by housing analyst Metrostudy Inc.
Alvin Toffler: “Future shock [is] the shattering stress and disorientation that we induce in individuals by subjecting them to too much change in too short a time.”
Ron Paul: "With our country's finances stretched thin, our credit limit fast approaching, and our currency inflated to the breaking point, there is no indication yet of any urgency on the part of Congress to rein in spending. The predictable answer to the government's voracious spending habits is this week’s proposal by some Democratic Congressional leaders for tax increases to pay for operations in Iraq . Here at home, however, there are promises our seniors heavily rely upon. We must keep these promises...Official reports show the trust fund having assets of $2.1 trillion. In reality, those dollars are just IOUs the government is writing to itself when it borrows from the fund to spend on unrelated programs. There are no real assets in the Social Security Trust Fund. This is similar to taking money out of your savings account, spending it, then replacing it with an IOU to yourself, and calling that IOU an asset. In addition, this money we owe to our seniors is not even included in official budget deficit figures. In fiscal year 2006 alone, $185 billion was borrowed from Social Security. The official deficit was reported to be $248 billion. The actual deficit for 2006 would be $433 billion when combining the two. This sort of accounting would land private sector executives in prison for fraud."
Due to lower refining margins, Chevron Corp. said third-quarter net income was “significantly below” the record $5.4 billion the company earned in the April-June period.
Valero Energy Corp., the nation's largest independent oil refiner, said it expects to report third-quarter earnings far short of Wall Street estimates because of tighter refining margins. Earnings from continuing operations, excluding special items, are now expected to be $1.30 to $1.40 per share.Analysts polled by Thomson Financial had been expecting earnings of $1.91 per share, on average.
President Vladimir Putin said that there was no “objective data” showing that Iran is developing nuclear weapons. Iranian negotiators said they will answer questions about their country's uranium enrichment work raised by United Nations nuclear inspectors.
Monsanto sees FY 2008 EPS $2.20 to $2.40. On Tuesday the stock closed at $89+, up from the low 60's just 2 months ago. The air is mighty thin at these valuations.
Blue Chip Economic Indicators newsletter stated economists surveyed now see the economy expanding 2.4% for the year, down from a 2.6% forecast in September and a 2.8% estimate in August. They believe troubles in the housing sector will likely spill over into consumer spending and business investment.
Google has bought Finnish startup Jaiku, which makes a mobile phone application people can use to send short messages about where they are and what they're doing.
The Indian rupee rose to a new nine and half-year high Wednesday. The rupee rose to 39.32 per U.S. dollar in early trade, its strongest level since March 1998.
Nouriel Roubini: "With consumption being 72%, with residential investment still falling at a 15-20% rate in Q3 and with capex spending by the corporate sector being flat in Q3 (after two months of falling durable goods orders) and the credit crunch in financial markets still serious in spire of a modest and tentative mending of the liquidity crunch, the most likely outlook for the US economy is still one of a hard landing." With the Dow and the S&P at record levels (not taking into account inflation and the falling dollar, I would suggest hedging your equity positions to guard against the thin air.
Sam Zell predicted the residential housing market would begin stabilizing next year but the economy would tumble into a recession in 2009.
"When you get house prices flattening out, you begin to get pressures on consumption," Greenspan said.
Bank of England Governor Mervyn King suggested he's reluctant to cut interest rates to shield lenders from increased credit costs and predicted more ``turmoil'' in financial markets.
UTStarcom Inc., the biggest supplier of wireless-telephone systems in China, said it plans to cut 700 jobs, or 11 percent of its workforce.
The eighth straight downwardly revised forecast from the National Association of Realtors calls for U.S. existing home sales to be 10.8 percent lower than last year as housing market struggles persist. Last month, the association predicted an 8.6 percent drop from a year ago.
Both water quality and the availability of water could be threatened by sharply increasing crops such as corn, said Jerald L. Schnoor, professor of environmental engineering and co-director of the Center for Global and Regional Environmental Research at the University of Iowa.
A stated goal is to increase biofuel production about six times, to 35 billion gallons by 2017, Schnoor said.
"That would mean a lot more fertilizers and pesticides" running into rivers and flowing into the oceans, he said in a telephone interview.
Saudi Aramco plans to increase oil exports to China by at least 9 percent this year to meet rising demand from refiners in the world's fastest-growing major economy, said two company officials. Shipments to China may climb to more than 26 million metric tons of crude this year, according to the officials from Saudi Aramco.
Third-quarter earnings of S&P 500 companies have "a good chance" of turning negative for the first time in five years on Thursday, after factoring in Wednesday's profit warnings from a slew of energy stocks, Thomson Financial said.
Boeing said the deliveries for the 787 have been delayed six months. In my view, company officials have not been forthright about the delivery time of this plane. For months I have discussed the problem with getting fasteners for the plane and the shortages involved. Now the company should discuss the cost of the penalties for the delay. I would not consider remaining a shareholder in this company.
