10/28/07 Alibaba
Alibaba.com Ltd., one of China's fastest-growing technology companies, reached its goal of raising $1.5 billion in its initial public offering Saturday, people close to the deal said. Alibaba, an e-commerce portal, sold 858.9 million shares, or a 17 percent stake, at roughly $1.75 each, a source told Dow Jones Newswires on condition of anonymity.The shares will debut on the Hong Kong stock market on Nov. 6. The IPO price translates to a multiple of 55 times its forecast 2008 earnings. Alibaba -- whose Web sites allow companies in China and overseas to trade with one another online -- is one of China's fastest growing Internet companies. It has seen its registered members soar from 6 million in 2004 to 24.6 million in 2007. Paying members increased from 77,000 in 2004 to 255,000 by June 2007. Yahoo! Inc., which holds a 39 percent stake in Alibaba's parent, Alibaba Group, had agreed to subscribe to about $100 million worth of shares.
About 1 1/2 months ago I mentioned considering Yahoo for purchase at $23 and noted Yahoo was the way to play the upcoming Alibaba IPO. Compared to Google, VMware, Apple, RIMM, and others it looks like Yahoo is a slow mover; however, the rise to $33 isn't too bad.
Bertrand Russell: “The biggest cause of trouble in the world today is that the stupid people are so sure about things and the intelligent folks are so full of doubts."
According to the WSJ, "Barry Diller and John Malone are having relationship issues. The two media moguls have made a fortune together. But lately, Mr. Diller's IAC/InterActiveCorp. hasn't been looking good. And Mr. Malone, who owns a majority voting stake, is talking as if the union is heading for the rocks."
Barry Diller has made his investors good returns. Malone would, in my view, make a mistake to interfere.
Richard Benson: "Derivatives are by design extraordinarily leveraged, so small changes in the financial markets can affect their value in a big way. A sizable wave in the financial markets can easily be magnified and turned into a tsunami of market losses. With the current level of credit derivatives all sitting off-balance sheet (and unnoticed like the SIV's recently were), unsuspecting investors could wake up to discover more alarming losses amounting to a few trillion dollars that were neither anticipated nor welcome. Finally, the financial institutions that have exposure to on-balance sheet credit risk are the Who's Who of major hedge funds, major banks, and Wall Street investment banks. Guess who the major counterparties are in the derivatives market? Why, they’re the same major players! So, while Bear Stearns has become the poster boy for all that's wrong with subprime mortgages, don't worry. Other firms like JP Morgan Chase, Morgan Stanley, Citibank, Merrill Lynch, and even Goldman Sachs, may have their pictures posted alongside Bear Stearns’ in the “Hall of Shame” when corporate credits turn down. Crumbling credit combined with deadly leverage can prove fatal to portfolios invested in financial stocks."
It's hard to believe that Total Money Market Fund Assets have risen to almost $3 trillion.
Downgrades on CDOs are just around the corner. They will cover tens of billions of this type of paper. The bounce in financials will prove, in my view, a dead cat bounce. The fallout hasn't even begun to be seen. All eyes are on the Fed. Rate decreases will not save the day. The Fed will ease but in the past week the spread on CMBSs rose a point.
Doug Noland: "It is worth noting that MBIA and Ambac combine for about $1.9 Trillion of “net debt service outstanding” – the amount of debt securities and Credit instruments they have guaranteed, at least in part, to make scheduled payments in the event of default. Throw in the Trillions of Credit insurance written by the mortgage guarantors and you’re talking real “money.” Importantly, the marketplace is beginning to question the long-term viability of the Credit insurance industry, placing many Trillions of dollars of debt securities in potential market limbo...Subprime and the SIVs are peanuts these days in comparison to the gigantic global CDO and Credit derivatives markets. CDOs may lack transparency, trade infrequently, and operate outside of market pricing (“mark-to-model”). Nonetheless, CDO exposure now permeates the entire global financial system – exposure that regrettably mushroomed in the midst of the most reckless end-of-cycle mortgage excesses imaginable. Rumors this week had major insurance companies suffering huge CDO losses. To what extent the big insurance “conglomerates” have exposure to CDOs and other Credit derivatives is unclear today, but there is no doubt that the global leveraged speculating community is knee deep in the stuff. Importantly, as goes the U.S. mortgage market, so goes the CDOs. I’m not optimistic...Returning to the vulnerable CDO market, some key dynamics are in play. With California now at the brink, uncertain but huge losses are in the pipeline for jumbo, “alt-A,” and “option-ARM” mortgages – loans that were for the most part thought sound only weeks ago. The market began to revalue the top-rated CDO tranches this week, a process that should only accelerate. “AAA” is not going to mean much. If things unfold as I expect, a full-fledged run from California mortgage exposure could be in the offing. And as the dimensions of this debacle come into clearer market view, the viability of the Credit insurers will be cast further in doubt – with ramifications for Trillions of securities and derivatives. General Credit Availability would suffer mightily."
Bloomberg's Matthew Brown reports “Iraq wants to diversify out of dollars to preserve the value of its foreign exchange reserves after the U.S. currency fell, the head of the central bank said. ‘We would like to diversify, definitely,’ Sinan al-Shabibi, governor of the Central Bank of Iraq, said in an interview in Washington. ‘This is a prudent policy.’ And you thought those in the Iraq government were buffoons.
The Goldman Sachs Commodities Index has only increased 33.4% y-t-d. Of course inflation is muted, says the Fed. I wonder whether the 11.5% growth in M3 money supply has anything to do with inflation and the collapse of the dollar.
Those long the dollar should also be long Charmin.
Mexico’s central bank raised its benchmark interest rate by a quarter percentage point to 7.50 percent.
Doug Noland: "The nightmare scenario - where the market abruptly comes to recognize that the leveraged speculating is hopelessly stuck in illiquid CDO, ABS, MBS, derivative and equities positions - doesn’t seem all that outrageous or distant this week. Unfortunately, today’s Ponzi-style acute fragility (as was demonstrated this summer in subprime, asset-backed CP, SIVs and the like) and speculative dynamics dictate that he who panics first panics best. I don’t expect the sophisticated players to hang around and wait for securities to be properly priced and the full extent of illiquidity and the unfolding Credit debacle to be recognized. And while Bubbling markets do delay the inevitable reversal of speculative flows from the leveraged speculating community, they only compound the risk of an inevitable ravaging run from illiquidity. We’ll see to what extent the Fed is willing to spur increasingly destabilizing global stock market speculation and dollar liquidation in false hope that lower rates can somehow mitigate Structured Finance Under Duress."
Peter Schiff : "So while most regard the Fed as the primary inflation fighter, in reality it is the sole inflation creator."
Footnoted.org: "Meritage Homes announced that its revenues from home closings were down 34% from third quarter 2006, with breathtaking declines of 65% in Nevada, 58% in Arizona, and 50% in California. And in a pessimistic-sounding move, the company took substantial write-offs of goodwill based on its expectation that “the downturn of the housing market will be deeper and longer than previously anticipated.” Nevertheless, Meritage threw in this cheery quote from Chairman and CEO Steven Hilton, exclamation point and all: “For those considering a home purchase as a long-term investment, and eager to enjoy the many benefits of home ownership, we hope they conclude that now is a great time to buy a home!” Thanks, Steve, but I think I’m going to pass."
Banks foreclosed on 3,242 Bay Area homes in the third quarter -- a 622% increase over last year.
The trade group Mortgage Bankers Association projects a 31 percent decline in mortgage origination volume between 2006 and 2008.
Terry Pratchett: “The trouble with having an open mind, of course, is that people will insist on coming along and trying to put things in it."
Saturday, October 27, 2007
Thursday, October 25, 2007
The Rejection
10/26/07 The Rejection
Cablevision's shareholders rejected the Dolan's family $10.6 billion offer to take the company private. I guess they forgot about bulls, bears, and pigs.
Terra Industries Inc.'s third-quarter earnings more than quadrupled to $54.4 million, or 51 cents a share, from $10.3 million, or 10 cents a share in the year-ago period. The Sioux City, Iowa, maker of agriculture nitrogen products said revenues in the recent quarter rose to $593.7 million from $464.8 million last year. Looking ahead, Terra projected robust nitrogen demand as farmers plant more acres of corn and wheat.
Agriculture and fertilizer company Bunge Ltd.'s third-quarter net profit more than doubled to $351 million, or $2.70 a share, from $169 million, or $1.40 a share, a year earlier. Net sales rose 82% to $12.68 billion. Analysts had forecast earnings of $1.77 a share on revenue of $9.47 billion. Bunge said its agriculture business improved across the board and its fertilizer unit continued to perform strongly. The company said it expects good market fundamentals to continue into 2008 and raised its profit guidance for 2007 by $60 million to a range of $690 million to $710 million.
Fertilizer company Potash Corp.'s third-quarter net profit rose 67% to $243.1 million, or 75 cents a share, from $145.2 million, or 46 cents a share, a year earlier. Sales for the period rose 36% to $1.3 billion. Analysts polled by Thomson Financial were expecting earnings of 82 cents a share on revenue of $1.15 billion. "We are now benefiting from rapidly growing economies in the developing world which increases the demand for crops used in food, animal feed, fiber and fuel," the group said. Potash also held to its prior guidance for 2007 earnings of $3.00 to $3.25 a share.
Black and Decker's "earnings per share declined from the prior year level, due in large part to commodity inflation," said Chief Executive Nolan Archibald in a statement.
Warren Buffett said South Korean stocks offer better value than other world markets and cautioned the U.S. dollar will continue to weaken against other currencies, according to media reports. He expects the problems in the U.S. subprime mortgage market to weigh on U.S. consumers for up to two years, but added the economy will eventually rebound.
Motorola's sales declined 17% to $8.8 billion. Motorola said it shipped 37.2 million handsets in the quarter. Sales in the mobile device segment fell 36% to $4.5 billion. Motorola estimated its market share in the quarter at 13%. The company said it sees fourth-quarter earnings from continuing operations in a range of 12 cents to 14 cents a share, excluding charges related to the restructuring.
Travelers' lifted its 2007 operating income guidance to a range of $6.52 to $6.62 a share compared to an earlier forecast of between $5.80 and $6.05 a share.
Honda expects full-year net profit of 640 billion yen, up from an earlier estimate of 625 billion yen. The car maker left its estimate of group operating income unchanged at 880 billion yen and cut its net revenue estimate to 12.3 trillion yen from 12.35 trillion yen earlier.