American Eagle Outfitters Inc. said late Wednesday September same-store sales fell 2% because of lower store traffic, and cut its outlook for the third quarter.
Tuesday, October 09, 2007
Going Forward
10/10/07 Going Foward
U.S. retailers will likely report weaker than expected September same-store sales because of abnormally warm weather and concerns over the health of the economy, the International Council of Shopping Centers said. Sales for the month will increase only about 2%, below ICSC's previous estimate of as much as 2.5%. Comparable-store sales in the week ended Oct. 6 rose 2.1%, the slowest pace since mid-June, ICSC and UBS Securities said. That warm weather has continued over the last several days in many areas of the country.
The slump in oceangoing imports unloaded at the 10 largest U.S. container ports in August was the first drop since Global Insight began its monthly Port Tracker report in 2005. The number stunned some port watchers.
"When I first saw these numbers, I called the researchers and asked them if they had left a column out of the spreadsheet. I thought it was a typo," said Craig Shearman, vice president of the National Retail Federation, which pays Global Insight to conduct the trade research.
SLM Corp. sued to force a group that proposed to buy out the company to close the deal. SLM said late on Monday that it filed the suit in Delaware Chancery Court against the group, which includes the New York private-equity firm J.C. Flowers, J.P. Morgan and Bank of America. An investor group led by J.C. Flowers & Co. said the reduced buyout proposal it made to SLM Corp. last week expired without negotiations.
M&A Law Professor Blog: "SLM does not deny that an MAE occurred in its complaint and] still has not disclosed the numbers necessary to make this calculation. They have only stated that it would have a disproportional impact compared to the disclosure in the 10-K. Thus, the jury is still out about whether an MAE has indeed occurred, though, the way the parties are acting it looks that way -- i.e., if SLM did not have an MAE it would disclose the numbers...and the settlement increasingly appears to be a lump sum payment on a risk-adjusted basis of the $900 million rather than a completed deal. As usual, I'm rooting for a Delaware opinion to further fill out the Delaware law on what constitutes a MAC."
Richard Daughty: "Silver is selling at the lowest ratio to gold, or anything else you can name, in 4,000 years of history. It should be selling - at a minimum - for $40! Right now! Can this trend continue?"
The IMF will cut its forecast for US economic growth next year to 1.9% from the 2.8% growth it predicted in April. The IMF may also cut its forecast for growth in the UK to 2.3% from 2.7% predicted in April.
China’s inflation may reach as high as 7% in September or October, citing Li Huiyong, an analyst at Shenyin & Wangguo Securities.
Niklas Zennstrom, co-founder of Internet telecoms group Skype, said on Tuesday he agreed the original valuation put on the company by purchaser EBay was too high. "We had to chart the trajectory of growth and how fast that would run, (but) we found out that was a bit front-loaded," Zennstrom told the annual ETRE technology conference in Hungary. "We overshot in terms of monetization," he said.
Six month bill rates continue to exceed 2 and 3 yr note rates.
Officials of Southern California's major water wholesaler say deliveries to the region's agricultural customers will be cut by nearly a third next year and residents are likely to face rate hikes in 2009 because of a statewide shortage. Utilities that serve residential customers and are supplied by the Metropolitan Water District of Southern California can expect price hikes between 5 percent and 10 percent in 2009, district spokesman Bob Muir said Monday. The rate increases would be needed to pay for additional water supplies from other sellers in the state and further investment in the water grid, he said.
Kimberly-Clark Corp. plans to raise prices on some of its products in the U.S. during the first quarter, citing "significant inflationary pressure from higher raw material and energy costs." As of Feb. 3, prices will be 4% to 7% higher on Cottonelle and Scott bathroom tissue, Viva and Scott paper towels, Huggies diapers, Pull-Ups training pants, Goodnites youth pants and Huggies Little Swimmers swimpants.
The EIA cut its global fourth-quarter oil demand growth projection to 2.1% from 2.4%. For 2008, the EIA cuts its demand projection by 140,000 barrels a day from a month ago, to 1.4% growth, but said tight market conditions will likely persist.
Thornburg Mortgage Inc. increased its estimated third-quarter losses on sales of mortgages by $236 million to about $1.1 billion.
According to Bloomberg, Ellington Management Group LLC, the Old Greenwich, Connecticut-based hedge-fund firm that focuses on mortgage securities, suspended client redemptions from two funds because it's too hard to value their assets.
Chrysler LLC intends to lay off an additional 1,500 people from its workforce beyond the 2,000 people the car company committed to letting go earlier this year, according to The Wall Street Journal citing people familiar with the plan.
U.K. Chancellor sees economic growth at 2% to 2.5% in 2008.
OPEC's members, including Saudi Arabia, Kuwait and Venezuela, bought a net $13.6 billion of Treasuries this year through July, the most recent period for which data are available, according to the U.S. government. They have purchased $45.6 billion more than they have sold since the end of 2005, or 29 percent of the $155.6 billion increase overall. About $4.5 trillion in marketable Treasuries are outstanding.
Oil will continue to be priced in dollars for now, said Qatar's energy minister, Kuwait's state-owned news agency reported. Changing the pricing of oil away from the dollar ``is not that easy,'' said Abdullah bin Hamad Al Attiyah, who is also Qatar's deputy prime minister.
The U.S. dollar fell 1.9% against a trade-weighted basket of 15 currencies in September compared with August, the Atlanta Fed reported Tuesday. It's was the largest monthly decline since May 2006. The average value of the dollar for all of September was down 5.1% compared with September 2006.
"Recent events suggest that housing will remain weak for several more quarters," said William Poole, president of the St. Louis Federal Reserve Bank, and a voting member of the Federal Open Market Committee this year. "Stabilization may not begin until well into 2008."
The financial markets, which were struck in August by a crisis of confidence in securities backed by mortgages and other uncertain assets, "appear to be stabilizing, but they have not returned to normal and are still fragile."
The Fed doesn't want to "bail out bad investments," and couldn't if it wanted to, Poole said. "We do have the responsibility to do what we can to maintain normal financial market processes."
Analysts at Lehman Brothers on Tuesday said they expect Countrywide Financial Corp. will book a $740 million third-quarter write-down on some loans held for sale, and lowered their quarterly estimate to a loss of 95 cents a share.
According to prices in the Chicago Board of Trade's federal funds futures market, the implied odds of an October rate cut fell from 48% to 38% on Tuesday. The market still expects the Fed to cut its target to 4.50% in December.
In a monthly report, the Energy Department's Energy Information Administration estimated that global demand for oil will be 1.8 million barrels a day higher in the fourth quarter than it was during the same period last year. The report follows a prediction Thursday from the U.S. National Oceanic and Atmospheric Administration that temperatures in the U.S. will be 1.3 percent colder than last year, although they'll be 2.8 percent warmer than average.
Alcoa, Inc.'s net income for the third quarter rose to $555 million, or 63 cents a share, from $537 million, or 61 cents a share, in the year-ago quarter. Earnings excluding discontinued operations rose to 64 cents from 62 cents a share. The New York-based aluminum producer said sales slipped to $7.4 billion from $7.6 billion. Analysts polled by Thomson Financial had forecast earnings of 65 cents a share on sales of $7.4 billion. The company already bought back 5% of its shares this year and this positively impacted the EPS. In addition, Alcoa plans to buy back up to 25% of its outstanding shares, up from earlier plans to buy back 10% of its stock.
U.S. retailers will likely report weaker than expected September same-store sales because of abnormally warm weather and concerns over the health of the economy, the International Council of Shopping Centers said. Sales for the month will increase only about 2%, below ICSC's previous estimate of as much as 2.5%. Comparable-store sales in the week ended Oct. 6 rose 2.1%, the slowest pace since mid-June, ICSC and UBS Securities said. That warm weather has continued over the last several days in many areas of the country.
The slump in oceangoing imports unloaded at the 10 largest U.S. container ports in August was the first drop since Global Insight began its monthly Port Tracker report in 2005. The number stunned some port watchers.
"When I first saw these numbers, I called the researchers and asked them if they had left a column out of the spreadsheet. I thought it was a typo," said Craig Shearman, vice president of the National Retail Federation, which pays Global Insight to conduct the trade research.
SLM Corp. sued to force a group that proposed to buy out the company to close the deal. SLM said late on Monday that it filed the suit in Delaware Chancery Court against the group, which includes the New York private-equity firm J.C. Flowers, J.P. Morgan and Bank of America. An investor group led by J.C. Flowers & Co. said the reduced buyout proposal it made to SLM Corp. last week expired without negotiations.
M&A Law Professor Blog: "SLM does not deny that an MAE occurred in its complaint and] still has not disclosed the numbers necessary to make this calculation. They have only stated that it would have a disproportional impact compared to the disclosure in the 10-K. Thus, the jury is still out about whether an MAE has indeed occurred, though, the way the parties are acting it looks that way -- i.e., if SLM did not have an MAE it would disclose the numbers...and the settlement increasingly appears to be a lump sum payment on a risk-adjusted basis of the $900 million rather than a completed deal. As usual, I'm rooting for a Delaware opinion to further fill out the Delaware law on what constitutes a MAC."
Richard Daughty: "Silver is selling at the lowest ratio to gold, or anything else you can name, in 4,000 years of history. It should be selling - at a minimum - for $40! Right now! Can this trend continue?"