Pulte Homes' net new home orders for the third quarter fell sharply to 4,582 units from 7,299 units while the company's backlog as of Sept. 30 was valued at $4.09 billion, compared with a backlog of $5.81 billion at the end of September last year. Pulte expects fourth-quarter profit at break-even to 10 cents a share but declined to provide a forecast beyond the immediate quarter due to "difficult market conditions that persist."
Home builder Ryland Group Inc. continued to lose money in the third quarter as the weak housing market reduced demand for its homes and the value of its inventory.The company said that new home orders in the third quarter fell 20.9% from a year earlier and that the dollar value of the new orders declined 27%.
Bank of America is cutting roughly 3,000 jobs and launching a strategic review of its investment banking business after recent poor performance from the unit.
Aetna raised its full-year forecast for operating earnings per share to $3.48, against its previous outlook of $3.40 to $3.42. It projected 2008 operating earnings of $4 per share.
In the Bay Area - which, by the California Association of Realtors' measure is made up of Alameda, Contra Costa, Marin, San Francisco, Santa Clara, San Mateo and Solano counties - sales of existing, stand-alone homes plunged 45.6 percent between September 2006 and September 2007, while the median sales price slid 5 percent to $702,240. September's median was a whopping 17.7 percent below May's peak of $853,910.
German business confidence dropped to a 20-month low in October.
Lehman Bros. now expects the Federal Reserve to cut its overnight lending rate by a full percentage to 3.75% by the middle of 2008, including a rate cut next week.
Robert Prechter: "All the fancy credit and investment structures in place today, and the spread of investment fever to the broad population, are consistent with a time of extreme optimism. Therefore they are consistent with pre-crash conditions...When the Fed engages in a large volume of repos, it helps banks on the margin avoid immediate disaster. But in doing so, it also delays the inevitable price adjustments and gives bankers a false sense of security, thus encouraging them to create more and more unsound loans. In the end, all this manipulation merely increases both the likelihood of a crash and the size of the decline. But you have to realize that the Fed and the banks could not get away with such activities in the absence of optimism. Society in recent years has had a voracious appetite for credit, and the Fed is merely helping the banking system provide it...the probability of a major bear market is unquestionably the highest in history. Just to give you some perspective: At the 1987 high, the Dow’s dividend yield had been below that of 1929 for three months; it’s now been below it for 13 years. At the peak in 1987, there had been only 3 readings at or above 90 percent bulls among stock traders on the Daily Sentiment Index; in recent months there have been 51 such readings. Today’s price-to-book value ratio for the Dow is three times as high as it was in 1987 and 1929. And these are tops. Forget about comparing today’s values to market bottoms. So yeah, I would say there’s risk of a crash, too...With optimism at a record in both duration and extent, with an unprecedented breadth of public participation, with record leverage in the investment markets, with a grotesquely bloated debt structure, and with cracks appearing in the credit markets beginning with sub-prime mortgages, I think the storm cellar is a good place to camp for awhile. Put your money in the safest cash equivalents you can find, ideally outside the banking system, and hibernate. When stocks and property become bargains again, you can venture back into the markets. But investing at today’s valuations is not prudent."
The Cato Report courtesy of Daily Reckoning:
"Discretionary spending soared in Bush's first term by 48%, not adjusted for inflation, more than twice as much as Bill Clinton spent (21.6%) in two terms.
"Defense spending under Bush has grown an average of 5.7% a year, compared to LBJ's of 4.9% (adjusted for inflation).
"Homeland security spending also has soared, to about $31 billion last year, triple the pre-9/11 number
"Education spending is up, adjusted for inflation, 18% annually since 2001.
"The 2002 farm bill caused agri-spending to double from 1990s levels."
New orders for manufactured durable goods in September decreased $3.8 billion or 1.7 percent to $214.5 billion, the U.S. Census Bureau announced today. This was the second consecutive monthly decrease and followed a 5.3 percent August decrease. Excluding transportation, new orders increased 0.3 percent. Excluding defense, new orders increased 0.7 percent. Shipments Shipments of manufactured durable goods in September, down three of the last four months, decreased $4.4 billion or 2.0 percent to $211.6 billion. This followed a 1.9 percent August decrease.
BEA Systems Inc. would be willing to negotiate a takeover agreement with a prospective buyer - including Oracle Corp. - at a price of $21 a share.
Ensco International: "Looking ahead to the fourth quarter of 2007, we currently expect a decline in our quarterly earnings...due to the continuing softness in the U.S. Gulf of Mexico jackup market and mobilization downtime on several of our international jackups prior to commencement of new contracts," the company said.
The number of initial claims in the week ending October 20 fell 8,000 to 331,000. The four-week average of initial claims rose 7,750 to 324,750. This is the highest level since the week ended September 1. Meanwhile, the number of Americans receiving state jobless benefits rose 7,000 to 2.53 million in the week ending October 13. The four-week moving average of continuing claims fell 3,750 to 2.53 million, the lowest since June 23.
Tribune Chairman and Chief Executive Officer Dennis FitzSimons said the company still expects to close its $8.2 billion transaction to go private in the the current fourth quarter, following receipt of certain regulatory approvals.
The recently announced six-month delay in the 787 Dreamliner program could cost Boeing close to $1 billion in added expenses, a leading Wall Street analyst said Wednesday.
Another government revision: Sales of new homes rebounded in September from summer sales levels that were much weaker than previously reported, the Commerce Department reported Thursday. Sales increased 4.8% to a seasonally adjusted annual rate of 770,000 from a revised 735,000 in August. Previously, August's sales had been reported at a 795,000 pace. September's sales were slightly higher than the 758,000 pace expected by economists. The three previous months were revised sharply lower, which means the housing market was much weaker in the middle of the year than previous believed. Sales of new homes are down 23.3% in the past year.
The Oil Drum: "Peak exports simply means that oil-producing countries are using more and more oil at home – leaving less to sell abroad. Moreover, sentiment is starting to develop in many nations that they must save some oil for future generations, not just sell it to the foreign devils as quickly as possible. This clearly means that major oil importers will face a shortfall in their ability to obtain oil many months or years sooner than they had been anticipating. The fall in the amount of oil available for purchase is likely to drop much more quickly than declines in production. When world oil exports fall, if they have not started doing so already, effects are likely to sharp and painful."
The outstanding level of asset-backed commercial paper fell for the 11th straight week, the Federal Reserve reported Thursday. Asset-backed paper dropped by $4.6 billion, or 0.5%, to $884 billion.
Natural gas supplies rose by 68 billion cubic feet to 3,443 billion cubic feet in the week ending Oct. 19, the Energy Department reported.
Two million subprime-mortgage foreclosures are on the horizon by 2009 if home prices continue their downward spiral, a congressional report said Thursday. A report by the Joint Economic Committee also estimated that $71 billion in housing wealth will be destroyed and states will lose $917 million in property tax revenue.
Robert McHugh: "We essentially got a fourth Hindenburg Omen observation Wednesday, October 24th, as the lower of NYSE New Highs and New Lows was 2.15 percent of total issues traded, which rounds up to 2.20 percent. It really is splitting hairs at this point, since we already have a confirmed Hindenburg Omen on the clock, suggesting we are in a high risk period for a significant decline. Today's near hit reinforces the key issue with the Hindenburg Omen, that being we sit in a very unhealthy market right now, and it hasn't gotten any better with this week's countertrend rally."
China's copper imports and its alloys jumped 93 percent to 1.2 million metric tons in the nine months ended Sept. 30 from a year earlier, the Beijing-based customs office said today. Copper, used in pipes and wires, has gained more than fourfold since 2003 as demand surged in China, the world's fastest- growing major economy.
Dec. crude ends up $3.36 at $90.46 a barrel on Nymex, and that's an all-time high close. Natural gas rose 22 cents to end the day at $7.19.
Microsoft reported a net profit of $4.29 billion, or 45 cents per diluted share, up from $3.48 billion, or 35 cents per diluted share, a year earlier. Revenue rose 27 percent to $13.76 billion in the three months ended September 30. Analysts, on average, had forecast 39 cents per share in profit.
Microsoft raised full-year earnings estimates to a range of $1.78 to $1.81 per share from a previous range of $1.69 to $1.73. It also raised its full-year revenue estimate range by almost $2 billion, to $58.8 billion to $59.7 billion.
U.S. banks had $3 million in outstanding loans from the Federal Reserve's discount window on Wednesday, down from $10 million the previous Wednesday, the Fed reported Thursday. For the week ending on Wednesday, outstanding loans averaged $142 million per day, up from $126 million the week before.
Gold futures for December delivery rose $5.40, or 0.7 percent, to $771 an ounce on the Comex division of the New York Mercantile Exchange, and have risen 21% this year. Silver futures for December delivery rose 31.5 cents, or 2.3 percent, to $13.905 an ounce. The metal is up 7.5 percent this year.
Native American Proverb: “A Native American grandfather talking to his young grandson tells the boy he has two wolves inside of him struggling with each other. The first is the wolf of peace, love and kindness. The other wolf is fear, greed and hatred. "Which wolf will win, grandfather?" asks the young boy. "Whichever one I feed," is the reply.”
Cablevision's shareholders rejected the Dolan's family $10.6 billion offer to take the company private. I guess they forgot about bulls, bears, and pigs.
Terra Industries Inc.'s third-quarter earnings more than quadrupled to $54.4 million, or 51 cents a share, from $10.3 million, or 10 cents a share in the year-ago period. The Sioux City, Iowa, maker of agriculture nitrogen products said revenues in the recent quarter rose to $593.7 million from $464.8 million last year. Looking ahead, Terra projected robust nitrogen demand as farmers plant more acres of corn and wheat.
Agriculture and fertilizer company Bunge Ltd.'s third-quarter net profit more than doubled to $351 million, or $2.70 a share, from $169 million, or $1.40 a share, a year earlier. Net sales rose 82% to $12.68 billion. Analysts had forecast earnings of $1.77 a share on revenue of $9.47 billion. Bunge said its agriculture business improved across the board and its fertilizer unit continued to perform strongly. The company said it expects good market fundamentals to continue into 2008 and raised its profit guidance for 2007 by $60 million to a range of $690 million to $710 million.
Fertilizer company Potash Corp.'s third-quarter net profit rose 67% to $243.1 million, or 75 cents a share, from $145.2 million, or 46 cents a share, a year earlier. Sales for the period rose 36% to $1.3 billion. Analysts polled by Thomson Financial were expecting earnings of 82 cents a share on revenue of $1.15 billion. "We are now benefiting from rapidly growing economies in the developing world which increases the demand for crops used in food, animal feed, fiber and fuel," the group said. Potash also held to its prior guidance for 2007 earnings of $3.00 to $3.25 a share.
Black and Decker's "earnings per share declined from the prior year level, due in large part to commodity inflation," said Chief Executive Nolan Archibald in a statement.
Warren Buffett said South Korean stocks offer better value than other world markets and cautioned the U.S. dollar will continue to weaken against other currencies, according to media reports. He expects the problems in the U.S. subprime mortgage market to weigh on U.S. consumers for up to two years, but added the economy will eventually rebound.
Motorola's sales declined 17% to $8.8 billion. Motorola said it shipped 37.2 million handsets in the quarter. Sales in the mobile device segment fell 36% to $4.5 billion. Motorola estimated its market share in the quarter at 13%. The company said it sees fourth-quarter earnings from continuing operations in a range of 12 cents to 14 cents a share, excluding charges related to the restructuring.
Travelers' lifted its 2007 operating income guidance to a range of $6.52 to $6.62 a share compared to an earlier forecast of between $5.80 and $6.05 a share.
Honda expects full-year net profit of 640 billion yen, up from an earlier estimate of 625 billion yen. The car maker left its estimate of group operating income unchanged at 880 billion yen and cut its net revenue estimate to 12.3 trillion yen from 12.35 trillion yen earlier.
Pulte Homes' net new home orders for the third quarter fell sharply to 4,582 units from 7,299 units while the company's backlog as of Sept. 30 was valued at $4.09 billion, compared with a backlog of $5.81 billion at the end of September last year. Pulte expects fourth-quarter profit at break-even to 10 cents a share but declined to provide a forecast beyond the immediate quarter due to "difficult market conditions that persist."
Home builder Ryland Group Inc. continued to lose money in the third quarter as the weak housing market reduced demand for its homes and the value of its inventory.The company said that new home orders in the third quarter fell 20.9% from a year earlier and that the dollar value of the new orders declined 27%.
Bank of America is cutting roughly 3,000 jobs and launching a strategic review of its investment banking business after recent poor performance from the unit.
Aetna raised its full-year forecast for operating earnings per share to $3.48, against its previous outlook of $3.40 to $3.42. It projected 2008 operating earnings of $4 per share.
In the Bay Area - which, by the California Association of Realtors' measure is made up of Alameda, Contra Costa, Marin, San Francisco, Santa Clara, San Mateo and Solano counties - sales of existing, stand-alone homes plunged 45.6 percent between September 2006 and September 2007, while the median sales price slid 5 percent to $702,240. September's median was a whopping 17.7 percent below May's peak of $853,910.
German business confidence dropped to a 20-month low in October.
Lehman Bros. now expects the Federal Reserve to cut its overnight lending rate by a full percentage to 3.75% by the middle of 2008, including a rate cut next week.
Robert Prechter: "All the fancy credit and investment structures in place today, and the spread of investment fever to the broad population, are consistent with a time of extreme optimism. Therefore they are consistent with pre-crash conditions...When the Fed engages in a large volume of repos, it helps banks on the margin avoid immediate disaster. But in doing so, it also delays the inevitable price adjustments and gives bankers a false sense of security, thus encouraging them to create more and more unsound loans. In the end, all this manipulation merely increases both the likelihood of a crash and the size of the decline. But you have to realize that the Fed and the banks could not get away with such activities in the absence of optimism. Society in recent years has had a voracious appetite for credit, and the Fed is merely helping the banking system provide it...the probability of a major bear market is unquestionably the highest in history. Just to give you some perspective: At the 1987 high, the Dow’s dividend yield had been below that of 1929 for three months; it’s now been below it for 13 years. At the peak in 1987, there had been only 3 readings at or above 90 percent bulls among stock traders on the Daily Sentiment Index; in recent months there have been 51 such readings. Today’s price-to-book value ratio for the Dow is three times as high as it was in 1987 and 1929. And these are tops. Forget about comparing today’s values to market bottoms. So yeah, I would say there’s risk of a crash, too...With optimism at a record in both duration and extent, with an unprecedented breadth of public participation, with record leverage in the investment markets, with a grotesquely bloated debt structure, and with cracks appearing in the credit markets beginning with sub-prime mortgages, I think the storm cellar is a good place to camp for awhile. Put your money in the safest cash equivalents you can find, ideally outside the banking system, and hibernate. When stocks and property become bargains again, you can venture back into the markets. But investing at today’s valuations is not prudent."
The Cato Report courtesy of Daily Reckoning:
"Discretionary spending soared in Bush's first term by 48%, not adjusted for inflation, more than twice as much as Bill Clinton spent (21.6%) in two terms.
"Defense spending under Bush has grown an average of 5.7% a year, compared to LBJ's of 4.9% (adjusted for inflation).
"Homeland security spending also has soared, to about $31 billion last year, triple the pre-9/11 number
"Education spending is up, adjusted for inflation, 18% annually since 2001.
"The 2002 farm bill caused agri-spending to double from 1990s levels."
New orders for manufactured durable goods in September decreased $3.8 billion or 1.7 percent to $214.5 billion, the U.S. Census Bureau announced today. This was the second consecutive monthly decrease and followed a 5.3 percent August decrease. Excluding transportation, new orders increased 0.3 percent. Excluding defense, new orders increased 0.7 percent. Shipments Shipments of manufactured durable goods in September, down three of the last four months, decreased $4.4 billion or 2.0 percent to $211.6 billion. This followed a 1.9 percent August decrease.
BEA Systems Inc. would be willing to negotiate a takeover agreement with a prospective buyer - including Oracle Corp. - at a price of $21 a share.
Ensco International: "Looking ahead to the fourth quarter of 2007, we currently expect a decline in our quarterly earnings...due to the continuing softness in the U.S. Gulf of Mexico jackup market and mobilization downtime on several of our international jackups prior to commencement of new contracts," the company said.
The number of initial claims in the week ending October 20 fell 8,000 to 331,000. The four-week average of initial claims rose 7,750 to 324,750. This is the highest level since the week ended September 1. Meanwhile, the number of Americans receiving state jobless benefits rose 7,000 to 2.53 million in the week ending October 13. The four-week moving average of continuing claims fell 3,750 to 2.53 million, the lowest since June 23.
Tribune Chairman and Chief Executive Officer Dennis FitzSimons said the company still expects to close its $8.2 billion transaction to go private in the the current fourth quarter, following receipt of certain regulatory approvals.
The recently announced six-month delay in the 787 Dreamliner program could cost Boeing close to $1 billion in added expenses, a leading Wall Street analyst said Wednesday.
Another government revision: Sales of new homes rebounded in September from summer sales levels that were much weaker than previously reported, the Commerce Department reported Thursday. Sales increased 4.8% to a seasonally adjusted annual rate of 770,000 from a revised 735,000 in August. Previously, August's sales had been reported at a 795,000 pace. September's sales were slightly higher than the 758,000 pace expected by economists. The three previous months were revised sharply lower, which means the housing market was much weaker in the middle of the year than previous believed. Sales of new homes are down 23.3% in the past year.
The Oil Drum: "Peak exports simply means that oil-producing countries are using more and more oil at home – leaving less to sell abroad. Moreover, sentiment is starting to develop in many nations that they must save some oil for future generations, not just sell it to the foreign devils as quickly as possible. This clearly means that major oil importers will face a shortfall in their ability to obtain oil many months or years sooner than they had been anticipating. The fall in the amount of oil available for purchase is likely to drop much more quickly than declines in production. When world oil exports fall, if they have not started doing so already, effects are likely to sharp and painful."
The outstanding level of asset-backed commercial paper fell for the 11th straight week, the Federal Reserve reported Thursday. Asset-backed paper dropped by $4.6 billion, or 0.5%, to $884 billion.
Natural gas supplies rose by 68 billion cubic feet to 3,443 billion cubic feet in the week ending Oct. 19, the Energy Department reported.
Two million subprime-mortgage foreclosures are on the horizon by 2009 if home prices continue their downward spiral, a congressional report said Thursday. A report by the Joint Economic Committee also estimated that $71 billion in housing wealth will be destroyed and states will lose $917 million in property tax revenue.
Robert McHugh: "We essentially got a fourth Hindenburg Omen observation Wednesday, October 24th, as the lower of NYSE New Highs and New Lows was 2.15 percent of total issues traded, which rounds up to 2.20 percent. It really is splitting hairs at this point, since we already have a confirmed Hindenburg Omen on the clock, suggesting we are in a high risk period for a significant decline. Today's near hit reinforces the key issue with the Hindenburg Omen, that being we sit in a very unhealthy market right now, and it hasn't gotten any better with this week's countertrend rally."
China's copper imports and its alloys jumped 93 percent to 1.2 million metric tons in the nine months ended Sept. 30 from a year earlier, the Beijing-based customs office said today. Copper, used in pipes and wires, has gained more than fourfold since 2003 as demand surged in China, the world's fastest- growing major economy.
Dec. crude ends up $3.36 at $90.46 a barrel on Nymex, and that's an all-time high close. Natural gas rose 22 cents to end the day at $7.19.
Microsoft reported a net profit of $4.29 billion, or 45 cents per diluted share, up from $3.48 billion, or 35 cents per diluted share, a year earlier. Revenue rose 27 percent to $13.76 billion in the three months ended September 30. Analysts, on average, had forecast 39 cents per share in profit.
Microsoft raised full-year earnings estimates to a range of $1.78 to $1.81 per share from a previous range of $1.69 to $1.73. It also raised its full-year revenue estimate range by almost $2 billion, to $58.8 billion to $59.7 billion.
U.S. banks had $3 million in outstanding loans from the Federal Reserve's discount window on Wednesday, down from $10 million the previous Wednesday, the Fed reported Thursday. For the week ending on Wednesday, outstanding loans averaged $142 million per day, up from $126 million the week before.
Gold futures for December delivery rose $5.40, or 0.7 percent, to $771 an ounce on the Comex division of the New York Mercantile Exchange, and have risen 21% this year. Silver futures for December delivery rose 31.5 cents, or 2.3 percent, to $13.905 an ounce. The metal is up 7.5 percent this year.
Native American Proverb: “A Native American grandfather talking to his young grandson tells the boy he has two wolves inside of him struggling with each other. The first is the wolf of peace, love and kindness. The other wolf is fear, greed and hatred. "Which wolf will win, grandfather?" asks the young boy. "Whichever one I feed," is the reply.”
Wednesday, October 24, 2007
The Reversal
10/25/07 The Reversal
Down more than 200 points early on, the Dow Jones Industrial Average finished 1 point lower, at 13,675.3. The S&P 500 shed 3.71 points to 1,515.88, while the Nasdaq Composite lost 24.5 points to 2,774.76. Why the reversal? The rumor that the Fed was about to announce another rate cut and with the rumor there was short covering.