The IMF will cut its forecast for US economic growth next year to 1.9% from the 2.8% growth it predicted in April. The IMF may also cut its forecast for growth in the UK to 2.3% from 2.7% predicted in April.
China’s inflation may reach as high as 7% in September or October, citing Li Huiyong, an analyst at Shenyin & Wangguo Securities.
Niklas Zennstrom, co-founder of Internet telecoms group Skype, said on Tuesday he agreed the original valuation put on the company by purchaser EBay was too high. "We had to chart the trajectory of growth and how fast that would run, (but) we found out that was a bit front-loaded," Zennstrom told the annual ETRE technology conference in Hungary. "We overshot in terms of monetization," he said.
Six month bill rates continue to exceed 2 and 3 yr note rates.
Officials of Southern California's major water wholesaler say deliveries to the region's agricultural customers will be cut by nearly a third next year and residents are likely to face rate hikes in 2009 because of a statewide shortage. Utilities that serve residential customers and are supplied by the Metropolitan Water District of Southern California can expect price hikes between 5 percent and 10 percent in 2009, district spokesman Bob Muir said Monday. The rate increases would be needed to pay for additional water supplies from other sellers in the state and further investment in the water grid, he said.
Kimberly-Clark Corp. plans to raise prices on some of its products in the U.S. during the first quarter, citing "significant inflationary pressure from higher raw material and energy costs." As of Feb. 3, prices will be 4% to 7% higher on Cottonelle and Scott bathroom tissue, Viva and Scott paper towels, Huggies diapers, Pull-Ups training pants, Goodnites youth pants and Huggies Little Swimmers swimpants.
The EIA cut its global fourth-quarter oil demand growth projection to 2.1% from 2.4%. For 2008, the EIA cuts its demand projection by 140,000 barrels a day from a month ago, to 1.4% growth, but said tight market conditions will likely persist.
Thornburg Mortgage Inc. increased its estimated third-quarter losses on sales of mortgages by $236 million to about $1.1 billion.
According to Bloomberg, Ellington Management Group LLC, the Old Greenwich, Connecticut-based hedge-fund firm that focuses on mortgage securities, suspended client redemptions from two funds because it's too hard to value their assets.
Chrysler LLC intends to lay off an additional 1,500 people from its workforce beyond the 2,000 people the car company committed to letting go earlier this year, according to The Wall Street Journal citing people familiar with the plan.
U.K. Chancellor sees economic growth at 2% to 2.5% in 2008.
OPEC's members, including Saudi Arabia, Kuwait and Venezuela, bought a net $13.6 billion of Treasuries this year through July, the most recent period for which data are available, according to the U.S. government. They have purchased $45.6 billion more than they have sold since the end of 2005, or 29 percent of the $155.6 billion increase overall. About $4.5 trillion in marketable Treasuries are outstanding.
Oil will continue to be priced in dollars for now, said Qatar's energy minister, Kuwait's state-owned news agency reported. Changing the pricing of oil away from the dollar ``is not that easy,'' said Abdullah bin Hamad Al Attiyah, who is also Qatar's deputy prime minister.
The U.S. dollar fell 1.9% against a trade-weighted basket of 15 currencies in September compared with August, the Atlanta Fed reported Tuesday. It's was the largest monthly decline since May 2006. The average value of the dollar for all of September was down 5.1% compared with September 2006.
"Recent events suggest that housing will remain weak for several more quarters," said William Poole, president of the St. Louis Federal Reserve Bank, and a voting member of the Federal Open Market Committee this year. "Stabilization may not begin until well into 2008."
The financial markets, which were struck in August by a crisis of confidence in securities backed by mortgages and other uncertain assets, "appear to be stabilizing, but they have not returned to normal and are still fragile."
The Fed doesn't want to "bail out bad investments," and couldn't if it wanted to, Poole said. "We do have the responsibility to do what we can to maintain normal financial market processes."
Analysts at Lehman Brothers on Tuesday said they expect Countrywide Financial Corp. will book a $740 million third-quarter write-down on some loans held for sale, and lowered their quarterly estimate to a loss of 95 cents a share.
According to prices in the Chicago Board of Trade's federal funds futures market, the implied odds of an October rate cut fell from 48% to 38% on Tuesday. The market still expects the Fed to cut its target to 4.50% in December.
In a monthly report, the Energy Department's Energy Information Administration estimated that global demand for oil will be 1.8 million barrels a day higher in the fourth quarter than it was during the same period last year. The report follows a prediction Thursday from the U.S. National Oceanic and Atmospheric Administration that temperatures in the U.S. will be 1.3 percent colder than last year, although they'll be 2.8 percent warmer than average.