National Oilwell Varco Inc.said third-quarter net income doubled to $366 million, or $1.02 a share from $176.6 million, or 50 cents a share in the year-ago period. Revenue climbed to 45% to $2.58 billion. Backlog for capital equipment orders for the company's Rig Technology unit increased to $8 billion, from $7.2 billion in the previous quarter. New orders during the quarter were a record $1.9 billion. "The company's backlog for capital equipment continued to increase as a result of strong demand for its drilling equipment, particularly for international offshore rigs," the company said.
Allegheny Technologies said third-quarter net income rose 21% to $193.9 million, or $1.88 a share, from $160.2 million, or $1.56 a share in the year-ago period. Revenue rose to $1.34 billion from $1.29 billion. "Our third quarter 2007 results had two divergent story lines," the company said. "Strong demand trends continued in our High Performance Metals segment and for our high-value flat-rolled products. On the other hand, shipments of our standard stainless products were extraordinarily weak."
Nabors Industries Ltd.'s third-quarter net income fell to $218 million, or 76 cents a share, from $292.8 million, or $1.02 a share, a year ago. The results include the sale of the Sea Mar offshore unit, a one-time item that added 8 cents a share to the bottom line. Revenue for the three months ended Sept. 30 slipped to $1.23 billion from $1.26 billion a year ago.
Chubb increased its 2007 operating income forecast to a range of $6.05 to $6.15 a share, from a previous target of $5.70 to $6.10 a share.
Amazon.com saw earnings surge more than 300% for the third quarter, topping expectations. The company reported earnings of $80 million, or 19 cents a share, for the quarter ended Sept. 30 compared to earnings of $19 million, or 5 cents a share, for the same period last year. Revenue grew 41% to $3.26 billion from $2.31 billion last year. Analysts expected the company to report earnings per share of 18 cents on revenue of $3.14 billion, according to consensus forecasts from Thomson Financial.
Research in Motion announced a deal to sell its popular BlackBerry wireless device in China. The company said it has signed an agreement with Alcatel-Lucent to distribute the BalckBerry in China.
For the fourth quarter, Talbots currently anticipates a loss per share in the range of 5 cents to 10 cents, including 9 cents a share of one-time expenses. This range assumes total company fourth quarter same-store sales in the negative mid-single digit range, with Talbots down mid-single digits, and J. Jill flat to slightly up. Based on the current forecast, at the end of the third quarter the company will be out of compliance with its acquisition loan financial covenants.
Home builder Centex Corp.swung to a fiscal second-quarter loss of $643.8 million, or $5.26 a share, from a profit of $137 million, or $1.11 a share, in the year-ago period. Revenue fell to $2.22 billion from $2.82 billion a year ago. Analysts surveyed by Thomson Financial estimated a quarterly loss of $3.26 a share on revenue of $2.08 billion.
Amazon.com saw earnings surge more than 300% for the third quarter, topping expectations. The company reported earnings of $80 million, or 19 cents a share, for the quarter ended Sept. 30 compared to earnings of $19 million, or 5 cents a share, for the same period last year. Revenue grew 41% to $3.26 billion from $2.31 billion last year. Analysts expected the company to report earnings per share of 18 cents on revenue of $3.14 billion, according to consensus forecasts from Thomson Financial.
Research in Motion announced a deal to sell its popular BlackBerry wireless device in China. The company said it has signed an agreement with Alcatel-Lucent to distribute the BalckBerry in China.
Tribune's net income attributable to common shareholders fell 5.8 percent to $152.8 million from $162.2 million a year ago. Net income per share rose 87.7 percent to $1.22 from 65 cents last year because of a lower number of shares outstanding in the most recent quarter. Excluding a gain from a tax benefit and a charge related to job cuts, income was 38 cents a share, compared with the average analyst expectation of 26 cents a share, according to Reuters Estimates. Revenue fell 4.1 percent to $1.28 billion.
Boeing cut its 2008 revenue view because of delivery delays for its 787 Dreamliner.
According to the WSJ, subprime mortgages aren't the only challenge facing Countrywide Financial Corp., the nation's biggest home-mortgage lender. Some loans classified as prime when they were originated are now going bad at a rapid pace. These loans are known as option adjustable-rate mortgages, or option ARMs.
Jim Rogers, chairman of Beeland Interests Inc., said he is shifting all his assets out of the dollar and buying Chinese yuan because the Federal Reserve has eroded the value of the U.S. currency. ``I'm in the process of -- I hope in the next few months -- getting all of my assets out of U.S. dollars,'' said Rogers, 65, who correctly predicted the commodities rally in 1999. ``I'm that pessimistic about what's happening in the U.S.''
The U.S. housing market's steep falloff continues to take a heavy toll on USG Corp., the Chicago building-products maker which on Tuesday reported a punishing 95 percent drop in third-quarter earnings. "Conditions in the housing market have deteriorated further as the inventory of unsold homes continues to build and the availability of mortgage financing has tightened," said Chairman and Chief Executive Officer William C. Foote, adding that the residential repair and remodeling sector is softening as well. "We do not expect a quick rebound in the housing market," Foote said, noting that market conditions suggest the housing sector "will remain weak for the balance of 2007 and at least through 2008."
The Big Picture: " The well regarded Jeremy Grantham -- the "G" in GMO -- points out in his quarterly letter to shareholders that home prices are trading several standard deviations above their "fair value." Grantham notes that the 2000 tech bubble was statistically a 3-standard deviation, 100-year event. As his nearby chart shows, House prices are also at 3 standard deviations from their intrinsic values. In order to return to more appropriate levels, prices need to drop 25% -- or just stay flat for 5 years."
Amazon's profit outlook for the holiday season "was a little bit below our expectations," said Colin Sebastian, who follows the company for Lazard Capital Markets in San Francisco. "The stock, at $100, is almost priced at perfection, and any material change in expectations is going to have an impact." After rising to $100 on Tuesday, the stock reversed and plummeted to $88.
ConocoPhillips said its Q3 net income fell from a year ago, to $3,673 million ($2.23/share), from $3,876 million ($2.31/share) in 2006. Revenue fell $2 billion to $46.1 billion. Earnings exceeded analyst estimates of $2.19/share.
Brad Setser: "6% of Bear Stearns a day. That is basically what the US has to sell to China to finance its current account deficit right now.
Not 6% of Bear ($1 billion) every business day. 6% of Bear every single day of the year. Financing the deficit requires selling more like 10% of Bear ($1.5 to $2b) every business day."
Sales of existing homes and condos fell 8% in September to the lowest level in at least eight years. Sales of existing homes and condos fell to a seasonally adjusted annual rate of 5.04 million, the lowest since 1999, when the real estate group began tracking combined single-family and condo sales. Inventories of unsold homes and condos rose to a 10.5-month supply, the largest in at least eight years. For single-family homes alone, sales fell 8.6% in September to a seasonally adjusted annual rate of 4.38 million, the lowest sales pace since January 1998.
The Houston Chronicle is cutting about 5 percent of its work force through layoffs.
The Energy Department reported a 5.3 million barrel drop in crude supplies for the week ending Oct. 19. Total motor gasoline inventories decreased by 2 million barrels in the latest week, while distillate supplies fell by 1.8 million barrels. Meanwhile, the API said crude supplies dropped by 6.3 million barrels.
Dec. gold ends up $2.50 at $765.60 an ounce on Nymex.
MICROSOFT TAKES $240 MILLION STAKE IN FACEBOOK, VALUING SERVICE AT $15 BILLION. That's a big valuation on 48 million Facebook users.
Amgen affirmed its forecast of $4.13 to $4.23 in adjusted 2007 earnings.
VMware Inc. reported a third-quarter profit of $65 million, or 18 cents a share, on revenue of $358 million, and this compares with the year ago period when it earned $19.2 million, or 6 cents a share, on $189 million in sales. Excluding charges and one-time expenses, VMware would have earned $85 million, or 23 cents a share. VMware topped the estimates of analysts surveyed by Thomson Financial, who forecast a profit of 17 cents a share on $334 million in revenue.
Crude oil for December delivery surged $1.83 to end at $87.10 a barrel on the New York Mercantile Exchange. Other energy futures also posted strong gains. November reformulated gasoline surged 3.86 cents at $2.1475 a gallon and November heating oil gained 4.22 cents at $2.3420 a gallon. November natural gas rallied 21.10 cents, or 3%, at $6.972 per million British thermal units.
Will Rogers: “Rumor travels faster, but it don't stay put as long as truth.”
Down more than 200 points early on, the Dow Jones Industrial Average finished 1 point lower, at 13,675.3. The S&P 500 shed 3.71 points to 1,515.88, while the Nasdaq Composite lost 24.5 points to 2,774.76. Why the reversal? The rumor that the Fed was about to announce another rate cut and with the rumor there was short covering.
National Oilwell Varco Inc.said third-quarter net income doubled to $366 million, or $1.02 a share from $176.6 million, or 50 cents a share in the year-ago period. Revenue climbed to 45% to $2.58 billion. Backlog for capital equipment orders for the company's Rig Technology unit increased to $8 billion, from $7.2 billion in the previous quarter. New orders during the quarter were a record $1.9 billion. "The company's backlog for capital equipment continued to increase as a result of strong demand for its drilling equipment, particularly for international offshore rigs," the company said.
Allegheny Technologies said third-quarter net income rose 21% to $193.9 million, or $1.88 a share, from $160.2 million, or $1.56 a share in the year-ago period. Revenue rose to $1.34 billion from $1.29 billion. "Our third quarter 2007 results had two divergent story lines," the company said. "Strong demand trends continued in our High Performance Metals segment and for our high-value flat-rolled products. On the other hand, shipments of our standard stainless products were extraordinarily weak."
Nabors Industries Ltd.'s third-quarter net income fell to $218 million, or 76 cents a share, from $292.8 million, or $1.02 a share, a year ago. The results include the sale of the Sea Mar offshore unit, a one-time item that added 8 cents a share to the bottom line. Revenue for the three months ended Sept. 30 slipped to $1.23 billion from $1.26 billion a year ago.
Chubb increased its 2007 operating income forecast to a range of $6.05 to $6.15 a share, from a previous target of $5.70 to $6.10 a share.
Amazon.com saw earnings surge more than 300% for the third quarter, topping expectations. The company reported earnings of $80 million, or 19 cents a share, for the quarter ended Sept. 30 compared to earnings of $19 million, or 5 cents a share, for the same period last year. Revenue grew 41% to $3.26 billion from $2.31 billion last year. Analysts expected the company to report earnings per share of 18 cents on revenue of $3.14 billion, according to consensus forecasts from Thomson Financial.
Research in Motion announced a deal to sell its popular BlackBerry wireless device in China. The company said it has signed an agreement with Alcatel-Lucent to distribute the BalckBerry in China.
For the fourth quarter, Talbots currently anticipates a loss per share in the range of 5 cents to 10 cents, including 9 cents a share of one-time expenses. This range assumes total company fourth quarter same-store sales in the negative mid-single digit range, with Talbots down mid-single digits, and J. Jill flat to slightly up. Based on the current forecast, at the end of the third quarter the company will be out of compliance with its acquisition loan financial covenants.
Home builder Centex Corp.swung to a fiscal second-quarter loss of $643.8 million, or $5.26 a share, from a profit of $137 million, or $1.11 a share, in the year-ago period. Revenue fell to $2.22 billion from $2.82 billion a year ago. Analysts surveyed by Thomson Financial estimated a quarterly loss of $3.26 a share on revenue of $2.08 billion.
Amazon.com saw earnings surge more than 300% for the third quarter, topping expectations. The company reported earnings of $80 million, or 19 cents a share, for the quarter ended Sept. 30 compared to earnings of $19 million, or 5 cents a share, for the same period last year. Revenue grew 41% to $3.26 billion from $2.31 billion last year. Analysts expected the company to report earnings per share of 18 cents on revenue of $3.14 billion, according to consensus forecasts from Thomson Financial.
Research in Motion announced a deal to sell its popular BlackBerry wireless device in China. The company said it has signed an agreement with Alcatel-Lucent to distribute the BalckBerry in China.
Tribune's net income attributable to common shareholders fell 5.8 percent to $152.8 million from $162.2 million a year ago. Net income per share rose 87.7 percent to $1.22 from 65 cents last year because of a lower number of shares outstanding in the most recent quarter. Excluding a gain from a tax benefit and a charge related to job cuts, income was 38 cents a share, compared with the average analyst expectation of 26 cents a share, according to Reuters Estimates. Revenue fell 4.1 percent to $1.28 billion.
Boeing cut its 2008 revenue view because of delivery delays for its 787 Dreamliner.
According to the WSJ, subprime mortgages aren't the only challenge facing Countrywide Financial Corp., the nation's biggest home-mortgage lender. Some loans classified as prime when they were originated are now going bad at a rapid pace. These loans are known as option adjustable-rate mortgages, or option ARMs.
Jim Rogers, chairman of Beeland Interests Inc., said he is shifting all his assets out of the dollar and buying Chinese yuan because the Federal Reserve has eroded the value of the U.S. currency. ``I'm in the process of -- I hope in the next few months -- getting all of my assets out of U.S. dollars,'' said Rogers, 65, who correctly predicted the commodities rally in 1999. ``I'm that pessimistic about what's happening in the U.S.''
The U.S. housing market's steep falloff continues to take a heavy toll on USG Corp., the Chicago building-products maker which on Tuesday reported a punishing 95 percent drop in third-quarter earnings. "Conditions in the housing market have deteriorated further as the inventory of unsold homes continues to build and the availability of mortgage financing has tightened," said Chairman and Chief Executive Officer William C. Foote, adding that the residential repair and remodeling sector is softening as well. "We do not expect a quick rebound in the housing market," Foote said, noting that market conditions suggest the housing sector "will remain weak for the balance of 2007 and at least through 2008."
The Big Picture: " The well regarded Jeremy Grantham -- the "G" in GMO -- points out in his quarterly letter to shareholders that home prices are trading several standard deviations above their "fair value." Grantham notes that the 2000 tech bubble was statistically a 3-standard deviation, 100-year event. As his nearby chart shows, House prices are also at 3 standard deviations from their intrinsic values. In order to return to more appropriate levels, prices need to drop 25% -- or just stay flat for 5 years."
Amazon's profit outlook for the holiday season "was a little bit below our expectations," said Colin Sebastian, who follows the company for Lazard Capital Markets in San Francisco. "The stock, at $100, is almost priced at perfection, and any material change in expectations is going to have an impact." After rising to $100 on Tuesday, the stock reversed and plummeted to $88.
ConocoPhillips said its Q3 net income fell from a year ago, to $3,673 million ($2.23/share), from $3,876 million ($2.31/share) in 2006. Revenue fell $2 billion to $46.1 billion. Earnings exceeded analyst estimates of $2.19/share.
Brad Setser: "6% of Bear Stearns a day. That is basically what the US has to sell to China to finance its current account deficit right now.
Not 6% of Bear ($1 billion) every business day. 6% of Bear every single day of the year. Financing the deficit requires selling more like 10% of Bear ($1.5 to $2b) every business day."
Sales of existing homes and condos fell 8% in September to the lowest level in at least eight years. Sales of existing homes and condos fell to a seasonally adjusted annual rate of 5.04 million, the lowest since 1999, when the real estate group began tracking combined single-family and condo sales. Inventories of unsold homes and condos rose to a 10.5-month supply, the largest in at least eight years. For single-family homes alone, sales fell 8.6% in September to a seasonally adjusted annual rate of 4.38 million, the lowest sales pace since January 1998.
The Houston Chronicle is cutting about 5 percent of its work force through layoffs.
The Energy Department reported a 5.3 million barrel drop in crude supplies for the week ending Oct. 19. Total motor gasoline inventories decreased by 2 million barrels in the latest week, while distillate supplies fell by 1.8 million barrels. Meanwhile, the API said crude supplies dropped by 6.3 million barrels.
Dec. gold ends up $2.50 at $765.60 an ounce on Nymex.
MICROSOFT TAKES $240 MILLION STAKE IN FACEBOOK, VALUING SERVICE AT $15 BILLION. That's a big valuation on 48 million Facebook users.
Amgen affirmed its forecast of $4.13 to $4.23 in adjusted 2007 earnings.
VMware Inc. reported a third-quarter profit of $65 million, or 18 cents a share, on revenue of $358 million, and this compares with the year ago period when it earned $19.2 million, or 6 cents a share, on $189 million in sales. Excluding charges and one-time expenses, VMware would have earned $85 million, or 23 cents a share. VMware topped the estimates of analysts surveyed by Thomson Financial, who forecast a profit of 17 cents a share on $334 million in revenue.
Crude oil for December delivery surged $1.83 to end at $87.10 a barrel on the New York Mercantile Exchange. Other energy futures also posted strong gains. November reformulated gasoline surged 3.86 cents at $2.1475 a gallon and November heating oil gained 4.22 cents at $2.3420 a gallon. November natural gas rallied 21.10 cents, or 3%, at $6.972 per million British thermal units.
Will Rogers: “Rumor travels faster, but it don't stay put as long as truth.”
Can Apple And Google Carry The Load?
10/24/07 Can Apple And Google Carry The Load?
Merrill Lynch & Co.said the summer's credit crisis triggered a bigger-than-expected $7.9 billion writedown during the third quarter.
Biogen forecast 2007 earnings of $1.84 to $1.94 a share, or $2.60 to $2.70 on an adjusted basis. On average, analysts surveyed by Thomson Financial expected the company to earn $2.67 for the year. Biogen has put itself up for sale.
Tellabs Inc.'s third-quarter profit fell from a year ago amid slower demand for its telecommunications networking products in North America. Tellabs reported net income of $4 million, or 1 cent a share, down from $59 million or 13 cents a share, in the year-ago quarter. Looking ahead, Tellabs said fourth quarter revenue will be flat with the third quarter.
Lexmark International Group, Inc. said it will transfer roughly 1,650 jobs to low-cost countries by the end of 2008 in a move that should save about $40 million in 2008 and $60 million later.
Whirlpool said it sees fiscal 2007 earnings from continiung operations in the range of $8 to $8.50 a share and free cash flow of $600 million to $650 million.
Smith International said third-quarter net incomer rose 26% to $166.8 million, or 83 cents a share, with revenue up 17% to $2.25 billion. It sees fiscal year earnings at the top end of its $3.15 to $3.25 a share view.
Coach Inc. said fiscal first-quarter net income rose 23 percent, driven by higher sales of its fall bags.
The WSJ reported Last month, as the nation's housing slump continued, consumer bankruptcy filings increased almost 23% from a year earlier -- representing nearly 69,000 people -- according to the American Bankruptcy Institute, a nonprofit research group whose members include bankruptcy attorneys, judges and lenders. Overall, consumer bankruptcy filings were up 44.76% during the first nine months of this year.
Caterpillar's CEO : "Sales and revenues in North America were down 11%. From an end market standpoint, inside North America, it is a very weak picture for many of the industries that we serve. U.S. housing is down and we expect it to continue its decline. Non-residential construction is weak. Coal mining and quarrying are down in the U.S. And on-highway truck engines are down significantly from last year and we do not see much sign of a major turnaround for awhile."
American Express said the provisions it set aside for future losses in its U.S. card business jumped 44%, spurred in part by growth in its lending portfolio but also reflecting spreading credit problems.
China's economy may expand 11.5 percent and the inflation rate will be 4.3 percent this year, said Wang Xiaoguang, an economist at the National Development and Reform Commission.
Growth in UK financial services could halve as a result of the credit squeeze, holding back the economy and forcing the government to slash growth in public spending, the Ernst & Young Item club warned. It also predicts that more discerning lending practices and lower bonus payments in London could turn the housing market’s “soft landing” into a sharper correction – but judges a big housing recession to be unlikely.
Daily Reckoning: "Foreclosures in the yankee state are running three times last year's level. And losses are working their way up the socio-economic ladder. Goldman Sachs' (NYSE:GS) Trust 2006-S3 is a sophisticated investment instrument containing 8,274 mortgages. One out of every six of those mortgages is in default - only 18 months after the thing was put together. When that many people stop paying, it wipes out the entire capital value of the derivative. And since speculators usually take leveraged positions, the losses can go much further."
Neumann Homes, one of Chicago's largest homebuilders, announced on Monday that it intends to file for bankruptcy.
The company, ranked among the top 10 in Chicago, also builds in Wisconsin and Colorado. Company CEO Kenneth P. Neumann said in the statement that "significant downturn in the Detroit, Chicago and Denver housing markets resulted in this situation. ... Even after the significant help we have received from our lenders this year, the company can no longer weather this storm."
Fires in Southern California have caused about 500,000 to be evacuated from their homes and, in total, almost 1 million have
left their homes.
Oracle said Tuesday its $17 per share offer to acquire BEA Systems will expire Oct. 28 unless BEA's board executes an acquisition agreement and lets shareholders vote on the bid.
As of October, finance companies had announced 130,000 job cuts for the year to date, according to outplacement firm Challenger, Gray & Christmas. That's more than double the 50,000 cuts announced in 2006 and well ahead of the record 116,000 announced in 2001.