Alcoa, Inc.'s net income for the third quarter rose to $555 million, or 63 cents a share, from $537 million, or 61 cents a share, in the year-ago quarter. Earnings excluding discontinued operations rose to 64 cents from 62 cents a share. The New York-based aluminum producer said sales slipped to $7.4 billion from $7.6 billion. Analysts polled by Thomson Financial had forecast earnings of 65 cents a share on sales of $7.4 billion. The company already bought back 5% of its shares this year and this positively impacted the EPS. In addition, Alcoa plans to buy back up to 25% of its outstanding shares, up from earlier plans to buy back 10% of its stock.
Monday, October 08, 2007
Rollovers
10/9/07 Rollovers
John Hussman: "As expected, the Fed entered $28 billion of repurchases on Thursday to roll over existing repos that were due on that day. The Fed did not “add” or “inject” reserves to the banking system, nor has any amount of overall reserves been added in recent weeks. There have been no “permanent” open market operations, and “temporary” ones have been pure rollovers of existing repos. Aside from $3 billion that banks briefly borrowed from the Fed a few weeks ago, the Fed has not “added liquidity” through the discount window either. The total amount borrowed by the banking system through the discount window fell to just $202 million last week. Meanwhile, the total reserves of the banking system remain about $45 billion, nearly all of which represents temporary repurchase agreements that are continuously rolled over as they become due...Roughly $30 billion of repos will roll over this Thursday; $24 billion of 7 day repos from last week, and another $6 billion in 14 day repos from the week before.The reason all of this is worth noting is because investors are putting so much false hope on the notion that the Fed is “injecting” all sorts of “liquidity” into the markets. Analysts discuss this as fact, when they evidently have not even looked at the facts. They literally make things up and present their claims as truth...But the Fed does not provide meaningful amounts of ongoing liquidity to the $6.3 trillion banking system (the quantity of loans has literally zero relationship with the small, stable pool of bank reserves, which has been falling since the early 1990's). Nor does the Fed control the $13.8 trillion U.S. economy. Foreign purchases of U.S. Treasuries outweigh the Fed's actions many, many times over...The stock market has advanced in recent weeks on very dull volume and relatively tepid breadth. This type of action is typically associated with short-squeezes and a backing-off of sellers, without robust underlying demand. If you look at the tepid price-volume behavior, the lack of breadth in the recent rally, and the growing divergences between the major indices and other market internals, it is not clear that buyers are particularly eager."
United Industrial Corp. definitively agreed to be acquired for $81 a share, or $1.1 billion, by Textron Inc.
SAP AG's agreed to acquire Business Objects SA of France for €4.8 billion ($6.78 billion) marks. The boards of the two companies agreed to the deal Sunday. SAP said it plans to launch an all-cash offer of €42 ($59) a share for Business Objects, a 20% premium over Friday's €35 closing price in Paris.The Financial Times opined it is possible a competing bid could emerge.
China brought in 110.4 million tons of crude oil while exporting exported 2.18 million tons, according to a Sunday report from official news agency Xinhua, citing data from the General Administration of Customs (GAC).
Meanwhile, domestic output of crude hit 124.7 million tons in the same period, up 1.3%. Refined oil imports hit 24.28 million tons, exceeding exports by 14 million tons. China produced 39.9 million tons of gasoline, up 8.8%, 7.68 million tons of kerosene, up 17.5% and 81.5 million tons of diesel oil, a 6.3% rise, Xinhau said.
A CIBC report notes that China consumes more than double its daily production of 3.5 million barrels, while other fast-growing Asian nations like India, Malaysia and Thailand are also boosting petroleum use.
Iraqi President Jalal Talabani endorsed a plan to divide Iraq along ethnic lines into three separate regions under a limited central government.
According to the Financial Times, JPMorgan Chase and Bank of America are expected to reveal losses of about $3bn on holdings of mortgage securities and leveraged loans when they report third-quarter results this month. This would take to more than $20bn the total writedowns announced by the world’s leading banks as a result of the credit market turmoil over the summer. JPMorgan is likely to unveil mark-to-market losses on leveraged loans of about $1.4bn, in line with those reported by Citigroup last week, according to Howard Mason, analyst at Sanford Bernstein. He estimates it will suffer a further $700m of writedowns on mortgages and mortgage-backed securities, for a total of $2.1bn. For Bank of America, he estimates leveraged loan losses will be $700m and the mortgage writedowns $300m. Merrill Lynch last week said it had suffered $5bn losses. UBS said it had $3.7bn of writedowns, Deutsche Bank $3.1bn and Citigroup $2.7bn.
The price of gasoline at the pump fell four cents in the past two weeks to an average $2.75 a gallon, Trilby Lundberg said, citing her survey of 7,000 filling stations nationwide. "There is no down trend coming that I can see," Lundberg said. "I am expecting a rise, not further declines, because the gasoline market is tight."
When they came home from Iraq, 2,600 members of the Minnesota National Guard had been deployed longer than any other ground combat unit. The tour lasted 22 months and had been extended as part of President Bush's surge. 1st Lt. Jon Anderson said he never expected to come home to this: A government refusing to pay education benefits he says he should have earned under the GI bill.m"It's pretty much a slap in the face," Anderson said. "I think it was a scheme to save money, personally. I think it was a leadership failure by the senior Washington leadership... once again failing the soldiers."
Anderson's orders, and the orders of 1,161 other Minnesota guard members, were written for 729 days. Had they been written for 730 days, just one day more, the soldiers would receive those benefits to pay for school.
"Which would be allowing the soldiers an extra $500 to $800 a month," Anderson said. That money would help him pay for his master's degree in public administration. It would help Anderson's fellow platoon leader, John Hobot, pay for a degree in law enforcement. "I would assume, and I would hope, that when I get back from a deployment of 22 months, my senior leadership in Washington, the leadership that extended us in the first place, would take care of us once we got home," Hobot said.
Both Hobot and Anderson believe the Pentagon deliberately wrote orders for 729 days instead of 730. Now, six of Minnesota's members of the House of Representatives have asked the Secretary of the Army to look into it -- So have Senators Amy Klobuchar and Norm Coleman.
Ryder System Inc. lowered its third-quarter earnings guidance to a range of $1.12 to $1.14 a share from $1.20 to $1.23 a share, citing soft demand for its commercial rentals, as well as lower pricing and higher carrying costs associated with used vehicles. "Economic conditions have softened considerably in more industries beyond those related to housing and construction," Ryder said in a news release. The company added it expects softer economic conditions to continue through the fourth quarter, and lowered its full-year forecast to a range of $4.10 to $4.15 a share from $4.30 to $4.35 a share.
According to industry analyst firm The Yankee Group, virtualization deployments among SMBs -- companies with less than 100 servers or fewer than 1,000 employees -- is expected to double during the next two years.
Crude oil for November delivery fell $2.20, or 2.7 percent, to settle at $79.02 a barrel.
John Hussman: "As expected, the Fed entered $28 billion of repurchases on Thursday to roll over existing repos that were due on that day. The Fed did not “add” or “inject” reserves to the banking system, nor has any amount of overall reserves been added in recent weeks. There have been no “permanent” open market operations, and “temporary” ones have been pure rollovers of existing repos. Aside from $3 billion that banks briefly borrowed from the Fed a few weeks ago, the Fed has not “added liquidity” through the discount window either. The total amount borrowed by the banking system through the discount window fell to just $202 million last week. Meanwhile, the total reserves of the banking system remain about $45 billion, nearly all of which represents temporary repurchase agreements that are continuously rolled over as they become due...Roughly $30 billion of repos will roll over this Thursday; $24 billion of 7 day repos from last week, and another $6 billion in 14 day repos from the week before.The reason all of this is worth noting is because investors are putting so much false hope on the notion that the Fed is “injecting” all sorts of “liquidity” into the markets. Analysts discuss this as fact, when they evidently have not even looked at the facts. They literally make things up and present their claims as truth...But the Fed does not provide meaningful amounts of ongoing liquidity to the $6.3 trillion banking system (the quantity of loans has literally zero relationship with the small, stable pool of bank reserves, which has been falling since the early 1990's). Nor does the Fed control the $13.8 trillion U.S. economy. Foreign purchases of U.S. Treasuries outweigh the Fed's actions many, many times over...The stock market has advanced in recent weeks on very dull volume and relatively tepid breadth. This type of action is typically associated with short-squeezes and a backing-off of sellers, without robust underlying demand. If you look at the tepid price-volume behavior, the lack of breadth in the recent rally, and the growing divergences between the major indices and other market internals, it is not clear that buyers are particularly eager."
United Industrial Corp. definitively agreed to be acquired for $81 a share, or $1.1 billion, by Textron Inc.
SAP AG's agreed to acquire Business Objects SA of France for €4.8 billion ($6.78 billion) marks. The boards of the two companies agreed to the deal Sunday. SAP said it plans to launch an all-cash offer of €42 ($59) a share for Business Objects, a 20% premium over Friday's €35 closing price in Paris.The Financial Times opined it is possible a competing bid could emerge.
China brought in 110.4 million tons of crude oil while exporting exported 2.18 million tons, according to a Sunday report from official news agency Xinhua, citing data from the General Administration of Customs (GAC).
Meanwhile, domestic output of crude hit 124.7 million tons in the same period, up 1.3%. Refined oil imports hit 24.28 million tons, exceeding exports by 14 million tons. China produced 39.9 million tons of gasoline, up 8.8%, 7.68 million tons of kerosene, up 17.5% and 81.5 million tons of diesel oil, a 6.3% rise, Xinhau said.