Chain-store sales for the week ended Oct. 20 rose 2.2% from the year-ago period, according to a survey released on Tuesday by the International Council of Shopping Centers and UBS Securities. On a week-over-week basis, sales fell 1.5%. "The latest week's dip reflected the confluence of deeper price discounts and warm weather that turned consumers off from seasonal apparel," said Michael Niemira, chief economist for ICSC. For October, ICSC expects retail sales to increase by about 2%.
The U.S. dollar index remains in the toilet at 77.57.
Lockheed Martin slightly raised its full-year earnings forecast, on the back of higher sales of its jet fighters and electronic warfare systems.
The Oil Drum: "What needs to be understood is that peak oil likely means peak food. About 17% of US energy use goes into agriculture. The food in the grocery store that you buy traveled a long way to get to you, and it was probably grown with fossil-fuel intensive fertilizers and pesticides. As of 1994, it took 400 gallons of oil and equivalents to feed each US citizen, and that number has probably gone up."
Robert McHugh: "The Weekly MACD positive territory blue histograms are not only shrinking, which serves as a necessary precursor to a "sell" signal, but generated a new "sell" signal Monday, October 22nd, as they went negative. The MACD Daily generated a "sell" signal Monday, October 15th, and worsened since then. The Dow Industrials sit in the middle of the Bollinger Bands on the weekly charts Monday, leaving open several possibilities - either a continuance lower, or a corrective rebound. In other words, at the moment the short-term pattern is somewhat vague. The McClellan Oscillator went negative as week ago for the first time since August 20th, and worsened the rest of the week, however is not at an extreme oversold level. The small change it gave last Thursday led to Friday's huge price move.
In combination, when we see prices hit the upper Bollinger Band (which we saw in all major indices last week) plus also see shrinking blue positive histograms in the index's weekly MACD, then we can expect a tradable decline to begin. We noted last week that we had both conditions."
Stephen Roach: "With both income and wealth effects under pressure, I don't see any way saving-short, overly-indebted American consumers can maintain excessive consumption growth. For a US economy that has drawn disproportionate support from a record 72% share of personal consumption, a consumer-led capitulation spells high and rising recession risk. Unfortunately, the same prognosis is likely for a still US-centric global economy."
Oil stocks are being picked to rise by a 28-to-1 margin at the U.K. financial betting web site BetsForTraders.com, the company said Tuesday. The financial site said that's an "unprecedented" ratio. As a contrarian, that gives me further impetus to cut back in the sector.
State Street's Global Investor Confidence Index fell 6.1 points to a level of 82.6, from last month's revised reading of 88.7, pressured by cautious investors in North America.
Wal-Mart plans capital expenditures for its current fiscal year of $14.7 billion to $15.4 billion, lower than its previous forecast. In June, the retailer forecast fiscal year capital spending would be $15.5 billion, down from $17 billion, saying it would open fewer supercenters than planned to try to boost sales at existing stores.
Gold for December delivery gained $3.10 to close at $763.10 an ounce on the New York Mercantile Exchange.
Merrill Lynch & Co.said the summer's credit crisis triggered a bigger-than-expected $7.9 billion writedown during the third quarter.
Biogen forecast 2007 earnings of $1.84 to $1.94 a share, or $2.60 to $2.70 on an adjusted basis. On average, analysts surveyed by Thomson Financial expected the company to earn $2.67 for the year. Biogen has put itself up for sale.
Tellabs Inc.'s third-quarter profit fell from a year ago amid slower demand for its telecommunications networking products in North America. Tellabs reported net income of $4 million, or 1 cent a share, down from $59 million or 13 cents a share, in the year-ago quarter. Looking ahead, Tellabs said fourth quarter revenue will be flat with the third quarter.
Lexmark International Group, Inc. said it will transfer roughly 1,650 jobs to low-cost countries by the end of 2008 in a move that should save about $40 million in 2008 and $60 million later.
Whirlpool said it sees fiscal 2007 earnings from continiung operations in the range of $8 to $8.50 a share and free cash flow of $600 million to $650 million.
Smith International said third-quarter net incomer rose 26% to $166.8 million, or 83 cents a share, with revenue up 17% to $2.25 billion. It sees fiscal year earnings at the top end of its $3.15 to $3.25 a share view.
Coach Inc. said fiscal first-quarter net income rose 23 percent, driven by higher sales of its fall bags.
The WSJ reported Last month, as the nation's housing slump continued, consumer bankruptcy filings increased almost 23% from a year earlier -- representing nearly 69,000 people -- according to the American Bankruptcy Institute, a nonprofit research group whose members include bankruptcy attorneys, judges and lenders. Overall, consumer bankruptcy filings were up 44.76% during the first nine months of this year.
Caterpillar's CEO : "Sales and revenues in North America were down 11%. From an end market standpoint, inside North America, it is a very weak picture for many of the industries that we serve. U.S. housing is down and we expect it to continue its decline. Non-residential construction is weak. Coal mining and quarrying are down in the U.S. And on-highway truck engines are down significantly from last year and we do not see much sign of a major turnaround for awhile."
American Express said the provisions it set aside for future losses in its U.S. card business jumped 44%, spurred in part by growth in its lending portfolio but also reflecting spreading credit problems.
China's economy may expand 11.5 percent and the inflation rate will be 4.3 percent this year, said Wang Xiaoguang, an economist at the National Development and Reform Commission.
Growth in UK financial services could halve as a result of the credit squeeze, holding back the economy and forcing the government to slash growth in public spending, the Ernst & Young Item club warned. It also predicts that more discerning lending practices and lower bonus payments in London could turn the housing market’s “soft landing” into a sharper correction – but judges a big housing recession to be unlikely.
Daily Reckoning: "Foreclosures in the yankee state are running three times last year's level. And losses are working their way up the socio-economic ladder. Goldman Sachs' (NYSE:GS) Trust 2006-S3 is a sophisticated investment instrument containing 8,274 mortgages. One out of every six of those mortgages is in default - only 18 months after the thing was put together. When that many people stop paying, it wipes out the entire capital value of the derivative. And since speculators usually take leveraged positions, the losses can go much further."
Neumann Homes, one of Chicago's largest homebuilders, announced on Monday that it intends to file for bankruptcy.
The company, ranked among the top 10 in Chicago, also builds in Wisconsin and Colorado. Company CEO Kenneth P. Neumann said in the statement that "significant downturn in the Detroit, Chicago and Denver housing markets resulted in this situation. ... Even after the significant help we have received from our lenders this year, the company can no longer weather this storm."
Fires in Southern California have caused about 500,000 to be evacuated from their homes and, in total, almost 1 million have
left their homes.
Oracle said Tuesday its $17 per share offer to acquire BEA Systems will expire Oct. 28 unless BEA's board executes an acquisition agreement and lets shareholders vote on the bid.
As of October, finance companies had announced 130,000 job cuts for the year to date, according to outplacement firm Challenger, Gray & Christmas. That's more than double the 50,000 cuts announced in 2006 and well ahead of the record 116,000 announced in 2001.
Chain-store sales for the week ended Oct. 20 rose 2.2% from the year-ago period, according to a survey released on Tuesday by the International Council of Shopping Centers and UBS Securities. On a week-over-week basis, sales fell 1.5%. "The latest week's dip reflected the confluence of deeper price discounts and warm weather that turned consumers off from seasonal apparel," said Michael Niemira, chief economist for ICSC. For October, ICSC expects retail sales to increase by about 2%.
The U.S. dollar index remains in the toilet at 77.57.
Lockheed Martin slightly raised its full-year earnings forecast, on the back of higher sales of its jet fighters and electronic warfare systems.
The Oil Drum: "What needs to be understood is that peak oil likely means peak food. About 17% of US energy use goes into agriculture. The food in the grocery store that you buy traveled a long way to get to you, and it was probably grown with fossil-fuel intensive fertilizers and pesticides. As of 1994, it took 400 gallons of oil and equivalents to feed each US citizen, and that number has probably gone up."
Robert McHugh: "The Weekly MACD positive territory blue histograms are not only shrinking, which serves as a necessary precursor to a "sell" signal, but generated a new "sell" signal Monday, October 22nd, as they went negative. The MACD Daily generated a "sell" signal Monday, October 15th, and worsened since then. The Dow Industrials sit in the middle of the Bollinger Bands on the weekly charts Monday, leaving open several possibilities - either a continuance lower, or a corrective rebound. In other words, at the moment the short-term pattern is somewhat vague. The McClellan Oscillator went negative as week ago for the first time since August 20th, and worsened the rest of the week, however is not at an extreme oversold level. The small change it gave last Thursday led to Friday's huge price move.
In combination, when we see prices hit the upper Bollinger Band (which we saw in all major indices last week) plus also see shrinking blue positive histograms in the index's weekly MACD, then we can expect a tradable decline to begin. We noted last week that we had both conditions."
Stephen Roach: "With both income and wealth effects under pressure, I don't see any way saving-short, overly-indebted American consumers can maintain excessive consumption growth. For a US economy that has drawn disproportionate support from a record 72% share of personal consumption, a consumer-led capitulation spells high and rising recession risk. Unfortunately, the same prognosis is likely for a still US-centric global economy."
Oil stocks are being picked to rise by a 28-to-1 margin at the U.K. financial betting web site BetsForTraders.com, the company said Tuesday. The financial site said that's an "unprecedented" ratio. As a contrarian, that gives me further impetus to cut back in the sector.
State Street's Global Investor Confidence Index fell 6.1 points to a level of 82.6, from last month's revised reading of 88.7, pressured by cautious investors in North America.
Wal-Mart plans capital expenditures for its current fiscal year of $14.7 billion to $15.4 billion, lower than its previous forecast. In June, the retailer forecast fiscal year capital spending would be $15.5 billion, down from $17 billion, saying it would open fewer supercenters than planned to try to boost sales at existing stores.
Gold for December delivery gained $3.10 to close at $763.10 an ounce on the New York Mercantile Exchange.
Monday, October 22, 2007
The Continuation
10/23/07 The Continuation
Rob Peebles: "Dear Social Security Administration:
Although I am not yet eligible for Social Security, I am writing to thank you for your latest Cost of Living Adjustment (COLA) for recipients. I would never have believed you possessed the courage to bump the oldsters’ monthly payments by a paltry 2.3% - the smallest increase since 2004. You rock! Thanks to you, the typical retiree’s monthly payment will increase by just $24. If they don’t blow that on higher ticket prices in Branson, they’ll spend it on the gas to get there.