A CIBC report notes that China consumes more than double its daily production of 3.5 million barrels, while other fast-growing Asian nations like India, Malaysia and Thailand are also boosting petroleum use.
Iraqi President Jalal Talabani endorsed a plan to divide Iraq along ethnic lines into three separate regions under a limited central government.
According to the Financial Times, JPMorgan Chase and Bank of America are expected to reveal losses of about $3bn on holdings of mortgage securities and leveraged loans when they report third-quarter results this month. This would take to more than $20bn the total writedowns announced by the world’s leading banks as a result of the credit market turmoil over the summer. JPMorgan is likely to unveil mark-to-market losses on leveraged loans of about $1.4bn, in line with those reported by Citigroup last week, according to Howard Mason, analyst at Sanford Bernstein. He estimates it will suffer a further $700m of writedowns on mortgages and mortgage-backed securities, for a total of $2.1bn. For Bank of America, he estimates leveraged loan losses will be $700m and the mortgage writedowns $300m. Merrill Lynch last week said it had suffered $5bn losses. UBS said it had $3.7bn of writedowns, Deutsche Bank $3.1bn and Citigroup $2.7bn.
The price of gasoline at the pump fell four cents in the past two weeks to an average $2.75 a gallon, Trilby Lundberg said, citing her survey of 7,000 filling stations nationwide. "There is no down trend coming that I can see," Lundberg said. "I am expecting a rise, not further declines, because the gasoline market is tight."
When they came home from Iraq, 2,600 members of the Minnesota National Guard had been deployed longer than any other ground combat unit. The tour lasted 22 months and had been extended as part of President Bush's surge. 1st Lt. Jon Anderson said he never expected to come home to this: A government refusing to pay education benefits he says he should have earned under the GI bill.m"It's pretty much a slap in the face," Anderson said. "I think it was a scheme to save money, personally. I think it was a leadership failure by the senior Washington leadership... once again failing the soldiers."
Anderson's orders, and the orders of 1,161 other Minnesota guard members, were written for 729 days. Had they been written for 730 days, just one day more, the soldiers would receive those benefits to pay for school.
"Which would be allowing the soldiers an extra $500 to $800 a month," Anderson said. That money would help him pay for his master's degree in public administration. It would help Anderson's fellow platoon leader, John Hobot, pay for a degree in law enforcement. "I would assume, and I would hope, that when I get back from a deployment of 22 months, my senior leadership in Washington, the leadership that extended us in the first place, would take care of us once we got home," Hobot said.
Both Hobot and Anderson believe the Pentagon deliberately wrote orders for 729 days instead of 730. Now, six of Minnesota's members of the House of Representatives have asked the Secretary of the Army to look into it -- So have Senators Amy Klobuchar and Norm Coleman.
Ryder System Inc. lowered its third-quarter earnings guidance to a range of $1.12 to $1.14 a share from $1.20 to $1.23 a share, citing soft demand for its commercial rentals, as well as lower pricing and higher carrying costs associated with used vehicles. "Economic conditions have softened considerably in more industries beyond those related to housing and construction," Ryder said in a news release. The company added it expects softer economic conditions to continue through the fourth quarter, and lowered its full-year forecast to a range of $4.10 to $4.15 a share from $4.30 to $4.35 a share.
According to industry analyst firm The Yankee Group, virtualization deployments among SMBs -- companies with less than 100 servers or fewer than 1,000 employees -- is expected to double during the next two years.
Crude oil for November delivery fell $2.20, or 2.7 percent, to settle at $79.02 a barrel.
Sunday, October 07, 2007
This Week
10/8/07 This Week
Mike Burk: "The market is overbought...It is likely the market is at or near a short term top...The coming week during the 3rd year of the Presidential cycle has been up slightly less than half of the time and the returns, on average, have been modestly negative. Over all years the averages have been up slightly more than half of the time and the returns, on average, have been modestly positive...As of Friday's close everything is in place to indicate a market cycle high. If this scenario is correct there could be another move to modestly higher highs before a decline into a cycle low begins...I expect the major indices to be lower on Friday October 12 than they were on Friday October 5."
Joseph Russo: "Breaching 15-year lows, The Dollar resides in the hyperinflationary danger zone below the 80-level. Should 80 mark a permanent ceiling, the dollar is on its way to 40, heading inevitably toward its intrinsic value of $0.00. Not surprisingly, The Dow is a near mirror image of the dollar. Whether or not this reflection will remain consistent in the aftermath of extreme dollar devaluations is questionable. For now, "letting the dollar go" is still perceived as bullish."