Which reminds me: Your timing was astonishing! You made this announcement just as oil prices were approaching $90 a barrel. A bold move! And get this: that same day, heating oil hit a record $2.75 in Massachusetts. That means aging Red Sox fans will be paying 17% more to keep their New England cottages cozy this winter. You really are the best.
And speaking of cottages, what do retirees most often complain about besides poorly lit parking? I’ll tell you what – property taxes. According to the Tax Foundation, median property taxes jumped almost 8% last year. Oh sure, the lucky ones live in areas that freeze property tax rates for seniors. But should they have to move – Gotcha! They have to pay taxes on their home’s current market value. Just another reason that your 2.3% COLA is 100% chutzpah.
And then there’s the irony: There’s you, a humongous government agency running a government program designed to help retirees, announcing a 2.3% COLA. And then there’s Medicare, another humongous government agency designed to help retirees, announcing the very same month that it’s charging 3.1% more for insurance premiums. Ouch! Oh sure, that’s only a few bucks more a month out of their Velcro wallets, but the hike reminds older folks that their inflation rate is much higher than the CPI that purports to measure inflation generally. And guess what? You don’t care. Awesome!
Speaking of “awesome,” I have to congratulate you on how cleverly you play the COLA game. After all, you don’t come up with the adjustments: you get them from the Bureau of Labor Statistics. There, they have rooms full of math whizzes working hard to come up with the COLAs for you. It’s their inflation calculation. No matter how ridiculous the CPI sounds, no matter how much they jack with “hedonics” or mess around with the housing component, it’s not your problem. Even that whole “steak prices are up so we’re buying chicken” angle is not your doing -- even if the next month’s calculation throws out the chicken component and substitutes cat food. You just implement whatever the number crunchers say and move on. Brilliant!
And the way you and the BLS are keeping the inflation rate for the elderly under your hats – remarkable! Oh yes, I know about the CPI-E, but I don’t know much – as you intended! From their website, I can see that the BLS has estimated seniors’ cost of living increases over certain periods. But there doesn’t seem to be any current data. For example, I can’t find a CPI-E number comparable to the 2.3% figure you used to adjust the COLA. Coincidence? Ha ha ha ha!"
Indian proverb: "Keep five yards from a carriage, ten yards from a horse, and a hundred yards from an elephant; but the distance one should keep from a wicked man cannot be measured."
The markets from some complex derivatives remain broken and may recover only gradually, said Randall Kroszner, a governor of Federal Reserve Board on Monday. "I would suggest that....the recovery may be a relatively gradual process and these markets may not look the same when they re-emerge," Kroszner said.
And for those who believe in the tooth fairy: "The Federal Reserve will continue to monitor developments in financial markets and act as needed to support the effective functioning of these markets and to foster sustainable economic growth and price stability," Kroszner said in a speech here to the Institute of International Bankers.
The NY Times reported collateralized debt obligations — made up of bonds backed by thousands of subprime home loans — are starting to shut off cash payments to investors in lower-rated bonds as credit-rating agencies downgrade the securities they own, according to analysts and industry executives. Cutting off the cash flow, which is governed by rules and mathematical formulas that vary by security, is expected to accelerate in the months ahead.Such a cutoff would be the latest blow to financial markets as investors try to anticipate the next problem that might shake confidence.
Bear Stearns and China's CITIC Securities announced an agreement in principle in which each firm would invest $1 billion in the other.
Kohlberg Kravis Roberts and Goldman Sachs will cancel their $8 billion takeover for Harman International but invest $400 million in convertible notes that the audio systems maker will use for a stock buyback, the companies said Monday. KKR and Goldman won't be sued and won't have to pay a termination fee under the agreement struck.
The New York Board of Trade is planning to shut its futures pits in the next six months as electronic commodities trading takes over, The New York Post reported.
Halliburton Co.'s third-quarter profit rose to $727 million, or 79 cents a share, from $611 million, or 58 cents a share, in the year-ago period. Revenue climbed to $3.93 billion from $3.39 billion a year ago. Results for the latest quarter received a favorable boost of $133 million, or 15 cents a share, from the recognition of U.S. foreign tax credits, and include a $21 million charge, or 2 cents a share, in after-tax charges related to environmental matters. Analysts surveyed by Thomson Financial estimated quarterly net income of 64 cents a share on revenue of $3.87 billion. Halliburton CEO Dave Lesar said the company expects North American land drilling pricing pressure to continue in the fourth quarter amid a battle for market share. The oil services firm said it'll keep costs under control to preserve its profits. In a more hopeful sign, the company said its expects the pressure pump and drilling business in North America to grow next year, with revenue and operating income expected to increase.
Weatherford International Ltd., the Houston provider of mechanical solutions, technology and services for oil-and-gas drilling and production, reported third-quarter net income rose 25% on 16% higher revenue. Earnings reached $292.7 million, or 84 cents a share, from $234.2 million, or 66 cents, in the year-earlier period. Revenue rose to $1.97 billion from $1.7 billion.
Merck & Co. said its third-quarter profit rose sharply, helped by sales of its vaccines and cholesterol drugs, and raised its 2007 profit forecast in view of strong current trends.
Ernst & Young's ITEM Club, a London-based economic research group, said in a report that it cut its growth forecast for the UK for 2008 to 2.1% from 2.5%. "This is a very timely tightening, targeting parts of the financial sector that were growing too fast and were too dependent on cheap credit," the report said.
Electrolux stated the risk for further decline in the U.S. appliance market, continued raw material cost increases and cost pressures on European margins adds uncertainty to the outlook for 2007.
Californian homes are overvalued by as much as 40 percent and stricter lending standards will probably contribute to ``material'' price declines, according to analysts at Goldman Sachs.
A veteran Wall Street analyst, Irv Zelman, chief executive of the research firm Zelman & Associates, says it's unlikely the U.S. housing market will recover before 2009, adding there's a ``50 to 60 percent chance of a recession,'' as the housing slump curbs consumer spending.
Wolfgang Munchau: "The market in inflation-protected bonds is less liquid than the market for ordinary government bonds. Hence there is a liquidity premium, which raises their price and depresses their yields, leading to a persistent underestimate of future inflationary expectations."
John Hussman: "As of Friday, the Dow and S&P 500 closed Friday within a fraction of a percent of where they were minutes prior to the Fed's September 18th interest rate announcement. And just for the record, the Fed has still added zero liquidity to the banking system. The total amount lent by the Fed to the banking system through the discount window fell again last week to just $240 million. Total bank reserves fell in September, from $44.9 billion to $42.5 billion. The monetary base – the only monetary aggregate that the Fed directly controls, fell in September from $853.482 billion to $851.279 billion. At least $19 billion of temporary repos will come due on Thursday, so the Fed won't be “injecting liquidity” into the banking system when it predictably rolls these over."
Half of likely US voters said they would never vote for Senator Hillary Clinton for president, a new survey by Zogby International shows. The latest Zogby survey showed 50% of those polled said they would never vote for her, compared with 46% of likely voters who said the same thing in a Zogby survey in March. Among Democratic women, 17% said they would not vote for Clinton.
The Oil Drum: "The German-based Energy Watch Group will release its study in London today saying that global oil production peaked in 2006 - much earlier than most experts had expected. The report, which predicts that production will now fall by 7% a year, comes after oil prices set new records almost every day last week, on Friday hitting more than $90 (£44) a barrel."
The national average price for gasoline rose about 5 cents over the last two weeks, according to a survey released Sunday.The average price of regular gasoline on Friday was $2.80 a gallon, mid-grade was $2.92, and premium was $3.03, oil industry analyst Trilby Lundberg said.
Brett Steenbarger: "In short, there has been no bearish edge to selling into a sizable gap down when the prior day has been down sharply. Indeed, on average, the trader would have made money by buying the open and holding through the following day."
Wachovia cut by 15 cents a share its 2008 profit target for Schlumberger to $5.05 a share on a more conservative outlook for its North American business. "Schlumberger has consistently said activity-related revenue growth is tied to offshore rig count growth," Wachovia said in a note to clients. "But it cautioned about inefficiency in first year activity of newbuild rigs and more generally about susceptibility to slowdowns associated with large, more complicated projects; it also acknoweldged troubled spots including Nigera, Kazakhstan and Libya."
Goodman Global Inc. said it OK'd a deal to be bought by private equity firm Hellman & Friedman LLC for $25.60 a share in cash.
Rohm & Haas Co.said it would seek to raise prices 5% to 15% on most of its chemical products, effective Nov. 1. "The costs of key raw materials" -- such as propylene, ethylene, methanol and others -- "have remained persistently high," said Pierre Brondeau, executive vice president for specialty materials, in a statement.
Gold for December delivery closed down $8.40 at $760 an ounce on the New York Mercantile Exchange. Crude for November delivery closed down $1.04, or 1%, at $87.56 a barrel on the New York Mercantile Exchange. The November front-month contract expired at the end of Monday's session.
Twelve wildfires fed by winds, high temperatures and low humidity have burned more than 100,665 acres (40,739 hectares) from Santa Barbara to San Diego County near the Mexican border, said Daniel Berlant, a spokesman for the California Department of Forestry.
David Yu: "Essentially, for about a month, the tech-heavy Nasdaq Index was on its own zero gravity parabolic flight while the retail sector, which incidentally sells these tech companies' products, was in a deep hole back on earth...If the SPX needed to be recalibrated, the Nasdaq would probably need a major tuneup. In order for the market to get back on track, the variance between the producers and the retailers of their products will have to be corrected."
Apple's net profit was $904 million, or $1.01 per share in its fiscal fourth quarter, compared with $542 million, or 62 cents per share, a year earlier. Revenue was $6.22 billion, up 29 percent from $4.84 billion a year earlier. These results beat Wall Street's average targets of 85 cents per share earnings and $6.06 billion revenue, according to the average forecast on Reuters Estimates. Apple also forecast fiscal first-quarter revenue of $9.2 billion, ahead of the $8.7 billion Wall Street target.
Target Corp. on Monday trimmed its October forecast for sales growth at stores open at least a year to a range of 2% to 4% as the company cited "greater than normal daily volatility and continued disappointing sales results for the first two weeks" of the month. It had previously forecast same-store sales growth of 3% to 5% for October.
General Motors Corp. will lay off 1,000 workers after Thanksgiving at its Lansing, Mich.-plant, which builds the Buick Enclave, Saturn Outlook and GMC Acadia.
Rob Peebles: "Dear Social Security Administration:
Although I am not yet eligible for Social Security, I am writing to thank you for your latest Cost of Living Adjustment (COLA) for recipients. I would never have believed you possessed the courage to bump the oldsters’ monthly payments by a paltry 2.3% - the smallest increase since 2004. You rock! Thanks to you, the typical retiree’s monthly payment will increase by just $24. If they don’t blow that on higher ticket prices in Branson, they’ll spend it on the gas to get there.
Which reminds me: Your timing was astonishing! You made this announcement just as oil prices were approaching $90 a barrel. A bold move! And get this: that same day, heating oil hit a record $2.75 in Massachusetts. That means aging Red Sox fans will be paying 17% more to keep their New England cottages cozy this winter. You really are the best.
And speaking of cottages, what do retirees most often complain about besides poorly lit parking? I’ll tell you what – property taxes. According to the Tax Foundation, median property taxes jumped almost 8% last year. Oh sure, the lucky ones live in areas that freeze property tax rates for seniors. But should they have to move – Gotcha! They have to pay taxes on their home’s current market value. Just another reason that your 2.3% COLA is 100% chutzpah.
And then there’s the irony: There’s you, a humongous government agency running a government program designed to help retirees, announcing a 2.3% COLA. And then there’s Medicare, another humongous government agency designed to help retirees, announcing the very same month that it’s charging 3.1% more for insurance premiums. Ouch! Oh sure, that’s only a few bucks more a month out of their Velcro wallets, but the hike reminds older folks that their inflation rate is much higher than the CPI that purports to measure inflation generally. And guess what? You don’t care. Awesome!
Speaking of “awesome,” I have to congratulate you on how cleverly you play the COLA game. After all, you don’t come up with the adjustments: you get them from the Bureau of Labor Statistics. There, they have rooms full of math whizzes working hard to come up with the COLAs for you. It’s their inflation calculation. No matter how ridiculous the CPI sounds, no matter how much they jack with “hedonics” or mess around with the housing component, it’s not your problem. Even that whole “steak prices are up so we’re buying chicken” angle is not your doing -- even if the next month’s calculation throws out the chicken component and substitutes cat food. You just implement whatever the number crunchers say and move on. Brilliant!
And the way you and the BLS are keeping the inflation rate for the elderly under your hats – remarkable! Oh yes, I know about the CPI-E, but I don’t know much – as you intended! From their website, I can see that the BLS has estimated seniors’ cost of living increases over certain periods. But there doesn’t seem to be any current data. For example, I can’t find a CPI-E number comparable to the 2.3% figure you used to adjust the COLA. Coincidence? Ha ha ha ha!"
Indian proverb: "Keep five yards from a carriage, ten yards from a horse, and a hundred yards from an elephant; but the distance one should keep from a wicked man cannot be measured."
The markets from some complex derivatives remain broken and may recover only gradually, said Randall Kroszner, a governor of Federal Reserve Board on Monday. "I would suggest that....the recovery may be a relatively gradual process and these markets may not look the same when they re-emerge," Kroszner said.
And for those who believe in the tooth fairy: "The Federal Reserve will continue to monitor developments in financial markets and act as needed to support the effective functioning of these markets and to foster sustainable economic growth and price stability," Kroszner said in a speech here to the Institute of International Bankers.
The NY Times reported collateralized debt obligations — made up of bonds backed by thousands of subprime home loans — are starting to shut off cash payments to investors in lower-rated bonds as credit-rating agencies downgrade the securities they own, according to analysts and industry executives. Cutting off the cash flow, which is governed by rules and mathematical formulas that vary by security, is expected to accelerate in the months ahead.Such a cutoff would be the latest blow to financial markets as investors try to anticipate the next problem that might shake confidence.
Bear Stearns and China's CITIC Securities announced an agreement in principle in which each firm would invest $1 billion in the other.
Kohlberg Kravis Roberts and Goldman Sachs will cancel their $8 billion takeover for Harman International but invest $400 million in convertible notes that the audio systems maker will use for a stock buyback, the companies said Monday. KKR and Goldman won't be sued and won't have to pay a termination fee under the agreement struck.
The New York Board of Trade is planning to shut its futures pits in the next six months as electronic commodities trading takes over, The New York Post reported.
Halliburton Co.'s third-quarter profit rose to $727 million, or 79 cents a share, from $611 million, or 58 cents a share, in the year-ago period. Revenue climbed to $3.93 billion from $3.39 billion a year ago. Results for the latest quarter received a favorable boost of $133 million, or 15 cents a share, from the recognition of U.S. foreign tax credits, and include a $21 million charge, or 2 cents a share, in after-tax charges related to environmental matters. Analysts surveyed by Thomson Financial estimated quarterly net income of 64 cents a share on revenue of $3.87 billion. Halliburton CEO Dave Lesar said the company expects North American land drilling pricing pressure to continue in the fourth quarter amid a battle for market share. The oil services firm said it'll keep costs under control to preserve its profits. In a more hopeful sign, the company said its expects the pressure pump and drilling business in North America to grow next year, with revenue and operating income expected to increase.
Weatherford International Ltd., the Houston provider of mechanical solutions, technology and services for oil-and-gas drilling and production, reported third-quarter net income rose 25% on 16% higher revenue. Earnings reached $292.7 million, or 84 cents a share, from $234.2 million, or 66 cents, in the year-earlier period. Revenue rose to $1.97 billion from $1.7 billion.
Merck & Co. said its third-quarter profit rose sharply, helped by sales of its vaccines and cholesterol drugs, and raised its 2007 profit forecast in view of strong current trends.
Ernst & Young's ITEM Club, a London-based economic research group, said in a report that it cut its growth forecast for the UK for 2008 to 2.1% from 2.5%. "This is a very timely tightening, targeting parts of the financial sector that were growing too fast and were too dependent on cheap credit," the report said.
Electrolux stated the risk for further decline in the U.S. appliance market, continued raw material cost increases and cost pressures on European margins adds uncertainty to the outlook for 2007.
Californian homes are overvalued by as much as 40 percent and stricter lending standards will probably contribute to ``material'' price declines, according to analysts at Goldman Sachs.
A veteran Wall Street analyst, Irv Zelman, chief executive of the research firm Zelman & Associates, says it's unlikely the U.S. housing market will recover before 2009, adding there's a ``50 to 60 percent chance of a recession,'' as the housing slump curbs consumer spending.
Wolfgang Munchau: "The market in inflation-protected bonds is less liquid than the market for ordinary government bonds. Hence there is a liquidity premium, which raises their price and depresses their yields, leading to a persistent underestimate of future inflationary expectations."
John Hussman: "As of Friday, the Dow and S&P 500 closed Friday within a fraction of a percent of where they were minutes prior to the Fed's September 18th interest rate announcement. And just for the record, the Fed has still added zero liquidity to the banking system. The total amount lent by the Fed to the banking system through the discount window fell again last week to just $240 million. Total bank reserves fell in September, from $44.9 billion to $42.5 billion. The monetary base – the only monetary aggregate that the Fed directly controls, fell in September from $853.482 billion to $851.279 billion. At least $19 billion of temporary repos will come due on Thursday, so the Fed won't be “injecting liquidity” into the banking system when it predictably rolls these over."
Half of likely US voters said they would never vote for Senator Hillary Clinton for president, a new survey by Zogby International shows. The latest Zogby survey showed 50% of those polled said they would never vote for her, compared with 46% of likely voters who said the same thing in a Zogby survey in March. Among Democratic women, 17% said they would not vote for Clinton.
The Oil Drum: "The German-based Energy Watch Group will release its study in London today saying that global oil production peaked in 2006 - much earlier than most experts had expected. The report, which predicts that production will now fall by 7% a year, comes after oil prices set new records almost every day last week, on Friday hitting more than $90 (£44) a barrel."
The national average price for gasoline rose about 5 cents over the last two weeks, according to a survey released Sunday.The average price of regular gasoline on Friday was $2.80 a gallon, mid-grade was $2.92, and premium was $3.03, oil industry analyst Trilby Lundberg said.
Brett Steenbarger: "In short, there has been no bearish edge to selling into a sizable gap down when the prior day has been down sharply. Indeed, on average, the trader would have made money by buying the open and holding through the following day."
Wachovia cut by 15 cents a share its 2008 profit target for Schlumberger to $5.05 a share on a more conservative outlook for its North American business. "Schlumberger has consistently said activity-related revenue growth is tied to offshore rig count growth," Wachovia said in a note to clients. "But it cautioned about inefficiency in first year activity of newbuild rigs and more generally about susceptibility to slowdowns associated with large, more complicated projects; it also acknoweldged troubled spots including Nigera, Kazakhstan and Libya."
Goodman Global Inc. said it OK'd a deal to be bought by private equity firm Hellman & Friedman LLC for $25.60 a share in cash.
Rohm & Haas Co.said it would seek to raise prices 5% to 15% on most of its chemical products, effective Nov. 1. "The costs of key raw materials" -- such as propylene, ethylene, methanol and others -- "have remained persistently high," said Pierre Brondeau, executive vice president for specialty materials, in a statement.
Gold for December delivery closed down $8.40 at $760 an ounce on the New York Mercantile Exchange. Crude for November delivery closed down $1.04, or 1%, at $87.56 a barrel on the New York Mercantile Exchange. The November front-month contract expired at the end of Monday's session.
Twelve wildfires fed by winds, high temperatures and low humidity have burned more than 100,665 acres (40,739 hectares) from Santa Barbara to San Diego County near the Mexican border, said Daniel Berlant, a spokesman for the California Department of Forestry.
David Yu: "Essentially, for about a month, the tech-heavy Nasdaq Index was on its own zero gravity parabolic flight while the retail sector, which incidentally sells these tech companies' products, was in a deep hole back on earth...If the SPX needed to be recalibrated, the Nasdaq would probably need a major tuneup. In order for the market to get back on track, the variance between the producers and the retailers of their products will have to be corrected."
Apple's net profit was $904 million, or $1.01 per share in its fiscal fourth quarter, compared with $542 million, or 62 cents per share, a year earlier. Revenue was $6.22 billion, up 29 percent from $4.84 billion a year earlier. These results beat Wall Street's average targets of 85 cents per share earnings and $6.06 billion revenue, according to the average forecast on Reuters Estimates. Apple also forecast fiscal first-quarter revenue of $9.2 billion, ahead of the $8.7 billion Wall Street target.
Target Corp. on Monday trimmed its October forecast for sales growth at stores open at least a year to a range of 2% to 4% as the company cited "greater than normal daily volatility and continued disappointing sales results for the first two weeks" of the month. It had previously forecast same-store sales growth of 3% to 5% for October.
General Motors Corp. will lay off 1,000 workers after Thanksgiving at its Lansing, Mich.-plant, which builds the Buick Enclave, Saturn Outlook and GMC Acadia.
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