David Yu: "One thing I hoped to see in Friday's rally was money flow indicating that trouble with the financial sector was over. Unfortunately, the intraday money flow - the difference between buy and sell dollar value - of the Financials dropped a whopping $187 million, or 85%, from noon hour to the closing. Friday's closing figure was also 41% below Thursday's. This counter rally flow indicates the concern over financial sector's credit trouble may not be over yet. Money might've started rotating out of the sector. While it's great to see the S&P 500 Index (SPX) set new record, it's discouraging, and perhaps alarming, to see the financial sector's money flow disparity. Basic Materials intraday money flow also declined 11% or $8 million. But money flow is not the only discontent. Friday's trading volume also indicates inadequate support from the market participants. Even though the SPX had set new record, the total trading volume was relatively light with just 2.29 billion shares changed hands...On Friday, the big board's TRIN Index fell off the cliff to 0.53, and the Nasdaq TRIN dropped to 0.63. The Nasdaq's New High-New Low Index rose to a 4-month high of 173 (noncumulative). While we don't know whether we're going to see a re-run of July's correction, we know these are some of the signs showing that the market might've been overstretched or overbought. Another good technical indicator of an overbought market is the RSI. My RSI Overbought-Oversold Index had just crossed below the uptrend trendline on 10/3/2007. And, as much as the price had advanced on Friday, my scan of the overbought-declining RSI and the oversold-improving RSI had resulted in a 5-5 tie. This keeps my RSI index below the trendline. And it continues to pose as a threat to reversing the uptrend."
Kevin Capp: "Recently, Southwest Gas Corporation delivered a report to the Nevada Public Utilities Commission warning of long-term supply problems in the face of a 4 percent increase in sales per year in Southern Nevada. The report also noted there was no conservation program on line to address it."Heinberg says this isn't unique to Nevada - it's a national catastrophe in the making. 'We're facing a natural gas train wreck. We're basically drilling all the time, and we're getting less in return. That means you got to drill more and more wells. Yet the amount that's being produced is stagnant and really declining.'"
Mike Burk: "The market is overbought...It is likely the market is at or near a short term top...The coming week during the 3rd year of the Presidential cycle has been up slightly less than half of the time and the returns, on average, have been modestly negative. Over all years the averages have been up slightly more than half of the time and the returns, on average, have been modestly positive...As of Friday's close everything is in place to indicate a market cycle high. If this scenario is correct there could be another move to modestly higher highs before a decline into a cycle low begins...I expect the major indices to be lower on Friday October 12 than they were on Friday October 5."
Joseph Russo: "Breaching 15-year lows, The Dollar resides in the hyperinflationary danger zone below the 80-level. Should 80 mark a permanent ceiling, the dollar is on its way to 40, heading inevitably toward its intrinsic value of $0.00. Not surprisingly, The Dow is a near mirror image of the dollar. Whether or not this reflection will remain consistent in the aftermath of extreme dollar devaluations is questionable. For now, "letting the dollar go" is still perceived as bullish."
David Yu: "One thing I hoped to see in Friday's rally was money flow indicating that trouble with the financial sector was over. Unfortunately, the intraday money flow - the difference between buy and sell dollar value - of the Financials dropped a whopping $187 million, or 85%, from noon hour to the closing. Friday's closing figure was also 41% below Thursday's. This counter rally flow indicates the concern over financial sector's credit trouble may not be over yet. Money might've started rotating out of the sector. While it's great to see the S&P 500 Index (SPX) set new record, it's discouraging, and perhaps alarming, to see the financial sector's money flow disparity. Basic Materials intraday money flow also declined 11% or $8 million. But money flow is not the only discontent. Friday's trading volume also indicates inadequate support from the market participants. Even though the SPX had set new record, the total trading volume was relatively light with just 2.29 billion shares changed hands...On Friday, the big board's TRIN Index fell off the cliff to 0.53, and the Nasdaq TRIN dropped to 0.63. The Nasdaq's New High-New Low Index rose to a 4-month high of 173 (noncumulative). While we don't know whether we're going to see a re-run of July's correction, we know these are some of the signs showing that the market might've been overstretched or overbought. Another good technical indicator of an overbought market is the RSI. My RSI Overbought-Oversold Index had just crossed below the uptrend trendline on 10/3/2007. And, as much as the price had advanced on Friday, my scan of the overbought-declining RSI and the oversold-improving RSI had resulted in a 5-5 tie. This keeps my RSI index below the trendline. And it continues to pose as a threat to reversing the uptrend."
Kevin Capp: "Recently, Southwest Gas Corporation delivered a report to the Nevada Public Utilities Commission warning of long-term supply problems in the face of a 4 percent increase in sales per year in Southern Nevada. The report also noted there was no conservation program on line to address it."Heinberg says this isn't unique to Nevada - it's a national catastrophe in the making. 'We're facing a natural gas train wreck. We're basically drilling all the time, and we're getting less in return. That means you got to drill more and more wells. Yet the amount that's being produced is stagnant and really declining.'"
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